Labor knows Jakarta trade deal is vital for us

Simon Birmingham and his Indonesian counterpart Enggartiasto Lukita in Jakarta. Picture: AP

The signing of the Australia-Indonesia free trade agreement means any incoming Shorten Labor government would face a defining test of its believability — on Indonesian relations, dealings with Asia, free trade and the strength to ­repudiate protectionists in its own ranks.

This is the reason a Shorten government, if it comes to power, will approve the FTA. The stakes are too high despite opposition from the trade unions. The significance of this FTA with Indonesia far exceeds the text of its provisions and a Labor government will have no viable option but to embrace it. Bill Shorten and his senior colleagues know this.

The FTA, coming up for parliamentary approval in the opening months after any Labor election success, would reveal the character of a Shorten government, notably whether it is a grand fraud or capable of serious strategic vision.

Australia needs this FTA, almost 10 years in the making. Our relative failure over decades to build the economic, trade, business and cultural ties with our nearest neighbour, the world’s largest Islamic nation, projected to be the globe’s fourth-biggest economy by 2050, constitutes a chronic disappointment sure to damage this country unless corrected.

But there is another message on trade policy that Labor is sending — the status quo on trade must change. Labor is determined on this issue and will enforce its stance in government. The aim is not to terminate free trade — as many populists demand — but rather, in an age of Donald Trump’s protectionism and scepticism about globalisation, to find a revised social contract to sustain free trade in this country.

It was a rare joint statement Labor released this week. In the names of Shorten, foreign affairs spokeswoman Penny Wong, Treasury spokesman Chris Bowen, and trade spokesman Jason Clare it declared the FTA with Indonesia a “positive step forward” and the finalisation of “many years of hard work on both sides of politics” with a future “global economic powerhouse”. The Labor quartet went as far as possible, given the parliamentary endorsement process still ahead, in sending the green light of approval. In private, senior ALP figures see this FTA as critical to Labor’s Asia policy. “It’s going to happen under Labor,” one said yesterday.

Labor has crossed the Rubicon on its plans for the Indonesian relationship. Shorten quotes Paul Keating that “no country is more important to Australia than Indonesia”. He says the goal of “strategic trust” will shape his dealings with Jakarta. Bowen has been learning Indonesian and aspires to lead by example in cultural understanding. He laments the bilateral trade relationship as “way underdone” and pledges to upgrade economic ties.

A craven sellout to protectionist and trade union pressures is not an option. If this united Shorten-Wong-Bowen-Clare declaration cannot carry the day then a Labor government will be smashed at its core in the opening months, an untenable proposition. Yet combating protectionism will be a vital test for Labor. Such sentiment is on the march around the world, driven by populists of the Right and Left, with a bragging, destructive Trump as protectionist-in-chief and a local union movement embracing protection in its tragic regression on how to improve the incomes of working Australians.

The Morrison government pulled off a mini-miracle this week in securing the FTA signing ahead of the Indonesian election, a tribute to Trade Minister Simon Birmingham and our ambassador to Indonesia, Gary Quinlan, given the fiasco over the Jerusalem embassy issue from which Scott Morrison staged his essential retreat.

Indonesian President Joko Widodo remains a friend of Australia and is keen to advance bilateral ties, though nobody should doubt the unpredictable passage the trade deal may face in the Indonesian parliament. In the end the FTA may become more important as an overall strategic catalyst for relations.

Meanwhile, Indonesia still offers the best insight into Australia as a strategically stupid country, the recent evidence being last year’s mindless anti-Jakarta slogans from politicians and journalists chanting “we won’t run a foreign policy to suit Indonesia”, triggered by the Jerusalem issue. Do they ever ask themselves how Australia will manage an Islamic Indonesia in the future, when its economy, power and military will far exceed our own?

Trade policy is set to change significantly under a Shorten government, another reality the political system needs to understand and digest. It won’t be easy. One of the first bills to be introduced will be a repeat of Clare’s A Fair Go for Australians in Trade Bill from last October. This will put Labor’s philosophy into law; it is designed to remain the law and lock in a ­future Coalition government.

It has two aims: to appease protectionists by removing from trade deals the hooks the populists and the unions will exploit to sink the entire deal; and to bolster the case for free trade by anchoring it to a more open, consultative and acceptable framework.

Warning that free trade today is unpopular, Clare said in his second reading speech: “Today there are a lot of people that are sceptical about trade and free trade agreements. That’s why the way we design, negotiate and assess trade agreements has to change.”

Under Labor’s law, trade agreements will maintain the principle of labour market testing — meaning employers must first test if an Australian can do the job before bringing in foreigners. The law will also terminate investor-state dispute settlement clauses that enable foreign companies, including Australian companies, to take legal action if agreements are breached.

These are significant changes in trade policy. In addition, Labor will legislate to ban trade deals from requiring privatisations or undermining of the Pharmaceutical Benefits Scheme and will ensure government procurement protects local jobs. It will require trade agreements to guarantee a number of labour rights.

“We need to lift the veil of secrecy that surrounds these agreements,” Clare says. “That makes people sceptical and suspicious.”

The role of the parliamentary joint standing committee on treaties will be enhanced. It will be involved from the start. Using the US model, Labor will have accredited trade advisers access the FTA text after each negotiating round to provide “real-time feedback”, and ideally the draft text will be made public at each stage. The parliamentary committee and business, unions and community groups will be briefed after each round. There will be an independent national interest and economic modelling assessment done on every trade agreement — critically, before they are signed.

It’s a transformation of how trade deals are done in Australia. It has two sure consequences — the opponents will have a de facto “seat” at the table and this must inevitably weaken the value of the agreements, but the final deal is guaranteed approval by parliament because the compromises will be built in by the process.

The real point here is that Labor now insists on these changes as the price for ongoing trade policy bipartisanship, ultimately underwritten by parliament. This can be seen as either appeasement of rising Labor protectionism or astute reforms to salvage free trade from the tide of populist, protectionist sentiment. Everything will depend on the inclination of a Shorten government. However, Labor, if it wins office, will have an ambitious free trade agenda. This includes the China-sponsored Regional Comprehensive Economic Partnership involving 16 nations covering half of global GDP, an FTA with the EU, and another with the UK post-Brexit.

As for the FTA with Indonesia, Clare agrees with Birmingham — there is no labour market testing waiver. The unions got this wrong. The issue does not arise and there is no problem. On the ISDS clauses to which Labor objects, these will be fixed not by changing the agreement but by a separate exchange of letters between Canberra and Jakarta. Indonesia has no trouble with that. Despite the noise and delays, the Indonesian FTA will end up bipartisan.