Devil in the detail for trade agreement
The Free Trade Agreement is a bad deal that can still be stopped, write PATRICIA RANALD and LOUISE SOUTHALAN.
Although Federal Parliament cannot vote on the whole US Free Trade Agreement (USFTA), it will vote on some legislation required for implementation, which can be blocked in the Senate.
The ALP, Democrats and Greens have said they will vote against the USFTA legislation in the Senate if it is not in the public interest. Australians must voice their concerns so they will keep this commitment.
Despite assurance, the agreement weakens Australian price controls on medicines and limits the regulation of Australian content in new forms of media. It adopts US copyright laws, which will cost consumers more. It sets up joint US-Australian committees to review policies on medicines, quarantine and food labeling and enables many policies to be challenged by the US government. It treats social regulation of essential services like tariffs, 'bound' or frozen at current levels and subject to challenge if increased. In short, it weakens a government's right to regulate and locks in moves towards US-style policies without democratic debate or decision. The economic benefits for Australia are unclear.
The dispute process enables a government to claim that a law or policy of the other country is in breach of the USFTA, or is preventing it from getting the benefits expected from the agreement. The dispute process requires initial consultations, referral to a Joint Committee of US and Australian government officials and finally, if not resolved, to a dispute panel of three agreed trade law experts. Hearings may or may not be public, and the panel may or may not invite non government representatives to make written submissions. The panel's initial decision can be revised after comments from the governments, before final decision. The panel can declare that a law should be changed or compensation be paid. The decision may or may not be made public and cannot be appealed.
This process uses trade law to challenge social regulation judged to be inconsistent with the agreement, like the pricing of medicines or the regulation of essential services. It is a clear restriction on the democratic right of governments to regulate in the public interest.
The USFTA allows for a review of decisions of the Pharmaceutical Benefits Scheme, which will lead to higher costs. A joint US-Australia Medicines Working Group will be based on commercial principles, and changes to patent laws could delay access to cheaper medicines.
An extension of copyright means higher costs for libraries and education bodies.
The USFTA is a 'negative list' agreement for two key areas, investment and services. All of Australia's laws and policies on investment and services at all levels of government are affected by the agreement unless they are listed as reservations.
Investment
US investment in Australia must be given 'national treatment', meaning it must be treated in the same way as local investment. US investors cannot be required to use local products, transfer technology or contribute to exports.
Existing limits on foreign investment are retained for newspapers and broadcasting, Telstra, Qantas, Commonwealth Serum Laboratories, urban leased airports and coastal shipping. However, these limits are subject to 'standstill' and cannot be increased. The Foreign Investment Review Board (FIRB) retains the power to review investments of more than $50 million in these areas, and in military equipment, security systems, the uranium and nuclear industries.
Regulation of foreign investment can only be increased for urban residential land, maritime transport, airports, media co-production, tobacco, alcohol and firearms.
However, the threshold for FIRB review of all other investment in existing businesses has been lifted from $50 million to $800 million. US investment in new businesses in areas not listed as reservations will not be reviewed at all. The US government estimates that if these rules had applied over the past three years, nearly 90 per cent of US investment in Australia would not have been reviewed.
Investor-state complaints
The Government has claimed that there is no process which allows corporations to challenge laws or sue governments in the USFTA. The US wanted this process based on the North American Free Trade Agreement model which has enabled corporations to challenge environment laws and sue governments for millions of dollars. However, the USFTA does provide a foot in the door for such a process. If there is a 'change in circumstances', an investor can request consultations with the other government to make a complaint. The other government is then obliged to "promptly enter consultations with a view towards allowing such a claim and establishing such procedures".
