Healthy Skepticism Library item: 350

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Publication type: news

Ranald P.
Trade text shows up freedom to lose
Newcastle Herald 2004 May 21

Full text:

The text of the Australia-US Free Trade Agreement released in March has been surrounded by controversy. The Government claims there are economic benefits for Australia, but economic studies predict either marginal benefits or slight losses.

Economists ranging from the Sydney Morning Herald’s Ross Gittins to The Australian’s Alan Wood have been sceptical, given the exclusion of sugar and limited access to other US agricultural markets.

Community organisations are concerned about the restraints the USFTA places on important public interest regulation.

US negotiators openly identified as barriers to trade Australia’s price controls on medicines through the Pharmaceutical Benefits Scheme, quarantine law, labelling of genetically engineered food and Australian content rules in film and television.

The Government claims that no important concessions have been made in these areas. But the devil is truly in the detail.

The text shows that the agreement does indeed set up a series of processes that undermine the ability of governments to regulate in the public interest in key areas, including the price of medicines under the Pharmaceutical Benefits Scheme.

Once social policy processes are in a trade agreement they are subject to a trade tribunal disputes process based on trade law, not on public interest criteria.

The decisions are made by three trade law specialists, and can be enforced by trade or financial penalties.

Drug prices in the US are three to 10 times higher than they are in Australia. Drug companies object to the Pharmaceutical Benefits Advisory Committee because it controls wholesale prices by comparing the price of new drugs with existing drugs before listing them for government subsidy.

The USFTA gives the companies the right to seek reviews of these decisions. Health experts such as Professor David Henry at the University of Newcastle have predicted that this will lead to higher wholesale prices, to be paid by taxpayers through higher costs to the Federal Budget or passed on to us as individual consumers.

The agreement also limits Australian content rules for new forms of media and sets up joint US-Australian committees to review future Australian policies on medicines and on technical standards such as food labelling, including labelling of GE foods. This will mean continued US pressure to adopt US standards, backed up by use of complaints to the trade tribunal.

The USFTA also has a “negative list” structure for services. This means that all regulation of services is subject to the agreement unless it is specifically excluded.

Australia has not excluded electricity, water or public transport services. This means that future government regulation of these services could be challenged if it does not give “national treatment” and full-market access to US firms, or if it is considered “too burdensome” for business.

For example, it may be in the public interest to limit foreign ownership or management of water resources.

In the regulation of markets in water rights for the Murray-Darling Basin there may be arguments for some priority for local landholders, or some limits placed on foreign investment. Such regulation would be inconsistent with the USFTA and could be challenged by the US government.

A Senate Select Committee and the Joint Standing Committee on Treaties are currently conducting public inquires into the text of the USFTA, with reports to parliament in June.

Like all trade agreements, parliament does not vote on the whole treaty, but only on the selected pieces of legislation required for implementation.

There was a USFTA signing ceremony on Wednesday, but the agreement will only be valid if the implementing legislation is passed through the Australian parliament after debate in August.

The agreement also has to be approved by the US Congress. The ALP, Democrats and Greens have all pledged to vote against implementing legislation in the Senate if it does not meet the interests of Australians.

The inquiries provide an opportunity for us to assess the agreement and to tell our political representatives to vote against the implementing legislation if it is not in the national interest. See www.aftinet.org.au for further information.