Ross Garnaut, long a foe of the FTA negotiations, makes the extraordinary claim in today’s “Australian newspaper”:http://www.theaustralian.news.com.au/common/story_page/0,5744,8633296%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”:http://www.rba.gov.au/Statistics/Bulletin/index.html#table_h).
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.