One deal, two fatalities? The AUSFTA

Maryanne Kelton, Flinders University

Ann Capling All the Way with the USA: Australia, the US and Free Trade, Sydney, University of New South Wales Press, 2004 (96 pp). ISBN 0-86840-976-6 (paperback) RRP $16.95.

Linda Weiss, Elizabeth Thurbon & John Mathews How to Kill a Country: Australia’s Devastating Trade Deal with the United States, Crows Nest, Allen & Unwin, 2004 (160 pp). ISBN 1-74114-585-6 (paperback) RRP $24.95.

On January 1 this year, the Australia-United States Free Trade Agreement (AUSFTA) came into force. Should Australians be worried that the government accepted this trade deal against the advice of expert trade negotiators? Did someone aim a gun at us in the process? Or should we be celebrating our government’s proclamation that we’ve logged on to a ‘once in a lifetime deal’ that binds us to the biggest economy in the world? Confusingly, governments on both sides of the Pacific are rejoicing in glittering gains for their domestic producers; meanwhile, economists have come up with dramatically divergent models of the FTA’s economic benefit. So, where to from here?

When the trade negotiations were concluded on 8 February 2004, public debate was dominated by sanguine government proclamations on the benefits of the deal. Public conversations suffered from the lack of expert analysis and the ‘democratic deficit’ in Australia’s international negotiations, which the government had promised to redress, had survived intact. However, two new books guarantee that analysis of the trade agreement will now be broader, better informed, and livelier. Both confront the Australian government’s docile and optimistic evaluations of the deal. Ann Capling’s All the Way with the USA: Australia, the US and Free Trade and How to Kill a Country: Australia’s Devastating Trade Deal with the United States by Linda Weiss, Elizabeth Thurbon and John Mathews demonstrate dramatically there is still much to debate. These authors establish that, despite revisionist claims since the deal was struck, the AUSFTA was intended as an all-embracing deal. They also recognise that, despite a self-professed special relationship with the United States, Australia lacks the leverage it needs to counter the potency of American industry groups on Capitol Hill. Only when Australian interests converge with domestic US interests in bargaining of this sort can we expect to achieve benefits for Australia. In this deal, however, as both books deftly reveal, convergence is absent in agriculture and quarantine, public health, government procurement, intellectual property, and other trade and services export sectors.

THE DEATH OF MULTILATERALISM

Until 1999 both political parties in Australia recognised the value of multilateralism.

Eminent trade policy analyst Ann Capling tackles the AUSFTA as it is etched within the broader diptych of free trade in Australia-US relations and Australian trade diplomacy. She examines how this exercise in bilateralism was always unlikely to fulfill the Australian government’s stated aims. She points out that the government’s enthusiasm to negotiate with a vastly more powerful state—indeed an exceptional state to which the rules don’t necessarily apply—is illogical. As past experience has shown, assuming that complete liberalisation would be achieved via this agreement was futile because ‘Australia has only ever secured significant improvements in market access to the United States in the context of multilateral negotiations’ (p. 40). Capling demonstrates that it was naïve of the government to expect otherwise.

Capling acknowledges that the multilateral system has flaws, but argues that it has served Australia’s interests as a smaller country in the international system. By working with others Australia has been able to achieve more than we might have been able to, particularly in market opening measures, given our size and influence. This is because the multilateral system allows for comprehensive bargaining of all countries across many sectors, and outcomes are enforced in a non-discriminatory fashion. Until 1999 both political parties in Australia recognised the value of multilateralism and had rejected preferential bilateral arrangements, like the AUSFTA, that exclude others. Since 1999, however, the Howard Coalition government has signed bilateral trade agreements with Singapore and Thailand, in addition to the AUSFTA. The government has stated not only that the bilateral trade diplomacy flanks its multilateral pursuits but that bilateral deals are the currency of the day. Supposedly, with the multilateral system stalled, Australia will be left behind if it doesn’t join the fray. Capling disagrees, arguing that bilateralism undermines the rules-based system so necessary for Australia’s prosperity.

