August 25th 2001

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Articles from this issue:

COVER STORY: Cloning: time for PM to take a stand

LAW: AFA joins High Court action over IVF

CANBERRA OBSERVED: 2001 Census: strange role of Bureau of Statistics

National Affairs: New business and agriculture lobby launched (FABA)

Agriculture: Apple import decision to be reviewed

Straws in the Wind

Trade: Minister's equanimity as US lamb exports get the chop

Government is committed to manufacturing: Senator Minchin

Historical Feature: Rural movement has message for today

Comment: Bendigo puts the 'bank' back into rural and regional Australia

Health: The bottom line and medical ethics clash

MEDIA: Vanishing trick; Abbott: the latest round

BOOKS: 'PC, MD' by Sally Satel - Political correctness in the medical profession

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Trade: Minister's equanimity as US lamb exports get the chop

by Colin Teese

News Weekly, August 25, 2001

The debate about the percentage of agricultural produce exported, featured in recent issues of News Weekly, is vitally important to farmers. One can only wish that ministers and industry politicians realised that fact.

Queensland academic, Mark McGovern, has argued that the politicians and industry spokespeople have turned the facts on their head. Eighty per cent of farm product is consumed domestically and 20 per cent exported, rather than the other way around. He makes his convincing arguments in an independently refereed paper.

By contrast, his opponents (whatever may be the reputations of the organisations behind them), whose ideological purpose drives them to vastly exaggerate the importance of agricultural exports for Australian farmers, have resorted to unsubstantiated assertions of rebuttal.

Farmer opinion, which is the target of this jousting, is understandably confused, not in any way due to McGovern. It is because of his opponents, whose purpose is not to debate the truth or otherwise of his arguments, but, ultimately, to insist, for ideological purposes, that farmers depend on exports and that, therefore, in their own interest, they must accept free trade and deregulation - even at the expense of their place in their own domestic market.

However odd it may at first seem, Australia's attitude towards its dispute with the United States over lamb exports is shaped by this ideological debate.

Almost two years ago, Australia complained to the WTO about barriers to its trade in lamb established by the US. Eventually, a dispute settlement panel was set up within the World Trade Organisation, at Australia's request, to examine the legitimacy of these barriers.

A few months ago that WTO panel finally found in Australia's favour, and the US was ordered to remove the impediments to our lamb exports within a specified time. That should have been the end of the matter.

In fact, the issue remains unresolved. The time limit established by the WTO for the removal of the restrictions has now expired, and yet the illegal restrictions remain.

It seems that US law precludes the removal of the restrictions without the permission of the industry. And that approval obviously will not be granted unless some other form of assistance is offered to US lamb producers.

This much has been admitted to Australia's negotiators by the US.

Australia has handled this distressing news with a strange equanimity. Trade Minister Vaile remains silent. More curiously still, lamb industry spokespeople do not appear to be putting pressure on either the Australian Government or the US to have the restrictions removed. It must be assumed that all of this means that our negotiators are busily at work with the US to agree on some form of assistance to US producers sufficient to induce them to permit the US to lifting of the existing restrictions on our lamb exports to the US.

Now, to the casual observer one thing seems clear. The US industry has mechanisms in place which restrict imports to its satisfaction. Common sense suggests that any new measures which emerge from negotiations, and which persuade the US industry to agree to lift the existing restrictions, must provide it with no less protection than before.

The question then arises: what possible reason can Australia have for engaging in a negotiation which cannot possibly advance the interests of Australian lamb exporters to the US beyond where they are now?

Perhaps the outcome of the lamb dispute is, after all - as was the case with our earlier dispute with the US over leather - an exercise in covering up the shortcomings of the WTO, rather than defending the principles and practice of free trade.

And, surely, it must be seriously embarrassing to all those who believed - or at least maintained - that the WTO would compel all member countries to be bound by WTO dispute settlement findings.

It now seems they are not.

Indeed, the WTO rules on dispute settlement turn out to be no more onerous than the old GATT rules. In practice, WTO rules do not bind offending parties to remove illegal restrictions, but merely to accept the consequences of retaining them. (As in the GATT, the injured party can increase protection against the offending party, on an equal volume of trade.)

Such retaliatory action, of course, serves no free trade agenda. And, what is worse, disadvantages smaller countries.

Yet we are constantly being told that one of the great benefits of the WTO is that it enables small countries (like Australia) to compeI larger countries to accept their responsibility to keep their markets open. In this respect, at least, so the argument goes, it establishes a level playing field.

But the reality is somewhat different. Power mostly wins out.

Here's how power works out in the WTO.

If a big country wins an action against a smaller country, it can compel the smaller power to change by threatening to take away a valuable concession with full WTO backing. (This kind of threat worked in the US versus Australia leather case, where threats of harming Australia's trade in sugar or dairy products compelled Australia to give way on leather.)

But that kind of threat doesn't work in reverse. For example, if Canberra threatens to take away a concession some US product enjoys in Australia, the size of the trade loss to the US is miniscule.

Thus any threat we might make against US trade to compensate for lamb trade losses, would have almost no impact on US export trade volumes. Our threats are therefore empty.

Apparently none of this seems to have dawned on our trade negotiators. Either that, or the point is deliberately overlooked in their headlong rush to identify themselves wholeheartedly with the ideology of free trade.

What we can say for certain is that winning in the WTO against the US on lamb does not for one moment equate with getting back the US lamb market lost to Australian producers.

lt is understandable Trade Minister Vaile is in no hurry to bring this unpalatable fact to the attention of Australian farmers especially, in an election year. Less understandable is Mr Vaile's refusal to embrace policies which would shore up the domestic market for the benefit of our farmers.

This, rather than sacrificing their domestic market on the altar of free trade, in the futile hope of persuading the big players to open up their markets for farm products is what our farmers most need.

If the lamb experience teaches us anything, it is that.

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