Freer trade

Although “not yet finished(link to story in The Australian newspaper)”:,5744,8605754%255E601,00.html, the negotiations between the Australian and US governments on a free trade agreement seem now to be in the final stretch. In a deteriorating environment for trade liberalization—particularly in agricultural markets—the emerging deal looks like a credible step forward that will improve prospects for opening markets on a global basis. The signs are that the deal will open most goods and many services markets on both sides, but will not fully open access to some of the United States’ biggest agricultural markets anytime soon. US barriers to Australian dairy and beef imports will be lowered incrementally; barriers to sugar may scarcely be touched. The overall shape of the deal is not yet clear, so it’s difficult to judge whether it meets the requirement of the WTO (Article XXIV of GATT) that a bilateral agreement should liberalize ‘substantially all trade’. Nor is it clear whether, as a whole, the deal will meet the ‘guideline’ added by WTO in 1994 that bilateral FTA’s should achieve this standard of market openness within a decade. These typically vague WTO standards have been tarnished by questionable observance and by the glacial progress most WTO members have made in opening their domestic markets to global trade. So a more important question—certainly a more pragmatic one—is whether any special treatment the bilateral agreement might offer protected farm industries in the USA could prejudice the chances of a more ambitious global agreement in the WTO next year or the year. If so, it would be a big loss for both Australian and US farmers. At present, the outlook for progress in the WTO talks is bleak. There seems to be little hope of making significant progress on reducing protection in world agricultural markets. Rationality has taken a holiday in the US election season: even former stalwarts of global market liberaliztion such as the US Farm Bureau seem to be allowing the ‘tail’ of declining industries to wag the dog. bq. The American Farm Bureau, at its annual meeting in Hawaii this week, voted by a narrow 204-202 margin to endorse a new stance in which the group would only support future trade agreements “that prevent economic damage to import-sensitive commodities . . . while advancing US agricultural trade and food security interests”. (“Financial Times(FT subscription page)”: The “Democrat contenders(NY Times story)”: for nomination do not have the courage to criticize the President’s record of politically calculated protectionism (steel, textiles, sugar) but pander to the invitation of protectionists to treat trade as if it were a threat to the security of the United States, to jobs and to moral welfare. And across the Atlantic, the EU Trade Commissioner is “testing acceptance(link to FT report)”: of a policy that would approve the use of bans on trade that somehow offend national ‘collective preferences’ (read “might be produced using genetically modified plants” or “animals treated with natural hormones” or “not marked with fashionable environmental icons”). In this environment, steps towards opening the most protected sectors of US and Australian markets can only be seen as encouraging the rest of the world to believe that progress can be achieved on a wider scale. Assuming, of course, that the Congress approves the deal as proposed …

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