Ironically, though fear of isolation has often informed Australia’s trade policy initiatives, Capling argues that the government’s acquiescence to the meagre agricultural outcomes in the AUSFTA has undercut its clout in negotiating further global liberalisation of agricultural products. Just after the AUSFTA was signed in April 2004, Australia discovered that it had been omitted from the invitation list of the meeting of WTO trade ministers convened to assist in further liberalising agriculture. Compounding the longer term problem, as Capling also shows, is Australia’s declining global share of world trade since 1996 and a parallel drop in the growth of manufactured exports. These remain as telling criticisms of recent trade policy, as does Australia’s record current account deficit, equivalent to 6.5 per cent of GDP in September 2004.

Australia’s defence analysts have warned of the dangers of linking trade and defence.

Ultimately then, in Capling’s distilled assessment, the AUSFTA flags the death of multilateralism, of an approach to trade policy in Australia that has worked. Capling also touches on the connections between trade and security policy in this deal. Trade and security issues have usually been compartmentalised in Australia-United States relationship. For the United States, the lease on its unique Pine Gap defence base was not something it needed entangled with its annual trade surplus with Australia of around $12 billion. Similarly, Australian policy makers also saw virtue in preserving the sanctity of the ANZUS relationship from periodic and menacing trade wrangles. When newly appointed Trade Minister Mark Vaile intimated that Australia might reconsider the status of US defence facilities in response to the imposition of lamb tariffs by the United States in July 1999, he was immediately reigned in by Coalition colleagues. Yet three years later Foreign Minister Downer, United States Trade Representative (USTR) Zoellick and Minister Vaile publicly connected the trade and defence aspects of our countries’ relationship in the campaign to seal the AUSFTA.

However, Australia’s defence analysts have warned of the dangers of linking trade and defence, precisely because economic clashes might jeopardise the alliance and because overplaying the security relationship may spread goodwill too finely (Tow 2004; Ball 1999). These analysts have history on their side. President Clinton’s Secretary of Defense, William Cohen, warned that the alliance may be jeopardised if Australia pursued a European equity partner for the Australian Submarine Corporation (Garran 2000). Are these new ties between defence and trade a precursor for more intervention of this kind? Now that the AUSFTA has been signed, both parties are committed to providing six months notice if they wish to exit the agreement. If ever any future Australian government decides that withdrawal was its only option, would United States use the security relationship as a bargaining chip to attempt to change its mind? The Coalition downplayed links between the trade agreement and involvement in Iraq through the 2004 election campaign, confirming that some of these fears are surfacing.

THE DEATH OF A COUNTRY

Weiss, Thurbon and Mathews complement Capling’s analysis by targeting four incursions by the AUSFTA into Australian institutions. These academics ask their readers directly not to dismiss their study as an anti-American polemic, and implore them to consider the detail they assemble about each step of Australia’s DIY execution. In all four cases they foresee a fatal reversal in the irony of Horne’s 1964 analysis that Australia was indeed lucky to prosper despite being governed by second raters. Lucky no longer, through poor governance Australia now has signed its death warrant by dismantling its prized national institutions with this trade agreement. Open slather on quarantine, a dose of bad medicine administered to the PBS, a counterfeit job on government procurement, and a no brainer for the knowledge economy sound the death knell. Their extensive primary research and stinging analysis in each of these case studies makes for compelling reading.

Countries often baulk at ‘WTO plus’ arrangements for good reasons.

Once border tariffs are dismantled, what is the new reach of liberalisation? How far does it extend into social and sovereign territory? How much should public health and media control be exposed to international market players? Proponents of the AUSFTA have extolled the virtues of some aspects of the agreement that go beyond the requirements of the World Trade Organization (WTO), particularly in intellectual property and pharmaceuticals. Yet countries often baulk at ‘WTO plus’ arrangements for good reasons. In public health and intellectual property (both central to the controversy over the AUSFTA), the priority for many countries is to maintain sovereignty over public health policy and costs, and to be able to provide affordable education. The WTO stated recently that the interpretation and implementation of the Trade Related Intellectual Property Agreement (TRIPs) should support ‘governments’ rights to protect public health’ (n.d). The Doha Declaration emphasised that ‘the TRIPs Agreement does not and should not prevent member governments from acting to protect public health’ (World Trade Organization 2004). Clearly where ‘WTO plus’ arrangements weaken sovereignty they become highly contentious domestically. And so they should here, and now.

