[Below is an un-footnoted Submission to this Inquiry. I was subsequently invited to give oral evidence at public hearings on 5 May, with the transcript available here.]
I welcome this Inquiry and the opportunity to make a public Submission on a topic that has been addressed now several times by the Australian Parliament. As an expert in international business law, I have made several Submissions to other inquiries related to Australia’s international affairs, including Free Trade Agreements (FTAs) and investment treaties, mostly recently giving evidence to this Senate Committee’s Inquiry into The Trade and Foreign Investment (Protecting the Public Interest) Bill 2014 (the “Anti-ISDS Bill”). In that evidence I remarked that there could be improvements in how Australia approaches FTA negotiations. Due to time and space constraints I make three specific suggestions regarding (a) treaty negotiation process and (b) treaty implementation and review, since both stages are encompassed by this Inquiry’s Terms of Reference.
1. In its Report in August 2014 recommending against enactment of the Anti-ISDS Bill, this Senate Committee specifically agreed with a point made in my Submission to that Inquiry and in oral evidence, that a better way to address some recent community concerns about the investor-state dispute settlement (especially arbitration) mechanism, now widely agreed in investment treaties world-wide (including mostly by Australia), is for the Australian government instead to develop a Model Investment Treaty (or FTA chapter) or model provisions. This could and should be developed based on extensive public consultation.
2. Subsequently I wrote to the federal Attorney-General and Trade Minister highlighting the Committee’s recommendation and volunteering to assist in developing such a Model Treaty or provisions, drawing on a research project on international investment dispute management funded by the Australian Research Council for 2014-6. The Trade Minister replied that this idea would be revisited this year, as officials were currently engaged in concluding major bilateral and regional FTAs. This somewhat puts the cart before the horse, as the benefits of a Model Treaty are lessened if major international agreements can be concluded before it is fully developed, but negotiating such treaties does consume human resources. However, negotiations for Australia’s bilateral FTA with China have now been completed, and the regional Trans-Pacific Partnership FTA may well be concluded this year, so the time now seems ripe to embark on this process of developing a Model Treaty or provisions to guide Australia’s future treaty negotiations.
3. My first broader suggestion for the present Inquiry, however, is that developing a procedure or even just a practice of public consultation to generate a Model Treaty or provisions could be a useful compromise mechanism to enhance public understanding and input into subsequent treaty negotiations. This is not a panacea, as it will only be worthwhile if Australia regularly concludes such treaties (as it does eg for international trade and investment), and because such public consultation would not necessarily have any or much Parliamentary scrutiny (compared to a process requiring more structured consultation, as through Senate Committee inquiries). But Parliament could issue recommendations to the Executive to initiate a process, with certain parameters and timeframes, to develop a Model Treaty or provisions and then ask for periodic reports on progress. This could therefore become a very useful way of responding to criticisms that the executive branch and current government are too divorced from public opinion when negotiating treaties.
4. A Model Treaty reached through such a public consultation process would not necessarily have to reach agreement on unitary wording for each provision, although this in fact appears to be universal practice for several other major countries that have successfully developed a Model Investment Treaty – both developed countries (eg the USA, first in 2004 and revised in 2012) and developing countries (eg India, presently revising its Model). Instead Australia’s model treaties might list alternatives for controversial provisions, eg one formulation that might be more acceptable to one major political party (such as Labor) and another that might appeal more to another (eg the Liberal Party). This may be the only realistic way forward as issues (such as ISDS) seem to become increasingly polarised in Australia. At least the process of public consultation and the ultimate Model provisions would improve citizens’ understanding and engagement in matters subsequently negotiated by their government leaders and officials, and guide the latter as to what may be within the realm of political feasibility as well as acceptable to counterpart states in the treaty negotiations. The alternative is the risk that a government led by one political party may conclude treaty negotiations, including certain provisions (such as ISDS), but not be able to pass implementing legislation to be able to ratify and bring into force the treaty (as almost happened with the Korea-Australia FTA last year, and which may well still happen with the China-Australia FTA after it is signed).
5. My second suggestion for this Committee is that government officials and their political leaders should be incentivised to innovate in treaty negotiations, by putting to their overseas counterparts original ideas suggested by local stakeholders, even if the reaction from the overseas counterparts may well not be positive.
6. For example, in several Submissions* as well as at public presentations I have urged Australian negotiators to propose including in FTAs provisions allowing (or perhaps even requiring) our regulators to share consumer product safety accident sharing with their counterparts in the close trading partner. Such provisions for greater regulatory cooperation would facilitate early detection, minimisation and management of health risks (including incidents such as the recent imported frozen berry problem). Including such provisions in FTAs, rather than ad hoc arrangements, has the advantages of showing citizens concerned about such treaties that they are not simply irresponsible measures for trade liberalisation at all costs, and may also make it easier to adapt local statutory requirements (such as the comparatively strict confidentiality obligations unfortunately added a the last moment in the Australian Consumer Law reforms in 2010.) Yet I believe this idea has never been raised in FTA negotiations, and certainly such provisions are not yet found in any of Australia’s recent treaties. Possibly this is because our FTA negotiations are very and increasingly busy, not just juggling many treaty negotiations but also an already growing range of topics; but also because they fear losing overall credibility by raising novel ideas at the negotiating table. Although these are partly valid reasons, the result is that FTAs get “stuck in a rut” and cannot respond to evolving community concerns.
7. How Parliament might then encourage officials and their political leaders to be bolder in such treaty negotiations is an interesting practical question. Again, it may well be sufficient to make a broad recommendation with a request for feedback on achievements (how many innovative proposals were made, even if not accepted by counterparts).
8. My third suggestion relates instead to treaty implementation, especially FTAs. My recent research for an ASEAN Secretariat project on consumer protection in Southeast Asia shows that such treaties, including those concluded by Australia, increasingly provide through ongoing regulatory cooperation through Work Programs or such like in specific fields (eg Sanitary and Phytosanitary measures). Yet it is extremely difficult to find out whether and what work has been achieved. Parliament should play a role in obtaining and publicising progress on such FTA work programs.
9. A good example is Chapter 6 of the Australia-Singapore FTA. The DFAT website does include a “Sectoral Annex on Food Products”, even including respective governmental contacts, but so far I have not been able to find out specifically what has been achieved under this part of the FTA. Other FTAs concluded by Australia also often provide for various work programs, but without even specifying who is supposed to be responsible.
I hope these suggestions are helpful and would be happy to provide oral evidence to this Committee in order to explain further.
Yours sincerely
Luke R Nottage
* See eg: Australian Government (DFAT), Submission on Country Strategies (Japan, Korea) under 2012 “Australia in the Asian Century” White Paper, 11 May 2013, at http://www.dfat.gov.au/issues/asian-century/; Productivity Commission, joint study Issues Paper, “Strengthening Economic Relations between Australia and New Zealand”, Submission dated 22 June 2012, at http://transtasman-review.pc.gov.au/all-submissions; Australian Senate “Inquiry into Australia’s trade and investment relationship with Japan”, Submission dated 21 July 2011, at http://www.aph.gov.au/house/committee/jfadt/japanandkoreatrade/index.htm.
