US and Australia Free Trade Agreement

Make a public submission now!

When Australia began negotiations with the US over a Free Trade Agreement (FTA) it was without any public debate or community consultation. The Trade Minister, Mark Vaile, went to Washington in April to begin talks about an FTA. On November 14, the same day as the WTO held a mini ministerial meeting in Sydney, an announcement was made that Australia and the US would commence negotiations to conclude a free trade agreement.
The Australian Department of Foreign Affairs has stated that the aim of this agreement is to liberalise trade in goods and services, to facilitate trade and investment and to address government level impediments to increased commercial exchanges.
Free Trade Agreements pose a number of problems, and in this case it is especially alarming given Australia's lack of bargaining power. The US has targeted Australian social policies as barriers to trade, and has also called for an end to Australia's content rules for film and television, the abolition of the Pharmaceuticals Benefit Scheme and a reduction in quarantine standards.
Following the announcement made on November 14, DFAT has called for public submissions on the proposed free trade agreement between the US and Australia. Please make a submission outlining your arguments and concerns over such an agreement. A brief background and some points to include in a submission are provided here.

---
What is a Free Trade Agreement?

A Free Trade Agreement is essentially a trade arrangement between member countries that 'eliminates all tariffs and other restrictions on substantially all trade in goods between member countries'.
FTAs are exceptions to WTO 'Most Favoured Nation' rule. The MFN is a fundamental principle in the WTO which states that members of the WTO must give fellow WTO members no less favourable treatment in terms of tariff rates and other trade measures than they afford any other country.
FTAs are an exception to this rule. The WTO allows individual countries to afford preferential treatment to partners in a FTA, or a Regional Trade Agreement (RTA), as long as the agreement meets strict conditions.
The reason for this exception is that WTO Articles state that there is a 'recognised desirability to increase the freedom of trade by the development of closer integration between member states through agreements establishing customs unions or free trade areas. At the same time, strict conditions apply to ensure that such agreements perform a truly liberalising function in international trade and do not encourage the establishment of new barriers, or provide an easy route to introduce new measures discriminating between trading partners'.

An FTA between the US and Australia

According to DFAT there is no predetermined definition of what an FTA between Australia and the US would cover, beyond the core requirement to eliminate tariffs and other restrictions on substantially all merchandise traded between parties. Aside from this core element, the negotiations will be driven by the interests, policies and practices of each country.
This is an alarming situation for Australia because of its unequal bargaining position. Australian negotiators want more access to the massive US economy and the removal of US agricultural subsidies and other restrictions on Australia's agricultural exports. Access to the US market for Australia means access to the one of the largest economies in the world. In return Australia can only allow the US access to its relative tiny market.
As predicted, the US is in a position to make a number of serious demands on Australia in considering a FTA. On the US 'barriers to trade' list is Australia's Pharmaceutical Benefits Scheme, quarantine laws, Australia's local content laws in film and television and the Foreign Investment Review Board.
In the name of free trade and 'freedom of choice' the US has targeted the Australian content of our film and television. The local content rules are important parts of Australia's cultural identity and they ensure Australian stories are told. These rules also ensure a local skills base which enables quality films and television programs to be made here. This important feature of our film and television industry should not be traded away.
Major pharmaceutical companies are corporate and political heavyweights in the US. The PBS negotiates lower drug prices in exchange for the PBS subsidy and technically it distorts the market. For this reason it has been targeted by the US as a barrier to trade. The PBS is a crucial social safety net for Australians that makes medicines more affordable. It should not be targeted as a trade barrier.
The US claims that Australia's strict quarantine laws are implemented because of political (special interest) intervention, and that quarantine regulations are a mask for protectionism. However, Australia's high quarantine standards are due to the fact that Australia is an island country that is disease free in some areas. In the light of the devastating effects from Mad Cow disease and Foot and Mouth disease, Australia should not consider reducing these high quarantine standards.
The US is also targeting Australia's national interest clause concerningforeign investment. Australia has specific investment restrictions through legislation in a few strategic industries such as media, telecommunications and airlines. The Foreign Investment Review Board is a general restriction and if its power was to be weakened or eliminated, important Australian industries would be vulnerable to US takeover. For example, the level of foreign ownership of Qantas is restricted to less than 50%. Under a free trade agreement such a provision could be removed and Qantas would no longer be Australian owned and managed.
It is crucial that none of the areas above are subjected to trade off in negotiations with the US over a free trade agreement. This would pose a serious threat to Australian culture, health and safety, public interest and economic independence.
In a recent development, Australia has announced that it will ask the WTO for an aggressive reduction in tariffs on manufactured goods and the complete elimination of tariffs in industrialised countries by 2010. This proposal is even more extreme than the new US proposal that called for tariffs to be scrapped by 2015.
The Australian government was considering a cut in car tariffs to 5% by 2010 in exchange for a multi-billion assistance package. But given its WTO bid, the government would be required to cut tariffs even faster. After the car industry the government has said it will turn its attention to the textile, clothing and footwear (TCF) industry.
The automobile and TCF industries are major employees, and the car industry is an important location for new technology entering Australian industry. The FTA proposal is really a plan for a massive de-industrialisation and more unemployment.

