1. AFTINET’s media work on the USFTA issue
2. Summary of Key Provisions of the Australia-US FTA
3. Report: International Trade Campaign Conference, Delhi
4. AFTINET Planning Meeting 10 March

1. USFTA Campaign

AFTINET's media release exposing the differences between the US and Australian summaries of the USFTA was sent to AFTINET members last Monday, with media releases from the Opposition Parties saying that they would be prepared to have an open Senate Inquiry and to block the implementing legislation for the USFTA in the Senate.

We received good coverage on ABC Radio National AM, ABC Radio News, SBS radio news, the Australian Financial Review, Radio 3CR, Interpress and the Wentworth Courier. Pat Ranald was on ABC Radio National Australia Talks Back on Tuesday 10 February.

The ABC TV 7.30 report took up our themes in their Monday program, as did the Sydney Morning Herald and the Age on Tuesday. There has been a rush of critical letters to the editor in most papers.

The government may not release the full text of the agreement for several weeks.

The Opposition parties are establishing the Senate Select Committee for the Inquiry. The government has also announced that the Joint standing Committee on Treaties will hold public hearings for its inquiry.

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2. Summary of Key Provisions of the Australia-US Free Trade Agreement

By Ted Murphy, National Assistant Secretary, National Tertiary Education Union

This summary is predominantly based on the material available on the websites of the Department of Foreign Affairs and Trade (DFAT) and the Office of the United States Trade Representative (USTR). There are important differences in terms of the detail and the emphasis between the two sites. The summary also includes additional detail of the Agreement published in the Australian Financial Review, the Age, and the Australian on 10 February 2004.

Until the text of the agreement becomes available it is not possible to offer a more comprehensive assessment of the Free Trade Agreement (FTA).

Investment

US investment in new businesses will be exempt from screening. Currently such investment is screened if over $10million in value. The threshold for national interest screening of proposed US acquisitions has been raised from $50million to $800m, except for:

• telecommunications, transport and defence-related industries, where the threshold remains $50m

• urban land, media, and investment by governments, which will continue to be screened regardless of the value of any particular investment.

The USTR estimates that had the $800m threshold operated over the last three years, 90% of US investment in Australia would have fallen outside the screening scope of the Foreign Investment Review Board (FIRB)

The significance of the above changes needs to be put in the context of the FIRB’s ability to impose conditions for approval, rather than simply accept or reject proposed investments. According to the Financial Review, in 2003 rejected only 79 of 4747 proposed investments from all countries, but specified conditions for 3566 of the approved applications. The ability to reject applications or specify conditions will be lost in respect of much future investment not only from the US but also Japan and New Zealand. Existing agreements with Japan and the US require a flow-on of the investment concessions granted to the US.

While the FTA will have a government to government dispute-settlement mechanism, unlike the North American Free Trade Agreement it will not allow for investor-activated or investor-state disputes.

Agriculture

Australia failed to secure an increase in the 87,000 tonnes annual quota for sugar exports to the US, a quota that represents less a single day of sugar consumption in America. This compares unfavourably with the outcome of the US –Central America FTA negotiations, which according to the Financial Review raised the quota from Central America by 99,000 tonnes, rising to 140,000 tonnes over the next 15 years.

Quota restrictions on beef will be phased-out over 18 years, though in-quota tariffs disappear from the date the FTA comes into effect. The Australian estimates that fourth fifths of the increase in market access will not be delivered until year 18. Quota increases won’t take effect until US beef production returns to its 2003 (before the mad cow disease scare) level, or three years after the date of agreement, whichever happens first. Over –quota duties remain until year 9 of the FTA and are then phased-out over a further nine years.

The USTR states that a price-based safeguards mechanism will be available after the 18 year transition period, and the mechanism will be " sensitive to market disruptions for high quality beef." According to the Financial Review, the safeguard mechanism would allow two-thirds of the current tariff to be reimposed if US beef prices fall by 6.5% below a two year rolling average, an event that Meat and Livestock Australia states happened six times in the past decade

A safeguard mechanism will also operate in the event of significant price-decreases for certain Australian horticultural imports to the US.

DFAT says there will be a three-fold increase in tariff quota dairy products from year 1, with an ongoing rise in quotas at the average yearly rate of 5%. The deal includes certain cheese, butter, milk, cream, and ice cream products that were previously excluded from the US market. The Financial Review claims that market access gains below the average rate apply to products that are sensitive to US interests, such as skim milk powder.

The USTR states that the increase in Australia dairy imports will be equivalent to about 0.17% of US dairy production, and 2% of the current value of total US dairy imports. The increased imports " are not expected to affect the operation of the Commodity Credit Corporation’s diary price support program " and there will be no change in over-quota tariffs.

The print media state that US duty on Australian wine will be phased out over 11 years, that a 500 tonne annual quota has been set for peanuts, and a 4000 case quota for avocados. US duty on seafood exports will be abolished.

Both DFAT and the USTR hail the outcome of the agreement for the elimination of tariffs on other products such as lamb, oranges, cotton seeds, cut flowers, soybeans, fresh and processed fruits, vegetable and nuts, alcohol and processed food products such as soups. The USTR says all US agricultural exports to Australia, valued at $400m, will receive duty-free access to Australia as at the date of effect of the FTA. The Age estimates that even after all phase-out periods are over, a quarter of Australia’s agricultural exports will still be subject to tariffs or quotas.

