BY ALISON DELLIT
Playing "Deputy Dawg" to US President George Bush has its rewards, and the big bone that Prime Minister John Howard anticipates being tossed as a reward for sending Australian troops to Bush's war in Iraq is a free trade agreement (FTA) with the United States. Like all of Howard's enthusiasms, however, this is a gift for big business — not for the rest of us.
Howard has wanted an FTA with the US for years, believing it will strengthen Australia's export industries. Australian agribusinesses and manufacturers want to be able to sell more to the US market.
Both the US and Australia put tariffs (customs duties) on imported items in order to make them more expensive, and therefore less attractive alongside locally made products. The US government also enforces quotas to restrict the import of Australian sugar, beef, cotton, peanuts and dairy products.
In theory, the FTA will ease these restrictions, allowing Australian-based corporations to export more of their products to the US. How much Australian business gains from the agreement, however, will only become clear when the US specifies how fast such barriers will be removed.
Washington's willingness to negotiate a FTA with Canberra is widely seen as a coup for the Coalition parties. While Australian exports are a relatively negligible concern for most US corporations, US agribusiness is trenchantly opposed to competition from Australian sugar and beef exports to the US.
Washington is fast tracking the negotiations, declaring that they will be completed by the end of this year. The first round of negotiations was held in Hawaii on July 21-25.
A "Friends of Australia" caucus was formed in the US Congress on July 17 to lobby support for the agreement. Forty-one members of Congress have joined. At a press conference at the launch of the caucus, congresswoman Jennifer Dunn explained in oblique terms the reason for the push: "I think we noticed, in a very important way, the people who were there to help after 9/11. I think it will count for something."
Washington wants it to be clear that the Australian ruling elite is being rewarded for supporting the US war in Iraq. Australia is held up by Washington as an example of what other countries can gain from cosying up to the US rulers' neo-imperial ambitions.
But the FTA will not be a gift — in order for Howard to get his corporate mates easier US sales, he will have to give US corporations some goodies. The US market is much more protected than the Australian market, meaning Canberra has less tariff reduction to offer in exchange for US tariff reductions.
What Washington wants instead is changes to legislation that reduce the profits that US corporations can make in Australia. So to get concessions for Australian big business, Howard intends to destroy services that benefit Australian workers.
Although the details of the negotiations are secret, Washington's objectives were set out in a November 13 letter from US trade representative Bob Zoellick to Congress.
Threat to PBS
The biggest attack the US is planning is upon Australia's Pharmaceutical Benefits Scheme. The PBS is a cornerstone of Australia's public health system. Under the scheme, all Medicare card holders are entitled to subsidised prescription medicines.
The government pays the difference between what the drug companies charge and what consumers are charged. The scheme works because the government maintains a monopoly on prescription drug purchases, and employs a cost-effectiveness measure to determine what is a fair price.
Under reference pricing, drugs with similar benefits are clumped together, and the government will reimburse the patient for the cost of the cheapest drug. Patients who want a more expensive alternative must pay the difference themselves.
In practice, this means most Australians use generic drugs instead of newer, patented versions. This is infuriating the US pharmaceutical companies.
"The PBS, which has operated for over 50 years, has created a climate in which free medicine is seen as the norm... Consumers are unwilling to pay more than a A$2 premium for any medicine (in addition to any co-payment)", complained the peak US drug body Pharmaceutical Research and Manufacturers of America (PhARMA) in a 1999 National Trade Estimate submission. "This is effectively denying market access to US companies", it added.
PhRMA has already told Washington that it will only support the FTA if the PBS is weakened.
The results of such weakening could be devastating for working people in Australia. A study commissioned by the Australia Institute, and published in the August 3 Sydney Sunday Telegraph, compared the wholesale prices of drugs produced in Australia with those in the US to estimate probable cost rises from the abolition of reference pricing. It found, for example, that arthritis drugs would treble in cost and ventolin asthma drug would rise from $11.47 to $42.90.
A spokesperson for trade minister Mark Vaile told the Telegraph that the "government was committed to the scheme". The question, however, is — in what form?
The Howard government is no fan of the PBS, and has been discussing ways to dismantle it for the last two years. While it is probably too politically dangerous for the government to scrap the PBS completely or to treble prices right now, it is extremely likely that the government will use the threat to the scheme to justify upping co-payments or reducing the impact of reference pricing.