Who is for and against a FTA between the US and Australia?

The Australian government claims that an FTA with the US will increase Australia's links to the world's biggest economy and will eventually be worth $4 billion dollars a year. This is made up of $2 billion in extra agricultural sales to the US and $2 billion in cheaper manufactured imports into Australia. This will mean fewer manufacturing jobs in Australia.
A coalition of major US corporations also supports the FTA, although they have outlined a number of conditions. For example, representatives of the US automobile industry state that Australian car tariffs must come down before they will support an FTA.
Naturally a number of multinational corporations are in favour of such agreements that reduce protection and open up markets. The director of Motorola pointed put that his company would prefer market opening to happen through the WTO, but companies are now looking for alternatives 'because the WTO is such a go-slow'.
In Australia the National Farmers Federation has critised the FTA agenda saying they are doubtful that any gains would be made in access to US agricultural markets. Labor, Greens and the Democrats are also strongly critical of the proposed agreement.
US farmers are also distressed by the proposed agreement, as Australia would be calling on the US to reduce its subsidies to farmers and other restrictions on Australia's agricultural exports.
And of course, there is massive criticism and concern from community groups over the proposed agenda that would erode Australian social services, culture, and health and safety. This is highlighted by just one of the US's demands, which is that Australia relax its labeling of genetically modified food.

The general implications of FTA

As mentioned, FTAs are beginning to be seen as alternatives to the WTO, which is not operating fast enough for companies and governments that are eager to see the market open up further.
This trend has alarming consequences. FTAs essentially mean the removal of protection and regulation. This means that global corporations gather strength and power as they challenge the provision of public health, education, social security workplace protection and environmental protection.
All of these things are at stake in an FTA as they no longer stand as essential public services, but as 'barriers to trade' that must be abolished.
There are already a number of disastrous agreements in place such as the North American Free Trade Agreement (NAFTA), which came into force in 1994. It is an agreement between the US, Mexico and Canada and was designed to give legal protection and new rights to corporations. Since its inception NAFTA has threatened the safety of food supply, undermined environmental and labour standards and cost the US, Canada and Mexico thousands of jobs.
An expansion of NAFTA is currently being negotiated in secret by Trade Ministers from 34 nations in North, South and Central America and the Caribbean. This is called the Free Trade Area of the Americas (FTAA) and would be far more devastating than NAFTA. The FTAA would include all the countries of the Western Hemisphere and aims to impose the NAFTA privatisation and deregulation agenda hemisphere-wide. It would impose rules that would empower corporations to stop governments from setting standards for public health and safety, to protect workers and to protect the environment. The FTAA aims to incorporate all the elements of the failed Multilateral Agreement on Investment (MAI) of 1998.
The MAI basically attempted to allow multinational corporations to move capital in and out of countries without government involvement or public interest rules. As already mentioned, such agreements subordinate workers rights, environmental standards and government regulation of public services to the interests of multinational corporations, most of which are US based.

It is crucial that agreements that pose such a threat to democracy and essential public services are defeated. Please prepare a submission outlining your objection to an FTA between Australia and the US.

The following points should be included:

• Australia is not in a strong bargaining position to negotiate with the US, it will have to make serious concessions.

• The PBS makes medicines more affordable to most Australians, it should not be targeted as a trade barrier.

• Australian content rules in film and television are important for cultural reasons, allowing Australian stories to be made and told here. These rules should not be scrapped in the name of free trade.

• Australia's high quarantine standards are necessary to kept disease out of Australia. These standards should not be lowered for a free trade agreement.

• Restrictions on the level of foreign ownership should not be removed in crucial industries as it would make them vulnerable to US takeover.

• The Australian manufacturing sector is especially under threat. A reduction in protection will mean the loss of jobs, skills and technology.
  --
  

Deadlines for submissions are - 15th of January 2003

Send to:
US FTA task Force
Office of Trade Negotiations
Department of Foreign Affairs
BARTON ACT 0221
us.fta@dfat.gov.au

The information in this paper comes from
DFAT - www.dfat.gov.au/trade/negotiations/us.html
AFTINET - www.aftinet.org.au/campaigns/austusafta1.html

Michele Freeman
Now We The People