As for Australia’s single desk marketing bodies for a range of agricultural products, DFAT states that they can be maintained while the USTR claims that the parties have agreed to negotiate through the WTO to abolish such arrangements globally.

97% of Australia manufacturing exports to the US will be duty free from the date of effect of the FTA, as will 99% of US manufacturing exports to Australia. Manufactured goods account for 93% of total US exports to Australia. US manufacturers estimate the exports gains to them as a result of the FTA to be $US2 billion per annum.

DFAT states that tariffs on textiles, some footwear and " a handful of other items" will be phased out by 2015. In addition to each country retaining their anti-dumping and countervailing measures, there will be a special transitional safeguard measure for textiles and clothing.

Tariffs on car components and commercial vehicles will be eliminated from the date of effect of the agreement. Australian passenger vehicle tariffs will be phased out by 2010.

DFAT states that the rules of origin will use a test as to whether products which include imported inputs are substantially transformed in the US or Australia, to the extent that the product changes tariff classification. Where this is difficult to demonstrate, an alternative or additional local content test will apply. Further, USTR says that textile and apparel tariffs will phase-out over a maximum of 15 years for goods that meet the FTA’s yarn-forward rule of origin.

DFAT states the FTA protects local content requirements, including capacity to set requirements for new and emerging media and to go beyond existing measures for subscription television formats, such as drama, children’s programming, and documentaries.

Nevertheless, according to the USTR the FTA contains " important and unprecedented provisions to improve market access for US films and TV programs over a variety of media including cable, satellite, and the internet."

The Age reports that the current 55% local content requirement for free to air TV is capped at this level under the FTA, and that the requirement that pay TV channels that screen drama spend 10% of their program budget on new Australian drama can only be raised in future to 20%.

DFAT states that while the PBS procedures will be changed to provide for greater transparency, speedier decision-making, and more opportunities for input from interested companies, the price of prescriptions will not increase as a result of the FTA.

The USTR states that the parties have agreed on the importance of innovation and research and development in pharmaceuticals, and the need to recognize the value of innovative pharmaceuticals and to have procedures that appropriately value the objectively demonstrated therapeutic value of a pharmaceutical. To implement these principles there will be provision for an independent review of PBS determinations of product listings, and other changes to enhance the transparency and accountability of the PBS.

DFAT also advises that the marketing approval process of the Therapeutic Goods Administration will ensure that generic manufactures do not enter the market before a patent expires, and that notice will be given to a US patent-owner where a generic manufacturer seeks to enter the market on the grounds that the patent is invalid.

US federal government contracts over $US6,725, 000 in construction and over $US 58,550 in other sectors will be open to Australian companies. The US federal procurement market is estimated to be worth $200 billion and Australia will join a list of over 80 countries able to compete for contracts.

DFAT states that most US state government purchases will also be open to Australian firms, while the USTR says that the extent of access at the state and territory level will be finalised over the next few weeks.

DFAT states that Australian procurement preferences for small business and indigenous people will remain. USTR states that the Commonwealth Government will eliminate industry development programs that require suppliers to meet local content or local manufacturing requirements.

There is little detail about the outcome for a range of service sectors. DFAT indicates that, at least for education services and legal services and possibly also for most service sectors, the FTA will require the US government to treat Australian owned service providers operating in America as favourably as American providers.

The likely corollary of this is that such ‘ national treatment’ would also apply to US providers operating in Australia, though the USTR is simply claiming the FTA will require Australia to " accord substantial market access its entire services regime"

Though neither website contains this information, a telephone enquiry to DFAT confirms that subsidies and grants are excluded under the Services Chapter of the FTA. Nevertheless, a requirement for Australian governments to treat US providers in a range of Australian service sectors as favourably as local providers, except for subsidies and grants, represents a potentially significant acceleration of liberalisation for those services where no such commitment was given under the WTO’ s General Agreement on Trade in Services.

The USTR states that there are statements in the FTA about ILO obligations and the need for high levels of environment protection. However, according to DFAT the only provisions that are enforceable through the agreement’s dispute-resolution mechanism are those to the effect that neither party shall fail to enforce domestic labour and environmental laws to achieve a trade advantage.

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AFTINET was invited to attend the International Trade Campaign Conference in Delhi in November of last year. AFTINET was represented by Suzette Clark, AFTINET Working Group member representing the Australian Catholic Social Justice Council. Suzette’s trip was funded by Church organisations.

The conference involved 110 participants from 48 countries, including 75 participants from the global south: 35 from Asia, 30 from Africa, 10 from Latin America, 25 from Europe and 10 from North America. AFTINET was the only organisation represented from Australasia. Each invited participant was engaged in trade campaigning through a number of strong national, regional and international networks and campaigns that have been active for a number of years.

The conference focused on closer national, regional, and international networks of trade campaigners, and a shared understanding of issues and approaches involved in the international trade campaign. The emphasis was on workshops, regional meetings and informal meetings. Participants agreed to work towards a coordinated international week of action, probably in probably in April 2005.

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An earlier bulletin report advised that the AFTINET Planning Meeting would be on 10 February. This was an error, the correct date is 10 March. Apologies for the confusion. All AFTINET members are invited to attend.

The meeting will be on 10 March from 5pm at the Conference room on Level 11, PSA House, 160 Clarence Street Sydney. The meeting will run for approximately two hours.

Come along if you can and have your say. Please let us know if you are coming. If you can’t attend but would like to make a suggestion for the planning meeting please contact Louise Southalan at lsouthalan@piac.asn.au or phone (02) 9299 7833.

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