JOHN KERIN. ‘Free Trade’ (sic), Some Fundamentals (Part 1).

Australian trade policy has dramatically changed over the last fifty years. What we now face is nothing like the situation we have been used to. The general public has little idea of the complexity and importance of trade negotiations, the reality of what we now face and the current implications of the US/China imbroglio and Brexit. None the less, some trade policy fundamentals for Australia persist, having been the main historical features of our endeavours. Agricultural trade policy has been central in the past, where we have still not advanced much, which is still relevant, but is no longer the main game.

There is no such thing as absolute ‘free trade’; trade arrangements are always negotiated and there are many hazards to overcome.

We have witnessed post WW2 government trade policy from the days of ‘protection all round’ of McEwen’s time in the 1950-60s, when both major parties still adhered to agricultural subsidisation and secondary industry protection. We had perfected every agricultural subsidisation measure known to humankind. By the mid 1970s we had reached the stage where industry protection measures were counter-productive in the primary and secondary industry sectors and led to double standards often being ignored as we tried to gain better access to overseas markets.

Further, all international commodity agreements collapsed: e.g. the International Wheat Agreement in the late 1960s and the International Sugar Agreement in 1984. By the 1960-70s agricultural commodity markets were in glut due to the subsidisation of agriculture by the majors; the now EU, the US and Japan, and us. Our negotiations to gain market access intensified once our privileged access to the UK market disappeared on 1 January 1973.

Our trade negotiations were principally concerned with commodity policy and gaining market access for those goods in which we had a comparative advantage, particularly with the EU, and Japan, once we diverted our attention to Asian markets. The public is led to believe any trade deal is a ‘good thing’. This means that Oppositions, from whichever political party, are generally loathe to criticise agreements, the Nationals being an exception.

Some analysts say trade is war waged by other means. In this situation, trade now also has profound security implications. The reality of cyber attacks and hacking to gain defence and security secrets, industrial advantage (industrial espionage), access to intellectual property and artificial intelligence, to manipulate stock and exchange markets and to interfere in electoral processes, gives strength to this abuse of language.

In the 1980-90s I had some close knowledge of trade negotiations. As a government we decided we would stop abusing the now EU to try to gain more market access but emphasise the stupidity of subsidisation of world commodity surpluses by the majors (still costing over US$1b a day) and work to gain multilateral trade agreements under the umbrella of the General Agreement on Tariffs and Trade (GATT), now the World Trading Organisation (WTO). We also dealt bilaterally where we could best marshall our arguments. It is possible to pursue bilateral, regional and multilateral trade deals at the same time.

The Hawke Government was successful in gaining an agreement from the EU to not pillage ‘our’ Asian markets with highly subsidised, dumped meat.

As a primary industry minister abroad, I was always another trade minister. When minerals and energy were added to the Primary Industry portfolio in 1987 I became involved in price negotiations with the Japanese on iron ore, coal and woodchips as well as a raft of agricultural commodities. I well remember giving a speech (lecture) on price formation to Nippon Steel-the principals were not amused. Thankfully, world mineral and energy prices are now (supposedly) settled by market forces.

What remains valid is that our national interests and the politics and power of the countries we negotiate with determine the success or otherwise of our efforts. As a reality the major economies and blocs such as the US, EU, Japan, China etc have more power in any negotiation than most other nations, even in the rest of the industrially developed world, let alone the developing world.

I have yet to see an agreement signed with the US that didn’t advantage the US.

While we are a rich nation and in the top 15 in per capita terms, e.g. income, wealth, GDP etc, we only have a tiny and shrinking percentage of the world’s population. We can’t be an “Asian Food Bowl” nor are we able to ‘Feed the World’.

One of the realities we face is that our primary industries no longer ‘enjoy’ protection or subsidisation, meaning we have little to trade away in any negotiation. We can only build our case on the general, if not theoretical benefits, of freer trade, particularly in agricultural commodities where we still have some comparative advantage or may differentiate our products.

Trade negotiations were once mainly about commodities, resources and the range of basic or traditionally transformed, manufactures. Negotiations are now more about intellectual property, investment, services, education, pharmaceuticals, bio-informatics, control of aspects of the ‘digital revolution’ and some advanced manufactures.

The second leg of the traditional trade debate is about investmentwhich raises many other issues such as sovereignty and ‘what’s in it for us?’, hence policy attention in Australia by the Foreign Investment Review Board (FIRB) and the criteria set for it by government. Investment and its role in globalisation are crucial to understanding the realities of the transition the world is currently going through.

A more recent phenomenon is that investment and activities by many foreign firms in Australia also involves the massive avoidance of company tax payment and security risk.

Australia’s quest for freer trade in agricultural commodities still continues. Agriculture is still regarded as ‘sensitive’ in all trade negotiations, particularly by countries who want to support their own agriculture with subsidy and protection measures and who have powerful agricultural lobbies.

 

John Kerin was Minister for Primary Industries and Energy 1987-91 and Minister for Trade and Overseas Development 1992-93.

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3 Responses to JOHN KERIN. ‘Free Trade’ (sic), Some Fundamentals (Part 1).

  1. Agree with you there Rosemary. John was a class act in the Parliament and it is good to hear from him on these pages. Mark Dean and Ray Broomhill in the Winter edition of the Journal of Australian Political Economy have contributed an article called “From post-Fordism to post-Holdenism.” They link the end of vehicle manufacturing to the signing of free trade agreements with Japan, South Korea and China.

    We need farmers as part of our society but so do all the other countries. I have sympathy for the farm lobbies in Japan and France, among those who are most active.

  2. Charles Lowe says:

    So – if every trade agreement has advantaged the U. S. – and particularly given this narcissistic President’s inclination to eschew multilateral agereements in favour of (bullyable) bilateral arrangements – we (at a minimum) must ensure that we are not disadvantaged by such U. S. strategy.

    Were it me – I would call it – amplified to the World – for what it is.

  3. Rosemary O'Grady says:

    Capitalism tends towards Monopoly.
    Free trade is not free and scarcely, therefore, trade. It can be exchange – if you stretch your conception of ‘exchange’. ‘Investment’ is exploitation by way of tax inequalities.
    Commerce is war and only sometimes ‘by other means’; it is survival of the fittest.
    ‘Black’ Jack McEwen and John Kerin were each very good MPs and Ministers of the Crown. This is a Romantic notion, in the literal sense of the meaning of the word.
    I wish they were in Government today.

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