September 22nd 2001

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Articles from this issue:

STOP PRESS: Who has declared war on the United States?

COVER STORY: Canberra to blame for Ansett's demise

CANBERRA: Asylum seekers bring ill tidings for Beazley and the ALP

COMMENT: Boat people reaction - echoes of the 1970s

NEW ZEALAND: Army caught in political imbroglio

STRAWS IN THE WIND: Send in the counsellors / Good morning, Vietnam

MEDIA: Out of touch with majority sentiment

LETTERS: Tristar: another view

Letter: Poor reception

Letter: Let them stay

REGIONAL AFFAIRS: Why East Timor chose Portuguese

TRADE: Lamb exports: where to now?

BUSINESS: Selling wholesome food to Australia's homes

FAMILY: Well-being of families and nation intertwined

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Lamb exports: where to now?

by Colin Teese

News Weekly, September 22, 2001

So far as the Government is concerned, we might reasonably conclude that the dispute over lamb exports to the United States is now over.

According to this writer's understanding, the result goes something like this. From November 15 the minor irritant of a three per cent tariff will be abolished on Australia's lamb imports into the US. A much more serious impediment to our exporters - the punitive 24 per cent tariff on all imports in excess of 81.5 million pounds weight - is also to disappear. This second barrier to trade effectively limited our lamb exports to 81.5 million pounds (40,750 tonnes).

If that were the end of the story then the Government and the World Trade Organisation would deserve our congratulations. And the WTO would have gained for itself a new and much needed credibility in the area of dispute settlement. Unfortunately, the opposite is true.

Effectively the WTO played hardly any part in deciding the outcome. The final outcome was achieved as a result of bilateral negotiations between the US and Australia; in much the same way as the leather dispute was resolved earlier this year. And while in the lamb dispute - as distinct from leather - Australia was, as it were, the innocent party, the US appears to have come out on top in both disputes. On both occasions Australia was fighting out of its weight division and the WTO was of no help.

In leather Australia was obliged to give up its "aid" to leather exporters, while the US retained illegal tax rebate measures which helped its producers compete unfairly with our leather imports. In principle, much the same has happened with lamb. In each instance with the consent of Australia.

True, in the case of lamb, the US has withdrawn - or will after November 15 - the measures it imposed illegally almost two years ago. In their place the US has substituted a US$75 million "aid package", at least as questionable as to validity as the measures withdrawn.

US producers are said to be husbanding some five million sheep. Assume from this flock they produce two and a half million lambs annually. Thus the new package amounts to a subsidy of US$30 per lamb.

No doubt US lamb producers are rubbing their hands at this highly satisfactory outcome. In all probability it is better than the illegal protection they have enjoyed for the last two years.

So, rather than applauding the outcome, how come we are not hearing Trade Minister Mark Vaile denouncing the replacement measure as an illegal subsidy and immediately announcing his intention to contest it in the WTO?

Alternatively, why is he not immediately announcing retaliatory measures against a volume of US imports into Australia equivalent to the losses of trade suffered by our lamb exporters? This latter course is open to him under WTO rules if the US refuses to remove its illegally imposed restrictions.

Retaliation would not, of course, restore our lamb market, but then, neither, in all probability, will the negotiated settlement. But retaliatory action would at least demonstrate Australia's capacity to act independently.

As it stands the outcome once more demonstrates that, in WTO sponsored dispute settlement, power wins over the merits of the case.

In choosing instead, to negotiate a settlement which endorses the new "aid" package, we must assume that the Minister has also agreed not to contest the new package in the WTO. He must have because, from the US lamb industry point of view, without that agreement, the US industry would never have allowed its government to sign off on the arrangement.

Pity the poor Australian lamb exporters, whose interests the Minister, along with farm industry leaders appear to have bargained away. Is it any wonder that farmers now express disenchantment with both these groups?

Pity, too, the WTO and its dispute settlement procedures, and its hopeless inadequacy when it comes to defending the interests of small trading nations against the powerful. Presumably, WTO officials and the Organisation's leadership understand this only too well. Their hands are tied, however, so long as powerful WTO members continue to flout the intent of WTO rules on dispute resolution.

What Australians will find curious is why our Trade Minister and farm industry leaders, along with mainstream National Party politicians, continue to defend the WTO and the free trade principles it is supposed to stand for, as faithful servants of Australia's best interests.

Even more curious is why the US in particular takes so little notice of wider world opinion about it and the WTO, and at the same time takes the narrowest possible view of the longer term US national interest.

The US has the most to gain by maintaining and strengthening support for the WTO; and, indeed, by widening the spectrum of its influence over new areas of international commercial relations. Yet, by demonstration, it seems determined to do the opposite, and arouse ever-growing suspicions about the value of the WTO in protecting the interests of the small over the large.

Australian Ministers, and indeed the Prime Minister himself, might do well by Australia, by the entire body of small countries, members of the WTO, by the WTO itself, and perhaps, even by the US as well, if they reminded the US of its wider interests and responsibilities.

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