Australian Trade
Policy Review 2011
On December 10th 2010,
Trade Minister Craig Emerson made a speech to the Lowy Institute in which he
recalled his record as a dedicated economic rationalist and adherent to the
principles of free trade, and announced a review of the government’s trade
policy. Follow this link to download a copy: http://trademinister.gov.au/speeches/2010/ce_sp_101210.html
In our December 2010/January2011 Bulletin AFTINET
made some initial comments based on the Ministers speech to the Lowy Institute,
where he announced the Review of Australia’s Trade Policy. See article below
or follow this link to download the bulletin.
On Tuesday 12th April 2011, Dr Craig Emerson
Australian Trade Minister, released the much anticipated review of Australia’s
Trade Policy. Follow this link to the Ministers Media Release; follow this link
for a copy of the report.
The review contains some wins for AFTINET’s community
campaigns. Below is a copy of AFTINET’s media release in response to the
announcement. Follow this link to download a copy of the media release.
The following article is an analysis of the policy and
highlights our victories – it can be downloaded by following this link.
The government's trade policy statement:
a mixed bag, with some victories for AFTINET campaigns on the PBS and investor
rights
By Dr Patricia Ranald, AFTINET convener
As indicated in December, Trade
Minister Emerson’s review of trade policy release on April 12, is based on five
principles. These are unilateralism, non-discrimination, separation of trade
and foreign policy, and transparency. The full policy is available at http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-jobs-and-prosperity.html.
AFTINET released a media
statement on the policy which received some media coverage (see www.aftinet.org.au). This article is a
more detailed analysis of the policy.
Free trade theory and unilateral reduction of tariffs and other trade
barriers
Much of the trade policy
statement was devoted to a detailed defence of free trade economic theory based
on the theory of comparative advantage (pp 1-9). This theory has many critics,
especially those who have studied the historical development of real economies.
Basically, the theory argues that each country should specialise in those
products which it can produce most efficiently, and should import all other
products. In the case of Australia,
this could mean an economy based on mining, agriculture, tourism and some
service industries. The theory argues that, if every country unilaterally
reduces its trade barriers, global trade will increase and economic efficiency
will be maximised.
However we advocate that the
objective of trade and economic policy is not simply to increase economic
growth and volumes of trade, but to improve living standards and the quality of
life in the context of human rights, labour rights and the protection of the
environment. More generally, Australian Labor Party policy recognises that the
achievement of these goals requires not only economic growth but action by
governments to correct market failures, ensure that the benefits of economic
growth are distributed fairly, and protect the environment.
The application of extreme free trade
theory also ignores the lessons of history. Historically, all industrialised
countries have used tariffs and other forms of industry policy to develop their
industries, but some now seek to “kick away the ladder” of industry policy for
developing countries
Studies by the World Bank and others have shown that rapid tariff reductions in
developing countries can simply cause unemployment and low economic growth in
the absence of other measures to develop employment
This is why even the World Trade Organisation supports special and differential
treatment to enable developing countries to have some industry policies.
Extreme free trade theory assumes
that those who lose their jobs as a result of unilateral tariff reductions will
simply move to jobs in other sectors created by higher economic growth. This is
demonstrably false. The impacts of unilateral tariff reductions are not evenly
spread, and it is not easy for those unemployed in one sector to move to
another. For example, in Australia,
employment losses resulting from tariff reductions in manufacturing industry
over the last three decades are concentrated in regional areas of high
unemployment and on older workers, often from non-English speaking backgrounds,
with less education and skill development opportunities. Despite adjustment
assistance, many of these workers are not welcomed by service industry
employers and remain unemployed. Australia already has very low
average tariffs and other trade barriers. The application of an abstract
principle of reducing all tariffs to zero without considering the actual impacts on specific industries and
communities would not only reduce government revenue but increase social
security and other adjustment expenditure, in addition to the human cost.
