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Free trade could impact water

Saturday, 10th January, 2015

A satellite image of Cubbie Station taken from Google Maps. A satellite image of Cubbie Station taken from Google Maps.

By Darrin Manuel

Returning water from foreign-owned irrigators to the Murray Darling system could become significantly more complicated once Australia’s Free Trade Agreement with China comes into effect.

Both countries agreed to terms on the Free Trade Agreement (FTA) in November last year, and it is expected to come into force some time this year.

However some parties are concerned that the agreement includes a clause that could allow Chinese interests to sue the Australian government if it makes legislative changes that hurt Chinese-owned businesses’ profits or future profits.

The clause is an Investor-State Dispute Settlement (ISDS) mechanism, and it was used by corporations to launch 568 cases against governments in 98 countries across the world in 2013.

Amongst them is Philip Morris’ ongoing case against the Australia government after it brought in plain packaging on cigarettes.

The tobacco giant is waging the legal battle through the Asian arm of its business using an ISDS embedded in Australia’s bilateral investment treaty with Hong Kong.

If Australia agrees to an ISDS mechanism in its FTA with China, then it will also be obligated to modify its trade agreements with Japan and offer them the same deal.

This could be of particular concern for those who want to see water returned to the river, as Cubbie Station and its 28km of dams are majority-owned by Shandong RuYi Group, a textile manufacturer owned by Chinese and Japanese investors.

Once the FTA comes into effect, any move to cut back on the water entitlements of irrigators under Chinese or Japanese ownership could lead to protracted international legal disputes.

Although the government says the ISDS provisions will contain safeguards to “protect governments ability to regulate in the public interest and pursue legitimate welfare objectives such as public health, safety and the environment”, many are not convinced.

Fellow at the Regulatory Institutions Network, ANU College of Asia and the Pacific, Dr Kyla Tienhaara warned of the dangers of an ISDS late last year in a piece for the ABC.

“Many ISDS claims now exceed $US1 billion and although the compensation actually awarded is generally much lower than what is sought, the impact on the public purse can be substantial,” she said.

“Investor complaints have covered the gamut of regulatory measures: from taxes to land-zoning decisions to bans on dangerous chemicals. Measures taken by governments to protect the environment have proven to be particularly susceptible.

“As countries around the world begin to take more serious action on climate change, ISDS is likely to become a key battleground between progressive governments and corporations that are resistant to change.”

Australia already has ISDS provisions with Chile, Singapore, Thailand and New Zealand, and agreed to its inclusion in a recent FTA with Korea which is yet to come into effect.

Ms Tienhaara also warned that the inclusion of an ISDS in the upcoming Trans Pacific Partnership Agreement (TPPA) with the United States could prove to be even more problematic.

“If the Government says yes to ISDS with Korea and China, it can hardly say no to the US in the ongoing negotiations for the TPPA, which is of particular concern given the highly litigious nature of American multinationals.”

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