Australia-America Free Trade agreement

And Robert Gottliebson in the Australian:

Sugar no sweetener in US free trade talks

December 15, 2003

It may take George W. Bush's and John Howard's personal intervention to sort out some of the key problems emerging in the US-Australia free trade negotiations.

However, with the exception of sugar, most of the problems are solvable, particularly as Australian negotiators are beginning to understand what is motivating their American counterparts.

Although Americans espouse free trade, their inner feelings are much more akin to Australian views of a decade ago. There is a deep concern at the current level of US imports and the potential to rise further.

For example, for a while it mystified some Australian negotiators as to why the US was so opposed to the Australian Wheat Board operating a single-desk wheat marketing organisation.

If the AWB was abandoned it would not make a huge difference to the US. However, the Americans are concerned that the Canadians have used similar single-desk marketing authorities and boards over a wide area of agriculture to extend the North American FTA.

They want to use Australia as a bargaining chip to attack the Canadians. Australia might well go along with the "no single desk" idea in exchange for big concessions elsewhere, but Australia does not want to be used as a "chip".

Removing the single desk would create significant opposition from many wheat farmers.

Elsewhere, the free trade talks concerning the beef industry do not look particularly difficult. Australian lean beef is different to the bulk of the American product and Australia does not have significant over capacity.

In the case of dairy, the Americans are concerned that Australia does not have any concessions to offer ? Australian dairy has no protection. Any concession gained from the US will result in a big increase in dairy sales.

The Americans asked that Australia not put sugar on the table. As soon as we did it, an intractable problem was created. In theory there would be no real harm to the US sugar industry if Australia had some additional access.

But the US sugar industry is one of the most subsidised and pampered in the world. Its retail selling price is more than twice the market price. If any concessions are made to Australia, then the Central and South American countries will want the concession extended. Brazil already has plantings that could replace the US industry. If there is no additional US access, the extra Brazilian sugar will be converted to ethanol.

Not surprisingly, Coca-Cola is a big supporter of the free trade agreement. Coke is the largest sugar user in the US and will substantially reduce its raw material costs if there is a fall in US domestic prices. Coke should not hold its breath.

It is conceivable that Australia might get a very long-term sugar concession from the US, but even that would be difficult given the huge threat from down south and the high subsidisation.

There are six Queensland seats involved in sugar growing so if sugar is left out of the agreement ? or an unsatisfactory token long-term concession given ? then Howard might be required to do more pork-barrelling before the election to boost the fortunes of sugar farmers.

Sugar is a depressed industry and in many areas the value of the real estate means many farms will eventually be shut down.

One of the biggest public controversies arose in the film and entertainment sector. The general opinion of negotiators is that many of the protests were made by people who simply didn't want an agreement with the US. What is on the table will not greatly affect the entertainment industry.

Similarly, in pharmaceuticals, Americans want more clarity and transparency in the decision-making process but don't want the formula changed.

Once the overall agreement is signed, it must then go before the Australian Parliament and the US Congress. There are no certainties in either process.

But the fact that all the state governments are in favour of the free trade agreement gives it an enormous advantage.

While there will be some gains in agriculture, the real gains will come if Australia gets more US investment or we gain much greater access to the American consumer.

A large number of American corporations, including the car and aircraft companies, want the free trade agreement, to gain easier access to products from Australia, although the attraction of Australia as a supply source has diminished over the past year because of the higher Australian dollar.

Today's Sydney Morning Herald reported negotions at a stand still over Australian access to US agricultural markets. In typical US fashion, it's demanding full access to Australian markets while providing nothing in return.

I hope the Australian delegation tells them to shove it!

If that is the case, so do I.

The US has been great at demanding other countries free up trade, and jettison protections, and refusing to do the same.

Don't do it! Canada has a so-called free trade agreement with the USA and I think we got hosed.

An article published recently in the online economics magazine MacroScan has criticised NAFTA suggesting the only winners have been US corporations. It suggests that though trade has increased the effect on workers in all economies has been negative. It refers to loss of economic and social sovereignty in Mexico and Canada.

You may wish to read for yourselves.

http://www.macroscan.com/cur/jan04/cur150104NAFTA.htm


I believe we would be well advised to stay clear of any general arrangements with the US until such time that its economic players have shown a real commitment to competitive markets; and further until the US ruling elites show respect and cease undermining the social arrangements that most western countries have in place.

Alarm bells ought be ringing. Already we see resistance to competition from Australia's comparatively efficient agriculture despite the fact that our industries are not nearly large enough to have any real impact in the US markets. Also we see pressure for Australia to vary its pharmaceutical benefits scheme to increase the profits of US corporations.

