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James:
Australia's US ambassador Michael Thawley:
"A stronger and more prosperous Australia will be a better partner
for Asian countries and our economic links with the US are an
important part of what makes us strong and prosperous."
The first part of the sentence is correct and the second half is bubious
at best. Throughout the history of Australia, the myth imposed on
Australians that it is an outpost of the British Empire has been the reason
why Australia remained in the backwaters. Until and less
Australia recognizes that it is part and parcel of Asia, its economic potentials
will not be fully realized. There is in fact little of comparative
advantage that can be captured between the economies of Australia and the
US. There is not much Australia can offer Texas, for example, except
as a enclave for rightwing immigrants.
Bilateral trade agreements are private deals within the context WTO.
It is a device to form exclusive clubs within the allegedly inclusive philosophy
of WTO. Singapore's bilateral deal with Japan and its pending talks with
the US are doomed to be counterproductive. Yet Singapore is unique,
a city state that hopes to prosper as a financial center for Southeast
Asia.
In parallel to the implementation of its WTO commitments, the United
States has continued with regional, bilateral and unilateral trade initiatives.
The report observes that the U.S.' multi-track approach to international
trade policy can be a source of tension within the multilateral system.
The United States has a large number of bilateral agreements with enforceable
provisions on increasing market access or reducing trade barriers.
These agreements primarily cover intellectual property rights, investment,
and product-specific market access. In the area of intellectual property
rights the United States generally seeks shorter transition periods than
those specified in the TRIPS Agreement, as well as pipeline protection
for pharmaceuticals and agricultural chemical products. Since 1991, the
United States has, as a policy, only concluded investment agreements with
countries which agreed to an intellectual property right agreement.
Commitments made by U.S. trading partners under bilateral agreements
have often been integrated into their WTO undertakings. This has most notably
been the case for bilateral agreements covering agricultural products,
textile and clothing items and commitments under the plurilateral Government
Procurement Agreement.
Market access agreements, generally negotiated in the context of a WTO
dispute settlement or a "Section 301" investigation, have generally not
required substantial changes in U.S. policies. An important exception is
the U.S.-Canada Softwood Lumber Agreement. Following lengthy discussions,
Canada agreed to tax exports above specified volumes to the United States;
and the United States committed itself not to use anti-dumping, countervailing
and Section 301 measures against Canadian softwood lumber exports.
There has been growing debate about whether bilateral trade agreements
are damaging multilateral efforts to eliminate barriers to international
trade. Trading blocks always charge optimal tariffs and make trade
agreements based on strategic considerations. Whether trading blocks
can form bilateral trade agreements make free trade less likely to occur
depends on the size distribution of the trading blocks. If there is one
large trading block along with some smaller ones then bilateral trade agreements
allow the smaller trading blocks to coalesce and block the monopoly power
of large trading blocks. In this case, bilateral trade agreements facilitate
the attainment of free trade. Not allowing customs unions leads to more
not less protection. If trading blocks are of roughly equivalent size then
bilateral trade agreements allow groups of trading blocks to more effectively
monopolize world trade in which case they may make free trade less likely.
These results suggest that a policy which inhibits the formation of trading
blocks may be harmful. The welfare effects of trade agreements are important
issues.
The presence or absence of an investment agreement was a very insignificant
factor determining investment decisions of foreign investors, and the country
advocating a multilateral agreement with pre-investment national treatment
to foreigners, does not itself appear to practice it. Generally,
experts from developing countries stressed that their national policies
and development needs should be taken into account in bilateral agreements,
whilst most experts from developed countries emphasised the protection
of foreign investors' rights. Some developing country representatives
also brought up the inequities and
inadequacies of existing bilateral agreements, that are due to the
unequal bargaining power between developed and developing countries.
There was also widespread agreement that, whether a country concluded
BITs (Bilateral Inmvesment Treaties) or not was an insignificant factor
to the inflow of foreign investment, as other factors
were much more important for attracting FDI. Many BITs
have defects or inadequacies.
BITs in fact, do not alway provided for national treatment of a foreign
investor even before he invested, that is, the foreigner was given the
same right to invest in a country as a national. Developing countries
have much less bargaining power to deal with a situation as happened in
Belgium when Renault suddenly decided to fold up its production unit, or
GM suddenly decided to close Vauxall in England. How could developing countries
exercise some leverage and create obligations on the investor to deal with
environmental or social problems that might be created?
