Australian Trade Policy Review 2011

On December 10^th 2010, Trade Minister Craig Emerson made a speech to the Lowy Institute in which he recalled his record as a dedicated economic rationalist and adherent to the principles of free trade, and announced a review of the government’s trade policy. Follow this link to download a copy: http://trademinister.gov.au/speeches/2010/ce_sp_101210.html

In our December 2010/January2011 Bulletin AFTINET made some initial comments based on the Ministers speech to the Lowy Institute, where he announced the Review of Australia’s Trade Policy. See article below or follow this link to download the bulletin.

On Tuesday 12^th April 2011, Dr Craig Emerson Australian Trade Minister, released the much anticipated review of Australia’s Trade Policy. Follow this link to the Ministers Media Release; follow this link for a copy of the report.

The review contains some wins for AFTINET’s community campaigns. Below is a copy of AFTINET’s media release in response to the announcement. Follow this link to download a copy of the media release.

The following article is an analysis of the policy and highlights our victories – it can be downloaded by following this link.

The government's trade policy statement: a mixed bag, with some victories for AFTINET campaigns on the PBS and investor rights

By Dr Patricia Ranald, AFTINET convener

As indicated in December, Trade Minister Emerson’s review of trade policy release on April 12, is based on five principles. These are unilateralism, non-discrimination, separation of trade and foreign policy, and transparency. The full policy is available at http://www.dfat.gov.au/publications/trade/trading-our-way-to-more-jobs-and-prosperity.html.

AFTINET released a media statement on the policy which received some media coverage (see www.aftinet.org.au). This article is a more detailed analysis of the policy.

Free trade theory and unilateral reduction of tariffs and other trade barriers

Much of the trade policy statement was devoted to a detailed defence of free trade economic theory based on the theory of comparative advantage (pp 1-9). This theory has many critics, especially those who have studied the historical development of real economies. Basically, the theory argues that each country should specialise in those products which it can produce most efficiently, and should import all other products. In the case of Australia, this could mean an economy based on mining, agriculture, tourism and some service industries. The theory argues that, if every country unilaterally reduces its trade barriers, global trade will increase and economic efficiency will be maximised.

However we advocate that the objective of trade and economic policy is not simply to increase economic growth and volumes of trade, but to improve living standards and the quality of life in the context of human rights, labour rights and the protection of the environment. More generally, Australian Labor Party policy recognises that the achievement of these goals requires not only economic growth but action by governments to correct market failures, ensure that the benefits of economic growth are distributed fairly, and protect the environment.

The application of extreme free trade theory also ignores the lessons of history. Historically, all industrialised countries have used tariffs and other forms of industry policy to develop their industries, but some now seek to “kick away the ladder” of industry policy for developing countries[1] Studies by the World Bank and others have shown that rapid tariff reductions in developing countries can simply cause unemployment and low economic growth in the absence of other measures to develop employment[2] This is why even the World Trade Organisation supports special and differential treatment to enable developing countries to have some industry policies.

Extreme free trade theory assumes that those who lose their jobs as a result of unilateral tariff reductions will simply move to jobs in other sectors created by higher economic growth. This is demonstrably false. The impacts of unilateral tariff reductions are not evenly spread, and it is not easy for those unemployed in one sector to move to another. For example, in Australia, employment losses resulting from tariff reductions in manufacturing industry over the last three decades are concentrated in regional areas of high unemployment and on older workers, often from non-English speaking backgrounds, with less education and skill development opportunities. Despite adjustment assistance, many of these workers are not welcomed by service industry employers and remain unemployed. Australia already has very low average tariffs and other trade barriers. The application of an abstract principle of reducing all tariffs to zero without considering the actual  impacts on specific industries and communities would not only reduce government revenue but increase social security and other adjustment expenditure, in addition to the human cost.

This is why there was reportedly a division in Cabinet about the policy, and why AFTINET, and its members like the Australian Manufacturing Workers Union have criticised the policy and challenged its application in the real world[3].

The application of this extreme free trade policy is also of concern to AFTINET members who represent services industries, particularly human services, and those like the finance, building and other services which require government regulation to address market failure and equity issues. The simplistic application of this theory appears to endorse a general reduction in government regulation simply because this might limit the volume of trade. "Invariably  government laws and regulations have the effect of reducing the amount of trade between countries …reducing government imposed restrictions on trade at home has the beneficial effect of exposing local businesses to international competition" (p.2).This clearly contradicts other aspects of government policy which recognise that government regulation is required to address other policy goals.

AFTINET advocates that trade policies must be based on human rights, labour rights, protection of the environment, and must not undermine the ability of governments to regulate in the public interest to achieve these principles.

