G�day. The substance of the US �Free� Trade Agreement seems to have got wholly lost in venal short term domestic politics, on both sides. Howard promised we wouldn�t do a deal if it wasn�t to our advantage, but did that very thing anyway to somehow prove that his obedience on Iraq actually had a payoff. Security and Trade never mix with the Yanks, but suddenly, if Labor says no, it�s anti-American. Mainstream media debate has been scant � I wonder why? – and from what I�ve read the majority of Latham�s shadow Cabinet wants to deal to avoid the anti-American tag from Howard. The national interest? Who cares?

 

See Alan Ramsey�s pieces yesterday Sovereignty lost in the trade-off and Political drama without a happy ending.

It�s sick.

Tonight, ex-Australian ambassador Tony Kevin’s stunning commentary:

Latham�s fateful choice, and Peter Beattie�s cargo cult economics

The irony is that Latham does not have to reject this FTA to meet Australian voter hopes that he will show backbone. He only has to say, ” We will look at this again after our two countries� elections are over. It has good and bad points for Australia. The fact that the US Congress voted so overwhelmingly in favour of Howard�s deal means that there is room for some rebalancing to level the playing field. We will look at it again after our election is over and I win government”.

To say this would not damage Australian-US relations. It is what Whitlam or Keating would be saying now.

There is a fine article by Brian Bahnisch, “Picking the low-hanging fruit first”, introduced with some cogent words from Margo Kingston, discussing Mark Latham�s current dilemma on the AUSFTA, on Webdiary 29 July 2004.

Labor is about to cripple its electoral chances, and our nation is about to be saddled nationally with a bad and dangerous agreement, unless Mark Latham has the sense and courage to defy the misguided siren-singers now circling around him. This is a big leadership test for him – I hope he will meet it.

After Queensland Premier Peter Beattie�s bizarre ABC AM interview last Wednesday with Catherine McGrath, more needs to be said on this vital national interest issue (Thankfully, Beattie qualified his na�ve cargo cult economics by noting that he was only “talking about it from Queensland’s point of view”).

Beattie argued Australia needed to sign this FTA to encourage US investment which we now need to generate more jobs in Australia. He recited this desperate mantra:

One thing I know � and this is where I disagree with the metal workers union � if we don’t sign up to the American free trade agreement and get investment in light metals, we’re going to lose jobs. And in the long-term, their approach on this will cost jobs. That’s what it will do. It’ll cost jobs. It won’t create jobs, it’ll cost jobs. It won’t protect jobs, it’ll cost jobs. We have to do what we can to create jobs and that’s the only way I can see us doing it.

In essence his position was that the agreement will bring US capital to Australia that will create more jobs. He said:

… to become competitive, we’ve got to have an injection of capital. I’d like to see American capital injected here to build up our industries so that we can compete in a realistic partnership way, with opportunities in China and elsewhere. I mean otherwise, we’re going to be swamped.

… jobs will be at risk unless we expand our own industry with the use of American capital, and try to take advantage of those investments.

But there is absolutely no economic evidence for this. What job-creating industries is US capital establishing in Australia? Where is there data for this? (Margo: See also Beattie�s Lateline interview on Friday night, where Maxine ran a disappointing interview by not challenging Beattie on the substance of his spin.)

This would be a laughable argument, except that it comes from a Labor state premier speaking on national radio and offering advice to Labor�s leader, so it has to be answered seriously. Here is why Beattie is wrong:

� US capital enters Australia freely now, up to very large limits. If the object of the FTA were to make it easier for larger US capital investments here, why not simply – as Ross Garnaut testified to the Senate Committee – abolish Australia�s Foreign Investment Review Board? Why not support open-slather foreign investment, forgetting about issues like national ownership of key resources and industrial assets? Let us become a branch office economy. We can do it simply by abolishing FIRB. We don�t need a bad-deal AUSFTA with all its other disadvantages for us as well.

� The Beattie idea that Australia is short of investment capital is nonsense too. We still have one of the highest per capita incomes in the world. A lot of our locally-generated capital goes overseas (in recent years a lot has been wasted in ill-judged Australian corporate investments in the UK and US). Then our tax system encourages the misdirection of Australian capital into unproductive owner-occupied housing and tax-subsidised leased luxury business cars – the large McMansions springing up all around our cities, with their rows of fully imported 4WD wagons parked in front of their triple garages, finally exist because of distortions in our tax system that shelter this kind of “investment” over the investments Beattie pleads for.