It is highly unlikely that Australian drug prices will remain the same after an FTA.
What US wants
But the PBS is not all that Washington wants. The list includes:
- Cuts to Australian quarantine regulations. Australia, a sea-bound continent with a fragile ecology, has unusually strict quarantine restrictions, including a 30-day ageing requirement for US beef. Pork, citrus and animal feed are also heavily restricted. In the letter, Zoellick says the US wants to "eliminate unjustified" regulations.
Chief Australian negotiator Stephen Deady has already signalled that the quarantine regulations are up for discussion.
- Elimination of the requirement to identify genetically modified food. US food producers are keen to be able to increase their GM components in food, but most Australians are deeply suspicious of GM food and will avoid it if possible. Canberra has already tried to reduce labelling requirements; the FTA may give it the excuse to do so with minimal public backlash.
- Removal of government monopolies on water, gas and electricity supply, and postal services. Further privatisation of these essentials will result in less reliability and less subsidised prices, making life much harder for the poor.
- Getting more US entertainment industry products into Australia. There are three main ways that the government ensures that entertainment is created in Australia — local content rules, which ensure that television and radio, must have a certain proportion of Australian-made content; subsidies to the arts (particularly the film industry); and public broadcasting.
Washington could demand the abolition of local content rules and government subsidies, and even more cuts to public media. This would almost certainly result in a dramatic reduction in Australian-produced entertainment, irrespective of ratings.
For example, because US television recoups its production costs in the much bigger US market, programs like Law and Order are sold to the Australian TV networks at around $30,000 an episode. In contrast, Australian drama series like Stingers will cost $300,000 an episode to make. Given the choice, the Australian networks would find it more profitable to buy only the cheaper US dramas.
It is unlikely, however, that Washington will demand the dismantling of current regulations. Of much greater concern to the US entertainment companies is to avoid new regulations to govern expanding forms of media (in particular pay TV, which at present has no local content rules) and programs that could be distributed via the internet, which are widely anticipated to be extremely popular in the next few decades.
- Telecommunications deregulation. Washington wants the US telecommunications giants to be able to have cheaper access to Telstra's copper network. As the still mostly government-owned Telstra owns most of the telecommunications infrastructure in Australia, other telecos pay to get access to it in order to deliver phone and internet services. Most of these companies want cheaper access, despite the increasingly decayed state of the network and the fact that Telstra is responsible for maintaining it. Cheaper prices amount to a public subsidy of Telstra's fully privately owned competitors.
- Clampdown on digital "piracy". This would make censorship of internet sites much more common. Washington wants regulations introduced that mean an internet service provider can be fined for unknowingly acting as conduits for copyright material.
The FTA is being enthusiastically welcomed by the 91×ÔÅÄÂÛ̳ of Australian business with the most to gain, particularly sugar and peanut farmers. But many other 91×ÔÅÄÂÛ̳ are waiting to see what the deal delivers before passing judgement. The National Farmers Federation, for example, has a position of supporting an FTA "only if it has agriculture at its centre". Toyota has threatened to close its Australian factories if the deal contains too many concessions to US automobile manufacturers. Even the film and television industry has claimed it would support an FTA which exempts its industry.
Behind the ambivalence of some Australian capitalists is also an intra-corporate debate about whether Canberra should be pursuing closer trade with Asia rather than the US. Prominent neoconservative economist Professor Ross Garnaut has been campaigning against the Australia-US FTA on the grounds that it will lead to a reduction in Australian trade with Asia, because US imports will be privileged in relation to Asian imports.
Garnaut cites the results of the second study that the government-funded Rural Industries Research and Development Corporation commissioned in December from ACIL Consulting on the FTA. The study estimated that Australian GDP would fall as a result of an FTA, because of loss of non-US trade. This contradicts the government's study, prepared by CIE, predicting a rise in GDP.
CIE's predictions were based on the assumption that the FTA would reduce costs by introducing more US competition into banking and accountancy — gains most likely made by pushing down wages and sacking staff.
Whichever Australian capitalists win or lose out of this debate, however, working people will be worse off. We can look forward to more expensive health care, less safe food, less arts funding, worse basic services and more censorship.
From 91×ÔÅÄÂÛ̳ Weekly, August 13, 2003.
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