June 11, 2002 | Commentary on Foreign Aid and Development

US must heed our free trade message

WASHINGTON is well aware of the purpose of John Howard's visit to the US this week. His address to a joint session of Congress tomorrow night - the first by an Australian prime minister since Bob Hawke 14 years ago - will be one that the Congress and President George W. Bush need to hear and heed.

Howard's message will be an invitation for a free trade agreement and hopefully a stern reminder of the benefits of free trade. Considering recent US decisions affecting trade, most notably the farm bill and the steel tariffs, Washington deserves a solid kick in the pants.

Australia has taken the lead by opening its market to US grapes and committing 1550 Australian servicemen and women to the international coalition against terror.

Additionally, according to some US government sources, Australia has more naval bases than ships and would be happy to have some US ships use them as a permanent port.

While New Zealand officials were rebuffed about their nuclear policy during Prime Minister Helen Clark's visit to Washington earlier this year, many US defence analysts consider Australia to be the US's best mate.

Unfortunately, the US hasn't always returned the favour. The laundry list of insults includes a tariff on lamb three years ago, recent actions on steel and, as Mark Vaile recently referred to in London's Financial Times, "the beauty contest over who has the worst farm policies" between the US and the European Union.

Now is the time for the US to rise to the occasion and return the favour by agreeing to negotiate with Australia. Howard should remind Congress that the US has not done much for Australia lately and should work hard to make it up to a friend and defence ally.

Trade is important to both countries. After all, the US is Australia's largest source of imports and the second largest export destination.

To have an agreement of substance, agriculture must be on the table. American farmers have greatly benefited from trading with Australia. The US trade representative reports that the US is working with Australia to resolve outstanding issues on Australia's quarantine system.

Australia has restrictions on Florida citrus, chicken, pork, apples, pears and corn. I've had far too many people (American and Australian) indicate that the US system is not a piece of cake either. Both countries should re-examine their policies and seek to lower barriers to agriculture.

The US could learn a lot from the Australian agricultural sector. Liberalisation is a key lesson. Australia paid short-term political costs to achieve long-term economic gains by reforming the agricultural sector. Congress should be reminded that the US is the largest agricultural exporter and should be taking the lead to lift barriers, not create them.

The US farm bill is a horrific blow against the free market. Vaile has stated that the biggest threat to the success of the WTO talks is that developed countries may refuse to budge on free trade, especially in agriculture. For the US to negotiate a deal with Australia, Washington must budge on protectionism.

Australia should seek a total exemption from the steel tariff for its steel producers. The US should seek a firm commitment from Australia to crack down on pirated DVDs. The US motion picture industry lost about $37 million to audiovisual piracy last year in Australia.

Although negotiations will be tough, especially when dealing with agriculture, this deal will benefit both countries and will reinforce the message of liberalisation throughout Asia and the world. Such a deal would spur the momentum needed to further the Doha trade round and possibly ignite a series of bilateral and regional agreements between other nations.

Howard should remind Bush and the US Congress that their actions have spoken louder than their words and that only liberalisation will heal the wounds US protectionism has created.

Sara Fitzgerald is a trade policy analyst in the Centre for International Trade and Economics at The Heritage Foundation (www.heritage.org), a Washington-based public policy institute.

About the Author

Sara J. Fitzgerald Policy Analyst
Center for Trade and Economics (CTE)

Originally published in The Australian