The murky business of sport

Lost in the endless vilification of Melbourne Storm is the notion of what salary capping means.  It is an agreement by a group of businesses to suppress the wages of their key employees.

Think of it like all the nation's banks forming a cartel and agreeing that they will limit the salaries of all their front line managers and analysts.  Such an agreement would boost the banks' profits or allow revenue to be diverted to beneficiaries other than the key players.

The consequences of such actions outside of the business of sport would be legion.

For a start, our fearless regulator, the Australian Competition and Consumer Commission (ACCC), would be hiring its favoured lawyers, courtesy of the taxpayer, to prosecute the agreement's perpetrators.  But even if it was minded to take such action on Rugby League salary caps, the ACCC is heavily conflicted since its chairman, Graeme Samuel, was a major mover in a similar trade-restricting cartel that operates with the AFL.

Similarly, our trade unions would be up in arms defending the high earnings, as they do with those in the mining industry, and point-blank refusing any suggestion of a cap on them.  But again the silence is deafening.

Many people think that young sportsmen are overpaid.  After all getting $500,000 a year for having a good time kicking a ball around looks like a bit of a whiz.  Many of this view would also condemn the high earnings of young pop stars, top car salesmen, and even successful software nerds.

But, as with other categories of workers, placing a cap on sportsmen's high earnings brings adverse repercussions.

It means some reduction in talented people choosing the profession.  Given the earnings that the most successful young sportsmen can command, even with a salary cap, this might sound unlikely.

However, only the real superstars obtain the million dollar payouts and no young man can predict that he will emerge in that bracket.  Moreover, life at the top is, at most, a five year window and there is a very high chance of injuries cutting that short, while reaching the required peak and holding oneself there is likely to bring longer term health issues.

Forcing down the front line employees' wages means money is diverted to other areas of spending.  It probably means more is spent on administration, travel, ground quality, promotion, training and so on.  While all of these areas of expenditure are worthwhile, they are likely to be less than optional.

A salary cap means a diversion from the spending that the fans really want -- which is on attracting and rewarding the players who will give them the excellent performances they pay to watch.

Genetics, family influences, and formal coaching all play a role in creating great players and in ensuring the game is at its peak in attracting people.  But the salary cap distorts the combination.  Its effects are reinforced by other distortions.

Players are not allowed to choose who they will initially play for and they require their club's permission to move elsewhere.  These restrictions would be illegal in any other activity.

Forty years ago English soccer had a salary cap, equivalent to about twice the average worker's earnings.  The English salary cap was only eliminated when the cartel of soccer clubs that imposed it was confronted by another cartel, professional footballers, who saw themselves as being swindled by it.

And this is at the heart of the issue.  A salary cap is a regulatory measure that a cartel imposes to reduce the earnings of the best and most valuable workers.  Those workers are, as a consequence, underpaid.  And, the fans also lose out as the ceiling on players' wages makes it difficult for a club to attract players from another to create combinations that will excite the fans.

The consequences of the English soccer salary cap were becoming apparent with the demise of the English game in international competition and some high profile departures of players to Continental Europe.  The upshot of overturning the regulation is that soccer players now earn colossal salaries and the game has improved to such a degree that, as evidenced by its followers, it is the world's most popular sporting code.

And this underlines a vulnerability that the Rugby League and AFL salary cap approaches can create.  The codes may become less attractive than alternative codes and see their sporting popularity decline.

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Our Great Books

In his review of 100 Great Books of Liberty, edited by John Roskam and Chris Berg, with Andrew Kemp, Merv Bendle argues our book "obscures the extent to which liberty had to won [sic] in spite of the immense power wielded over the millennia by Platonic and related metaphysical systems of thought."

In his review, Bendle reproduces part of the book's blurb and spends more than 2,000 words critiquing it.

Fortunately most, if not all, of his concerns about 100 Great Books of Liberty are dealt with in the introduction.

Bendle's review is less about the book we have produced, and more about what book he would have preferred we produce.

100 Great Books of Liberty is not a narrow compendium, seeking to measure the works of the past by the tight ideological standards of the present.  As the subtitle -- "The essential guide to the greatest idea of Western Civilisation" -- makes clear, our purpose is different.

We seek to demonstrate the supreme achievement of Western Civilisation is the idea of liberty -- the idea that individuals should be free to pursue their own goals, constrained only by the equally-applied rule of law.

While the desire for freedom from repression is a universal constant, found in every civilisation and in every historical period, only within the West has it developed into a systematic program.

Bendle characterises the modern coherence of this program as an illustration of the "fundamental unity of liberal thought" -- he argues our book fails to demonstrate this unity -- but to describe it as Bendle does is entirely ahistorical.

It is not possible to fully grasp liberty and liberalism without having some appreciation of how the debates over, say, the Glorious, or French, or American Revolutions, or over natural rights, or empiricism, or the Renaissance played out.  Liberty-seeking thinkers have fallen on both sides of each of those issues.  Their contributions should not be casually dismissed.

Take the French Revolution.  Bendle argues that the inclusion of both Edmund Burke's Reflections on the Revolution in France and Thomas Paine's Rights of Man undermines the project, "as if they were [both] champions of liberty."

But both illuminate the quest for, and ideals, of liberty in important ways -- conservative and revolutionary liberalism are two major strands of thought about the struggle for freedom.  A liberalism that cannot accommodate both is a weak liberalism.  Should change be radical or evolutionary?  The history of Western Civilisation is a chronicle of attempts to answer that question.

Modern liberals are the heirs of both Burke and Paine.

This is why we cast a wide net for one hundred books which illuminate the struggle for liberty.  We include the obvious -- Smith, Hume, Hayek, de Tocqueville, Friedman, Rothbard, and Mises.  We include works that focus on certain elements of liberalism -- Perez Zagorin's How the Idea of Religious Toleration Came to the West, Matt Ridley's The Origin of Virtue, and Tyler Cowen's In Praise of Commercial Culture.  We include character studies, such as Robert Caro's magnificent multi-volume study of Lyndon Baines Johnson.  No work better explores the drive for political power than Caro's as-yet-incomplete biography.

We include works which explore particular historical periods where liberty developed.  And unusually for a collection such as this, we look at the development of Australian liberalism.

We include the ultimate statement of totalitarianism, Plato's The Republic, and Karl Popper's devastating rebuttal.

That should be the first clue that we're not just trying to draw up an arid list of "approved" books.  We're trying to explore every facet of liberty and Western Civilisation in an accessible and engaging way.

So what about the book Bendle would have preferred?

He would like Hobbes' Leviathan to have been included -- which is fair enough -- but would prefer Burke's Reflections on the Revolution in France to be excluded for deviationism.

Burke opposed the French Revolution because he feared it would not further the cause of French liberty.  Hobbes defended a state with almost limitless power.  Yet it is Burke who Bendle would like to kick out of liberty's canon.

Likewise with Jacob Burckhardt, who, in his later years, expressed a distinctly nineteenth century conservative's pessimism about individualism, democracy, and technological progress.  But as Charles Richardson makes clear in his contribution, those views did not stop his Civilisation of the Renaissance in Italy from identifying the Renaissance as critical for the development of many of the liberal ideals he personally opposed.  If a student is to grasp the cultural origins of individualism, they're going to have to read Burckhardt, even if he was a bit of a pessimist.

Ayn Rand was crazy -- nobody is disputing that -- but her books remain one of the most powerful ways to get young people interested in individualism and liberty.

Following Bendle, we could easily pick faults in almost every book and author in the canon.

He rightly recommends John Locke's Second Treatise of Government, but Locke's labour theory of value is not totally sound.  No one would exclude Friedrich Hayek from the liberal canon, but that doesn't mean they have to accept the model constitution he proposes in Law, Legislation and Liberty.

Alexander Hamilton -- who Bendle praises -- was an advocate of "energetic" government.  Karl Popper wrote that "Marx was right in asserting that increasing misery tends to be the result of laissez-faire capitalism".  And John Stuart Mill supported industry protection.  Ludwig von Mises wrote some very un-Misean work while he was an Austrian bureaucrat.

