September 29th 2007

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Articles from this issue:

FEDERAL ELECTION 2007: NCC policy initiatives on biofuels and Internet safety

EDITORIAL: Horse flu outbreak: time to face hard facts

CANBERRA OBSERVED: John Howard's risky succession strategy

NATIONAL AFFAIRS: Will we learn from our quarantine debacle?

DEFENCE: Emerging nuclear challenges for Australia

NATIONAL SECURITY: Another triumph for the ABC or potential calamity?

EMPLOYMENT: Offshore assets most Australians never see

SCHOOLS: How much should we pay teachers who don't deliver?

LIFE ISSUES: 'Rosita', poster-child for pro-abortion lobby

UNITED STATES: Questions over Republican nomination

OPINION: Disgrace of the West's 'cognitive dissonance'

AS THE WORLD TURNS: libertarianism, lesbian's twins, Chinese toys, anti-Americanism

Kevin Rudd's motherhood statements (letter)

Kevinism or a Ruddism? (letter)

Facility with languages (letter)

Australia needs American help with defence (letter)


BOOKS: FAITH THROUGH REASON, by Janne Haaland Matláry

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Will we learn from our quarantine debacle?

by Colin Teese

News Weekly, September 29, 2007
Many of Australia's most lucrative exports could be jeopardised if we don't heed the lessons of the recent equine influenza outbreak, warns Colin Teese.

Who could have anticipated it? The latest casualty of mal-administrated quarantine rules has been Australia's horse population.

Official inquiries notwithstanding, don't be fooled! The Australian Quarantine and Inspection Service (AQIS) and the Commonwealth Government are to blame. Somehow, our quarantine guardians have managed to allow a horse, or horses, to enter Australia while infected with equine influenza (EI). For the racing industry, the outbreak could not have come at a worse time.

Horse-racing hit the headlines because, these days, it makes a significant contribution to our overall economy. But other areas of horse activities, hardly less important, have also been affected - most notably, those associated with the process of preparing animals for participation in the forthcoming Olympic Games in Beijing.

Worst case

The worst-case scenario would be if the disease spread to Victoria. In that event, the Melbourne Cup would be cancelled for the first time in its history.

In the borderless, free-trade world Australia has designed for itself, and, uniquely, chooses to operate to its own disadvantage, quarantine standards have been eroded. We can't apparently allow even the appearance of keeping anything out of the country - including plant and animal diseases.

The best thing that could come out of the EI disaster would be for AQIS and the Commonwealth Government to be finally called to account.

But the forces of darkness are hard to suppress. When the disease first struck Sydney's Centennial Park horse population, damage control kicked in immediately. The identifying veterinarian was immediately ridiculed, apparently by AQIS. "Rubbish," he was told, "We have never had EI in Australia." The vet went on to point out that he was quite certain of his diagnosis as he had seen the disease before in South Africa.

Well, the Government has now set up an inquiry to determine what really happened: how the disease managed to find its way into Australia - at least we hope that's what the Government intends to do.

But with the recent experience of the wheat export scandal, who can be confident that the Government will tolerate an outcome critical of its role? Also, there is always the possibility that, as with the AWB, even with an adverse outcome, the Government will deftly handball blame and responsibility to Biosecurity Australia.

These days our Government readily delegates a fair degree of independent, discretionary power to its various agencies. It is easy to understand why. If things do go wrong, there is a fair chance that the agency, not the Government, can be saddled with blame. No doubt that's the Government's hope with the EI outbreak.

So far as quarantine matters are concerned, cynicism is quite justifiable. To understand why, we need to look beyond AQIS and see how messily our rules on imports of infected plants and animal products - and, yes, in the case of horses, the importation of live animals - have been compromised in pursuit of an unrealistically open-trade policy.

Ever heard the phrase "comparative advantage"? It's a well-worn term in the mouths and pens of today's economic ideologues. They didn't invent the term, or the concept. The English economist David Ricardo (1772-1823) did that 190 years ago in his classic work, On the Principles of Political Economy and Taxation (1817).

Ricardo contended that we would all be better off if each nation produced at full capacity that which it was best suited to produce, and that its surplus should be sold to others. The funds generated from such transactions would help it buy from other nations what they were better at producing.

Effectively, Ricardo's law of "comparative advantage" gave us the original justification for countries to increase their prosperity by engaging in freer international trade. He elaborated his idea by way of an illustration. Britain, Ricardo insisted, should trade its cotton textiles for Portuguese wine. Portugal was better at wine production, while Britain made the better textiles. Both would benefit from such an exchange.