This is why there was reportedly
a division in Cabinet about the policy, and why AFTINET, and its members like
the Australian Manufacturing Workers Union have criticised the policy and
challenged its application in the real world
The application of this extreme
free trade policy is also of concern to AFTINET members who represent services
industries, particularly human services, and those like the finance, building
and other services which require government regulation to address market
failure and equity issues. The simplistic application of this theory appears to
endorse a general reduction in government regulation simply because this might
limit the volume of trade. "Invariably
government laws and regulations have the effect of reducing the amount
of trade between countries …reducing government imposed restrictions on trade
at home has the beneficial effect of exposing local businesses to international
competition" (p.2).This clearly contradicts other aspects of government
policy which recognise that government regulation is required to address other
policy goals.
AFTINET advocates that trade
policies must be based on human rights, labour rights, protection of the
environment, and must not undermine the ability of governments to regulate in
the public interest to achieve these principles.
In terms of the negotiating
agenda, the government says its main priority will be multilateral negotiations
through the WTO Doha round. But it is also giving priority to the Trans-Pacific
Partnership Agreement with the US, Australia, New Zealand, Chile, Peru,
Singapore, Malaysia, Brunei and Vietnam, as a possible path to a wider
free-trade agreement in the Asia-Pacific . A possible future comprehensive
economic partnership for East Asia, involving the 10 ASEAN members, plus Australia, China,
India, Japan, New Zealand
and the Republic
of Korea, and other
ASEAN-centred processes, is also mentioned. Other bilateral negotiations in
progress are the Australia–Korea free-trade agreement, the Japan-Australia free
trade agreement and the China-Australia free trade agreement. Possible
free-trade agreements with Malaysia,
Indonesia,
and the Gulf Cooperation Council are also mentioned.
Some victories for AFTINET campaigns
There are other aspects of the
policy which are responses to our campaigns and which we have welcomed.
The first is the decision that
the government will follow the recommendations of the Productivity Commission
and will not support the inclusion
of investor-state dispute procedures which give foreign businesses greater legal
rights and domestic investors, including rights to sue governments for damages
on issues like cigarette plain packaging legislation. The policy also states that ‘ in the past Australian governments have thought
the inclusion of investor state dispute
resolution procedures in trade agreements with developing countries at
the behest of Australian businesses .The Gillard government will discontinue this practice (p.20)” . The
welcome ditching of the investor state dispute process is a direct response to
our campaigns over many years, since this proposal was defeated in the
Australia-US free trade agreement in 2004, and more recently through our
submissions to the Productivity Commission and the government's trade review.
Secondly, the government has adopted
the recommendation of the Productivity Commission that the government should not include matters in bilateral and
regional trade agreements that would “raise costs or effect established social
policies” (p.26). In particular, the government will not accept positions that
limit its ability to continue the Pharmaceutical Benefits Scheme (p. 20). The
Productivity Commission recommendation adopted in the trade policy also
recommended that the government should not
include increased intellectual property protection in future bilateral or
regional trade agreements (p.26) The clear protection of the Pharmaceutical
Benefits Scheme and the rejection of increased intellectual property rights are
also responses to AFTINET advocacy over many years, including our submissions
to the Productivity Commission and to the trade review.
Thirdly, there is an important
policy improvement in transparency in trade negotiations. In the past, trade
negotiations were ratified in secret by Cabinet and only examined by the Joint
Standing Committee on Treaties after the decision had been made. This policy
has changed to enable consideration of trade agreements by the Joint Committee
before ratification by Cabinet. Again, this is a response to AFTINET campaigns
for greater public and Parliamentary debate and accountability for decisions on
trade agreements. It is not yet clear how this policy will be implemented. We
will advocate for the text of the trade agreement to be made available publicly
before ratification, and for a public enquiry by the Joint Standing Committee
on Treaties, to enable full public and Parliamentary debate before
ratification.
