8 July 2004

Contents:

1. Key Labor senator hits US agreement
2. Rationalists run for cover in free-trade debate
3. USFTA events in July: Melbourne, Brisbane
4. Thai Australia Free Trade Agreement Process Flawed, say Community Groups

1. Key Labor senator hits US agreement

Australian Financial Review, 6 July 2004

Australian farmers, intellectual property users and the nation's pharmaceutical system could be disadvantaged by the free-trade deal with the United States, the Labor senator chairing an inquiry into the agreement said yesterday.

Former trade minister Peter Cook cited serious problems in the agreement. Senator Cook is chairing a special committee that is investigating the trade deal. It is due to report to the Senate by August 12.

Labor has said it will not decide whether to support the free-trade agreement in the Senate until the committee's report is released.

A government-commissioned study estimates the FTA will boost the Australian economy by more than $6 billion. However, Senator Cook said it was clear some of the assumptions of that study were wrong, including judgements on how many US government procurement contracts Australian companies would win.

A key problem with the deal was that while other deals signed by the US, and the section in the FTA covering the services sector, included a most-favoured-nation component, this trade deal excluded agriculture.

Senator Cook said it meant Australian farmers would not enjoy any benefits taken up by other countries that signed trade agreements with the US. "From an Australian point of view ... it would seen sensible for Australia to request a most favoured nation-style clause," he said in a speech at the University of Western Australia.

Senator Cook said provisions covering intellectual property locked Australia into the US view at the World Trade Organisation level. The provisions covering the pharmaceutical benefits scheme, he said, needed to be stronger to ensure the bill did not undermine the delivery of cheap drugs in Australia.

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2. Rationalists run for cover in free-trade debate

Sydney Morning Herald, Ross Gittins, July 5, 2004

Have you noticed how little the usually noisy economic rationalists are having to say about the pros and cons of the free-trade agreement with the United States? It's not a good look.

With the notable exception of Professor Ross Garnaut of the Australian National University and a few ex-Productivity Commission econocrats, the rationalists are missing in action.

They're not backing up Professor Garnaut in his untiring opposition to the deal but, by the same token, they're not coming out in support of it, either. No, they're all terribly busy staring at the ceiling and whistling Dixie.

Their silence raises doubts about whether the rationalists are all they claim to be. They claim to be objective and disinterested. They claim the economic prescriptions they espouse are based on science and are quite apolitical.

Their support is not for business interests, but for the role of markets, which have proved so remarkably good at delivering prosperity to all of us. And when it's necessary to take sides, their sympathies are always with the consumer, never the producer.

That's what they claim. The alternative explanation is that, for the most part, the economic rationalists are just a bunch of right-wingers, who instinctively sympathise with capital over labour, are big on individual freedom and hate paying taxes.

They love the neo-classical model of economics because they find it fits so easily with their political prejudices, seemingly elevating them to the level of scientific truth.

And that, you see, is why the case of the free-trade agreement is so significant. Here we have a deal that's hard to reconcile with the tenets of economic rationalism but which is being pushed by a conservative Government with its back to the wall and joyously received by virtually the entire business community.

It's crunch time for the rationalists. Do they stick up for their principles and oppose a government they sympathise with? Do they risk giving uncomprehending offence to their business employers, sponsors and mates?

Do they risk being accused of anti-Americanism? Do they get into the same bed as a bunch of protectionist unions and paranoid actors? Or do they simply button their lips for the duration?

I repeat the challenge. Where are all the right-wing think tanks when we need their contribution? Where's the Centre for Independent Studies? Where's the Melbourne-based Institute of Public Affairs? Where's the fearless Des Moore and his Institute for Private Enterprise?

Where are the rationalists patiently explaining to the punters that the so-called free-trade agreement isn't actually about free trade but, rather, a preferential trade deal between two countries?

To the business community, we've been invited to enjoy special entree to the biggest and most advanced economy in the world. How could there possibly be any objection?

Where are the rationalists explaining to their business mates that it's a lot more complicated than that?

Where are the rationalists explaining that the trouble with preferential deals is that, as well as creating additional trade between the two countries giving preferential treatment to each other, the deals also divert trade from third countries?

And that the cost of this diversion has to be counted against the benefits of the extra bilateral trade.

