Barry Coates: Deal falls a long way short of free trade

COMMENT

During her adventures in Wonderland, Alice memorably chides herself for failing to follow her own precepts. "I give myself very good advice," she says, "but I very seldom follow it."

Trade negotiators take heed. They have repeatedly said that multilateral agreements are the priority, but instead they negotiate bilateral deals.

The latest is the trade deal between Australia and the US. It is short-sighted and politically inspired. Most seriously, it will undermine the prospects of getting fairer rules on agriculture in the World Trade Organisation (WTO), damaging the interests of millions of farmers around the world.

It would be a monumental mistake for our politicians to continue pursuing a bilateral trade deal with the US. There are several reasons.

First, the imbalance of economic and political power is far greater in bilateral negotiations than in multilateral deals. Even though Australia supported the US on Iraq and climate change, they were treated shabbily in the bilateral trade talks.

They got no improvements in access on sugar, which the Government had identified as the make or break issue, little additional access for dairy products and a wait of around two decades for any significant opening of the US beef market.

Meanwhile, they gave open access for almost all US exports, including subsidised US farm products, more access for film/TV programmes, changes to rules that may increase the price of medicines, and automatic approval for most US investment in Australia.

As one commentator said in the Australian newspaper, "we should've walked".

With virtually nothing to offer the US, it is likely that New Zealand would get a far worse deal.

Secondly, the powerful farming lobbies in Washington and Brussels are chortling. As chair of the Cairns Group of agriculture exporting countries, Australia has long been a champion of opening up the highly protected, highly subsidised markets in US and European Union (EU).

However, in the run-up to the Cancun Ministerial of the WTO last year, the Cairns group was neutered by Australia's unwillingness to criticise the US. Leadership on agriculture passed to the G20, an alliance of developing countries, led by Brazil, China, India and South Africa.

As a founding member of the Cairns group, New Zealand was left out in the cold.

The collapse of the WTO talks in Cancun was partly the result of the insistence by the G20 for a fairer deal on agriculture. They are insisting on deep reform, particularly to the subsidies that are destroying the livelihoods of farmers around the world.

Cotton became a test case at Cancun. The US provides around US$4 billion ($5.7 billion) in subsidies to 25,000 farmers (mainly large corporations), considerably more than the total value of the annual cotton crop.

The US dumping of cotton on world markets at below market prices was challenged by the four West African countries that have 10 million people directly dependent on cotton for their livelihoods.

In response the US suggested that the West Africans, some of the world's most efficient producers, should diversify out of cotton.

The power of the agribusiness lobbies was evident in the Australia-US bilateral trade deal. The sugar lobby managed to keep sugar off the table through the carrots of large donations to political campaigns and the stick of mobilising voters in the key state of Florida in the forthcoming US election.

They were able to protect both the huge subsidies on sugar, around US$1.68 billion ($2.39 billion) a year, and the steep import tariffs of up to 150 per cent.

Under the 2002 US Farm Act, subsidies are also rising in the dairy sector, enabling the largest US producers to compete unfairly on international markets and drive farmers in the developing world, from Malawi to Jamaica, off their land.

It is in our interests to reform these policies, not only to benefit New Zealand farmers but also to help some of the poorest rural communities in the world.

The pressure for reform is mounting. The G20 and an alliance of smaller developing countries, including a number of our Pacific neighbours, have been demanding an end to the most damaging forms of subsidy.

And there has been pressure within the US and EU, as well as internationally, from a huge campaign of citizens from around the world, including more than four million people who have signed Oxfam's Make Trade Fair petition.

Instead of adding to the pressure, Australia has done the opposite. Its derisory deal with the US expands quotas by only 0.17 per cent of US beef and dairy production. It leaves the huge system of tariffs, quotas and subsidies largely intact. This is a strategic blunder.

The US and EU farming lobbies have been handed an own goal by the Australian Government's short-sighted pursuit of a trade deal. It deals a serious blow to the prospects of real reform through the WTO.

The third reason for our Government to step back from its quixotic pursuit of a bilateral trade deal with the US relates to our role internationally.

The US has repeatedly shown that it relentlessly pursues the national interest, linking a trade deal to issues such as New Zealand's stance on nuclear weapons or the invasion of Iraq. A trade deal may be incompatible with an independent foreign policy. That is a price not worth paying.

There is an alternative. We can leave the Alice in Wonderland pursuit of a bad deal with the US.

We have far more to gain from making common cause with the developing countries that represent the future growth in our international trade, rather than with the US and EU who systematically shut us out of their markets.

In Cancun, New Zealand had a chance to distance itself from Australia's agenda and align ourselves to the G20's call for real reform of agriculture. We have that chance again.

New Zealand is set to play a pivotal role in WTO negotiations. The New Zealand Ambassador to the WTO, Tim Groser, has just been appointed to the most crucial role in the current negotiations, as chair of the agriculture negotiations.

It is time to recognise that our interests are aligned with much of the developing world, build new alliances and mount a campaign for fair international trade rules.

* Barry Coates is executive director of Oxfam New Zealand.