Weeding out the GM Problems

On February 2 the European Union (EU) rejected an application from Bayer CropScience to grow genetically modified (GM) canola in Europe.  The application had been pending since 1996, the same year GM canola was first grown commercially in Canada.

I read the final report and found that the issue was "a loss of biodiversity" as demonstrated in farm-scale evaluation trials in the UK.  This was attributed to "better weed control".  In fact, there was a "3-fold lower weed biomass and a 5-fold lower (weed) seed rain" compared with conventionally managed canola.

I was dumbfounded, because the GM canola was being rejected for the very reason it had been developed -- better weed control.

The history of crop cultivation in Europe dates back 2,000 years.  Many crop weeds are now considered native and valued by conservationists as habitat for insects that are fodder for farmland birds.  The same weeds are a production cost.

If the UK trials had shown the GM canola system did not give improved weed control, no doubt the technology would have been rejected on the basis that it failed in its key objective.  The trials showed cultivation of GM canola provided superior weed control and GM canola was rejected because of the fewer weeds which was interpreted as "a loss of biodiversity".  Clearly the GM companies are in a no-win situation in Europe.

Weeds are estimated to cost Australian agriculture in excess of $4 billion each year.  Because weeds are such a significant cost, herbicide tolerance is the most sought after trait in GM crops and makes up three quarters of total GM plantings worldwide.

In contrast to the EU determination, the Australian federal government recently approved the planting of GM canola on the basis that it is no more harmful to human health or the environment than conventional canola varieties.  However, moratoriums introduced by the NSW and Victorian governments prevent commercial plantings.  Over the next few months the NSW government must decide whether it will approve large scale farm trials.

The trials are to test the potential for "co-existence" between GM and non-GM canola.  Yet successful GM industries including Canadian canola and Australia cotton, while growing a percentage of both GM and non-GM plants, do not segregate the final product because their major export markets are not prepared to pay the additional costs.

We are at a cross roads in Australia, we can either go-the-way of Canada and accept GM canola, or we follow Europe and reject the technology.

The implications are significant.  European agriculture is heavily subsidised and is increasingly as much about the provision of "environmental services" as it is about food production.  In contrast Canada has embraced GM technology and is now the major world exporter.

Seventy-five per cent of Canadian product is genetically modified.  Japan and China are Canada's two main export markets.

Australia currently consumes and exports vegetable oil from both conventional and GM cotton seed but only from conventional canola.  Interestingly the Europeans have approved the importation of GM canola seed for consumption (i.e. they will eat GM, but not grow GM).

Further, the documentation supporting the decision to reject GM canola indicated a key herbicide currently used to control weeds in conventional canola in Australia will be phased out in Europe by April 2005 because of environmental concerns.

If we reject GM canola we will be denying Australian canola growers the production efficiencies their competitors -- Canadian canola growers and Australian cotton growers -- enjoy in new GM varieties.

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Fighting Ignorance with Evidence

Address to the 2004 combined Annual General Meeting and Conference of
Property Rights Australia,
Roma, Saturday 14th February 2004.

"Saints should be presumed guilty until proven innocent."

George Orwell, 1949

INTRODUCTION

A prominent objective in the Property Rights Australia (PRA) Constitution is, "Ensure detailed scrutiny of any scientific basis quoted by government in support of its policy decisions".

At your first Annual General meeting in July last year, I focused on how science is being prostituted to undermine the legitimate property rights of primary producers.  I gave examples illustrating the extent to which environmental campaigns, supported by government scientists, are increasingly appealing to science to force government policy decisions for the protection of the environment -- all the while telling whopping lies.

Thank you for the opportunity to return and address this second annual general meeting of PRA.  Today, I want to consider how it is that environmentalists get away with telling such big lies.  I will begin with the big issue for PRA -- that is, restrictions on tree clearing in western Queensland.  I will then touch on some of the Murray-Darling Basin issues that I have researched over the last six months before considering the nature of environmental fundamentalism.

TREES HAVE BECOME SACRED IN
AUSTRALIA -- LIKE COWS IN INDIA

The way we define a problem will have a powerful effect on the way we think about solutions to that problem.

The Productivity Commission recently released its Draft Report on the Impacts of Native Vegetation and Biodiversity Regulations. ^[1]  The report defined the policy problem thus:  "The problem that prompted this inquiry is that private landholders are perceived as providing too little native vegetation and biodiversity conservation on their land."

If this were the case, the native vegetation regulators across Australia would target those who have no trees on their properties and, for example, suggest that they replant.  The Productivity Commission's definition of the problem side-steps the real issue:  across Australia, landholders with heavily timbered properties are the ones most affected by the regulations because it is the act of clearing that is the real issue.

The bottom line is that trees have become sacred in Australia, like cows in India.  It is the act of cutting down trees that most offends environmental fundamentalists -- it is the ultimate sin.

But environmentalists confuse us, they give the impression that they are all about science and they appeal to the authority of science.  They claim that trees need to be protected to prevent land degradation, protect biodiversity and prevent global warming.

The Productivity Commission's report, reflecting this popular but naïve assessment of the problem, states:  "the reasons for increasing conservation on private land, and the benefits of doing so, will vary by region depending on issues such as how much native vegetation exists, what habitat it provides, and what key objectives the government wants to pursue (for example, salinity, climate change or biodiversity)". ^[2]  Yet the reality is that for any one region the objectives (salinity, greenhouse, runoff, biodiversity) have been promoted at different times depending on what the conservation movement believes will give it most political leverage at that point in time.  For example, in South West Queensland, restrictions were introduced with the Queensland Vegetation Management Act 1999 on the basis that there was a need to conserve biodiversity.  It soon became evident, however, that there was still potential for clearing, so the need to stop clearing to prevent salinisation of the landscape was promoted, culminating in additional restrictions based on flawed salinity hazard maps in July 2002. ^[3]  When it was evident that even with the biodiversity and salinity restrictions there would still be potential for some clearing, there was a push for controls for greenhouse reasons, culminating in the moratorium on new permits introduced in April 2003.

The latest campaign, launched by the Wilderness Society in December 2003, is focused on a series of television advertisements shown, "on the Sunshine Coast and Gold Coast over the busy summer holiday period to bring the problem of land clearing into people's lounge rooms". ^[4]  It ran with the slogan, "Land Clearing -- Turning Queensland into Wasteland".

The Queensland Herbarium recently completed analysis of data from 2001 which showed that 81.3 per cent of Queensland remains covered in what is classified as remnant vegetation. ^[5]  The figure for 1997 was 82.3 per cent and for 1999 is 81.8 per cent.  So while it may seem hard to believe, the reality is that most of Queensland is covered in remnant vegetation -- Queensland is not being turned into a wasteland!

Yet the clear impression from the campaigners, via the media, is that landholders are irresponsibly clearing large areas of native vegetation -- resulting in irreparable damage to the environment.  Even during the height of clearing in 1999-2001, however, the annual clearing rate was only 0.7 per cent of the 81 million hectares of woodland and forest ecosystem in Queensland. ^[6]  Furthermore, the 2001 estimate that forests covered 81 million hectares of Queensland is an increase of 5 million hectares over a 1992 estimate that put forest cover in Queensland at 76 million hectares. ^[7]  The Australia's State of the Forests Report 2003 also suggests an increase, rather than a reduction, in the area of Australia covered in forest.

No-one, however, is reporting the net increase.  The media and even the Australian Bureau of Statistics are only interested in reporting the clearing. ^[8]

The general impression, reinforced by the jargon used in the Queensland Vegetation Management Act (VMA), is that trees don't re-grow.  There is constant reference to the protection of remnant vegetation.  Yet the detail of the legislation accommodates and includes "re-growth" in the definition of "remnant" where re-growth is at least 50 per cent of cover and 70 per cent of the height of what would have been its undisturbed state.  As a consequence, "remnant" can include vegetation less than a decade old.

The general impression, supported by the legislation, is that remnant ecosystems are fixed in time and place and steadily disappearing.  It is assumed that the maintenance of these remnant ecosystems simply involves the exclusion of human activity.  Yet the reality is that the Australian landscape is constantly evolving and changing and has been actively managed for thousands of years -- predating European settlement.  Along the coast, the fire regimes of the Aborigines created open eucalypt woodland where rainforests would have otherwise developed. ^[9]  In the semi-arid rangelands, remove fire and introduce cattle and the tendency in Australia (and other parts of the world) is for woodlands to thicken and acacia thickets to replace once open grasslands. ^[10]  Despite the phenomenon of vegetation thickening being well documented in the scientific literature, its existence as a phenomenon and its potential impacts on farm viability continue to be ignored.