Tariffs and government purchasing rules
Australia's remaining tariffs are on textiles, clothing and footwear (15 to 25 per cent) and on motor vehicles and parts (5 to 15 per cent). Both of these industries employ thousands of workers of non-English speaking background in regional areas of high unemployment. Tariffs on motor vehicle parts will fall from 15 per cent to zero when the USFTA comes into force, which will mean immediate job losses. Tariffs on assembled motor vehicles will be phased out by 2010 and on clothing by 2015. Some state governments also have purchasing schemes which require foreign contractors to give preference to local products or to form links with local firms to support local employment. These will not be permitted under the USFTA. State governments are still considering whether they will agree to the government procurement chapter of the agreement. Regional employment studies are needed to assess these impacts.
Less rights to regulate essential services
"Services" include health, education, water, postal, energy and environmental services. The USFTA applies to all levels of government -- federal, state and local.
The USFTA text states that the services chapter does not apply to public services. These are defined as services not supplied "on a commercial basis, nor in competition with one or more service suppliers". This is the same flawed definition that has been used in other agreements, such as the World Trade Organisation Services Agreement, commonly known as GATS. In Australia many public services are supplied on a commercial basis or in competition with other service suppliers, including health, education, water, energy and post. Such services could be covered by the agreement, unless they are listed as reservations.
USFTA rules do not apply to subsidies or grants. This protects public funding of public services from being challenged. Australia must treat US companies as if they were Australian companies.
Australia must also give full 'market access', which means no requirements to have joint ventures with local firms, no limits on the number of service providers, and no requirements on staffing numbers for particular services. Even blood services are treated as traded goods.
Australia's qualifications, licensing and technical standards for services cannot be "more burdensome than necessary to ensure the quality of the service". Regulations could be challenged by the US government on these grounds.
These obligations apply to all services unless they have been specifically reserved.
Services reservations
Existing laws and policies of state and local governments are listed as reservations but are 'bound' at current levels and cannot be made more regulatory.
Social welfare, public education, public training, health and child care are reserved, but only "to the extent that they are established or maintained for a public purpose", which is not defined. If the US challenged a childcare regulation, for example, it is unclear what Australia would have to do to prove that the childcare services were "established or maintained for a public purpose".
Note that water, energy and public broadcasting services are not listed as reservations, and are therefore included in the agreement.
Quarantine and food labeling
New processes have been established under the USFTA which will give the US government direct input into Australian laws and policies on quarantine and technical standards, including labeling of genetically engineered food.
Content rules in new media
The Government claims that USFTA protects Australian content and culture. In reality, there are strict limits on future governments' ability to ensure that Australian voices continue to be heard.
Australia's existing local content quotas are "bound", and if they are reduced in the future they cannot later be restored to existing levels. Also, future Australian governments are limited in the laws they can introduce for new media.
For multi channelled free-to-air commercial television, Australian content is capped at 55 per cent on no more than two channels, or 20 per cent of the total number of channels made available by a broadcaster, up to only three channels. For free-to-air commercial radio broadcasting, Australian content is capped at 25 per cent. The expenditure requirement on Australian content for subscription television is limited to 10 per cent (which can rise to 20 per cent for drama channels, but, only on conditions which allow the US to challenge).
There are more restrictions on interactive audio and/or video services, since the Australian government must first prove that Australian content is not readily available. Any rules must be applied transparently and be no more trade restrictive than necessary, and can be challenged by the US. These restrictions severely limit the capacity of future governments to respond to new circumstances and new forms of media.
Public broadcasting
Because public broadcasting is not listed in either of the Annexes, it is not excluded from the agreement. The funding of public broadcasting is protected by the general exclusion of subsidies and grants. However, the regulation of public broadcasting could be affected by the agreement because the definition of public services excludes services provided on a commercial basis or in competition with other service providers. SBS advertising or ABC product marketing may not be excluded by this definition. This ambiguity may mean that the US could challenge some regulation of public broadcasting, claiming it is inconsistent with the USFTA.
Researched and written by Dr Patricia Ranald and Louise Southalan of the Public Interest Advocacy Centre.
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June 2004 contents
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