In terms of the negotiating agenda, the government says its main priority will be multilateral negotiations through the WTO Doha round. But it is also giving priority to the Trans-Pacific Partnership Agreement with the US, Australia, New Zealand, Chile, Peru, Singapore, Malaysia, Brunei and Vietnam, as a possible path to a wider free-trade agreement in the Asia-Pacific . A possible future comprehensive economic partnership for East Asia, involving the 10 ASEAN members, plus Australia, China, India, Japan, New Zealand and the Republic of Korea, and other ASEAN-centred processes, is also mentioned. Other bilateral negotiations in progress are the Australia–Korea free-trade agreement, the Japan-Australia free trade agreement and the China-Australia free trade agreement. Possible free-trade agreements with Malaysia, Indonesia, and the Gulf Cooperation Council are also mentioned.

Some victories for AFTINET campaigns

There are other aspects of the policy which are responses to our campaigns and which we have welcomed.

The first is the decision that the government will follow the recommendations of the Productivity Commission and will not support the inclusion of investor-state dispute procedures which give foreign businesses greater legal rights and domestic investors, including rights to sue governments for damages on issues like cigarette plain packaging legislation.  The policy also states that ‘  in the past Australian governments  have thought  the inclusion of investor state dispute  resolution procedures in trade agreements with developing countries at the behest of Australian businesses .The Gillard government will  discontinue this practice (p.20)” . The welcome ditching of the investor state dispute process is a direct response to our campaigns over many years, since this proposal was defeated in the Australia-US free trade agreement in 2004, and more recently through our submissions to the Productivity Commission and the government's trade review.

Secondly, the government has adopted the recommendation of the Productivity Commission that the government should not include matters in bilateral and regional trade agreements that would “raise costs or effect established social policies” (p.26). In particular, the government will not accept positions that limit its ability to continue the Pharmaceutical Benefits Scheme (p. 20). The Productivity Commission recommendation adopted in the trade policy also recommended that the government should not include increased intellectual property protection in future bilateral or regional trade agreements (p.26) The clear protection of the Pharmaceutical Benefits Scheme and the rejection of increased intellectual property rights are also responses to AFTINET advocacy over many years, including our submissions to the Productivity Commission and to the trade review.

Thirdly, there is an important policy improvement in transparency in trade negotiations. In the past, trade negotiations were ratified in secret by Cabinet and only examined by the Joint Standing Committee on Treaties after the decision had been made. This policy has changed to enable consideration of trade agreements by the Joint Committee before ratification by Cabinet. Again, this is a response to AFTINET campaigns for greater public and Parliamentary debate and accountability for decisions on trade agreements. It is not yet clear how this policy will be implemented. We will advocate for the text of the trade agreement to be made available publicly before ratification, and for a public enquiry by the Joint Standing Committee on Treaties, to enable full public and Parliamentary debate before ratification.

Fourthly, we welcome the fact that the government has for the first time given  support in principle to the inclusion of labour and environmental provisions in trade agreements  However  the policy does not support clear enforcement  provisions, which would ensure implementation  AFTINET will continue to campaign for strong labour and environmental provisions  based on internationally agreed standards  which should be enforced through the same mechanisms as other aspects of trade agreements, , including trade sanctions.

Fifthly, AFTINET supports the principle that there should be a clear separation between trade policy and foreign policy, and that Australia should not endorse trade agreements with which are not in the national interest (p.11). The government appears to be applying this principle to the PACER-plus negotiations, which were not included in the list of trade priorities in the statement. Previous Ministers have argued that PACER-plus was not about trade benefits for Australia, but was about development of Pacific Island economies. We hope that the review of PACER-plus negotiations now confirmed by the Parliamentary Secretary for the Pacific Islands will result in positive policies to assist Pacific Island development, without imposing extreme tree free trade requirements on small and vulnerable economies.

The test of this new trade policy will be its implementation. The new policy should mean that in the Trans-Pacific trade agreement negotiations between Australia, the US, New Zealand and six other Asia-Pacific countries, the Australian government will not agree to US demands for an investor state dispute process and increased intellectual property rights, and will not ratify an agreement if it contains these provisions. AFTINET will continue our campaigns on the TPPA and PACER-Plus to achieve meaningful implementation of these policies.

 

AFTINET Media Release 12 April

Trade Review a mixed bag but has some welcome policy changes says fair trade group.

"The Government trade policy review places too much faith in unilateral tariff reductions and the theoretical benefits of free trade, while ignoring their impacts on industry development and employment" said Dr Patricia Ranald, convener of the Australian Fair Trade and Investment Network

“However, there are four important policy changes which we have advocated and which we welcome”, said Dr Ranald.

“Firstly, the government will not support trade agreement provisions which will restrict the ability of Australian governments to legislate on social, health and environmental issues. In particular, the government will no longer support the inclusion of investor state dispute procedures which give foreign investors greater legal rights than domestic investors, including rights to sue governments on issues like cigarette plain packaging legislation. This should mean that the government will oppose these demands by the US government in the current Trans-Pacific Partnership Agreement negotiations” said Dr Ranald.