Oh, and George Orwell was a proud socialist.

But that doesn't mean their books didn't make liberty the greatest idea of Western Civilisation.

Bendle may prefer five great books of liberty to our one hundred, but if we were to follow his advice, liberalism would be sterile and fragile.

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Governing in ignorance: Australian governments legislating, without understanding, intellectual property

ABBREVIATIONS

AUSFTA = Australia United States Free Trade Agreement
EU = European Union
FCTC = Framework Convention on Tobacco Control
FTA = Free Trade Agreement
IP = Intellectual Property
Paris Convention = Paris Convention for the Protection of Industrial Property
TBT = Technical Barriers to Trade
TRIPS = Agreement on Trade Related Aspects of Intellectual Property Rights
US = United States
WHO = World Health Organisation
WIPO = World Intellectual Property Organisation
WTO = World Trade Organisation

1.0 EXECUTIVE SUMMARY

Monday, 26th of April 2010 is World Intellectual Property Day.  Intellectual property is one of the most poorly understood areas of public policy, but also one of the most important to understand in a knowledge economy.  Yet legislators regularly advocate for, and sometimes actually amend IP legislation without understanding how the consequences to Australia's international IP obligations.  And there are two very real examples in the area of trademarks.

Recently the South Australian Parliament passed the Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009 which requires the plain packaging of R 18+ videos, essentially stripping them of their trademarks.

The Federal Parliament is currently considering the Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009 designed to strip tobacco products of any branding other than government health warnings about the health consequences of smoking and limited descriptions sufficient for suppliers, retailers and consumers to differentiate products.

By introducing plain packaging, the intellectual property of films and tobacco products -- their trademarks -- will be stripped from packaging.  The effect will be:

• As required under Section 51 (xxxi) of the Commonwealth Constitution, Australian taxpayers may be required to gift to film and tobacco companies billions of dollars to compensate for the loss of their trademarks.  In the case of films an indicative calculated range could be $119m to $357m per year, and in the case of tobacco products the gift from taxpayers to tobacco companies could range from $1,009m to $3,027m per year.
• Australia will breach its international obligations under the Paris Convention for the protection of intellectual property, the World Trade Organisation's Agreement on Trade Related Aspects of Intellectual Property Rights and its free trade agreement obligations to not discriminate against the registration and use of trademarks.  Doing so may allow for retaliatory measures to be taken against Australia's exports.
• Under Australia's free trade agreements, equivalent compensation may be required as under Section 51 (xxxi) of the Constitution for the expropriation of an investor's property.

Considering Australia's international standing in major multilateral fora like the World Trade Organisation an open flouting of our obligations is likely to seriously damage Australia's international reputation and credibility as an honest broker for free trade.

Countries that export products affected by these Bills may be entitled to enact retaliatory measures against Australia's exports equivalent to the value of lost income.

And Australia will also lose significant moral authority internationally in arguing against violations of the patents, trademarks and copyright in other markets owned by Australian innovators, companies and creative artists.

2.0 INTRODUCTION

Intellectual Property is one of the most poorly understood areas of public policy, especially by legislators.  Increasingly IP is in the spotlight because public policy issues are arising as a result of different perspectives and understandings of IP by consumers, owners and governments.

Internationally there are significant debates about the role of IP in promoting the development and access to medicines and climate change technologies as well as the role of copyright to promote the creation and access to artistic works.

But out of the three core forms of IP (patents, copyright and trademarks), trademarks are often ignored and fall prey to bad legislation.  And there are two significant recent examples.

First, the South Australian Parliament passed the Family First-proposed Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009.  The Act introduces the obligation for R 18+ classified films to be separated from non-R 18+ films.  And if the films were not separated from non-R 18+ films they must be displayed in plain packaging.  The only permissible branding on the film case is the "name of the film in letters of 10 millimetres or less in height" and necessary classification details.

Second, the Senate Community Affairs Committee is holding an Inquiry into the Family First-proposed Plain Tobacco Packaging (Removing branding from Cigarette Packs) Bill 2009.  The Bill requires the removal of all branding from cigarette packaging in favour of a single colour (Pantone 154) packaging that, excluding health warnings and minor descriptors, removes any branding or labelling.  The only permissible branding on the packet is standardised twelve point, black Helevetica font text on the front outlining the product's contents, as well as equivalent text relating to the manufacturer in eight point on the side of the packaging.

This research paper will assess the recent trend towards plain packaging of trademarked goods and explore the potential consequences for Australia should it head down this path.

3.0 THE TREND TOWARD STRIPPING TRADEMARKS

There is plenty of literature assessing the impact of branding and trademarks and how they can increase the attractiveness of a product to consumers.  But in the past few years there has been an emerging body of literature that seeks to assess the perceived negative or undesirable nature of branding and trademarks for certain products and the perceived benefits of removing it.

In the August 2007 a study was released assessing the impact of branding and its contribution to the attractiveness of certain food products to children.  The article published in the Archives of Paediatrics and Adolescent Medicine based on research from Stanford University's School of Medicine ⁽¹⁾ found that by adding McDonald's branding to certain food products increased their attractiveness to children.  The study also identified that by the age of 2 children were capable of understanding the value of brands.

The study involved a small group of children each tasting five pairs of different McDonald's foods with one in McDonald's packaging and one in plain packaging.  After being fed the different food pairs the study found that children overwhelming preferred foods packaged from McDonalds.  Table 1 outlines the preference rate for the foods in the study.

Table 1 | Preference for McDonald's food based on its packaging, per cent

McDonald's food	McDonald's packaged	Plain packaged
Hamburger	48.3	36.7
McNuggets	59	18
French fries	76.7	13.3
Carrots	54.1	23
Milk or apple juice	61.3	21

Source:  Robinson, T.N., Borzekowski, D.L.G., Matheson, D.M. & Kraemer, H.C., 2007,
"Effects of fast food branding on young children's taste preferences",
in Archive of Paediatric and Adolescent Medicine, v161, n8

While the study was small, the result is indicative of the power of branding and the contribution it has product sales.  In light of debates surrounding obesity rates in the developed world it is unsurprising that such studies that trademarks and branding should be considered in whether to make certain food products more, or less, attractive.

Advertising of branding appears regularly as a theme to be addressed in the National Preventative Health Taskforce's report either explicitly through recommendations to remove branding, or implicitly through the promotion of branding through advertising.

3.1 STRIPPING TRADEMARKS FROM FILMS

The South Australian Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009 appears to be without precedent.  In Australia and overseas it has always been accepted that X 18+, or equivalent rated films, must be displayed separately from content accessible my minors.

However the introduction of plain packaging of R 18+ films is a new development that extends the theme of limiting access of certain film products to minors, but with the punishment of removing branding and trademarks if retailers choose not to comply.

3.2 STRIPPING TRADEMARKS FROM TOBACCO PRODUCTS

Internationally there has been a longstanding push to regulate the international trade of tobacco products and equally to develop international standards to be adopted on a country-by-country basis to limit the availability and consumption of tobacco products.

The high watermark of the international campaign against tobacco products was in 2003 following the negotiation of the Framework Convention on Tobacco Control under the World Health Organisation.  The FCTC outlines a series of objectives that clearly seek to reduce the consumption of tobacco products and obligations for governments to develop laws and regulations to achieve this purpose within their sovereign territory, including on "packaging and labelling of tobacco products". ⁽²⁾

Article 11 of the FCTC includes the obligation to introduce measures such as health warnings on packets and to ensure that the packaging and labelling is not "false, misleading, deceptive or likely to create an erroneous impression about its characteristics". ⁽³⁾

Article 13 also includes regulations relating to advertising, promotion and sponsorship by the tobacco industry. ⁽⁴⁾

Following the conclusion of negotiations of the FCTC, the WHO Secretariat has developed guidelines for implementation of the provisions of the FCTC.  However the WHO has taken license and included under the implementation guidelines for Article 11 of the FCTC that

"parties should consider adopting measures to restrict or prohibit the use of logos, colours, brand images or promotional information on packaging other than brand names and product names displayed in a standard colour and font style (plain packaging)". ⁽⁵⁾

It is important to note that these guidelines were developed by WHO bureaucrats and do not hold the same legal status as the FCTC text.  Furthermore the original FCTC does not mention plain packaging.