The phenomenon is ignored because the concept of an "Eden" is so important to environmentalism as a religion, along with the idea that because broad-scale tree clearing occurs, Queensland must be turning into a wasteland.  We have cut down trees, therefore we have sinned and therefore everything must be going to hell.  Never mind that trees grow back and never mind the statistics which, on scrutiny, might indicate our grasslands are more at risk than our forests.  Interestingly, Queensland satellite data show that 26 per cent of all clearing in 2000-2001 was of land that had no trees in 1991. ^[11]

PROPAGANDA EVERYWHERE

The Australian Conservation Foundation media release of 19th February, 2003, stated:  "The scale of commitment to landclearing and woodlands protection issues from national state and local (environment) groups has now reached a high level, comparable to the native forest protection campaigns of the eighties and nineties".  In the same way that metropolitan Australia has been led to believe that graziers are turning western Queensland into a "treeless wasteland", environmental fundamentalists have created propaganda about the activities of other resource users -- foresters, fishers and miners.

You may believe that environmental campaigns are justified in southern Australia, where so much environmental harm has allegedly been done.  However, I have just spent the last six months searching for evidence to support the widespread belief that the Murray River is getting saltier, that the area of land affected by dry-land salinity is increasing, that thousands of 300-year-old River Red Gums are dying in southern Australia -- but all I have found is just more propaganda.  Salt levels in the Murray River have actually halved over the last 20 years, the area at risk of irrigation salinity has reduced by over 90 per cent in the NSW section of the Riverina, and I can find no evidence to suggest that the area currently affected by dryland salinity is increasing. ^[12]  Despite claims that River Red Gums forests are dying from lack of water as a result of river regulation and extensive logging, the data actually show that, for example, in the Barmah forest the trend was one of increasing saw log volume and growing stock during the twentieth century.

Murray Cod was listed as a threatened species in July last year on the basis that there had been a 30 per cent decline in numbers over the last 50 years.  However, there are no data supporting such claims.  The most widely quoted source of information on native fish status in the Murray-Darling Basin is a survey undertaken in 1995-96 that did not provide any data from which trends with respect to improvement or deterioration in fish numbers could be determined. ^[13]  The report's principal conclusions include the statement that:  "A telling indication of the condition of rivers in the Murray region was the fact that, despite intensive fishing with the most efficient types of sampling gear for a total of 220 person-days over a two-year period in 20 randomly chosen Murray-region sites, not a single Murray cod or freshwater catfish was caught."

It is evident, however, from fishing magazines and the results of local fishing competitions that Murray cod are present.  The annual Deniliquin Yamaha Fishing Classic, for example, registered a record 48 Murray cod in 2003. ^[14]  A feature in the winter 2003 edition of Freshwater Fishing Australia's titled "Riverina Revival" included comment that, "The mainstay of the Edward River fishery (an anabranch of the Murray) is the Murray cod and numbers at present are high ... the number of juvenile fish of 45-50 cm just short of legal length of 50 cm, can be frustratingly high for anglers looking for a keeper." ^[15]  But perhaps most remarkable is that at the same time, in the same years, that the scientists were undertaking their now much-quoted survey that found no Murray cod, commercial fishermen harvested 26 tonnes of Murray cod from the same region! ^[16]

The local retort to the scientist's declaration that they didn't catch any fish goes something along the lines, "The scientists, although having letters behind their name, spending some $2million on gear, and 2 years trying, evidently still can't fish." ... or perhaps they just didn't want to catch any fish.  I have observed that while environmental fundamentalists, often with scientific qualifications, express great concern over a problem, they also seem very committed to the problem and to its continued existence.

It may seem counter-intuitive, but most statistics show that the condition of the environment in developed countries, including Australia, is actually improving. ^[17]

ENVIRONMENTAL FUNDAMENTALISM

I was emailed an article by Henry I. Miller ^[18] some weeks ago, titled "Applying science by public vote".  It began with a teacher asking her third-grade class, "How can you tell whether a whale is a mammal or a fish?"

"Take a vote," suggested one of the pupils.

"This idea might be amusing coming from a child, but it is a lot less funny when applied by governments to the formulation of complex policies that involve science and technology.  And it's an approach becoming increasingly common around the world," wrote Miller.

Voting is the hallmark of a democratic process -- and democracies are founded on the laudable principles of liberty and equality.  But democracy has nothing to do with the scientific process.  Science is a way of attempting to understand the world in which we live from a rational point of view, based on observation, experiment and tested theory.  History has shown that it is often mavericks, who determinedly ignore the consensus opinion and "swim against the tide" in pursuit of the truth, that have contributed most to our understanding of the natural world.

If we consider the history of humanity, we find that societies that tolerate both the unencumbered pursuit of knowledge and the democratic process are rare.  Humankind has often existed under regimes where religious belief dominates the cultural and political landscape and scientific research is constrained.  Religion is about faith, while science is about observation.  Science requires discipline, but has no respect for authority or consensus.

A new religion has emerged in the West over the last few decades.  Environmentalism has been described as the preferred religion for the urban atheist.  In a speech given in San Francisco last September, Michael Crichton, author of Jurassic Park, said, "Why do I say it's a religion?  Well, just look at the beliefs.  If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.

There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a judgment day coming for us all.  We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability.  Sustainability is salvation in the church of the environment.  Just as organic food is its communion, that pesticide-free wafer that the right people with the right beliefs, imbibe." ^[19]

Although Christians, for the most part, now accept an independent role for science, Environmentalists increasingly appeal to science to give authority to their policies.  This apparent strength is also a significant weakness.  Environmentalism is very vulnerable to the evidence because, unlike many of the "old religions" that invoke faith, environmental fundamentalists claim that science supports their policies -- the same policies that, for the most part, have no basis in observation or tested theory.  So, increasingly, situations arise where the evidence, the facts, contradict the rhetoric and also the plan that is meant to deliver "Ecologically Sustainable Development".

Rather than accepting the evidence and throwing out the policy -- and admitting that the emperor never had any clothes -- governments are increasingly sponsoring committees to find a solution to this dilemma that they can claim represents the consensus view.  Propagandists have long used the notion of consensus to draw the doubting individual into agreement by presenting their view as the unanimous opinion of all right-thinking people. ^[20]

There is a growing awareness, particularly in rural and regional Australia, that science in the context of environment is being abandoned for propaganda.  Propaganda is the antithesis of honest education and information.

There is a need for people to stand up and be counted and point out that the evidence does not support the rhetoric -- that the emperor indeed has no clothes.  This is beginning to happen.  I have met courageous individuals who really do care about the environment and the truth.  They are a diverse group including fishers along the Murray, rice growers from the Riverina, a bush woman from the High Country (who suffered so much during the bushfires last year), graziers in western Queensland and north all the way to the Daintree and Cape York.  Let us, together, fight ignorance with evidence.

Thank you.

---

ENDNOTES

1.  "Impacts of Native Vegetation and Biodiversity Regulations".  Productivity Commission Draft Report.  December 2003.  Page 159.

2.  Ibid, page 160.

3.  The Salinity Management Handbook, Queensland Department of Natural Resources 1997 explains that areas receiving less than 600mm per year in Queensland are not at risk of salinity because insufficient rain falls to satisfy plant demand and recharge ground water -- in southern Australian where most of the rain falls in winter the equivalent situation occurs at around 200mm annual rainfall.

4.  Land clearing -- turning Queensland into wasteland:  TV Ad campaign brings bulldozers into lounge rooms.  Wilderness Society Media Release.  26th December 2003.

5.  Dr Gordon Guymer, Director, Queensland Herbarium, Queensland Environmental Protection Agency, personal communications, 29th January 2004.

6.  Queensland Department of Natural Resources and Mines.  Land Cover Change in Queensland 1999-2001.  Issued January 2003.

7.  Ibid., page 14.

8.  Marohasy, J. 2003.  "How useful are Australia's Official Environmental Statistics?" IPA Review.  55:  8-10.

9.  Neldner V.J., Fensham, R.J., Clarkson, J.R. and Stanton, J.P.  1997.  "The natural grasslands of Cape York Peninsula, Australia.  Description, distribution and conservation status".  Biological Conservation.  81:  121-136

10.  Burrows, B. 1999.  "Tree clearing -- rehabilitation or development on grazing land?" IV International Rangelands Conference.  Townsville, Australia.  Fensham, R.J. & Skull, S.D.  1999.  "Before cattle:  A comparative floristic study of Eucalyptus savanna grazed by macropods and cattle in North Queensland", Australia.  Biotropica 31, 37-47.  Fensham, R.J.  1998.  "The influence of cattle grazing on tree mortality after drought in savanna woodland in North Queensland".  Australian Journal of Ecology 23, 405-407.  Fensham, R.J.  1998 "Resolving biomass fluxes in Queensland woodlands".  Climate Change Newsletter 10, 13-16.

11.  Land Cover Changes in Queensland 1999-2001, Queensland Department of Natural Resources and Mines, January 2003.  (See pg 26.  Table 6.  http://www.nrm.qld.gov.au/slats).

