Havachat: Free, fair or foolish? The Australian-US FTA - Day 2

Havachats are week-long email dialogues between two prominent advocates on an issue of the day. To vote on the issue and make your view count, click here.

Day 1 . 2 . 3 . 4 . 5.

Doug is first. Alan responds.

From: Doug Cameron
Sent: Tuesday, May 26, 2003 13:54
To: Alan Oxley
Subject: First response

Dear Alan,

I am afraid that the same old rhetoric on the benefits of free trade will not be sufficient to answer the increasing critical analysis being undertaken by unions, civil society, independent academics, and now the government's own Productivity Commission.

Despite your best attempts to justify a free trade agreement with the United States the evidence is mounting that it is not in Australia's interest.

My contention that the USFTA will not advance the social and economic position of the majority of working Australians is receiving widespread independent support.

Despite your unsubstantiated claims that the USFTA will protect and increase jobs for Australian workers, the Productivity Commission, after extensive analysis, contradicts your fundamental thesis.

Productivity Commission research, reported in the Australian Financial Review (26 May 2003) finds that:

• Most preferential trade deals negotiated over the past four decades have depressed rather than expanded trade.
• Preferential trade deals divert more trade from non-member countries than they create between countries signing the agreement.
• 12 out of 18 bilateral free trade agreements had reduced the value of exports even after allowing for the impact of other factors that influence trade flows.
• Agreements that reduced trade included some of the most liberalising, including, NAFTA, the European Union, the Australia-New Zealand Closer Economic Relations Agreement, and the Mercosur agreement between Argentina, Brazil, Uruguay and Paraguay.
• Some of the more prominent Preferential Trading Agreements have not even succeeded in creating more trade among members.

When you've got the Productivity Commission and the AMWU against you, you're in trouble!

You claim that the USFTA will not undermine Australia's culture. However in the APEC Study of August 2001, partly authored by you, it is claimed that one of the benefits of the USFTA is the influence of US management on Australian management. Your report observes favourably that US firms "were less likely to recognise unions".

I don't believe that Australian management culture needs to be driven any further towards the "greed is good" culture of many US firms. Are you seriously advocating that Australian business should more closely resemble the deceit, corruption and lack of corporate governance epitomised by Enron and WorldCom?

Your claim that we nearly lost our automobile and steel industries in the '80s because we sheltered them from world markets is again, a simplistic assertion based on your increasingly isolated view of the benefits of free trade.

The capacity for government to intervene in these industries, to assist them to modernise, introduce new technology and management systems was a key factor in their survival. This was achieved with the full support and involvement of the Australian trade union movement. Under a proposed USFTA, government capacity to intervene in the interests of Australian communities will be significantly limited.

Contrary to your claims that we are now a successful exporter of manufactured goods, DFAT data for the calendar year 2002 shows Australia's Elaborately Transformed Manufacturing trade deficit has blown out to $70 billion. ETM's are recognised as providing more added value to an economy and are a significant user of information technology and research and development. The USFTA will simply drive us towards an increased reliance on agriculture and mining and a bigger ETM deficit.

I don't want more Australian workers looking for "adjustment packages", I want them in high-skilled, well-paid manufacturing jobs.

Doug

From: Alan Oxley
Sent: Monday, May 26, 2003 23:22
To: Doug Cameron
Subject: Re: First response

Doug,

The gains for Australia from an FTA are too great to be dismissed with slogans and selective quotes. You say the US National Association of Manufacturers expects an FTA to expand exports to Australia by US $1.8 billion. True. Our manufacturers also expect to increase exports by hundreds of millions of dollars. That is the whole point of an FTA. Trade for both sides expands. It is win-win. And the smaller economy usually wins more. New Zealand did better from the FTA negotiated with Australia 20 years ago.

You say Australian manufacturing will be up against it. Surely you have noticed over the past 15 years that manufacturing has been Australia's best-performing export sector; better than mining and farming. It doesn't matter if we import more manufactures than we export. Economically, it's the overall balance of total trade and investment that matters and that's in good shape. Our manufacturers have proved they can compete and win in the US market. They had a go and succeeded. Recognize their world-class performance.

You pick and choose among Australian free-rade economists as they suit your case. Normally you wouldn't have lunch with them. Of the study by the free trade CIE group in Canberra, which estimates an FTA will add $4 billion a year to the Australian economy (and that is an underestimate - econometric modelling always underestimates real results: Australian business expects an FTA will deliver at least double that), you say simply that won't be achieved.

Your evidence? Another free trader, Professor Ross Garnaut from ANU. Ross opposes the FTA because he prefers multilateral trade liberalisation, something I haven't seen you endorse. And you endorse a similar critique from ACIL, another free trade group. They will be tickled. I don't recall your approving their work when they were advising the Howard Government on how to bust the MUA.

And now you quote approvingly a report from the Productivity Commission, the great nemesis of Australian protectionists. It shows that several free-trade agreements divert trade. This is based on long-established economic theory. It can happen if trade barriers are high. But read all of the report. You will see it does not assess the case of an FTA with the US, it is a warning to do it properly. There is no problem. Trade barriers between Australia and the US overall are low.

But this is not the main game. Today is 1780 in economic time. That was when Britain industrialised. The rest of the world ultimately followed. Those who were slow to industrialise remained poor. Today, the US is leading us into the Information Age. You know how quickly technology is changing everything, including the work place. Adapt or drop behind.

Fortunately, Australians like IT. We are adapting. If we want to succeed in the Information Age, we need to keep pace with the cutting edge of change. Then we will create new businesses and new jobs. The cutting edge of IT is the US. These are the reference points an FTA will give our companies. So set up, they will compete in any market in the world. Whose standards would you use?

You can sneer that this is acquiring Enron and Worldcom values. We don't have to look over the fence for that. We have HIH, we had Skase, we had Bond. And we always will and so will they. Was the whole US labor movement criminal like Jimmy Hoffa?

Ask your children and their friends where we should look to keep up to date with IT. They know where the future lies and it doesn't frighten them. They also know we don't have to become American to take the best from America.

Alan

Reader Poll: What do you think? Vote on the issue and make your view count, click here. (As you would expect from OLO this is not a "quickie" online poll. Your views will be properly analysed and represented).

Day 1 . 2 . 3 . 4 . 5.