US Free Trade Agreement Craig Emerson - Shadow Minister for Innovation, Industry and Trade

Doorstop Interview

Transcript - Parliament House, Canberra - 14 February 2003

Emerson: If a free trade agreement between Australia and the United States is such a good idea, why is the Government being so secretive in the way it's handling the negotiations? An independent report has been commissioned by the Government on the impact of a free trade agreement with the United States on Australian farmers. That report has been prepared by ACIL Consulting and the Government has confirmed through Senate Estimates that it is suppressing the report. I have put a freedom of information request in for it and I'm awaiting a response to that but with no optimism whatsoever, because it's also clear from Senate Estimates that the Government has sent a letter to the consultants with eighteen separate concerns and is saying that it will not be releasing the report and will not be completing the consultancy until those concerns are addressed. We get a bit of the tone of the report from the change in the title of it by the consultants – it is now called A Bridge Too Far. It is a report that is critical of the impact of a free trade agreement on Australian farmers. In addition, in Senate Estimates, we asked the Government whether it would release a statement setting out what it wants to achieve in the negotiations for a free trade agreement with the United States and the answer is, it will not. It will not even set out its negotiating objectives. Now contrast the Government's closed-door secretive approach to these negotiations with that of the US Administration. When Bob Zoellick and the Prime Minister launched the negotiations on the 14^th of November last year, Mr Zoellick immediately wrote to the Congress a seven page letter setting out US negotiating objectives for the free trade agreement. Why won't the Government do that here in Australia? If it's such a good deal, why is the Government being so secretive about it? It's the same approach that it's conducting in relation to the negotiations on the General Agreement on Trade in Services – closed door, secretive negotiations. Again on the GATS, the Government has confirmed that twenty-two countries have formally asked Australia, in documents that were compiled and given to Australia by the middle of last year, to open up our services markets to foreign competition. The Government has confirmed that it will not be releasing those documents publicly either. So why all the secrecy if this is such a good deal? The Government has to change its trade strategy. Last year, Australia's exports fell, and they fell by the greatest amount since many of you were born in the early 1960s. It's the largest fall to have occurred from then ‘til just last year. Last month Australia recorded its worst ever monthly current account deficit of $3 billion. You'd think that the Government would come to realise that we have a big problem. Australia has a big problem because exports are actually falling and the impact of the drought has only just begun to show up. Already we've had thirteen successive trade deficits, we are headed for more, and we are headed for an international debt of $350 billion. When Peter Costello rolled out his debt truck in September of 1995 and condemned the then Labor Government for selling out our economic sovereignty to other countries, debt was $180 billion. He said ‘We will fix that problem'. Fix it? They've doubled it. It's about to hit $350 billion and every monthly trade deficit is going to add to that burden.

Journalist: Just on the issue of secrecy, if the Government is approaching a free trade deal in talks with the US, wouldn't it make sense to play your cards close to your chest?

Emerson: Well, why? I think quite to the contrary. The Government is asserting that a free trade deal with the United States is good for Australia. Good for Australian farmers, good for Australians overall. If that is the case, this would be a good news deal. If it's going to be a good news deal, as the Government asserts, and I dispute, then you would bring the Australian people with you instead of negotiating behind closed doors.

Journalist: But I mean that's – …. In any deal that you do, you don't go in and put your bottom line on the table straight away and say ‘There it is, that's what we're willing to give away'.

Emerson: Far from putting the bottom line on the table, the Government has said that everything is up for negotiation in a free trade deal with the United States. I asked the Foreign Minister, Alexander Downer, who was then representing the Trade Minister, Mark Vaile, in the Parliament, if the United States asked for changes in the Pharmaceutical Benefits Scheme, if the United States asked for changes in the Foreign Investment Review Board, and if it asked for changes in Australian local content rules, would the Government rule those out or are they all up for negotiation. He said, these are all matters for negotiation. The Government is putting items on the negotiating table, that's for sure, but it's not telling the Australian people what it is prepared to do and what it is not. Contrast that with what the United States is doing. I pay credit to the way the US, at least, is conducting these negotiations. They have a Congressional Oversight Committee and they have set out, from day one, the US negotiating objectives. They include single desk marketing of Australian agricultural products. They include reducing, or eliminating, our remaining tariffs on motor vehicles and textiles, clothing and footwear. They include local content rules for Australian television and film and radio. At least the Americans are being up-front saying what they want out of it. When we asked, formally, through the Senate Estimates process for written answers ‘Will the Government, will the Trade Minister table in the Parliament, just for discussion or debate, a set of negotiating objectives?' the answer was given in one word: ‘no'.

Journalist: Do you think Australia should pull out of negotiations on a free trade agreement with the US?

Emerson: I have said all along that by going down this preferential trade deal path, what the Government euphemistically calls ‘competitive liberalisation', we are treading a very dangerous path, because it threatens to undermine our efforts, and the efforts of other countries, in the Doha Round of global trade negotiations. The big gains to Australia would come from reductions around the world, globally, in trade barriers. But as countries see Australia and others negotiating these preferential deals, they are getting pretty nervous about it and saying ‘Well, we'd better get in on that too'. If everyone says ‘Well look, Australia and other countries are signalling that they have no confidence in being able to achieve an outcome globally', the whole show will disintegrate into regional trading blocs; which is exactly what happened during the Depression, a big cause of the Depression, and a precursor to the Second World War. Do we want to see that happening again? It would be a tragedy for this nation, which has traditionally been an open trading nation, to end up in a world of regional trading blocs. And I can say this. China has expressed concern to others, to academic colleagues of mine, that Australia is in the process of negotiating these bilateral preferential deals, and they are then saying ‘Well, we may need to be in on the act'. Because when the music stops, no one wants to be without a chair. And they then, as a response to that, are looking at the idea of an East Asian trading bloc. Well, the bad news is we won't be a member. Australia won't be a member of an East Asian trading bloc. We will be a member of a North American trading bloc, on terms determined by the pre-existing members. We will have nowhere to go, but North America. Here we are in Asia. Fifty-five per cent of our exports go to East Asia. How would we go to the United States and say ‘Well, we got locked out of that trading bloc, can you pick up the 55 per cent of exports that were going to East Asia?'. Well, the Americans, quite sensibly, would say no.

