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Thursday, 24 June 2004
Page: 31498

Mr ORGAN (12:30 PM) —Well, here we are again, confronted with complex legislation which has been introduced in haste and which the government expects to be debated forthwith. This government continues to mock the democratic process by trying to ram legislation through this parliament with the minimum of scrutiny. I remember the last time this happened, with the Greater Sunrise Unitisation Agreement Implementation Bill 2004—and look at the hornet's nest that stirred up with East Timor. Now here we are again with the US Free Trade Agreement Implementation Bill 2004 and the US Free Trade Agreement Implementation (Customs Tariff) Bill 2004.

There is one sitting day—perhaps two—left to us before the five-week winter break, and the government decides, in its infinite wisdom, that it is a good idea to introduce this legislation in what could be the dying days of this parliament. We are still waiting for one of the parliamentary committee reports, for goodness sake! Another was tabled only yesterday morning, half an hour before this legislation was introduced. What an affront to the democratic process, and what a slap in the face to the Australian people! What motive could the government possibly have for this unseemly haste, unless it is trying another wedge move on the opposition?

And what on earth are the opposition doing in agreeing not to oppose this legislation? Didn't the AMWU reps come around and see them on Tuesday? They certainly came to see me, and the National Institute of Economic and Industry Research report which they brought with them should have set alarm bells ringing in the Labor Party. That report says the free trade agreement will make us $47 billion worse off. That is a very long way indeed from the prediction in the government-commissioned report produced by the Centre for International Economics of a $52.5 billion boost, a prediction which previous opposition speakers have reminded us was summed up by Professor Ross Garnaut's devastating put-down that it fails the `laugh test'.

I am not an economist; I am a geologist who worked in a university library before the people of Cunningham put me in this place as their representative. But even I can see that what we are being told about the benefits of this agreement cannot be true. Look at the dichotomy between the views of the Minister for Trade and those of his US counterpart, Special Trade Representative Robert Zoellick. Our bloke says we will be way better off under the FTA, and theirs says the same about the US. Those positions cannot exist at the same time; they are mutually contradictory.

Let us look at the `real deal', as Dr Elizabeth Thurbon and Professor Linda Weiss have dubbed it. They say the government is only telling half the story—and here is why. Let us look at agriculture first. The government says:

The AUSFTA will give Australian agriculture a significant boost in the US market.

But here is the real deal. Under the deal, we have agreed to completely open our market to all US agricultural exports, removing all tariffs, quotas, seasonal restrictions and subsidies from day one. But the US is allowed to keep many of its tariffs, quotas, seasonal restrictions and enormous subsidies in place. This is not free and it is not fair. The government says:

Two thirds of all agricultural tariffs—including in important commodities such as lamb, sheep meat and horticultural products, will be eliminated immediately

a further 9 per cent of tariffs will be cut to zero within four years.

But here is the real deal. Some tariffs might come down—but not for our most competitive exports. Tariffs remain in place for key sectors like wool, for 10 years; wine, for 11 years; steel; and beef, dairy, horticulture and cotton, for 18 years. Also, if our exports to the US rise too quickly or our prices are too competitive against the exchange rate, the US can slap its tariffs back on, no questions asked.

While Canberra chime, `We've got new market access for X, Y and Z,' they do not tell you about seasonal restrictions. Under the deal, our avocado producers are allowed to sell to the US for the first time. But the catch is that we are not allowed to sell to the US during our peak production time. It is the same story for citrus. No such barriers will remain at this end. It is not free; it is not fair. The government claims:

The AUSFTA provides greater access to the US market for two of Australia's key agricultural export industries, beef and dairy.

But the real deal is that our beef and dairy producers have to wait almost a generation—18 years—for the elimination of US quotas and tariffs. This is longer than any developing country has ever been given by the World Trade Organisation, the WTO, to prepare for competition. As for dairy, US farmers only agreed to let us in because we will not be competing directly with US producers—that is, we will be selling certain kinds of cheese that will displace European imports, not US products.

Australia's sugar access remains unchanged at 87,000 tonnes per annum. Our sugar producers got nothing from the deal, even though the government promised it would not sign a deal that locked sugar out. Now we will spend millions of dollars closing down our sugar industry. This is a loss for Australia, not a gain. And the government says:

Australia's quarantine and food safety regimes, which ensure our health and our environment are protected, are not affected by the Agreement.

But the facts are that under the deal we have agreed to let US trade representatives sit on the bodies that determine our quarantine standards. This will expose our quarantine regulators to even more pressure to compromise science based risk assessment, placing animal, plant and human health at risk. We do not have a good track record of resisting the persistent US pressure to relax our stringent quarantine standards. Last year, we started importing Californian table grapes following 10 years of relentless pressure, even though the grapes are infested with diseases that could ruin not only our grape and wine industries but also our mango and avocado orchards and eucalyptus forests. But do not worry: we are decontaminating the grapes with methyl bromide, a known carcinogen that is one of the most toxic chemicals known to humans and that will be banned in the US from next year—except for spraying export produce. In response to US pressure, we have also relaxed our quarantine protocols to allow in pest- and disease-affected pork, poultry, apples, citrus, stone fruit and pears. So much for agriculture; what about manufacturing? The government says:

Duties on more than 97 per cent of US non-agricultural tariff lines (excluding textiles and clothing), worth $6.48 billion in 2003, will be duty free from day one of the Agreement.

