Supporting Local Steel Does Not Jeopardise Trade Deals

Claims by Liberal Government Ministers that if Australia required the use of Australian made steel in government projects that this would tear up or invalidate existing Free Trade Agreements are without foundation and are simply scaremongering.

A court or tribunal MIGHT find that a particular contract or provision was not legal under the FTA. This would invalidate the contract, but have no impact on the FTA, which would continue as before.

Whether a court or tribunal WOULD find that a particular contract or provision was not legal under the FTA depends on the particular facts. While some of Australia's FTAs contain rules preventing discrimination in government contracts, others do not. Those that do – the US FTA, the Korea FTA, and the Japan Australia Economic Co-operation Agreement – contain exemptions, such as for defence contracts and for SMEs.

For a government procurement contract or provision to be invalid:

(1) a company in another country would want to obtain a contract for the supply of steel to the Australian Government,

(2) the company would need to be based in a country which had an FTA with Australia that contained rules preventing discrimination in the awarding of government contracts,

(3) the government contract would have to be for a purpose that was not specifically excluded from the government procurement rules, such as defence procurement, and

(4) the company would need to win a legal challenge against the contract. The government could argue that foreign firms were not being discriminated against; they could win the contract, all they were being required to do was to use Australian steel, as local companies were being required to do.

As I said earlier, even if these hurdles were all jumped, all that would happen is that the contract would be invalid – the FTA would continue as before.

I personally think it is unwise to agree to government procurement provisions in trade deals. They can fetter the capacity of governments to act in the best interests of their own industries and workers. I don't mind if other countries do it – why shouldn't they support their own industry and their own workforce? The China FTA contains no government purchasing rules because the Chinese Government itself wanted to make its own decisions about purchasing. And the US Australia FTA exempts the US steel industry from government purchasing rules, but not Australia's! Those Liberal Ministers who now say we are blocked by the US trade deal from helping the Australian steel industry should explain the negotiating genius of the Howard Government in achieving this outcome.

But to claim that we can't support local steel in government procurement contracts because they will invalidate existing Free Trade Agreements is scaremonging nonsense. The reason Liberal Ministers say we can't give local preference is because they basically don't want to.