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The Australian Catholic Social Justice Council sees trade as essential for development of countries and acknowledges the positive effects of globalisation. However, the economy cannot be taken as the ultimate determinant of human life.  The challenge is to ensure that the human person remains the centre and the beneficiary of all aspects of globalisation and trade. 

It is not free trade, but fair and just trade which will enable this for all peoples.

Australia & United States Free Trade Agreement (A&USFTA)

Objective: The objective is a legally binding agreement which would remove all trade barriers between the USA and Australia.

Process: The negotiations started on March 17, 2003, and were to have continued for at least a year.  Both Australian and US governments are now expressing the hope that the agreement will be ready by the end of this year.

Negotiations for this agreement are taking place behind closed doors.  In Australia, it will not be discussed or voted on in Federal Parliament because the signing of it does not necessitate the passing of any new laws.  Yet it will be legally binding on all levels of government – federal, state and local – even if in the future there is a change of government as the result of an election.  

The US Congress does have the right to scrutinise, debate and vote on any trade agreement.  When negotiators finalise the Free Trade Agreement, Congress is informed and there is a 90 day period for Congressional review.  After this, Congress either endorses or rejects the agreement.

Why have a free trade agreement?

Both the US and Australian governments have linked the A&USFTA with the post-September 11 security alliance. The Australian government’s recent White Paper on Trade and Foreign Affairs stated it would "put our economic relationship on a parallel footing with our political relationship”.1  The Trade Minister and Australian negotiators have said that this Agreement would mean closer integration of the Australian and US economies.

Comment

The Australian government argues that integration with the US economy, the largest in the world, will be beneficial.  Orthodox economic consultants predict very low economic gains for Australia, even if all trade barriers, including in goods and agriculture, are removed by the US.  It is conceded that such a removal is very unlikely.2

A major area of concern is that the US has far fewer social safety nets than Australia.  For example, the US has a privatised health system which leaves many uninsured and without access to health care, and the price of basic medicines is higher than in Australia.  Australia still has a public health insurance system, which has strong public support, despite government promotion of private health insurance, and proposed changes to Medicare.

Do Australia and US have equal bargaining power?

The Australian economy is only 4% the size of the US economy. This puts Australia in a very weak bargaining position.

The Australian government’s own background paper on the A&USFTA says that the US sees Australia in economic terms "as the addition of another medium sized state roughly equivalent in GDP to that of Pennsylvania"3.

Comment

The Australian government hopes to gain access to US agricultural markets.  However, US farmers are an entrenched and powerful lobby group, and the US Congress has recently passed legislation which increased subsidies paid to individual farmers.  The US government would find it extremely difficult to now reduce tariffs and quotas in key areas for Australia, such as sugar and dairy products.

Australia’s main remaining tariffs (taxes on imports) are in the textile, clothing and footwear industry, (15-25%) and in the car industry (5-15%).  Successive governments have reduced tariffs but have made the judgement that these are strategic industries which provide key skills and employment in our economy.

Complete removal of these tariffs could threaten thousands of jobs, and have a devastating impact on vulnerable workers and regional communities.  The Australian Productivity Commission reports that 78,000 people work in the textile, clothing and footwear industry.  Most of these workers are women of non-English speaking background.  The car industry employs almost 54,000 people, mostly men over 35, of whom 26% are of non-English speaking background.  Both industries provide significant employment in regional areas where there is little alternative, including Northern Adelaide, Mt Gambier, Bordertown, Geelong, Albury, Ballarat, Burnie, Devonport, Launceston, Wollongong, Taree, Ipswich and Toowoomba.4

Will social policies be affected?

The main negotiating targets for the US are Australian laws and regulations, which we see as important social policies, but US trade negotiators and corporations see as barriers to trade.  The Trade Minister and the Australian negotiators have confirmed that the following social policies are on the negotiating table:

  1. the Australian Pharmaceutical Benefits Scheme (PBS)
  2. the provision and regulation of essential public services
  3. Australian content rules in film and television
  4. labelling of genetically modified food
  5. controls on foreign investment
  6. local preferences in government purchasing
  7. Australian Wheat Board and quarantine laws

 

Comment

The danger of these social policies being included as trade targets, is that they will be traded off for limited gains in agricultural markets.

