Home > Economics - General > Asset sales and the FTA

Asset sales and the FTA

December 12th, 2009

With opposition to the Queensland government’s proposed asset sales showing no signs of abating, the government has attempted to sugarcoat the pill by making various promises about maintenance of employment and working conditions, preference for Queenslanders as shareholders and so on. Most of these gimmicks have been tried before, and commentators of all kinds have quickly dismissed them. But one point that came up when something similar was tried in NSW is that some of these promises might breach the US-Australia Free Trade Agreement, which restricts our sovereignty in all sorts of surprising ways.

Dr Patricia Ranald, Convener of the Australian Fair Trade and Investment Network sent me the following summary of the issues.

Public transport, energy and water services were not excluded from the AUSFTA agreement, which is a negative list agreement which includes all services unless they are excluded.

The agreement does not apply to them while they are publicly owned, but if they are privatized, the agreement does apply.

This means that both the investment and services chapters would apply.

I discussed this with Unions NSW during the 2007 energy privatization debate. They then sought legal advice from a trade law specialist, which confirmed that the AUSFTA rules did apply to energy services, and that the proposed NSW safeguards on limits on foreign ownership and requirements of the buyer to maintain regional centres of employment would be contrary to the AUSFTA and could not be delivered as promised. In the end this was not used in the public debate because the state conference voted against the sale.

The investment Chapter of AUSFTA ( Chapter 11)

The investment chapter states that there can be no requirements for any level of Australian ownership for assets with a value of less than $800 million at the time of the agreement. This has been indexed, so is probably now over $1 billion. I understand the rail assets may be worth more than this, so the investment chapter may not apply. However, it is useful to know that these rules did prevent the Howard Government from trying to mitigate the Snowy Mountains sale (see summary below)

If the value is greater than the threshold, the Commonwealth Government may require notification, and may regulate, if it judges foreign ownership to be contrary to the national interest ( this would be an interesting test for the feds!)

However, even if the investment chapter does not apply, there are also some rules about ownership in the services chapter, which apply to all services, regardless of value.

The services chapter (Chapter 10)

Article 10.2 applies to all services the free trade principle of “national treatment” for transnational investors. This means that that there can be, no limits on levels of transnational ownership, no preference or assistance for local service providers and no requirements for technology transfer or links with local firms.

Article 10.4 applies the principle of “full market access” for transnational investors. This means there can be no regulatory limits on the number of service providers, and no requirements for for joint ventures, or for services to be located in particular regions or to employ or train local people.

Article 10.7 also restricts the ability of governments to regulate essential services in the public interest. For example, qualifications, licensing and technical standards for services cannot be “more burdensome than necessary” for business.

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  1. Ernestine Gross
    December 12th, 2009 at 12:16 | #1

    I’ve come across this topic in 2005 in the context of water management in Sydney.

    Where was Barnaby when this agreement was signed? (Not an expression of calling for support of the said Minister but merely an obvious question.)

  2. Alice
    December 12th, 2009 at 12:33 | #2

    “Article 10.7 also restricts the ability of governments to regulate essential services in the public interest.”
    Meaning the govt can be sued by some deep pocketed multinational it is attempting to regulate, in the interests of providing essential services to the Australian people. We should never have signed the FTA in the first place. JH. JH’s fault. Pack him up and send him to live as Bush’s shoeshine boy in Texas. He will turn us all into shoeshiners for mainly US companies with this hasty foolish agreement.

  3. December 12th, 2009 at 14:26 | #3

    Actually, Alice we can get out of the FTA if we give the US six months notice in writing. (“How to Kill a Country” (2004), by Weiss, Thurbon and Mathews p157 (at the very end of the book))

    That will be one of he policies I will be putting to voters in the Federal Elections. I will also be surveying all other candidates — Liberals, Labor, Nationals, Greens, Independents,etc. to see whether or not they also support such a policy and publishing the results as I did during the Queensland State elections.

    I will also oppose the Australia China Free Trade Agreement and Australia’s inclusion in any South East Asian Union.

    Some posts I made to the other forums relating to the fire sale may be of interest. They are here and here.

    Professor Quiggin: In case yo may not have noticed when I asked earlier as you may have noticed in the Third of the YouTube Broadcasts featuring Andrew Fraser and myself, Andrew Fraser attempted to make a big deal out of that 5 minute debate between yourself and him on Friday 28 November on Madonna King’s breakfast. He told me that he was quite happy to debate you.

