US-Australia Free Trade Agreement: recent readings

Free trade agreements are fairly dry topics - not the sort of issue to get demonstrators out in the street. But Australians ought to be taking a close and informed interest in this FTA. It is about our children’s futures. Here are three recommended readings, and a key newspaper article reference, on the politics and economics of the proposed US –Australia Free Trade Agreement.

I say "proposed" because this agreement although signed by the two governments has not yet been legislated by either the US or Australian legislatures. I hope it will not be.

I am not an international trade economist and my interest in this issue is primarily political. This FTA goes to the heart of John Howard’s view of the world and of Australia’s place in it. The readings below indicate why I don’t believe this FTA is in Australia’s national interest.

In my view, this FTA offers a far greater threat to Australia’s "national integrity" and national sovereignty than a few thousand refugees who tried to reach Australia in small boats from Indonesia in recent years. In negotiating this FTA, the Howard government basically proposes to give away to US economic power and mega-capital, for no commensurate Australian export market development, privileged access to our country’s (admittedly small) market and (very large) natural and intellectual property resources. This FTA, which has been some years in the gestation, has already seriously limited Australian options to take part in multilateral free trade structures e.g. the East Asian free trade community, which Australia should be part of, but from whose proposed membership Australia is currently excluded for political reasons – in particular, because of Australia’s obvious growing enmeshment in the US economic political and cultural orbit.

Paul Kelly of "The Australian" recently suggested that the opposition to the US-Australia FTA comes from both multilateral free-traders and from economic nationalists. His implication, if I understood it correctly, was that this opposition was thereby in some way weakened because it was self-contradictory.

But actually there is no contradiction between those positions. One may be an economic nationalist in terms of wanting to try to protect Australian ownership over limited national resources e.g. fresh water, cultural and intellectual property; and a multilateralist in seeing the best hope for doing so being through engaging in the creation of equitable multilateral global or regional trade, investment and environmental protection regimes. There is a lot more work needed to tease out the substance of such issues in relation to this FTA.

Ross Garnaut has set some of the issues in his important article.

"FTA worsens our woeful trade outlook", 10 February 2004, "The Australian"

Below are three other recommended readings:

1. Chris Wallace, in a brilliant piece of political investigative reporting, "Bush rebuff stunned negotiators", 25 February 2004, , "The Australian" exposes how the deal was finally done by Howard and DFAT (the "political" part of DFAT, that is) – who overruled Australia’s professional trade negotiators who wanted to walk away from the final deal. Buried away on page 6 of "The Australian", Wallace’s piece should have been on page 1. Putting it on my website means it will hopefully reach a wider audience and be remembered.
2. I summarily addressed the US-Australia FTA in my chapter on Australian foreign policy in the new book "The Howard Years", edited by Robert Manne (Black Inc Agenda, 2004). I finalised the paragraphs below in November 2003. I took a punt on how I thought Howard might in the final negotiation throw away Australia’s interests – if Wallace’s reporting is correct, it turned out to be prescient.
3. I wrote an opinion feature "FTA ratification fill of pitfalls for Howard", 14 February 2004 , "Canberra Times" on the politics of this FTA in the months ahead.

TK, 25 February 2004

 

READING 1:

Bush rebuff stunned negotiators",

- Christine Wallace, 25 February 2004, "The Australian" (page 6)

John Howard's last-minute free trade deal plea to US President George W. Bush pressed for more beef trade concessions and any concession at all on Australian sugar exports to the US.

The blanket rebuff earlier this month to the Prime Minister's modest requests shocked the negotiating team -- which recommended against accepting the deal -- as well as the business groups assisting them.

Mr Howard asked Mr Bush for market access for an extra 30,000 tonnes of beef in addition to the 70,000 tonnes already agreed on, pressing for total extra access of 100,000 tonnes.

He also asked for a quickening of the phase-in period from 18 to 15 years and any concession at all Mr Bush could offer on Australian sugar exports to the US.

"It would've made the difference between a good deal and a line-ball deal," one source close to the talks said yesterday of Mr Howard's requests. "It caught all of us off-guard that the relationship wasn't worth 30,000 tonnes of beef.

"If the Yanks weren't prepared to do that, it really soured our view."

Senior Department of Foreign Affairs and Trade officials, from the foreign policy rather than the trade side of the department, overrode the negotiators' recommendation that the deal not be signed.

Some negotiators considered resigning over the Government's agreeing to the deal, which includes unprecedented price mechanisms that will cut sharply into the extra US beef market access negotiated in it. Early estimates are that the price mechanisms will kick in on alternate years, negating the extra access benefits on beef.

Australia has resisted accepting similar mechanisms from Japan, and they are considered a serious backward step by experienced trade negotiators.

"We've never agreed to this sort of stuff before," one party to negotiations said last night.

Participants consider political over-optimism the key flaw in the process, as politicians expected good relationships would deliver benefits. Trade Minister Mark Vaile expected his relationship with US counterpart US Trade Representative Robert Zoellick to deliver significant farm trade benefits in the end, but it did not.

Further up the line Mr Howard expected the same from Mr Bush and was similarly disappointed.

In the end it was a political call by Mr Howard that a deal should be done at any cost, participants say. Mr Vaile is understood to have left the final decision to Mr Howard.

 

 

 

READING 2.

Extract from Tony Kevin’s chapter on Australian foreign policy in "The Howard Years", edited by Robert Manne (Black Inc Agenda, February 2004).