In Australia the National Preventative Health Taskforce's report, Australia the healthiest country by 2020, released in June of 2009 included analysis and recommendations of potential regulations to limit the availability and consumption of tobacco products along the same lines as the provisions in the FCTC.

The Taskforce made reference to the idea of plain packaging in its second Technical Report that focused on tobacco and argued that

"consumer research indicates that decreasing the number of design elements on the packet reduces its appeal and perceptions about the likely enjoyment and desirability of smoking". ⁽⁶⁾

But what the Taskforce left out of its report is that the study cited relates to the evaluation of a training program for people with mental illnesses.  The study used a basket of measures to discourage the consumption of tobacco products with no sufficient assessment of plain packaging in isolation to warrant such a claim. ⁽⁷⁾

The reality is that there is no evidence that plain packaging works.  In February 2009 in response to the submission of an e-petition calling for the introduction of tobacco product sales restrictions and plain packaging, the British Government highlighted that

"no studies have shown that introducing plain packaging of tobacco would cut the number of young people smoking or enable people who want to quit, to do so". ⁽⁸⁾

In fact the British government argued that

"Given the impact that plain packaging would have on intellectual property rights, the Government would need strong and convincing evidence showing the health benefits of this policy before it would be acceptable at an international level". ⁽⁹⁾

Britain is not the only country that has considered plain packaging, the proposal has also been debated in Canada and New Zealand and has been rejected in both countries.

The Taskforce's recommendations for the first phase (2010 -- 2013) of its proposed plan is the elimination of

"the promotion of tobacco products through design of packaging ... (including) amend(ing the) Tobacco Advertising Prohibition Act 1992 to require that no tobacco product may be sold except in packaging of a shape, size, material and colour prescribed by government(, and) amend Trade Practice CPIS (Tobacco) Regulations 2004 to specify exact requirements for plain packaging". ⁽¹⁰⁾

The Federal government is now in receipt of the Taskforce's report and is considering its response.  Concurrently it now has to consider the merit of a Bill that seeks to turn the principles of plain packaging into a reality.

While the idea of plain packaging is not new, because Australia is the first country in the world to seriously consider legislation the Parliament is entering uncharted legal waters and the unintended consequences of passing this Bill need to be appropriately scrutinised.

4.0 THE PLAIN PACKAGING BILLS

On the 29th of April 2009 Leader of the Family First Party in the South Australian Parliament and Legislative Councillor, Dennis Hood, introduced the Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009.  The Bill sought to regulate the display of R 18+ films in South Australian retail outlets to make them inaccessible to children unless they appeared in plain packaging.  Should a film be plain packaged it must specifically:

• bear "no images or markings"
• only have "the name of the film in letters of 10 millimetres or less in height"
• and "markings relevant to its classification". ⁽¹¹⁾

The Bill also includes penalties for retailers who do not comply and equivalent regulations and penalties related to the promotion of films.

With low public awareness of the Bill or its impact, the Bill passed the South Australian Parliament at the end of 2009 and came into force in January 2010.

On the 20th of August 2009 Leader of the Family First Party and Victorian Senator, Steve Fielding, introduced the Plain Tobacco Packaging (Removing branding from cigarette packs) Bill 2009.  The Bill primarily seeks to regulate the outward display of cigarette packs by removing the capacity for a product to include any branding or the presentation of a trademark.  The specific requirements are that cigarette packets must be:

• the "colour identified as PMS 154 on the Pantone Matching System, reproduced with a non-gloss finish"
• be "without illustration or decoration" including "decorative ridges, embossing, bulges or other irregularities"
• may only include the "brand name of the product" in black, non-bolded, Helvetica size 12 text on the bottom of the front side of the packet and the number of cigarettes in the packet and/or the weight of tobacco only
• may only include size 8 text naming the "manufacturer or importer of the package" with their contact details. ⁽¹²⁾

The Bill also stipulates the size of the packet, that no packaging (for example transparent plastic) around the main packet can have additional information, branding or bear trademarks, and that the maximum number of cigarettes in each pack is limited to twenty-five. ⁽¹³⁾

In his second reading speech to Parliament Senator Fielding argued that "responsible legislators ... need to do our very best to put in place measures that will discourage as many people from smoking as possible".  And that the legislation will "take the polish and attractiveness off cigarette branding and positive images that tobacco giants try to associate with their products". ⁽¹⁴⁾

5.0 UNINTENDED CONSTITUTIONAL CONSEQUENCES

These Bills have significant problems.  Under Section (xviii) of the Commonwealth Constitution the Commonwealth Parliament has legislative power over "copyrights, patents of inventions and designs, and trade marks".

The spirit of the Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009 is clearly to encourage the placement of R 18+ films in a separate location from films with a lower classification such as MA 15+, M 15+, PG or G.  However, the effect of the legislation, should retailers decide not to separate R 18+ films, is to strip them of their branding and trademarks for display.

Considering the conflict between the powers of the Commonwealth over IP law and the South Australian Parliament's legislation stripping legal products of their trademarks, the South Australia's legislation may conflict with Federal powers.

The Commonwealth Plain Tobacco Packaging (Removing branding from cigarette packs) Bill 2009 is explicitly designed to introduce plain packaging for all tobacco products and deliberately remove branding and trademarks.

Under Section 51 (xxxi) of the Commonwealth Constitution the Parliament has legislative power over "the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws".  As a consequence the Commonwealth is legally entitled under Australian law to legislate plain packaging and the devaluing of trademarks.

But acquiring the trademarks of companies on "just terms" would require the Commonwealth to compensate film and tobacco companies for the acquisition.

With annual retail sales for films at $1 billion per annum and tobacco products at $10 billion per annum ⁽¹⁵⁾ it is likely that the removal of trademarks would result in taxpayers being required to contribute hundreds of millions of dollars, and potentially billions.

Table 2 | Indicative compensation range for trade mark loss by product per year, AUD$m

Products	Expenditure	10%	30%
Films	$1,193	$119	$357
Tobacco	$10,091	$1,009	$3,027

Source:  Author's calculations, based on 2006 data from Scollo, M.M. & Winstanley, M.H. (Eds), 2008, "Tobacco in Australia:  Facts and Issues", Chapter 2, Third Edition, Cancer Council Victoria, Melbourne, Australia, and Australia Visual Software Distributors Association, 2008, "Statistics"

Research has been completed identifying the overall contribution trademarks make to the productivity of companies ranging from ten to thirty per cent. ⁽¹⁶⁾  Table 2 outlines the potential cost that may need to be compensated by taxpayers to the affected industries from stripping trademarks from films and tobacco products per year.

It is substantially less likely that film companies could seek compensation for the loss of their trademarks since they have an alternative to their loss.  But the same does not apply to tobacco products.  Additionally, the loss would need to be made by the South Australian government.  However, compensation for the expropriation of intellectual property may be securable through Australia's international free trade agreement obligations as outlined in Section 6.2.2.

6.0 UNINTENDED INTERNATIONAL LEGAL
AND REPUTATIONAL CONSEQUENCES

The introduction of plain packaging also poses serious risks that Australia will breach a number of its international obligations under relevant trade and intellectual property treaties.

6.1 THE PARIS CONVENTION

Australia has been a ratifying Party of the Paris Convention for the protection of Industrial property since October 1925 and its provisions have informed the development of Australia's patent and trademark regime.

