The Age, Melbourne
Free trade is costing millions: report
By Peter Martin
14 December 2010
A year-long investigation of Australia’s free trade agreements has found they are often nothing of the kind.
The Productivity Commission has told the government there is little evidence to suggest Australia’s six free-trade agreements have produced ’’substantial commercial benefits’’.
Some may have actually reduced trade by introducing complex rules that make it difficult to sell goods made with products imported from countries not in the agreements.
The extra cost imposed by these ’’rules of origin’’ could amount to 8 per cent of the value of each export shipment.
Copyright provisions inserted in the US-Australia Free Trade Agreement could eventually cost Australia as much as $88 million per year as the nation pays an extra 25 per cent each year in net royalty payments, ’’not just to US copyright holders, but to all copyright holders’’.
The copyright provisions extend payments from 50 years after an author’s death to 70 years and enshrine in Australian law ’’rules that would otherwise be anti-competitive such as permitting the use of region codes on DVD players’’.
The provisions have saddled Australia with copyright obligations ’’even higher than in the US … because we matched their higher level of copyright protection but have maintained our lower level of copyright users’ rights’’, the report says.
The net present value of the extra copyright costs imposed by the provisions agreed to by the Howard government when it signed a US-Australia agreement might amount to $700 million.
’’And this is a pure transfer overseas, and hence pure cost to Australia,’’ the report says.
It finds provisions inserted in the US-Australia agreement granting drug manufacturers greater rights in their dealings with the Pharmaceutical Benefits Scheme had real potential for adverse outcomes and that ’’vigilance was required to ensure this did not arise’’.
The commission says before agreeing to further free trade agreements Australia should first consider whether other options could deliver similar or greater benefits at less cost, among them trade facilitation, investor protection and mutual recognition of standards.
Until 2003 Australia had only one free trade agreement, with New Zealand. The Howard government signed agreements with Singapore, Thailand and the US, and the Rudd government with Chile and ASEAN.
The Gillard government is negotiating them with China, Malaysia, Japan, Korea, Indonesia, the Gulf Co-operation Council and the Pacific Island Forum.
The Department of Foreign Affairs and Trade was unable to tell the commission the cost of negotiating agreements, saying its trade work could not be ’’separately identified and costed’’.
Trade Minister Craig Emerson welcomed the report, saying he had announced a review of trade policy.
The Australian Services Roundtable said the existing process ’’does not work’’.
’’For a decade now trade negotiations based on the trade-off mentality have not delivered any significant reductions in services trade barriers,’’ said executive director Andrew McCredie.