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FTA scepticism « Previous | |Next »
January 6, 2006

The results of the bilateral Australia-US Free Trade Agreement, which was signed in 2004 and came into force at the start of 2005, are beginning to come in. And things are quite different to what they are supposed to be.

Remember the sell? The FTA was meant to be vitally important to Australia's prosperity and global success in the twenty-first century; it was an enormous potential gain to the Australian economy; a ‘once in a lifetime deal’ that binds us to the biggest economy in the world etc etc.

Well, is it a good thing? What do the results say? The results, according to Michael Costello writing in the The Australian, are not good:

According to US Census Bureau figures, the first 10 months of the FTA saw Australian merchandise exports to the US falling 4 per cent.... What's more US exports grew by 4 per cent in the same period as ours declined by 4 per cent. The result is a billion-dollar increase in our trade deficit with the US over the comparable period in 2004.

How is that result a good thing for Australia? I can see that it is for the US. Wasn't it meant to be the other way around?

Wasn't the FTA meant to change Australia's economic history of having a massive net surplus on primary exports and a massive net deficit on manufactured exports? As Evan Jones succinctly puts it:

In a nutshell, ‘Australians’ export coal so that they can import cars and personal computers. Economists call this phenomenon ‘comparative advantage’. Ship the materials overseas, have them processed, then ship them back as manufactured commodities.

Wasn't the FTA meant to be a start to clawing back Australia's indebtedness to the rest of the world (now overA$57 billion) by opening the big US markets to Australia's manufacturing goods?

What has gone wrong? The Australian will have nothing to do with this scepticism.

OPPONENTS of the Australia-US free trade agreement are nothing if not obstinate –---and opportunist. A year after the deal was done the world has not ended, but they still say catastrophe is imminent...

Note the straw dog style of argument. Whose saying that? We are just pointing to the gaps between what was supposed to be and what is.

Oh, and we make an inference from the figures. As a free trade agreement the FTA is a dud. It is not free trade. There is no massive expansion in two way trade. The FTA is a preferential trade agreement in which the US used its muscle to seek preferences for its exports from a weaker nation. The US does this to improve its productive capabilities. Alas this at the expense of Australia's general welfare. The results bear this analysis out.

| Posted by Gary Sauer-Thompson at 1:26 PM | | Comments (5)
Comments

Comments

Gary, I went looking for the data on this, to see which industries were winners and losers, and if the FTA aided them in becoming winners or losers. I couldnt find it. Since this is getting so much media play, it would be nice if they would provide primary sources that we could analyse, rather than having to take their word for it.

Cameron,
I went looking for the data too. I couldn't find it either. I just thought that it was me--not knowing my way around the US Census Bureau.

Nor could I find much in Australian newspapers. That suprised me. I just htough that it was a case of me haven't not really been reading them closely this week.

I have to admit that I was suprised at the lack of data.

What is your source for this remark?

According to US Census Bureau figures, the first 10 months of the FTA saw Australian merchandise exports to the US falling 4 per cent. What's more US exports grew by 4 per cent in the same period as ours declined by 4 per cent. The result is a billion-dollar increase in our trade deficit with the US over the comparable period in 2004.

Whilst I'm personally not in agreement with the USFTA - in business there is often a loss in the first year or two before a significant gain comes in on a project but that is not what we were told would happen.

Vee,
I should have linked to it.

It is a statement by Michael Costello in his op.ed.'Done Like a Dinner', in Friday's Australian.
I've put the link into the post.

I generally ignore the links to News Ltd as they drop out after several days. Instead I give the author, name of the piece and the quote. I slipped up this time.

Apologies.

Thanks for that. I ignore News Ltd links for that reason too.