An opportunity for Labor

In this article drawing on her new book, All the Way with the USA, Ann Capling argues that Australia needs a trade policy that puts trade, rather than foreign relations, at centre-stage.  A YEAR AGO this week, Australian trade negotiators in Washington were in the final frantic stages of trying to stitch together a free trade agreement with the United States.  Throughout the year-long negotiation, the Howard government had stressed the importance of getting a good deal for Australia, which included the removal of US restrictions on major Australia’s agricultural exports. In the dying hours of the negotiations, however, it was evident that the agreement was going to fall well short of Australia’s expectations - despite a personal plea from the prime minister to President Bush for the smallest of concessions. Australia’s trade negotiators always knew this would be a difficult negotiation, but even they were shocked at the lousy deal on offer from Washington. Yet their recommendation that the agreement not be signed was overridden by Prime Minister Howard, who was clearly of the view that a bad deal was better than no deal at all. For Howard, the issue was not so much about specific costs and benefits for industries or for social programs, or even the net economic benefits overall. Fundamentally, this trade agreement was about politics, not economics. At the domestic political level, Howard’s triumph in securing a free trade agreement with the US was promoted as evidence of his economic and foreign policy credentials, especially compared to the new leader of the Labor opposition, Mark Latham. The Coalition argued that any move by Labor to block the trade agreement was evidence of its anti-Americanism, and showed that a Latham Labor government could not be trusted to manage Australia’s relations with the United States, including the alliance. This proved to be a remarkably effective political tactic: although Labor was deeply divided on the merits of the agreement, in the end, Latham was not willing to torpedo it. Apart from domestic political considerations, there was one reason above all why Howard would not allow our negotiators to return home empty-handed. Australia’s pursuit of the trade agreement was driven by the prime minister’s very strong desire to strengthen Australia’s political and strategic links with the US - an objective that assumed even greater importance with the so-called ‘war on terror’. Howard saw the trade agreement as a means of binding Australia more closely to the United States. As Trade Minister Mark Vaile put it at the signing ceremony, ‘This is the commercial equivalent of the ANZUS Treaty’. But Washington sees it as much more than that, and the Bush administration has made clear that the trade agreement carries with it the expectation of continuing Australian support for the strategic framework of US interests - a commitment that will not end with Australia’s involvement in Iraq. This point was underlined by the US Trade Representative, Robert Zoellick, who declared that any country seeking an FTA with the US must offer its cooperation ‘or better - on foreign policy and security issues’. Since uttering these words, Zoellick has become deputy secretary of state in the new Bush administration and can be expected to hold Australia to this understanding. It has been a cardinal rule of Australian foreign policy that commercial, political and security interests should not be mixed like this. Indeed, the greatest significance of the Australia-US FTA is that it subordinates Australia’s trade interests to other political and strategic interests that have little to do with our economic welfare. This subordination of trade policy to other political, strategic and electoral concerns could not have come at a worse time. Australia’s trade performance has deteriorated sharply over the past few years and export growth across key sectors - including agriculture, manufacturing and services - has declined dramatically since the late 1990s. Nor is Australia keeping pace with its competitors, as our share of global markets has also declined markedly during this period. At the same time, imports have grown strongly, resulting in massive trade deficits and the slowing of economic growth. This is not sustainable over the long term, especially in the absence of a coherent trade and industry policy aimed squarely at addressing economic concerns rather than shoring up other foreign policy objectives. Australia urgently needs a new trade policy - one that focuses on investment in infrastructure and education, research and innovation, and industry and export development. For its part, the Coalition government believes that Australia’s salvation will be found in further free trade agreements. Few trade experts share this rosy view. Kim Beazley is eager to press Labor’s credentials in economic policy - getting trade policy right would be an excellent place to start. • Ann Capling is associate professor of political science at the University of Melbourne. Her book, All the Way with the USA: Australia, the US and Free Trade, is published in APO’s Briefings series by UNSW Press ($16.95). This talk was first broadcast on Perspective, on ABC Radio National. 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