Introduction and the Political Background

In the second half of 2013, there was a change in the political composition of the Australian Federal Government with control moving from the Australian Labor Party to the Coalition comprised by the Liberal and National Parties. To put this in a United States context, it largely represented a shift from a Democratic to Republican Congress. However, at the moment, the Coalition only controls the lower house of Parliament (the House of Representatives) but not the upper house (the Senate) where the Coalition will need the support of other Senators, whether from smaller political parties or from a number of "independent" Senators to have legislation passed.

The situation becomes even more complicated when it is considered that the Coalition parties do not share identical positions on trade matters. The Liberal Party tends to favor more open trade subject to traditional concerns on levels of investment in certain strategic industries where majority Australian control is felt to be preferable. On the other side, the National Party has traditionally been perceived as supporting the agricultural sector which has had the consequence in Trade matters of supporting improved export markets for agricultural producers but resisting reductions in tariffs on imported foods and seeking restrictions on direct foreign investment in the agricultural sector or in agricultural land. These differences play out in the context of debate as to levels and areas of investment which need review by the Australian Foreign Investment Review Board (FIRB) and the role of the Federal Treasurer who often has the ultimate decision on whether proposed investments are in the "National Interest" to be approved. Many foreign investors and nations have often complained that the entire process lacks transparency and consistency. Given that Australia has few substantive barriers to overseas trade, the issue of foreign investment and restriction on that investment takes on a significant level of importance.

The importance of foreign investment is currently playing out in negotiations on the proposed FTA with the PRC where there is concern on large - scale PRC investment, especially by State Owned Enterprises.

These differences within the Coalition have played out in other ways. The role of Trade Minister is currently occupied by Andrew Robb (a member of the Liberal Party) although the role had traditionally been held by a member of the National Party. This has caused some tension with the members of the National Party which manifested itself with the Agriculture Minister (Barnaby Joyce) a member of the National Party being openly critical of the terms of the Japan Australia Economic Partnership Agreement (JAEPA) on its signing by Prime Ministers Abbott and Abe on 8 July 2014 in Canberra. The criticisms focused on its perceived failures to deliver more immediate benefits for Australian agricultural exporters - criticisms which were also expressed at the time of announcement of the terms of the Korea Australia Free Trade Agreement (KAFTA).

The sensitivities of the agricultural sector (both for Australia and its trading partners) play out in the KAFTA and the JAEPA in a number of ways. By way of examples

• Even though levels of foreign investment in Australia without the need for FIRB review have generally been increased in both Agreements, subject to a reservation in relation to agricultural investment where the threshold before the need for review remains relatively low.
• Many of the concessions for Australian agricultural products by way of reductions in quotas in the KAFTA only operate on a seasonal basis.
• The JAEPA includes a specific Chapter addressing the trade in "essential food" aimed at ensuring continued supply and to limit restrictions and prohibitions.

At the same time, all political parties have taken similar positions on some Trade issues

• They have all expressed objections to the inclusion of Investor State Dispute Resolution (ISDS) mechanisms in FTA on the basis that it compromised national sovereignty. This was the firm position of the former Labor Government and may have formed an impediment to the completion of a number of Free Trade Agreements (FTA). That position has shifted somewhat by the current Coalition Government although it is directly in opposition to the position of US interests that such provisions must be included.
• They have all supported "toughening" the Australian Trade Remedies regime covering anti-dumping and subsidies. The former Government undertook a massive review and reform of the system and included a series of reforms all of which were expressed to assist Australian Industry in making applications and prosecuting claims. This has included the establishment of the new Anti-Dumping Commission and a new Anti-Dumping Review Panel together with the movement of the administration of the regime from the Australian Customs and Border Protection Service to the Department of Industry. There are stories of even further "tightening" which are reportedly to include a "reversal of onus" which would provide that once a prima facie case of dumping or subsidy has been established it is up to the exporters and importers to disprove the alleged dumping or subsidy. An earlier attempt to introduce such a provision was defeated in Parliament as that version was deemed to be inconsistent to the WTO Agreements. We await to see the revised version.

The current Government has also relaxed the formal position of the former Government which dictated a "purer" form of comprehensive FTA and adopted a more pragmatic approach which has been consistent to its "open for business" mantra and its assurances that the FTA with Korea, Japan and the PRC would all be in place by the end of 2014 being 12 months from taking office. However that more pragmatic approach has led to criticism from other trading partners - in particular from the US where the view has been expressed that the Australian approach has compromised negotiations on the Trans Pacific Partnership (TPP) by allowing too low a base to Japan and others to join any trade agreements.

Putting to one side the KAFTA and JAEPA (just for the moment - we'll be back soon), it is worth identifying the countries with which Australia has various FTA

• NZ
• Singapore
• US
• Malaysia
• Chile
• Thailand
• ASEAN countries (in conjunction with NZ)
• PACER (the Pacific Islands)

As you will note, there are a number of ASEAN countries with which Australia has bilateral FTA. In those cases, parties have the option of choosing either the ASEAN or bilateral FTA for specific transactions but not a combination of both

In addition to the completed FTA, Australia is negotiating on a number of other bilateral or regional FTA. This includes the seemingly permanent negotiations with the PRC and the potential regional FTA in the forms of the TPP, the Regional Comprehensive Economic Partnership (RCEP), and the revised Pacific Agreement on Closer Economic Relations. The proposed deal with the Gulf Co -Operations Council (GCC) is "on hold" and Australia is at the very early stages of advancing discussions with Indonesia and India on different types of trade agreements, neither of which is expected to deliver outcomes in the near future.