6.1.1 Relevant Articles

Article 6_quinquies(A)(1) of the Paris Convention makes it clear that Australia has an obligation to recognise trademarks, stating:

"Every trademark duly registered in the country of origin shall be accepted for filing and protected as is in the other countries of the Union, subject to the reservations indicated in this Article". ⁽¹⁷⁾

Article 6_quinquies(B) includes the "reservations" for either denying the registration or invalidating a trademark:

1. "when they are of such a nature as to infringe rights acquired by third parties in the country here protection is claimed.
2. when they are devoid of any distinctive character, or consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, place of origin, of the goods, or the time of production, or have become customary in the current language or in the bona fide and established practices of the trade of the country where protection is claimed.
3. when they are contrary to morality or public order and, in particular, of such a nature as to deceive the public.  It is understood that a mark may not be considered contrary to public order for the sole reason that it does not conform to a provision of the legislation on marks, except if such provision itself relates to public order". ⁽¹⁸⁾

Article 7 further clarifies that

"The nature of the goods to which a trademark is to be applied shall in no case form an obstacle to the registration of the mark". ⁽¹⁹⁾

6.1.2 Discussion

Article 6_quinquies(A)(1) of the Paris Convention clearly states the obligations of a country to register a trademark and respecting foreign trademarks, except in the situation of the "reservations".

Of the "reservations" included under Article 6_quinquies(B) none provide a justification to limit the registration of a trademark.  Article 6_quinquies(B)(3) could be misinterpreted as giving some justification because R 18+ films and tobacco products may be "contrary to morality or public order", but this section explicitly states that it is relevant to the trademark, and not the product.

Article 7 reinforces this point making it clear that the nature of R 18+ films and tobacco products "shall in no case form an obstacle to the registration of the (trade)mark".

It highly likely from the relevant provisions that the introduction of plain packaging for R 18+ films and tobacco products would be in direct violation of Australia's obligations under the Paris Convention.

6.2 THE WORLD TRADE ORGANISATION

To become a member of the WTO requires countries to accept the full obligations of the numerous WTO Agreements such as the General Agreement on Tariffs and Trade, the General Agreement on Trade in Services and numerous other agreements, including, relevantly, the Agreement on Trade Related Aspects of Intellectual Property Rights.

TRIPS has always been an extremely controversial agreement because of the binding obligations it places on WTO members to administer and enforce an IP regime.  However, for a country like Australia the passage of TRIPS was relatively uncontroversial because we already had an operating and affective IP regime.  TRIPS merely reiterated our obligations with nominal changes to domestic legislation.

A relatively short Agreement, TRIPS builds on the principles of the WIPO Administered treaties including the Paris Convention and binds WTO members that were not already parties to these treaties or enforcing them.

6.2.1 Relevant Articles

As an agreement, TRIPS is primarily focused on requiring individual countries to have an IP regime and gives broad obligations that give countries license to adapt the principles of the Agreement into domestic legislation based on their unique legal system and governance systems.

However, there are some specific requirements in TRIPS such as the minimum twenty year patent life requirement from the filing date under Article 33.

And another specific section of the Agreement is Section 2, Article 20 that stipulates:

"The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings". ⁽²⁰⁾

Further, under Section 2, Article 15(4) it states:

"The nature of the goods or services to which a trademark is to be applied shall in no case form an obstacle to registration of the trademark". ⁽²¹⁾

Section 2, Article 17 of TRIPS states there are exceptions provided for governments to the overall obligations described, however the agreement only allows for

"limited exceptions ... such as fair use of descriptive terms, provided that such exceptions take account of the legitimate interests of the owner of the trademark and of third parties". ⁽²²⁾

The wording of this Article strongly suggests that exceptions should be limited and interpreted narrowly.

6.2.2 Discussion

TRIPS was one of the most heavily negotiated and contentious international agreements that exists because of its binding obligations on WTO members irrespective of their earlier participation in IP treaties administered by WIPO.

As a consequence, many TRIPS provisions provide significant flexibility for individual countries to take the principles of IP and then to legislate them based on their own national circumstances and values.  As a result there are few specific provisions in the Agreement.

But the relevant passages relating to the recognition and restrictions on trademarks are descriptive and explicit.

Section 2, Article 20 is such a provision that makes clear that a trademark cannot be

"unjustifiably encumbered by special requirements ... in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings". ⁽²³⁾

But that is precisely what plain packaging for R 18 + films and tobacco products would achieve by removing trademarks that would enable consumers to distinguish between products and brands.

Similarly Section 2, Article (15)(4) is also a clear provision stating that the nature of goods and services cannot be an "obstacle to registration of the trademark".  While the provisions of the Bill do not seek to limit the registration of a trademark, it would seek to limit the intended value of such a mark, including the exclusive eight to exploit its recognition.

It's also important to note that Australia's bilateral free trade agreements require the continued observance of TRIPS in their intellectual property chapters.

By adopting plain packaging Australia would not just be violating its obligations under the WTO, but also its obligations under free trade agreements with ASEAN countries, ⁽²⁴⁾ Chile, ⁽²⁵⁾ New Zealand, ⁽²⁶⁾ Singapore, ⁽²⁷⁾ Thailand ⁽²⁸⁾ and the United States. ⁽²⁹⁾

For example, the Chapter 17 of the AUSFTA covers intellectual property rights and obliges members to reaffirm their obligations under the Paris Convention under Article 1(2) and to the TRIPS Agreement under Article 1(3).

Furthermore, the government should also be concerned with investment chapters in free trade agreements that could invoke the same principles as Section 51 (xxxi) of the Constitution that oblige compensation for directly or indirectly expropriated or nationalised investment.

For example, Chapter 11 of the AUSFTA includes provisions related to direct or indirect "measures equivalent to expropriation or nationalisation" ⁽³⁰⁾ of investment that may require the Commonwealth to compensate film and tobacco companies for the deliberate expropriation of the value of their trademark.

The validity of the potential for the expropriation of a trademark is further highlighted in Article 17(5) of Chapter 11 which recognises the potential expropriation of IP so long as the "limitation, or creation" of the trademark "is consistent with Chapter Seventeen" of the AUSFTA.

6.3 BROADER IMPLICATIONS

The strength of Australia's position in multilateral trade fora, and in particular the WTO, is based on an international recognition of Australia's capacity to act as an 'honest broker'.

The foundations of that position are built on our traditionally strong commitment to multilateralism, our recent history of unilateral liberalisation and commitment to trade liberalisation which aligns Australia closely to the objectives of the WTO.  And also because of the general international recognition that we uphold our obligations under the WTO including acting as a market economy built on respect for property rights.

The benefits of a strong standing enables Australia to shape the agenda in the WTO and ensure that both liberalisation and our national interest are advanced.

But the passage of plain packaging legislation puts that standing at risk.  Knowingly and flagrantly breaching our international obligations is likely to harm Australia's profile as an honest broker in these fora.  Australia would be openly flouting its WTO and WIPO Treaty obligations that would become a basis for other countries to ignore their equivalent obligations.

Internationally IP rights are controversial.  Australia is one of the few countries that has a long standing, credible and respected IP regime and we rightly seek to educate the world in establishing, operating and enforcing their IP regimes to promote their and our mutual national interest.

By introducing plain packaging Australia will also lose significant moral authority internationally in arguing against violations of the patents, trademarks and copyright in other markets to the detriment of Australian innovators, companies and creative artists.

In the past Australia has instigated dispute settlements through the WTO and has acted as a third party in IP specific WTO disputes. ⁽³¹⁾  But passing plain packaging would also harm Australia's credibility in the WTO's dispute settlement process because we would be knowingly ignoring our obligations.

The passage of plain packaging will also open an opportunity for countries that export products stripped of their trademarks to Australia to enact retaliatory measures under the WTO against Australian exports equivalent to the harm incurred on their exports.  As a consequence many industries may face new trade barriers in established or emerging markets.

And it is highly likely that the world's largest exporter of IP, the United States, will complain about the South Australian Parliament's legislation stripping film products of their trademarks through the WTO.

The same is likely to apply to tobacco products.  Arguing that the public health risks associated with tobacco consumption will decrease opposition from countries through the WTO does not stand scrutiny.

Countries are willing to raise breaches on tobacco products in WTO fora.  In November 2009 a number of countries raised concerns about trade restrictions perceived to be trade barriers at the Technical Barriers to Trade Committee meeting. ⁽³²⁾

7.0 CONCLUSIONS

Irrespective of the good intentions of plain packaging legislation, they both have serious, unintended consequences.

