FTA smoke and mirrors

[multi]

Now that the excitement over the preferential trade deal with the United States has settled along with the dust, maybe we can sensibly evaluate its strategic significance.

It's not surprising the Howard Government was beating up its achievement with talk about a historic, once-in-a-generation opportunity to forge closer ties with the largest and most dynamic economy in the world, thus setting Australia up for the next half century.

What was surprising was how many otherwise sensible people were buying the hype.

Some of the commentators in the American-owned Murdoch press were carrying on as though we'd just become the 51st state.

This boosterism revealed ignorance on two levels: it overestimated the limited degree of further opening up involved in the deal and it underestimated the high degree of integration that already exists between the two economies.

Starting with the extent of change to be brought about by the deal, we all know that in the area where barriers are highest - agriculture - the change was embarrassingly small.

We've yet to be told the extent to which we've been made a more congenial destination for US exports of services and intellectual property but I suspect it largely boils down to providing windfall gains to US holders of patents and copyright.

That brings us to by far the biggest area of trade between the two countries - manufactured goods. So what's the big change here? Apart from a few niche concessions, they're removing their general tariff of 2 or 3 per cent and we're removing ours of 5 per cent or less.

This is going to revolutionise trade between us? Such minor changes will be overwhelmed by whatever's happening to the greenback-Aussie exchange rate at the time.

Some people have argued that the really significant change has to do not with trade protection but with the lightening of restrictions on foreign investment.

Under the changes, US companies will, in the main, no longer need Foreign Investment Review Board approval for deals worth less than $800 million.

But FIRB has only ever knocked back the tiniest proportion of proposals - though it's true it attaches conditions to a lot of its approvals. And though many of the enthusiasts assumed the Government would be obliged to extend the Americans' preferential treatment to all other countries, John Howard has since poured cold water on that fond hope.

As for the excitement about all the opportunities for trade and investment about to be opened up between our two great nations, where have these people been hiding? To hear them talk, you'd think there was a Berlin Wall between us that we'd just agreed to knock down.

The well-known truth is that, apart from agriculture, the barriers to trade and investment between us are already quite low and, as a result, the two economies are already highly integrated.

The US is, for instance, by far and away the greatest single source of our merchandise imports. Historically, it's been the second-biggest customer for our merchandise exports, after Japan. Turning to services, the US is our biggest source of imports by far and our biggest destination for exports.

Adding exports and imports together to give total trade in goods and services, the US and Japan are neck and neck for the honour of being our biggest trading partner.

The US is also the biggest single source of foreign investment in Australia, accounting for 30 per cent of the total (although it's pipped by Britain if you look just at equity investment).

And the US is by far the biggest destination for Australian investment abroad, accounting for about half our total equity investment, way ahead of Britain with 14 per cent.

I have to say, however, I've always regarded that statistic as a measure of the timidity of Australian business people. We're right next to burgeoning Asia so we have two-thirds of our overseas equity investment in the US and Britain? We can only go where they speak English?

All told, there's little doubt we're already comprehensively plugged in to the "largest and most dynamic" economy in the world. But what exactly does that "most dynamic economy" title mean?

If it means the US economy is at the world's technological frontier, that's undoubtedly true. All the best new technology either starts in or is quickly appropriated by the US.

But you also have to say that our existing links with the US are perfectly adequate to give us ready access to that technology. As various studies have shown, we're no slouch in the early adoption of information and communications technology. The trade deal will make little difference to that.

However, if "dynamic" refers to the pace of economic growth, then there's no way the US is the most dynamic country in the world. Its rate of growth was quite slow until just the second half of the '90s and it's been slow again in the 2000s. There's no telling whether or when it will return to its New Economy pace.

No, if it's a major country with a dynamic rate of growth you're after, there's no need to leave the 'hood - it's China. China has grown at a rate averaging 8 per cent a year for the past quarter of a century. And, though a major setback is always possible, it shows no sign of slowing.

What's more, since China joined the World Trade Organisation, the explosion in its trade with the world - its imports as well as its exports - has been nothing short of amazing.

Everyone says the US is the second-biggest customer for our merchandise exports but that ceased to be true in September last year when it was overtaken by China. Get this: over the course of 2003, our exports to China grew by 56 per cent!

And that's before we've seen any effect from the two big natural gas deals we've done (it also continues to treat Hong Kong as a separate country). Now get this: it's quite plausible to project that China will replace Japan as our largest trading partner within five years or so.

Next, we need to think about the Government's repeated assertion that the US accounts for a third of the global economy. If you do a simple conversion of every country's GDP to US dollars, that would be about right.

If you adjust for "purchasing power parity" (PPP), however - for the fact that one US dollar buys a lot more in some countries than in others - America's share of the world economy shrinks to 21 per cent. Which compares with the European Union's 20 per cent and China's 12 per cent.

Now, you can argue that simple US dollar conversion is the more appropriate way to measure a country's size for purposes of international trade. But don't forget this: PPP points to the direction in which exchange rates are likely to move over the long term.


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it doesn't change anything in the public domain as first thought..but
Section 17.4.4 (page 17-7)

4. Each Party shall provide that, where the term of protection of a work
(including a photographic work), performance or phonogram is to be
calculated:

(a) on the basis of the life of a natural person, the term shall be not less
than the life of the author and 70 years after the author’s death; and

(b) on a basis other than the life of a natural person, the term shall be:

(i) not less than 70 years from the end of the calendar year of the
first authorized publication of the work, performance, or
phonogram, or

(ii) failing such authorized publication within 50 years from the
creation of the work, performance, or phonogram, not less than
70 years from the end of the calendar year of the creation of the
work, performance, or phonogram.


As a bonus, we get the DMCA in later sections.

[floydian slip]

Some of the commentators in the American-owned Murdoch press were carrying on as though we'd just become the 51st state.

welcome to america