Why the federal government is challenging the US trade investigation

The Trump administration has proposed a new 12.5 per cent tariff on Australia and a slew of other countries for allegedly failing to take action to prevent slavery, angering the federal government.

An investigation by United States Trade Representative Jamieson Greer found that Australia had “failed to impose and effectively enforce a forced labour import prohibition”.

The investigation found “the results of this investigation indicate that the acts, policies and practices of Australia related to the failure to impose and effectively enforce a forced labour import prohibition are unreasonable and burden or restrict US commerce”.

Fifty-four countries including China, Vietnam, Japan, the United Kingdom and New Zealand have been hit by the same 12.5 per cent tariff, with the investigation using similar language for dozens of countries.

A separate group of six economies – Canada, the European Union, Ecuador, Indonesia, Mexico and Pakistan – were hit with a lower 10 per cent tariff because the investigation found they were the only countries who had “not failed to impose a forced labour import prohibition”.

An existing 10 per cent tariff on all countries, including Australia, that was imposed by the Trump administration in February is due to expire in July.

Government sources were scrambling to understand the implications of the proposed new tariff, but said they believed it would not sit on top of the existing 10 per cent tariff. That means that, if imposed after a consultation period, Australian exports would move from a 10 per cent to 12.5 per cent tariff rate.

A spokesperson for Trade Minister Don Farrell said: “Australia maintains our position that any tariffs on Australian exports to the United States are unjustified and inconsistent with our free trade agreement.

“Australia has robust, comprehensive and world-leading legislation addressing forced labour and modern slavery.

“We continue to use every opportunity to advocate that US tariffs imposed on Australia are unwarranted.”

John Kunkel, a senior fellow at the University of Sydney’s United States Studies Centre, said: “Greer has clearly been tasked with restoring elements of the Trump tariff regime the Supreme Court knocked down in its ruling on his ‘liberation day’ tariffs. This looks like his attempt to put US tariffs on a more solid legal basis.”

Beef, a major Australian export to the US, would be exempt, as would other food items, metals and certain fuels and chemicals.

The US investigation found the countries including Australia were “subjecting US producers to unfair competition from forced labour goods in both export markets and the US market, and by displacing foreign goods produced without forced labour or forced labour inputs from their domestic market to the United States and other markets”.

Freya Dinshaw, associate legal director at the Human Rights Law Centre, said alarm bells had been ringing for a long time in relation to the risk of goods made with forced labour flooding Australian shop shelves.

“If the US is looking to penalise countries who have not taken sufficient steps to prevent forced labour in global supply chains, then Australia is indeed vulnerable,” she said.

Australia’s anti-slavery commissioner Chris Evans warned in January that Australia faced a growing risk of becoming a dumping ground for goods made with forced labour that were banned elsewhere.

For example, certain goods or materials that are subject to import restrictions in the United States due to forced labour risks, including certain bicycles, seafood, clothing, cotton, and polysilicon, are currently able to enter the Australian market.

These import bans also have implications for Australian businesses exporting goods to countries adopting these measures, and supplying to businesses that operate in these markets.

There are an estimated 50 million people globally and 41,000 people in Australia who are trapped in conditions of modern slavery and forced labour.

Several developed countries, such as the US, Canada, Mexico and the 27-member European Union bloc have or are moving to introduce import bans on goods made with forced labour.

Modelling from Fair Supply, a supply chain risk intelligence platform, estimates more than 21 per cent of all goods brought into the country last financial year – about $1 in every $5 spent on imports – were linked to supply chains where coercion, debt bondage and other forms of modern slavery are known to occur.

In March, the UN Committee on Economic, Social and Cultural Rights called on Australia to introduce mandatory human rights due diligence under the Modern Slavery Act – and to report back on progress within 24 months.

Last month, a powerful alliance of more than 100 investors, businesses, unions, civil society organisations, academics and survivor advocates called on the federal government to prioritise the introduction of due diligence requirements on large companies operating in Australia.

The 105 signatories include investors representing trillions of dollars in funds under management, eight national and state unions, and more than 30 civil society organisations from five continents.

The proposed reforms would shift corporate efforts from focusing on reporting alone to taking action by promoting a “proportionate and outcome-focused approach to addressing modern slavery” that is aligned with international standards.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.