Advocates of liberalisation and globalization assumed liberalisation
is a good thing and advocate maximum protection for foreign investors.
>From this view, the function of BITs was to have watertight provisions
of protection for foreign investors, including pre-entry and post-entry
national treatment. The US is the best practitioner of this approach.
However, the US itself does not subscribe to pre-entry national treatment,
as it provides for exemptions for many of its own sectors in these treaties.
A second model places emphasis on the need to meet the development goals
of each country. For example, the treaties have to reflect national
policies; one country provided protection only for investments of more
than a year (so that investors out to make quick profits were not given
protection); and other countries had mentioned their concerns that foreign
investors adhere to national laws on environment, labour, consumer protection
and restrictive business practices.
Strong host developed states like the US may have an extensive listof
exceptions. But host developing countries tend to have a shorter exception
list as they are worried that a long list may discourage foreign investors.
Experts from developing countries have brought out inequities and inadequacies
in the BITs and the environment in which they were concluded. Although
the aim of BITs was to promote and protect FDI, BITs play a "minimal role"
in attracting FDI. Many African countries sign investment treaties but
do not get any foreign investments. Investment flows are determined by
access to markets, social and political conditions. Many BITs do
not take into account the host country's needs. Many countries sign 'blank
checks', called treaties, which are defective from the point of international
law.
The importance of either BITs or a multilateral framework on investment
should not be overestimated for attracting foreign investments. There
is no evidence to show that the investors would deem the host country unsafe
if that country did not conclude a BIT with their home country and would
therefore refrain from investing in that country. In the case of China,
the US is the biggest investor behind Hong Kong, Macao and Taiwan,
although a Sino-US BIT has not been concluded yet. Therefore, for
developing countries, economic growth and development should be put at
first place according to their own needs and strategy. Several economic,
institutional and political factors affect investment decisions, the most
important being development and growth of the host country market.
In order to attract more investment, there is no need for a host country
to conclude a BIT or a multilateral framework on investment (MFI), if doing
so would mean conceding so much of the country's economic autonomy.
Therefore, it is very necessary and important to give a comprehensive
and correct assessment of BIT and MFI. Compared to regional or multilateral
investment agreements, BITs had the advantage that it could be tailored
to the specific situations of the two countries. On the other hand,
with a multilateral investment framework, developing countries would be
under high pressure to open their markets to developed countries.
While foreign investments have positive economic effects, experience shows
that negative effects should not be neglected. To fulfil economic development
goals, the host country has to retain sovereign rights to decide when and
which sectors are to be opened to foreign investments and the conditions
for access to the domestic market, according to its own development strategy.
Otherwise, foreign investments may be detrimental to economic and social
development. In the framework of GATTS, developing countries have borne
the pressure for opening up their domestic service markets to foreign investments,
and the TRIMS agreement has deprived developing countries of some policy
instruments useful for effective administration of foreign investments.
The multilateral agreement on investment under preparation by OECD even
asks for national and MFN treatment in respect of pre-establishment phase
of investment, which means that the developing countries have to unconditionally
open all economic sectors to foreign investments. Furthermore, its disciplines
on
performance requirements would deprive the host country of the
right to determine the condition for admission of foreign investments.
Whilst BITs may have many common clauses for protecting investors'
interests, it cannot be deemed that those clauses can be incorporated
into a multilateral investment framework as such. In a multilateral forum,
ideological and strategic considerations will take the place of practical
and short-term considerations.
Existing BITs were formed out of the situation of the old international
economic order. The concepts contained in many BITs provisions, such as
commitment not to nationalise foreign investments, adequate, prompt and
effective compensation in case of nationalisation, and unconditional consent
to submit investor-State disputes to international arbitration, are no
longer generally recognised as the principles to deal with international
investment issues. Some of these even contradicted with the results
of the efforts to establish a new international economic order (NIEO) and
embodied in UN documents such as the UN Charter of Economic Rights and
Duties of States, and Declaration for the establishment of the NIEO.
Considering the great difference of specific situations and needs
of one country to another, it would be very difficult to have strict binding
rules and principles on international investments.
Africa had attracted little FDI despite liberalisation by many countries.
