As unions attempt to discredit the trade deal with China, Bill Shorten must carefully weigh its post-byelection benefits. By Sophie Morris.

Shorten politicising the China free trade deal

Tony Abbott (standing, centre) looks on as China’s Gao Hucheng and Australia’s Andrew Robb sign the free trade agreement between the two countries.
Tony Abbott (standing, centre) looks on as China’s Gao Hucheng and Australia’s Andrew Robb sign the free trade agreement between the two countries.

It was an advertisement in the Mandurah Mail this week that distilled the political potency of Labor’s attacks on the China trade deal.

“Abbott’s China free trade agreement will cost jobs in Canning,” read the ALP-endorsed ad, directed at voters in the West Australian seat that is preparing for a crucial byelection on September 19.

Liberals campaigning in the outer urban and regional seat south of Perth this week concede this message is resonating.

It’s not a sophisticated message – Tony Abbott has declared it a “racist lie” that conjures up the White Australia Policy – but it may be effective, particularly in an electorate with rising unemployment. And it’s backed by a barrage of union-funded advertisements, claiming the government has “stuffed up” the trade deal by favouring Chinese workers over Australians.

The deal that was supposed to be seen as a harbinger of employment and prosperity, and a major achievement for the Coalition government, is instead being portrayed as a destroyer of local jobs.

Trade and Investment Minister Andrew Robb, normally patient and unflappable, gets irate at suggestions he has negotiated a deal that could jeopardise local employment.

“This is pure politics,” he fumed on ABC Radio National this week. “It’s grubby politics. It’s a selfish, selfish act by Bill Shorten, and China can’t understand it.”

He says Chinese investors are puzzled by suggestions they want to flood Australia with workers, and officials are concerned by Labor’s posturing.

1 . Labour market testing

Yet a literal reading of the deal and associated documents lends some support to the claims by Labor and the unions that it leaves the door ajar to the erosion of what is known as “labour market testing”.

In migration parlance, labour market testing refers to a requirement that employers prove they have tried to recruit local workers before hiring from overseas. They have to show evidence they have advertised and not had enough applications. We’ll return in a moment to whether or not it works.

At least one independent observer, Senator Nick Xenophon, believes there are valid concerns about the trade deal.

“For some inexplicable reason, the government hasn’t ruled out that there won’t be labour market testing,” Xenophon told ABC News Radio this week. “It means there could be big projects where there isn’t even an attempt to find Australian workers for those jobs. If you have a very clinical look at the text of the deal, it doesn’t look right in terms of labour market testing.”

Former Labor trade minister Craig Emerson says the government has, whether by accident or design, left itself room in the agreement to weaken labour market testing.

“It is not difficult to imagine the present Australian government or a future government wanting to keep Australian construction workers and tradespeople off the site of major projects as an arm of its industrial relations policy,” he says.

Emerson argues the problem can be easily fixed with separate legislation mandating labour market testing, avoiding any need to renegotiate the China agreement.

He is at odds, though, with Simon Crean, another former Labor trade minister and leader, who says the China–Australia Free Trade Agreement does nothing to erode labour market testing or standards. Crean this week joined a chorus of Labor luminaries backing the trade deal, including Bob Hawke, Bob Carr and state Labor leaders. It is improbable that Shorten would be prepared to block the deal, which has been 10 years in the making and which industry and business groups strongly support.

2 . Labor conference backing

At the ALP’s national conference in July, a compromise resolution was negotiated, binding Labor to “pursue all possible parliamentary processes to remove significant faults in the ChAFTA”.

The strategy harks back to Labor’s insistence in 2004, under then leader Mark Latham, on amendments to protect the pharmaceutical benefits scheme in legislation implementing the United States free trade agreement. The then prime minister, John Howard, insisted the changes were not needed but relented in the interests of passing the deal.

Shorten says he supports a deal with China, just not a “dud deal”, and wants further safeguards written into the enabling legislation, a pitch the government is resisting as it pressures Labor to support the agreement in its entirety and pass it before year’s end.

Before exploring the details of the deal and the veracity of the claims and counterclaims, it’s worth considering what is at stake here.

For this debate about trade has turned into shadow boxing over whether or not there should be labour market testing before the recruitment of skilled migrants. Employer lobby groups are generally not keen on it: they argue it is unnecessary red tape. Unions like it. It’s an alibi against the accusation that “foreigners are taking our jobs”.

3 . Lack of evidence

Henry Sherrell, who worked at the Immigration Department and is now a policy analyst at the non-partisan Migration Council Australia, thinks the current stoush is far removed from the policy facts.