Removing trademarks from R 18+ films and tobacco products will significantly devalue the intellectual property rights giving them the opportunity to demand compensation on "just terms".  Similar compensation may also be required under investment provisions in free trade agreements like the USFTA.  And with compensation calculated to range from $119 million to $3.4 billion per year the price tag is not cheap.

On a moral ground most Australians would be offended that up to $3 billion of their tax dollars could be handed to the profits of tobacco companies because the Parliament decided to pass ill-considered legislation.

The removal of trademarks would also breach Australia's intellectual property obligations under the Paris Convention for the protection of industrial property, the World Trade Organisation's Agreement on Trade Related Aspects of Intellectual Property Rights as well as free trade agreements requiring that these agreements be respected.

The consequences of Australia's international standing and credibility in multilateral fora will be diminished and our capacity to credibly criticise other countries who flaunt their international IP requirements will also be harmed.

Because of a potential WTO violation, the countries affected will also be entitled to impose retaliatory measures that will harm Australia's exports in key markets.

Should Australia continue down the plain packaging path we would be the first country to do so and would be heading into uncharted waters in violating Australia's international obligations.

Before passing this Bill the Parliament should give serious consideration to whether it is prepared to accept the financial and reputational consequences of its passage.

8.0 REFERENCE LIST

Australia Visual Software Distributors Association, 2008, "Statistics"

Department of Foreign Affairs and Trade, 2009, "ASEAN-Australia-New Zealand Free Trade Agreement", Chapter 13, Commonwealth of Australian, Canberra, Australia

Department of Foreign Affairs and Trade, 2008, "Australia-Chile Free Trade Agreement", Chapter 17, Commonwealth of Australia, Canberra, Australia

Department of Foreign Affairs and Trade, 2005, "Australia-United States Free Trade Agreement", Chapter 17, Commonwealth of Australia, Canberra, Australia

Department of Foreign Affairs and Trade, 2005, "Australia-United States Free Trade Agreement", Chapter 11, Commonwealth of Australia, Canberra, Australia

Department of Foreign Affairs and Trade, 2003, "Singapore-Australia Free Trade Agreement", Chapter 13, Commonwealth of Australia, Canberra, Australia

Department of Foreign Affairs and Trade, 2005, "Thailand-Australia Free Trade Agreement", Chapter 13, Commonwealth of Australia, Canberra, Australia

Fielding, S., 2009, "Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009", Senate, The Parliament of the Commonwealth of Australia, August 20

Fielding, S., 2009, "Second reading speech:  Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009", Senate, The Parliament of the Commonwealth of Australia

Greenhalgh, C. & Rogers, M., 2007, "Trade Marks and Performance in UK Firms:  Evidence of Schumpeterian Competition through innovation", Oxford Intellectual Property Research Centre, University of Oxford, Oxford, United Kingdom

Hood, D., 2009, "Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009", South Australian Parliament, April 29

National Preventative Health Taskforce, 2009, "Australia:  The healthiest country -- National Preventative Health Strategy -- Overview", National Preventative Health Secretariat, Canberra, Australia, p17

National Preventative Health Taskforce, 2009, "Tobacco Control in Australia:  Making smoking history", National Preventative Health Secretariat, Technical Paper 2, Canberra, Australia

Number10.gov.uk, 2009, "Tobaccoyouth -- epetition response", Government of Great Britain and Northern Ireland, September 25

Prochaska, J., Fromont, S., Leek, D., Suchanek Hudmon, K., Louie, A., Jacobs, M. & Hall, S., 2008, "Evaluation of an Evidence-Based Tobacco Treatment Curriculum for Psychiatry Residency Training Programs", Academic Psychiatry, v322, pp 484–492

Robinson, T.N., Borzekowski, D.L.G., Matheson, D.M. & Kraemer, H.C., 2007, "Effects of fast food branding on young children's taste preferences", in Archive of Paediatric and Adolescent Medicine, v161, n8

Scollo, M.M. & Winstanley, M.H. (Eds), 2008, "Tobacco in Australia:  Facts and Issues", Chapter 2, Third Edition, Cancer Council Victoria, Melbourne, Australia

World Health Organsation, 2003, "World Health Organisation Framework Convention on Tobacco Control", World Health Organisation, Geneva, Switzerland, pv

World Health Organisation, 2009, "WHO Framework Convention on Tobacco Control:  Guidelines for implementation Article 5.3;  Article 8;  Article 11;  Article 13", United Nations, Geneva, Switzerland, p41

World Intellectual Property Organisation, 1883, "Paris Convention for the protection of industrial property", Geneva, Switzerland

World Trade Organisation, 1994, "Agreement on the Trade Related Aspects of Intellectual Property Rights", Geneva, Switzerland

World Trade Organisation, 2009, "China — Measures Affecting the Protection and Enforcement of Intellectual Property Rights", World Trade Organisation, Geneva, Switzerland, DS362

World Trade Organisation, 2009, "Tobacco and poultry among members' trade concerns", World Trade Organisation, Geneva, Switzerland, 6 November

---

ENDNOTES

1.  Robinson, T.N., Borzekowski, D.L.G., Matheson, D.M. & Kraemer, H.C., 2007, "Effects of fast food branding on young children's taste preferences", in Archive of Paediatric and Adolescent Medicine, v161, n8

2.  World Health Organisation, 2003, "World Health Organisation Framework Convention on Tobacco Control", World Health Organisation, Geneva, Switzerland, pv

3.  World Health Organisation, 2003, "World Health Organisation Framework Convention on Tobacco Control", World Health Organisation, Geneva, Switzerland, p9

4.  World Health Organisation, 2003, "World Health Organisation Framework Convention on Tobacco Control", World Health Organisation, Geneva, Switzerland, p11

5.  World Health Organisation, 2009, "WHO Framework Convention on Tobacco Control:  Guidelines for implementation Article 5.3;  Article 8;  Article 11;  Article 13", United Nations, Geneva, Switzerland, p41

6.  National Preventative Health Taskforce, 2009, "Tobacco Control in Australia:  Making smoking history", National Preventative Health Secretariat, Technical Paper 2, Canberra, Australia

7.  Prochaska, J., Fromont, S., Leek, D., Suchanek Hudmon, K., Louie, A., Jacobs, M. & Hall, S., 2008, "Evaluation of an Evidence-Based Tobacco Treatment Curriculum for Psychiatry Residency Training Programs", Academic Psychiatry, v322, pp 484–492

8.  Number10.gov.uk, 2009, "Tobaccoyouth -- epetition response", Government of Great Britain and Northern Ireland, September 25

9.  Number10.gov.uk, 2009, "Tobaccoyouth -- epetition response", Government of Great Britain and Northern Ireland, September 25

10.  National Preventative Health Taskforce, 2009, "Australia:  The healthiest country -- National Preventative Health Strategy -- Overview", National Preventative Health Secretariat, Canberra, Australia, p17

11.  Hood, D., 2009, "Classification (Publications, Films and Computer Games) (R 18+ Films) Amendment Bill 2009", South Australian Parliament, April 29

12.  Fielding, S., 2009, "Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009", Senate, The Parliament of the Commonwealth of Australia, August 20

13.  Fielding, S., 2009, "Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009", Senate, The Parliament of the Commonwealth of Australia, August 20

14.  Fielding, S., 2009, "Second reading speech:  Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009", Senate, The Parliament of the Commonwealth of Australia

15.  Scollo, M.M. & Winstanley, M.H. (Eds), 2008, "Tobacco in Australia:  Facts and Issues", Chapter 2, Third Edition, Cancer Council Victoria, Melbourne, Australia

16.  Greenhalgh, C. & Rogers, M., 2007, "Trade Marks and Performance in UK Firms:  Evidence of Schumpeterian Competition through innovation", Oxford Intellectual Property Research Centre, University of Oxford, Oxford, United Kingdom

17.  World Intellectual Property Organisation, 1883, "Paris Convention for the protection of industrial property", Geneva, Switzerland

18.  World Intellectual Property Organisation, 1883, "Paris Convention for the protection of industrial property", Geneva, Switzerland

