Australia-United States Free Trade Agreement
Encyclopedia
The Australia – United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States modelled on the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...

 (NAFTA). The free trade agreement (FTA) was signed on 18 May 2004, ratified by the U.S. House of Representatives on 14 July 2004 by a vote of 314–109 and by the U.S. Senate on 15 July 2004 by a vote of 80–16. President George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....

 signed the United States-Australia Free Trade Agreement Implementation Act into law on 3 August 2004. The FTA came into force on 1 January 2005. In Australia, the US Free Trade Agreement Implementation Act was passed in August 2004, and came into effect on 1 January 2005.

History of the FTA

The U.S. first proposed a free trade agreement with Australia as far back as 1945. In more recent times, the prospect of an Australia-U.S. FTA was raised in the 1980s by the Hawke
Bob Hawke
Robert James Lee "Bob" Hawke AC GCL was the 23rd Prime Minister of Australia from March 1983 to December 1991 and therefore longest serving Australian Labor Party Prime Minister....

 Government, and in 1992 U.S. president George H. W. Bush
George H. W. Bush
George Herbert Walker Bush is an American politician who served as the 41st President of the United States . He had previously served as the 43rd Vice President of the United States , a congressman, an ambassador, and Director of Central Intelligence.Bush was born in Milton, Massachusetts, to...

 offered to begin FTA negotiations with Australia, but was turned down by Australian Labor Party
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...

 Prime Minister Paul Keating
Paul Keating
Paul John Keating was the 24th Prime Minister of Australia, serving from 1991 to 1996. Keating was elected as the federal Labor member for Blaxland in 1969 and came to prominence as the reformist treasurer of the Hawke Labor government, which came to power at the 1983 election...

.

It was not until early 2001, after the election of George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....

 in the U.S. and with John Howard
John Howard
John Winston Howard AC, SSI, was the 25th Prime Minister of Australia, from 11 March 1996 to 3 December 2007. He was the second-longest serving Australian Prime Minister after Sir Robert Menzies....

 in power in Australia, that an Australia-U.S. FTA finally began to take shape. In April 2001, President Bush signalled his interest in pursuing an FTA with Australia provided “everything is on the table”. Following this, in 2004, the Department of Foreign Affairs and Trade
Department of Foreign Affairs and Trade (Australia)
The Department of Foreign Affairs and Trade is a department of the government of Australia charged with advancing the interests of Australia and its citizens internationally...

 commissioned a private consultancy – the Centre for International Economics (CIE) – to model the economic impacts of such an agreement. Negotiations for the FTA began in April 2003 and after five rounds of negotiations held in Canberra
Canberra
Canberra is the capital city of Australia. With a population of over 345,000, it is Australia's largest inland city and the eighth-largest city overall. The city is located at the northern end of the Australian Capital Territory , south-west of Sydney, and north-east of Melbourne...

, Hawaii and Washington, D.C., the text was finally agreed to in February 2004, and signed off on by Australian Trade Minister Mark Vaile
Mark Vaile
Mark Anthony James Vaile , Australian politician, is a former Deputy Prime Minister of Australia and former leader of the National Party of Australia.-Early life:...

 and U.S. Trade Representative Robert Zoellick
Robert Zoellick
Robert Bruce Zoellick is the eleventh president of the World Bank, a position he has held since July 1, 2007. He was previously a managing director of Goldman Sachs, United States Deputy Secretary of State and U.S. Trade Representative, from February 7, 2001 until February 22, 2005.President...

 in Washington in May 2004.

The FTA was ratified by the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 with the passage of the United States-Australia Free Trade Agreement Implementation Act on 3 August 2004. In Australia, the agreement's implementing legislation was reluctantly passed, with amendments, by the Senate
Australian Senate
The Senate is the upper house of the bicameral Parliament of Australia, the lower house being the House of Representatives. Senators are popularly elected under a system of proportional representation. Senators are elected for a term that is usually six years; after a double dissolution, however,...

 on 13 August 2004. After some delay, the U.S. Administration accepted the amended Australian legislation as being consistent with implementation of the agreement. In Australia the US Free Trade Agreement Impementtion Act 2004 was signed into law on 16 August 2004. The Agreement came into force in both countries on 1 January 2005.