Fourthly, we welcome the fact
that the government has for the first time given support in principle to the inclusion of
labour and environmental provisions in trade agreements However
the policy does not support clear enforcement provisions, which would ensure implementation AFTINET will continue to campaign for strong
labour and environmental provisions
based on internationally agreed standards which should be enforced through the same
mechanisms as other aspects of trade agreements, , including trade sanctions.
Fifthly, AFTINET supports the
principle that there should be a clear separation between trade policy and
foreign policy, and that Australia
should not endorse trade agreements with which are not in the national interest
(p.11). The government appears to be applying this principle to the PACER-plus
negotiations, which were not included in the list of trade priorities in the
statement. Previous Ministers have argued that PACER-plus was not about trade
benefits for Australia, but
was about development of Pacific
Island economies. We hope
that the review of PACER-plus negotiations now confirmed by the Parliamentary
Secretary for the Pacific Islands will result in positive policies to assist Pacific Island development, without imposing
extreme tree free trade requirements on small and vulnerable economies.
The test of this new trade policy
will be its implementation. The new policy should mean that in the
Trans-Pacific trade agreement negotiations between Australia, the US, New
Zealand and six other Asia-Pacific countries, the Australian government will
not agree to US demands for an investor state dispute process and increased intellectual
property rights, and will not ratify an agreement if it contains these
provisions. AFTINET will continue our campaigns on the TPPA and PACER-Plus to
achieve meaningful implementation of these policies.
Ha-Joon Chang Kicking Away the Ladder –
Development Strategy in Historical Perspective, Anthem
Press, London,
2002.
World Bank, (2005)
Assessing World Bank Support for Trade 1987-2004: An IEG Evaluation, New York. This study
concluded that ‘bank advice was too optimistic about the benefits of trade
liberalisation for growth in the short run” and that it “underestimated the
interaction among growth, trade and distributional outcomes, and the
country-specific context” (p xvi).
AFTINET Media Release
12 April
Trade Review a mixed bag but has some welcome
policy changes says fair trade group.
"The Government trade policy review places too
much faith in unilateral tariff reductions and the theoretical benefits of free
trade, while ignoring their impacts on industry development and
employment" said Dr Patricia Ranald, convener of the Australian Fair Trade
and Investment Network
“However, there are four important policy changes
which we have advocated and which we welcome”, said Dr Ranald.
“Firstly, the government will not support trade
agreement provisions which will restrict the ability of Australian governments
to legislate on social, health and environmental issues. In particular, the
government will no longer support the inclusion of investor state dispute
procedures which give foreign investors greater legal rights than domestic
investors, including rights to sue governments on issues like cigarette plain
packaging legislation. This should mean that the government will oppose these
demands by the US
government in the current Trans-Pacific Partnership Agreement negotiations”
said Dr Ranald.
“Secondly, the government will not support
increases in corporate intellectual property rights which would make medicines
more expensive, and undermine the Pharmaceutical Benefits Scheme. This should
mean that the government will not agree to US government demands for increased
corporate intellectual property rights and changes to Pharmaceutical Benefits Scheme
in the current Trans-Pacific Partnership Agreement negotiations” she added
“Thirdly, there is an important policy improvement
in transparency in trade negotiations. In the past, trade agreements were
ratified in secret by Cabinet and only later examined by the Joint Standing
Committee on Treaties. This policy has changed to enable consideration of trade
agreements by the Joint Committee before ratification by Cabinet, which should
lead to more public debate and better decisions” she explained.
“Fourthly, the government has given qualified
support to the inclusion of labour and environmental provisions in trade
agreements, but unfortunately the enforcement process is not clear. We support
stronger labour and environmental provisions based on internationally agreed
standards which would be enforced through the same mechanisms as other aspects
of trade agreements, including trade sanctions,” she added.