Preferential trade deals generate a lot of wasteful administrative cost because of the "rules of origin" that go with them. These are needed to ensure goods from third countries - or goods with too many imported components - don't gain preferential access to the other country.

A lot of time and money is wasted checking that goods comply with the rules of origin. And the incentive to change a good's components to make it comply involves not just trade diversion but a form of hidden protection.

Where are the economic rationalists explaining these grubby facts of life to their starry-eyed business mates?

Professor Garnaut's great concern is that the move to bilateral trade deals will come at the expense of genuine free trade via further rounds of multilateral trade negotiations under the auspices of the World Trade Organisation.

In the bad old days Australia used to be part of an "Imperial preference" trade system centred on Britain. If the Yanks keep on making bilateral deals, we'll end up with an imperial preference set-up centred on the US.

So where are the rationalists patiently explaining to the misguided Professor Garnaut and his Productivity Commission supporters that their fears are unfounded, that bilateralism is just a ploy to advance multilateralism and that the Americans can be trusted to act in the interests of the world, not just themselves?

The business community's grasp on the basics of trade economics is so tenuous that many business people would probably be quite put off to learn that, according even to the econometric study paid for by the Government, the deal is expected to worsen significantly our bilateral trade deficit with the US.

Our imports from them are expected to grow twice as much as our exports to them, adding about $3 billion a year to the deficit.

So where are the rationalists explaining that this isn't the bad thing it seems to be? Where's the Adam Smith Society explaining, yet again, the error of mercantilism?

And then there's the stack of interventionist queries that arise over the proposed accommodation of American drug companies' interests in the Pharmaceutical Benefits Scheme, the potential inhibition on the marketing of generic drugs and the seemingly crazy proposal to retrospectively extend copyright protection from 50 to 70 years after the author's death.

When you remember that intellectual property law constitutes the imposition of a legislated monopoly on the free market - with all the inherent potential for "government failure" and capture by vested interests - you'd think this the perfect opportunity for the self-proclaimed independent rationalist think tanks to make a contribution.

So why the deafening silence? Lost the courage of your convictions?

Ross Gittins is the Herald's Economics Editor.

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3. USFTA events in July: Melbourne, Brisbane

(a) Melbourne USFTA question and answer night Wednesday 21 July

Public First invites you to a USFTA question and answer night

When: 7.30 pm sharp, Wednesday 21 July
Where: Trades Hall, cnr Lygon St and Victoria Parade, Carlton

Chair: Marcus Clayton, public interest lawyer, Slater & Gordon

Panel: David Ristrom (Greens), Sen. Lyn Allison (Democrats), Sen. Gavin Marshall (ALP), Alan Moran (Institute of Public Affairs)

More information: Contact Public First 9662 9688, 0419 537 595

(b) Brisbane Forum on the USFTA Tuesday 13 July 7pm

The USFTA: Implications for Australia

Queensland Council of Unions building,
2^nd floor, 16 Peel Street, South Brisbane

Speaker: Terrie Templeton (WTO Watch Qld)

Sponsored by: Just Peace

More information: Contact Annette Bromley (07) 3324 8459

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AFTINET MEDIA RELEASE, 5 July 2004

"The Thai-Australia Free Trade Agreement is a quick fix deal developed without community consultation and without information about its impact on communities in Australia or Thailand," Dr Patricia Ranald, Principal Policy Officer at the Public Interest Advocacy Centre said today.

Dr Ranald convenes the Australian Fair Trade and Investment Network of 87 community organisations concerned about the impact of trade agreements on domestic laws and policies.

"The deal was announced last October, the text was not made available until 6 months later and the Joint Parliamentary Standing Committee on Treaties has yet to consider it," said Dr Ranald. "This is another example of the undemocratic process of trade agreements being negotiated and signed without proper community consultation or parliamentary scrutiny," she said.

"The main impacts of the agreement in Australia will be on the car industry and the textile, clothing and footwear industries, which are large employers in regional areas, yet no studies have been done of the impacts on jobs in these industries or communities. Such research should be done and made public before negotiations begin" explained Dr Ranald.

"Thai community groups, farmers organisations and Senators have made similar complaints about the lack of community consultation," added Dr Ranald. "We are also concerned at the lack of guarantees in the agreement that labour rights and environmental protections will not be undermined" said Dr Ranald.