October 2, 2002 | Commentary on Foreign Aid and Development

Mr Vaile, bilateral means 'two sides'

Trade Minister Mark Vaile has a tough task ahead of him in Washington this week when he talks with US Trade Representative Robert Zoellick and US Secretary of Agriculture Ann Veneman about his Government's bid for a bilateral free-trade agreement.

Despite the potential benefits for both countries, the US farm lobby has been speaking out against negotiating with Canberra in protest against Australian sanitary and phytosanitary standards. As Max Baucus, chairman of the powerful US Senate finance committee, argued recently: "It will be difficult to move ahead on a US-Australia agreement until Australia demonstrates a willingness to address some of the barriers that keep US agricultural products out of the Australian market."

The Americans have a point. Australians always talk about the merits of free trade, yet some of the restrictions in place are questionable. After all, US producers regularly complain about Australian restrictions on citrus, stone fruit, chicken, pork, apples, pears and corn.

True, Canberra recently opened its market to California grapes; the first shipment arrived on July 16. According to the US Department of Agriculture: "Under the auspices of the Australian Quarantine and Inspection Service, shipments of grapes will be inspected and fumigated [before] being sent to Australia." But if such procedures work for grapes, why not use the same procedures to open the Australian door to American citrus, stone fruit, apples, pears and corn?

Of course, when it comes to free trade, the US is also hypocritical. The new US farm bill has greatly increased subsidies. What's more, Australians complain that exporting various products such as feeder cattle into the US is not a walk in the park. There have been rumours of Australian feeder cattle being stalled in US Customs. Australians also note restrictions and/or problems exporting products such as citrus, tomatoes and avocados.

But it is in the context of free trade agreement negotiations that such issues will be solved. Past trade agreements such as the North American Free Trade Agreement in 1993 and the Uruguay Round in 1994 have greatly benefited US producers and consumers by lowering barriers. If barriers didn't exist between the US and Australia, a free-trade agreement would not be necessary.

So for the US farm lobby to push Australia aside is not a wise move for an industry that exports one out of every three hectares produced. The US is the largest agricultural exporter and produces far more than Americans can consume. US producers need greater market access, not less; impeding a deal with Australia is foolish. THE Bush administration has recently made an ambitious proposal to the World Trade Organisation to cut agricultural subsidies and to lower tariffs. Negotiating an agreement with Australia would be a fine start for the US to implement this endeavour.

The Bush administration should press ahead with agricultural liberalisation by opening the door to Australian farm products and should ensure speedy processing of such goods. US agriculture should also look to Australia as a model of farm reform. According to the OECD, before the US farm bill, farm support in the US was 21 per cent of farm receipts compared with Australia's 4 per cent.

US President George W. Bush's new national security strategy includes an objective to move ahead with bilateral trade agreements and notes an agreement with Australia as one of them. In light of this, the US Trade Representative should commit to formal negotiations with Australia and be prepared to make meaningful concessions. Australia should do the same. Vaile should remind key members of the US Congress that Australia is a strong ally in the US war on terror and is the most serious economy with which the US has negotiated.

But Vaile must also commit Canberra to allow more US products into the Australian market. Although all of this is easier said than done, if both countries are as serious about market liberalisation as they say they are, they will surely understand that nothing ventured calculates into nothing gained.

Sara Fitzgerald is a trade policy analyst at the Centre for International Trade and Economics at the Heritage Foundation in Washington.

About the Author

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

Originally published in The Australian