  1. Australian Pharmaceutical Benefits Scheme (PBS). The Australian government uses its purchasing power to exercise price control for commonly prescribed medicines.  It does this through “reference pricing”, which means that it can set the prices it pays pharmaceutical companies for medicines, rather than letting them be subject to market prices.  The government then subsidises these drugs so that they are affordable to most Australians, especially those on low incomes. The price of prescription medicines in the US is more than three times the price of medicines in Australia.  Higher prices for medicines would make them unaffordable for many in Australia.  The US pharmaceutical companies want higher Australian prices for their products, and US negotiators have specifically targeted reference pricing in the A&USFTA negotiations.
  2. Privatisation and challenges to regulation of essential public services. The US wants to remove all restrictions on trade and investment in services, including essential services like health, education, and water.  This would allow corporations to challenge government provision and regulation of services, and lead to privatisation.  All services, all regulation of services and all regulation which could affect foreign investment, will be automatically included in the A&USFTA unless they are specifically excluded.
  3. Australian content rules in film and television. The US is challenging Australian content rules in film, television and music as barriers to trade.  These rules ensure that Australian voices are heard and Australian stories are told.  Without them, Australia’s cultural identity and diversity would be swamped by US imports, which already have a large share of the Australian market. It is cheaper to buy US programs than to produce Australian programs.
  4. Labelling of genetically modified food. The US is the largest producer of food containing genetically modified organisms (GMOs).  Lobbying by agribusiness companies has ensured that there is no US requirement for labelling to show GMO content in food.  Australia has labelling requirements and a regulatory regime for GMO crops because there is an overwhelming desire by consumers to know whether food contains GMOs, and to ensure that non-GMO food remains available so that they can make an informed choice.
  5. Removing all controls on foreign investment and giving corporations the right to sue governments. The US wants to abolish all regulation of foreign investment, including the power of the Foreign Investment Review Board to review foreign investment in the national interest, and to remove any limit on foreign investment in media, telecommunications and airlines.  The US also wants to give corporations the right to challenge laws and to sue governments for damages if such laws harm their investments.
  6. Abolition of local preferences in government purchasing. The US is seeking the removal of all barriers to government purchasing markets.  At present, there are some Federal and State government purchasing arrangements which ensure that smaller local firms have access to purchasing contracts, or require transnational companies with government purchasing contracts to develop relationships with local firms.  These arrangements contribute to local jobs and economic development.
  7. The Australian Wheat Board and quarantine laws. The US has identified both of these as barriers to trade.  The Australian Wheat Board provides a single point of sale for wheat, which increases farmers’ bargaining power in global markets.  Removing Australia’s high quarantine standards could have a devastating impact on plant crops and both farm and native animals.

What has happened in other US FTAs?

When two or more nations become signatories to a Free Trade Agreement, investors from one of these nations can complain to a panel of trade experts about a law or policy of one of the other nations.  Hearings are closed to the public.

Mexico

A US corporation, Metalclad which deals in toxic waste, planned to build a toxic waste facility in Mexico.  The local government refused to give planning permission as the land and water in the area were already contaminated from toxic waste.  Metalclad sued the Mexican government, arguing that the decision was operating as a barrier to trade, and was prohibited under the North American Free Trade Agreement (NAFTA).  The tribunal decided that Mexico should pay Metalclad $US15.6 million in compensation.

Canada

Ethyl is a US chemical company which produces MMT (fuel additive which contains manganese).  In 1997 the Canadian government imposed a ban on the import of MMT in fuel on public health and environmental grounds.  Ethyl sued the Canadian government, challenging the ban under the North American Free Trade Agreement on the grounds that it was a barrier to trade.  Canada was forced to settle the case with Ethyl.  It reversed its ban on MMT, and paid $US13 million in legal fees and damages to Ethyl.

United Parcel Service (UPS), a US corporation, is the world’s largest express carrier and package delivery company.  It is suing Canada under the North American Free Trade Agreement about the way Canada Post, a publicly owned service, operates.  It provides a similar service to Australia Post.  UPS is arguing that Canada Post’s monopoly on standard letter delivery violates NAFTA rules on competition policy because it uses its public infrastructure to cross-subsidise its parcel and courier services.
 