At the same time as advancing its own agenda, Australia has somehow managed engaged with the WTO agenda include endeavouring to advance the WTO Doha Round, becoming a party to the WTO Trade Facilitation Agreement ), leading negotiations on the WTO Trade in Service Agreement and considering entry into the WTO Government Procurement Agreement (among others).

Both the KAFTA and the JAEPA include similar architecture as to Chapters, Schedules and Annexes and provisions regarding rules of origin and certificates of origin. However, there are a number of areas of specific interest.

• In a sense, both FTA can be considered as having aspirational characteristics. While there are a number of demonstrable immediate benefits, many of the benefits to Australian exporters phase in over a number of years. Again this demonstrates a pragmatic approach to FTA which may not be popular with some industries or commentators but reflects the bargaining positions of the parties and the desire of the Australian Government to get a deal in place given the moves by other trading competitors.
• Both the JAEPA and the KAFTA include some flexibility in terms of requirements for importers and exporters to hold documents evidencing that goods are entitled to preferential treatment. Both agreements allow for exporters to elect to either hold Certificates of Origin issued by an authorized party or to provide their own Exporter Declaration. There are also provisions enabling exporters who are not the producer to provide such verification and even for importers to do so on occasion.
• There is no ISDS in the JAEPA on the basis that both countries are deemed to have mature legal systems. However the absence of such a provision does call into question the views on the Korean legal system as there is an ISDS in the KAFTA so far as it relates to foreign investment
• Both the JAEPA and the KAFTA include State to State dispute resolution provisions subject to specific areas such as Technical Barriers to Trade, Sanitary and Phystosanitary Measures, Competition Policy and some aspects on Movement of Natural Persons
• In a manner consistent with the perceived political agenda, while both the KAFTA and the JAEPA have increased the threshold for investment before the FIRB must give approval that is subject to specific exemptions in areas considered to be particularly sensitive. This sort of selective approach to investment approval may well form the basis for similar arrangements under the FTA with the PRC - where I would not expect the inclusion of an ISDS
• Services remains possibly the hardest area to secure significant immediate gains. Despite this, Australia's services sector continues to perform strongly outstripping all other exports.
• The JAEPA includes 2 Chapters which address specific areas of interest in trade between Australia and Japan, namely Chapter 7 (Food Supply) and Chapter 8 (Energy and Mineral Resources). Both Chapters reflect concerns to ensure that trade in these items is maintained and well regulated so as to reduce the prospects of interruption in these areas which are vital to both countries.
• The JAEPA does not include Chapters on Labor and Environment as are in the KAFTA. While both Japan and Australia are parties to various international agreements on these topics, the absence of these provisions in the JAEPA raises the perennial question as to whether these topics actually have a place in FTA.

In the Australian context, the first step after "in principle" agreement on an FTA, is that it is subject to formal legal review and translation, then signature and only then subject to Parliamentary review. In the Australian context this does not require passage and approval by both Houses of Parliament but it is laid before the Joint Standing Committee of Treaties (JSCOT) and occasionally review by a separate Senate Committee (as is the case with the KAFTA). While this has never rejected an Agreement out of hand, the review by JSCOT affords aggrieved parties with the right to object to Agreements, which has been the case with KAFTA - and in a recent example JSCOT did not immediately approve the adoption of the Anti - Counterfieting Agreement so the Federal Government is seeking to secure support for the KAFTA, as it will do for the JAEPA which it is introduced.

The FTA will then be subject to domestic legislation to implement its provisions (for example, introducing specific provisions for rules of origin and certificates of origin and reductions in rates of duty). Once both parties have passed the domestic legislation then they will exchange Diplomatic Notes and the FTA will start 30 days later. In the case of the KAFTA this may be early January 2015 with the JAEPA sometime later.

There may be an impact on the PRC FTA negotiations in particular - the willingness to agree to a less comprehensive agreement on the KAFTA and the JAEPA may give some indicators as to where the Australian Government may be prepared to give ground. As a result we may see an agreement with the FTA with PRC relatively shortly with provisions not unlike those of the KAFTA and JAEPA in terms of sectoral specific deals, allowance of increased PRC investment (including by PRC State Owned Enterprises) and no ISDS. It may also not deliver immediate improvements in trade in lieu of longer - term concessions from the PRC. Doubtlessly this will infuriate certain sectors of the Australian economy but will be viewed more broadly as at least a starting point with a significant trade participant who has been an elusive FTA partner for many years.

 By Claudia Burke & Stephen Tosini*

Federal Circuit Affirms Anti-Dumping Determination Concerning Fresh Garlic from China.  Qingdao Sea-line Trading Co., Ltd. v. United States (Fed. Cir.) [Newman, Reyna, Chen, JJ].  On September 10, 2014, the Federal Circuit sustained the Department of Commerce's calculation of antidumping duties on certain imports of fresh garlic from China.  Sales of products in non-market economies, such as China, may not reflect the fair value of the products.  Commerce thus calculates a "surrogate value" for non-market economy merchandise based on the value of similar merchandise in a market economy at the level of economic development comparable to that of the subject non-market country, e.g., India.  The Federal Circuit, applying a de novo standard of review, affirmed the Court of International Trade judgment sustaining Commerce's determination of the:  (1) surrogate value for garlic bulb; and (2) surrogate financial ratios that Commerce uses to value general, selling, and administrative expenses, overhead, and profit.  The court also confirmed that the interested parties, not Commerce, have the burden to create an adequate record.

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