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Rethinking Australian Investment Treaty Policy

October 16, 2013 in Economics

By Simon Lester

Simon Lester

The recent Australian elections were decided mostly by domestic policy issues, but their outcome will have an impact beyond the border, as the new government may rethink Australia’s somewhat unique view on the international investment regime. Whereas most of the world supports a core set of investment rules, Australia has long been a skeptic. The Liberal-National coalition, however, has indicated that it is more amenable to these rules. If they decide to revise current policy, Australia will have an opportunity to refine its thinking on rules that were developed decades ago and are ripe for modernization.

The international investment regime came to the average Australian’s attention several years ago when tobacco company Phillip Morris used an obscure Hong Kong-Australia investment treaty to challenge Australia’s plain packaging cigarette laws before an international tribunal. This challenge helped cement Australian doubts about these treaties.

If we can get international investment rules right, we will be able to liberalize investment without interfering with national autonomy and causing needless controversy.”

In its 2004 free trade agreement with the US, Australia had objected to the inclusion of investor-state rules (rules that allow for investors to sue governments directly), and these rules were ultimately excluded from the treaty. This was a major departure from US policy, one that has not since been repeated. Australia’s ability to dictate the terms to the US indicates the strength of Australian convictions on the issue. A few years later, Australia made a policy of excluding investor-state rules from trade agreements permanent, based on findings of an independent agency called the Productivity Commission. In response to these findings, Australia announced that it would no longer pursue investor-state provisions in its international agreements.

Thus, as a matter of formal government policy, Australia was already wary of these rules. The plain packaging case simply brought more attention to the issue and affirmed for many Australians the correctness of this view.

Now Australia might abandon its position, at least as a hard and fast rule. As noted, the Liberals have previously expressed a desire to change course on this issue. For example, rather than categorically exclude investor-state rules, Australia might now consider using them on a case-by-case basis.

The obvious places to carry out a new policy would be in the Trans Pacific Partnership (TPP) trade negotiations and in bilateral talks with China and Korea. In these talks, Australia has previously asked to be …read more

Source: OP-EDS

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