    Could you tell us why the debate was limited to five minutes, contrary to what seemed, to me, to be Madonna King’s undertaking to hold a far more substantial debate?

    Was it because Andrew Fraser did not want to have a longer debate or was it because Madonna King backed away from her undertaking?

    James Sinnamon

    Brisbane Independent for Truth, Democracy,
    the Environment and Economic Justice

    Australian Federal Elections, 2010

  4. December 12th, 2009 at 14:29 | #4

    Sorry, that should have been “the debate on Friday 27 November on Madonna King’s Breakfast Show.”

  5. paul walter
    December 12th, 2009 at 15:38 | #5

    Alice, you li’l ripper!

  6. paul walter
    December 12th, 2009 at 18:40 | #6

    I never get past how economic rationalists can straight faced, propose the sort of rubbish constituted in the example of the AUSFTA. It is a”Melian Dialogue”, if you like; a ruthless oppressive document based on a doctrine of colonisation, as much as anything to do with trade.
    The article also touches on the sleazy depths to which conservative and labor alike will plumb, in their unrelenting efforts to do down the Australian people, on behalf of people whos values are inimicable to everything this country has aspired to represent.

  7. Alice
    December 12th, 2009 at 18:42 | #7

    @daggett
    Ooohhh sorry Daggett…..am I hearing right?

    That little nobody and nobrainer Fraser only gave the Prof 5 minutes?? Sorry Daggett but I can hear his ideology with every breath in his stubborn blind interview with you. We have got a debt (panic panic panic..oh panic we need to reduce the debt.) We MUST get a surplus!!! NO matter what the (freaking) economy is doingn or what the people want..He is a two word Treasurer “no debt” and Ill add – no brains.

    Well all I can say to Andrew Fraser is this and it wont be pretty. You are on the WRONG side of what the electorate wants and he needs to grow some b***s.

    Part of me feels sorry for him. He thinks he doesnt have the money to pay for schools, health and education, and he, in his stupidity wants to sell income generating public assets to pay for whats bleeding money.

    Take a closer look Andrew. The States have starved to anorexia since de-regulation (no excise taxes). The Commonwealth gets most of the income taxes. GST just aint enough. Canberra is gorgeous and well fed and has no problems. Sydney is a mess and now QLD.

    Move the responsibility to the Commonwealth and get rid of the States if they cant mount a decent fight for more of the ublic funding without flogging everything we once owned in sight. Really, we dont need the States and inept State Governments.

    They are not fighting the real fight. Either resign in favour of the Commonwealth (ie get out of the way) or find a way to do your job properly without going against what the majority of people in the State want and selling everything in sight!!!
    We the people will sell you soon. We dongt need this ideological garbage because you have a short term three / four year survival blinkered political ambitions. You do us, the people, much more harm than good.

    No b***s Fraser.

  8. nanks
    December 12th, 2009 at 18:52 | #8

    Alice :
    “Article 10.7 also restricts the ability of governments to regulate essential services in the public interest.”
    . JH’s fault. Pack him up and send him to live as Bush’s shoeshine boy in Texas.

    why would you reward him Alice?

  9. Alice
    December 12th, 2009 at 18:54 | #9

    @daggett
    Im a great admirer of Thurbon – the woman is smart.

  10. Alice
    December 12th, 2009 at 18:56 | #10

    @nanks
    Ok the Alice – send him to Long Bay instead.

  11. Alice
    December 12th, 2009 at 18:57 | #11

    woops meant “Alice says”

  12. nanks
    December 12th, 2009 at 18:58 | #12

    Alice :
    @nanks
    Ok the Alice – send him to Long Bay instead.

    I’m thinking psychiatric nurse

  13. Alice
    December 12th, 2009 at 19:03 | #13

    Too late – JH cant get a psychiatric nurse even if he needs one (and he does) – his govt closed the mental health institutions and chucked the mentally ill on the streets.

    Guess its the gutter JH should be sent to Nanks?

  14. nanks
    December 12th, 2009 at 19:44 | #14

    @Alice
    I was thinking jh should do some time as a psych nurse – give him a glimpse at the sorts of ‘lifestyle choices’ some people have

  15. Alice
    December 12th, 2009 at 19:53 | #15

    @nanks
    Or dont have Nanks?

  16. nanks
    December 12th, 2009 at 20:02 | #16

    @Alice
    exactly – where is the irony smilie when I need it (I did my phd in the psychiatry dept at UQ)

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