What is the Australia-US Free Trade Agreement?

We are endlessly told of the benefits of ‘Free Trade Agreements’, ‘Free Markets’, and the inevitability of a borderless world economy. Yet in a world where playing fields are never level and markets are never free, a trade agreement between the United States of America, made substantially in secret, risks many of the ecological and social values that are so important to the sustainability of Australian communities. The possible effects of a bilateral agreement between the world’s only superpower and Australia, a country whose economy is only the size of an average US state, are many and substantial.

Australian governments have been attempting for years to gain access to US markets. On 14 November 2002, the Australian and US governments announced that negotiations would begin towards a Free Trade Agreement between the two countries.

When the Federal Government commissioned a report by ACIL Consulting to find out the effects of a trade agreement in early 2003, the report was quashed on the grounds that it found that Australia would be economically worse off. Despite this, negotiations on the agreement continued across 2003. In February 2004, a deal was struck between US and Australian governments and now this is in the form of draft legisaltion to be implemented in Australia law. The Australia – United States Free Trade Agreement entered into law on the 1 January 2005.

Key Concerns

Corporate control:
The degree of corporate influence in lobbying for the FTA shows exactly whose interests will benefit from this deal. The following companies are members of the American Chamber of Commerce (AMCHAMB) and the Australia America Free Trade Coalition (AAFTC), who have been lobbying the Australian and US governments to sign and implement the FTA:
Alcoa; BHP Billiton; Cargill; Caterpillar; Esso; Exxon Mobile; News Ltd; Proctor and Gamble; Pfitzer; Norvatis; Southcorp; VISY; Western Mining; and Westfield Holdings.

Power Imbalance?
Australia’s economy is miniscule in comparison to that of the United States. Exports from Australia to the US represent 11% of total exports from this country. However, in the reverse, exports to Australia represent only 0.7% of American exports. This sheer imbalance in trade between the US and Australia means that there is a potential for a massive impact here through economic change in the US, but barely a ripple would be felt in the reverse. Moreover, the US would be able to leverage its power to continually open Australia’s markets up to more and more competition, without necessarily reciprocating or compensating. Poorer people in both Australia and the US are already feeling the effects of privatisation, while multinational corporations make the profits.

How much for medicines?
The Pharmaceutical Benefits Scheme (PBS) has existed in Australia for 50 years. Bulk buying of medicines by the government has meant that prices have been subsidised, giving wide access to all Australians to integral health benefits. However, under the FTA draft legislation, US pharmaceutical companies have the right to appeal a decision for their drug not to be included in the PBS. This could lead to many more expensive drugs being included, at the increased cost to Australian tax payers.

Environmental Degradation:
The FTA legislation contains an 'expropriation' clause in the investment chapter which means that new Australian environmetnal laws which threaten the profits of U.S. companies are open to challenge. Examples are the introduction of a carbon tax or ban of genetically modified crops.

Losing control?
In addition, the kinds of demands made by US corporations and the US government on Australia put at risk a series of mechanisms and institutions that have been established to protect Australian markets and culture from the global market. While a sustainable future requires a fundamental change to the ways in which economies are organised, such regulations have played an important role in limiting the effects of corporations. Under a free trade agreement with the US, Australia could lose control of foreign ownership levels (Foreign Investment Review Board), Export Monopolies (such as the Australian Wheat Board), and local content in Australian television. Moreover, a free trade agreement with the US would mean that Australia would be able to express even less levels of independence in its economic and foreign policies than it does at present as the fortunes of Australia’s economy linked even more closely to that of the only remaining superpower.