12.  Marohasy, J. 2003.  "Myth & the Murray:  Measuring the Real State of the River Environment".  IPA Backgrounder.  Vol 15/5.

13.  Fish and Rivers in Stress:  The NSW Rivers Survey, J.H. Harris and P.C. Gehrke (eds), CRC for Freshwater Ecology, Canberra, 1997.  (See http:enterprise.canberra.edu.au/WWW/RiverSurvey.nsf)

14.  "Good Cod!  Anglers refute threatened species claim", Deniliquin Pastoral Times, 4th July 2003.

15.  "Riverina Revival" by M. Auldist in Freshwater Fishing Australia.  Issue 63, Winter 2003, pg 32.

16.  Reid, DD, JH Harris, DJ Chapman.  "NSW Inland Commercial Fishery Data Analysis", FRDC Project No. 94/027.  December 1997

17.  The Skeptical Environmentalist:  Measuring the Real State of the World.  Bjørn Lomborg.  Cambridge University Press, 2001.

18.  "Applying science by public vote".  Henry I. Miller.  The San Diego Union-Tribune.  2 December 2003.

19.  "Remarks to the Commonwealth Club".  Michael Crichton, San Francisco, 15 September 2003.

20.  Davies, N.  Europe:  A History.  Pimlico.  1997

Sceptics, the Environment Needs You

Last year, on the eve of a visit to Australia by Associate Professor Bjørn Lomborg -- Danish statistician and author of the international best seller The Skeptical Environmentalist -- Clive Hamilton warned us to be skeptical of him because he had been found guilty of scientific dishonesty and because his book was a political polemic, not a work of science (The Age, September 18, 2003).

Lomborg challenged the dishonesty accusation.  Just before Christmas a ruling was handed down by the Danish Ministry of Science, Technology and Innovation strongly repudiating the findings of its own Committee on Scientific Dishonesty and concluded that the original judgment was emotional and contained significant errors.  Lomborg commented, "I am happy that we now have confirmation that freedom of speech extends to the environmental debate".

While many made much of the dishonesty finding, the repudiation has gone largely unreported.

Why is it that a witch-hunt was orchestrated against a mild mannered statistician whose main message was simply that we should, "examine the facts before forming our conclusions"?  Based on an assessment of internationally accepted official statistics, Lomborg showed that key environmental indicators -- including water and air quality and forest cover -- show an improving trend in most developed countries.  In addition Lomborg showed that some problems are not as serious as suggested and that solutions are indeed being found.  That this proposition was greeted with hostility and outrage by many high profile environmentalists is illustrative of the extent to which they are -- while claiming great concern over a problem -- also deeply committed to the continued existence of the problems.

Societies that tolerate the unencumbered pursuit of knowledge are rare.  More often than not religion and ideology dictate their cultural and political landscape, thus constraining scientific research and its reporting.  The process used by the Danish Committee of Scientific Dishonesty to declare Lomborg "dishonest" was more reminiscent of some ancient medieval rite than of a scientific committee.  That Clive Hamilton and others relied so heavily on this shamefully fabricated verdict to discredit Lomborg speaks volumes.  Indeed, environmentalism is emerging as a new and sacred religion, with Greenpeace and the World Wide Fund for Nature representing the new church, complete with charity status and tax exemptions -- for their multi-million dollar earnings.

It was wrong of Clive Hamiton to state that Lomborg believes, "improvements to the natural environment render environmental activism unnecessary".  On the contrary, in his address to the National Press Club last year Lomborg stated, "I think we should be incredibly happy we have Greenpeace.  I think it's incredibly important to say that people don't act in bad faith.  When business organisations go out and say, 'don't worry so much about the environment', they might actually have a point.  We should certainly listen to them.  But they also have an interest, and we should remember that.  Likewise, when Greenpeace go out and say, 'we're all gonna die and we need to act now', they might be right too, and we should certainly listen to them, but they certainly also have an interest.  The problem is that while few people trust business organisations, most people actually believe Greenpeace over and above independent scientists, university scientists and public organisations.  That, I think, is problematic."

During Lomborg's visit to Australia renowned Australian environmentalist Professor Ian Lowe cited the Australian Bureau of Statistic (ABS)'s report Measuring Australia's Progress and specifically land clearing in Queensland as evidence that Lomborg's treatise does not hold true for Australia.  However, if we scrutinise the ABS report in the same way Lomborg scrutinised other official data, we find that the ABS report is actually misleading.  The report only shows clearing rates and does not considering the overall trend with respect to vegetation cover.  When re-growth is taken into account we find that the trend nationally is one of increasing forest cover.  This trend holds true for Queensland where official government estimates showed an increase of 5 million hectares in the extent of woodland and forest ecosystem cover over the last 10 years.  The reader may find it hard to believe that the official statistics show 81 percent of Queensland is still covered in remnant vegetation -- a figure that has remained constant over the last decade.  Just because environmental campaigners ignore the facts, does not mean they go away.

The issue is real for Australia.  Despite the perception that our environment is deteriorating, the reality is that air and water quality are generally improving and there has been a net increase in forest cover over the last decade.  Koalas, once a threatened species, are now so numerous the Victorian government is introducing a hormone contraceptive plan to control numbers.

Given that we have spent much time and billions of dollars on environmental programs, this good news should not really be surprising.  However, as Lomborg would say, this doesn't mean we can't do better.  But let us move forward on the basis of the evidence rather than the failed predictions of our doomsayers.

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A Deal for our Future

With the appropriate last-minute drama, an Australia-US free trade treaty is to go ahead and the Howard Government will be preening itself on cutting a deal that offers Australia major benefits.

The US accounts for a tenth of our goods exports and a fifth of our imports, shares that are markedly higher once trade in services is counted.  With a few notable standouts, tariffs on both exports and imports are low.  Hence achieving spectacular benefits was never likely.  Instead, the objective was to make long term gains by integrating Australia into the world's largest and in many ways most dynamic economy.

Over the past fifty years, the key to the unprecedented rise in world prosperity, in which Australia has participated, has been steady liberalisation of world trade.  Unfortunately, anti-globalisation activists have succeeded in derailing further progress through the World Trade Organisation processes.  And there is a disturbing trend to erecting new trade walls, especially by the European Union.  Hence, though Australia's trade is increasing rapidly with China and other Asian countries, without the treaty with the US, we risked trade stagnation.

The free trade treaty with the US changes that.  It creates a platform on which the Australian domestic market is transformed from one of 20 million affluent people to one of over 350 million.

More than anything else the integration with the US will mean a gradual harmonisation of Australian prices for goods and services with those prevailing in the US.  The vastness of the US market brings keener competition there and lower prices across the range of goods and services.  Australian consumers are the obvious beneficiaries of this merging of markets but the greater competition and the potential for supplying niches will also ensure sharper focussed industries here in Australia.  Also important in this respect is the opening up the $200 billion market for US government purchases.

The reduction of the largely minor tariffs on manufactured goods will also bring benefits.  It must be remembered that with a ten per cent profit margin, even eliminating a tariff as low as 2.5 per cent is a powerful spur to increased sales as it means a 25 per cent profit improvement.

Progress in many agricultural areas was disappointing.

Lack of movement on American sugar tariffs is Australia's main frustration.  That said, the only reason why the US price is so attractive is that the its market is heavily protected -- in other words the US sugar price is artificially high and not one that we should rely on to build a sustainable industry.

Australian producers also remain largely locked out of the US dairy markets.  However most horticultural goods will see barriers removed, as will wine which has showed spectacular growth over recent years.  Some increased openings are also achieved in beef (and in recent years, Australian growers have been keen to sell more than US quotas allow) and sheep meat which has been growing rapidly.

For its own part, Australia gave little away.  The noisy entertainment industry has kept its protectionist local content restraints on imported material, though technology must surely eat away at the effectiveness of this.  Australian negotiators also held the line on pharmaceutical purchasing which gives us prices on most medicines at half of the US domestic levels.

Negotiating the agreement on free trade with the US was relatively easy precisely because trade with our giant ally is already largely free.  This means the short term benefits are hardly likely to be spectacular, but there is also little of the pain that uncompetitive sectors would suffer in the case of, say, free trade treaties with China or Japan.  Moreover, the treaty does not lock us into a discriminatory trade pact -- there are no consequential tariff increases against other countries.

The US is progressively seeking to shore up free trade in an area incorporating Canada, Mexico and other countries in Latin America and Asia.  The collapse of global multilateral trade negotiations, makes it important for Australia to be a part of this and integrating our economy closer that of the US has additional, if less definable, political and military advantages.

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Union Needs Scrutiny

Corruption, or the purchase of special treatment from political parties, is the cancer of democracy.

Australia is by most measures one of the least corrupt countries.  In fact, the lack of corruption, and its adjunct -- the impartial rule of law -- is widely considered to be one of Australia's main competitive strengths.