“Secondly, the government will not support increases in corporate intellectual property rights which would make medicines more expensive, and undermine the Pharmaceutical Benefits Scheme. This should mean that the government will not agree to US government demands for increased corporate intellectual property rights and changes to Pharmaceutical Benefits Scheme in the current Trans-Pacific Partnership Agreement negotiations” she added

“Thirdly, there is an important policy improvement in transparency in trade negotiations. In the past, trade agreements were ratified in secret by Cabinet and only later examined by the Joint Standing Committee on Treaties. This policy has changed to enable consideration of trade agreements by the Joint Committee before ratification by Cabinet, which should lead to more public debate and better decisions” she explained.

“Fourthly, the government has given qualified support to the inclusion of labour and environmental provisions in trade agreements, but unfortunately the enforcement process is not clear. We support stronger labour and environmental provisions based on internationally agreed standards which would be enforced through the same mechanisms as other aspects of trade agreements, including trade sanctions,” she added.

From: AFTINET February 2011 Bulletin

Trade Minister Emerson announces trade policy review January-April 2011

By Dr Patrica Ranald

On December 10, Trade Minister Craig Emerson made a speech to the Lowy Institute in which he recalled his record as a dedicated economic rationalist and adherent to the principles of free trade, and announced a review of the government’s trade policy.

The main issues which made the headlines were the Minister’s claim that he favoured unilateral trade liberalization, and that he was interested only in trade deals that would bring “real results for the Australian economy and the global trading system”.

The issue of most concern in the Minister’s speech is his proposal that Australia should unilaterally reduce all remaining tariffs to zero. As Australian Manufacturing Workers Union National Secretary Dave Oliver said, ‘this would devastate manufacturing jobs and would cost the government $10 billion in revenue over three years.’

The Minister rejected the prospect of being “mired in interminable processes that simply enable us to say that negotiations are proceeding” and “collecting trophies for the national mantelpiece, empty vessels engraved with the words free trade agreement if they are nothing of the sort and of token value to our country.” This appears to be aimed at the US-Australia Free Trade Agreement (AUSFTA), reinforced by his criticism that the Howard Government’s attitude to this agreement was so entwined with the US defence alliance that “any Labor criticism of the likely or actual content of the Australia-US Free Trade Agreement was branded anti-American and un-Australian”.

The Minister admitted that the current multilateral, regional and bilateral negotiations scheduled for 2011, including WTO, the Trans–Pacific Partnership Agreement (TPPA), and bilaterals with Japan, China, South Korea, the Gulf States, Indonesia, Malaysia and India would constitute “a hugely ambitious trade agenda” and that “actual progress on some may be disappointing.” He asserted that “Australia will pursue negotiations with those partners who are genuine about liberalization”.

The Minister announced that he would conduct a review of Australia’s trade policy in the first three months of 2011, against what he identified as five Labor principles from the Hawke-Keating era: unilateralism; non-discrimination; separation from strategic and foreign policy; transparency; and trade policy as part of overall economic reform. The review will be guided by the Report of the Productivity Commission on Bilateral and Regional Trade Agreements, released on December 13. In fact many issues raised in the speech are taken from that report (see article below). This review would also have an impact on the ALP policy platform debate leading to the ALP Conference which is scheduled for December 2011.

The application of the principle of separating defence, strategic and trade issues, and rejecting deals with no trade benefits for Australia could be applied to the TPPA, with interesting results. Australian negotiators are already saying there will be no likely market access gains for Australia with the US. Australia already has FTAs with seven of the other eight TPPA countries, and so is unlikely to gain any further market access with them. Logically, this should mean that the TPPA deal should be rejected. The same principles could apply to the PACER negotiations, which previous Ministers asserted several times, are about development issues for the Pacific Islands, and would not result in trade benefits for Australia.

The Minister also made some interesting remarks about Intellectual Property, which suggests that he may not want to include the AUSFTA provisions, which adopted US monopoly copyrights and patent laws, in other agreements like the TPPA:

“Provisions that are in Australia's national interest obviously should be extended to other countries willing to settle high-quality, trade-creating agreements but those that are not in the national interest should not be extended to others for the sake of reaching a low-quality agreement. For example, an intellectual property clause which extends the duration of foreign copyright in one agreement and doesn't offer obvious economic benefits to Australia should not be part of a later agreement just because we had already used it.”

Logically, this argument should be applied to the TPPA to exclude both US Intellectual Property rights demands and the US Investor–State disputes process, which even the Howard government was forced to exclude from the AUSFTA because community campaigning showed it was not in the public interest.

AFTINET will monitor and report to members on the progress of the trade policy review, and how submissions can be made to it. AFTINET will also be conducting a lobbying visit to Canberra in the New Year.

The full speech is available at:

http://trademinister.gov.au/speeches/2010/ce_sp_101210.html

Follow this link to download the bulletin containing this article.

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