19.  World Intellectual Property Organisation, 1883, "Paris Convention for the protection of industrial property", Geneva, Switzerland

20.  World Trade Organisation, 1994, "Agreement on the Trade Related Aspects of Intellectual Property Rights", Geneva, Switzerland

21.  World Trade Organisation, 1994, "Agreement on the Trade Related Aspects of Intellectual Property Rights", Geneva, Switzerland

22.  World Trade Organisation, 1994, "Agreement on the Trade Related Aspects of Intellectual Property Rights", Geneva, Switzerland

23.  World Trade Organisation, 1994, "Agreement on the Trade Related Aspects of Intellectual Property Rights", Geneva, Switzerland

24.  Department of Foreign Affairs and Trade, 2009, "ASEAN-Australia-New Zealand Free Trade Agreement", Chapter 13, Commonwealth of Australian, Canberra, Australia

25.  Department of Foreign Affairs and Trade, 2008, "Australia-Chile Free Trade Agreement", Chapter 17, Commonwealth of Australia, Canberra, Australia

26.  Department of Foreign Affairs and Trade, 2009, "ASEAN-Australia-New Zealand Free Trade Agreement", Chapter 13, Commonwealth of Australian, Canberra, Australia

27.  Department of Foreign Affairs and Trade, 2003, "Singapore-Australia Free Trade Agreement", Chapter 13, Commonwealth of Australia, Canberra, Australia

28.  Department of Foreign Affairs and Trade, 2005, "Thailand-Australia Free Trade Agreement", Chapter 13, Commonwealth of Australia, Canberra, Australia

29.  Department of Foreign Affairs and Trade, 2005, "Australia-United States Free Trade Agreement", Chapter 17, Commonwealth of Australia, Canberra, Australia

30.  Department of Foreign Affairs and Trade, 2005, "Australia-United States Free Trade Agreement", Chapter 11, Commonwealth of Australia, Canberra, Australia

31.  World Trade Organisation, 2009, "China — Measures Affecting the Protection and Enforcement of Intellectual Property Rights", World Trade Organisation, Geneva, Switzerland, DS362

32.  World Trade Organisation, 2009, "Tobacco and poultry among members' trade concerns", World Trade Organisation, Geneva, Switzerland, 6 November

Chance to combat climate change through policy has come and gone

On the ABC1's 7.30 Report last week, Barack Obama reiterated his belief that putting a price on carbon was the best way to reduce greenhouse gas emissions.  However sweet the rhetoric about combating global warming, the cold reality is this:  comprehensive climate legislation, which US senators will unveil next week, is unlikely to pass into law this year.  Here are five reasons why.

PUBLIC OPINION:  In the wake of climate-gate, glacier-gate and the recent record-breaking snow storms, polls show rising scepticism of the science of man-made global warming.  A Harris poll last year found that only 51 per cent of Americans believe the Earth is getting warmer -- down from 71 per cent two years ago.  And according to a January Pew Survey, climate change is ranked dead last in a list of policy priorities;  only 28 per cent think reducing carbon emissions is a top priority.

THE ECONOMY:  The American people, not to mention nervous politicians up for re-election, are always wary of new taxes, especially when unemployment remains at 9.7 per cent.  Outgoing Democrat Senator Evan Bayh spoke for many colleagues when he recently said:  "We need to deal with the phenomena of global warming, but I think it is very difficult in the economic circumstances we have right now."  In this environment, it is politically dangerous for, say, a Democrat politician facing re-election in a Rust Belt state to tell constituents they should pay higher taxes to help China become more energy efficient and more economically competitive.

GEOGRAPHY:  In Washington, climate politics is just as much about geography as partisanship:  where a majority of voters in the Pacific coast and the Northeast are green, people in other regions are brown.  To secure passage of climate legislation, Obama has to win over not only a few Republican but also several "blue dog" Democrat senators from the South as well as "brown dog" Democrats from the Midwest and Great Plains, whose states are heavily dependent on oil, coal and manufacturing.  And that is before the substantially amended legislation requires a stamp of approval from the House of Representatives which only narrowly passed an even less pork-ridden Bill last June.

OFF-SHORE DRILLING:  To appeal to sceptics on the Right, Obama supports plans to expand nuclear power generation and off-shore drilling.  Although conservatives are largely in favour of ending the drilling ban, many Republicans warn that the President's proposal is too modest.  Besides, environmental groups and liberal Democrats, especially from oceanside states, are strongly opposed to off-shore drilling.  So Obama's overture could very well be counterproductive:  he could fail to win over unconverted Republicans even as he drives away erstwhile supporters.

INTERNATIONAL CLIMATE:  It is difficult for US politicians to sell the imperative of pricing carbon at home when the rest of the world is suffering global-warming fatigue.  Copenhagen failed to secure any kind of legally binding, verifiable and enforceable global climate deal.  And with China and India chugging along the smoky path to prosperity, the chances of a post-Kyoto agreement at Mexico City are small.

Beijing and Delhi insist they will not join the West in what they see as an economic suicide pact.  In France, the Sarkozy government recently jettisoned the idea of a carbon tax.  In Canada, the emissions trading scheme is stalled in legislative limbo.  And in Australia, public confidence in what Tony Abbott calls Labor's "big new tax" has collapsed.

These factors explain why comprehensive US climate legislation is unlikely to pass this year.  And with Republicans set to gain seats in both the House and Senate in November's mid-term elections, any serious climate and energy Bill is even less likely to become US law in the next few years.

The political climate is changing so dramatically that even Obama's Interior Secretary Ken Salazar recently said:  "I think the term 'cap and trade' (or emissions trading) is not in the lexicon any more."  Al Gore's moment has come and gone.

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Immigration and growth: 200 years of success

There's a Rowan Atkinson sketch about a (pre-David Cameron) Conservative Party speech.  In character, Atkinson starts talking about Indian immigrants:  "I like curry," he says.  "But, now that we've got the recipe ... is there really any need for them to stay?"

That combination of populism and affected naivety about immigration and population suddenly dominates our political sphere.

In Tony Burke, we now have Australia's first dedicated Minister for Population.  Under Tony Abbott, the Coalition is looking to make population growth from immigration into an election issue.  The shadow immigration minister has called for a dramatic reduction in migrants.  There's now an opposition sub-committee dedicated to population.

And for what it's worth, the Greens are instinctively hostile to anything that increases consumption within our territorial borders.  More immigrants, economic growth, new products, cashed up bogans buying plasma televisions, anyone buying anything -- whatever it is, they're against it.

There is no force in parliament willing to embrace the benefits of population growth and immigration -- historically, the two key drivers of Australia's success.

It's Kevin Rudd's fault.  In October he admitted publically what most Australian governments have believed for the last century -- he believes in a "big Australia" and he "makes no apologies for that".  Since then, we've had six months of apologies.

Certainly, immigration itself presents policy challenges.  But not that many.  Australia isn't a target for welfare-shopping:  migrants can't get the dole for their first two years.

And I'd be more concerned about the cultural challenges of immigration if we hadn't had two hundred years of successful pot melting.  Each migrant cohort is always more "different" than the last.  And each cohort has successfully integrated into Australian society.

But when a politician expresses concern about population pressure, it is typically nothing more than a cover for government failure.

Take infrastructure.  Will governments be able to supply enough roads and railways and community services for an expanding population?  Well, that's their job.  To abrogate that responsibility is to admit that they are inept.  They'll have the money:  more people means more taxpayers.

Or our high house prices, which are now being blamed on migrants and foreign investors.  According to opposition housing spokesman Kevin Andrews, speaking to The Australian last week, his constituents are "saying their kids can't get into the market because they go to auctions and are outbid every time by foreigners".

Andrews was a former immigration minister (you might remember that) so clearly he's playing to his favoured side.  Nevertheless, Assistant Treasurer Nick Sherry has announced a "new enforcement crackdown" on non-residents buying houses.

House prices are inflated for a very simple reason:  governments are choking land supply by restricting housing development at the edges of our cities.  When demand increases but supply is limited, prices go up.

