ALP warns Jakarta of doubts on free-trade deal

Labor has warned the Indonesian government it might seek to delete clauses from the Australian-Indonesian trade deal.

Opposition Leader Bill Shorten. Picture: Glenn Hampson

Labor has warned the Indonesian government it might seek to delete controversial clauses from the Australian-Indonesian trade deal before greenlighting the agreement in parliament, potentially delaying benefits for exporters.

Labor briefed Indonesian ­officials late last year on the party’s new trade policy, which bars clauses in trade agreements that allow companies to more easily sue foreign governments, suggesting it could apply to the deal with Jakarta.

The so-called investor-state dispute settlement clauses would be banned in new trade agreements under the Labor policy, introduced last year under pressure from unions, which are increasingly hostile to free-trade deals.

Indonesian government sources said Labor suggested a Shorten government could apply the policy to the trade deal, which is yet to be ratified by ­either government, in an effort to gauge Jakarta’s reaction to the possibility of making adjustments to the agreement.

In order for Australian exporters to get the tariff cuts in the deal, it needs to pass through parliament.

The meeting is further evidence that Labor is unlikely to wave the enabling legislation through parliament without some changes. Labor sources confirmed the party briefed Indonesian officials last year.

Investor-state dispute settlement clauses allowed tobacco giant Philip Morris to take Australia to court over plain-packaging laws. While the company lost, it cost taxpayers $40 million in legal fees. Labor believes Indonesia has not been in favour of investor dispute clauses because they mostly favour Australian mining companies. The opposition believes the agreement could be changed through a “side letter” to avoid a wider rewriting of the agreement.

The Labor policy also bars the party from supporting deals without labour standards and significant labour market testing, meaning employers have to check if Australians can do the work before foreigners are hired. A source said there were fewer concerns in the party about the labour clauses as there did not appear to be any expansion of waivers allowing companies to bring in workers without first ­offering jobs to locals. As the party is in opposition, it has not made any request or approach to the Indonesian government about specific side deals.

Trade Minister Simon Birmingham has condemned Labor’s refusal so far to commit to ratifying the trade deal, saying the party was being “reckless”.

He said Labor’s trade policy would make it “next to impossible” to negotiate future deals.

Unions have voiced opposition to the deal, highlighting the inclusion of investment dispute clauses and saying it could lead to worker exploitation as the number of working visas available to Indonesians will rise from 1000 to 4100 a year. But many Labor figures, including trade spokesman Jason Clare, are keen for the deal to come into force. Bill Shorten, foreign affairs spokeswoman Penny Wong, Treasury spokesman Chris Bowen, and Mr Clare have said the trade agreement is a “positive step forward”.