A major potential avenue for corruption is the provision of donations to political parties.

Australia has made significant strides in improving both disclosure and scrutiny of political donations, and thereby reduced the potential for possible corruption.

All political donations of above $1500, whether paid directly to political parties or indirectly through third parties, are disclosed and accessible through the Australian Electoral Commission website.

Both the media and politicians scrutinise this data and are continually on the lookout for special treatment.

For example, the fact that the Manildra Group gave a large donation of just over $300,000 to the Liberal Party, and that this group also received special treatment from the Howard Government for its ethanol operation, was exposed and discussed at length.

There is, however, a relationship that has received little scrutiny:  the relationship between the Construction, Forestry, Mining and Energy Union and the ALP.

The fact that the unions give money to the Labor Party is hardly controversial.  Moreover, the details of this funding are disclosed in detail on the AEC website.

The concern is that some unions, specifically the CFMEU, are demanding and receiving special treatment in exchange for political donations.

At its latest national conference, the ALP passed a resolution that committed a future federal ALP Government to give special preferences to "union friendly (read unionised, and union preferred) firms" in the issue of Government contracts.

This proposal was supported by -- and stands to benefit greatly -- the CFMEU (construction division), which in turn gave $460,000 to the ALP last year, making it the party's second largest donor.

This is not just a hypothetical policy either, as the Bracks Government has already put it into place in respect of some public works projects such as the MCG redevelopment.

Given that the policy violates all basic tendering rules -- increases costs, hinders competition and undermines job creation -- it cannot be rationalised as "in the public interest".

Indeed it looks and smells like "buying influence".  Or, in short, corruption.

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Workers' future debated behind IRC's closed doors

During the last six months of 2003, the Australian Industrial Relations Commission began hearing a case which is likely to have a profound impact on the way Australian business is organised and on the working lives of many Australians.  The "family friendly" case could change the fundamental structure of industrial awards in Australia.

But, so far, this key debate has been kept behind closed doors, secreted away from political or community input.  The closed door approach has occurred by agreement between the players involved in the applications and results from unusual tensions between them.

The family-friendly award proposals were initiated by the Australian Council of Trade Unions which applied for award changes based on a traditional and prescriptive "employee rights" versus "employer obligations" approach.  For example, the ACTU application seeks to allow employees to demand time off if a family member is ill.  The employer would have to agree to the demands and awards would prescribe in detail the process of allocating and managing the time off.

In responding to the ACTU application, the employer bodies could have done the usual and moaned about the cost to employers.  The stage for moral posturing would have been set where unions would say workers need new rights with employer organisations replying that the bosses can't afford it.

But this time something substantially different happened.  The major peak employer bodies responded to the ACTU application with a counter-application that would produce fundamental structural change to awards.  The major employer counter-application states that "if the employer and employee agree", individual employees and employers could vary a wide range of work arrangements without reference to industrial relations institutions.  The only stipulation on process being that an individual employer-employee agreement was genuine.

This individual agreement process sanctioned by awards would apply to things such as accessing part-time and casual work, being able to work "ordinary hours" on weekends, varying hours, days and times of work, accessing time off instead of payment for overtime and penalty rates, and a wide range of other key reforms.

The changes sought are historic and would have far-reaching implications on the mix of lifestyles and working choices formally available to workers.  The impact for businesses on how they could potentially service their clients would be substantial.

But the secrecy of the negotiations so far reflects the fact that the employer application has unsettled normal relationships between the institutions that control these matters.

There are indications of division within the employer ranks.  The Australian Chamber of Commerce and Industry with the National Farmers Federation and smaller employer bodies support the "by agreement" approach.  The Australian Industry Group errs to the more prescriptive model which is aligned to the ACTU's wishes.  The ACTU is prepared to discuss the AIG approach but won't discuss the employer-employee agreement model.

The ACTU is trying to manage deep internal union divisions, particularly between white- and blue-collar factions.  White collar unions are said to be disposed towards the "agreement" approach.  Blue collar unions want process imposed on employees.  The ACTU has sought to buy time by tying up the application with challenges to dozens of procedural matters, including excluding the construction industry from family-friendly consideration.

Of all this, the public to date knows little, has had no direct input -- yet it affects them intimately.

Over the last two decades, Australians' attitude to work and their expectations of it have changed massively.  An ageing but physically and mentally fit population want work options but not full-time.  Younger Australians are bored with the idea of a job for life.  Families need adaptable work.  People simply want income!  Yet "the people" are excluded from the debate and change process.

Australia's industrial award system is stuck in a framework that fails to match these newly emerging social needs of many working people.  The small number of players who have the capacity to change the work regulation system can renew the relevance of the system.  But this will mean a shift in their institutional roles and could prove the main blockage to family friendly and lifestyle reform in 2004.

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Putting Murray River where its Mouth Is

As a cause, Environmentalism has a lot going for it.  Promise to "save" something and you may not only feel righteous superiority but, if you are the leader of the Federal Opposition, it may help you stem the flow of votes from your party to the Greens.  Hence Mark Latham's recent promise to "save the whole Murray River" starting with an allocation of, "450 gigalitres (of water) needed to keep the mouth of the Murray open" (Murray plan a priority, The Land, January 22, pg. 17).

The Australian Conservation Foundation has made the River's mouth a symbol of River health and impressed upon the Australian public the belief that the mouth runs dry because irrigators take too much water from the river.

The reality is much more complex.

Before irrigation, the famed explorer, Charles Sturt, writing in the early 1800s, commented on the nature of Australian rivers, "Falling rapidly from the mountains in which they originate into a level and extremely depressed country;  having weak and inconsiderable sources, and being almost wholly unaided by tributaries of any kind;  they naturally fail before they reach the coast, and exhaust themselves in marshes or lakes;  or reach it so weakened as to be unable to preserve clear or navigable mouths, or to remove the sand banks that the tides throw up before them".

Under natural conditions during drought, the Murray River's main channel would run dry or reduce to a series of saline and stagnant pools.  As a consequence of the dams built over the last 100 years, however, even during the severe drought of the past few years there has been water in the River.

At Wellington the Murray runs into a large lake system.  A series of barrages constructed in the early 1900s at the bottom of Lake Alexandrina stops freshwater flowing out to sea and stops tidal flow into Lake Alexandrina, and the adjoining Lake Albert.

The barrages help maintain this now artificial freshwater system at a more constant water level.  This is considered important for boating and tourism in South Australia.  Evaporation from the lakes is estimated to be in the order of 600 to 1,000 gigalitres per year.

The Murray's mouth could reasonably be considered to be where the River enters the Lakes at Wellington.  However, the official "Murray Mouth" is the narrow, often blocked passage through the coastal sand barrier downstream of the barrages.  Any extra water for "the mouth" must thus pass through the Lakes.

Last year, as a consequence of the "Save the Murray Campaign" the concept of water flowing out the narrow passage downstream of the barrages became a national preoccupation.  Yet all the while water was flowing at Wellington and evaporating from the Lakes.  When it did rain in September, the barrage at Goolwa was lifted and water flowed from Lake Alexandrina out to sea.

In reality, more water for the "Murray Mouth" is likely to be a case of providing more water for evaporation from an artificial lake system at the expense of River Red Gums and Irrigators upstream.  The nonsense is illustrative of how both sides of politics have become too eager to sign up for environmental causes that may deliver no environmental benefit.

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Commonwealth Plays Catch-Up in Aboriginal Affairs

Secondary school age Aboriginal children who live in remote communities are returning to boarding schools in regional centres around Australia.  Like other students, some may want to stay at home.  Some primary school age Aboriginal children who live in remote communities on the other hand, may look forward to returning to the local school, if only to escape the chance of being assaulted at home.

Who has the authority to make the older students attend school?  Who has the authority to protect the younger students?

Ideally, parents should, but unfortunately some lack the requisite authority.  Indeed, when a family member abuses a child, the family is unlikely to provide protection.  In these cases, it is essential that the state intervene.  Until very recently, too many administrators have failed in their duty to Aboriginal children by not enforcing truancy and child protection laws for fear of offending Aboriginal politicians.

Fortunately, times are changing.  In a number of ways, state power is being reintroduced to help Aborigines integrate.

Truancy laws are beginning to be enforced in Queensland, the Northern Territory and Western Australia.  In Western Australia, parents will need to attend counselling or be fined if their children persist in truancy.  Teachers, education administrators and parents are learning that letting children escape schooling does not preserve indigenous culture.

Soon, officers of the Department of Families in Queensland will, for the first time in decades, be based in Aboriginal communities.  Aboriginal children at risk will no longer be placed with an Aboriginal family as a first priority, but with whomever can best care for them.

Aboriginal councils in Queensland will for the first time be elected on a non-racial basis.  For the first time, these councils will be able to levy their residents, to raise funds for house maintenance and other essential services.  Rates have never been an option, as there is no private property.