That's the fault of those politicians now so concerned about population.  Bob Carr is one of the most passionate advocates of population restraint.  And his government was deeply reluctant to release land for housing.

So the idea that we don't know where all these extra Australians will live is very peculiar.  We've been expanding for two hundred years, and we haven't run out of space to build houses.

Critics of immigration and population expansion present their views as brave contrarianism -- they are the only ones willing to talk about the elephant in the room.

For such "straight talkers", their case against population growth requires some awkward moral contortions.

Take the claim made by Bob Brown earlier this month:  "skilled migrants, by the way, if left in their own countries, would help raise standards of living there".  This is the "brain-drain" thesis -- that when the most educated poor people leave their home countries, they further impoverish the developing world.

But it should go without saying the major problem in the developing world isn't they don't have enough skills.  It's that they are underdeveloped.  They're poor.

Brown is telling people in poor countries they cannot seek to improve their lives, and the lives of their family.

That's cruelty dressed up as kindness.

Well, it's actually worse.  Migrant workers send money to their relatives back home.  These remittances add up to more than the world's foreign aid budgets combined.  And, unlike foreign aid, rather being funneled to governments, or distributed according to the preferences of first world donors, remittances go straight to the people who can use the money best.

So limiting skilled migration and chocking off remittances would add to third world poverty.

Migrants to Australia seek better lives than the rest of the world can provide.  That should be flattering.  They should not be used as scapegoats for the policy failures of our own governments.

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Shuffling hospital deckchairs

Public hospitals will remain afflicted by the blurred accountabilities, buck- passing and unresponsive bureaucracy if the Federal Government's health reform package is approved at today's COAG meeting.

The proposal that the Commonwealth becomes the majority funder of public hospitals, responsible for 60 per cent of the cost of services provided, leaves the states and territories with a not inconsiderable 40 per cent share.

States would continue to own hospitals, choose their location, and manage capital planning requirements.

The states will also be left responsible for managing industrial relations matters in the public hospital sector.  Given that labour costs account for a significant share of the overall costs of running hospitals, the Commonwealth will become financially exposed to inflationary wage increases approved at the state level.

The shift in funding proportions is a recipe for ongoing uncertainty for all involved in the health system.

What if public hospitals continue to underperform in the eyes of patients and taxpayers?  Who will be made responsible for this:  Kevin Rudd, the majority funder, or the state premiers, the service deliverers?

It is envisaged that the distribution of Commonwealth funding will be determined by a casemix-style system based on the cost of treating individual patient cases.  An independent regulatory body will be established to calculate a standard efficient cost for each treatment.

This proposal builds in potentially another avenue for political blame- shifting.  If hospitals lacking economies of scale reduce the number of procedures offered, or even close, as a result of the Government's own funding policy, it may seek to lay blame for these outcomes on the independent body.

The public hospital system increasingly operates for the convenience of bureaucrats.  The number of administrators has grown by close to 50 per cent nationally over the past decade, exceeding that of the general hospital workforce.

This has occurred at the same time as patients languish in emergency departments and on surgical waiting lists.

State government area health organisations in jurisdictions such as NSW have been identified in numerous reports both as a key repository for a burgeoning health bureaucracy, as well as a source of top-down administrative inflexibilities imposed on doctors and nurses at the hospital coalface.

Instead of forcing states to abolish area health services and reintroduce individual hospital governance boards, the Rudd plan will simply add another layer of administration in the form of hospital group networks.

These networks across Australia would turn against each other for a share of resources.  Frictions could also emerge if services are eventually relocated to larger hospitals in a given network.

Questions surrounding appropriate funding amounts will not go away if the federal reform plan becomes a reality.

It is proposed that the Commonwealth will finance its injection of funds by acquiring 30 per cent of GST revenue that already goes to the states.  This is a recipe for dramatically weakening Australia's federal system of government, as Commonwealth preferences over the use of the 30 per cent GST share will necessarily override those of the states.

The Commonwealth and states would possibly continue to accuse each other of starving public hospitals of funds if waiting lists or patient adverse events persist.  Such political point-scoring could create an impetus for the centralisation of additional revenues into the future.

A future prime minister could look to forcibly obtain more state revenue sources, such as mining royalties, under the pretext of funding public hospitals in the face of an ageing population.  Former NSW premier Bob Carr's vision of part-time state parliaments would indeed become a reality.

A heavier funding role in health for the Federal Government is also likely to come with the political desire for a greater say in how public hospitals operate around the country.

Given the regularity of service delivery failings by the Commonwealth ranging from defence procurement to housing insulation, a federal health department as an eventual monopoly funder, provider and regulator of public hospitals would not augur well for patients hoping for fast, effective treatments.

A slippery slope toward hospital centralisation in Australia will also come at the expense of the benefits of diversity inherent in the current state provision of services.

That we already know that Victoria, with its casemix funding and local hospital boards, provides relatively efficient hospital services compared to the bureaucratised NSW and Queensland systems represents valuable policy intelligence that simply cannot be gleaned from a centralised, one-size-fits-all system run by Canberra.

The problems associated with public hospitals do not amount to a lack of money.  Over the decade to 2007-08, real funding increased from $19 billion to $31 billion, an increase of 60 per cent.  State government funding rose over the period by 68 per cent.

Ultimately nothing short of a separation of health and state will be necessary to treat a growing number of patients without blowing out government budgets.  Scant regard has been given to the need for greater private sector involvement in hospital and health care over the next few decades.

The Rudd Government's proposed shuffling of the hospital funding and policy deckchairs will not improve the Australian health-care system, and will in many respects worsen it.

State premiers would do well to reject the plan at the intergovernmental heads meeting.

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The blame game is all Canberra's fault

Kevin Rudd will take over the hospital system and everything will be dandy.

That's the election pitch to voters in New South Wales, South Australia, and Queensland, who are desperate to have the Prime Minister wrestle hospital control out of the hands of the state governments those voters elected.

Rudd's proposal displeases John Brumby, who believes that comparing Victoria's health system with that of New South Wales is defamatory, if not outright seditious.  If both leaders hold their ground, we have the edifying prospect of a state premier defending his state against a prime minister of his own party, while they both head to an election.

It's probably some kooky factional thing.  No doubt a few Labor heavyweights know the "real story" behind it all.

But Brumby is right to fight.  It is very altruistic of the Prime Minister to "end the blame game" by granting himself more power.

After all, this "blame game" is entirely Canberra's fault.  Over the past one hundred years, the Commonwealth just hasn't been able to stop itself interfering more and more with areas that are state responsibilities.  Well, according to the constitution.

It's understandable the states are so unpopular -- the New South Wales government has become little more than a succession of coups d'état.  Queensland looks to be heading that way too.

But put aside any notion of states' rights, of the virtues of a federal structure of government, of having the government closest to the people to be the one that makes the decisions.  Or of the danger of concentrating power in just one level of government.

Right now, the biggest delusion in Australian public debate is that the federal government is inherently better at running policy.

There are calls to have Canberra take over:  occupational health and safety laws, more workplace laws, disabled parking permits, taxi drivers' training standards, the timing of daylight saving, the date for ANZAC day, travel concessions for seniors, safety standards for poultry, taxes on racing and wagering, the rules governing firearms management, inheritance laws, public transport, building standards, childcare standards, pokies licensing, bikie gang laws, carbon emissions plans, and on and on and on.

That's only about half the list I have in front of me -- every man, his dog, and his dog's government relations officer seems to wants Canberra to assume responsibility for some state policy or another.

Last October Kevin Rudd even argued urban planning should be subject to a federal takeover.  Urban planning is about as far from a Commonwealth responsibility as you could get.

Dissenting against the Howard Government's Workchoices industrial relations takeover, Michael Kirby, called this "opportunistic federalism".  There's no political theory, no policy consistency, or coherent direction governing what policy areas Canberra chooses to suck into its vortex.  Just whatever federal politicians reckon will be most popular.

And there's no doubt the health takeover is popular.  Eight out of 10 Australians want a federal takeover of health.

But this isn't that.  The states will continue to fund 40 per cent, the Commonwealth the remaining 60.

