Selling out

The free trade deal compromises important Australian industries for scant gain.There was no way the Australian trade negotiators were going to fly home from Washington empty-handed. The Howard government’s commitment to farmers that there would be no free trade agreement without significant improvements in market access to the US was always in the realm of non-core promises. So much political capital had been invested in securing this deal that Canberra was never in a serious position to walk away from it. In at least one respect, this is a historic agreement. Over the years, both Coalition and Labor governments have examined the idea of an FTA with the US, but have never proceeded. Understanding that Washington would find it impossible to make major concessions in politically sensitive areas such as beef, dairy and sugar, Australian governments have not been willing to accept a half-baked agreement that compromises its own economic and political interests. Not willing until now, that is. Proponents of this FTA will have trouble concealing their disappointment, for the gains are truly few and far between. For instance, Australian beef producers will get duty-free access to the US - in 18 years. Australian dairy exporters will make marginal gains, but will still be adversely affected by massive American subsidies that contribute to global market distortions. Sugar has been excluded from the agreement. We are still not able to export our world-class high-speed passenger ferries to the US. And as for Australia’s services sector, the jury is still out. There appears to be a great deal of unfinished business in the services negotiations, which means the FTA is likely to become a platform that will enable the US to continue to press its demands in areas such as education, training and culture. To be sure, the removal of US tariffs on car parts and utes is welcome news for our automotive industry. Horticulture and processed food manufacturers may also benefit from the removal of US tariffs on products such as avocados, mangos and fruit juice. But these are nothing more than crumbs off the table. Judging by the media statements from both countries, there is a gross imbalance in this FTA. Australia already suffers from a $US9 billion ($A11.7 billion)-a-year trade deficit with the US, and this looks set to worsen. The US manufacturing sector alone expects to achieve export gains of $US2 billion a year thanks to the FTA. By contrast, Australian Trade Minister Mark Vaile spoke yesterday of millions of dollars of benefits for Australia - a far cry from the $A4 billion figure that was touted by the government for the past three years. This is a rather unusual outcome, especially given the argument that, in bilateral trade deals, it is the smaller partner that is meant to gain the greatest benefits from gaining access to a much larger market. Until the text of the agreement is released, it is hard to know exactly what Australia has ceded in these negotiations. There are real concerns about the Pharmaceutical Benefits Scheme. The deal will bring changes to the PBS that appear to be aimed at giving pharmaceutical companies more say in the decisions of the Pharmaceutical Benefits Advisory Committee. But the FTA provides for the establishment of a new and ‘independent process’ to review determinations of product listings, which appears to open more avenues for pharmaceutical companies to challenge PBAC decisions. There are similar concerns about the future of local content rules for new media formats. Australia could have carved out the audiovisual and entertainment sector from the agreement, just as the US carved out sugar. Significantly, it chose not to, and the US believes it has achieved ‘important and unprecedented provisions’ for improved market access to Australia for movies and TV shows. In the end, a lot of political and bureaucratic effort has been invested for a scant return. Perhaps we should think of this exercise as a three-year publicity campaign aimed at raising Australia’s profile in US government and business circles. Now the Howard government has an even bigger PR task, trying to persuade Australians that this deal is in the national interest. One thing is for certain, though: we can expect to see some sweet deals for the Australian sugar industry in the lead-up to the federal election. Ann Capling, an associate professor in political science at the University of Melbourne, is the author of Australia and the Global Trade System,Cambridge University Press, 200