Bi-lateral v Multi-lateral agreements
Most international treaties and agreements are multi-lateral, which means that lots of different countries are parties to the treaty. Such agreements must resolve a range of issues and cater to a range of needs of different countries, via the so-called consensus decision making process of the United Nations. However, the U.S. is embarking on a trend of creating lots of bi-lateral trade agreements. This means that the only barriers, interests and standards are those advanced by the people involved in negotiations from the two countries. Even the World Trade Oragnisation (WTO) has a Dispute Settlement Mechanisms to deal with multi-lateral agreements, which enables environmental considerations to be taken into account. This is not the case with bi-lateral free trade agreements. Bi-lateral FTA's therefore represent a "race to the bottom" with regards to environmental standards.

What Decision Making Process?
Lastly, we object to the ways in which this trade agreement in being negotiated. We believe that open public debate must occur when the potential effects of such an agreement are so socially and environmentally significant. Instead, public consultations have been inadequate with limited opportunity for public comment and little information made available regarding the content of negotiations. Furthermore, newly formed organisations made of large corporations in both the US and Australia have sought to influence public and government opinion to ensure a positive outcome for their bottom lines.

What’s Wrong with Free Trade?
’Free trade’ is based on neoliberalism — the idea that the most efficient way for society to distribute resources is by ensuring that the capitalist economy is managed with the barest possible levels of government intervention and administration. In other words, the market becomes the key determinant in deciding ‘who gets what’. It is highly questionable whether the market is the most efficient way of distributing resources, and the question quickly becomes ‘efficiency for whom’? Far from a ‘trickle down’ effect, the gap between the rich and the poor across the world is widening. The profits of free trade are lining the pockets of the superrich while the rest of the world are forced to face the social and ecological consequences.

Free Trade Agreements and the WTO
Free Trade Agreements (FTAs) are codified legal arrangements between countries that seek to counter the role of governments in regulating and inhibiting types of trade. Negotiated by delegations drawn from government, state bureaucracies and businesses, FTAs tend to be made between the elites of each country in both developed and underdeveloped economies. The World Trade Organisation plays a very similar role, but makes rules that apply to all member countries (most of the world).

Under the World Trade Organization, member countries must not give fellow members more favourable trade concessions than others. This is known as the Most Favoured Nation (MFN) principle, and in effect means that all WTO member countries must give all other member countries the same treatment in trade policies, such as tariff levels and trade rates. While this sounds fair, it stops any special treatment of countries that are disadvantaged and assumes (unrealistically) that all countries are equal in strength.

The major exception to the Most Favoured Nation principle are Free Trade Agreements (such as the North American Free Trade Agreement) and Custom Unions (such as he European Union). These are known as Regional Trade Agreements (RTAs) by the WTO, which allows for individual countries to provide preferential treatment to other countries as an exception to the MFN principle. The proposed Australian-US Free Trade Agreement would be one such Regional Trade Agreements.

The US is increasingly moving from using the WTO to using free trade agreements to achieve its trade goals. The US is always the bigger player in the negotiations, and so able to easily push corporate profits at the expensive of ecological and social values, while the gap between the rich and the poor continues to widen.

What can I do about it?

1. Get informed! Knowledge is power – well it’s a start anyway. Check out the websites below. Get other people informed by talking to them, distributing leaflets, organising public meetings...

2 Get active! Information doesn’t mean much if just stays in your head. Get involved in a group already campaigning on these issues (like FoE!) or start your own. Your involvement can be any thing from writing to your local paper and MP to spending the rest of your life as a full time campaigner. It’s a global movement, get involved!

If all else fails, you can always give us money!!!

This fact sheet was created with bits of information provided by;
(From those on the right side of history)

Friends of the Earth International:
www.foei.org

AFTINET (Australian Fare Trade and Investment Network):
www.aftinet.org.au

Susan Hawthorne, ‘The Australia-United States Free Trade Agreement’, Arena 63, February-March 2003.

Sean Healy, ‘All the way with FTA’, Green Left Weekly, 11 June 2003.

And from other people who should read this pamphlet and get out more:

www.dfat.gov.au (This is the government’s propaganda site, and isn’t much fun).
www.austa.net (Australian based corporate lobby group)
www.aaftac.org (the equivalent American lobby group)