A leading international trade lawyer has cautioned that Australian companies receiving government assistance as a result of the new carbon price scheme may breach trade agreements. 

Shanker Singham, partner and head of Squire Sanders international trade team, told ALB that with regards to the impending carbon price scheme, two wrongs don’t make a right. “Those Australian companies that are benefiting from those subsidies, which are competing against foreign companies in foreign markets, are going to have to deal with cases brought against them and will probably have to pay increased tariffs, because of the subsidy they received from the Australian Government,” said Singham.

The Gillard Government announced several support packages for Australian industries negatively impacted by the carbon price, including the Australian steel industry, which is set to receive A$300 million. “Competitors will not take the carbon price into account,” said Singham. “They will still take action against them if they are receiving a subsidy.”

Singham is visiting Australia for the first time following the firm’s opening of its first Australian office in Perth (formerly Minter Ellison Perth) and was guest speaker at an American Chamber of Commerce in Australia (AmCham) Conference in Perth last week. Based in Washington, Singham is a U.S. Government advisor on trade policy and advises global companies on trade, competition, regulatory and economic integration issues and is one of the most experienced and acknowledged legal experts on the interface between trade, competition and regulatory issues. 

Singham says there are a number of similarities between Australia and the U.S. when it comes to trade, particularly with regards to anti-competitive market distortion. “Distortions occur when the government distorts the market, usually to support one of its local champions,” said Singham. Emerging markets such as China, India and Russia are of particular concern in this area, but also developed economies such as Australia and the U.S. “Australia has been pretty good on World Trade Organisation (WTO) compliance, and tends to be a promoter of eliminating trade barriers and market distortion, but it is not immune to powerful domestic protectionist pressures, particularly in a downturn,” said Singham.

While a number of countries have adopted this approach in recent years, in a bid to protect local jobs and promote local economic growth, what they are actually doing is damaging the global supply chain to the point where you end up harming the companies that you are trying to protect. “Companies that generally contribute the most revenue are global companies, with global supply chains ... Initiatives to use only local companies or local resources are clearly violating the spirit of trade agreements, ” concluded Singham.