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Why Latham should reject the FTA

The Age, Melbourne

20 July 2004

Why Latham should reject the FTA

This so-called free trade agreement is a humiliating sell-out, says Tim Colebatch.

When I was a kid, if you turned on the TV, the chances were you found yourself looking at another country. We saw a lot of westerns, a lot of Hollywood sitcoms, but next to nothing based on life in our own country.

Turn on the pay TV movie channels today and it seems nothing has changed. You get an endless stream of American films, at best based on the life US writers see around them, at worst just repeating Hollywood cliches of violence and suspense. Where the hell is Australia?

We might have to get used to not seeing it on TV. If Labor bows to conventional wisdom and approves the US free trade agreement, the film and television industry built up over 40 years by visionaries such as Hector Crawford and Sir John Gorton could gradually fade off our screens over the next 40 years.

Local content rules are a matter for national governments; they ought to have nothing to do with a free trade agreement. When the Bush Administration pushed for Australia’s rules to be watered down, the Howard Government should have just said no - as the Canadians said no in their free trade agreement with the US, as the world said no in the Uruguay Round.

At first the Howard Government too said no. But then John Howard buckled and said yes. Now, as a result of US pressure, the Government will enforce a high level of local content only on the declining free-to-air channels.

For the rising pay TV network, this agreement would limit future Australian governments to require operators at best to spend 20 per cent of their drama budgets on Australian programs. On current patterns, that would limit Australian drama, forever, to just 6 per cent of actual program time.

It is one of several red lines Howard crossed so he could get an agreement signed before the coming election. And it is one of three reasons why Labor should say no to this deal, send it back to the negotiators to resume work after the elections in both countries, and show us that in government it really would be different from the team it endlessly criticises.

The key issue was never the Pharmaceutical Benefits Scheme that Labor has focused on. Budgetary imperatives ensure that ministers and bureaucrats will limit any gains the US pharmaceutical industry appears to have made. Similarly, the influence of the farm lobby will limit any backdowns on quarantine, another of the four areas Labor says are its prime concerns.

But neither issue should ever have been part of a free trade agreement. Nor should Labor’s two soundly based concerns: the watering down of local content rules, and the extraordinary decision to adopt large swathes of US law on intellectual property and copyright.

All four are non-trade areas in which the US, with Howard’s acquiescence, has used this negotiation to influence or even decide Australian policies - for all time.

For me, the second red line that Howard crossed is one that Labor no longer mentions. In his desperation for a deal, the PM accepted an agreement that would mean free trade in one direction, but restricted trade the other way.

This is really half a free trade agreement. It will mean free trade for American exports to Australia. The day the agreement begins, 99 per cent of US exports will enter Australia duty-free, with complete free trade within 10 years. But it will not mean free trade for Australian exports to the US: not ever. The US will retain a ban on exports of Australia’s world-leading fast ferries. It will limit Australia’s sugar exports to token levels. It will exclude most Australian textile exports by tailor-made rules of origin.

The US will still severely limit Australian dairy exports. And it will maintain indefinitely quotas on Australian exports of beef and 30 or so other areas of farm produce - openly for 18 years, and then reappear like Cheshire cats whenever US prices fall significantly, which analysts say happens every couple of years.

How could any Australian government agree to such a lopsided deal? We are proud to be a nation that walks tall, treats others as equals, and demands the same of them. Could you imagine Sir John McEwen, Bob Hawke or Paul Keating accepting this cringing, second-rate outcome? It is a humiliating sell-out.

The lopsided outcome is why the US Government’s study of the deal predicts it will benefit US exporters far more than Australia’s. The US International Trade Commission estimates that annual US imports of Australian goods will rise by $US1.76 billion, mostly in beef and other food, while Australian imports from the US will rise by $US2.54 billion, mostly in manufactures.

The third red line Howard crossed to get this deal in time for the election was in agreeing to adopt US laws to protect copyright and other forms of intellectual property. This could mean absurdities such as accepting the patent a US firm has claimed on double-clicking your computer mouse, and endless litigation as US giants try to stamp out competition from Australia’s open source software creators.

A knowledge economy needs to lean towards encouraging flexibility and innovation, not rewarding rent-seekers. We should be reducing the length of copyright and patent terms, not increasing them. And rather than signing away our right to use offset programs and government purchasing to develop new industries, we should have kept them out of this deal. Instead, we have ended up with a free trade agreement that does not deliver free trade, and instead invades a range of non-trade areas where our American friends frankly have no business to be.

So what do we do? As one advocate of a Australia-US deal puts it privately, the problem is that negotiations ended at the half-way mark. In February the negotiators should have walked away, taken a long break for consultations and rethinking, and then resumed talks after both countries had got their elections out of the way.

That is still the way to do it. It is only possible if Labor has the guts to defy the Murdoch empire - half-owner of Australia’s pay TV network, and hence a major beneficiary of the deal - vote this agreement down, and restart negotiations in 2005.

Tim Colebatch is economics editor of The Age.