17 July 2003

Contents:

AFTINET and other organisations will hold a short lunchtime rally on Wednesday 23 July, when the Senate Committee inquiring into GATS and the USFTA comes to Sydney. The rally is in support of the inquiry and to publicise the issues around these trade negotiations.

Where: Macquarie St. Sydney, outside Parliament House
When: Wednesday 23 July at 1pm

As mentioned in the recent AFTINET Alert, the Trade Minister Mark Vaile has called for public comment on Australia’s approach to the 5th World Trade Organisation (WTO) Ministerial Conference (from 10 to 14 September). It is important that they receive comments from a wide range of community organisations and individuals.

Please consider doing a submission if you can. Submissions must be lodged by 15 August 2003.

AFTINET will draft a submission and circulate it for comment by the end of July. AFTINET's latest publication on our criticisms of GATS and the proposals for new WTO agreements is here on our website.

A background paper on the Doha Round negotiations can be found on the Department of Foreign Affairs and Trade (DFAT) website at www.dfat.gov.au/trade/consultations.html or by writing to:

Trade Policy Section,
DFAT
R.G. Casey Building
John McEwen Crescent
Barton, ACT 0221.

3. Visit your local member about the USFTA! Politicians visits project about to begin

Last year we held a successful campaign where AFTINET members visited their local members to raise concerns about the GATS negotiations. This brought noticeable responses from the government. Now it is time to do it again about the Australia US Free Trade Agreement. This agreement is currently being negotiated, and the US and Australian governments have said they want to sign it by the end of the year.

AFTINET will prepare a list of key concerns and requests that you can base your visit around and leave with your MP. This will be available shortly.

Don’t miss this opportunity to make your voice heard about the USFTA!

If you live outside NSW:

Please consider visiting your local member. Additional copies of our leaflet about the USFTA are available by contacting Sarah Mitchell on smitchell@piac.asn.au or on (02) 9299 7833.

Please let us know who you visit and how the visit goes.

If you live in NSW:

AFTINET member Lesley Gruit has kindly volunteered to coordinate the NSW visits. If you live in NSW please contact Lesley to express your interest in taking part in a visit to your local member.

4. ALP and Democrat Dissent on Singapore Australia Free Trade Agreement

The Committee is dominated by government members, and it recommended ratifying the treaty. However it also expressed concerns at the inadequacy of the consultation process. Reflecting this, it recommended that ‘there be an opportunity for greater public involvement, specifically including local government, in the consultation process leading up to the first review of SAFTA’ (Recommendation 1). The Committee also expressed serious concerns at the fact that the government had introduced implementing legislation before the Committee’s review process had been completed.

Three members of the Committee (Senator Gavin Marshall (ALP), Senator Andrew Bartlett (Democrats) and the Hon. Dick Adams (ALP)) did not support ratification, and issued their own comments regarding the treaty. Senators Marshall and Bartlett issued a joint statement which expressed concerns about the inadequacy of the Committee inquiry process, in particular the failure to hold public hearings and to directly seek input from State and Territory governments and local governments regarding the treaty.

Dick Adams’ statement dealt with the concerns about inadequate consultation as well as specific issues about the content of the agreement such as the dangers of the negative list approach and the right given to foreign corporations to sue the government.

Senators Marshall and Bartlett also raised these concerns about the substance of the agreement in their speeches to the Senate on the tabling of the report.

All three of the minority members of the Committee made the point that SAFTA is dangerous not only for the impact it has as an agreement but because the government is using it as a model for the US Free Trade Agreement. The Committee itself acknowledged the ‘significant concerns in the Australian community as a result of this Agreement, especially given its widely accepted status as a ‘template’ treaty for future free trade Agreements’ (para 2.9).

5. Keep investment pacts off Cancun's agenda

By Kavaljit Singh, Financial Times, July 7 2003

If the European Union, Japan and Canada have their way, negotiations for a multilateral investment agreement will begin at the World Trade Organisation meeting in Cancun in September. But many developing countries are doing everything they can to ensure they do not. They are right to do so: an MIA has the potential to cause them serious economic damage.

There is no conclusive evidence that investment agreements lead to increased foreign investment. Since the 1980s, developing countries have signed numerous bilateral investment agreements, yet they receive less than one-third of the world's total foreign direct investment flows. Africa, consisting of 53 countries, receives less than 2 per cent of the total FDI flows to all developing countries. That is not because of a lack of investment agreements: rather, it is because of factors such as the small size of domestic markets, poor infrastructure, civil unrest and political instability.

Even if one assumes that an MIA might lead to increased investment in some countries, there is no guarantee that it would contribute to economic growth and development. It is the quality of investment that determines growth and development. Since most portfolio investments have tenuous links with the real economy and are speculative in nature, their contribution to economic growth is negligible. Even FDI flows, traditionally known for their stability and spillover benefits, have changed in character. Since the bulk of FDI flows are now associated with cross-border mergers and acquisitions, their positive impact on the domestic economy through technology transfers, employment generation and other effects has been diluted. It is worth recalling that restrictions on foreign investment have not necessarily led to poor economic performance. Many countries, such as Japan, South Korea, Taiwan and China, have registered higher growth without liberalising their investment regimes.

The existing frameworks of investment liberalisation are highly biased in favour of protecting foreign investors' rights. Countries enjoy correspondingly less freedom to adjust their investment policies to suit their development needs. Although the EU favours the adoption of a "bottom up" approach to investment, which allows countries to select the sectors they wish to liberalise - along the lines of the General Agreement on Trade in Services - there is no guarantee that it would give member countries the policy freedom they need. As seen during the ongoing Gats negotiations, it puts added pressure on countries to make wider commitments over the years. Likewise, an agreement covering many but not all developing countries would also be problematic, as it would in effect compel outsiders to join later on.

The MIA's one-size-fits-all strategy is ill-conceived because WTO members are at different stages of development. What is good for capital-exporting Japan may not be good for capital- importing Bangladesh. Investment is a much more politically sensitive issue than trade. In spite of the liberalisation of investment rules that has occurred in recent decades, all countries (including the developed ones) have used regulation to ensure that foreign investment meets their development goals. This is why previous attempts to establish a multilateral investment regime have failed. Recent "mini-ministerial" meetings of the WTO have also failed to build a consensus on launching negotiations.

The MIA has many other flaws. What would happen to the more than 1,800 existing bilateral and regional agreements once the MIA came into force? Would these be deemed invalid? The WTO's working group on trade and investment has yet to give this issue the attention it deserves. Another problem is that the WTO's interest in balance of payment issues is at present confined to current account transactions. But an MIA would necessitate capital account liberalisation. That may not be to many countries' taste, given the reappraisal of the benefits of capital account liberalisation that has taken place since the 1997 Asian financial crisis.

The WTO is not an appropriate venue for negotiating an investment agreement. Since its mandate is confined to trade in goods and services, it has neither the jurisdiction nor the competence to deal with investment issues. The WTO's trade arbitrators, for instance, lack the expertise that would be needed to work out how much compensation a foreign investor should receive if a member country violated the MIA. The world may well need a radically different institution to address investment issues at the multilateral level.

Unless the MIA's advocates can find a solution to these fundamental issues, they should not continue to press their case. There will be no shortage of other matters to discuss at September's meeting.

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6. USFTA event Perth 26 July

Globalisation Roundtable No. 10:

The impact of the proposed Australia-United States Free Trade Agreement on Australian farmers

When: Saturday 26 July 2003, 9am-1pm

Where: Conservation Council Boardroom, City West Lotteries House, 2 Delhi Street, West Perth (near the City West Railway Station).