Because no major party has yet had the guts to address our tax system, too much of our home-grown capital gets frittered away in such excess consumption. Not to mention the huge amount of money we siphon away in gambling. Our country has more than enough capital to employ our population and more � it�s just that we use most of it less productively than we should, in terms of generating jobs for our kids. (Whom we meanwhile impoverish under HEX loans � we stuff their chances both ways).

� American capital investment coming into Australia is not a free gift. It is a loan. It still has to be serviced in interest or dividends and eventually, at a time of the provider�s choosing, repaid to the US. Beattie�s cargo cult economics reminds me of credulous Melanesian islanders waiting vainly for their free “cargo” from US planes coming from the sky. Hey, it�s not like that, Peter. There is a price to be paid for foreign capital, in terms of loss of national economic autonomy, freedom of decision, and sovereignty. The more of our economy we allow to pass into foreign ownership, the less sovereignty we will have. It is that simple. (One way of dealing with it would be to diversify sources of foreign ownership � so that it is not all US and UK-based. But Howard would not hear of that heresy, would he?).

� Much foreign investment does not go into new jobs-creating green field�s investment in new plants. Much of it goes into buying existing winners � enterprises that canny foreign investors can see the value of, especially in terms of creative Australian talent and intellectual property and entrepreneurship. In other words, cherry-picking our best and our most potentially internationally competitive ideas and enterprises, industrial or agricultural. (Margo: On this point, seeSubsuming us into America – the economic aspect.)

� And once they have bought and own such enterprises, US owners can do what they wish with them � repatriate management and research capability back to US home base, and try to persuade the best and brightest Australian staff to go with it. Look at the history of Aspro (Nicholas), Berlei bras, Helena Rubinstein, the early Australian aviation industry � how did so many promising Australian companies in the end become American companies? Simple � the Americans bought them. That is what US investment really means. As often as not, it eventually means loss of Australian jobs, especially the most high-paying and creative ones, to the US – not new jobs. No wonder 1 million Australians are working overseas. No wonder so many are working in the US leaving lonely parents and grandparents back here wondering where their kids went. Think about it, Peter.

� But Peter Beattie doesn�t have to think about all that. It is not a state premier�s problem. But Mark Latham does have to think nationally. What happens to our thriving IT companies, our creative arts companies, our biotech companies, our garment design houses, under this agreement? Will the best of them be cherry-picked and sucked up by US capital in the new integrated commercial environment? Thanks, John, for bringing us this Trojan horse.

� Meanwhile, as US Ambassador Tom Schieffer has reassured us, we can all go back to making parts � simple low-value ones, I guess � for cars assembled in the US. Remember those low-wage assembly lines in the 1960s? The high value end of the car industry � the design, the marketing, the high technology and IT � can flow back to US parent companies. Goodbye, Holden, Falcon, Camry. Is this really where 60 years� effort to build a viable Australian car industry � that we now have finally achieved – ends? Thanks, John. Thanks, Ambassador.

Wake up, Beattie! This FTA isn�t about protecting Australian jobs or capital. This shonky deal is about John Howard trying to salvage something politically from the mess of his Iraq policy � to try to convince credulous voters that he has plucked some alleged economic benefit for Australia out of the tragic and shameful Iraq invasion imbroglio.

But he hasn�t. The Emperor has no clothes. There is not enough real benefit in this FTA for us. Even Vaile wanted no deal in the end � why are we all burying that recorded fact?

Ironically, the structure of this agreement � the small print – offers good prospect of benefits for US exporters and investors. Zoellick knew a good deal when he saw one. They are being offered preferential access to Australia�s national garage sale. Lots of good stuff to sell � but only one buyer, thank you � big, rich and white. You can see who will win there. No wonder the US Congress fell over itself to vote for this deal. As Zoellick murmured quietly, Australia offers “the low-hanging fruit”, The Canberra Times’ Jack Waterford reported the US diplomat as saying to him? “We like you Aussies, because you are such an easy lay”. Thanks again, John, for taking such good care of us. There is no net benefit to Australia in this FTA. There is only farmer disappointment, and unacceptable risk, and loss of sovereignty. We do not need this so-called Free Trade Agreement.