28 September 2001

On Australia’s pursuit of agricultural free trade

Bill Pritchard, The University of Sydney

Since the early 1980s Australia has championed agricultural trade liberalisation. Strong bipartisan support has been accorded to the efforts of Australian trade negotiators to forge multilateral agreements to free up agricultural trade. Australia took a leading global role in promoting these issues during the Uruguay Round of the GATT (1986–93); was at the forefront of regional initiatives such as APEC’s 1994 Bogor Declaration; has argued strongly for a new World Trade Organization (WTO) trade round, and, under the Howard Government, has pursued a free trade agreement with the United States (largely with the aim of improving the market access of Australian agricultural exports). In an era when the gap between the major political parties’ economic positions has narrowed, the differences in trade policy are especially minute.

Recent debate on global trade raises questions for Australia’s longstanding pursuit of multilateral agricultural trade reform. The failure of the 1999 WTO Seattle Summit—a result of voluble third world protests within the WTO fora, coupled with the emergence of street-level anti-globalisation movements—has challenged claims of the supposed inevitability of multilateral trade liberalisation. If nothing else, these disruptions emphasise that trade liberalisation is as much a political as an economic project. A new political landscape has emerged in which trade liberalisation is attacked from both the Left and Right: calls for renewed protectionism come from sources as diverse as Pauline Hanson, Doug Cameron of the Australian Manufacturing Workers’ Union, and entrepreneur Dick Smith.

These issues are complex, and deserve rigorous analysis. Trade liberalisation, in agriculture and elsewhere, produces a social landscape of winners and losers. From the perspective of progressive politics, the public policy challenge should be to understand these outcomes and recommend positions that defend economic, environmental and social justice goals. Unfortunately in Australia, trade policy formulation during the past two decades has not taken this approach. Instead, policy has relied almost solely on assumptions that multilateral agricultural trade liberalisation would deliver large benefits for rural exporters, benefits that would trickle through the economy.

A new political landscape has emerged in which trade liberalisation is attacked from both the Left and Right.

This essay asks two fundamental questions about this bipartisan consensus. First, it inquires into how and why arguments for multilateral agricultural trade reform took hold in Canberra. Second, it questions these policies. The argument here is that although these policies may generate national economic benefits, these are not as large or influential as often portrayed. In short, the trade bureaucracy—the Australian Bureau of Agricultural and Resource Economics (ABARE), the Department of Foreign Affairs and Trade (DFAT), and the Rural Industries Research and Development Corporation (RIRDC)—and many agricultural economists ‘over-sell’ these policies to the Australian public. Critical debate on these issues has been occluded because of the institutional dominance of economists and their dependence on dense and technical discourses. More inter-disciplinarity, rigour and diversity are required in the agricultural trade policy debate. A first step would be the institutional separation of trade research from trade policy advocacy.

Australia’s support for deregulated and liberalised agriculture since the early 1980s represents the cutting edge of an historical juncture in the relationship between nation-states and food systems. Historically in Australia, as in most nations, food and agriculture have been regulated intensely. Three broad arguments have underpinned the economic regulation of these sectors. First, food security is a national concern, so governments have had legitimate interests in regulating food production. Second, agricultural regulation has dovetailed with rural development agendas. Third, traditionally asymmetric industry structures (many farmers, a few large buyers of agricultural products) have required state intervention to promote ‘fairness’.

From the late 1970s neo-liberal ideas have contested assumptions of the superiority of government over market processes. Neo-liberal arguments found ready expression in Australian agricultural policy because of a strong and technically literate community of orthodox agricultural economists. Through the 1980s and into the 1990s these economists became the key voice within agricultural policy discourse. By contrast, in Europe, for example, where agricultural policies were debated in terms of their broad economic, social and cultural implications, Australian policy discourse has been dry and monolingual.

The dominance of economics in Australian agricultural policy-making helped the nation assume the diplomatic box seat for advocating multilateral trade reform. With the support and encouragement of the trade bureaucracy, Australia’s agricultural economists built a global reputation within their discipline for modelling the supposed international benefits of trade liberalisation. Early in the Uruguay Round negotiations, the Hawke Government galvanised these efforts by successfully convening the Cairns Group of agricultural exporter nations. ABARE was charged with providing the modelling expertise to argue the case for trade liberalisation. Over the course of the Uruguay Round negotiations the Australian consular mission in Geneva (the de facto headquarters for the Cairns Group) became the global epicentre for the development of arguments and evidence in support of liberalising world agricultural trade.

