Not content with humiliating Labor over the FTA, John Howard has decided to raise the stakes, by rejecting a face-saving Labor amendment cutting off a minor loophole with respect to the PBS. On recent track record, Howard’s judgement looks sound. Labor will probably cave yet again, and look even weaker than before. This was, of course, precisely the judgement the Americans made on Howard and Vaile. By the end, the Yanks knew Howard would sign anything and proceeded to dictate one of the most lopsided treaties ever seen (in the absence of actual gunboats to enforce signature).
But maybe the worm will turn. The PBS is the most vulnerable single aspect of the deal. If Labor can’t fight and win on this, they can’t fight and win on anything. It seems unlikely, but perhaps Howard has overplayed his hand.
John Quiggin 
I think you are putting a wrong slant on the FTA John and one that is inconsistent with economic theory. I’ve had a go before but, at the risk of repeating myself let me argue the point again.
Of course the FTA is a lopsided treaty — the stakes are lopsided. Australia has much to gain from improved access to the vast US market (perhaps in areas of trade that do not even currently exist) but the US has comparatively little to gain from improved access to Australia. Australia is literally a small economy and there would be many other small countries who want the sort of agreement Australia has secured. The US does indeed have a strong bargaining position.
To put it another way suppose the US and Australia were levying optimal import tariffs and export taxes on the goods they trade with each other and that you computed the Nash optimal charges. Australian charges would generally be much lower than US charges. Giving up protection is more valuable for Australia than for the US.
Of course you are arguing that Australia makes net losses from the FTA because of the PBS and IP issues. I don’t think you are right but wouldn’t like to debate you on this issue because the empirical issues are complex and the claim of access to thee world’s biggest market, while compelling to me (and three Labor State Premiers among others) is open-ended and vague. But I do think you need to evaluate the FTA on the understanding that it will necessarily be lopsided and to start from that point.
There is always the potential for one party to a bilateral agreement to monster the other party and carve up most of the gains from trade for themselves. But this usually reflects the interests of the producers, not consumers, in the Big Guys corner.
The US, whilst the Cold War raged, was content to not exploit its massive-market enabled greater bargaining power by allowing fairly unregulated trade to it allies.Those halcyon days are over.
Now the Americans are using a this-800-lb-gorilla-gives-no-more-free-lunches-even-to-its-best-buddies trade strategy. Not only is the US throwing its weight around the trade bargaining table, it is doing it on a bi-lateral rather than multi-lateral way. This move does double political service by both:
disabling multi-partisan international insitutions in favour of US unilateral national institutions
empowering partisan US interests, esp the Republican Party political-industrial-ecclesiastical complex
The US Republican Party is wrecking international economic institutions in the Trade Round, just as it wrecked international political institutions during the Gulf War, as a matter of principle. not expediency. It does not want any peer competitor rivaling its interest complex.
THe GOP is a Rogue Elephant Party. Does anyone have an elephant gun capable of bringing this beast down?
Harry, I think your argument shows that Australia should try its hardest to keep the negotiation in multilateral forums, rather than in a series of bilateral deals where the big party always wins. That’s in line with Ross Garnaut’s viewpoint.
Harry, according to Four Corners the American drug companies want to undermine the PBS beacause it has attracted attention not only from other countries but from state legislatures in the US. I don’t know whether this is true but it might explain why the FTA is a big deal for the Americans even if it’s not significant in terms of access to markets. And if it’s true we might be doing the world a favour by resisting it.
Of course I support multilateral reforms in preference to bilateral reforms if they can be negotiated. If they cannot then good bilateral reforms are a second best target. And the initial posting concerned the FTA.
John’s point seems seems right — small countries would have a better bargaining position if they have lots of other small country company.
Could someone post here a reminder of the national expenditure on beer, cheezels and pokies, to compare to what is spent on ‘life-saving medicines’?
hardly a fair comparison malatesta, one is needed daily and hopefully the other is only used once in a life time – a bit like comparing what you spend on soap and toiletpaper to what you spend on getting the carpet cleaned
James, that info about our PBS getting up Big Pharma’s nose has been around for quite a long time. And I reacall Alan Oxley saying repeatedly that the PBS was not part of the FTA, would not, could not be part of the FTA. I never believed him and the Americans are superb at getting concessions in the last flurry of negotiations.
