The US Free Trade Agreement and the GATS
Patricia Ranald
US FTA: trading Australia away?
Negotiations for an Australia-US Free Trade Agreement started on March 17 in Canberra, two days before the invasion of Iraq. This is despite the fact that the government's own FTA background study by the APEC Study Centre predicted very low economic gains only if all trade barriers, including in agriculture, were removed, and then conceded that this was very unlikely. An independent study by ACIL Consultants has confirmed that removal of all barriers is unlikely and concluded that there would be net losses to the Australian economy in part because of trade lost to Asia Pacific countries, which currently take 55% of our exports.
Why then is the government persisting with the negotiations? Both the US and Australian governments have linked the FTA with the post September 11 security alliance. The Australian government's recent White Paper on Trade and Foreign Affairs said it would "put our economic relationship on a parallel footing with our political relationship" (p xvi). Many commentators see this as a serious mistake likely to create perceptions of Australia as a satellite of the US and damage trade and diplomatic relationships with other countries, especially those in our region.
The Australian economy is only 4 per cent of the size of the US economy. This puts Australia in a very weak bargaining position. The government's own background paper says that the US sees Australia in economic terms "as the addition of another medium sized state."
Moreover, Australia has few trade barriers in goods and agriculture, which means the main negotiating targets for the US are Australian laws and regulation which we see as important social policies but US trade negotiators and corporations see as barriers to trade. These are listed by the US Trade Representative Bob Zoellick in his report to the US Senate and by US companies which gave evidence to the US Trade Commission in January.
Pharmaceutical companies want changes to the Pharmaceutical Benefits Scheme which has price controls to make medicines affordable to most Australians, especially those on low incomes. The companies want higher prices for their products, which could make medicines unaffordable for many. The US also wants to abolish the power of the Foreign Investment Review Board to review foreign investment in the national interest, and to remove any limit on foreign investment in media, telecommunications, airlines and banking.
The US wants to remove all restrictions on trade and investment in services, including essential services like health, education, and water. This would allow corporations to challenge government regulation of services, and lead to privatisation. Australians have made the policy decisions that public regulation and often public provision of these services is required to ensure that there is equitable access to them.
Another target is the labelling of genetically modified food. There are no US rules for labelling to show GMO content in food. Australia has labelling requirements because consumers want to know whether food contains GMOs, so that they can make an informed choice.
The US is also challenging Australian content rules in film, television and music as barriers to trade. These rules ensure that Australian voices are heard and Australian stories are told. Without them, Australia's cultural identity and diversity would be swamped by US imports, which already have a large share of the Australian market.
Most Australians support these social policies, which help make Australia a more equitable society than the US, with a distinctive culture. The government says it will maintain policy objectives but that the issues are still up for negotiation. The negotiations take place behind closed doors over the next year, and the agreement, like other trade agreements, will be ratified by Cabinet, not by parliament. This is unacceptable. Social policies which protect the public interest should be publicly debated here and decided by parliaments at the national or state level, not secretly signed away in a trade agreement.
"A way of viewing the economic association from the US perspective is to see [Australia] as the addition of another medium sized state roughly equivalent in GDP to that of Pennsylvania" (Government report on the FTA, Australian APEC Study Centre, 2001, p. 48)
WTO GATS negotiations: trading away essential services?
What is GATS?
The Australian government is currently involved in negotiations about the General Agreement on Trade in Services (GATS) in the World Trade Organisation (WTO) The negotiations aim to conclude in 2005.
The Australian government and other member governments of the WTO signed the General Agreement on Trade in Services (GATS) in 1994. It applies to all services, from banking to transport and telecommunications, to health, education and water. GATS treats services as traded commercial goods, ignoring the social aspects of many services, which are so essential to peoples' lives. GATS aims to promote international trade in services, and to remove barriers to such trade.
Although some GATS rules apply to all services, many only apply to those services that each government agrees to list in the agreement. However, GATS commits governments to increase over time the range of services included in the agreement, without any review of its impacts.
The GATS Agreement was signed with little public debate in Australia. Like other WTO Agreements, GATS rules are legally binding on all levels of government, and can be enforced through the WTO dispute system. Governments can complain about the laws of other governments to a panel of trade law experts which meets behind closed doors and the winner can ban or tax the exports of the loser.
GATS and privatisation of public services
GATS has some rules which recognise the right of government to regulate services and to provide and fund public services like health, education and water. However the definition of public services in the GATS is unclear: it defines public services as those not supplied on a commercial basis or in competition with other service providers. Since many public services have been exposed to private competition this means some GATS rules could apply to some public services. The current agreement only fully covers public services if governments list them in the GATS agreement. Most governments have not so far listed public services like health, education or water, but are being pressured to do so by transnational services companies which see these essential services as billion dollar markets for investment.
Governments are now being asked to increase the range of services which they agree to be covered in the GATS, and to make changes to the rules of GATS which could reduce their right to regulate services, and to provide and fund public services. There is a proposal to reduce the right of governments to regulate services by applying a "least trade restrictive" rule to some regulation of services. This would allow these regulations to be challenged by other governments as a barrier to trade.
There has also been discussion about defining government funding of public services as "subsidies" to which corporations might have access through competitive tendering, a form of privatisation.
The GATS negotiators have been making specific requests for certain services to be included in the GATS agreement. European requests to Australia were placed on the internet in February 2003 with responses due by March 31. The requests reveal that the European Commission, representing 15 European countries is requesting:
1. The inclusion of water services in the GATS. This could mean privatisation of water services and would also reduce the ability of state and local governments to regulate water services to ensure they are available and affordable to all.
2. The inclusion in the GATS of all postal items and all modes of delivery "handled by any type of commercial operator, whether public or private." This would mean privatisation of Australia Post and the end of the 50c standard letter charge which enables people in rural and regional areas affordable access to postal services. Privatisation of Australia Post would also mean closure of post offices in country towns already deserted by the banks.
3. Removing the powers of the Foreign Investment Review Board to review investment in the national interest and no right to limit foreign shares in strategic industries like Telstra or Qantas.
The US government has requested the removal of Australian content rules in film, television and music, claiming these are a barrier to trade.
We oppose these requests and believe that public policy about regulation, public funding and provision of essential and cultural services should be made democratically by governments at national and local levels, not secretly signed away in trade agreements. We call on the government to:
i) make public its requests to and from other countries, and its planned responses to those requests and enable public debate about the responses by delaying;
ii) support the exclusion of all public services from the GATS, including public health services, public education services, postal services and water services;
iii) oppose any proposals which would remove the right of Australia to regulate levels of foreign investment in any industry;
iv) oppose any proposals which would open up the funding of public services to privatisation;
v) oppose any proposals to which would reduce the right of governments to regulate services, including the application of a "least trade restrictive" test to regulation;
vi) submit all policies on GATS to full parliamentary debate and a parliamentary vote before commitments are made.
Patricia Ranald is Principal Policy Officer at the Public Interest Advocacy Centre and the Convenor of the Australian Fair Trade and Investment Network of 64 community organisations. For information and campaign materials see the aftinet website.