Asia Times: Oceania


	June 11, 2002	atimes.com

Oceania

Australia-US trade pact easier said than done
By Purnendra Jain

ADELAIDE - A free-trade agreement (FTA) with the United States has been a long desired goal of the administration of Australian Prime Minister John Howard. If concluded on terms and conditions advocated by the Howard team, this would be the most prized trophy for the prime minister personally and for his government in general. To push this proposal further, Howard on Saturday began a five-day trip to Washington, his third to the US since last September.

There are several items on the agenda for Howard's meeting with US President George W Bush, including the continuing war on terrorism, the volatile Middle East and the nuclear standoff between India and Pakistan. The prime minister is also scheduled to address a joint sitting of the US Congress. Undoubtedly, during his trip Howard will remind Bush, Congress members and other interlocutors about Australia's importance as a trusted ally in the South Pacific that has unquestioningly supported the United States historically and all its post-Cold War strategic moves, from the Gulf War in the early 1990s to the US National Missile Defense system plan and the current war against terrorism. Above all, his speech will outline the benefits of free trade between the United States and Australia.

Although before his departure Howard declared he wouldn't give a blank check to the US as far as Australia's commitment of its troops is concerned, it is certain that Australia will remain engaged alongside US troops in their fight against terrorism. Australia will have little option but to comply with US requests if further demands are placed on it for the war against terrorism. Its substantial increase in this year's defense budget is a clear indication that Australia is preparing itself to support America's global strategic interests.

The main purpose of Howard's visit this time around is to press the Bush administration for an FTA. This visit is timely. Australia's prospects of clinching an agreement have increased as the US Congress is now likely to give trade promotion authority (TPA) to the president - the first time since 1991, after which president Bill Clinton was able to form the North American Free Trade Agreement. TPA will allow the president to negotiate a trade package that Congress must accept or reject, but may not amend.

The US ambassador to Australia, Tom Schieffer, remarked last week that Australia could have a two-way free-trade pact with the US by mid-2003. Australian Minister for Trade Mark Vaile is also optimistic that an FTA with the US is closer now than at any time in the past.

The US has FTAs with Mexico, Canada, Israel and Jordan and is negotiating pacts with Chile and Singapore. Australia has a Closer Economic Relations free-trade agreement with New Zealand. The US is not the only country with which Australia is currently pushing for an FTA, but certainly it is its No 1 priority and the most prestigious of all. Australia is negotiating free-trade agreements with Singapore, Japan and Thailand.

Howard and his Thai counterpart Thaksin Shinawatra agreed during the latter's visit to Australia late last month to work on the nuts and bolts of a free-trade agreement between the two countries, what they call "FTA plus". This agreement will be comprehensive and broader in scope than a conventional free-trade agreement, covering liberalization of trade in goods and services. An announcement was made after the completion of a study on an Australia-Thailand FTA undertaken jointly by the Australian Department of Foreign Affairs and Trade and the Thai Ministry of Commerce. The evidence presented in this study indicated that there would be clear gains to both Australia and Thailand from a free-trade agreement and that it would boost both nations' gross domestic product (GDP).

Similarly, the issue of a free-trade agreement was discussed at the time of Japanese Prime Minister Junichiro Koizumi's visit to Canberra in late April. Both Koizumi and Howard agreed to pursue the agenda, but the agriculture issue is a big bottleneck, and Japan will not so easily open up its agriculture markets because of the strong political clout that the Japanese farm lobby enjoys in Tokyo's political circles.

Farm products are a big sticking point between Canberra and Washington, too. The recent Farm Bill will give massive subsidies to US farmers, somewhere around US$200 billion. This would make Australian farmers uncompetitive not only in the US market but also in other world markets. Prices of sugar, beef and wheat will drop around the world as a result of subsidies to US farmers. Australian farm lobbyists demand abolition of US farm subsidies and they want Howard to remind Bush of not just free trade but also fair trade. But Howard will have little success in this, as Bush, like Howard, is playing into the hands of domestic constituencies and those voters and lobby groups that matter politically.

Moreover, Australia has to wait for its turn. As soon as TPA is won, the US administration will pursue its negotiations with Singapore and Chile, which are first in the queue. Australia's turn might come along with those of Morocco and the five nations of the Southern African Customs Union - South Africa, Botswana, Lesotho, Namibia and Swaziland.

In any case, it won't be an easy negotiation, as there are several hurdles in the way. Agricultural products are one. From the US perspective, Australia's tough quarantine regime is another, which US Trade Representative Robert Zoellick considers backdoor protection. Vaile has assured Australian farmers the FTA with the US would be comprehensive and that "agriculture is central to our agenda". He has also confirmed that no compromise will be made in quarantine requirements.

Some commentators suggest that an FTA with the US could proceed without agriculture, as it is only a small part of trade with the US. Australia's exports to the US are about US$6.4 billion, of which agricultural products are about one-quarter of the total exports. But this would be political suicide for the Howard administration and, given the trade minister's assurances to farmers, it is unlikely that farmers' interest will be put on the backburner.

An FTA with the US on Australian terms will certainly place the Australian economy on slightly sounder footing. But the question is whether such a bilateral deal with the US is essential. Probably not.

Australia's clout in multilateral and international institutions has already diminished in recent years. Australia has dumped its own brainchild, the Asia Pacific Economic Cooperation (APEC) forum. It is isolated from other regional processes such as the Association of Southeast Asian Nations (ASEAN) plus three. Canberra's recent rejection of a United Nations delegation's advice to improve the conditions of the detention centers for asylum seekers will further isolate Australia from this institution in whose reform it once played an important role. Following the United States' lead, Australia has rejected the multilateral Kyoto Protocol on climate change. Australia is seen to be now increasingly moving away from its past broader global and regional perspectives in its pursuit of narrow interests and playing into the hands of conservative domestic forces.

All signs indicate that Howard's US mission is about surrendering Australia into the hands of the US, not just in defense and security matters but in economic and trade areas as well. Harvard academic Samuel Huntington in The Clash of Civilizations and the Remaking of World Order described Australia as a "torn country", neither belonging to Asia nor to the West (read the US). Howard is committed to prove Huntington's thesis wrong by pursuing his ideal of "all the way with GWB".

Purnendra Jain is a professor in the Center for Asian Studies at Australia's Adelaide University.

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