Aboriginal communities in Queensland have been given the power to control the possession and consumption of alcohol.  These laws, in the hands of Aboriginal people, are producing some startling results in reducing alcohol related offences and alcohol related injuries.

In the Northern Territory, the "cultural" defence by old men having sex with Aboriginal girls "promised" to them is now outlawed.  This hole in the criminal code was a disgrace to both sides of politics.

These changes are significant -- they eschew collective self-determination as an end in itself, although they embrace it where it promotes life chances, most likely to occur in the wider world, beyond Aboriginal-controlled enclaves.

How is the Commonwealth government to respond to these state government initiatives?

Since 1967, the Commonwealth has had the whip hand in Aboriginal policy, but it has squandered too much of its power on symbolism, rhetoric, and ideology.  It has invested too much of taxpayers' money on building remote slums.  It chooses to not use its authority in the few -- though expensive -- tools it has to intervene.  The two major programs -- the Community Development Employment Program and the Community Infrastructure and Housing Program -- come with few obligations.

The Commonwealth will need to decide if it should be propping up outstations and remote communities with CDEP and CHIP, or whether it uses the funds for training to help people leave communities.  Remote Aboriginal communities must come to grips with the need for at least some parts of their population to live and work elsewhere, balanced against the need to maintain connections with country and with kin.  CDEP should be a training program, not a work-for-the dole program.  Non-training unemployment beneficiaries could opt to undertake volunteer activities of the sort presently undertaken by CDEP.

The Commonwealth has been lumbered with big-ticket items like administering Native Title and funding the Indigenous Land Corporation.  The land rights struggle has ensured a particular historical form of Aboriginality, but it will not provide a life to other than a few tour guides and community gatekeepers.

The Commonwealth has also been lumbered with ATSIC.  A political infrastructure designed to create Tammany Hall politics.  ATSIC can act as a national secretariat for the Aboriginal community, and provide advice to the Minister, but that is all.  The Commonwealth should lend support to those with real authority in state government, the police, the teachers, the welfare officers -- many of whom will be Aboriginal -- who can make a difference.

Perhaps one of the most powerful tools in economic development will be the realisation that it is not enough to exist "on country", but to generate an income that can sustain the country.  The key will be to use state powers to ensure that children attend school.  In this regard, the Commonwealth needs to put its shoulder to the wheel.

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The Battle for the Battlers

The Labor Party's big challenge is to win back the battlers -- the many millions of working class people working hard to get ahead and live the good life.

And there is little doubt that Mark Latham is, amongst potential Labor leaders, best suited to the task.  He grew up in a working class family and in a working class neighbourhood.  He is hard working and aspirational.  He is a family man who has experienced a troubled family life.  He is pragmatic, intelligent and keen on experimentation.  Importantly he has a mind and he speaks it.

Part of the problem for Mr Latham and the ALP, is that working class of today is very different to that of the past.  Today's working class is wealthier, better educated and more empowered, than that of previous generation.  Its members are also more likely to be self-employed than work in a unionised factory.  Thus the Party can no longer rely on allegiances based on union membership, distrust of "the boss", the desire for wealth redistribution, ignorance or tradition.  It needs to go out and win its support with values and policies.

Also -- and this does to the heart of the ALP's problems -- there is a growing divide between the values and priorities of the intellectual elites, who have come to dominate the ALP, and the working class.  While the elites remain focused on such issues as reconciliation, refugees and the republic, the wider community remains focused on jobs, education and health.

Mr Latham has done well in refocusing the broad values and policy priorities.

His speech to the National Conference emphasised the need for hard work and for governments to focus on helping people help themselves.  He emphasised the need for personal responsibility.  He praised aspirational values and social mobility.  He took credit on behalf of the Labor Party for the economic reforms of the past two decades as well as the robust economy they produced.  He emphasised the importance of competition and productivity growth in producing jobs and investment.

His speech contained none of the "them vs us" and anti-globalisation rhetoric common in the past.

As for policy priorities, the speech emphasised education, health, families and taxes -- the priorities of the battlers.

The speech avoided comment on reconciliation (and reportedly a pledge to deliver a national apology to Aborigines was dropped).  The speech dwelled only briefly on refugee policy.  And while Mr Latham promised a republic, it is one based on model chosen by the public, including presumably a directly-elected president.

While he has done well with the broad brush, he is struggling with the details.

Mr Latham has quite adroitly focused on the high taxing policies of the Howard Government and on the need to give tax relief.  As Opposition Treasury spokesman he argued for tax cuts even for the higher income groups.  This is logically popular with today's working class -- most of whom are paying over 50 cents of each additional dollar earned in tax.  His proposal, however, upset many in the Party, particularly the powerful public service unions, who see tax cuts as a threat to their members' income and as a threat to their ability to redistribute wealth and to mould society.

Rather than go with his initial across-the-board tax cuts -- which incidentally would greatly reduce the many poverty traps currently in the tax system -- he committed to smaller more limited and as yet unspecified tax cut.  In so doing, he not only lost a chance to attract overtaxed battlers, but wealthier people sick of Howard and Costello's high taxing ways.

While Mr Latham correctly emphasised the need to focus on education, he lost the plot in the detail.  Education is without question on of the most important links in improving social mobility.  There is also little doubt that the existing system, particularly the public system has flaws.  The fact is that thousands of working class families are leaving the public system, at great personal cost, for the private system.  This move is not based on ideology or desire to join an old bays or girls club, but rather by a desire to get the best education for their kids.  The shift is not driven by changes in funding.  Over the last decade, all States have significantly increased funding to public schools with higher salaries, more teachers, more teacher aides and better facilities.  Indeed the expenditure per pupil in the public secondary schools exceeds by a substantial margin the comparable level of expenditure in the Catholic system.  While the Commonwealth Government has increased it support for private schools ( as well as for public schools), private schools fees have continued to rise.

Instead of recognising the need to address the reason for the loss of student to the public system, Mr Latham slipped in the old public vs private debate.  While this might solidify votes from the public school teachers, it will alienate the many working-class families struggling to pay private school fees.

Mr Latham also succumbed to the elites on higher eduction by promising to reduce tuition fees.  In short he agreed increase the tax transfer from medium income earners (who provide the bulk of tax revenue) to the future elite.  Put another way, he agreed to tax truck driver to subsidies doctors.  This is not only inequitable, but starves the universities of funds.

Mr Latham's most serious problems lie with the environment, or rather the pursuit of the urban green vote.  Over the last few decade the ALP steady abandoned it support for resource extraction industries in deference to the whim of urban voters.  This has been most pronounced in native forest industries.  While in the past Mr Latham has been a vocal critic of this process, as the new leader he has embraced it.  He has committed to the ratifying the Kyoto Agreement, which will cost many thousand of jobs and achieve little.  He is considering reneging on the agreement (passed by State and Federal Labor Governments) to continue limited logging of old regrowth forest in Tasmania.  He has committed to taking 20 per cent of irrigators' water entitlements in the Murray-Darling River Basin, potentially without compensation.

Mr Latham is the person to bring the Labor Party back to it roots and to recapture Howard's battlers.  The question is:  will the Party allow him to do so or will it instead become more firmly the party of the chardonnay set?

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The New Protectionism

One of the largest threats confronting the world today is the rise of protectionism.

Trade liberation has been the single most important factor in the unprecedented rate of economic growth experienced over much of the world over the last sixty years.

Australia is no exception.  While we pursued protectionist policies for much of our history, we began reducing trader barriers in the 1980s.  This change in policy has contributed greatly to our recent "miracle economy".

Nonetheless, protectionist tendencies run deep;  deeper than logic and the national interest.  This was illustrated last week by the reaction to a report that Telstra IT jobs were going to India.

IBM Australia has for six years had a contract with Telstra to provide a range of IT services.  It recently informed Telstra of a plan to contract-out about 500 software development jobs to India -- where its parent company has close ties and major investments.  Telstra readily agreed as it was a win--win arrangement.

IBM Australia benefits from the decision by the renewal of its contract.  Telstra shareholders, including taxpayers, benefit from lower costs and better services.  Likewise, telecommunication consumers benefit from lower costs and higher quality services.  Even Australian IT contractors at least do not lose, as the savings are such that IBM Australia plans use a portion to redeploy all 500 contractors to other tasks.

Telstra also faced a competitive imperative.  Its main competitor, Optus, contracted-out similar IT services years ago (in its case to China) and is reaping the benefits.

One would have expected a positive response from politicians.  After all, Australia is a large net beneficiary of offshore contracting of services.  McKinsey & Co estimates these gains at around US$400 million per year.  Offshore contracts play a critical role not only to the local IT industry but the pharmaceutical, education, engineering, hospitality, accounting and legal industries.  Our comparative advantage in trade in services has long been recognised by successive Australian governments and this has led them to push for further liberalisation.  More perversely, successive Australian Governments have identified India -- the country to which the jobs in question are going -- as a key potential market for Australian service exports.

