- The Washington Times - Thursday, December 4, 2003

SYDNEY, Australia — As U.S. and Australian negotiators scramble to meet the year-end deadline for free-trade talks agreed to by President Bush and Prime Minister John Howard, concern is mounting in Australia that a rushed deal might be detrimental for the smaller economy.

The two nations, with annual two-way trade of more than $20 billion, started talks in March. Lead U.S. negotiator Ralph Ives and Australia’s Stephen Deady are entering the fifth round of discussions in Washington, hoping to leave only the most-contentious issues to the political leaders to decide before the deadline.

Upcoming elections in both countries have put negotiations on a fast track. The United States hopes to avoid the sort of lengthy process it had with Chile. Australia, a military ally in the U.S.-led war on Iraq, is seizing on what it considers a brief opportunity to firm up ties with the world’s largest economy. It’s this rush to forge a deal that has many Australians worried that damaging compromises will be made on key issues such as agriculture.

“There’s so much political momentum to get this done that whatever they’ve got [by the deadline], they’ll declare it a political victory — even if it’s a very inadequate agreement,” said professor Ross Garnaut, an expert in international economics at the Australian National University in Canberra and a former Australian ambassador to China.

Mr. Garnaut wants both countries to abandon bilateral talks, which he says undermine more beneficial multilateral agreements. Australia, once a champion of multilateral trade, recently has embraced bilateral free-trade deals with Singapore and Thailand and is courting the possibility with China.

Both the United States and Australia admit that upcoming elections loom over the talks. With “more than half” of the text completed, the most challenging issues for two of the world’s biggest farm-goods exporters will have to be resolved in weeks, according to a U.S. Embassy official.

“There are formidable challenges,” the official said, and the two countries still hope to meet the deadline and avoid negotiating trade in the middle of an election.

Typical trade agreements take Washington about two years to negotiate, so if they finish in nine months, it will be a “record,” the official said.

Australian Trade Minister Mark Vaile, who travels to the United States to negotiate with U.S. Trade Representative Robert B. Zoellick, concedes that time is the “limiting factor.”

Still, he said, he will focus on negotiating improved market access and won’t sign away social benefits such as the national pharmaceutical plan that provides inexpensive medicine to Australians.

The Howard government maintains that both Australia and the United States, one of its largest trading partners, will benefit if all trade barriers are removed over a short time period, even if domestic subsidies aren’t changed. In fact, relatively speaking, Australia could benefit more.

A government-commissioned report by the Centre for International Economics (CIE) in Canberra said Australia’s gross domestic product — about 4 percent of the United States’ — could gain about $2 billion annually after 10 years, and the United States could gain about $2.1 billion.

That’s in line with U.S. estimates, said the U.S. Embassy official.

The main gains for the United States, which exports and imports less than 2 percent of its goods and services with Australia, would be in export manufacturing such as motor vehicles and parts, the report said.

Therefore, Washington is targeting some of the few areas where Australia still has barriers to trade, such as motor vehicles, textiles, clothing and footwear. It also is seeking liberalized investment rules and discussions about intellectual property.

Commodities are key to Australia. It has exports and imports with the United States of more than 11 percent and 20 percent, respectively, and stands to gain most from the elimination of U.S. tariffs on sugar, dairy and other agricultural products, the report said.

But not all Australians are convinced of the benefits. Various unions and groups, including the largest manufacturing union, have protested outside Parliament House in Canberra.

Many are concerned that the tight political timetable will force Australia to sign away jobs or capitulate on agricultural tariffs. That could alienate the National Farmers Federation, the largest farm-lobby group, which has supported the talks and called for extra access initially to U.S. markets and then a phasing out of tariffs in fewer than 12 years.

Japan and Australia have been trying to negotiate a trade deal for years, and it hasn’t materialized precisely because Japan won’t cut its agricultural tariffs and Australia won’t back down.

Professor Linda Weiss, an expert in international trade at the University of Sydney, said the main problem in Australia is that it lacks a national trade strategy. Because Australia runs the world’s second-largest trade deficit with the United States after the Netherlands, it can gain only if all tariffs and subsidies on agriculture are eliminated.

There’s also an overriding sense in Australia, even from some newspapers, that the “little” country might lose its big chance to “bond even more closely in the security chain to America,” Ms. Weiss said.

Alan Oxley, the former ambassador to General Agreement on Tariffs and Trade and chairman of the Asian Pacific Economic Cooperation at Melbourne’s Monash University, is convinced the agreement, even if it’s rushed, will boost the gross domestic product by more than the CIE study showed. Mr. Oxley is also the director of an Australian business group, including Alcoa, IBM, the Australian Dairy Council and Southcorp Ltd., that backs free trade with the United States.

Like many Australians, Mr. Oxley shares the unspoken idea that trade and security issues are linked, even though both governments deny it. Part of the “race against time” is to try to capitalize on the good will generated from a “war dividend” through Australia’s support of U.S. initiatives in Iraq, he said.

The big rush is to “see if the agreement can get put through Congress while there remains some residual sympathy for Australia for the involvement in Afghanistan and Iraq. That’s running the timetable,” he said.

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