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Wed, Jul 23, 2003 - Page 12 News List

Australia-US trade pact may backfire

AFP , SYDNEY

Australia is jeopardizing its economic and security interests by pursuing a free trade deal with the US which will discriminate against its Asian trading partners, one of the nation's leading trade experts warned yesterday.

Ross Garnaut, a former adviser to prime minister Bob Hawke's government and now an academic with the Canberra-based Australian National University, said there were also major flaws in officials' claims as to the value of the deal to Australia.

Garnaut was giving evidence to a federal parliamentary committee which is examining the General Agreement on Trade in Services (GATS) and the proposed free trade agreement (FTA) with the US which is now under negotiation.

The third round of formal FTA negotiations began in Hawaii this week.

An Australia-US FTA has become a key trade policy objective of Prime Minister John Howard, who now enjoys a close personal relationship with US President Geroge W Bush.

Garnaut said that by striking an FTA with the US, Australia would hurt its economic interests which may lie with other countries.

Instead of focusing on the current round of WTO trade talks, which would produce far larger benefits by cutting tariffs and subsidies everywhere, Australia was working on a deal that would do little for the national economy, he said.

"An FTA with the US of the kind currently under negotiation is likely to damage Australian economic interests and possibly damage Australia's security interests through the tensions it may introduce into relations with the US," Garnaut said.

"The negotiation of such an agreement at this time would accelerate the weakening of the multi-lateral trading system that is currently in process by adding to momentum for the development of discriminatory trade areas," Garnaut said.

Garnaut said some East Asian countries were now looking at their own bilateral deals which would exclude Australia.

"Trade discrimination within East Asia, from which Australia was excluded; for example giving Thailand and Philippines preferences in the Chinese, Korean and Japanese markets, would be devastating for Australia and discussions are now underway to do precisely those things," he said.

"Any potential gains in the US market from the bilateral agreement would on analysis be trivial compared with potential loss of our main markets and main growth markets in East Asia."

The federal government has claimed the FTA would boost the Australian economy by about A$4.0 billion (US$2.6 billion) a year.

Garnaut said some of the assumptions underpinning that claim included overseas ownership of Australia's banks and other major policy changes.

"One has to face up to the fact that you've got to change the policy before you get the gains and the gains will be bigger if you don't restrict foreign ownership to American ownership," he said.

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