Domestic political circumstances buttress the Australian Government’s support for this project. Australia’s pursuit of multilateral trade liberalisation positions external actors—the European Union, the United States, and Japan—as villains. This is electorally convenient: negative economic conditions at home can be blamed on the intransigence of these players. Why criticise domestic policy settings (and thereby risk creating enemies) when policy-makers in Brussels or Washington can be demonised?

Australia’s pursuit of multilateral trade liberalisation positions external actors as villains.

With agricultural policy development dominated by orthodox economists and with the major political parties having electoral incentives to fall in line, the trade bureaucracy has been provided with a free hand to fund extensive publicity campaigns justifying the Australian position. Since 1996, ABARE, DFAT, and RIRDC have published over 100 research documents advocating trade liberalisation. Several have been published multilingually, reflecting Australia’s attempt to gain high moral ground as world leader of the trade liberalisation project. Their sentiments are summed up in the title of RIRDC’s publication ‘Reason versus Emotion’ (Stoekel and Corbet, 1999), which explicitly poses the trade policy choice as between the ‘rational logic’ of multilateralism, and ill-informed ‘emotionalism’. Through these devices, multilateral trade liberalisation is projected as a national cause, rather than as an issue for policy and academic debate. As I argue elsewhere, an attempt in 1998 to legitimise these stances through a Parliamentary Inquiry generated the farcical conclusion that the Australian public’s scepticism about free trade could be explained by insufficient effort towards ‘selling the benefits’ (Pritchard, 2000).

These efforts assume that trade liberalisation will generate manifest benefits for the national and international economies. Yet how valid are these arguments? According to econometric modelling cited by the Australian Government, the seven years of Uruguay Round negotiations probably provide an annual boost to Australian agriculture of between 3.5% to 4% (Murtough et al., 1994). (The fact that multilateral trade boosterists cite these estimates suggests they are within the upper bounds of possible impacts.) Given the emphasis on these issues in Australian trade discourse, these results are surprisingly flaccid. In an average year, good spring rains would probably provide more benefits to Australian agriculture than the outcomes of world trade negotiations.

In any case, the recent history of the beef industry illustrates how the staged modelling of econometrics can be awry in the face of market reality. Proponents of free trade forecast that the partial opening of the Japanese and Korean beef markets in the late 1980s would be a bonanza for the Australian beef industry. However, these benefits have largely proven to be a chimera, because of the emergence of a tightly vertical coordinated beef production and distribution complex that shifts value towards ‘near-consumer’ agencies. Australian meatpacking is predominantly foreign owned, and questions have been aired publicly about the transfer pricing and taxation practices of some of these companies (Queensland Government, 1998). The point is, trade liberalisation often goes hand-in-hand with shifts to industry structures that may re-position Australian activities within international supply chains. Trade modellers, however, do not always make these connections.

Despite these doubts, there is a stubborn insistence within public institutions and the media that freer trade will provide a major fillip to the rural economy. In 1999, when the Clinton Administration imposed import restrictions on Australian and New Zealand lamb, the major metropolitan newspapers published 35 separate articles criticising the decision including four front page stories. In August 2001, when the US recanted, just 11 articles were published; none of which were on any front page. Clearly, the ‘bark’ of free trade’s promise is much more newsworthy than the reality of its ‘bite’.

At the international level, Australia’s support for free agricultural trade positions the nation as being ‘on side’ with developing nations. It enables Australia to assert moral authority in supposedly helping the world’s poorer nations earn valuable export incomes. Of course the Cairns Group contains a number of poor nations (including Indonesia, Brazil and Fiji) that strongly oppose EU and US agricultural subsidies. It is one thing, however, to oppose someone else’s protectionism, quite another to commit to reduce your own. As shown by the abortive 1999 Seattle WTO Summit, developing nations may support subsidy reduction in the EU and US, but have considerable misgivings about the pace and process of global trade reform generally (see Lockie and Pritchard, 2000).

For farmers forced off the land, hardship is interpreted as personal rather than policy failure.

