Dick Nichols
ALP leader Mark Latham would make himself very popular if he rejected the Coalition government's misnamed "free trade" agreement (FTA) with the United States and demanded its renegotiation.
He would become the hero of the Australian Manufacturing Workers Union (AMWU), whose national secretary Doug Cameron has led the union campaign against the FTA; the arts community would cheer him to the rafters for "defending Australian culture"; even the sugar farmers would wonder if he, and not maverick National Party MP Bob Katter, wasn't their man.
Latham could present himself as the better custodian of the Australian "national interest" than the "suck-holes" of the Coalition government, who were unable to win immediate greater access to US markets for a key export like beef, and who have agreed to extend patent rights from 50 to 70 years, boosting the profits of struggling US multinationals.
Finally, the opposition leader could present rejection as intellectually coherent: it would give him an opportunity to again play the formidable polemicist against PM John Howard, the treasurer Peter Costello and foreign minister Alexander Downer — making a welcome change from the platitudinous suburban nice guy into which his minders are turning him.
The bulk of mainstream economic analysis supports the case for renegotiation. Over the past two years five different economic assessments have been carried out on the concept and final form of the FTA. Four of them found that it would either have little economic impact at all, or would actually damage Australia's economy.
This is due to the government's incorrigible tendency to downplay the costs and exaggerate the benefits of the deal. For example, it omits such costs as the $444 million in compensation resulting from the exclusion of sugar, changes to the Pharmaceutical Benefits Scheme (up to $1.5 billion a year), increased costs to farmers as quarantine laws are relaxed and increased costs to all consumers with the extension by 20 years of copyright protection for books, music, films, art and computer software.
A report by economics consultancy ACIL Tasman, commissioned by the federal government's own Rural Industries Research and Development Corporation, found that the FTA would damage Australia's economy. It concluded that "an FTA with the US, even if fully achieved, would ... leave Australians as a whole worse off".
Melbourne's National Institute of Economic and Industry Research found that the agreement could cost the Australian economy up to $50 billion and 200,000 jobs over its lifetime.
An International Monetary Fund report calculated that the FTA would shrink the Australian economy by 0.03% per year, with $5.25 billion of extra US imports into Australia overwhelming only $2.97 billion extra Australian exports to the US.
Howard and his trade minister Mark Vaile pretend that these reports don't exist, favouring instead a report commissioned for the Department of Foreign Affairs and Trade by the Centre for International Economics (CIE). This states that "the most probable effect on welfare after a decade is an increase of $5.6 billion per year above what it would otherwise have been".
But this CIE report also says that more trade will be diverted away from Australia by this agreement than it will create. To offset this unfortunate finding the CIE model assumes a massive increase in US investment in Australia. Former Keating diplomat and ANU economics professor Ross Garnaut has called this assumption "laughable".
Finally, the most thorough analysis to date, conducted by econometrician Dr Philippa Dee of the ANU for the Senate Select Committee on the FTA, tears the confident assumptions underlying the CIE report to shreds.
Here are just three of many examples:
- Would the changes to Australia's foreign investment rules lead to a big reduction in the cost of investment to US capitalists, provoking a wave of US investment here? The possibility of this happening is highly exaggerated.
- Would Australia's share of the US government procurement market grow to about 30% of Canada's share of that pie? A more realistic estimate is 4%.
- Would Australian exporters always achieve world prices for their products? No, to achieve a position in "niche" markets Australian exporters might well have to accept lower prices, reducing their gains.
As a result of her modeling — based on realistic, conservative assumptions — Dee came up with a gain from the FTA of just $53 million a year. This tiny figure reinforces the findings of a separate Productivity Commission report on bilateral trade agreements in general. It found that 12 out of 18 of these reduced more trade than they created.
Obviously, the attempt to put a precise figure on the likely "overall" net impact of the FTA is pseudo-science: given all the imponderables involved, the end result could be anything from a large loss to a large gain.
But we can be much more certain about the likely losers — Australian small and medium capitalists who at present enjoy some sort of protection against cheaper imports in fields as diverse as car components to video production, and Australian consumers whose spending is subsidised by arrangements like the PBS.
Given all this, why isn't Mark Latham already attacking the FTA?
The answer is that while a large majority of voters are sceptical about the FTA, those with real economic and political power — Australian big business and their political puppets — are all in favour of it. Outfits like BHP-Billiton see big gains for themselves, no matter what the "overall net gain" to the economy as a whole.
This explains why the state Labor premiers, thirsting for private investment (and scrabbling among themselves for it), have signed joint declarations supporting the FTA. Their united front with the Coalition government, backed from within federal Labor by former leader Kim Beazley, speaks volumes about the forces that really drive policy in this country.
Will Latham play the Australian nationalist card and stand up against the powers-that-be and his own right wing over the FTA? The very thought will have the Labor leader (who once accused Doug Cameron of "using the bogey word 'globalisation' to launch a new campaign against capitalism") breaking out in a cold sweat.
Latham may still surprise us, but it's not likely. Labor's impending capitulation over the FTA — adding to its collapse on the PBS, its retreat on Iraq and its capitulation on gay marriage — adds one more powerful reason to make the Socialist Alliance and Greens vote at the coming poll as big as possible.
[Dick Nichols is the managing editor of Seeing Red, the forum of social, political and cultural dissent launched by Socialist Alliance.]
From Green Left Weekly, August 4, 2004.
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