Hospital workforce planning will be jointly managed by the federal and state governments, which will make workplace relations for nurses and doctors a hell of a lot more complicated.  Specialised services will also be jointly managed, as will the mix of medical services.  Procuring equipment will be negotiated between states and local hospital networks.  The federal government will set performance targets, state governments will measure targets, and local hospital networks will try to achieve those targets.

This plan won't cull bureaucracy.  It'll add it.  The federal government will have a stake about what happens in the hospitals.  The states will have a stake, and the local hospital networks will have a stake.  And regulators get a stake.  A bit like the current system, except in triplicate.

More:  if you believe a federal government takeover of funding will allow local communities to run hospitals, recall the insulation industry debacle.  The government that coughs up the money is ultimately held responsible when it all falls apart.  The next person to die in a waiting room will be seen as Kevin Rudd's personal responsibility.  And then there'll be more direct federal intervention into hospital management.

Brumby's stand against this plan is great.  But he doesn't focus on the real problem.

The states cannot avoid being the lapdog of the federal government while they're almost entirely reliant on the federal government for their money.

Rudd's health plan takes a third of the revenue from the GST back from the states.

If Brumby wants to assert Victoria's position as a health innovator, he'd push for something really radical:  to get Canberra out of the income tax business and return the power to levy income taxes to the states.

Ask a nearby teenager.  Earning your own money is the key to independence.  Only with fiscal sovereignty will the states be able to reassert their policy autonomy.

Brumby's confrontation with Rudd will be hollow unless he tackles the states' master-servant relationship with the Commonwealth.

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Killing the goose that laid the golden Easter egg

Easter in Melbourne this year was a throwback to the 1970s, with closed shops and empty streets.  Interstate visitors looking for bargains in the city's fashionable precincts had to settle for a cup of coffee.

Effectively outlawing shopping on three of the year's prime trading days has a particularly adverse effect on Melbourne's attraction as a tourist destination.  Enforcing shop closures considerably reduces the city's draw as a visitor destination, undermining a considerable amount of economic activity.

Easter shopping has returned to a past of highly restrained opening hours that prevailed in Victoria prior to the Kennett government.

Kennett's short six years of office until 1999 brought about reform on a wide front.  Deregulating shopping hours in general, he also designated only two days of forced closure -- Christmas Day and Easter Friday.  The unions spat chips, but they had little support.

The Labor government has chiselled away at the Kennett reforms.  In 2003 Easter Sunday was added to the forbidden trading days and the Saturday was declared a public holiday, guaranteeing shop assistants a ferociously expensive wage loading.

Characteristically, the trading restrictions have been accompanied by a plethora of rules and exceptions.  Easter is boom time for the grocery shops with fewer than the regulatory threshold of 100 employees -- and the IGAs and 7-Elevens have a field day.

But this is at the expense of the consumer, who is denied choice and often forced to pay a premium price.

Preventing the major retailers from trading means that the shopping malls cannot justify opening.

Compressing shopping hours means an inefficient use of space, and an inferior shopping experience as people queue to be served and for parking.

The way the government sees it, shops are there for the employees, not for the customer.  And employees, at least according to the union, don't want to work when everyone else is holidaying.

But preventing consumer needs from being met comes at a price.  Cafes, footy clubs, nightclubs and amusement parks are most in demand precisely when most people are not working.

Labour matters are at the cutting edge of the backsliding from reforms introduced in the Kennett era in Victoria and by the Howard government nationally.

The Rudd Government has made it more difficult for firms to sack workers, even those who are casuals.  It is giving extra privileges for unions to enter workplaces and claim representation of workers;  it is preparing us for discriminatory pay increases for women, overturning the existing requirement of equal pay for equal work.

Labor in Canberra and in Spring St often claims to be deregulationary.  But both are introducing measures that would convert private firms to the sort of low-productivity, high-cost outfits that are government departments.

While such measures confer advantages to some workers in the short term, they eventually backfire on efficiency, thereby blunting the ability of firms to respond to consumer needs and opportunities.

We are all worse off as a result.  But for the politicians, the decay is a long time coming so they catch the applause of those gaining short-term benefits without paying the eventual price.  Nice work if you can get it.

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Let society shape itself

It's hard not to be cynical.  Especially when a developer lobby claims giving the government power to force people to sell their homes -- to developers -- is for "community benefit", as the chief of the Urban Development Institute did last month.

It's universally agreed that developers have nothing but the interests of the community at heart.

Anyway, that's the proposal of the state government:  to set up a government planning authority with the power to compulsorily acquire property and hand it to private developers.

The developers will then build higher-density housing -- one house replaced with nine -- and flog them off at a profit.  It's an ingenious business model.  Unless it's your house they have their eye on.  The government believes some houses will just have to be demolished if it is to realise its grand Metropolitan Strategy and relax the pressure on house prices.

I guess you can't make an omelet without first passing legislation that forces poultry farmers to sell their eggs to an omelet factory.

Traditionally, governments have had the power to compulsorily acquire property for new freeways or rail lines:  obviously public things.

But in recent years, that power has become a lot more extensive, allowing private companies to benefit.  NSW isn't the only jurisdiction taking one person's property and giving it to another.

In 2005, the US Supreme Court ruled that the local authority in a town called New London, in Connecticut, could force people to sell their property to other private property owners -- in that case, to the pharmaceutical giant Pfizer, which would inhabit a new corporate facility on the land.

The court made the same argument as the NSW government:  compulsory acquisition powers can be used if there is a public benefit from doing so.  In the New London case it was claimed that bulldozing homes to make way for Pfizer would bring taxes and jobs.  To the New London authority and the US Supreme Court, the property rights of the homeowners were just a trivial obstacle on the road to the town's bright future.

The court's decision was widely condemned.  Especially because Pfizer left the new site a couple of years later, taking the best hopes of the New London planning establishment with them.

Those people whose homes were forcibly purchased to make way for the Sydney Metro, before it went embarrassingly defunct, have had a similar experience.

These new powers would eliminate something that has dogged urban planners since their profession began:  property rights.

Urban planning has always been about more than nominating where streets should go.  Planners imagine that if only they could impose their ideal configuration of roads, apartment complexes, and "community spaces", they could save the environment, improve quality of life, fix the obesity crisis, restore social capital, encourage historical awareness, and boost a city's self-esteem.

I'd trust them more if their plans weren't always thrown away well before their use-by date.

The first major plan for Sydney, the 1948 County of Cumberland Plan, was supposed to be in place up to 1980.  It was supplanted by a new plan in 1968, supposed to last until 2000.  Then came one in 1988, another in 1994, in 1997, in 1998 and in 1999.  That last plan should have lasted until 2016.  It didn't.

The planners imagine that the next one will last till 2036.  It won't.

But not discouraged by this seemingly endless cycle of bluster and disappointment, the government's plans are always extremely ambitious.  They're full of watercolour drawings and accompanied by expensive dioramas.

For modern planners the challenge is how to impose their vision of paradise on existing urban environments.  These environments are already full of roads and parks and businesses and various-density housing -- remnants of older, forgotten plans, or just a reflection of where people want to live.

The complication is property rights.  People own the houses governments want to bulldoze.  And the government that tramples property rights tramples the foundation of economic growth, of personal savings, and of economic security.  Because, fundamentally, property rights are human rights.

So compulsory acquisition to expedite the government's planning strategy should be seen for what it is:  a cartel of developers and legislators offering a blank cheque to urban planners to undermine the fundamental right of property ownership.

But there is something Sydney can do to ease the pressure on house prices.  Governments could just let society and the urban environment shape themselves.  It would take the fun out of urban planning, but it'd be a lot more successful.

Some people like living in inner-city shoeboxes.  But not everyone does -- should their preferences be forfeited?  Instead of trying to force as many people into as small a space as possible, the government could release more land for new houses to be built.

There's enough land on the Cumberland Plain to expand Sydney 50 per cent.  And infrastructure spending could follow where people want to live.  (That really shouldn't be beyond the capability of a competent government.)

That would ease the pressure on house prices.  Certainly more than giving urban planners the power to eliminate property rights would.

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