“I’m at a loss why labour market testing is the be all [and] end all of debate over the 457 visa program,” he says. “There is no evidence that labour market testing gets Australians into employment.”

“If you’re a malicious employer, you can place a couple of Facebook ads and pass the test. This creates the veneer of compliance and protecting jobs when it is nothing of the sort.”

He favours increased fees for employers hiring migrants to encourage firms to recruit locally instead. “Employers respond to prices, not paperwork,” says Sherrell, arguing that the revenue could be used to fund compliance and settlement services. It is also high time, he says, to lift the minimum salary level for skilled migrants, which has not been indexed for the past two years.

A review of the 457 skilled visa program, commissioned by the government and led by consultant John Azarias last year, recommended the abolition of labour market testing, arguing it was neither reliable nor effective.

Labour law and migration law expert Joanna Howe, of the University of Adelaide, told the review: “Even if the employer-conducted labour market testing requirement was imposed more rigorously by the department … [it] is too easily evaded by unscrupulous employers and provides an additional regulatory burden on the vast majority of law-abiding employers.”

The government has referred the issue of labour market testing to its new advisory council on skilled migration, chaired by Australian Industry Group chief executive Innes Willox, who has publicly argued it “is costly and it’s ineffective and doesn’t achieve much”.

The current labour market testing requirements are a relatively new addition to the skilled migration program.

When the previous Labor government overhauled skilled migration in 2009, lifting the minimum salary level, it chose not to introduce labour market testing. It was not considered a priority until 2013, when Julia Gillard’s leadership was under pressure and she decamped to Western Sydney for a week, where she promised that Labor would stop “foreign workers” taking Australian jobs. “We will support your job and put Aussie workers first,” she said.

The legislation implementing her promise passed parliament the day after Kevin Rudd deposed her, taking effect from November that year under the new Coalition government. But it only applies to certain sensitive occupations, with professionals and executives largely exempt.

Robb insists there is no erosion of labour market testing, but adds that the regime introduced by Labor is far from comprehensive anyway. Only about 6000 of the 38,000 subclass 457 visas issued this year have been in categories that require it.

4 . Political hyperbole

The trade deal does extend exemptions from labour market testing. Chapter 10 of the FTA defines “contractual services suppliers of China”, who along with business visitors and corporate transferees are explicitly exempted from labour market testing, as including workers with “trade, technical or professional skills”.

This mirrors a clause in the Korean FTA, concluded last year, but it is a broader definition of “contractual service suppliers” than was included in the trade deal the previous Labor government signed with Chile, which did not extend the exemption to tradespeople.

The other issue raised by Labor – and by Xenophon – relates to workers on major Chinese-backed projects and is covered in a memorandum of understanding accompanying the FTA. The new investment facilitation arrangements (IFAs) would allow projects worth $150 million, with Chinese investment of at least 15 per cent, to enter discussions with the Department of Immigration and Border Protection about importing workers. Wages and conditions would need to comply with Australian law.

Such projects could include, for instance, a big construction site. It’s much lower than the $2 billion threshold for the enterprise migration agreements introduced by the previous Labor government.

An IFA does not guarantee the Chinese-backed project will be allowed to import staff, but assures investors that it ticks all the boxes for the department to consider approving such a request.

Labour market testing is not a condition of entering an IFA, but it could be required in the next step towards bringing in workers, known as a labour agreement. These agreements, struck under an IFA, would outline, among other things, “the sponsorship obligations … including any requirements for labour market testing”.

This language is less than conclusive, but the government points to departmental guidelines that opportunities must first be provided to Australian workers. Labor considers this too discretionary.

The third concern relates to a side letter from Robb to his Chinese counterpart Gao Hucheng, which removes 10 trades from the list of those requiring mandatory skills assessments prior to migration. This has been most strongly opposed by the Electrical Trades Union, which warns it could result in dodgy and dangerous wiring.

However, the change is not as alarming as it sounds. Migrants from most countries are already exempt from upfront mandatory skills assessments, which only apply to those from countries where qualifications are suspect. Also, these workers, including electricians, mechanics and carpenters, would still need to present their qualifications to the department and meet licensing requirements imposed by state governments.

As is often the way in politics, there is truth and hyperbole on both sides in this argument.

The deal, whether through clumsy drafting or deliberate intent, has provided the unions with enough ammunition to mount their political campaign. And the government has been slow to sell the benefits and rebut the criticisms.

Having made political mileage out of this, Shorten knows he cannot afford to block the deal and will eventually need to engineer a political compromise.

But not until after Canning votes.

This article was first published in the print edition of The Saturday Paper on Sep 5, 2015 as "Chinese whispers".

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Sophie Morris is The Saturday Paper’s chief political correspondent.

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