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Free to trade or forced to trade?

By Anne Matthews-Frederick - posted Wednesday, 21 September 2011


Established in 1995, with around one hundred and fifty members, and a 2011 budget of A$178.5M, the World Trade Organization (WTO) is the watchdog of world trade practises. Its aim is to ensure that trade between member nations flows as smoothly, predictably and freely as possible.

Members are signatories to an Agreement that obligates them to abide by the decision of the referee. The referee is the Appellate Body, consisting of seven members with no affiliation to any Government, no conflict of interest and an obligation to a code of conduct. Nevertheless, some resumes on the WTO website reveal a career history suggesting otherwise.

On this world stage, Australia is not an example of righteousness, but a villainous serial offender, guilty of several trade practice breaches based on Australia's economic and social need to retain the disease free status that has benefited home industries.

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Unfortunately the referee seems unable to differentiate between the effect of a decision to free up trade for a T-shirt and an unprocessed food consumable. The first dispute, DS18, initiated in 1995 by Canada and resolved in its favour in 2000, removed phyto-sanitary regulations enacted from 1975 to protect the fledgling Tasmanian salmon industry from imported disease.

Australia was found obstructive; the over the top regulations to thwart entry of disease, breached Australia's responsibility to another member nation to allow trade to flow smoothly, freely and predictably. Australia was at fault in not basing her regulations on a risk-based assessment that agreed with global visionaries, determined at all costs, to remove barriers to trade.

In the 2002 to 2005 apple dispute DS245, initiated by the US against Japan, the issue was again entry of a disease. This time it was fire blight, having originated in North America had spreading to England in 1958 and then to Europe, Africa, the Middle East and New Zealand, but not to Japan or Australia. Japan's concern was well founded and therefore valid. Once introduced, this disease can never be eradicated, merely controlled by another expensive chemical.

In the USA, management of fire blight includes chemical costs of around $1000 per hectare and $275 per hectare for pruning annually. A study by Adamson (2006) estimated each previously profitable hectare in Australia would run at a net loss of $11,000 to $18,000 if fire blight management was required. Once established, outbreaks and the degree of devastation of fire blight are unpredictable so Australians have much to lose if the referee is wrong.

Japan complied with the US trade request, subject to specific protective methods to maintain Japan's disease free status. However, the US filed a dispute and achieved the right to export without the panel imposing any of the key protective measures sought by Japan. Japan argued that its method of risk assessment included, "the historical facts of trans-oceanic spread (of fire blight), the rapid growth of international trade, and the lack of knowledge on the pathways of transmission of fire blight."

Japan's argument that its requirements were a reasonable and prudent precaution, failed to persuade the panel. Of 150 member nations, Australia was the only defender of Japan's right to protect its borders from the introduction of disease. Perhaps Australian bureaucrats read the tealeaves when New Zealand enthusiastically supported the panel's decision.

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Encouraged by both decisions, New Zealand initiated dispute DS367, against Australia in 2007. The dispute settled in 2011 with the door open to New Zealand apples and fire blight. The reaction from the Chairman of Apple and Pear Australia Ltd., John Lawrenson, in 'The Chronicle' says it all: 'Once New Zealand Apples start coming into Australia, farmers . . . will be wondering if today is the day they discover fire blight in their orchard.'

His concern is reasonable. In 2006, a Government media release from Tim Mulherin, Qld Minister for Primary Industries, expressed concern about the extreme susceptibility of Stanthorpe's $40M industry to fire blight. "Mr Mulherin said new research showed that imported apples could be carrying the disease fire blight, yet display no symptoms."

On the other hand, New Zealand claimed that "Australian quarantine measures applied to New Zealand were neither based on an appropriate risk assessment nor supported by scientific evidence, since all sixteen of Australia's measures were found to be inconsistent with its obligations under Act 5.1,5.2, and 2.2 of the SPS Agreement."

As the final conditions of trade imposed by the WTO included many of the measures referred to by New Zealand in its complaint, the statement seems ingenuous. That so many measures sanctioned by the WTO panel were amongst the options originally offered to New Zealand in the 2006 Report begs the question. Why did New Zealand pursue its goal through the WTO rather than chatting over a beer with its best mate in the region?

Is it because the WTO permits compensation claims when trade restrictions nullify or impair benefits to the aggrieved trade partner?

During the protracted fourteen year campaign against the European Community over bananas, the US and Ecuador respectively claimed from 1999, an annual amount of US$201.6M and $191.4M. Their dispute had nothing to do with bio security. It was about choosing trade partners and now appears resolved after a lengthy and costly battle between the legal eagles and their panels of experts.

Is it because Japan's legal team failed to win one point of law, establishing legal precedents that Australia appreciated it could not overturn even with the best mercenaries for hire?

Is it because, in every dispute over protecting borders from bio security risks versus an exporter, the WTO ruling favours the exporter by imposing minimal restrictions and minimal cost to the exporter to comply?

The introduction to the Uruguay Round Agreement Article 1-11 says, "no member should be prevented from adopting or enforcing measures necessary to protect human, animal or plant life or health, subject to the requirement that these measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Members where the same conditions prevail or a disguised restriction on international trade."

Who perceived in 1995 that a nation would have to choose international obligation over national responsibility? Who realised the words "where the same conditions prevail," does not mean that trade between disease free countries or trade between countries with disease, but trade between both disease prone and disease free?

A $600.9M apple industry in 2006/06 is at risk because of membership in the WTO. Is being a team player worth the risk?

Australia has lost two battles based on photo-sanitary measures and the queue to joust will grow longer unless our Government simply capitulates to avoid publicity.

For instance, the Philippine requests in 2002, DS270 and 2003, DS271, to open the doors to pineapples, fresh fruit and vegetables are in the consultation stage of the process. For Australia, and Japan, the consequence of a poor decision is the loss of benefits accruing to disease free status.

It is about the viability of farms to re-start post disease attack, the loss of immediate and short term income to growers and their communities as restocked plantations grow to maturity (remember the citrus canker outbreak in Queensland), the loss of access to local food with it benefits of less exposure to chemicals, and fruit delivery that has a lower carbon footprint.

While the Final Report 2011 conveniently concurs with the conclusion of the referee that introduction of fire blight and other diseases may be a low risk, it does state that once in Australia, fire blight will spread like wild fire. The only winners in these WTO decisions are WTO employees, legal teams, experts, exporters and the chemical companies. Is membership worth being forced to trade?

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About the Author

Anne Matthews-Frederick spent seven years in the teaching profession, followed by a 1980s "sabbatical" on a Sunshine Coast hinterland acreage at Carter's Ridge. In 1988 the family returned to Brisbane where Anne embarked on a successful career as a real estate agent. During this period, Anne created her own newsletter Life@Windsor-Wilston-Grange and website.

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