February 14th 2004

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Articles from this issue:

COVER STORY: Australia-US free trade agreement: free trade or fair trade?

EDITORIAL: Bush and Iraq: the essential issues

ELECTION: How Labor outgunned the Coalition in Queensland

AGRICULTURE: Political will needed to solve dairy industry crisis

CANBERRA OBSERVED: Latham catches government on wrong foot

OPINION: Regionalism the solution to excessive centralism

STRAWS IN THE WIND : Deschooling or reschooling? / Oxbridge / Pluralism

Death ethics (letter)

Front and centre (letter)

CANADA: Exposing the myths behind 'free market' agriculture policy

ISLAM: Musharraf's ambitious quest to lead the Islamic world

Bird flu cover-up shows that change in China comes slowly

COMMENT: Is President Bush really "dumb"?

BOOKS: Divorce Law and the Future of Marriage, by Barry Maley


MUSIC: Reflections for Peace, Joy and Serenity

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Australia-US free trade agreement: free trade or fair trade?

by Colin Teese

News Weekly, February 14, 2004
At the time of writing, the final outcome of the negotiations between the US and Australia was still uncertain; even though the deadline for negotiations had passed. Such a situation is perfectly normal in trade negotiations. Indeed, critical, stand or fall issues are rarely discussed until after the nominal deadline has passed.

If that were not so the parties would not be able to get what they want out of negotiations on the bread and butter issues because of concentration on the difficult points.

Besides, mundane, and apparently uncontroversial issues, sometimes turn out to become break points. And, if they can't be solved, then there is no point in considering the really big issues.

This particular negotiation has proved different in one important respect. There seem to have been a less than usual number of bread and butter issues.

Non-negotiable issues

There has been another important difference. Neither side has ever revealed clearly, nor has it dribbled out, which issues are simply not negotiable; and what concessions are absolutely essential to the point where if they are not met there will be no agreement.

More important still, Australia does not appear to have been clear about precisely what we stood to gain from any free trade agreement with the US.

It is true that, in the beginning, some quite specific, extravagant and ill-founded claims were made. Dollar amounts were even specified. There never was any sound basis behind any of these claims, and gradually they have dropped out of discussion.

But that has not stopped the steady flow of generalised assertions about how much, supposedly, we stood to gain from a successful outcome.

Unfortunately, what has never been made clear is if the proposed agreement is so heavily weighted in our favour, and therefore against the US, why are the Americans so keen to conclude it?

There is, to this writer's knowledge, no history of the US pressing to conclude agreements which strongly favour the other side.

Although nothing much has been explained in detail, we can make educated guesses on what, in particular, each side wants.

Take the USA.

It appears to have a much larger and more clearly defined wish list than does Australia. It wants, not necessarily in order:

1. relaxed quarantine restrictions on its agricultural imports into Australia;

2. the easing of the conditions on foreign investment into Australia;

3. the relaxation, if not the abandonment of the rules relating to Australian content in Australian television, and

4. arrangements in place which will prevent Australia obtaining branded pharmaceuticals at cheap prices.

There are probably more, but these are among the most important of the US requests.

And we don't know, or at least those of us not present at the negotiating table don't know, what, if any, of these items are absolute musts for the US.

When it comes to the Australian side, our wish list is not so clear-cut, except that we want better conditions of access for our agricultural exports, in particular those for sugar and dairy products.

Now it is important to note that nothing in the known US catalogue of demands involves free trade. Some items, notably those relating to foreign investment and television programming, require changes in regulations which, hitherto, Australia has considered desirable in the national interest.

One, relating to quarantine, invites Australia to admit, formally, that certain at least of its quarantine regulations are maintained, not for the safeguarding of health standards, but as protective trade barriers.

Finally, the request relating to pharmaceuticals is, in fact, a complete denial of free trade. It is asking, in effect, Australia to commit itself to pay more for prescription drugs than the market determines.

In effect, the US wants to protect the high prices demanded by its drug companies when cheaper products are available elsewhere.

It is a kind of dumping action in reverse. There are provisions in the WTO agreement against damaging the markets of other countries by selling goods to them below cost, that is, by dumping: there is nothing, nor should there be, in a trading world committed to free trade, against a country choosing to accept cheaper dumped goods.

If the Australian Government agrees to this demand it will be turning its back on free trade and denying Australian consumers one of the basic rights an open market is supposed to confer upon them: that is to buy from the cheapest source. And remember, the product category is prescription drugs.

For the less well off, the price they pay for drugs, can have a direct bearing on their health and that of their families.

It seems to be the case that the Australian government is prepared in one case to tamper with health considerations of the nation for reasons which are by no means clear. In another, it appears ready to compromise one of the commitments it undertook in signing up to the World Trade Organisation agreement a decade ago.

And for what? Not free access to the US market for our dairy products and sugar, but for some kind of improvement over the very restricted access to the US market which we currently enjoy. In the case of sugar, the Prime Minister has attempted to represent some kind of improved access to the US market as a solution to the industry's problems. Unfortunately, in a recent and convincing letter to the Financial Review a spokesman for the sugar industry contradicted that proposition. More exports, he emphasised, and gave reasons why, were not the solution to the industry's problems.

It seems clear, then, that the detail of what is being negotiated - even supposing it succeeds - may not significantly benefit Australia; and neither does it advance the interests of free trade. In light of those facts it would appear necessary to search elsewhere for some kind of justification of the agreement.

Such a justification may well exist, but neither government so far seems prepared to share with us what that justification might be.

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