And here's the real deal: manufacturing tariffs between Australia and the US are already very low, except in a few key areas. In the few areas where tariffs do exist in the US, many will remain. For example, we will still be prohibited from selling our world-class, highly competitive fast ferries to the US. But, again, the US gets 99 per cent access to our market, no questions asked. The US enjoys a huge trade surplus with Australia in manufactured goods and calculates a further $US2 billion in its favour as a result of the deal. The government says:

... tariffs on textiles, some footwear and a handful of other items will be phased out, with all trade in goods free of duty by 2015.

But in place of tariffs, we will have to comply with complex rules of origin. Rules of origin mean that the goods you export have to contain a certain level of Australian made content to qualify for tariff reductions in foreign markets. That means that our textile producers who import their yarn will probably not qualify for any concessions at all. Singapore thought it was getting a bargain under its free trade deal with the US, but it found the rule of origin conditions so hard to meet that it does not even bother applying for tariff reductions now; it just pays the tariff.

It is a similar picture in government procurement. The Howard government claims:

The A$200 billion market in US federal government—

and most state government—

purchases of goods and services will now be open to Australia.

But under the real deal our access to the US procurement market will be severely limited by a number of barriers and discriminatory policies. A major barrier is that the US government has retained the right to give preference to its small firms—which are not small at all, employing up to 1,500 people. How many Australian companies applying for procurement contracts in the US will employ more than 1,500 people? Also, we will be competing with hundreds of other much larger US firms in our own market—firms that the US government supports with what it calls `aggressive advocacy'. That means the US government gives subsidies to US firms to help them win foreign procurement contracts.

Basically, then, our government expects us to be able to compete in a huge US market alongside millions of protected `small' US firms, employing up to 1,500 people, and in our own small market alongside many hundreds of US firms also subsidised by their own government. How can we possibly win? We will not win, and the government knows it. We did not sign the WTO government procurement agreement because the government's own report on the matter concluded that access to the US market would remain limited by domestic regulations. So why has the government suddenly changed its tune? If competition in government procurement is so good, why do we not just sign the WTO government procurement agreement?

Then there is the claim:

Australia will have a waiver from US programs favouring US firms and products.

The facts are that, while 28 other countries also have such a waiver, in practice `buy American' laws continue to influence the purchasing strategies of many US agencies. The vast purchasing budget of the Homeland Security agency is being used to acquire American produced goods without competitive bidding, and a law currently before the US Congress will make it extremely difficult for waivers to be granted. The Buy American Improvement Act of 2004 is aimed at restricting waivers of the `buy American' laws, to prevent foreign firms gaining procurement contracts, thus protecting US companies.

More worryingly, we have agreed to scrap our industry development programs. These allow us to set conditions in return for granting procurement contracts to foreign suppliers in our own market. Such offset programs produce net benefits for Australian industry and employment, for example, by stipulating that suppliers source local inputs, employ a certain percentage of Australians, transfer technology or undertake similar actions. All this is to disappear. In particular, our young information and communications technology industry, which has made important strides under the mandated component of the procurement program, can expect to lose out to the tactics of a well-subsidised Microsoft. So while the US can keep and strengthen its Buy American Act under the deal and continue to subsidise its major exporters, we have agreed to abandon our development programs—the so-called `Microsoft clause'. Then there is the claim:

Australian preferences for small businesses and indigenous people will remain.

Sure, but so will America's. The funny thing is that our government defines a small business as a business employing up to 20 people, but the US defines a small business as a business employing up to 1,500 people. So it will be able to give preference to companies that are huge by Australian standards. How will we compete with that?

The picture is just as grim for intellectual property. The government would have us believe:

Australia's IP laws will be substantially harmonised with the largest intellectual property market, and a global leader in innovation and creative products.

The facts are that intellectual property protection under the WTO and WIPO treaties is more than enough to make sure that innovators are rewarded for their efforts. Extending patent protection in pharmaceuticals will delay the critical introduction of generic drugs for even longer, making us pay more and more for medicines. Patents extending copyright well beyond the life of any author—the so-called `Disney clause'—will mean that libraries and educational institutions will have to pay royalties for even longer. That is a cost that many institutions will not be able to bear.

On investment, the government claims:

Australia has secured an agreement that should provide a strong framework for continuing to promote high levels of two-way investment between Australia and the US.