Nigeria attracted 60% of Africa's FDI inflows because of its large market
and oil resources. In Zaire, even before the new government took power,
investors were rushing there to sign agreements because of its resources.
FDI is attracted to countries that have markets and resources, and not
because of BITs. Three of the largest five countries from where
foreign investments came to Indonesia did not have BITs with Indonesia.
BITs were only a tool to assure the home country of their investors' security.
What is provided for in BITs is in accordance with Indonesian law, and
there was no additional item. Japan had concluded BITs with only
four countries. The major recipients of Japanese FDI were the Southeast
Asia region and China. Japan had no BIT with Southeast Asian countries,
only with China. A stable political and social condition was the most important
investment factor.
The US entered into BITs to protect US interests abroad and to have
its investors treated fairly. For the US, at the heart of BITS are three
elements: non-discrimination to FDI, protection of investor rights, and
enforcement mechanisms for the first two elements.
These three elements are also in NAFTA and APEC and the US hopes to find
them also in the MAI. The important question was not whether BITs or other
agreements were better tools, but the underlying principles. Do they lead
to efficient use of investment resources? Do they encourage countries
to be passed over? Investment rules were only one element in investment
decisions and that market size, infrastructure, economic stability and
regulatory costs are often more important.
The shift towards bilateral agreement was accelerated by the stagnation
of multilateral negotiations in the wake of the fiasco of the December
1999 World Trade Organisation (WTO) ministerial meeting in Seattle.
APEC, which accounts for 60 percent of global production and 50 percent
of trade, is currently made up
of 21 economies from the Americas, Asia and Oceania, including Hong
Kong, a SAR of China -- a
country that in its turn claims Taiwan, another of the members, as
a renegade province.
The two main themes of the gathering in Brunei will be the social impact
of globalisation and the ''new
economy'', and the relationship between the WTO and bilateral or regional
trade accords. The Seattle fiasco led Asian members of APEC like
Japan and South Korea, which wanted trade liberalisation within the forum
to be strictly governed by the standards and norms agreed by the WTO, to
rethink their opposition and turn to regional and bilateral accords.
Agreements reached by Japan and Singapore, and by Singapore and New
Zealand, as well as the advanced stage of negotiations on trade deals between
Asian members of APEC and members from other regions. APEC representatives
from Singapore, New Zealand and Chile met in Santiago on Nov 2 to exchange
information on the agreement negotiated between Singapore and New Zealand,
to be formalised in Brunei. The trade pact between those two countries
was proposed at the last APEC summit, held in Auckland last year, where
it was underlined that all commercial accords reached within the forum
must be compatible with and adaptable to the ''over-arching'' agreement
being negotiated by the 140 members of the WTO. Negotiations for
a trade deal between South Korea and Chile are in the advanced stage, and
this Southern Cone nation also has its eyes on a treaty with Japan.
Official Australian policy states: Bilateral trade strategies are of
particular importance given the range and diversity of barriers which Australia
faces in overseas markets. Australia's farm exports and export potential
are adversely affected not only by the European Union's (EU) common agricultural
policy, but also by the European Free Trade Agreement (EFTA) agricultural
programs, the US Farm bill, the North American Free Trade Agreement, and
a variety of tariff, subsidy and other restrictions in the US, Japan, Republic
of Korea, Taiwan, Thailand, India and elsewhere. Bulk and processed mineral
exports are constrained by domestic production subsidies abroad, non-tariff
access restrictions, tariff escalation and supply diversification policies.
Services, manufactured products and intellectual property are also affected.
Full Statement:
http://www.australia.ch/~australi/bilaterl.htm
The Free Trade Area of the Americas (FTAA) is a comprehensive trade
negotiation process embracing the 34 democratic nations of the Western
hemisphere. Its origins date back to the first Summit of the Americas in
Miami, hosted by President Clinton, in December 1994. Following extensive
preparatory work over the following four years, and based on recommendations
developed by Trade Ministers at their meeting in Costa Rica, in March 1998,
leaders officially launched the negotiations at the second Summit of the
Americas in Santiago, Chile, in April 1998. The aim is to reach an agreement
that is balanced, comprehensive and consistent with the World Trade Organization
(WTO) agreement.
The FTAA negotiations hold the potential for creating the world's largest
free trade area, with 800 million people and a combined Gross Domestic
Product (GDP) of nearly US$11 trillion.