Ricardo's idea was sound in an era when nations traded only a small number of goods, and when trade was confined to goods where the advantage was essentially natural rather than created. Even in Ricardo's own example, Britain was eventually unable to maintain its advantage in textile manufacture. Neither, in the end, could Portugal with wine.

In today's much more complex world, Ricardo's idea of comparative advantage is hopelessly out of date. But that does not prevent economic rationalists from clinging desperately to its underlying assumptions. The reason is obvious. If the idea of comparative advantage no longer holds, then free trade in any absolute sense becomes impossibly difficult to justify.

So the theory of "comparative advantage" holds sway within a certain group of economists whose ideas came back into vogue in the last quarter of the 20th century.

But there are dissenting views, most notably by the Harvard University economist, Michael Porter. In the late 1980s, a seminal study by Porter pointed out the relevant issue was no longer "comparative advantage", but "competitive advantage".

By "competitive advantage" he meant the created skills in manufacture and presentation which gave one product an advantage in the market place over another. There was no shortage of examples to prove his point. At the time he was writing, Japan had captured the world market in a number of important areas of manufacturing, including the making of cars. But could anyone say that Japan started with a comparative advantage in car-making? Quite the opposite. They created one for themselves.

They did it the way these things have always been done in industrial societies. They kept offshore competitors at bay, while demanding that Japanese car manufacturers competed rigorously in the home market.

The Japanese Government also played its part. Its interventions ensured that the exchange-rate value of their currency, the yen, did not rise (as trade theory tells us it should) in proportion to the increase in export income; and so Japanese car-makers maintained their competitive position. China is today doing the same thing.

Almost all orthodox economic opinion in Australia rejects this reality. The Commonwealth Government's Productivity Commission and its economic fellow-travellers hold to the theory of comparative advantage. Furthermore, they insist that Australia's comparative advantage lies almost solely in the extraction and sales of minerals, and this is therefore what we should concentrate on.

It made economic sense to use the proceeds of that activity to purchase cheaper imports in substitution for Australian manufactures, and, where appropriate, agricultural products.

These ideas, enthusiastically supported by similarly disposed media and academic influences, appear to have overwhelmed the policy thinking of successive governments.

In the process, our manufacturing industry, and much of agriculture, have been brought to their knees. Meanwhile, our nation, unable to export enough minerals to pay for our import consumption needs, has been driven further and further into debt.

It is this commitment to a pristinely pure and entirely inappropriate free-trade policy that has jeopardised our formerly rigorous quarantine standards. Quarantine enforcement has been routinely compromised by trade policy considerations. We have seen it in one product after another - apples, salmon, beef, pork, citrus and bananas, to name just a few.


Always the assertion is put forward by Biosecurity Australia that we cannot maintain foolproof control over infected imports without threatening the integrity of our commitment to free trade. Of course, all of this is rubbish. The World Trade Organization (WTO) does not question the right of any country to maintain a quarantine regime as stringent as it deems necessary; all that the WTO demands is that quarantine rules are not substitutes for trade barriers.

The economic ideologues pushing their phoney brand of free trade and WTO obligations have managed to obfuscate all of this and, in the process, capture government policy on quarantine. We are now less rigorous than we once were about protecting our industries from plant and animal diseases. Equine influenza is the latest example of the consequences of this policy.

Perhaps now, voices pushing the opposite view will at last be heeded.

What the Government does not understand, and the economic ideologues are not telling them, is that lowering quarantine standards actually deprives us of one of our comparative advantages. If there is one comparative advantage that Australia enjoys most decisively, it is our naturally endowed capacity to keep out plant and animal diseases.

We are an island-continent well isolated from the world's infected countries. Unlike them, our isolation allows us the capacity to keep out unwelcome diseases. However, with the free-trade lobby in charge of the administration of quarantine policy, we are no longer committed to protecting that important competitive advantage.

The consequence of not protecting the one genuine comparative advantage over which we have total control is already being felt through the EI outbreak. We don't need an inquiry to tell us that this could not have happened if AQIS had been doing its real job - that is to say, keeping out plant and animal diseases, rather than involving itself in trade policy.

If the Government's inquiry exposes these shortcomings about Australia's quarantine system, and if the Government is prepared to address them, something worthwhile will have been achieved.

Much is at stake, not the least of which are our valuable agricultural exports to a number of very choosy markets.

For the moment, however, it is hard to have confidence in a favourable outcome from any official inquiry. It all comes down to whether we continue to permit common sense and the national interest to be sacrificed to economic ideology.

- Colin Teese is a former deputy secretary of the Department of Trade.

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