How Free is 'Free Trade'?
— A Case Study
Ghali Hassan—01/2005 |
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The Australian government plays with fire
as it enters into a 'free trade' agreement with
the US that will undoubtedly damage its economy,
undermine its healthcare system, and even jeopardize
its sovereignty. |
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| (This article first
appeared in www.newmatilda.com.) |
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 N
AUGUST 2004, the
Australian Senate passed the enabling legislation for
the Free Trade Agreement (FTA) with the US that could
have the effect of undermining Australia's health care
system and Australia's national sovereignty. The agreement
negotiated with the US by the Howard government will
put pressure on the Australian government to increase
the price of medicines and open Australia to new pest
and diseases. |
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| Australia's fear of being 'left behind' played heavily
on the minds of Australian government officials, and
has contributed to Australia's decision to seek a trade
agreement with the US — only the second US free
trade agreement with a developed country. Without any
meaningful debate, the Australian people were misled
into believing that the agreement will be good for
Australia. The Australia-US Free Trade Agreement (AUSFTA),
scheduled to go into effect from 1 January 2005. |
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| Despite its participation in the slaughter of hundreds
of thousands of innocent Iraqis as evidence of friendship
with the US, the Howard government got nothing for
its service to George Bush. "It is a political
deal with George Bush", wrote Alan Ramsey of the Sydney
Morning Herald. "It enables [Prime Minister],
John Howard to spin an electoral illusion to seduce
voters, as well as use as a cudgel should Labor challenge
it. It is, Howard prays, the key piece in his election
strategy to stay Prime Minister." The deal is
not in Australia's best interests. |
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| It is very naive to believe that 'access' to American
markets will prove profitable for Australia. So far,
free trade operates in such a way as to allow the US
to reap the profits of markets of the countries they
have an agreement with, while effectively blocking
their own markets for non-American products. Mexico,
which is included in the North American Free Trade
Agreement (NAFTA), has not profited massively, or at
all from being included in this agreement, which began
on 1 January 1994. Opening the US markets to other
countries would result in more competition and decreased
profits for the US. They prefer to buy into nations
in the form of investment. For instance, more than
10,000 companies have been taken over by US corporations
since Canada signed its FTA with the US in 1988. The
first US FTA with a developed country. Today, Canada
owns fewer and fewer companies. |
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| With the FTA and NAFTA Canada is trading less with
the rest of the world. "Over 85 per cent of Canada's
exports now go to the US, and about 70 per cent of
Canada's international trade is handled by US corporations," said
David Orchard of Campaign for Canada. These corporations
trade with countries of their choosing which may or
may not benefit Canada. Canada is now the most foreign-owned
developed nation. According to David Orchard, Canada's
standard of living has fallen since the signing of
the NAFTA/FTA, and Canada has less access to US markets
than when Canada traded with the US under the GATT/WTO
rules. |
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| Like Mexico and Canada, it is predicted that Australia
will lose some of its manufacturing capacity and manufacturing
labour force in the first few years of the AUSFTA.
The AUSFTA will wipe out 99 per cent of US-Australia
manufactured goods tariffs. US Trade Representative,
Robert Zoellick, called it "the most significant
immediate reduction of industrial tariffs ever achieved
in a US free trade agreement". |
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| The Australian government claimed that Australian
industries and exporters would reap benefits from the
AUSFTA after restrictions were lifted. However, the
US price safeguards mechanism to restrict imports will
remain. The price safeguards are there to thwart any
competitive goods from Australia to the US. |
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| Commenting on the Free Trade Area of the Americas
(FTAA), US Secretary of State, Colin Powell, stated
recently: "Our objective with FTAA is to guarantee
North American companies the control of a territory
that goes from the Arctic Pole all the way to Antarctica,
free access to the whole hemisphere without difficulties
or obstacles for our products, services, technology,
and capital." And from January 2005, 'the control'
will be extended to reach as far as the Indonesian
Archipelago. |
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| With the main markets where Australia could compete
with the US — sugar, wine, dairy, beef, and fast
boats — excluded from the US markets after the
AUSFTA is signed, there is not much left for Australia
to compete with the US in a 'free trade' deal. In addition,
cheap US agricultural exports are expected to have
negative effects on Australian farmers and agricultural
producers. Furthermore, US agriculture is heavily subsidised
and has had the effect of driving down prices for a
key commodity to levels that threaten the livelihood
of small-scale farmers in other countries. |
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| Similarly, the Thai-Australia Free Trade Agreement
(TAFTA) which came into effect on 1 January 2005, will
leave about 40,000 families working in the dairy industry
and a large number of small scale farmers in Thailand
hopelessly competing with large scale and technology-driven
Australian farmers. Like the AUSFTA, the TAFTA is an
agreement between executive governments, not between
the parliaments of the people. The agreement will reap
benefits to Prime Minister Thaksin Shinawatra and his
cronies at the expense of Thai farmers. |
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| The truth about bilateral trade deals is simple.
It is no longer how the rich and powerful (US or Australia)
gain easy access to more and more exploitative measures
in multilateral from, whether WTO or FTAA. There is
strength in numbers, and a revolt by a handful of developing
countries can make what Robert Zoellick thinks of as
'progress' difficult or impossible. It happened last
year at Cancun and Miami. |
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| In a bilateral deal, on the other hand, the rich
and powerful almost always retain sufficient leverage
to push through much harsher measures. They are starting
small — US bilateral deals with Jordan, Morocco,
and Singapore won't exactly set global markets afire,
and even Chile and Thailand are only middling players.
