Sydney Morning Herald | 11 August 2004
It’s becoming clear that the FTA will not be in our interests, writes Ross Gittins.
The funny thing about the free trade agreement with the United States is that Australians and Americans see it as being about completely different things. Australia’s businesspeople see it as about eliminating the barriers to exports and imports between the two countries, which they regard as a good thing.
The premiers see it as about our Government giving up the right to vet US takeovers of mid-sized Australian companies or proposals to set up shop in Australia. The premiers think this will bring a lot of new investment to their states.
To the Americans, however, the deal is about something most Australian businesspeople don’t take much interest in - intellectual property rights.
Intellectual property rights are protected by such legal devices as patents, copyright and trademarks. Copyright covers things such as books, music, recordings, movies, computer games and software.
Patents cover a multitude of mechanical inventions, but also medical drugs and aspects of computer software.
The US is by far the world’s largest exporter of goods and services with intellectual property (IP) embodied in them. It rightly believes that the production and export of IP is where its future prosperity lies.
So a primary objective of the US Government’s trade policy has long been to make the world a more congenial place for US exporters of IP.
It’s trying to get other countries to "harmonise" their IP laws with US laws, to act as policemen in prosecuting citizens who pirate American IP, and to enhance the ability of US companies to protect their rights in other countries’ courts.
This is all very well for the Americans, but it offers little benefit to us, just costs. Why? Because we are, and always will be, a heavy net importer of IP.
Another concern is that the US Congress has allowed America’s IP law to be debauched by powerful commercial interests. Big American drug and software companies have turned the patent system into an anti-competitive rort.
They do this by using many dubious patents to extend the life of a patent ("evergreening") or just to box in their competitors. They’ve become highly litigious, suing competitors or threatening to sue small innovators they want to push around. This has been possible partly because the US patent office is hopelessly understaffed and thus incapable of vetting dubious applications.
On top of this, Congress allows industry lobbyists to persuade it to extend retrospectively the duration of patents and copyright. Copyright has been extended from 50 years after the death of the creator to 70 years, mainly because the Disney Corporation was about to lose control of Mickey Mouse. Such extentions do little or nothing to increase the incentive to create, they just give a windfall gain to copyright holders at the expense of consumers.
And yet the free trade agreement obliges us to extend the life of our copyright to fit in. We have already been obliged to extend patents from 16 to 20 years in the name of harmonising with US law.
The section dealing with IP is the longest chapter in the agreement. And it presents us with a puzzle. Our Government repeatedly assures us it has given the Americans little of any value, so there’s nothing for us to worry about. But US politicians and lobby groups say they’re well pleased with the precedent our deal sets for the many free trade agreements the US intends to reach with other countries. How can this conundrum be resolved?
Well, it may be that one or both sides is lying. But I think it could be that our Government is talking about now, whereas the Americans are thinking about the future.
Take the classic case of the US objection to our rules specifying a minimum level of Australian content for television programs and ads.
Our Government has acted to protect its existing local-content rules for television. But it has limited its ability to extend local-content rules to cover new electronic mediums as they arise. So the Americans know they have only to wait for changing technology to give them the upper hand.
Or, take the "standstill" principle we’ve agreed to. We can’t decide to increase the existing local-content requirement and, should we ever decide to lower it, we’re forbidden to put it back up. So, over time, the Americans benefit from a kind of downward ratchet.
Mark Latham’s last-minute amendment will do nothing to stop this loss of our control over local content. It merely ensures that any reduction of the existing standard must be decided by the Parliament, not a bureaucrat.
As part of its obsession with advancing the interests of its big IP exporting companies, the US Congress deeply disapproves of our Pharmaceutical Benefits Scheme, which allows Australians to pay two or three times less for their drugs than Americans do.
Our Government swears it’s agreed to nothing that would add to the cost of the PBS, but various experts in IP law see loopholes in the free trade agreement that the US drug companies are bound to exploit over time. Those academics doubt that Latham’s amendment is sufficient to solve the problem.
In this and other areas, the agreement gives US companies considerable scope to use our courts to argue the toss with our Government when it seeks to do something they believe is contrary to the provisions of the agreement.
Now consider this. The deal prohibits Australian companies from exporting drugs to the US (and thereby undercutting local US drug prices). Our Government says this is not a problem because Australian law already prohibits such exports.
What we’ve given up, however, is our ability to change that law should we see fit at some point in the future. So I suspect the deal involves us giving up a fair bit of our future room to move - selling off a slice of our sovereignty - particularly in the ever-more important area of intellectual property.
And don’t forget that, should our Government persist with actions the Americans consider contrary to the agreement, they have the right to impose sanctions on us.
I have a fear the Howard Government’s wonderful trade agreement with the mighty United States may turn out to be a Trojan Horse.