The fundamental question remains how many super trade blocks can be
formed and bilateral trade agreement signed within the context of globalization?
Is everybody double triple dealing?
Henry C.K. Liu
schulte-baeuminghaus wrote:
Does anyone have any comment on the report below
on an Australia-United States free-trade deal?
My own reaction is, at least to some extent, ambivalent.
On the one hand, I favour an international régime of relatively
free, non-discriminatory trade.
The Havana Charter, signed in1948 but never brought into effect, and
the General Agreement on Tariffs and Trade which took its place, generally
regulated trade in a way that eliminated most of the more outrageous features
of international trade in the interwar period, at the same time as it protected
the interests of the smaller as well as the larger trading entities - not
perfectly but tolerably.
The Havana Charter and GATT looked towards the creation of customs
unions and free-trade areas. Thinking at the time was that it was desirable
to allow the creation of such an entity in Europe as part of the rebuilding
of the continent after WW2. A European Customs Union Study Group was already
at work in 1947 or 1948 and, as time passed, the European Economic Community
was established under the Treaty of Rome of 1957.
The EEC (now the European Union) has some good features but it is far
from embracing free trade, even within the Union itself. In its trade relations
with countries outside the EU, it is, in many respects and in a number
of areas of trade, highly protective and discriminatory.
Much the same applies to the United States and the free-trade areas
that it has created/negotiated/entered into or planned in recent years.
Therefore, as the report below acknowledges, it may be doubted whether
the United States would, like the unwise virgin, go all the way in a free-trade
ageement with Australia. (Texan Governor Bush, now President-elect Bush,
is hardly likely to leave his Texan cattlemen, or his Texan or other sheepmen
for that matter, to the tender mercies of competition with Australian producers.)
But, even if he - and the Congress - did, one must question whether
the result would be all that satisfactory for Australia - or for Singapore
which is also said to be seeking a free-trade relationship with the United
States, although the case for Singapore could be a lot stronger.
The United States has always sought easy entry into most world markets.
It tried to negotiate Treaties of Friendship, Commerce and Navigation with
Australia and many other countries after WW2, which would have given the
US MFN or national treatment with those countries. Some countries did negotiate
such treaties although the more sensible governments diluted the terms
that the US proposed, in order to ensure that they did not become wholly
dominated by the United States economy and that they were not denied reasonable
means of independent economic development.
Has the situation changed in the last fifty years, so that it now makes
sense for Australia to enter into a thoroughgoing free-trade association
with the United States?
As I have said in other contexts, both the United States and Australia
have followed economic policies that have resulted in a shift of major
parts of both their economies overseas - mostly to the dynamic countries
of Asia. What advantage does either see in having the two "failed economies"
join together?
Canada has done it but are there elements in the Canadian position
that distinguish it from Australia's? Canada's unnerving proximity to the
United States makes it virtually inevitable that it will be dominated by
the US, so when rape is inevitable...
Would Australia be well advised to retain such independence of trade
and development policy as it still has?
Admittedly, Australia has already swallowed the "free" market, globalisation
line that is so close to Washington's heart. Does it matter if we now go
the extra mile with Texan cowboy Bush?
One thought is that globalisation and the rest have done us little
good so far. Australia's economic performace since 1970 has not been impressive.
Recent growth has been rather better but from such low levels - to which
misconceived policies had earlier taken it - that it may have done no more
than recover a very little of the long lost ground. In relative terms,
Australia has slipped steadily down the scale of significant economies
for virtually the whole of the past thirty years.
Should this be taken as a warning?
In the days when anti-inflation policies most dramatically failed,
the tendency was for governments, including the Australian Government,
to conclude that they needed to "fine-tune" their policies or apply them
with even fiercer determination than ever. (We were and still are rather
like Napoleon in Animal Farm, who, when he failed to meet
his norms, repeated to himself, "I must work harder, I must work harder....")
Is this the thought now? "Free" trade, "free" markets, globalisation
and the rest are the answer to the policy-makers' prayer. All that is needed
is to go the limit and prosperity will be guaranteed.
Is that the answer or is advocacy of "free" trade, manifested in this
instance by a proposed free-trade area with the US, just another buzz-word
solution to our trade and economic-development problems?