But rack up enough highly restrictive bilateral deals
and you increase the pressure in both bilateral and
multilateral negotiations, even on bigger players.
Bilateral free trade is the West's new tool for intervention
into the affairs of other nations, and reaps benefits
for Western corporations. |
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| Under the AUSFTA, not only drug prices in Australia
will rise as a result of the new Pharmaceutical Benefits
Scheme (PBS), the Australian government will cooperate
in backdoor deals of denying life-saving drugs (generic
drugs) to millions of people in developing countries.
Furthermore, this rise in prices for generic drugs
will affect the budgets of public hospitals, and in
effect will put severe pressure on the financing of
the Australian health care system. Known for its efficiency,
the Australian health care system relies on the practice
of government purchasing power to negotiate prices,
and 'evidence-based' procedures for marketing pharmaceuticals. |
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| All these will be eliminated by the AUSFTA, and
prices will rise markedly. Never before has the US
directly tried to undermine and challenge how a foreign
developed country, like Australia, operates its national
health care system and provides inexpensive drugs to
its citizens. |
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| It should be borne in mind that the Bush Administration
wants to strengthen the protection of expensive brand-name
US drugs in wealthy countries, like Australia, where
the highest profits can be made. That is why the US
is not interested in having 'free trade' with Burundi. |
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| Do Australians want to have the same health care
as Americans? Health care in the US is worse than any
of the industrialised countries, with appalling statistics.
The US is one of the few countries in the world that
do not provide universal health care for children and
pregnant women. Infant mortality, low birth weight,
and child deaths under five are ranked among the highest
in the US as compared to Western industrial nations
and Japan. More than forty five million Americans lack
basic health care cover. Australians will suffer at
the hands of unaccountable US corporations. |
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| Although much of the debate over the AUSFTA has
been about higher drug prices, one important issue
is absent from the debate: its impact on Australia's
national sovereignty. Australia has been lucky to escape
all the pest and diseases prevalent in other parts
of the world and Australia's quarantine regime is designed
to ensure that we stay that way. The AUSFTA will intervene
in policies of utmost national importance for economic
security, and will influence the quarantine decisions
in Australia. The inclusion of US trade representatives
in Australia's quarantine decision-making processes
will give American officials the power to intervene.
Australia will be forced to compromise its scientifically
based quarantine decisions to allow untested and harmful
US chemical products in to Australia. |
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| For example, in 1979, the Toxic Substances Control
Act (TSCA) took effect in the US. The TSCA required
chemicals to be tested before being registered for
use. However, 80 per cent of the US chemicals on the
market worldwide today were introduced before 1979,
and are not required to be tested before being registered
for use. These include highly toxic substances that
were effectively allowed into the market by TSCA, such
as industrial solvents like ethyl benzene, known to
cause nerve damage; heavy metals like cadmium, an ingredient
in many paints and industrial ceramics that can cause
kidney failure; and a family of plastic by-products,
called furans, that are potent carcinogens and endocrine
disrupters. According to Mark Schapiro in The Nation magazine,
many of these chemicals have been found in high concentration
in the bloodstream of Americans and Europeans. With
compromised quarantine and no regulatory policies to
test chemicals for toxicity on human health and the
environment, not only the Australian people are in
danger of developing disease, but also Australian flora
and fauna are left at the mercy of US officials and
giant US chemical companies. |
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| Furthermore, the US wants the technology of the
future monopolised by large private corporations. The
agreement includes product patents. For example, if
Australia wants to design a new technique for producing
an effective vaccine against bird flu virus, or avian
flu, using genetic engineering techniques, Australia
can't do it because the biotechnology patents impede
such innovative activity. It will also place restrictions
on compulsory licensing, according to experts in the
area. |
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| The most cunning of the changes introduced by the
AUSFTA are certainly those to do with intellectual
property rights (IPRs). The AUSFTA beefs up protections
for copyrighted US and digital products such as music,
movies and consumer software. For instance, the price
of CDs and DVDs will increase after the AUSFTA comes
into effect, and this will also lead to a rise in piracy.
The US wants the local contents rules abolished to
prevent them covering subscription TV, the Internet
and other new media. The US also wants media ownership
restrictions in Australia lifted. The Australian cultural
sector should have been fully excluded from the AUSFTA.
The impact of the AUSFTA is uncertain, but the drowning
of Australian cultural identity by the US Big Mac of
monoculture, and by what Edward Said rightly calls
cultural imperialism is not difficult to predict. |
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In conclusion, the AUSFTA is not in Australia's
national interests. Australia is not fully ready and
cannot compete with the US; therefore the AUSFTA is
not beneficial for Australia. Australia should conduct
risk analysis before entering into a free trade with
the US. There will be a better time for a fairer free
trade. |
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| Copyright © 2004
Ghali Hassant |
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| Further Reading |
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| Linda Weiss, Elizabeth Thurbon
and John Mathews (2004). How to Kill a Country. (Allen & Unwin
paperback). |
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