I thought John Garnaut’s piece was very revealing. At that time Howard thought he had a US$2 billion benefit (from the first CIE study) but he would have known that most of that was sugar, dairy and beef, which had largely evaporated, so he did it all for nothing much, as did Latham on the basis of Philippa Dee’s $53 million (the Senate C’tee’s favoured study). Our loss of sovereignty alone is worth more than that.
We have to recall that in 2001 we were the ones that approached the US. Very soon there was a lobby group of 60 US corporations, eager to get in the act, and soon thereafter the numbers grew to 120.
The EU and the US largely conduct trade to the benefit of their corporations looking for extra Lebensraum.
Then there is the geopolitical factor with the US and a desire to establish standards for other trade deals. They would have been pleased with the inroads they made with us in PBS and intellectual property.
John’s right. You never take on a big guy unless you have some mates. They made gains they never would have made with the EU and the rest in tow.
Now we are lining up for the same treatment from China. Apparently that, too, was our idea.
Harry, I don’t want to be discourteous, but I’m too weary to try. Sorry!
Jack, yes they do (have an elephant gun) according to Peter Brain. He points out that the Chinese and Japanese hold a lot of US$. He thinks they will precipitate a currency crisis when it suits them. I guess that might be when they are not quite so dependent on the US as the importer of last resort.
Also Immanuel Wallerstein (who also thinks the US is heading for a currency crisis after which we will have secular deflation) reckons things have been tougher for capitalists since about 1970. One reaction to the squeeze has been to attack the conditions of the workers, safey nets, welfare spending etc. Another has been increased competition between the centres of capital, the US, the EU and North Asia. I think on his World Systems Theory that might make us not core, not perihperal, but probably semi-peripheral. The FTA IMHO would give us relatively less power in relation to the core areas of world capital, as it opens us to further domination by foreign corporations, as well as a foreign culture.
I know it is old-fashioned to worry about who owns things, but ask yourself whether you prefer to own or be owned?
Sorry to break the flow here but I want to directly address John’s post. I just want to focus on the dirty politics rather than high-minded economics for a moment.
If we cast our minds back to Tampa we can remember that no matter how much Beazley gave Howard, Howard would push him until he could not do any more. One stringent bill would come after another.
Should Labour cave on this point it will be to their own detriment. The last thing the Liberals want to do is focus the campaign on Health. That is why they preemptively blew so much of their war chest last year to pass the ‘reforms’ to medicare.
If labour don’t play this delivery, Howard’s next may be a lot harder to get the willow on.
This FTA was born of political motivation, and unfortunately is being played out in politics.
In terms of politics, who has more to lose?
What points can be publicly argued?
Latham has won on both counts. Howard has more to lose; this FTA is his baby and he needs to be seen to have the pay off, and he cannot be seen to have been the one to have strangled it at birth himself. Latham has the initiative on both those counts.
The next issue is what can be publicly argued. Again, this is politics. It’s about perception, not fact. Regardless of the actual value of the final amendment, Latham needs to publicly prove the ALP’s intentions are for the good of the nation. Howard has to publicly prove the amendment is not necessary. Latham’s is much more emotive an issue, and is therefore far ahead of Howard’s in terms of politics. (Unbelievably, Abbott chose to fight for public face on the basis of an anti-American stand! If the Libs continue this in relation to a health issue, they’ve lost the argument immediately).
Yes, it’s risky. But this is yet another form of Latham taking on Howard and the national state in his own terms. In the main, this projects Latham, ultimately, as the innovator in the Australian public eye, tied to Australian interest, moreso than Howard.
It’s disheartening beyond words to watch opportunity like this – ie, the possibility of a proper FTA – go so political; but it was ever so, sadly.
In essence I agree with Peter on the politics.
I am with Garnaut on the economics.
It seems to me Howard would be mad to fight an election on this. you can’t beat a negative and their reasons for not agreeing to the amendment is that the protection is already there .
so they do not to pass the FTA because of greater protection on this issue?
Howard hoisted on his own mercantilist petard.
The worst thing about the FTA is that australia is endorsing agricultural protection.
NZ and australia have the least subsidised agriculture is the world yet we are still punished by the rich protectionists in japan,the US and europe.
The effect of protectionism on the third world is devastating and should be dealt with.
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