The FTA and a fall in exports

Ross Gar­naut, long a foe of the FTA nego­ti­a­tions, makes the extra­or­di­nary claim in today’s “Aus­tralian newspaper”:,5744,8633296%5E7583,00.html that the focus of trade offi­cials on the FTA over the past year of nego­ti­a­tions has been a dere­lic­tion of duty bq. Offi­cial Aus­tralia has not yet faced up to the sever­i­ty of the present trade prob­lem. Exports have declined in each of the past three years after 15 years of sus­tained strong growth. Nev­er in the 20th cen­tu­ry did exports decline for three years in a row — not even in the Great Depres­sion of the 1930s or in either of the world wars. This ter­ri­bly mis­lead­ing. No one—least of all the Reserve Bank—has ignored the export trends: Ross has no rea­son to be ring­ing alarm bells. The trends have noth­ing what­ev­er to do with the focus of (some of) the Can­ber­ra pol­i­cy com­mu­ni­ty on the FTA over the past 12 months. There are much sim­pler and much more com­pelling rea­sons that are evi­dent in the data (chart­ed from Reserve Bank series “here”:

The fall in mer­chan­dise exports is due to the sharp fall in rur­al and resources exports, that togeth­er make up 40% of our total exports of goods and ser­vices. The rea­sons? Not, as Prof. Gar­naut alleges, lack of offi­cial atten­tion, or the FTA or the col­lapse of the WTO Can­cún meet­ing or even the US Farm Bill (which affect­ed only US farm­ers direct­ly). The falls are ful­ly explained by the com­bi­na­tion of the worst drought in a cen­tu­ry that dec­i­mat­ed har­vests of grains, sheep, wool, dairy and hor­ti­cul­ture plus an adverse swing in the val­ue of the $Aus from US0.55¢ in 2001 to US0.77¢ today that has made our exports of both rur­al and min­er­al rea­sources less valu­able in $Aus. A sim­i­lar cur­ren­cy effect (plus SARS) is evi­dent in the export record of the price-sen­si­tive ser­vices sec­tor. Exports here, too, have been grow­ing strong­ly despite the alleged ‘lack of offi­cial atten­tion’. Ross’ oth­er claims are equal­ly con­tentious. * He makes unfound­ed claims about the ‘deal’ on the US farm bill. This deal, if it real­ly exist­ed, was entire­ly a US domes­tic ‘trade-off’ in which Aus­tralian inter­ests played no part at all. If the pas­sage of the sub­sidy-heavy Farm Bill real­ly did clear the way for the Con­gress to grant the Pres­i­dent author­i­ty to nego­ti­ate for­eign trade deals—this is the Administration’s ‘spin’ on the Farm Bill—then it enabled the launch of the mul­ti­lat­er­al nego­ti­a­tions from which Aus­tralian farm, ser­vices and man­u­fac­tur­ing indus­tries still stand to ben­e­fit. * He forecasts—apparently against his own assess­ment of the poor oppor­tu­ni­ties won in the US market—that Australia’s farm exports to Asia will col­lapse fol­low­ing the FTA. * He rolls out the same tired old fur­phy that Australia’s efforts on the FTA con­tributed to ‘starv­ing the mul­ti­lat­er­al trade nego­ti­a­tions of oxy­gen’. Hav­ing been close­ly involved in both the mul­ti­lat­er­al efforts lead­ing to Can­cún and in the FTA (on behalf of clients), I can say from my own expe­ri­ence that this is balder­dash.

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