Journalist: To what extent, Craig, do you think the …[inaudible]… of a free trade agreement will also get caught up internationally …[inaudible] … part of the politics of a war with Iraq?

Emerson: Out of the words of Government Ministers, this Government is the first government in the post-war era that has very deliberately entangled trade policy with our strategic alliance with the United States. Not a slip of the tongue, but a boast that a free trade agreement with the United States would reinforce the alliance and alliance would reinforce its free trade agreement with the United States. Firstly, it will not be a free trade agreement and the Australian people will be very disappointed to learn that there is, in fact, no intention, whatsoever, of negotiating a free trade agreement. And yet that is what it's called. It'll be some concessions in some areas, but at the same time running grave risk of damaging our efforts in the global round of trade negotiations. But this Government, the first in the post-war era, has said explicitly time and time again that we link, closely, our alliance with the United States with the proposed free trade agreement with the United States. I am fearful of the response that that will illicit from our big trading partners in East Asia where send 55 per cent of exports.

Journalist: Has there been any public criticism, though, by those East Asian trading partners including China?

Emerson: There hasn't been any formal public criticism, but that sort of criticism, those concerns, have already been relayed to colleagues of mine in the academic world.

Journalist: Just by China, or by other countries as well?

Emerson: By China. Other countries have informally mentioned it to me, at various meetings, in the broader context of ‘We are very concerned about the signals that Australia is sending, in terms of its relationship with the countries of Asia'. And we know there's been a lot of adverse signals sent in the last few months. I'm also, and I've said publicly, that I'm very concerned about the impact of that on our trading relationship with East Asia. In the last year, when our exports fell, they fell even further to the countries of East Asia and the Government is already saying ‘Oh, that's that drought'. Well the drought didn't affect all of last year's figures, the last twelve months. It's starting to affect these figures. So why have our exports to East Asia fallen by more than our exports to the rest of the world? Then the Government says, ‘Oh, that's because of the global economic slowdown'. East Asian economic growth last year was 6.7 per cent. Now, that is rapid growth by any measure, and yet our exports to East Asia are falling by more than they are falling to the rest of the world. Let's take any possible impact of the drought out and look at our exports of non-agricultural products to East Asia, and guess what? They have fallen by more than our exports of agricultural products. So everywhere you go, every excuse the Government makes for its appalling trade performance in East Asia is blown out of the water by the facts of the matter.

Journalist: Coming back to the negotiations, do you think that the Government should go ahead with them or should it pull out at this stage?

Emerson: What I'm saying, at this stage, is that the Government should do what Labor has been saying and that is put Doha first. Put all its effort into the Doha Round of multilateral trade negotiations, rather than getting side-tracked into trying to negotiate preferential trade deals with other countries. Can I take this opportunity to emphasise that we have never, Labor has never been opposed to bilateral trade deals. In fact, we did a large number of them with China, Korea, Japan, but we did it on a non-preferential, or a non-discriminatory basis. That is, we said ‘We think it's good for you, we think it's good for us if you open up your markets for wool, for wheat, for sheep, and so on, and for beef. But do it for all countries and we'll take our chances'. And that is consistent with World Trade Organisation philosophy - in technical terms, most favoured nation basis. But what it really is, is non-discriminatory. So that's what we're saying. Pursue your trade objectives in a non-discriminatory way. In terms of a trade deal with the United States, if there were scope to pursue negotiations on non-discriminatory basis, then that would be consistent and potentially supportive of, the WTO negotiations. But that is not what is proposed. What is proposed and what is contained in all the other FTAs negotiated with the United States is a set of discriminatory, or preferential, arrangements. And that's where we see the hazards.

Journalist: Talking of Doha Round, do you have any response to the Harbinson plan for reducing agricultural trade barriers?

Emerson: No, not at this stage. Look. Tim, you might recall the Uruguay Round of multilateral trade negotiations. Time and time and time again people said ‘This is going nowhere, it's hopeless, let's give up'. But through leadership, including leadership by Australia, a determination by Australia to get a good outcome out of the Uruguay Round, we persisted and other countries persisted. Now it wasn't an ideal outcome, but it certainly did open up lots of international markets to Australian exporters. Not only that, the Uruguay Round took a lot longer than was planned. But through that persistence, through the leadership that was displayed in those years by the then Labor Government, in forming the Cairns Group of fair trading nations – a powerful third force in the negotiations – we did get a good outcome. But what's happening here is the old two bob each way. The Government wants two bob each way. It's putting two bob on a trade deal with the United States, and two bob on ‘Well, maybe we can get an outcome the Doha Round'. It's diverting resources. There's 60 negotiators coming from the United States, that means there'll have to be a lot of Australian negotiators on the trade deal with the US, and that means less trade negotiators in the Doha Round.