August 11th 2001

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The companies driving US-Australia free trade agreement

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The companies driving US-Australia free trade agreement

by Patrick J. Byrne

News Weekly, August 11, 2001
About 60 major US and Australian corporations and business organisations have formed the "America-Australia Free Trade Agreement Coalition" to promote the proposal. More than 100 are expected to eventually join this formidable pressure group.

  • Eighteen of the US corporations are among the world's top 200 corporations with annual sales of $US1,327 billion, which is more than four times the annual out put of the entire Australian economy (about $US300 billion).

  • The two largest of these corporations alone, General Motors and Exxon Mobil, are bigger than the Australian economy.

  • The annual profits of these 18 corporations amount to over $US79 billion and they employ over three million workers altogether.

Undoubtedly, Prime Minister Howard, who floated the proposal earlier this year, will be lobbied heavily by these companies when he goes to Washington in September to advance the proposal with President George W. Bush.

This combined economic power of these corporations pushing this free trade pact should be of serious concern to Australians.

International trade is about power politics, where the strong do as they please and the weak extract what benefits they can. For example, Australia announced it was planning to take Japan to the World Trade Organisation disputes panel over a 390 per cent tariff on out-of-quota imported rice, the Japanese simply announced they were postponing future talks over Australian wheat imports. The message was clear: back off on rice or the Japanese would retaliate by looking elsewhere for wheat imports. Australia had no choice but to back down immediately.

In most industries, US corporations dwarf their Australian competitors.

Further, Australia has a huge trade imbalance with the US. Australia takes 20.8 per cent of its imports from the US, but the US takes only 9.8 per cent of our exports. We cannot gain access to their markets for our agricultural products, which are the main products that would be competitive in the US market.

Any agreement first should aim to redress this huge trade imbalance. That would have to involve opening the US market to our farm products, particularly sugar, wheat and other grains, beef, etc.

But there is no way that the US is going to do this. Despite all its rhetoric about free trade, the US was behind the collapse of the WTO Seattle meeting that aimed at liberalising world trade in agricultural goods. Indeed, the US, Japan and the EU do not want to open up their markets to food and fibre imports.

US subsidies

Washington heavily subsidises US farmers. Under the Democrat Clinton Administration, US farm subsidies increased from an average of 19 per cent to 24 per cent of a farmers' total income over the 1990s. Over the same period, Australian farmers saw subsidies fall from eight per cent to six per cent of their total farm income. In the past three years US farm subsidies have increased substantially.

Historically, Republican administrations have been more sympathetic to farmers than Democrats. Hence, we can expect President Bush to continue, and probably to increase, subsidies to farmers.

Even a recent report commissioned by Prime Minister Howard had to work hard at putting a positive spin on the few benefits to Australia it could find coming from such an agreement.

The report strained the bounds of credibility, claiming that a free trade deal would have substantial benefits for sugar exports.

However, the US is unlikely to compromise its sugar market, and if it did make some openings for imports, it would give preference to producers in Latin America over Australia.

If Australia cannot gain access to the US for its food products, then a free trade deal offers substantial concessions to the US will almost inevitably impact seriously on Australia. The US has signalled that as part of any agreement it wants:
  • The winding back of the single selling desk for Australia wheat (the Wheat Board gives our farmers a competitive edge in world markets, and US grain traders have been campaigning strongly for its abolition).

  • The winding back of Australia's strict quarantine rules, in order to gain access for US grapes (currently banned because California has Pierce's Disease which kills vines), apples (also banned because the US has fire blight), pork, poultry and stone fruit;

  • Access to our textile and broadcasting services.

Also, it is believed that the US wants freer access to Australian government contracts (i.e., the abandonment of any preferential government contract to Australian companies) and to our health and education sectors.

A free trade agreement with the US is likely to see Australia concede more than the US ever will, thereby worsening our trade imbalance. Huge US corporations could well be given even easier access to the Australian market, putting further pressure on many of our industries.

Australia's struggling farm sector would suffer from imports of heavily subsidised US products and from weakened quarantine rules.

Finally, many US commentators have criticised the corruption of US politics by corporate money. There is a risk that Australian political parties could be weaned onto such methods. US corporations are intent on pursuing their interests, which are not necessarily in the national interest of Australia.

Key members of the American-Australian Free Trade Agreement Coalition
Corporation1999 sales
$US billions
1999 profits
$US billions
1General Motors176.56.0388,000
3Exxon Mobil163.97.9106,000
4Ford Motor Coy162.67.2365,000
5DaimlerChrysler Coy160.06.1467,000
9General Electric Co.111.610.7340,000
17BP Amoco83.65.080,000
28Philip Morris Companies61.77.7137,000
68Compaq Computer Corp38.50.676,000
73Proctor & Gamble Coy38.13.8110,000
89Chase Manhattan*33.75.475,000
143Lockheed Martin5.50.4147,00
180Duke Energy21.71.521,000
181New York Life International21.70.67,000

* Has since become JP Morgan Chase & Co

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