All the way with the USA. Australia, the US and Free Trade

Ann Capling

Series entitled Briefings, from Sydney: UNSW Press, 2005

Reviewed by Richard Letts

The Australia/US Free Trade Agreement came into operation on New Year's Day, 2005. The haggling, the politicking, the media manipulations around the terms of the agreement are over. Now, for good or ill, we live with it and see what evolves.

Music Council Network members were kept well informed on aspects of the negotiations and the final agreement as they concerned music and culture. This little (96 page) book by Associate Professor of Political Science Ann Capling looks more broadly at the agreement, placing it in the context of Australia’s history in international trade.

While she gives the arguments both for and against, it’s pretty clear from the first chapter that Capling is not a supporter. Indeed, by the end of Chapter 4 she abandons reservation:  “Australia has been lumbered with a trade agreement that is clearly a dud.”

Capling gives plenty of reasons:

·          This is a bilateral agreement. As a small nation, Australia is in a very weak position to negotiate bilateral agreements with large trading partners like the USA. This was abundantly demonstrated in the terms of this particular agreement, where the US made only minimal concessions in the area of greatest moment for Australia, agriculture, while demanding concessions in other areas Australia wished to protect, including culture, pharmaceuticals and intellectual property.

·          Australia can do much better through multilateral negotiations under the WTO, where it can join with other countries in pressing policies that are mutually beneficial. But its concentration on the US negotiations and its concessions in the US agreement have greatly weakened its formerly strong position in the multilateral arena. For instance, the Cairns Group, of which is was the leader, has been sidelined by a new Group of 20 in pushing for the removal of obstructions to trade in agriculture. Australia’s acceptance of the US trade terms concerning agriculture will make it almost impossible for it now to seek removal of the agricultural trade barriers of Asian trading partners.

·          The Australia/US Free Trade Agreement is really a Preferential Trade Agreement which discriminates against our Asian trading partners -- who absorb 40% of our exports. It breaks with a long-standing commitment to non-discrimination in trade relations. We may pay a price for this.

·          At the end of negotiations, the Australian negotiators thought the terms offered by the US were so poor that they wanted to walk away. John Howard obliged them to complete the agreement and the next day, they signed. Why? For domestic political reasons, and as part of a broader strategic and security alliance with the US. Capling says that this coupling of trade policy with foreign policy represents a reversal of decades of Australian trade practice, is a revival of a sort of imperial preference system that was disastrous in the past, and will again be damaging to trade.

·          Capling also cites a position put forward by an FTA protagonist, Alan Oxley, and suggests that it has been adopted by the government. Oxley argued for “deep integration” of the Australian economy with the US economy. One implication is that Australian institutions and practices will mimic US institutions and practices: a proposition that would bring great discomfort to many, perhaps most, Australians.

·          Two economic analyses of the agreement were produced after terms were decided, commissioned by the Coalition and by Labor. The government’s consultants predicted an increase of $6 billion a year for Australian exports to the US. Labor’s consultant predicted a mere $53 million. Capling cites the opinion of one economist that the former is laughable.

Of course, Capling presents a much more extensive argument, including opposing positions which she variously accepts or disposes of. I am not broadly expert in trade and so am not in a position to give an informed assessment of Capling’s position other than to note that while I agree with her perceptions about the cultural aspects of the agreement, they did not suggest a deep understanding.

The government is oblivious or dismissive of such arguments. It is proceeding to negotiate more bilateral treaties (now Malaysia and China) and regional treaties (ASEAN). For the purpose, China is to be declared a market economy and ‘a form of democracy’, whatever the facts. Everything is to be on the table for the China treaty; that therefore includes culture.

The Australia/US Free Trade Agreement brings no benefit to the Australian cultural sector and potentially damages it. Interested readers have already heard that opinion from me and from the Music Council and others in the cultural arena. The Capling book gives an opportunity for non-expert readers to fit these cultural issues into a wider context. It is well written, clearly argued and of easily digestible length. Recommended.

NOTE. Ann Capling also wrote an article for Music Forum Vol. 6 No. 6, August 2000:  “The Enemy Within: Globalisation, Culture and the Role of Government.”  Her thesis in that article: the threat from the WTO is contained. Worry about the economic rationalist within.

Music Forum Vol 11 No 3