This would be fine if it meant that the US would carry out more wealth-creating, productive or technologically-upgrading investment in Australia. Over the past 10 years, the vast majority of US investment in Australia has been for the purchase of Australian firms and assets—that is, the simple transfer of wealth from Australian to US hands. US greenfields investment in Australia—investment in new businesses, which creates more jobs for Australians—is miniscule in comparison. There is nothing in the deal to ensure that US investment in Australia will become more productive in the future. The government says:

The Agreement preserves Australia's foreign investment policy, but with a range of changes that maintain our ability to screen all investment of major significance.

But the real deal is that we have given up the right to screen all foreign investment beneath a threshold of $800 million. That means that 90 per cent of all Australian companies could now be purchased without screening. But the effective end of screening is less problematic than the removal of all conditions attached to foreign investment to ensure that it is fruitful for the Australian economy.

Now what about the biggie—that is, health? The government says:

Access by Australians to affordable medicines under the PBS will be maintained under the AUSFTA.

But Thurbon and Weiss's Real Deal shows this is just wishful thinking. Australia's Pharmaceutical Benefits Scheme is seen as the gold standard of affordable public health care by the rest of the world. US state governments have been trying for the past 10 years to build their own PBS, but US pharmaceutical companies keep taking them to court to prevent this as it would undermine their massive profits. US drug companies are now keen to destroy our PBS to ensure fatter profits. Under the deal, we have given the drug companies what they least deserve: increased protection against generic producers; a new body to sell the virtues of overpriced US drugs to Australians, the Medicines Working Group; and an independent appeals process to challenge the listing decisions of the PBAC—all of which will increase the price of the existing pharmaceuticals bill by $1.5 billion without any added health benefits and place more onerous burdens on the PBS.

Then there is the government's assertion:

The Agreement reinforces Australia's existing framework for intellectual property protection of pharmaceuticals.

It is a nice sentiment, but who is protecting whom? We have a framework extending the life of pharmaceutical patents, but who is this protecting? Not the Australian pharmaceutical industry, which mainly comprises generics producers who will now have to wait longer to introduce their more affordable versions of overpriced US drugs; not the Australian public, who will have to fork out more money for brand-name medicines for longer periods; and not the PBS, which will have to extend its subsidisation of expensive brand-name medicines with Australian taxpayers' money. So who is being protected?

The big question is: how did our government come to negotiate our country into this glaringly lopsided, nationally detrimental agreement? Thurbon and Weiss say the Australian government's deluded sense of the special nature of its relationship with the US saw it enter into negotiations under a misguided assumption that the US would modify its publicly proclaimed approach to international trade negotiations—that is, aggressive advocacy of US business interests in overseas markets—in order to further the special friendship that our countries are believed to enjoy. It is a fact that the Australian negotiating team originally anticipated the attainment of a comprehensive and nationally advantageous free trade deal, including a comprehensive deal in agriculture. This accords with DFAT's understanding of what constitutes an FTA. According to DFAT's webpage headed `Free Trade Agreements' and sub-headed: `What are Free Trade Agreements?':

The crucial test of an FTA or Customs Union is that it must eliminate all tariffs and other restrictions on substantially all the trade in goods between its member countries. ... this means, at the very least, that a high proportion of trade between the parties—whether measured by trade volumes or tariff lines—should be covered by the elimination of tariffs and other restrictive trade regulations. Australia considers that this must be a very high percentage, and that no major sector should be excluded from tariff elimination.

It is a fact that Australia's negotiators, led by the trade minister, believed the attainment of such an agreement would be possible due to our special relationship with the US. It is a fact that the Australian negotiating team sold the idea of an AUSFTA to Australian industry con-stituents, both at home and in the US, on the grounds that the deal agreed to would be comprehensive.

It is a fact that Australian businesspeople working in the US and familiar with the US political system believed such a deal was impossible and that the US had no intention of granting substantive market access concessions to Australia in a range of areas in which we are highly competitive, including sugar, beef, dairy and a range of horticultural industries such as stone fruit. It is a fact that US based Australian business representatives expressed these concerns to the trade minister during a visit to the US in 2003 to muster support for the negotiations. It is a fact that the minister insisted that a comprehensive agreement would be possible due to our special relationship with the US. It is a fact that Australia's US based businesspeople were right and the minister was wrong. Australian businesspeople in the US never believed for a moment that the Australian government would actually push ahead with a deal which clearly fell so short of its original goals and which in many ways puts Australia's economic future at risk.

The belief that the US would approach its negotiations with Australia any differently from the way in which it negotiates agreements with other countries—that is, on the basis of aggressive advocacy-—bears testimony to the naivety of Australia's negotiators. The fact that our government is seeking to paint meagre concessions and horrendous potential damages as overall wins for Australia is, at best, naive and, at worst, anti-Australian. It is clear that the costs of this deal will dramatically outweigh the benefits and cause irreversible damage to our economy, to our major national institutions and to our enviable status as a disease-free producer. That is why this so-called free trade agreement must be rejected—not closely examined in the Senate as Labor proposes but rejected outright for the outrageous sham it surely is.