Provisions of the FTA

The text of the Free Trade Agreement is divided into twenty-three sections, listed and summarized as follows:

Establishment of the free trade area and definitions

This chapter lays the framework for the FTA. It states that the provisions are consistent with the relevant sections of the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...

 (GATT) 1994 and the General Agreement on Trade in Services
General Agreement on Trade in Services
The General Agreement on Trade in Services is a treaty of the World Trade Organization that entered into force in January 1995 as a result of the Uruguay Round negotiations...

 (GATS). Both GATT and GATS are documents created by World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 (WTO) agreements and they lay the boundaries for subsequent bilateral agreements such as the Australia-U.S. FTA.

The chapter also sets definitions to be used throughout the agreement in order to assure uniformity.

National treatment and market access for goods

Chapter three of the FTA lays out conditions for what types of goods are subject to non-discriminatory treatment. Certain types of goods are fully applicable to the agreement immediately and some are phased in over a period of years or temporarily applicable.

The chapter also reminds the two countries that they must abide by the WTO rules applying what is called national treatment. "National treatment" means that each country will provide the same treatment to imported goods from the other country as if they were domestically produced goods.

Finally, the chapter established a Committee on Trade in Goods with the purpose of providing arbitration for each country to "raise issues of concern in relation to tariffs, non-tariff measures, rules of origin and customs administration."

Agriculture

The agriculture section of the agreement outlines the system for eliminating most tariffs for agriculture products being traded between the two countries. It also agrees to eliminate export subsidies when the good in question is being exported to one of the two party countries.

Special tariff rate quotas are part of the agreement. These quotas allow Australian producers to export increasing amounts of these products free of duty to the United States during the tariff elimination period. The following agricultural products are designated:
  • Beef
  • Dairy
  • Tobacco
  • Cotton
  • Peanuts
  • Avocados


The quota systems vary for the different products and are outlined, in detail, in this section.

The section also sets up a Committee on Agriculture with the purpose of providing "a formal opportunity for Australia and the United States to discuss a wide range of agricultural issues relevant to the Agreement, including trade promotion activities; barriers to trade; and consultation on the range of export competition issues."

Finally, the two countries have committed to working with the WTO on a multilateral scale to eliminate export subsidies to other WTO member countries.

Textiles and apparel

Chapter four deals with the trade of textiles and apparel between the two party countries. The bulk of this section outlines the rules of origin provisions with regard to textile goods and safeguarding the domestic markets of the two countries. The agreement provides a mechanism to institute emergency action should the sudden increase in imports due to the reduction of tariffs lead to detrimental effects on the domestic industry of the importing country.

In addition, this section details the cooperation of Customs authorities for ensuring that the rules of the agreement are carried out and outlines possible actions which can be taken if the exporting country appears to be acting in bad faith.

Rules of origin

The rules of origin section outlines the rules for determining the origin of the goods being traded in order to establish eligibility and also the method to determine the value of the goods traded.

For the purposes of the FTA, this section defines an originating good as those that:
  • are wholly obtained or produced entirely in the country, such as minerals extracted there, vegetable goods harvested there, and live animals born and raised there;
  • are produced in the country wholly from originating materials; or
  • are produced in the country partly from non-originating materials.


The section also outlines supporting documentation and verifications that the goods being traded are, indeed, originating in the exporting country, as defined by the agreement. The responsibility for verification of the applicable conditions is given to the importer. Denial of preferential treatment and penalties may apply if proper verification is not provided by the importer upon request made by the importing country.

Customs administration

This section outlines the requirements of the customs authorities to:
  1. promptly publish law, regulations, guidelines and administrative rulings,
  2. administer customs laws in a uniform, impartial and reasonable manner,
  3. provide advance rulings on tariff classifications and rules of origin within a given period of time,
  4. provide some sort of administrative body to review customs determinations,
  5. cooperate with each other on all reasonable matters, especially those involving suspicion of illegal activity,
  6. protect the confidentiality of information provided in cooperation with other customs authorities,
  7. impose their respective penalties for violations of customs laws and regulations,
  8. promptly release goods consistent with ensuring compliance with customs laws,
  9. apply risk management systems to concentrate on high-risk areas and facilitate low-risk areas, and,
  10. maintain expedited procedures with respect to express shipments.

