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Productivity Commission Report: the bad and the good

By Dr Patricia Ranald

The bad news: unilateral tariff reductions, no labour rights or environmental standards, weak on culture

Consistent with its overall approach to free trade, the Productivity Commission Report on Bilateral and Regional Trade Agreements released on December 13 supports unilateral liberalisation by the Australian government as the preferred way for Australia to reduce trade barriers (p. xxxvi and Ch 11). This is the source of Minister Emerson’s approach to unilateral tariff reductions, which could be devastating for manufacturing industry, as outlined in the article above.

The Report recommends against the inclusion of labour rights and environmental standards in trade agreements, despite submissions from unions and other community groups on these issues (p. 280).

The report also rejects submissions from unions and cultural organizations which argued that media and cultural services should be completely excluded from trade agreements to ensure the survival of local cultures, opting instead for a more equivocal exception on cultural measures “provided that the measures are not unjustifiably discriminatory or a disguised restriction on trade” (p. 284)

The good news: no deal if no economic benefits, no extension of intellectual property rights and no rights of corporations to sue governments

The Report confirms some of the criticisms of the Australia-US Free Trade Agreement and other bilateral agreements raised by AFTINET members.

A major criticism that the report confirms is that the claimed economic benefits of many of the agreements have been oversold, and are in fact not significant (p. xxxv). The Report also recommends against the use of optimistic econometric feasibility studies based on unrealistic assumptions to justify entering into negotiations (p. xxxvi).

The Report supports non-discriminatory multilateral trade negotiations, which potentially include all countries, and recommends that trade negotiations be separated from strategic or other policies. Bilateral and regional agreements should only be pursued if there are clear economic benefits for Australia (p. xxxvii). These points were also reflected in Minister Emerson’s speech.

The report also confirms that some provisions in the Australia-US Free Trade Agreement (AUSFTA)were in fact against the national interest and should not be included in future trade agreements. These include intellectual property provisions which increase monopoly rights for corporations for copyright and patents at the expense of consumers. (p. xxxviii). For example, extending monopoly patent rights allows drug companies longer periods to charge very high prices for medicines, which is clearly against the interests of consumers

The report also recommends against investor-state dispute processes, which give additional rights to foreign investors to sue governments for damages outside the Australian legal system (p. xxxviii).

Public campaigning kept these extra corporate rights to sue governments out of the AUSFTA, but US companies like Philip Morris are demanding them in the current Trans Pacific Partnership (TPPA) negotiations between the US, Australia and seven other countries. Philip Morris is currently suing the Uruguayan government for legislation restricting tobacco advertising. If these extra corporate rights were included in the TPPA, they would give tobacco companies like Philip Morris the right to sue the government for damages if it introduces its proposed cigarette plain packaging legislation

As noted in the previous article, the application of these principles would mean that the Australian government should question the basis of the TPPA, and should certainly reject both increased intellectual property provisions and an investor state-dispute process in the TPPA and other trade agreements.

The report did not accept submissions from AFTINET and others that Parliament rather than Cabinet should make the final decision to ratify trade agreements, but it does support some transparency and accountability measures. The main one is that, after completion of negotiations, but before the signing of any trade agreement, the government should commission and publish an independent assessment, which would be debated publicly and in parliament before the decision about signing was made. This would be a step forward for transparency and accountability.

There was a major division of opinion on these and other issues between Andrew Stoler, an Associate Commissioner, and former advocate of the AUSFTA, and the other authors of the Report. Stoler, who is Executive Director of the Institute for International Trade at the University of Adelaide, disagreed with the criticisms of the AUSFTA, and with the transparency recommendations. His dissenting views are attached in Appendix A of the report.

The full report is available at http://www.pc.gov.au/projects/study/trade-agreements

December 20, 2010


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