Healthy Skepticism Library item: 994

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Davidson K.
Can we please get serious?: The US free trade deal may be a disaster for Australia. Not that our politicians seem to care
The Age 2004 Oct 21

Full text:

The Howard Government’s decision to sign the free trade agreement with the US will have far more long-term repercussions for Australian society, its institutions and its economy than anything arising from the recent election. Yet the FTA hardly rated a mention during the campaign.

The reason is obvious. Latham Labor, which could have had the support of the Greens and Democrats for the asking, was split on the issue. The Left wanted to reject the FTA on the grounds that it was against the public interest. The Right wanted to pass the enabling legislation, not because it believed the FTA was in the national interest, but because it didn’t want to be portrayed as anti-American.

I am sure the Coalition was relieved that it could hide behind the bipartisan “done deal” to avoid having to justify the failure to get any meaningful access to US markets for Australia’s agricultural producers – despite the Prime Minister’s last-minute personal plea to President George Bush for a small concession on sugar, and despite the danger (not removed by Latham’s amendments) to Australia’s world-class Pharmaceutical Benefits Scheme.

This was another case of the ALP giving up the potential high electoral ground because of the Right faction’s determination to present the smallest possible target. As two of Australia’s most respected free-traders, Professor Ross Garnaut (whose mid-1980s report on opening up the economy became the basis for policies that led to Australia’s present prosperity) and Bill Carmichael (former Industries Commission
chairman) pointed out, there was no need to rush into the agreement before the election and before a comprehensive study by the Productivity Commission.

The deal reflects US institutional arrangements and tilts the playing field massively in favour of the US.

There was, and still is, a wide range of expert opinion that considers the FTA will prove a long-term disaster for Australia. The latest example is How to Kill a Country: Australia’s Devastating Trade Deal with the United States, by Sydney academics Linda Weiss, Elizabeth Thurbon and John Mathews, published last week by Allen & Unwin.

This book argues that the FTA is chiefly aimed at undermining Australian institutional arrangements that give this country a competitive edge:
the quarantine system that cost-effectively protects Australia’s “clean and green” advantage in domestic and export markets; the PBS that makes medicines affordable to all Australians; intellectual property laws that strike a balance between encouraging innovation and protecting intellectual property rights; and the taxpayer-funded government procurement system that is designed to foster local industry.

The deal reflects US institutional arrangements and tilts the playing field massively in favour of the US, without opening up any real trading advantages in agriculture or even manufacturing (such as fast ferries), where Australia enjoys a real competitive advantage that could hurt American manufacturers if the US market was opened up to Australian competition.

According to the authors, there are two agreements in the trade deal:
“There is a trade agreement that purports to represent the principles of free trade (but breaks with these principles whenever they might damage American interests); and there is an investment and intellectual property agreement that unashamedly brings Australia’s institutions and procedures into line (read: harmonises) with those of the US, to make Australia ‘safe’ for US investors and US intellectual property holders.”

The FTA reflects and reinforces the new US economy, which increasingly makes profits from exploiting intellectual property, rather than production and trade. According to the authors: “The goal is to turn these intellectual property rights from what have traditionally been monopoly rights for limited duration, strictly to encourage innovation in the arts and sciences, into (perpetual) ‘natural rights’ associated with trade and investment.

“Congress has extended the terms of copyright no fewer than 11 times in the last 40 years . . . The royalty flows from intellectual property rights are extremely attractive. After all, you don’t have to do anything to earn them, just like the absentee landlord drawing rent from the land.”

And what happens when, despite everything, Australia gets a potential “win” in the US market that is sufficient to adversely affect a powerful industry group in the US? If the Canadian experience under the North American free trade agreement (NAFTA) is a guide, not much.

In 2002 the US imposed anti-dumping duties on Canadian lumber, which forced 50 mills to be closed and thousands of workers to be laid off.
The grounds were that lower Canadian royalties (compared with the cutting fees imposed by the private owners of US forests) conferred a subsidy on Canadian foresters.

The Canadians successfully appealed to a NAFTA tribunal against the US claim. But, after initially accepting the verdict, the US Department of Commerce attacked the tribunal for “overstepping its authority . . . and committing legal error”, and has sent the decision to the Office of the US Trade Representative for review. This led The Economist to comment that the Canadians have been left to wonder whether their neighbours’
rhetoric about free trade and the rule of law is just that.

Those Australians who think Australia’s support for George Bush in Iraq and other military adventures has led the US to offer Australia a more balanced FTA than the deal given to the Canadians simply don’t understand how Washington works.