What is it?
Australia is negotiating a Free Trade Agreement with China. The Abbott government has pushed hard on this, in combination with the recently signed Japan agreement. A Free Trade Agreement liberalises restrictions, typically trade-related, between two countries. Most common are reductions in tariffs or abolitions of quotas. While Free Trade Agreements are normally bipartisan in Australia, there is disagreement outside of politics as to whether they make a strong economic impact. Bernard Keane at Crikey recently reflected on the impact of the Australian-United States Free Trade Agreement:
Still, the AUSFTA is a splendid example of the howling gulf between political journalists, who see FTAs, particularly those announced with elaborate theatre and plenty of colour and movement in foreign capitals, as significant events, and economists, who see little of interest in what at best are trade diversion agreements.
Why does it mention immigration if its about trade?
The article says the Chinese government want to import Chinese workers into Australia to work on projects funded by Chinese investment. Regulations of investment are often included in Free Trade Agreements. However the ability to tie labour to investment decisions has not previously been included in a Free Trade Agreement which Australia is party to. This would set a new negotiating precedent.
Why can’t Chinese workers come through standard immigration programs?
Current immigration regulations require any foreign residents, including Chinese citizens, to hold an appropriate work visa (most likely a 457 visa) if they are working on an Australian-based project for more than three months. It is likely two parts of the 457 visa program – English language proficiency and Australian market salary rates – present issues for Chinese investors wanting to bring their own workers into Australia. These regulations mean workers must have a base level of English (and pass a test to prove it) and they must be paid what Australian’s would be paid to do the same work. The argument from the Chinese government is likely that these regulations add significant cost to Chinese investment in Australia.
Should Chinese workers have a labour exemption due to their massive foreign investment in Australia?
This is the key question. The Chinese government would say yes. The movement of Chinese labour will make investment easier, creating more of it. However the Australian government is resisting such calls. While investment will increase under such a move, its primarily because it will be cheaper and the benefits will mostly accrue to China. One of the reasons the mining boom was welcomed by governments of both sides in Australia was the spike in jobs in mining and construction. This helped keep unemployment low and raise real Australian incomes in a time of global uncertainty. Allowing foreign investors to import their entire labour force would undermine one of the key arguments for the investment in the first place.
So this is a bad idea?
From an immigration perspective, yes I think so. Exemptions and exclusions are tricky business in immigration. Once you start favouring one country, you create significant disincentives for others. If Chinese investors were able to build projects quicker and cheaper than other investors, this would create an uneven playing field. Granted, this is one of the purposes of the Free Trade Agreement in the first place. However this particular inclusion has the ability to undermine Australian labour market norms, not a standard outcome of a Free Trade Agreement.
Any adjustment to the regulations governing international labour mobility should apply to all citizens, instead of those privileged by their country of birth. It is one thing to debate changes to the 457 visa program, it is another completely to create a new type of visa specifically for one country.
What about changes to the 457 visa program?
This is the second article in the last month that has been deliberately leaked by the government about this issue. This shows the Abbott government wants the public to know this agreement is under negotiation. More importantly, the stories say the Abbott government is resisting such moves to include a labour movement clause in the agreement. This demonstrates the Abbott government as strong negotiators but willing to find a compromise, perhaps via the 457 visa program.
The problem with this type of reporting is that the generally interested reader has no idea what is under consideration for the 457 visa program. It gets tacked on as an afterthought. Policy making as speculation and innuendo.
Potential changes may include lowering the English language barrier, watering down the market salary rates proposal or carving out exemptions within the 457 visa program for specific occupations related to specific Chinese investment. Each of these changes has its own set of issues. These changes may apply to everyone or perhaps just to Chinese workers.
What’s going to happen?
We’ll have to wait and see. I can’t see the Abbott government allowing a general labour movement clause in the Free Trade Agreement although who knows? There are undoubtedly changes coming to the 457 visa program – there is a current enquiry underway at the moment – and perhaps this issue will tie in. This would be unfortunate.
In my view, changes to labour mobility should be discussed discretely from trade and investment. Further, proposals that favour one country over another should generally be frowned upon, with the exception of fostering development and regionally-based agreements.