Weiss, Thurbon and Mathews endeavour to show how these issues have played out through Canada’s Free Trade Agreement with the United States. Although much of the standard literature on the Canadian-US FTA and later the North American FTA focuses on the massive expansion in two way trade, these authors raise doubts about the depth of these agreements’ success. They also disclose a little recognised but unparalleled decline in some of the Canadian standard of living indicators since the trade agreement with the United States. Unemployment rose and increases in personal and wage incomes declined (p. 15). US foreign investment did increase spectacularly between 1985 and 2002 but, as they note, 96.6 per cent of this amounted to captures of Canadian assets and companies (p. 14). Both books ask whether greater integration with the United States will result in Australia’s economic and social subservience to that power. In other words, has Australia forfeited its capacity to shape its institutions and policies with the AUSFTA?

CONCLUSION

Is this all just ‘scaremongering nonsense’ as the Minister for Trade, Mark Vaile (2004) has exclaimed? Capling points out that ‘there are no firm answers to (some) of these questions. But they are certainly worth thinking about’ (p. 12). Undoubtedly we should think about how far the AUSFTA mugs our social institutions and our sovereignty. We might also consider whether the significant expenditure of government, bureaucratic, and industry resources to get us to this point might have been used to better effect.

Has Australia forfeited its capacity to shape its institutions and policies with the AUSFTA?

So, when eminent scholars reason that Australia’s previous good fortune as a lucky country and Australian trade policy are fatalities of current policy making we could at least be willing to question the government’s motivations and behaviour. We might also think that there is more at work here than the asymmetries of power. Though the cover of the Weiss, Thurbon and Mathews text depicts Uncle Sam shooting its trusty and trusting marsupial mate under the poker table, they, together with Capling have grasped that it was the Howard government’s desire for a deal, any deal, that drove it to acquiescence. Unquestionably too, any savvy US negotiator, conversant with Australian domestic politics, would have smelled blood. Sure, Uncle Sam drove a hard bargain but if there are two fatalities on the bar room floor, the smoking gun will have belonged to the deputy sheriff.

REFERENCES

Ball, D. 1999, The US-Australian Alliance: History and Prospects, Working Paper No. 330, Strategic and Defence Studies Centre, ANU, Canberra.

Capling, A. 2001, Australia and the Global Trade System: From Havana to Seattle, Cambridge University Press, Cambridge.

Department of Foreign Affairs and Trade 2004, Australia-United States Free Trade Agreement, [Online], Available: http://www.dfat.gov.au/trade/negotiations/us_fta/final-text/index.html [2004, Nov 17].

Garran, R. 2000, ‘US Threat to Sink Strategic Alliance’, The Weekend Australian, 23–23 December.

Stoler, A. 2004, ‘Australia-US Free Trade: Benefits and Costs of an Agreement’, in Free Trade Agreements: US Strategies and Priorities, ed. Jeffrey J. Schott, Institute of International Economics, Washington D.C., April, pp. 95–116.

Tow, W. 2004, ‘Deputy sheriff or independent ally? Evolving Australian-American ties in an ambiguous world order’, The Pacific Review, vol. 17, no.2, June, pp. 271–290.

Vaile, M. 2004, Transcript of ‘New book warns of quarantine risks’, ABC News, 4 November.

World Trade Organization n.d. The Doha Declaration explained: Trade-related aspects of intellectual property rights (TRIPS), paras 17–19, [Online], Available: http://www.wto.org/english/tratop_e/dda_e/dohaexplained_e.htm [2004, Nov 18].

World Trade Organization 2003, Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health: Decision of the General Council of 30 August 2003, 1 September, [Online], Available: http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm [2004, Nov 18].

Maryanne Kelton has recently completed her PhD, ‘More than an ally? AustraliaUS relations since 1996’. She teaches in the School of Political and International Studies at Flinders University.