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The government must be crazy to agree to this 'free trade' agreement

By Elizabeth Thurbon and Linda Weiss - posted Tuesday, 17 February 2004


The proposed Free Trade deal with the US tabled last week is cause for great alarm for many parts of the Australian community.

Keep in mind that despite the government’s rhetoric, our current trade relationship with the US is not profitable for this country.

We’ve long run a massive trade deficit with the US, now standing at around $9 billion. This is the second-largest trade deficit with the US in the world.

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While some individual Australian exporters certainly profit from their sales to the US, as a country we don’t, because we buy so much more than we sell.

To benefit the Australian community then, any trade agreement we sign with the US will have to reduce – not add to – this current burden on our economy.

But sadly the deal on the table has little chance of doing this.

Why?

Because the industries in which Australian producers are most competitive - and thus most likely to survive in the US market - will continue to face significant barriers under the proposed deal.

In beef – one of our most competitive industries - Australian farmers will have to wait 18 years for unfettered market access to the US.

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Its worth noting that the 18 years that the US is giving itself to prepare for Australian competition is more time than any of the poorest developing countries have ever been granted by the WTO to effect structural adjustment.

Our sugar industry will have to wait for even longer for greater US market access.

But while the US has managed to keep its weakest industries effectively shielded from Australian competition, we have agreed to open our weakest industries to an onslaught of highly competitive US imports.

Our IT, financial services, telecommunications, media, and pharmaceutical industries (just to name a few) will face intense competition from their more mature and cashed-up American counterparts.

The most likely outcome of this crazy arrangement is a modest increase in our exports to the US but a massive increase in US exports to Australia

What this means for our already huge trade deficit with the US is obvious. So much for the National Interest.

Equally concerning is that under the proposed deal, the government will effectively be signing away our sovereignty – our right to make decisions independent of outside influences – in two of the most important areas: quarantine laws and the Pharmaceutical Benefits Scheme.

Under the deal, the US has won the right for American representatives to sit on the Australian bodies that determine our quarantine laws.

Similarly, the US has won the right to have American representatives sit on the Australian board that decide which medicines will be subsidized by Australian taxpayers’ money.

It takes little to appreciate the army of savvy US legal experts that will be aggressively advocating Australia’s subsidisation of American pharmaceuticals.

And US Pharmaceutical companies already receive enormous assistance from their own government through a sophisticated range of publicly funded intellectual property supports.

But our national selflessness does not end there.

Under the proposed agreement, we will sign away our right to screen most US investments in Australia. The neutering of our Foreign Investment Review Board will mean open slather for US takeovers of Australian firms and assets.

Ironically, in announcing this bonza deal (pdf, 22Kb) on their website, the US Trade Representative Office erroneously referred to our Foreign Investment Review Board as our Foreign Investment Promotion Board. This Freudian slip clearly reflects the role that the US expects the Board to play for America in the future.

Of course – the US will retain substantial screening powers over foreign investment under its anti-terrorism laws.

But the list of lopsided deals goes on.

Under the deal, Australia will throw open its government procurement markets to US bidders – a concession we have thus far avoided by steering clear of the WTO’s Government Procurement Agreement.

We have stayed out of this agreement because we understand the important role that government procurement has played in industry development in Australia – the government supports fledgling domestic companies by granting them procurement contracts.

Under the proposed agreement however, not only will American firms be able to win these contracts, but Australia will be prohibited from linking any industry development initiatives to procurement at the central level.

For example, we will be unable to require US companies involved in procurement to use Australian suppliers, or to employ a certain number of Australians on their projects.

But this is not to say that Australia should shy away from freer trade in the future.

There is nothing wrong with freer trade – in fact freer trade (implemented mutually and sequenced correctly) can deliver massive opportunities for countries at all levels of development.

But this is not a free trade agreement. This is a lopsided trade and investment deal that will deliver few benefits to Australia and massive benefits to the US.

So the question must be asked – exactly whose national interest is our government advancing?

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About the Authors

Elizabeth Thurbon is a Lecturer in the School of Politics and International Relations at the University of NSW. She has published on the financial systems of East Asia and is collaborating on a large comparative project, researching government-business relations in the global economy.

Linda Weiss is Professor of Government and International Relations at the University of Sydney. Her work in the comparative and international politics of economic development has been translated into several languages. She is the author of four books, including The Myth of the Powerless State.

Other articles by these Authors

All articles by Elizabeth Thurbon
All articles by Linda Weiss
Related Links
University of Sydney
US-Australia Free Trade Agreement - Australian Perspective
US-Australia Free Trade Agreement - US Perspective
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