Australia’s free trade agreement with Indonesia has been billed as a win-win for both nations. But the deal might not be quite as sweet as Scott Morrison and Indonesian president Joko Widodo made out in their historic meeting in federal parliament on Monday.
And local and visiting workers could end up the biggest losers in the pact.
It’s expected that under the arrangement Australian businesses will profit from lower import tariffs and greater market access – increasing the competitiveness of local exports and boosting Aussie ownership of companies based in Indonesia.
The free trade deal will also simplify paperwork for Australian exporters by guaranteeing the automatic issue of import permits for live cattle, frozen beef, sheep meat, and other key exports.
Then there’s the fine print.
One of the deal’s conditions allows corporations to sue the Australian government if it passes a law that could dent profits. Another opens Australia’s borders to an unspecified number of temporary, more easily exploited workers, according to Michele O’Neil, president of the Australian Council of Trade Unions.
Ms O’Neil told The New Daily the agreement would allow Indonesian workers to make Australia home on temporary working visas and fill positions in 400 occupations – putting local jobs at risk.
“No independent analysis has been done and this could have a huge impact on chefs, nurses, plumbers, carpenters, bricklayers, tilers and many more workers who are already struggling to find enough work,” Ms O’Neil said.
Competing on a level playing field is one thing, but competing against a country that has an appalling human rights record and doesn’t pay people properly “puts workers on a slippery slope”, Ms O’Neil said.
“We should expect that trade deals be subject to proper scrutiny and that unions and others in civil society, as well as business, have the opportunity for genuine input,” she said.
“The Morrison government conducts these deals behind closed doors and the true impacts are never given an independent examination.”
Trade Minister Simon Birmingham told The New Daily he found it “astonishing that the ACTU are criticising a trade deal that will actually create more jobs for Australians”.
“The fact is, there’s never been a successful investor-state dispute settlement claim brought against the Australia government, but Australian investors have used those provisions, in a small number of cases, to protect their interests in investments overseas,” he said.
Ms O’Neil’s comments come after President Joko Widodo on Monday became only the second Indonesian leader to address Australian parliament.
In his historic address, Mr Widodo said Australia and Indonesia must assemble like the Marvel superheroes Avengers and fight climate change and economic protectionism.
“When the forces of good unite, the Avengers Assemble and the common enemy can be defeated. Then intolerance and protectionism and the fear of poverty and the threat of climate change can be overcome,” the president said.
The speech came after Mr Morrison hosted the president for a private dinner at The Lodge on Sunday in an effort to prove how important he considers a close relationship with the nation that is one of the fastest growing in the Indo-Pacific and our 13th largest trading partner.
The South-East Asian country is the world’s most populous Muslim nation and recorded a gross domestic product of more $1.5 trillion in 2018, according to the World Bank.
Mr Widodo told parliament in Canberra his country’s economy would be the fourth largest in the world by 2050 – by which time he expects its middle class to have become the globe’s third largest.
The size of Indonesia’s consumer market explains why members of industry have been so supportive of the new trade deal.
- See the Australian government’s fact sheet on the Indonesian economy here
The agreement will eliminate tariffs on 99 per cent of Australian goods imported into Indonesia and guarantee the automatic issue of import permits for live cattle, frozen beef, sheep meat, feed grains, and other key products.
Which is why Prudence Gordon, general manager of trade and economics at the National Farmers Federation, told The New Daily the deal was “exceptional” for drought-stricken farmers.
“In terms of reducing tariffs, it’s a really good outcome. But also, in terms of the trade facilitation, the kinds of administrative barriers that exporters need to get through to get product into Indonesia are going to be more certain,” Dr Gordon said.
“In many respects, that’s worth even as much as a tariff reduction – just knowing you’re going to get a certain volume of product into a market is really important.”
Australia memang memiliki budaya yang berbeda dengan Indonesia, namun kita punya banyak kesamaan: kemajemukan, toleransi, demokrasi, dll.
Melalui persahabatan yang tulus, hubungan Indonesia dan Australia bermanfaat bagi kesejahteraan kedua negara, juga bagi kawasan dan dunia. pic.twitter.com/Re5PBeeJr5
— Joko Widodo (@jokowi) February 10, 2020
Australia already enjoys a two-way trading relationship with Indonesia worth $17.8 billion a year – but this pales in comparison to its economic ties with other Asian economies.
Our trading relationship with China, for instance, is ten times larger.
University of NSW economics professor Tim Harcourt said there was a lot of untapped potential in Australia’s relationship with Indonesia – a wrong this trade deal would help right.
The country’s growing middle class provides plenty of opportunities for companies selling high-value-added consumer goods, he said.
And Indonesia’s status as a collection of islands means companies specialising in bridges and other types of infrastructure will easily find investable projects.
“In terms of Australia’s relationship with Indonesia, it’s been pretty underdone,” Mr Harcourt told The New Daily.
“There’s only around 2500 companies exporting to Indonesia from Australia, and there’d be three times that exporting to Hong Kong and China.
“It’s still relatively small compared to what you’d expect.”