There are other less tangible benefits flowing from the decision.  It will generate wealth and jobs for Indians in a far more effective manner than the $20 million in foreign aid Australia provides per year.  It will help develop a powerful constituency within India to free up its markets for services as well agricultural products.  It will also help develop links between Australian and Indian firms.  And one thing is clear:  the Indian IT industry will become a world force with or without Australian involvement.

Instead of support and leadership, our politicians criticised the decisions.  The Treasurer, Mr Costello, warned Telstra to ensure that jobs went to Australian first;  the Opposition Leader condemned the decision and blamed it on the lack of training and the Democrats demanded that government use their purchasing power to punish companies which out source jobs off-shore.

The fact is that trade in service will increase as a share of world trade and will become increasingly important to the success of Australian firms and the economy.

As such, it is the new frontier of trade debate and needs to be better addressed.

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Casual alternative wrongly demonised

The proposal by the federal ALP to give casuals access to full time holiday and other entitlements reflects a long held view that any work that is not full time and not permanent is somehow illegitimate.

This is a view that ignores simple mathematics, appears out of step with community expectations and seeks to impose one model of business operations onto business.

Workers are attracted to casual jobs.  They normally receive 6 to 11 percent higher pay than full timers and are paid on the spot.  Under most awards, full time entitlements equate to about 19 percent of workers' weekly pay.  Award casual loading is mostly between 25 and 30 percent putting, casuals' income way in front of full timers.  Casuals are paid their entitlements in cash each week.

If the ALP proposal were to add additional holiday and other leave to casuals -- when they already have their leave paid out -- it would on the surface seem to enable casuals to double dip.

This could initially excite casuals giving them up to 30 percent higher pay than full timers.  But business wouldn't carry the additional cost and would have to make casuals permanent, saving business up to 11 percent on weekly wages which will come from the pockets of casual employees.

Being paid leave entitlements in cash each week saves casuals from the risk of company collapse.  Full-timer "entitlements" are in effect loans made to companies.  When companies collapse, full timers become creditors whereas casuals credit risk is limited to one week.  The ALP proposal potentially limits casualisation and exposes more workers to financial loss in company collapses.

Why then the ALP proposal?  There is a strong view amongst industrial relations and human resource academics, some managers, unions and some industry associations that the only socially legitimate form of work is full time, permanent employment.

These groups argue that national skills development is reduced by the use of casuals, that loyalty to the firm is not possible, that work safety is reduced and that employers avoid their responsibilities when employees are casuals.

The public relations "war" against casualisation has been occurring for about five years in Australia and perhaps peaked as a force at a packed Australian Industrial Relations Society conference in Adelaide early last year.

The three day talkfest featured all the key anti-casualisation campaigners, but what was surprising was the confusion that prevailed in the conference summations.  Whereas the underlying theme was that casualisation was an employer plot, several key case studies painted a starkly different picture.

For example a South Australian hospitals case study showed how the hospitals had to offer a wide variety of engagement types to attract and retain staff.  Their "standard" forms of employment included full time, part time, casual, contractor, agency and many more.

The diversity of engagement types was driven by hospital workers demanding alternate mixes of work -- or they weren't interested in working.  The message of worker demand was repeated at the conference in other case studies.

However the anti-casualisation campaigners brush with worker reality did not diminish the demonisation campaigns.

The ALP policy seems to be responding to the campaigns but it has potential political risk.

If the "employer plot" view is accurate, the ALP anti-casualisation proposal may be seen by employees as saving them from exploitation.  But if the South Australian case studies of worker demand is closer to the truth, the ALP risks angering large numbers of people.

This includes students who need casual work, older people who want to stay in the work force but on a highly casual basis, many working parents and people scared of business collapse.

These people have done their mathematics and know the dollar value of casualisation.

The Howard government quietly embarked late last year on a policy of neutralising industrial relations as a political issue in the next election.

If the ALP proposal is counter to community aspirations, an anti-casualsation stance -- even if masked by "worker rights" language -- risks backfiring on the ALP among many people who want casual work.

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The New Protectionism

One of the largest threats confronting the world today is the rise of protectionism.

This threat is real and its new face highlighted last week by reaction to Telstra's (or rather its contractor, IBM Australia), decisions to contract-out IT jobs to India.

While reports of rising protectionism in Australia have focused on such things as steel import quotas and agricultural subsidies, the focus in the US has actually been more on the loss of IT and other service jobs to off-shore operations -- known as "offshoring".

Indeed fear of off-shoring has led to five US states proposing legislation to prohibit or severely restrict the state governments from contracting with firms that contract-out services to low-wage developing countries.  The US union movement has also been actively lobbying Congress against off-shoring.

There is no doubt that off-shoring is a significant and growing phenomenon in the US.  Forrester, a leading IT consultancy firm, predicts that nearly 500,000 IT jobs will be moved offshore from the US over the next twelve years.  While this represents a small number of total US jobs, it represents 8 per cent of current IT jobs.

That similar concerns exist in Australia is much harder to understand.  While the US is a net exporter of off-shoring jobs, Australia is a large net beneficiary of off-shoring.  McKinsey & Co estimates that Australia benefits from off-shoring to the tune of US$400 million per year.  Moreover, our comparative advantage in trade in services has long been recognised by successive Australian Governments and this has led them to push for the liberation to trade in services.  More perversely, successive Australian Governments have identified India -- the country to which the Telstra IT jobs are going -- as a prime potential market for Australian service exports.

While the debate about trade in services is in many ways identical to that of trade in goods, it has some different aspects which make it both more difficult and important to advance.

Protectionism is based fundamentally on the notion that trade is a zero-sum game.  Of course, in reality, trade is win--win, at least when viewed from an economy-wide perspective.  This is illustrated nicely by Telstra's off-shoring decisions.  The facts are that Telstra's contractor of many years, IBM Australia, has decided to shift 500 software development jobs to India.  It did so to save costs, to access higher skills and to provide a greater range of services to it client.  IBM Australia benefits from the transaction by the renewal of its contract.  Telstra shareholders, including taxpayers, benefit from the ability of the Telstra to match it major competitor, Optus, which has off-shored similar services, and to generate profit.  Telecommunication consumers benefit from lower costs and higher quality services.  Australian IT contractors benefit from use of some of the saving to create new domestic jobs.

There are benefits from this decision.  First, it generates wealth and jobs for Indians, in a far more effective manner than the $20 million in foreign aid that Australia provides to that country annually.  Second it will help develop a powerful constituency within India to free up its markets for services as wells as goods.  Finally, it helps develop links between Australian firms and Indian firms.  And one thing is clear:  the Indian IT industry will become a world force, with or without Australian involvement.

Trade in services, however, has characteristics which make trade liberation more difficult (though there are major exceptions).  First, many service sectors have until now not been subject to foreign competition -- at least not directly.  Thus the idea is new and the new is often threatening.  Second, the service sector accounts for most existing and virtually all new jobs in Australian.  Thus the number of people affected by trade in services will potentially be much larger than for trade in goods.  Third, service providers are generally more affluent and articulate than farmers and manufacturers.  Fourth, the union movement has identified trade in services, particularly IT services, as fertile ground for its own renewal.  Little wonder that the union movement was the chief propagator of the recent Telstra off-shoring scare.

Finally, politicians are, with few exceptions, latently protectionist, seeking to use the power of the state to provide special favours and protection from the "outside".  This is particularly the case when it affects them and their own constituency, which in turn largely comprises service providers.  Hence we were subject to the absurd spectacle of all major parties chastising Telstra for doing what all governments have long advocated -- competing on a world stage and creating value for shareholders and the economy.

All is not gloomy, many parts of the service sector, most importantly the IT industry, have a global, competitive culture.  More importantly still, technology is likely to thwart any efforts to stop trade in IT services.  The culture of the contractor in the service sector will also limit the influence of unions.

Nonetheless, services are likely to be the next battle ground for free trade.

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The New Missionaries: NGOs in Third World Development

NGOs are the new missionaries to the Third World.  The original missionaries carried messages of Christianity and capitalism.  Many of the new missionaries whether Christian or not, are decidedly anti-capitalist.  Many are given unwarranted legitimacy in international forums.

Oxfam/ Community Aid Abroad has been active for many years, seeking a reduction in the debt owed by the most heavily indebted poor countries to multilateral institutions such as the World Bank and IMF.  A nice thought, except that the successive forgiveness of debt provides an incentive to continue Third World practices that created the debt in the first place.

Guilt, wrongly attributed, and altruism, can raise money for transfers of wealth between the First World and the Third, it has succeeded in capturing the minds of international bureaucrats in the UN, and at times unfortunately in the World Bank, though less so at the IMF.  Guilt, however, is no substitute for the message of economic development based on sound political and economic institutions.