From: AFTINET February 2011 Bulletin
Trade Minister Emerson announces trade policy review January-April
2011
By Dr Patrica Ranald
On December 10, Trade Minister
Craig Emerson made a speech to the Lowy Institute in which he recalled his
record as a dedicated economic rationalist and adherent to the principles of
free trade, and announced a review of the government’s trade policy.
The main issues which made the
headlines were the Minister’s claim that he favoured unilateral trade
liberalization, and that he was interested only in trade deals that would bring
“real results for the Australian economy and the global trading system”.
The issue of most concern in the
Minister’s speech is his proposal that Australia should unilaterally
reduce all remaining tariffs to zero. As Australian Manufacturing Workers Union
National Secretary Dave Oliver said, ‘this would devastate manufacturing jobs
and would cost the government $10 billion in revenue over three years.’
The Minister rejected the
prospect of being “mired in interminable processes that simply enable us to say
that negotiations are proceeding” and “collecting trophies for the national
mantelpiece, empty vessels engraved with the words free trade agreement if they are nothing of
the sort and of token value to our country.” This appears to be aimed at the
US-Australia Free Trade Agreement (AUSFTA), reinforced by his criticism that
the Howard Government’s attitude to this agreement was so entwined with the US
defence alliance that “any Labor criticism of the likely or actual content of
the Australia-US Free Trade Agreement was branded anti-American and
un-Australian”.
The Minister admitted that the
current multilateral, regional and bilateral negotiations scheduled for 2011,
including WTO, the Trans–Pacific Partnership Agreement (TPPA), and bilaterals
with Japan, China, South Korea, the Gulf States, Indonesia, Malaysia and India
would constitute “a hugely ambitious trade agenda” and that “actual progress on
some may be disappointing.” He asserted that “Australia will pursue negotiations
with those partners who are genuine about liberalization”.
The Minister announced that he
would conduct a review of Australia’s trade policy in the first three months of
2011, against what he identified as five Labor principles from the Hawke-Keating
era: unilateralism; non-discrimination; separation from strategic and foreign
policy; transparency; and trade policy as part of overall economic reform. The
review will be guided by the Report of the Productivity Commission on Bilateral
and Regional Trade Agreements, released on December 13. In fact many issues
raised in the speech are taken from that report (see article below). This
review would also have an impact on the ALP policy platform debate leading to
the ALP Conference which is scheduled for December 2011.
The application of the principle
of separating defence, strategic and trade issues, and rejecting deals with no
trade benefits for Australia
could be applied to the TPPA, with interesting results. Australian negotiators
are already saying there will be no likely market access gains for Australia with the US. Australia already has FTAs with
seven of the other eight TPPA countries, and so is unlikely to gain any further
market access with them. Logically, this should mean that the TPPA deal should
be rejected. The same principles could apply to the PACER negotiations, which
previous Ministers asserted several times, are about development issues for the
Pacific Islands,
and would not result in trade benefits for Australia.
The Minister also made some
interesting remarks about Intellectual Property, which suggests that he may not
want to include the AUSFTA provisions, which adopted US monopoly copyrights and
patent laws, in other agreements like the TPPA:
“Provisions that are in Australia's
national interest obviously should be extended to other countries willing to
settle high-quality, trade-creating agreements but those that are not in the
national interest should not be extended to others for the sake of reaching a
low-quality agreement. For example, an intellectual property clause which
extends the duration of foreign copyright in one agreement and doesn't offer
obvious economic benefits to Australia
should not be part of a later agreement just because we had already used it.”
Logically, this argument should
be applied to the TPPA to exclude both US Intellectual Property rights demands
and the US Investor–State disputes process, which even the Howard government
was forced to exclude from the AUSFTA because community campaigning showed it was
not in the public interest.
AFTINET will monitor and report
to members on the progress of the trade policy review, and how submissions can
be made to it. AFTINET will also be conducting a lobbying visit to Canberra in the New Year.
The full speech is available at:
http://trademinister.gov.au/speeches/2010/ce_sp_101210.html
Follow this link to download the bulletin containing this
article.
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