ECONOMICS: by Colin TeeseNews Weekly
Who's looking after world trade
, October 20, 2001
The Report of the Joint Standing Committee on Treaties, which examined Australia's relationship with the World Trade Organisation (WTO), was released last month.
The Committee embarked upon a series of public hearings, round table discussions and community forums in mid-October 2000. It did not take evidence in either South Australia or Tasmania. Its report was delivered almost a year later.
This writer, on behalf of the National Civic Council, was among those who presented evidence to the Committee.
Essentially, the NCC suggested to the Committee that there was a need for trained commercial diplomats if Australia was to be able to represent itself well in international trade forums, including the WTO. This point does not seem to have registered with the Committee.
On the whole, the report is a most disappointing document.
Most importantly, it disappoints because all of the orthodox assumptions about "free trade", about so-called globalisation and about the WTO itself, are accepted as givens by all except one of the Committee members. Fair trade
Only Democrat Senator Andrew Bartlett was bold enough to register dissent. He pointed out that his party supported the notion of "fair trade" over "free trade". He also registered the point that macro-economic modelling (so-called modelling, this writer might have added) pointed to the "net benefits" of trade liberalisation. Obviously this implies that there are both winners and losers from the process, but the Committee (other than Senator Bartlett), while supporting the idea of free trade, does not acknowledge the need to help the losers.
And even Senator Bartlett accepts uncritically the Committee's assertion (unsupported by evidence) that globalisation is inevitable and unchangeable. He did, however, observe that important issues such as the impact of globalisation on poverty and income distribution were not discussed in the Report.
The general tone of the Report and its likely direction can be discerned by the foreword to the document, signed by its Chair, Senator Helen Coonan. There was no conclusive evidence, she maintained, that the WTO (and she adds for good measure the World Bank, the IMF and the World Economic Forum) were contributing to the inequality between rich and developing nations.
The Senator then added that "the WTO is working to prevent small nations and disadvantaged developing countries from being excluded from the world trading system through the application of the principle on non-discrimination".
Of course it may be said in defence of both the Committee and Senator Coonan that the Committee's terms of reference were drawn very narrowly. But even there, presumably, the Committee could have held out for wider terms of reference.
The Committee's recommendations and their content are too numerous to cover fully in this review, but, selectively, some of the views of the Committee are worthy of comment.
True to its Terms of Reference, the Committee makes a recommendation relating to the inclusion of private law firms in the dispute settlement process. It is hard to see how this could help at all. The likely outcome of such a process is that excessive legalism will be introduced into WTO proceedings.
Lawyers themselves tacitly admit this when they assert that the presence of professional advocates will benefit the process. The opposite is likely to be true, since fact rather than persuasion has always been at the heart of settling disputes on the rules relating to international trade.Questionable decision
Still on dispute settlement procedures, the assertion by certain academics, that the dispute settlement procedures of the WTO are enormously superior to the those of the old GATT - which the Committee accepted uncritically - is highly questionable.
It was asserted, for example, that that previous "veto" available to losing parties is no longer available.
In practice, that assertion is incorrect. Under WTO rules, there is no obligation on losing parties to accept outcomes, though they may suffer retaliation if they do not. It was the same under the GATT. That is not the only error of fact in the report.
On the matter of quarantine, the report is extremely damaging to Australia's interests.
It asserts, falsely, that Australia, and all other countries, can no longer maintain a no risk policy on quarantine. The truth is they never could. Not because of any international rules, but because of the fact that the movement of goods and people across borders has always entailed some risk. As a matter of fact, the WTO rules are no more onerous than those we were committed to under GATT.
Nevertheless, AQIS, for whatever reason, insists that they are, and the Committee seems to have accepted this view.
Finally, at least as far as this reviewer is concerned, it is worthwhile to ponder on what the Department of Foreign Affairs and Trade (DFAT) maintained was its approach to dispute settlement.
First, it doesn't appear to want to take the initiative on a trade dispute unless Australia has a major share of world trade in a product. Why, exactly, is not clear.
Surely the measure should focus on whether or not an Australian industry is being harmed by the illegal trade restrictions of one of its trading partners?
Second, DFAT wants to take a different attitude towards trading partners' illegal actions which harm Australian industries, according to whether we are in trade surplus or deficit with them.
Here DFAT seems to be saying we can't afford to be in dispute with a partner with whom we are in deficit. Trade effects
Two things can be said about these two conditions taken together. They would seem to preclude us from entering into dispute settlement on most occasions. And second, our trading partners don't seem willing to bind themselves to the same considerations.
For example, the United States, which enjoys an overwhelmingly large trading surplus with us - and which, as well, restricts our agricultural exports to their market - never seems inhibited by these considerations from launching disputes against us.
Could it be that despite all that DFAT and, indeed, the WTO says to the contrary, different rules do, after all, apply in disputes between the large and small players?
At the very least, the instincts of the small tell them exactly how far they can go in dealing with the large.
One might have expected at least recognition of this reality by the Committee.
- Colin Teese was Deputy Secretary of the Department of Trade