Dealing too closely with the US exposes us to its Ideology of Business Welfare at the expense of Human Welfare.

The stuff like the pharmaceutical benefits, and our decent health system and such are the very things that concern me - and I do NOT trust this government to safeguard us.

I shal certainly read the, article.

Any more details on that?

This is the sort of stuff that scares me:

But corporations have also benefited greatly from the provisions in NAFTA that allow companies to receive compensation for supposed restrictions on their expansion and behaviour by governments. NAFTA rules limit each country's domestic policies to deal with issues ranging from environmental health and food safety to banking and truck safety regulation. Under the investor rights guaranteed in the agreement, investors are allowed to demand compensation for ?indirect expropriation?.

This has been interpreted to include any government act, including those directed at public health and the environment, which can diminish the value of a foreign investment. These cases are adjudicated by special tribunals, bypassing the legal system of all three countries. Already, suits with claims amounting to more than $13 billion have been filed by large companies.

And this:

In a typical case in 2000, the Mexican government was ordered to pay nearly $17 million to a California firm that was denied a permit from a Mexican municipality to operate a hazardous waste treatment facility in an environmentally sensitive location. While the result of such provisions has been an alarming increase in environmental pollution, especially in the newly industrialising border areas of Mexico, it has definitely allowed US companies to reduce their operating costs and thereby increase their profits. But the treaty affords no comparable protection to those harmed by the actions of multinational companies, for example in terms of adverse environmental effects.

However, it is agriculture that has experienced the worst effects of NAFTA, and underlined the unfair nature of the original treaty. The US continues with and has even increased its huge agricultural subsidies, which allow large agribusiness corporations to sell produce in Mexico at prices well below actual costs. Meanwhile, NAFTA has eliminated 99 percent of Mexico's agricultural tariffs. As a result, since 1994 the amount of US corn dumped on the Mexican market has increased by 15 times. Similarly, the amount of US beef going into Mexico has doubled, poultry imports from US have tripled and pork imports have quintupled.

The stuff on Mexico is especially worrying, since globalization, if it is to have benefits outweighing the negative consequences, presumably is most to be assessed in its effect on poorer countries.But perhaps I am confusing what seems to be a very US large corporation driven trade agreement with globalization?

here is more from the article on Mexico:



The resulting collapse in crop prices in Mexico has completely destroyed the viability of Mexican farming, even subsistence maize farming which was the mainstay economic activity in most of rural Mexico. Ironically this has not meant much of a benefit for those urban Mexican consumers who still have jobs, since retail corn prices have barely fallen.

Estimates of the loss of agricultural employment because of this unfair competition range from 1.3 to 1.85 million workers, and the official estimates is that at least 1,000 people leave the Mexican countryside every day in search of work opportunities or simply the means for basic survival. They clog Mexico City as street vendors, or add to the flow of legal and illegal migrants to the US (now estimated to be more than 150,000 people every year), because they have no other means of subsistence left.

This also helps to explain why farmers? groups such as the Via Campesina have raised the demand for ?food sovereignty? and why agriculture was the dominant issue among both developing countries and people?s groups at the failed WTO meeting in Cancun last year.

Incomes in Mexico have also reflected this major crisis in livelihood. According to the Centre for Economic and Policy Research in Washington, in ten years income per person has grown by only nine percent in Mexico, which is around one-fifth of the growth in the 1960s and 1970s.

All in all, therefore, NAFTA has a dismal record as far as its impact on the people of the region is concerned. It is all the more alarming, then, that the US administration is trying to push the NAFTA model even further, through its aggressive promotion of the FTAA (Free Trade Agreement of the Americas). Once again, in these negotiations, the US government has refused to allow agriculture or non-tariff barriers to be negotiated, but wants the Latin American countries to compromise their national sovereignties in crucial sectors such as banking and telecom, and to agree to NAFTA-style investor "protections."

After a failed meeting in December, the US managed to arm-twist four relatively weak Central American countries - El Salvador, Guatemala, Honduras and Nicaragua ? to sign up to this agreement. Costa Rica which still retains some degree of autonomy from the US, withdrew at the last minute. But the Bush administration has every intention of continuing to pressurise other countries to comply, even though this is creating enormous popular resentment across the region.

Anniversaries are usually opportunities for stock-taking. In the case of NAFTA, the popular assessment is summed up by new joint the slogan of several movements across the region: ?ten years is enough!?

Any comments on the fairness of the article?

A tidbit on the Aussie-US Trade Agreement from a US paper (The Boston Globe) yesterday:

Yeah - we already lost a lot of our dairy farmers by opening up competition between states, I think.