"The toughest foreign policy choice Howard now faces is whether he can pull off an Australia–United States Free Trade Agreement (FTA) that will not expose Australia to potentially irreparable damage to our agricultural economy, threatened hydrology systems, artistic and cultural values, and public health under Medicare. The stakes are enormous, and given Howard’s record I have no confidence whatsoever that he will adequately protect Australia’s interests.

Howard has painted himself into a corner by promising the Australian people a good FTA as the reward for Australia’s military participation with the US in an internationally illegal war. But a beleaguered and weakened President Bush cannot deliver a benevolent Congress. A hard-nosed and economically distracted Congress will not be inclined to reward Australia for our (barely noticed) role in the Iraq invasion – especially as that war itself becomes more divisive within the US. Howard has no cards in the US Congress game, and Australian negotiators know this.

Australia, already virtually tariff-free, is seriously outgunned in a hard negotiation with a much larger and protected economy. In the end, the price the US will demand for the types of market access that Australia wants will almost certainly be too high to be in Australia’s national interest. But will Howard then have the courage and wisdom to walk away from a bad deal, having already invested so much of his own prestige in the promised goal? Or will he try to wheedle and deceive Australians into giving away to the US what should not be given up of our remaining economic sovereignty? If the Senate vetoes a bad deal, will he then try to drive it through, using his authority and remaining prestige as Prime Minister, under a double-dissolution election trigger?

Here is the central foreign policy paradox of the Howard years. A man who built his domestic electoral standing and foreign policy profile on assertive nationalism and the trumpeted defence of homeland integrity against the intrusion of unwanted aliens lies down meekly and accepts the greatest intrusion of all – the rolling advance of American power and values over Australia’s political, economic and cultural values and institutions. The bizarre scene at Parliament House on 23 October 2003, with Australians for the first time held behind barricades, locked out of their own sitting parliament, in order not to incommode a minutely choreographed government welcome for George W. Bush, encapsulates the new outlook. "

(Pages 293-294, "The Howard Years")

 

READING 3:

"FTA ratification full of pitfalls for Howard",

- Tony Kevin, Canberra Times "Forum" section, 14 February 2004, page B3

 

The Opposition holds strong cards from now until the election.

 

Signature and ratification of the US-Australia Free Trade Agreement both come under government executive powers. Our Senate does not have to ratify the FTA as such. But our Parliament is required to pass through both Houses new domestic legislation needed to bring certain parts of the FTA into operation, e.g. changes in certain tariff regimes. That allows the possibility of Senate rejection of such bills.

A Senate committee is now to examine the FTA. Opposition parties have the majority. Its report, which could be negative, is likely to be adopted by the Opposition-controlled Senate. But this report will be purely advisory. The government will be able to ignore it or submit FTA-related bills in advance of it.

So is the Opposition power reduced to opposing new bills required to implement the FTA? Will the Government be able, having committed to ratify the FTA, to accuse the Opposition-controlled Senate of carping, "un-Australian" obstructionism ? Are all the cards in the Government’s favour?

Actually, the Opposition holds strong cards from now until the federal election. For once, non-incumbency works in its favour.

First, the treaty is not a done deal as far as US approval is concerned. The US legislature has real advice-and-consent powers. It is by no means certain that Bush will be able to get the presently agreed FTA text through the legislature, or that he will expend scarce political capital in an election year in trying to. Bush and Howard have gambled on the "Fast-track" process where the US legislature has to approve the deal all-or-nothing.

They could still get nothing. Sectional interest groups in Washington, joined by those preferring a more strategically targeted approach to bilateral FTAs and by those opposed on non-discriminatory free trade grounds, may combine to kill or defer the present deal in the Senate. That would be game over, and an embarrassing policy failure.

Even if the US legislature approves the present FTA package, Labor can use the Senate inquiry, whose mood and pace Opposition parties will control, as an extended public "teach-in" , exploring the issues in depth and educating public opinion in the ways this agreement might actually damage the Australian national interest.

The Senate committee will pay close attention to Professor Ross Garnaut’s views. Garnaut, whose professional credentials are unrivalled in international trade policy, has set out the many ways in which this FTA fails Australian interests, both bilaterally and in a broader multilateral trade context.

In any case, one can already see how the wind is blowing in public opinion. In newspaper letters pages, the majority of letters are opposing the FTA on well-argued and diverse grounds.

This is the international, Australian expert and public-opinion climate in which the Government has to shepherd through the FTA over the next several months. Increasingly, Howard will be damned if he does and damned if he doesn’t.

Even in Howard’s best-case scenario of a quickly US-ratified and unchanged text, he then faces a Hobson’s choice on when to ratify. If he proposes Bills enabling a quick Australian ratification, not waiting for the Senate report, he will be accused of ignoring the Senate on a key treaty. He cannot defer ratification till after the Australian election, or he will miss the US election cut-off.

The Government is already trying to drive a new wedge, claiming that Labor is on the one hand rejecting the FTA, and on the other hand saying it wants to study the detail before committing itself. But Labor has actually positioned itself well already, and without using pollyspeak or spin.

Latham’s initial public reaction that he thinks Australia was dudded in this deal is out there in public memory banks.

Labor can now responsibly say it will work through this FTA text carefully in the Senate, as soon as it gets to see the final text . This is, politically, a strong position.