Polish on a Rough Trade

Currently, the big trade news is the US decision to put barriers on steel imports.  As a major steel producer at BHP's Westernport plant, Victoria has a real interest in this issue.

Any moves that diminish our exports threatens jobs.  This is especially unfortunate in an industry like steel where Australia is highly efficient.

By the same token, the USA was facing a major threat to its employment levels from a torrent of imports.  In its actions, the Bush Administration seems to have abided by world trading rules, which provide for temporary import restraint measures in such circumstances.

For its part, the Australian Government is preening itself on its success in winding back the impact on Australia's steel exports to the USA from an initial level of 60 per cent of the total to 15 per cent.  Perhaps this is partly due to our favourable image in the USA, which has also brought USA agreement to negotiate a free trade treaty with Australia.  The benefits of such a treaty are amply demonstrated in the present steel case where Mexico and Canada -- two nations with a free trade agreement with the US -- are immune from cutbacks.  This is in spite of the fact that those countries' steel exports to the US are many times the size of Australia's.

It therefore makes no sense for the Federal ALP to argue against an Australia-USA free trade agreement.  And the Premiers of Queensland and New South Wales seem to have rejected the line taken by their Federal colleagues.

However, the benefits to Australia of a free trade treaty with the USA go far beyond the immediate issue of the day.  We also have a risk, following the farce of anti-globalisation demos in Seattle and here in Melbourne, that the movement towards freeing up commerce on a world level is grinding to a halt.  If we don't move forward in liberalising trade, we might well move backwards.

The US is a natural trading partner with Australia.  It supplies a fifth of our imports and is the market for over ten per cent of our exports -- and a far higher share than this for the faster-growing processed goods exports such as steel.  Our economy is tied closely to that of the US in terms of investments and technology exchanges.  Australian investment in the US is worth over $150 billion and US investment here is worth over $220 billion.

A free trade agreement does not foreclose more open multilateral trade, but if the world is to split into competing trade blocs, Australia is far better off with the US.  Like Australia, the USA is highly imperfect in ensuring its markets remain fully open to the cheapest supply.  But the US does tend to support the lower level of government intervention in commercial relations and imports, which we also espouse in Australia.

Moreover, a free trade agreement with the USA offers the prospect of greater agricultural access.  This is something that would be inconceivable with the European Union, which is the alternative partner if the world is to deviate from a multilateral trade setting.

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