Australia-USA Free Trade: Competitive Liberalisation at Work in 2003

little less than two years after its launch, the World Trade Organisation’s latest round of multilateral trade negotiations, the ‘Doha Development Agenda’, has failed to live up to original expectations. The collapse of the Cancun Ministerial meeting in September, coming on top of missed negotiating deadlines earlier in 2003, has lowered expectations and made completing the round on schedule (before the end of 2004) problematic. Meanwhile, Australia and the United States, arguably two of the strongest supporters of the multilateral trading system are each working hard on a number of preferential trade arrangements (PTAs) — a term which will be used to refer to those bilateral and plurilateral trade agreements envisaged in the WTO GATT 1994 (Article XXIV) and GATS (Article V) Agreements. Although customs unions will be included by reference, the bulk of the discussion will be directed at free trade agreements that do not call for common external levels of protection. One of the more significant of these efforts is the negotiation of a bilateral Australia-US free trade agreement (AUSFTA) linking the two countries in what would be a combined market of over 300 million consumers. This sounds impressive, but few economists argue that a bilateral preferential free trading arrangement like AUSFTA would produce greater gains than a successful WTO round. On top of what some argue is a distraction from a needed focus on the WTO talks, the negotiation of the bilateral agreement is consuming no small amount of scarce human and budgetary resources. The acceleration of the negotiating time frame (with an objective of finishing in 2003) has not made matters any easier. So why are Canberra and Washington expending considerable time and resources on AUSFTA when the WTO negotiations seem to be in a bad way? The answer lies in part in the exercise of a policy of ‘competitive liberalisation’ embraced and espoused by politicians and negotiators in both the United States and Australia. AUSFTA and similar initiatives are designed to complement the negotiating effort in Geneva by putting additional external pressure on other players in the Doha process while at the same time producing tangible (and earlier) trade benefits for the business communities in Australia and the USA. There is also an undeniable (and undenied) political and security aspect to the AUSFTA negotiation that should not be ignored in any discussion of this ambitious initiative.