Sanitary and phytosanitary measures

In conjunction with the existing WTO Sanitary and Phytosanitary
Agreement on the Application of Sanitary and Phytosanitary Measures
The Agreement on the Application of Sanitary and Phytosanitary Measures - also known as the SPS Agreement is an international treaty of the World Trade Organization...

 (SPS) Agreement, this section sets up two committees to ensure that the SPS agreement provisions are followed.
  • Committee on Sanitary and Phytosanitary Matters- provided with a mandate for "increasing the mutual understanding of the SPS measures and regulatory processes of each Party as well as continuing the cooperative efforts of the Parties internationally."
  • Standing Working Group on Animal and Plant Health- to help with the resolution of specific animal and plant health matters with the goal of resolving the problems with the least adverse effect on trade as possible.

Technical barriers to trade

This section acknowledges the rights and obligations of Australia and the United States to each other with respect to combating barriers to trade. These rights and obligations were laid out by the WTO Agreement on Technical Barriers to Trade
Agreement on Technical Barriers to Trade
The Agreement on Technical Barriers to Trade--- commonly referred to as the TBT Agreement --- is an international treaty administered by the World Trade Organization...

, which deals with standards, regulations, and conformity assessments, among other things.

Most of the section is language from both countries agreeing to share information on several levels of government regulation. They agree to attempt to accept each others regulations and publish such rules and regulations in a timely manner in order to ensure transparency.

Safeguards

The goal of the safeguards section of the agreement is to lay out an agreed upon structure to guard against severe adverse effects to each countries domestic industries during the transition period after lifting tariffs. The countries also agree to consider the exclusion from the application of global WTO safeguards imports from the other country where those imports are not a substantial cause of the injury to the domestic industry.

Cross-border trade in services

Section 10 of the FTA gives clear meaning to the phrase "cross-border trade in services" and provides suppliers with an open environment in which to conduct their business. It requires that each country give the other's service suppliers national treatment or most-favored-nation treatment and prohibits many restrictions to market access and transfers.

Investment

The investment chapter of the FTA provides clear definitions as to what investments are covered and gives cross-border investors assurances in order to make it as safe as if they were investing in their own country. Among other things, the section prohibits each country from imposing or enforcing any of the following requirements in relation to an investment in its territory:
  • to export a given level or percentage of goods or services;
  • to achieve a given level or percentage of domestic content;
  • to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;
  • to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with an investment;
  • to restrict sales of goods or services in its territory that an investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
  • to transfer a particular technology, a production process, or other proprietary knowledge to a person in its territory; or
  • to supply exclusively from its territory the goods that an investment produces or the services it supplies to a specific regional market or to the world market.

Telecommunications

This section details agreed upon terms by both countries to assure fair trade between the telecommunications industries in each country. The rules specifically exclude measures relating to broadcast or cable distribution of radio or television programming.

Among other provisions, the agreement lays out rules for settling disputes among the members of the telecommunications industries in one country with the members in the other. It entitles enterprises to:
  • seek timely review by a regulator or court to resolve disputes;
  • seek review of disputes regarding appropriate terms, conditions, and rates for interconnection; and
  • to obtain judicial review of a determination by a regulatory body.

Financial services

This chapter is concerned with ensuring a non-discriminatory environment with regard to financial services. The section defines financial services as "all insurance and insurance-related services, and all banking and other financial services, as well as services incidental or auxiliary to a service of a financial nature."

The section further lays out the scope of its application as it applies to measures by either country that affect:
  • financial institutions located in the territory of that country that are controlled by persons of the other country;
  • investors of the other country who have invested in financial institutions located in that country;
  • the investments of investors of the other country in financial institutions located in that country; and
  • cross-border trade in financial services by service suppliers of the other country.

