No sweetener in Aussie-US trade pact

The agreement, signed by Australian Trade Minister Mark Vaile on 8 February, reduces bilateral tariffs on a range of goods, services and investments from January 2005.

But following pressure from US agricultural exports, it makes a special case of the beef industry and exempts sugar – a move that has prompted much anger in the sugar growing areas of Queensland.

Hailed by Prime Minister John Howard as a “once in a generation opportunity” to tie Australia’s economic fortunes to that of the US, the deal has received mixed reviews in Australia, despite early claims that it would bring A$4 billion ($3.2 billion).

Bilateral trade between the two countries is around $28 billion a year, making the US Australia’s second largest merchandise trade partner after Japan.

Most attention has focused on the omission of sugar from the deal. The decision is attributed to President George Bush’s sensitivity to public opinion in Florida, the biggest sugar state in the US and a key to his re-election this year.

“While the FTA will provide substantial benefits for many exporters on both sides of the Pacific, it contained a glaring omission that is just as likely to embolden other nations to continue protecting coddled industries,” says HSBC Australia’s chief economist John Edwards.

“This will have ramifications beyond bilateral pacts, and into the even more important area of multilateral trade agreements.”

Security alliance

“The truth is that Australia won this deal for one reason only – because of its security alliance with the US and close ties between Howard and President (George) Bush,” wrote Paul Kelly, a leading political analyst at the national flagship newspaper The Australian.

“But the free-trade agreement must stand or fall solely on grounds of national economic interest, not security.”

Green Senator Bob Brown (C) was warned for heckling Bush

Senator Bob Brown, the leader of the Green party in Canberra and a strong critic of Australian involvement in the Iraq war, says it is “no accident” the free trade agreement had occurred “in tandem” with Australian support for the war.

“It was always on the agenda right through the invasion,” said Brown, who heckled US President Bush when he visited Australia last year and was restrained by security guards.

“The fact is that the war has led to even greater world instability, and I’ve never seen a prime minister of this country so keen to ingratiate himself with the Americans.” Senator Bob Brown Greens Party

Brown is one of two Green senators in the 76-member Senate, but the fact that Howard’s coalition government does not have a majority in the Senate gives smaller parties such as the Greens access to the balance of power on crucial votes.

“Prime Minister Howard spent the last two years telling us that this was a one in a generation opportunity to tie Australia to the US, but the result is that Australia is getting too close to a foreign power and this is wrong,” says Brown.

“The fact is that the war has led to even greater world instability, and I’ve never seen a prime minister of this country so keen to ingratiate himself with the Americans.

“Sadly, Australia does not even get a very good deal out of this agreement – we’ve excluded sugar simply because we are so subservient to the US farm lobby.”

Debating benefits

Among economists, Macquarie University’s trade expert Dr Sean Turnell says he supports the deal for the “somewhat immeasurable but dynamic benefits which come from greater access to the US market”.

But at Citigroup, the bank’s Australian head economist Paul Brennan says he is surprised Canberra signed the deal because of its intrinsic flaws.

Labour’s Mark Latham may gain from the row over the agreement

Heather Rideout, the deputy chief of manufacturing industry lobby the Australian Industry Group, expressed confidence in the deal, while trade export and former diplomat Alan Oxley said Australia would definitely benefit from increased access to the US, which is “the font of new technology, adaptation and innovation”.
 
But opposition leader Mark Latham, who heads the Labour party, has been cautious on the deal, saying he would prefer multilateral trade liberalisation over bilateral agreements such as the one with the US.

Opposition leader Mark Latham, who heads the Labour party, said the government had undermined Australia’s free trade credentials by signing the deal with the US. He said Australia risked retaliation from China and Asian nations, which could lock it out of Asian trade blocs.

Latham said the government had undermined Australia’s free trade credentials by signing the deal with the US. He said Australia risked retaliation from China and Asian nations, which could lock it out of Asian trade blocs.

Howard’s end?
 
A surprise choice as Labour leader last December, Latham is gaining popularity and could pose a serious challenge to a fourth election victory for Howard, who has hinted at a November poll this year.

He is likely to campaign hard in the “sugar seats” of North Queensland, where angry farmers are threatening Howard with an electoral backlash.

Australia’s sugar industry was earning around A$2 billion a year in the late 1990s, but receipts fell to below A$1 billion last year. Australia is a major world producer of sugar, refining five million tonnes annually.

“The anger now – this won’t die,” warned Sugar Industry Reform spokesman Bernie O’Shea. “Mr Howard has got a limited time to change this and I would say that if nothing is done satisfactorily, I’m certain there will be a withdrawal of support.”

Howard is likely to meet with sugar industry representatives in the coming weeks to explain the deal, and has hinted at some compensation in the form of government assistance.

Latham, who called Howard “an arse-licker” for his attitude to the US before his ascension to the Labour leadership, also landed himself in controversy late last year when he called President Bush “incompetent and dangerous”.

In a December survey, 45% of those polled said they agreed with Latham’s assessment.