Take one very prominent example, the Jubilee 2000 campaign to forgive the debt of poor countries.  Oxfam and the churches, with the Pope and the Dalai Lama and stars like Bono of rock group U2 pressed Western governments to forgive the debt of the poorest countries.  The argument was to let them start afresh without the burden placed on them by the West.

A former World Bank economist, William Easterly, has tested the incentives in debt forgiveness.  He found that the big problem is that debt forgiveness is not new.  The World Bank/ IMF Highly Indebted Poor Countries Initiative, now running at $27 billion, stands on the shoulders of decades of previous rounds of debt forgiveness.

The promise of Jubilee 2000 was no different to all of those that have gone before.  "The debt campaigners treated debt as a natural disaster that just happened to strike poor countries".  The truth is not so charitable.  Countries that borrowed heavily did so because they were willing to mortgage their future.  They were irresponsible, they sold productive assets into unproductive hands, they built unproductive infrastructure, they favoured one ethnic group above another, or one region above another, they ran inflated economies, they were corrupt, they waged war, they allowed black markets to develop because they controlled exchange rates and interest rates.

How many "progressive" NGOs would sign up for Easterly's remedies?  "Does the government of each nation face incentives to create private sector growth, or does it face incentives to steal from private business?  In a polarised and undemocratic society, where class-based or ethnically based interest groups are in a vicious competition for loot, the answer is probably the latter ... In a democratic society with institutions that protect the right of minority interest groups, institutions that protect the right of private property and individual economic freedoms, governments face the right incentives to create private sector growth".

Environmental NGOs have bought into the trade, aid and development game as well.  The Australian Conservation Foundation is active in Papua New Guinea, supporting local NGOs pressing its line on "ecologically sustainable development" and "management of natural resources".  Green NGOs will cite the Ok Tedi mine as an example of poor exploitation practices.  Ok Tedi experienced wash from a tailings dam escaping into the local river and affecting the amenity of the residents downstream on the Fly river.  The action brought by Slater & Gordon in Australia was the straw that broke the camel's back in terms of BHP's involvement with OTML in the mine.  They walked away from the mine, agreeing to pay compensation to certain groups.  They were already paying compensation to others, already paying for infrastructure and development costs in the immediate region, they were already subject to an Act of the PNG legislature requiring specific performance in all matters associated with the mine, including environmental management.

The mine continues, in the hands of the PNG government, but with a significant and skilled partner, BHP absent.  The chance for PNG citizens to break out of the primitive existence is diminished.  The Greens wants to keep the PNG villagers in the Stone Age.

A contrast in the Pacific, where the progressive NGOs are conspicuously absent, or at least ineffectual, is New Caledonia.  Rather than opt for the liberation path of the post-colonial so disastrous for their neighbours, such as the Solomons, New Caledonia is "still lucky to have France".  New Caledonia has a First World standard of living, high literacy rates and long life expectancy.  The careful and long-term devolution of power from the colonial power to the locals, contrasts with the Anglo experience in the Pacific, where the liberationists have reaped the dividend of poverty and mayhem.

Latham's Choice: Put the Child or School First?

Labor now has a communicator;  the next trick is to work out what he needs to communicate.  The new leader of the Opposition, Mark Latham, will have to wear statements made as Treasury spokesman, but to some extent, a line can be ruled under nearly all previous statements.  The electorate are for the first time listening to him as Opposition leader, so he has an opportunity to make, not remake himself.

In the next nine months, Latham has to negotiate National Conference, sell the policies developed by his team, and begin to think in terms of specific seats.  He has to do this with one very important worry in the back of his mind.  Labor may never again win a parliamentary majority.  It is the same problem the Liberals face, as the Nationals begin to fade from the scene.  The vote share by the three major parties averaged 97 per cent for the 1949 and 1951 elections, 80 per cent for the 1998 and 2001 elections, and 77 per cent for 2001.  Labor's share of that diminishing vote was only 37.8 percent -- lower than in any of the big defeats of 1975, 1977, and 1996 and the lowest primary vote for the party since 1906.  No matter what the polls say, it is a long way back.

The stability of the party system may well unwind as the majors find it just too much to spread their tiny membership, and their policies across a very broad spectrum of policy demands.  Simple electoral arithmetic may soon be outdated.  Minority government has been the experience of nearly every state government in the last decade, and there are more Independents in the House of Representatives than has ever been the case.  There have only been nine Independents out 727 members elected to the House of Representatives since 1941, most of those successes occurred since 1990.

That is the future, but back to the present.  The easy part is the faces.  Latham starts with a minor reshuffle.  The main winners are Simon Crean as Shadow Treasurer, Julia Gillard's additional duties as Manager of Opposition Business in the House of Representatives, Nicola Roxon as Shadow Attorney-General, Robert McClelland in Home Security, Daryl Melham as Shadow Minister for Housing, and Stephen Smith as shadow Immigration spokesman.  The rest remain in place, including the "silly" ministries, "Sustainability", "Population", and "Reconciliation".

The hard part is policy.  In his first speech to Parliament as leader, Latham mentioned early childhood development.  He implored parents to read books to their children.  "It is the foundation stone of lifelong learning because the truth is that learning does not start the first day school;  it starts the first day of life".  Now here is a policy area to watch.  Like school funding and child-care before it, Labor will open up a new front for Commonwealth spending.  They will seek to develop "quality" early childhood development, meaning professionalising those who care for very young children.

Nearly forty years ago, Bridget Plowden reported to Tony Crosland, Harold Wilson's Secretary of State for Education, on the future of English children and their primary schools.  Plowden attributed most importance in accounting for variations in children's achievement to the home, then the neighbourhood, and least of all to school.  That never stopped a labor government in Britain or Australia spending a lot more on public education.  Public expenditure is supposed to substitute for what some parents lack:  the desire to achieve.  The issue for Labor is what stimulates that desire.  Ask most immigrant families, it is almost certainly not public resources.  Plowden's insight into the factors that lead to children succeeding was simple.  The mother's aspirations for the child, and the number of books in the home.  Has anything changed?

Mark Latham's story of the importance of reading to children is sobering.  But what does a government do about it?  Does a government follow the advice of the early childhood development specialist, and Australian of the Year Fiona Stanley, and pour resources into children at the youngest age, or does it implore the parents to take an interest in the child?  Does it fund the parents?

This same question is being played out in school funding, university funding, even medical insurance, with obvious implications for income tax cuts.  Does a government substitute for personal exertion, or does a government reward personal exertion?  Labor was always in the first camp.  In Whitlam's time, Labor wanted the state to massively substitute for individual effort.  But in the last three decades, there has been a remarkable change of heart on the part of the electorate.  Many parents make a considerable financial sacrifice in order to fund their children, and their health.  Labor appeared to step into this camp when it introduced HECS for university students.

Until last week, my reading of Mark Latham was that he was in the Plowden camp.  My bet is that by the time he comes out of the other end of the National Conference he will be in the Stanley camp.  The more interesting thing is how the government will react.  In its heart, it must be in the Plowden camp, but it too will have to lay off bets with the easy solution of paying professionals to do what only a parent can.

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Local coastline well and truly in tidal wave sights

As I write this column the number of people estimated to have died from the Boxing Day Tsunami that devastated Indian Ocean communities is 150,000.

The earth quake that generated the tsunami occurred on the anniversary of that which killed approximately 41,000 Iranians when the city of Bam was flattened in 2003.

Earthquakes have the potential to cause great destruction.

When the island volcano of Krakatoa erupted in August, 1883, giant waves hurled ashore coral blocks weighing as much as 600 tonnes.

A year ago nobody was discussing the possibility of another Krakatoa.

During 2004 the world's media were preoccupied with "human-induced climate change" the "war on terror" and "the war on Iraq" as potential sources of devastation.

The Global Coral Reef Monitoring Network identified the 1997-98 coral bleaching event as severely impacting on reefs in South Asia including Sri Lanka and the Maldives with concern that climate change and/ or another El Nino event could slow recovery.

The human death toll from the Boxing Day tsunami tragedy would have been much greater had the giant waves not first struck the coral reefs that protect beaches on these Indian Ocean Island, in this way dissipating a lot of energy.

Yet earthquakes and tsunamis are not listed by the large global environmental organisations as environmental threats.

These organisations focus exclusively on human impacts on the environment.

There are four potential sources of tsunami:  earthquakes, undersea volcanoes, submarine landslides and asteroids.

NASA estimates that asteroids with a diameter of 90 metres or more can be expected to hit one of Earth's oceans once every 2,000 years.

Eastern Australia is more likely to be hit from a tsunami resulting from an earthquake along the Alpine fault which runs through New Zealand.  There would be a maximum of three hours before such a tsunami hit Australia's east coast.