Competition-related matters

The parties agreed to minimise obstacles to the operation of each others' competition and consumer protection policies. Australia agreed that its governments at all levels would not provide any competitive advantage to any government businesses simply because they are government-owned. This provision is consistent with existing provisions of Australia's National Competition Policy
National Competition Policy
The term National Competition Policy refers to a set of policies introduced in Australia in the 1990s with the aim of promoting microeconomic reform.-Origins:...


Government procurement

Subject to some exceptions, and the non-participation of some US states, the agreement required, in government and government agency procurement, that each party should accord to the other treatment no less favourable than the most favourable treatment accorded to domestic goods, services and suppliers.

Electronic commerce

The parties agreed to co-operate on mechanisms to facilitate electronic commerce, not to impose customs duties on digital products and for each to apply non-discriminatory treatment to the digital products of the other.

Intellectual property rights

Australia agreed to extend its copyright expiration
Copyright expiration in Australia
Copyright expiration in Australia is generally either 50 or 70 years after a work was created. The law has evolved over the years, and photographs are treated differently to other published work. Generally, anonymous works pre 1955 are no longer copyright...

 period from 50 to 70 years after the author’s death where copyright is calculated on the basis of the life of a natural person, and 70 years after the first performance or publication in other cases.

The agreement expands the rights of patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 holders.

The agreement requires legal enforcement of digital rights management
Digital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...

 systems, however an Australian legislative committee has issued a report stating that this portion of the treaty has a "significant flaw": while the agreement provides permitted exceptions allowing the use of copyright access circumvention devices, it also disallows access to the tools used for such circumvention. The report goes on to term it a "lamentable and inexcusable flaw", an "egregious flaw", and even a "flaw that verges on absurdity". The committee expressed the strong view that the Government must find a solution to the flaw before implementing this portion of the treaty.

Labour

Chapter 18 of the Agreement deals with labour, and is largely confined to general statements of principle. The Parties reaffirm their obligations as members of the International Labour Organization (ILO) and their commitments under the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998) (ILO Declaration). The Agreement recognizes the right of each Party to establish its own labour standards, and to adopt or modify accordingly its labour laws, and states that each Party shall strive to ensure that its laws provide for labour standards consistent with the internationally recognised labour principles

Environment

Chapter 19 responds to concerns that parties may seek to gain trade advantages by relaxing environmental laws.

Article 19.2 states that "The Parties recognise that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in their respective environmental laws."

Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws in a manner that weakens or reduces the protections afforded in those laws as an encouragement for trade with the other Party, or as an encouragement for the establishment, acquisition, expansion, or retention of an investment in its territory.

Transparency

Chapter 20 requires that:

Each Party shall ensure that its laws, regulations, procedures, and administrative rulings of general application respecting any matter covered by this Agreement are promptly published or otherwise made available in such a manner as to enable interested persons and the other Party to become acquainted with them.

and that

Each Party shall maintain judicial, quasi-judicial, or administrative tribunals or
procedures for the purpose of the prompt review20-2 and, where warranted, correction of final administrative actions regarding matters covered by this Agreement.

U.S. attitudes to the FTA

After the FTA was signed, there were initially concerns that the American agricultural sector would lobby against the agreement, due to a fear that it could interfere with the government's farm subsidies program. However, the agreement, with time limits on importation of Australian agricultural products such as beef
Beef
Beef is the culinary name for meat from bovines, especially domestic cattle. Beef can be harvested from cows, bulls, heifers or steers. It is one of the principal meats used in the cuisine of the Middle East , Australia, Argentina, Brazil, Europe and the United States, and is also important in...

 and sugar cane managed to allay the concerns of the American agricultural market (while greatly frustrating many Australian producers).

A coalition of trade union
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...

s and other groups did speak out against the agreement on the basis that it would cause similar problems to those experienced by NAFTA.