Ideas for Action

1.    Write a letter to the Minister for Trade, Mark Vaile, raising concerns about the A&USFTA.
Address:      The Hon. Mark Vaile MP
Minister for Trade
Parliament House, Canberra
Email:     This email address is being protected from spambots. You need JavaScript enabled to view it.

A sample letter can be found on the AFTINET website:
    www.aftinet.org.au/campaigns/sampleletter5.html
     
2.    Visit your local member of parliament.
Use this paper for background information and key concerns.
Tips on how to prepare for the visit are on the ACSJC website:
    www.socialjustice.catholic.org.au

3.    Be informed and inform others.
Spread the word to members of your family, community, parish, school, workplace, and your friends.
This paper can be photocopied and is available on the ACSJC website.
More detailed information is available on the AFTINET website:
    www.aftinet.org.au

4.    Make a donation to the AFTINET Campaign.
The Australian Fair Trade and Investment Network is a national network of over 70 community organisations and many more individuals concerned about trade and investment policy.  The ACSJC is a member organisation.

Currently, AFTINET is engaged in a campaign to raise awareness about and provide information on the A&USFTA.  To contribute to this campaign contact the ACSJC or send a cheque payable to AFTINET Ltd to the ACSJC.

The ACSJC thanks Dr Patricia Ranald and Ms Louise Southalan of AFTINET for their generosity in making their research and publications available for this paper.

Catholic Social Teaching

Trade between individuals, communities and nations has always occurred in some form.  Trade is essential for development.  

Trade develops people’s capacity to meet their own needs, and builds mutual and sustainable economic relations between peoples.

Catholic Bishops’ Conference of England and Wales and Catholic Bishops’ Conference of Scotland, Trade & Solidarity, June 2003, p.7

Globalisation has many positive effects and possibilities, enabling the interconnectedness of nations, the networking of communities and movements and almost instant global communication.  The challenge is to ensure that the human person remains the centre and the beneficiary of all aspects of globalisation.

For a more equitable society and a more stable peace in a world on the way to globalisation, it is an urgent task of the international organisations to help promote a sense of responsibility for the common good.  But to achieve this we must never lose sight of the human person, who must be at the centre of every social project. … The challenge, in short, is to ensure a globalisation in solidarity, a globalisation without marginalisation.   This is a clear duty in justice, with serious moral implications in the organizations of the economic, social, cultural and political life of nations.

John Paul II, World Day of Peace Message, Jan. 1 1998, no.3

The economy cannot be taken as the ultimate determinant of human life.  Trade negotiations must not endanger important social policies which ensure the delivery of such things as essential public services and affordable prescribed medicines to people on low incomes.

Faced with the tragic situation of persistent poverty which afflicts so many people in our world, how can we fail to see that the quest for profit at any cost and the lack of effective, responsible concern for the common good have concentrated immense resources in the hands of a few while the rest of humanity suffers in poverty and neglect? … Our goal should not be the benefit of a privileged few, but rather the improvement of the living conditions of all.

John Paul II, Lenten Message 2003, par.2

It is not free trade, but fair and just trade which will enable all peoples to experience the positive aspects of globalisation.

When two parties are in very unequal positions, their mutual consent alone does not guarantee a fair contract; the rule of free consent remains subservient to the demands of the natural law … trade relations can no longer be based solely on the principle of free, unchecked competition, for it very often creates an economic dictatorship.  Free trade can be called just only when it conforms to the demands of social justice.

Paul VI, Populorum Progressio, par. 59

Endnotes

  1. Department of Foreign Affairs and Trade, Advancing the national interest: Australia’s Foreign and Trade Policy White Paper, Commonwealth of Australia, Canberra, 2003, pxvi
  2. A Bridge too Far? An Australian Agricultural Perspective on the Australia/United States Free Trade Area Idea, prepared for the Rural Industries Research and Development Corporation, ACIL, Canberra  www.rirdc.gov.au/reports/GLC/ACIL-ABridgeTooFar.pdf
  3. Australian APEC Study Centre, An Australia-US Free Trade Agreement: Issues and implications, Commonwealth of Australia, Canberra, 2001, p 48.
  4. Productivity Commission reports on the Auto Industry, 2002 and the Textile Clothing and Footwear Industry, 2003, www.pc.gov.au

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