TRADE : by Colin TeeseNews Weekly
Why US trade deal won't fly
, April 21, 2001
One does not know whether to pronounce the Coalition parties cynical or na•ve when they talk about a free trade zone with the United States. Perhaps it is a bit of both.
At the very least, one would have thought that someone among their many trade officials would have advised them why the negotiation of a free trade agreement with the US was at the unlikely end of probability. Equally, one expects more from our major dailies, including the Financial Review, which opine so confidently on the possibility of concluding free trade agreements.
In that context, the Financial Review treated its readers to a so-called news story to the effect that a ground-breaking agreement had been reached in Buenos Aries. Apparently, after two days of intensive negotiations at the official level, Pan American Heads of Government would consider a final declaration in Quebec City later this month. This declaration would pave the way for free trade in the Americas by 2005.
Great news, readers were entitled to conclude, unless they read on. It turns out that there is still a minor issue or two to be addressed; notably, the matter of US agricultural subsidies and its anti-dumping procedures. (Australian exporters to the US should particularly note that the concern is not the WTO rules on anti-dumping and subsidies, but US law and practice on those issues.)
On both of these issues US practice - and law - goes far beyond what the WTO rules permit.
We learn at the end of the Financial Review article that progress to embrace free trade by 2005 is absolutely conditional - at least as far as Brazil, Argentina, Paraguay and Uruguay were concerned - on the matter of US agricultural subsidy and anti-dumping laws being settled.
As any hard-nosed trade negotiator knows, these amount to major barriers to agreement. Even more so, when we learn that there is a further condition. The proposed free trade area should not oblige countries to infringe their own domestic laws.
So long as those qualifications remain, the possibility of a free trade area coming into being is like someone offering $100 million to the first man to swim the Atlantic Ocean. He or she is unlikely to have to pay up!
If these are to be the impediments to establishing a free trade area covering the Americas, we may safely assume that nothing more generous will be offered to the rest of the world - including Australia.
A further problem for Australia is the pattern of trade existing between ourselves and the US. At present we buy from the US almost three times what we sell. Our exports are mainly agricultural products and minerals.
Like the Latin Americans, our hope would be to increase our exports of agricultural products and to have the US more closely observe the WTO rules on issues such as anti-dumping. Nothing now known suggests that we would have any chance of realising these hopes.
On the import side, the US faces almost no impediment to its access to our market for manufactured goods, but it does want to sell more of its agricultural produce here.
We could expect any free trade area agreement to include a US demand for more liberal access to the Australian market for agricultural products, including the liberalisation of our quarantine rules. That is, unless we have not already given these concessions away unilaterally, in the context of competition policy.
The European Union represents the only free trade agreement in the world. And it is based upon the idea that its Member States enjoy a margin of preferred access to each other's markets over the rest of the world.