More substantial lobbying
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...

 was undertaken by American pharmaceutical companies, who were concerned about the Australian Pharmaceutical Benefits Scheme
Pharmaceutical Benefits Scheme
The Pharmaceutical Benefits Scheme or PBS is a program of the Australian Government that provides subsidised prescription drugs to residents of Australia. The PBS ensures that all Australians have affordable and reliable access to a wide range of necessary medicines.-History:The PBS was established...

. See below.

American manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 lobbies strongly supported the FTA.

On the 15 July, both houses of the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 gave strong support to the FTA. The agreement was also supported by Democratic Party Presidential nominee John Kerry
John Kerry
John Forbes Kerry is the senior United States Senator from Massachusetts, the 10th most senior U.S. Senator and chairman of the Senate Foreign Relations Committee. He was the presidential nominee of the Democratic Party in the 2004 presidential election, but lost to former President George W...

.

Additionally, labour groups expressed concern regarding the agreement. In a report to the USTR office, the Labor Advisory Committee (LAC) recommended that Congress reject the U.S.-Australia FTA because they believed the agreement failed to meet congressional negotiating objectives.

Support

The agreement became a major political issue leading up to the 2004 Elections. After a protracted period of negotiation under Howard
John Howard
John Winston Howard AC, SSI, was the 25th Prime Minister of Australia, from 11 March 1996 to 3 December 2007. He was the second-longest serving Australian Prime Minister after Sir Robert Menzies....

 government Trade Minister Mark Vaile
Mark Vaile
Mark Anthony James Vaile , Australian politician, is a former Deputy Prime Minister of Australia and former leader of the National Party of Australia.-Early life:...

, the agreement was strongly supported by the Howard government as an enormous potential gain to the Australian economy and as essential to the continuation of the U.S.-Australia alliance.

Economic benefits

The government relied on estimates of the economic benefits of the FTA computed by the Centre for International Economics, a consultancy group.

Dynamism and economic integration

The leading group supporting the FTA was called Austa. Austa's arguments focused on the dynamic benefits of integration with the U.S. economy.

Opposition

Criticisms of the FTA appeared from a number of sources and on a number of grounds:

Trade diversion

Economic theory suggests that bilateral agreements like the FTA will lead to trade creation
Trade creation
Trade creation is an economic term related to international economics in which trade flows are redirected due to the formation of a free trade area or a customs union. The issue was firstly brought into discussion by Jacob Viner , together with the trade diversion effect...

 between the parties directly involved, but will also cause trade diversion
Trade diversion
Trade diversion is an economic term related to international economics in which trade is diverted from a more efficient exporter towards a less efficient one by the formation of a free trade agreement or a customs union.-Occurrence:...

 from third countries, offsetting any benefits. Bilateral agreements may also undermine multilateral agreements such as those associated with the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

. Partly as a result of these factors, the estimates of benefits produced by the CIE and relied on by the government were disputed by most economists who made submissions to the Senate Committees inquiring into the topic, some of whom concluded that the agreement would reduce Australia's economic welfare

Intellectual property

The provisions of the AUSFTA in Ch 17 required Australia to offer stronger protection to American intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...

. In particular, the minimum term of copyright
Copyright
Copyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...

 was extended to 70 years after the author's death. Most economists and others interested in intellectual property issues regarded this as undesirable. A number of prominent American economists took the same view in the case of Eldred v. Ashcroft
Eldred v. Ashcroft
Eldred v. Ashcroft, was a court case in the United States challenging the constitutionality of the 1998 Sonny Bono Copyright Term Extension Act...

.

Other key changes included:
  • special copyright term extension for photographs
  • broader definition of technological protection measures, narrow exceptions, and review process
  • protection of temporary copies
  • stronger protection of electronic rights management information
  • protection of pay television broadcasts
  • safe harbour provisions for Internet Service Providers
  • protection of performers' economic and moral rights in respect of sound recordings
  • broader civil and criminal offences


For a discussion of the copyright changes, see Rimmer, M. "Robbery Under Arms: Copyright Law and the Australia-United States Free Trade Agreement"

Article 17.10.4 of the AUSFTA also required Australian legislation under which the Australian Therapeutic Goods Administration had to notify a pharmaceutical patent holder of intended market entry by a generic competitor. The Australian academic Thomas Alured Faunce
Thomas Alured Faunce
Thomas Alured Faunce is an Associate Professor jointly in the College of Law and Medical School at the Australian National University at Canberra Australia...

 has argued that this could facilitate the rent prolongation strategy known as 'evergreening
Evergreening
Evergreening refers to a variety of legal and business strategies by which technology producers with patents over products that are about to expire, retain rent from them by either taking out new patents or by buying out or frustrating competitors, for longer periods of time than would normally be...