Unlike coral reefs that have the effect of reducing the land impact of tsunamis, bays and inlets -- for example, Sydney Harbour -- create opportunity for wave reflection and refraction potentially magnifying and focusing impacts.

Professor Ted Bryant, of the University of Wollongong and author or Tsunami:  The Underrated Hazard, suggests the Australian Government should plan for tsunamis including through a public awareness campaign.

In contrast, Dr Anne Felton, an Australian and a tsunami expert based at the University of Hawaii, suggests that because of the difficulty of calculating the likelihood of a tsunami hitting the east coast of Australia it is not worth establishing an early warning system.

While the experts don't agree on whether we should plan for a tsunami, they do agree that the Australian coastline is always at risk.

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From Bureaucracy to Business Enterprise

Agenda

Publishers will tell you that a book of conference papers is hard to sell, and editors will tell you that a book of conference papers is hard to review.  The latter, even more so when three of the papers are comments on other papers.  Publishers and editors are generally right, they have to be because they are paid to know their market.  This is a useful starter for the review of an edited book about the regulation of Government Business Enterprises and Government Operated Corporations.  The contributors jump between the two terms, so for the purposes of the review the generic GOC will suffice.  The issue for all of the contributors is to decide how public or private are GOCs, and having decided, to be satisfied that each is sufficiently accountable to the appropriate power, the government and/ or the market.

The contributors appreciate the dangers of bureaucratic inefficiency and party-political manipulation in the governance of GOCs on the one hand, and the emulation of private sector management on the other.  It is not difficult to be left with the impression however, that the complexities of designing accountability systems for GOC performance are such that, in the absence of overwhelming economic argument, like the presence of a natural monopoly, it is better to privatise than to corporatise.  If a GOC cannot serve two masters, the private interest and the public interest, then best to sell and let government concentrate on regulating the market, not the GOC.  I suspect that most of the authors in the volume would not be in the privatisation camp.  In fact, at the outset while the editor claims to have no preference for state control over government control of economic enterprises, those in favour of market processes are described as "ideologues of the Right" whereas the statists are assumed to be normal.

There are three classes of contribution;  we will name them, reactionary, sceptical, and accepting.  Only the latter seem to be aware that Australian GOCs have turned from being a net drain on government budgets to a net contributor in the space of two decades, that many of those privatised are making a significant contribution to the economy, and subsidies for public purposes once associated with GOC pricing are more explicit.  The reactionary contributions begin with the presumption for continued public ownership and argue that privatisation is not a continuous evolution of economic policy, but that in the economies surveyed -- Australia, UK, US -- despite the fact that there have been "slash and burn turn(s) of the cycle" of ownership, there should be no presumption that government will vacate the field.  The governments in the countries surveyed may have vacated the field of economic ownership, but there is no suggestion that they have vacated the regulation of the marketplace, nor (often at the behest of the electorate) most other aspects of life.  A second contributor wants to start a "counter reformation" and have the market well and truly subsumed by politics.  He confuses the ability to charge a commercial price with a lack of public accountability.  "Increases in profitability arise precisely because managers are not subject to constraints imposed through public accountability, and are therefore free to manage enterprises so as increase revenue and reduce costs".  It could be argued that price is a form of public accountability, and that to this author accountability really means hidden subsidy.

The sceptics have a problem specifying the "public interest".  One asks, "how can managers of GOCs be motivated to act in the broader interests of society?  For example, "Governments may like the [GOC] to operate efficiently, in the sense of producing its relevant outputs at the lowest possible cost.  However, governments may also be concerned about unemployment.  If efficient operation of the [GOC] involves a significant reduction of the workforce and a rise in unemployment, these two objectives will conflict".  This is surely a confusion of the enterprise with the economy.  If in the short run a government uses it own enterprises to bolster employment in an inefficient operation (or indeed in protecting a private one) it will in the long run the risk of leading to higher unemployment.

One of the important innovations of the corporatisation period has been not only the discipline of the market on enterprises, but also the discipline on politicians of specifying non-economic objectives, or economic objectives broader than the enterprise.  One contribution produces a survey of members of various boards of Queensland GOCs, which indicates difficulties in Ministerial intervention in the affairs of the GOC.  For example that the Minister-as-shareholder may promote electoral maximising rather than wealth-maximising behaviour.  Quite so, but if the "public interest" is to be achieved, it is difficult to state who else other than the Minister may be in a position to know the public's interest.  A useful suggestion may be to insulate a GOC from certain excesses of ministerial intervention, for example, when a Minister holds down insurance premiums for workers' compensation until after an election, by ensuring the premium setting process is transparent.  A high degree of specification of governance parameters, that is setting out a thorough menu of performance on non-financial criteria, or community-service-obligations is a desirable thing, but is unlikely to prevent a Minister from asserting that his interventions are not in the public interest.  However, one of the interlocutors advises, "A risk of inappropriate Ministerial intervention may be the price we pay for the opportunity for appropriate intervention".

Another contributor criticises the perennial Productivity Commission critique that GOCs are not efficient, and supports Senator Stott Despoja's suggestion of a Public Interest Commission!  Why not just get rid of government altogether, which I suspect is the entire purpose of the governance discourse that has crept into political-economy in the last decade.  It is as if the underlying objectives of GOCs are only social.  It may be more helpful to commence with the assumption that their objectives are economic, and then specify the non-economic objectives and preferably implement these available outside of the operation of the GOC.

Another discusses a case study the Energy and Water Ombudsman Victoria, and questions whether the privately funded (by licence holders) structure can be part of the doctrine of responsible government.  The assertion is that energy and water are public goods, which the state has chosen to deliver privately, but that the "provision of essential services is properly situated in the public realm".  Surely, the issue is not what the state wants, but what the customers want, presumably a good service at best price.  What were once deemed essential services are clearly no longer public goods.

There is a presumption that "market governance", governments letting go of economic entities (but not of regulation) is tantamount to the "fraying of Ministerial accountability".  The presumption is that the consumer, for the purposes of goods and services provided by a GOC, is also a citizen.  Hence, the call for direct accountability of the scheme by "consumer/ citizens".  This would involve the election of consumer representatives by their relevant constituencies, which in practise usually means the funding of consumer advocacy groups and their pet projects.

In terms of the dispute resolution processes available for contracted parties and consumer/ citizens, the contribution kindly presents an alternative view, in the form of a judge's remark.  "The courts have not taken the view that a privately founded, privately managed organisation ... is necessarily to be subject to control by the courts.  That is certainly not to say that such an organisation may treat itself as above the law;  it is merely to acknowledge that the courts will not discourage private organisations from ordering their own affairs within acceptable limits".  Quite so.

There are contributions that accept corporatisation and who wish to enhance its usefulness with suggested reforms that may help achieve some of the benefits of market-based governance without giving up governmental control.  "Sometimes these benefits are best achieved by replicating the governance of private firms".  One contributor addresses the problems of managerial agency costs and inappropriate Ministerial intervention with a number of innovative strategies.

The first is a contractual solution, to let parties resolve issues contractually without legislative intervention.  In fact, the contract may be part of legislation, but a particular device such as an appropriately crafted Statement of Corporate Intent, may go long way to solving the issue of the divergent interests of a Minister in the responsibility for a GOC.  Another, quite intriguing gambit, is to create a class of private investors with a stake in the GOC by the issue of subordinated debt.  The idea is to create an investor class that has an incentive to monitor and whose purchase and sale decisions provide a market signal about the GOC performance.  Other contributors suggest ways to define those who should have standing to sue a GOC in private actions, to mimic the environment of the private firm.

Such suggestions seem to be greatly advanced in the exercise of accepting the presence of government-owned corporations in the market place and creating the best opportunity for them to perform as economic entities, rather than the reluctant starters who would rather "social" objectives be achieved by economic entities.  The difficulty for the reluctant corporatisers is that, the more corporate responsibilities are loaded onto GOCs, the greater the reason to privatise.  The desire to account for each potential adverse aspect of the market, by incorporating into the governance of every GOC, every conceivable fail-safe arrangement, rather defeats the purpose of the corporatisation.  Those who want to broaden the scope of corporate governance by incorporating the political agendas subsumed under corporate social responsibility only serve to produce a strong argument to allow the GOC to escape the clutches of government, and at least then face merely the competition of its peers and the ordinary weight of regulation.

In essence, the dominant contributions in the book reflect the prevailing orthodoxy of the Griffith University Key Centre for Ethics, Law, Justice and Governance:  that we live in a post-parliamentary, post-democratic, post-market age;  that the combination of representative government and the regulated market are insufficient to deliver a just outcome for everyone.  Rather than the liberty to make ones own way in the world, the dominant value is that every citizen has recourse to every forum to resolve his or her every problem, and that every problem is public and shared by every other citizen.  I guess they know their market.

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