Despite the outcry
over lost jobs, the Bush Administration is on the verge of losing
more. This week the United States and Australia are set to finish
negotiations for a free trade agreement (FTA). With the United
States already running a trade surplus with Australia, this
agreement could quiet critics of lost manufacturing jobs. Yet the
deal could be significantly delayed or thwarted if the U.S. Trade
Representative doesn't offer better access to Australian farmers.
In order to get a good deal, the Bush Administration should:
- Put everything
(sugar, beef, etc.) on the table.
- Seek to close
the deal as soon as possible so that American workers and consumers
can start as soon as possible to reap the benefits of free trade
in the Making?
agricultural proposal is rumored to be very protectionist.
According to an American business source who wishes to remain
anonymous, "The agricultural proposal is not commercially
meaningful and is embarrassingly crappy." For one thing, rumors
indicate that the Bush Administration refuses to open trade in
sugar. The U.S. sugar industry, uncompetitive and heavily protected
by a tariff rate quota, once again seems to have succeeded in
obtaining an exclusion from trade negotiations.
Moreover, at a
time when mad cow disease is a North American reality and U.S.
consumers need as many choices from as many countries as possible,
the U.S. offer on beef is likewise rumored to be protectionist. But
while the National Cattlemen's Association complains about imports,
Australia simply does not have the capacity to flood the U.S.
market. In addition, U.S. producers all too often seem to forget
that the benefits of trade do not flow only one way: The majority
of Australian beef is flipped on the griddles of America's
official objectives for the FTA include "the removal of tariff rate
quota restrictions on Australian exports to the United States,
including those affecting exports of beef, dairy products, sugar,
peanuts and cotton." Australia, as one of the world's most
efficient agricultural producing countries, is naturally seeking
increased market access for its agricultural products. Assuming
that Australia will be willing to take home half a loaf is a risky
gamble for the Bush Administration. The Administration would do far
better to offer significant access to Australian sugar and beef in
order to secure the deal.
Not only would
such an offer ensure the deal, but it would also allow American
consumers access to cheaper sugar. Thanks to U.S. sugar policy,
American consumers pay two to three times the world price for
sugar. Intransigence is the same old politics-a needlessly
expensive same old politics.
Benefits of Free Trade with
overall trade surplus with Australia having reached nearly $6
billion in 2002, a free trade agreement makes sense for both the
U.S. and Australia. For example, "U.S producers of transportation
equipment, non-electrical machinery, computer and electronic
products and chemicals are the strongest exporters to Australia,"
according to a report prepared for the American-Australian Free
Trade Agreement Coalition by The Trade Partnership. Additionally,
the report notes, "more than half of U.S imports from Australia are
inputs or capital goods used to manufacture products in the United
States." Cheaper inputs or capital goods means lower overhead costs
for U.S. manufacturing, which could open the door for companies to
hire more workers.
In his State of
the Union address, President George W. Bush emphasized, "My
Administration is promoting free and fair trade, to open up new
markets for America's entrepreneurs, and manufacturers, and
farmers, and to create jobs for America's workers." To pursue this
mission effectively, the Bush Administration must put everything on
the table in this agreement with Australia. The President's speech
also noted that "exports are growing." But if he is to continue
this trend, the President must not allow presidential politics to
trump good economics.
Fitzgerald is a Trade Policy Analyst in the Center for
International Trade and Economics at The Heritage