.'

Local content provisions

Many in the Australian film and television
Australian television
Television in Australia began experimentally as early as 1929 in Melbourne with stations 3DB and 3UZ using the Radiovision system by Gilbert Miles and Donal McDonald, and later from other locations, such as Brisbane in 1934....

 community expressed concern over the effect of the agreement on government regulations enforcing a mandatory minimum of locally-produced content on television. Since American content can be purchased by networks at a cost far less than the local production of Australian content, fears were raised that the agreement would result in the diminishing fraction of home-grown media being screened on Australian television networks and in Australian cinemas being reduced even further. As a result, the Media, Entertainment and Arts Alliance
Media, Entertainment and Arts Alliance
The Media, Entertainment & Arts Alliance is the Australian trade union and professional organisation which covers the media, entertainment, sports and arts industries...

, as well as a number of prominent artists individually, argued for rejection of the FTA on the grounds that it would erode Australian culture.

Manufacturing and agricultural sector

Australia as a whole is heavily reliant on primary industry and the main benefits of a FTA between the two countries were seen to be increased access to the large, but heavily subsidised and protected, American market by Australian producers. In particular, the rural and regional-based National Party
National Party of Australia
The National Party of Australia is an Australian political party.Traditionally representing graziers, farmers and rural voters generally, it began as the The Country Party, but adopted the name The National Country Party in 1975, changed to The National Party of Australia in 1982. The party is...

 lobbied hard to have the agreement extend to the export of sugar. The eventual provisions of the agreement did not go as far as had been hoped, and as a result, some lobbyists for the sugar industry, notably independent Bob Katter
Bob Katter
Robert Carl "Bob" Katter is an Australian federal politician, a member of the Australian House of Representatives since March 1993 for the Division of Kennedy, and the leader of Katter's Australian Party...

, urged rejection of the FTA. However, many, such as then Premier of Queensland Peter Beattie
Peter Beattie
Peter Douglas Beattie , Australian politician, was the 36th Premier of the Australian state of Queensland for nine years and leader of the Australian Labor Party in that state for eleven and a half years...

, still felt that the agreement was a net gain for Australian agriculture and supported ratification on that basis.

The Australian manufacturing sector was another problematic area. Australian labour, wage and environmental protection
Environmental protection
Environmental protection is a practice of protecting the environment, on individual, organizational or governmental level, for the benefit of the natural environment and humans. Due to the pressures of population and our technology the biophysical environment is being degraded, sometimes permanently...

 standards are substantially higher than those of the USA. The Australian Manufacturing Workers Union
Australian Manufacturing Workers Union
The Australian Manufacturing Workers Union, or more fully, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union is an Australian trade union that is registered with the Australian Industrial Relations Commission and is affiliated with the Australian Council of Trade...

 ran a high-profile campaign against the FTA on the basis that it would lead to manufacturing jobs being outsourced
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...

 overseas.

Pharmaceutical Benefits Scheme

The Pharmaceutical Benefits Scheme
Pharmaceutical Benefits Scheme
The Pharmaceutical Benefits Scheme or PBS is a program of the Australian Government that provides subsidised prescription drugs to residents of Australia. The PBS ensures that all Australians have affordable and reliable access to a wide range of necessary medicines.-History:The PBS was established...

 (PBS) is a central component of the Australian healthcare system. The scheme provides reimbursement to community pharmacy for the costs of dispensing prescription medicines prescribed in accordance with the PBS Schedule, a comprehensive but closed formulary. Drugs are added to the formulary on the basis of an assessment of comparative effectiveness and cost effectiveness compared to the therapy most likely to be replaced in practice. The result is that where there is no evidence of incremental benefit, a drug may not be listed at a higher price than the comparator with the result that for many (but by no means all) drugs the prices for subsidy purposes are a great deal cheaper than in many other major markets.

