Free trade with America? Read the blueprint and weep
August 1 2002
It may work for Canada, but a NAFTA-like agreement would assault Australian sovereignty.
By Kenneth Davidson.
Now that President George Bush has got his "fast track" authority to negotiate free-trade agreements with more than 30 countries, Australians will have to take the idea seriously.
Australia's foremost lobbyist for an Australia-US free-trade agreement is Alan Oxley, who operates out of Monash University as chairman of the Australian APEC Centre and director of AUSTA, the Australian business coalition for a free-trade agreement with the US.
APEC (Asia-Pacific Economic Cooperation) is the group of Pacific-rim countries whose political leaders meet each year and pose in funny shirts or tops. It was established at the instigation of the Hawke government, with the support of the US, when Australia was snubbed in its attempt to become a member of ASEAN by the "recalcitrant" Prime Minister of Malaysia, Dr Mahathir, and it issues meaningless communiques that promise to work toward free trade by the year 2020 or some such.
Oxley criticised my column on the proposed Australia-US free-trade agreement ("Howard is sacrificing our interests", on June 13) on the basis that, contrary to what I argued, the agreement had been beneficial to Canadian trade.
My major concern, however, is that, based on the agreement between the US, Canada and Mexico (North American Free Trade Agreement, or NAFTA) - which would become the template for any agreement with Australia - it is likely that an Australia-US agreement would be a direct assault on Australian sovereignty under the rules governing foreign investor rights (NAFTA, Chapter 11).
NAFTA can be seen as primarily an investment agreement whose extension is simply another route by which the US can achieve the purpose that lay behind the Multilateral Agreement on Investment, which was aborted by global public opinion led largely by Canadian activists.
>From the US viewpoint, Chapter 11 gives US multinationals
unprecedented legal rights, which they can exercise against the
national governments of Canada and Mexico. These rights can be
exercised through tribunals, set up under NAFTA, which are not
answerable to national tribunals or local legislators.
Does Alan Oxley's AUSTA anticipate that Australia will be able to avoid the investor rights aspect of the NAFTA agreement, or is this one of the prime benefits for AUSTA members?
According to trade economist Ross Garnaut: "The main cost to Australian-Asian relations of seeking to negotiate a free-trade agreement with the US is that it enhances perceptions in Asia that Australia sees its interests outside the region."
Garnaut points to modelling done for the Department of Foreign Affairs and Trade, which shows that an Australia-US agreement would mean more imports into Australia of North American vehicles, textiles, clothing and footwear, at the expense of Japan, Korea and China. He argues that this expected fall in Australian imports from Asia would invite retaliation.
Garnaut also makes a convincing case that Australia has a better chance of liberalising the US agricultural market through the World Trade Organisation.
Certainly, it is impossible that Australian farmers would get better access under an Australia-US free-trade agreement than Canadian farmers do under NAFTA.
On agriculture, NAFTA is full of pious intentions and abundant escape clauses. For example, on market access: "... the parties shall work together to improve access to their respective markets (but)... each party may, during the applicable period of transition, adopt or maintain special safeguards in the form of tariff quotas."
And on domestic support: "The parties recognise that domestic support measures can be of crucial importance to their agricultural sectors."
And on export subsidies: "The parties shall establish a working group which shall meet at least semi-annually to work towards the elimination of all export subsidies in connection with trade in agriculture between the parties."
Based on NAFTA, there can be no such thing as free trade between Australia and the US in agriculture. The US simply wants a softening of our quarantine restrictions.
Australia already has virtual free trade with the US in manufacturing. The US wants to scrap our local TV content rules, the Pharmaceutical Benefits Scheme and the Foreign Investment Review Board.
So where are the benefits? Oxley says people are freer to move inside free-trade agreements. Really? Tell that to the Mexicans who try to move illegally into the US each night.
NAFTA allows for the free movement of goods, services and investment - but not people - between the three countries. NAFTA is about giving multinationals superior rights than are available to people acting through their governments. It is about stripping future governments of their powers to act on behalf of their electors.
Australia should not go down this path.
Kenneth Davidson is a staff columnist.