Editorials / Columns
The Cost of Free Trade
By Michol Rantschler
Feb 17, 2004, 20:33

The recent free trade deal between President Bush and his Iraq war ally Australian Prime Minister John Howard is already seeing an uprising of disapproval by labor groups in Australia, illustrating once again that free trade nevertheless has strings with a price tag attached.

"If we were asked to vote on it today or in the parliament tomorrow we would be opposing it," said Australian Labor Party treasury spokesman Mark Latham Monday. "It is not a free-trade agreement at all. It's a partial trade agreement that from our assessment this morning is not in Australia's interest."

But the deal would wipe out duties on virtually all manufactured goods traded between the two nations, a far cry from the current situation, in which the United States pays 10 times what Australia does. It’s a landmark deal that could increase American manufacturing exports by $2 billion yearly, which some exports say will be good for U.S. workers in the industry who have continued to lose jobs to foreign competitors.

The advantageous points to the United States are the virtual elimination of import duties on manufactured goods to Australia, our ninth-largest trading partner. It marks the second free trade deal with an industrialized nation, Canada being the first through the North American Free Trade Agreement.

The National Association of Manufacturers in the United States, which has been critical of U.S. trade policy (while supporting outsourcing of American jobs), applauded the agreement. Australia's top manufacturing union, however, said massive Australian job losses could come as American industrial goods pour into the sparsely populated country of 20 million, and that the restrictions on Australian agricultural exports make the deal inequitable.

Australian beef sales will not immediately be tax-free, but the taxes will rather be phased out over the next 18 years if the deal goes through. The sugar cane industry has been entirely left out of the agreement. The United States, in contrast, will enjoy an almost immediate disappearance of $400 million it currently pays in tariffs to Australia each year.

But free trade with Australia could also pose a threat to America, opening the manufacturing market up to a host of competitors in developing nations in Australia’s region that can make products less expensively. An alliance of more than 18,000 companies is asking for a moratorium on such deals to protect American manufacturing.

Two weeks ago Costa Rica agreed to join El Salvador, Guatemala, Honduras and Nicaragua in a free trade pact with the United States. While there has been strong opposition to the deal between the United States and five Central American nations because of a lack of labor and environmental standards, the Australia deal will see less objection because the Aussies are already doing better than America on these points. Both deals await congressional approval.

The Central American Free Trade Agreement is modeled after and the next step since 1994’s extension of NAFTA to Mexico. Its ostensible purpose is to open up more areas for U.S. exports, but relaxed trade regulations are of great economic detriment to average Americans, not to mention a host of ethical concerns including human rights, the environment and animal welfare.

“America can no longer afford the price of ‘free’ trade,” Lou Dobbs wrote in U.S. News and World Report January 16. He said, “We've given away our manufacturing base through ‘free’ trade. In 1951, the average U.S. trade tariff was approximately 15 percent. By 1979 the average industrial tariff had sunk to 5.7 percent, and now it is just under 3 percent. Most foreign importers enjoy nearly unrestricted access to the U.S. marketplace. As a result, Americans have become the world's greatest customers, with the country accumulating a trade deficit every year since 1976.”

But for America, this is one of the few instances where fair trade and free trade are in the name global neighborhood. The Australian deal is one of the more benign steps in globalization, and the Bush administration will probably enjoy a mostly acquiescent congress and populace, not to mention the important votes of farmers in the president’s re-election.

Print