Asset sales and the FTA
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.