While the scheme is very effective at keeping many drug prices low, pharmaceutical corporations in both the US and Australia are wary of the operation of the scheme, since they argue that higher drug prices are necessary to fund the costs of research and development
Research and development
The phrase research and development , according to the Organization for Economic Co-operation and Development, refers to "creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of...

. The American pharmaceutical companies claim that in enjoying low-cost medicines, Australians are essentially "freeriding" on the costs of research performed in the US.

While companies have in particular criticised the process by which drugs are listed on the PBS, claiming that it lacks transparency, public health advocates have claimed that calls for transparency are merely an effort by drug companies to gain greater control over the process of listing. To a large degree the existing limitations on the transparency of the process are those that have been imposed by the industry itself.

Disquiet about the Pharmaceutical Benefits Scheme led to speculation that the American side would lobby heavily for its abrogation as an integral component of a free trade agreement. The Government has been criticised, particularly by the Australian Democrats
Australian Democrats
The Australian Democrats is an Australian political party espousing a socially liberal ideology. It was formed in 1977, by a merger of the Australia Party and the New LM, after principals of those minor parties secured the commitment of former Liberal minister Don Chipp, as a high profile leader...

 and Greens
Australian Greens
The Australian Greens, commonly known as The Greens, is an Australian green political party.The party was formed in 1992; however, its origins can be traced to the early environmental movement in Australia and the formation of the United Tasmania Group , the first Green party in the world, which...

, for not doing enough to safeguard the operations of the Pharmaceutical Benefits Scheme, allegations which the Government has strenuously denied. Some academics (such as Thomas Alured Faunce
Thomas Alured Faunce
Thomas Alured Faunce is an Associate Professor jointly in the College of Law and Medical School at the Australian National University at Canberra Australia...

) have argued that evidence obtained under Freedom of Information
Freedom of information
Freedom of information refers to the protection of the right to freedom of expression with regards to the Internet and information technology . Freedom of information may also concern censorship in an information technology context, i.e...

 legislation indicates the use of the AUSFTA Medicines Working Group as a forum for lobbying
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...

 by United States negotiators. Their competitive markets interpretation of the constructive ambiguity
Constructive ambiguity
Constructive ambiguity is a term generally credited to Henry Kissinger, said to be the foremost exponent of the negotiating tactic it designates. It refers to the deliberate use of ambiguous language on a sensitive issue in order to advance some political purpose. Constructive ambiguity is often...

 of innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...

 in Annex 2C.1 of the AUSFTA (backed by its association with a non-violation nullification of benefits
Non-violation nullification of benefits
Non-violation nullification of benefits claims are a species of Dispute settlement in the World Trade Organization arising under World Trade Organisation multilateral and bilateral trade agreements. NVNB claims are controversial in that they are widely perceived to promote the social vices of...

 provision) was what spurred the July 2007 Australian legislation splitting the PBS Schedule into two categories: F1 for patented, single brand medicines, and F2 for generic medicines requiring compulsory price drops, with restricted reference pricing between them. This claim was also strenuously denied by the Australian government at that time.

Ratification of the FTA

The Australian Government did not hold a majority in the Senate, and thus required the support of the opposition Labor
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...

 party, the Greens, Democrats, or independent senators in order to secure ratification. The Government put heavy pressure on Labor Party leader Mark Latham
Mark Latham
Mark William Latham , an author and former Australian politician, was leader of the Federal Parliamentary Australian Labor Party and Leader of the Opposition from December 2003 to January 2005....

 to secure Opposition support of the agreement (knowing that Latham, among many Labor members, viewed the FTA as beneficial). The issue had divided the party, with the Left faction
Political faction
A political faction is a grouping of individuals, such as a political party, a trade union, or other group with a political purpose. A faction or political party may include fragmented sub-factions, “parties within a party," which may be referred to as power blocs, or voting blocs. The individuals...

 in particular arguing that Labor should reject the agreement.