Shouldn't we really be getting our macroeconomic policy right? Should
we not be tearing ourselves away from the sort of policies that have bedevilled
the United States itself and led it into such rough and highly dangerous
waters in the past thirty years?
Will the days of reckoning for the United States economy, which might
well arrive in the course of the next few weeks or months, be a warning
that Australia and other countries cannot possibly ignore?
Will that emphasise the need to embrace more carefully considered policies,
to avoid buzz-word solutions, to treasure the little independence in policy-making
we still have left and to say no to any further domination by the United
States - and, indeed, by any other of the major world economic powers?
Even for small and middle-sized economies, that is not an impossible
dream. Take a look around the world at the success stories - and the failures.
(Take a look especially at those who have tied themselves too closely to
the notions of the United States. Like that noble animal, Napoleon, if
their hearts haven't burst yet, that fate might be not far down the road....)
So the true answer is, "Get your macroeconomic policies right, and
you won't need to lean on others - they will more likely begin to lean
on you."
Any comment on the report below would be appreciated.
James Cumes
backCanberra
in Bush push on free trade
STORIES IN
THIS SECTION*
*
Canberra
in Bush push on free tradeBy
Washington correspondent ROY ECCLESTON
20dec00
AUSTRALIA will urge President-elect
George W. Bush to consider an historic, but controversial, free-trade deal
that aims to boost the nation's economic ties with the world biggest economy.
Australia's US ambassador Michael
Thawley has strongly argued the merits of the deal, saying it could significantly
boost the bilateral relationship, now worth $30 billion annually in two-way
trade.
The free-trade agreement was quietly
floated by the Clinton administration, but the Howard Government believes
that Mr Bush, with his free-trade ethos, has a better chance of making
it a reality.
However critics, including Australia's
former foreign affairs and trade chief, Professor Stuart Harris, and former
ambassador to China, Ross Garnaut, fear it will send the wrong signals
to Asia, a bigger trading region for Australia.
Mr Thawley told the American-Australian
Association at a New York meeting that those criticisms were misplaced.
"I do not agree . . . and it defeats
me how that can be thought to be the case," Mr Thawley said.
"A stronger and more prosperous
Australia will be a better partner for Asian countries and our economic
links with the US are an important part of what makes us strong and prosperous.
Australia cannot afford to think like this and allow its options to be
ruled out pre-emptively."
Australia has a free-trade deal
only with New Zealand, but last month announced it would negotiate a similar
deal with Singapore over the next 12 months.
Labor has publicly backed a proposed
deal with China.
The Government is keen to actively
pursue the proposal with the Bush administration once the President-elect
appoints his trade representative and other key economic advisers.
Comments in recent days by Mr Bush
and his senior foreign policy staff, Secretary of State-designate Colin
Powell and National Security Adviser Condoleezza Rice, have given a fillip
to a possible bilateral deal by stressing a renewed focus on relations
with allies as well as the importance of free trade as a force for world
peace.
Mr Bush said "we must be true to
our friends" and added that "we will promote a fully democratic western
hemisphere bound together by free trade".
Mr Powell said his first priority
was "letting our allies know that we appreciate all we have been through
over the last 50 years".
With the ANZUS security pact 50
years old in 2001, and bilateral celebrations planned, Australia believes
the timing is good for an approach.
Mr Thawley pointed out to the American-Australian
Association that Australia has no natural constituency in the US from which
to lever political support; it relies on its partnership through all the
major wars of the century, and other links with the US, to give it a hearing
when problems arise.
Proponents of a free trade deal
say its value is that it institutionalises the economic relationship "and
provides a mechanism for supporting and facilitating it at a political
level".
But there are many domestic political
obstacles in the US to a deal. Without significant concessions from the
US on agricultural imports (sugar and lamb in particular) it would be impossible.
Australia, too would have to prepare
for changes: there would be more car imports to pressure Australia's protected
industry, pressure also for change to media rules, and possible consequences
for Australian rules on local content in television shows.
But Mr Thawley told his audience
there were many benefits possible: it could improve access to the US market;
attract US attention to the Australian market, and "it could provide a
fillip to our economic relationship across the board".
Supporters of the US-Australia deal
also point out that Singapore is negotiating a free-trade deal with the
US, which they say makes a nonsense of claims that Australia would be seen
to be turning away from Asia.
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