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Free trade: its integration « Previous | |Next »
January 20, 2004

The Free Trade Agreement (FTA) with the US is back in the news as negotiations enter their final stages over the next 10 days. What is currently being addressed by Trade Minister Mark Vaile and US Trade Representative Robert Zoellick is resolving the issues not agreed to by the negotiating teams. Then Howard and Bush step in at the last minute.

No doubt we will hear our free traders say that if Australia is to be a leading-edge economy, then we need more US investment in Australia. The FTA is the appropriate instrument to opening the door and providing the welcome mat. It is doing business with the US that will prevent Australia's inevitable decline down the global wealth table in a globalized world. Protection means economic decline; an open economy means economic growth. That's the line.

Tim Colebatch says in The Age any "agreement will be a compromise of interests, in which both sides trade off what they feel they can afford to give politically to protect what they cannot." He goes to say that:

"The political reality is that to get an agreement by Friday week, Australia will have to give up more than it wants and accept less than it wants. The deal will not be a balanced one...[America] is unlikely to give free access to Australia's far more competitive exporters, even over 10 years or more. It will not lift its ban on fast ferries and it is unclear whether it will agree to free trade in dairy and beef. To secure even that outcome, Howard and Vaile will have to make some politically painful calls. Few of the US demands are easy to meet, and some would hurt seriously."

Australia will give ground on restrictions on foreign investment, will reduce local content rules on digital TV and other new media forms, abolish farm export monopolies such as the AWB's control of wheat exports, and concessions on the Pharmaceutical Benefits Scheme to increase the returns to the US pharmaceutical manufacturers.

A key sticking point is the attempt by the Bush Administration to use the FTA to secure changes to Australia's PBS system to increase the price of drugs for the US pharmaceutical manufacturers. Is this the payback for the political donations pharmaceutical manufacturers to Bush's election to the imperial presidency?

Not much there for Australia, is there? The cards are stacked against Australia.

Will John Howard, the man of steel, crumble like a soft cookie? Will he sell out Australian consumers by siding with the US pharmaceutical manufacturers? That will not go down well with Australian public opinion.

So why the Australian push for an FTA with the US? The FTA is said to be about securing access to the US market for Australian agriculture, eg., dairy produce, sugar and beef. But there is more to it than this.

John Howard's politics are about locking Australia into the US axis. The free traders dream about a borderless world. Thus Alan Oxley in yesterday's Australian Financial Review (subscription required, 19 01 04, p. 47) says that Australia is an industrialized, democratic, and free market society with a greater focus on the market than the state. So Australia is just like the US. Hence integration with the US makes good sense. The inference? Australia should become an extension of the US market.

They rarely mention the power politics underneath all this. It is just free trade for them. Pure economics. Never political economy.

| Posted by Gary Sauer-Thompson at 6:45 AM | | Comments (0)