Latham responded unexpectedly by making Labor's support of the FTA conditional on an amendment that would allegedly safeguard the PBS. This effectively turned the tables on Howard: if the Government refused the amendment as unnecessary, it opened itself to claims it was not safeguarding Australian interests; if it supported the amendment, it then tacitly admitted that the original terms of the agreement were inadequate. The bill was eventually amended and passed.

Latham's amendment proposals were supported by the Australian Medical Association
Australian Medical Association
The Australian Medical Association is a professional association for Australian doctors and medical students.The AMA uses a representative structure involving state branches and committees to work with members to promote and protect the interests of doctors.The mechanisms that allow this include:*...

, but dismissed as ineffective by the Greens and Democrats, who still argued for outright rejection of the FTA.

In January 2006, the government was reportedly considering repealing the amendments, as a result of pressure from the U.S. pharmaceutical industry.

Outcomes

In the year following the agreement, Australian exports to the U.S. declined, while U.S. exports to Australia increased. This followed the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...

's prediction that the Australia-United States FTA would shrink the Australian economy marginally because of the loss of trade with other countries. The IMF estimated $US5.25 billion of extra U.S. imports entering into Australia per year under the FTA, but only $US2.97 billion of extra Australian exports to the U.S. per year. However, it remains unclear whether or not Australia's worsening trade deficit with the United States can be solely attributed to the FTA. It may have been a lagged effect of an appreciation of the Australian dollar against the US dollar between 2000 and 2003.

For the U.S., the FTA improved the overall trade deficit situation, creating a trade surplus with Australia which rose 31.7% in the first quarter of 2005, compared to the same timeframe in 2004. U.S. exports to Australia increased 11.7% in the first quarter of 2005 to nearly $3.7 billion for the quarter. Agriculture exports to Australia increased 20%.

According to Australian Department of Foreign Affairs and Trade figures the imbalance in trade between the U.S. and Australia increased substantially during 2007. The United States became Australia's largest import source, with goods and services imported to a value of over A$31 billion. Australia's exports to the U.S., however, amounted to only $15.8 billion AU. It remains unclear what, if any, real benefits the agreement has produced.

In U.S. Fiscal Year 2006 (October 2005 through September 2006), which was the first full year during which E-3 regulations were in effect, the U.S. Department of Homeland Security recorded 2,123 admissions of Australian citizens as E-3 status
E-3 visa
The E-3 visa is a United States visa for which only citizens of Australia are eligible. It was created by an Act of the United States Congress as a result of the Australia-United States Free Trade Agreement , although it is not formally a part of the AUSFTA. The legislation creating the E-3 visa...

 foreign workers under the treaty. 9,294 admissions were recorded in U.S. Fiscal Year 2007 (October 2006 through September 2007).

See also

  • E-3 visa
    E-3 visa
    The E-3 visa is a United States visa for which only citizens of Australia are eligible. It was created by an Act of the United States Congress as a result of the Australia-United States Free Trade Agreement , although it is not formally a part of the AUSFTA. The legislation creating the E-3 visa...

     program passed by the United States government in the aftermath of the AUSFTA.
  • Import sensitive product
    Import sensitive product
    An import sensitive product is a product that is particularly susceptible to competition from imports from other country suppliers. Import sensitive products generally receive longer phase-in periods for tariff reduction or elimination in trade agreements...

  • United States-Australia relations


Australian free trade agreements:
  • Australia-Chile Free Trade Agreement
    Australia-Chile Free Trade Agreement
    The Australia–Chile Free Trade Agreement is a trade agreement between the countries of Chile and Australia. It was signed on July 30, 2008 and went into effect in the 1st quarter of 2009...

  • Australia New Zealand Closer Economic Relations Trade Agreement
    Closer Economic Relations
    Closer Economic Relations is a free trade agreement between the governments of New Zealand and Australia. It is also known as the Australia New Zealand Closer Economic Relations Trade Agreement and sometimes shortened to...


Governmental links


Media


Pro-FTA links


Anti-FTA links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK