Is Free Trade Fair?

Fools rush in where angels fear to tread
And so we come to you, our (goods), our heart above our head
Though we see the danger there
If there’s a chance for us, then we don’t care. (Mercer and Bloom)

It is welcome news to see some discussion from Westpac’s Senior Banker Rob Whitfield about the FTA with China. (No need to give away farm in FTA – the Australian 15/9/14). Years spent sitting on the side lines waiting to play might not seem so bad if we look at what has happened when we played the FTA game in recent years. In our rush to sign FTAs we have not considered whether they are fair to Australian interests. Trade is important, but should be win/win.

Over the past four decades our trading partner options have changed from a UK European focus. We were effectively locked out of the old trading relationships with the formation of the EU. The USA is a major trading partner with investment in many of our major companies operating here but did not necessarily give reciprocal rights to our farmers when we signed a FTA with them in 2005.

In recent years our exporters have had to deal with a high AUD$. Our mineral commodity exports hid the decline in exports in our food and manufacturing sectors to the national bottom line. Manufacturing has struggled to stay viable or move off shore, resulting in loss of jobs and critical mass in the supply chain in key industries. When companies close, the flow on effect is felt by those businesses here that supply goods and services. We lose critical mass.

Australia has had a wake-up call to better manage our income and debt, but we have not counted the costs of past Agreements. We can always live in hope.

However, hope will not pay our bills if we do not own the exports or set an equitable price for suppliers. And when our dollar goes down we will be dependent on rising import costs that impact inflation. Viable, locally owned and sourced businesses would be a buffer against our dependence on imports.

The idea that everyone gains from Free Trade Agreements is an oft cited motherhood statement, but not necessarily true if our history is any indication. For example, while not the primary cause for withdrawal by the motor vehicle industry here, its decline was exacerbated by FTA in 2005 with Thailand which allowed access for cars from South Korea and Japan via the back door into our market. In that case, we did not get a bilateral agreement so our exports to Thailand had the burden of high tariffs. Score – they win we lose. Instead we blame the workers’ wages when factories close.

History is not kind to our negotiators. This situation is not helped by a naive and commercially, inexperienced public service, who are our negotiators and political advisers.

   To gain from FTAs we have to obtain access to sales that our businesses and growers would not get locally or from other customers, and in return give access for imports of similar dollar values, but not in direct competition with our own.

     Since some of our domestic companies will lose as a result of import competition, our negotiators need to continually model the possible gains and losses. The least they could do would be to consult locally owned businesses not just the big end of town.

The rest of the world wants to “Feed Asia” and they are doing their own deals. Their own producers and processors will get priority. Agricultural products unfortunately are politically sensitive in most countries who “protect their farmers”, but not here.

The lure to allow these Agreements with Asia is concealing the real picture here. Current negotiation’s main target is agricultural products. However as we have highlighted over many years the majority of our food export commodities are controlled beyond the farm gate by foreign interests.

Fresh food may present other opportunities, but if we are importing fresh produce to satisfy FTAs then where are the efficiencies in transport costs and quality controls for our producers? Where is the assurance that our consumers and processors have access to quality, safe and affordable food here? Will AQIS and Biosecurity Australia be resourced to ensure diseases do not enter, and will poor growing conditions put our people at risk? Will our labelling laws require and enforce Country of Origin so consumers are free to choose?

    Earlier this year the Government is promising 1745 jobs will be created in the next year here, and the boost will continue for at least 15 years, with 950 new jobs expected in 2030. (Source DFAT). However, there is no evidence in government papers where these jobs will be created and what levels of exports are from Australian owned operators. Nor have we identified how many jobs will be lost.

A quick review of DFAT shows import duty into Australia shows 0% to 10% on many of the goods we are proposing to open our doors to off shore. Whereas in the case of South Korea our exports in the same products have export tariffs between 10% and over 500% plus and will be gradually removed over 15 years. Does this sound like a fair deal? Ask our rice growers who have been excluded.

Some owned growers and manufacturers will gain opportunities in these Agreements. But those products excluded are not happy.  Without due consideration of the real benefits to Australia we will continue to “paint ourselves into a corner” exposing our economy. It has been all too easy to call “takeover of our wealth creating assets” investment, locking Australia out of the decisions, real profits and putting our jobs, skills and reinvestment at risk.

And when we consider that many of our agriculture exports here are controlled beyond the farm gate by foreign interests, and our farmers’ income is declining as their on farm debt rises, then the real value to Australia is reduced further. It does not augur well for deals with China.  Who is looking after our interests?

The Australian Companies Institute Limited (AUSBUY) Lynne Wilkinson CEO