Healthy Skepticism Library item: 427

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Publication type: news

Weiss L, Thurbon E.
The FTA: pandering to Rome
Financial Review 2004 Jun 4

Full text:

In the 130s BC, when Rome was emerging as a world power but did not yet have an empire, the various small kingdoms and principalities of Asia Minor vied with one another for Roman preferment. But one kingdom outdid all others in its pandering. This was the kingdom of Pergamon, ruled by the tyrant Attalos III. When he died in 133BC, he left the city-state to Rome as a bequest – without consulting his countrymen. They were none too pleased, and when Rome claimed its prize, they fought back, under their national champion Aristoricos. After a bloody war Rome eventually emerged triumphant in 130BC, bringing Pergamon under its sway and renaming it the first province of Asia Minor. Thus began the Roman empire.

History has never known a comparable example of a political leader so pandering to the interests of another power as to give away his principality. But the parallel with what the Howard government has done in the Australia-US free-trade agreement is not so far-fetched.

Reading the small print of the FTA, it is amazing that a deal so utterly lopsided could have been negotiated by an Australian government.

Consider the following features of the agreement, which can be verified by reference to the Department of Foreign Affairs and Trade website, and even more tellingly to the website of the Office of the US Trade Representative:

1. Under the agreement, we grant the US total and immediate access to our market in areas in which it is strong (manufactures and services), but remain effectively shut out of the US market where we are strong. Our competitive fast ferries, for example, remain completely excluded from the US market. Worse still, perhaps, are the insultingly long periods our exporters must wait (16 to 18 years) for their comparatively minuscule concessions – in everything from beef and dairy to stone fruits and other horticultural products. This is to say nothing of the “seasonal restrictions” that will apply to horticultural products such as avocados, which mean that during our peak avocado production periods, we are not allowed to export to the US. Even our greatest champions of the deal – steel and wine – see the main benefits of the bilateral agreement as buying them protection against US harassment (via the unpredictable and frequent imposition of price safeguards), rather than in securing major increases in market access.

The worst (most nationally damaging) feature of the agreement is the way in which it dictates the “harmonisation” of Australian institutions, procedures and laws with their US counterparts, ensuring that any remaining differences (differences that might give Australia competitive advantages) are systematically eliminated. This is the sense in which the Howard government may be compared with Attalos III.

1. Quarantine is essential for an island nation, and for any country seeking to maintain a successful agricultural industry. Strict quarantine has been well understood as a part of nation-building by the US for the past 200 years, and vigorously enforced. But under the agreement Australia is voluntarily abandoning its long-established, independent quarantine procedures. The deal stipulates the creation of a new “oversight” committee – including US trade representatives – to monitor Australia’s science-based quarantine decisions. In effect we are about to downgrade the scientific rigour of risk assessment in favour of trade politics. Under the new rules of this bilateral game, Australia’s quarantine restrictions – wherever they may impinge on US exports – are to be treated broadly as trade barriers in a guise amenable to negotiation and removal by trade representatives. It should come as no surprise then that US farmers have already put dollar values on the gains they expect to reap from the “elimination” of Australian quarantine standards.

And don’t bet on our representatives holding their own under US pressure. Our authorities have already revealed their inability to resist relentless pressure for quarantine concessions, even when science dictates otherwise. Biosecurity Australia’s recent back-flip to allow banana imports from US companies in the Philippines – even though its last scientific report recommended otherwise – is a case in point. The recent decision to allow the importation of diseased Californian table grapes “decontaminated” with methyl bromide (a known carcinogen banned in the US from 2005 except for export purposes) also reveals the dangers to which Australians will be exposed should we allow the further politicisation of quarantine standards.

1. Pharmaceutical companies are the most profitable sector of the US economy – thanks largely to the exorbitant prices they charge for their drugs. Now these companies are using FTAs as a means to raise drug prices (and hence their own profits) worldwide. Australian negotiators have apparently fallen for the phoney arguments these companies deploy to support their case for higher prices – that we should all share the burden of their expensive R&D. The simple fact that these companies spend, on average, two to three times as much on marketing as they do on R&D exposes this bogus argument. So does the fact that these companies’ R&D (“innovation”) costs are already heavily subsidised by their own government. Nevertheless, we have agreed to a deal under which the price of existing drugs in Australia will rise by $1.5 billion, and the prices of new drugs reach US levels (more than three times their current price). Inevitably, this will leave us with one of two outcomes. It will either make the Pharmaceutical Benefits Scheme unsustainable, or force our government to channel resources away from other parts of the health system to support it.

1. All countries utilise government procurement to bolster their own industries, deploying the power of public purchasing to encourage local innovation, technological upgrading and employment. In particular, the US has over the past two centuries used public purchasing to build new industries, notably the semiconductor industry through military and civilian procurement in the 1960s and 1970s. The US enshrines government procurement in its laws through the Buy American Act, now being strengthened under new provisions in the Buy American Improvement Act (2004). In Australia too we have benefited greatly from the power of government procurement, notably with the Snowy Mountains Scheme in the 1950s and 1960s, and latterly with the building of a national software industry through government purchasing policies at state and federal levels. The Australian negotiators have given all this away by agreeing to abandon any “Buy Australian” clauses or conditionalities – and these are totally unreciprocated by the US side.

So why is our government prepared to agree to such lopsided concessions, and to sacrifice Australian interests in this way? This draft agreement raises in an extreme and urgent form the key issue for our future: will Australians roundly reject this agreement, or will we sign up to become the first overseas province of the new American economic empire?