'Fair trade' or 'free trade'by Bob HarrisNews Weekly
, August 26, 2000
The recent dispute between the fair trade and free trade factions at the ALP Conference in Hobart highlights the growing resistance of the working class and lower middle class to the theories of economic rationalism. The voting was close and if a free vote had been allowed, the fair trade argument would have been part of Labor Party policy.
This is indicative of the rising mood of unrest in sections of the community, which have not benefited from the past 15 years of economic reform.
Despite volumes of “good financial figures” produced by economists, it is apparent that the rewards of this change have largely benefited the top 20 per cent of the population.
The rest of the community has seen their living standards stagnate or fall and they now live in a climate of economic insecurity. Because that top 20 per cent is well represented in the political parties, universities, the media and even union bureaucracies, growing opposition to various “reforms” has been hidden from general discussion.
The nation has been constantly bombarded by “good news” stories and gang-buster export figures. However, the Hobart Conference shows that discontent is percolating to the surface.
The rural sectors now show this stirring. In the past, the rural press has swallowed the free trade dogma of the National Farmers Federation and the state farming organisations while the agricultural community has suffered great losses.
But, in recent months, this has started to change with some editorial writers at The Land in NSW now openly questioning the poor results of blindly following free trade practices while other countries openly subsidise their farming populations.
This discontent stems from a feeling that the classical economic theories now in vogue fail to consider the social effects of their implementation. Lowest price is the golden rule. No account is taken of the working conditions under which overseas goods are produced. This has led to the ridiculous position where our workers have to compete with what is, in some countries, effectively slave labor.
The quest for efficiency is showcased as the yardstick of a successful society. No measure is taken of the financial costs to society of broken marriages, and the drug and criminal activities which can be induced by such policies. The expanding private security industry is seen as a productive service and is now included in the calculation of GDP.
It was as a result of these conditions that the leader of the AMWU introduced at the Hobart Conference the notion of a “fair trade” tariff in a bid to remedy the damage done to Australia’s manufacturing sector. These industries have a great ability to provide well-paying, full-time employment to those looking for work, who have little hope of benefiting from information technology industries.
The Metalworkers move marks a return to the once fundamental but now forgotten Labor Party commitment that “It is the responsibility of good government to provide a job for every man who wishes to work.”
The AMWU proposed to implement the “fair trade” theory through the implementation of a selective social tariff to balance the unfair wages used to produce imports. Their method is doomed to failure because its selective implementation would allow tit-for-tat reprisals against our exports. Mechanism
However, there does exist a mechanism which would achieve a better outcome. It is Section XII of the old GATT agreement and should be in the World Trade Organisation clauses.
Article XII is headed “Restriction to Safeguard the Balance of Payment”. Part of this section states:
“Any contracting party, in order to safeguard its external financial position and its balance of payments may restrict the quantity or value of merchandise permitted to be imported.”
The punch-line to this is that it cannot be selectively used but must be an import tariff (primage) on all goods. By applying the tariff universally, it prevents the retaliation of other countries.
Dubai recently had balance of payment problems due to its vast expenditure on infrastructure (wharves) and the International Monetary Fund recommended this action. Last year the IMF also recommended the use of such an import tax to finance government needs in East Timor.
Under the “bound” agreement with the World Trade Organisation, we are allowed to introduce a 12.5 per cent rate in these circumstances.
With a net foreign debt of $255 billion, we are certainly now in a position where the Government could invoke this clause.
The beauty of this solution is that while it helps our balance of payments problem, it also aids the rebuilding of the nation’s manufacturing base.