Implicit in Australia’s self-appointed championing of global trade liberalisation on behalf of the developing world, however, is the assumption that this is beneficial for these poor economies. The Australian Government uses econometric modelling that identifies potentially massive gains from global trade liberalisation, including a finding that the world economy would be US$400 billion better off from global trade reform, with US$90 billion of this being generated from agriculture (DFAT 1999: iv). In this context it is instructive to briefly discuss the key findings of a recently published UNCTAD report that looks backwards at economic modellers’ performances in forecasting the outcomes for developing nations from the Uruguay Round (Whalley, 2000). In reviewing the performance of the eight most influential econometric models used for these trade negotiations, Whalley concludes that they shed little insight whatsoever into whether developing nations should support or oppose trade liberalisation:

If as a developing country negotiator, one wanted to draw upon the model results [from the Uruguay Round] to support or help frame a negotiating position for the next round, seemingly there is support for almost anything one wanted to argue. The gains to developing nations could be large or small; agriculture could be the most important issue, or it could be services. Impacts on individual countries could be positive or negative, large or small (2000: 1–2).

This suggests two things. Evidently there is no consensus internationally on the economic implications of the liberalisation project for developing nations, despite the implied certainty of this position within Australian trade policy documents. Second, although when expressed in monetary terms the potential (upper bound) gains from agricultural free trade seem large (e.g., US$90 billion), it needs to be remembered that world GDP is at least in excess of US$30,000 billion. Accordingly, these gains represent less than 0.3% of the world economy.

Where to from here? This essay argues that the national benefits of agricultural trade liberalisation have been ‘over-sold’ and, because of institutional and political factors, debates have been truncated. Questioning free trade is positioned discursively as ‘against the national interest’, as ‘emotional’ not ‘rational’. For farmers forced off the land or rural towns in crisis, hardship is interpreted as personal rather than policy failure. The hardships of rural Australia remain largely unseen and unmeasured by an agri-trade bureaucracy more interested in attempting to model (things like) how the funding of hedgerow protection in Europe represents a hidden subsidy that hurts Australian farmers (ABARE, 1999: 4).

The rural populism of One Nation’s reactive protectionism represents one response to these problems. Clearly, however, banning agri-food imports is not a comprehensive answer. A more immediately relevant and appropriate course of action might simply be to foster a culture of more open and robust debate on these issues within government. At present, the economically dominated ABARE both conducts research and leads the way in advocating multilateralism. This has tended to discourage an outward-focused, multi-disciplinary approach to these issues. With the research-policy distinction blurred, ABARE has faced few incentives to rethink its research directions. Formal bureaucratic separation of research and advocacy functions could generate a ‘purchaser-provider’ split that promotes more voices being heard. Certainly at the current time, political economic and social science research is funded as a poor cousin to orthodox agricultural economics. The relatively slim resources of the Social Sciences Division of the Bureau of Rural Sciences represents the only institutional commitment in the Federal bureaucracy to a specifically non-economic focus on rural and agricultural issues. Moving in this direction would entail a modest but progressive shift within the national trade policy and research agenda.

REFERENCES

ABARE (1999) ‘Multifunctionality: a pretext for protection?’ ABARE Current Issues 3, ABARE, Canberra.

Department of Foreign Affairs and Trade (1999) Global Trade Reform: Maintaining Momentum, DFAT, Canberra, available at: http://www.dfat.gov.au/trade/negotiations/gtr_2000.pdf.

Lockie, S. and Pritchard, B. (2001) ‘Linking production, consumption and environment in agri-food research’, in Lockie, S. and Pritchard, B. (eds) Consuming Foods, Sustaining Environments, Australian Academic Press, Melbourne.

Murtough, G., Zheng, S. and Vanzetti, D. (1994) ‘APEC trade liberalisation post-Uruguay Round: a general equilibrium analysis’, paper presented to the Conference of Economists, Gold Coast, 25–28 September.

Pritchard, B. (2000) ‘Negotiating the two-edged sword of agricultural trade liberalisation: trade policy and its protectionist discontents’, in Pritchard, B. & McManus, P. (eds) Land of Discontent: The Dynamics of Change in Rural and Regional Australia, UNSW Press, Kensington, pp 90–104.

Queensland Government (1998) ‘Submission to the House of Representatives Standing Committee on Primary Industries, Resources and Rural Affairs Inquiry into Australian trade policies’, unpublished, available from the Department of the House of Representatives, Canberra.

Stoekel, A. and Corbet, H. (eds) (1999) Reason versus Emotion—Requirements for a Successful WTO Round, RIRDC Publication 99/167, Canberra.

Whalley, J. (2000) ‘What can the developing countries infer from the Uruguay Round models for future negotiations’, UNCTAD Policy Issues in International Trade and Commodities Series, 4, United Nations, New York and Geneva.

Bill Pritchard is Lecturer in Economic Geography in the School of Geosciences at The University of Sydney.

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