The U.S. and Australia have finally agreed on the text of a freer trade agreement. Australia declined to insist that the U.S. adopt its domestic environmental and labor regulations, which is a good thing. (And, presumably, even Richard Gephardt and Fritz Hollings won’t be able to complain with a straight face that the Aussies are undercutting us on those matters.) The Bush Administration’s diehard defense of its indefensible farm programs continues; the sugar program, among the worst of the worst, remains untouched without so much as an increase in quotas. But there was some movement on dairy, beef, and wine– after a long phase-in time, the U.S. will allow significantly more dairy and beef access, and will eliminate tariffs on Australian wines. (I reluctantly came around on long phase-in times on trade agreements in my December TNR column.)
It remains unclear just what the deal says about film and television– the U.S. is claiming that it won some access, Australia is claiming that its domestic sector remains protected, and the text won’t be public for two weeks. (Throughout the negotiations my sympathies have been with the Aussie side on most things, because mostly it was the U.S. that was trying to maintain unpleasant barriers to trade. On film and TV it was the other way around; I’m no fan of domestic media content rules, whether in Australia or in France. I don’t think Australian film or TV needs such rules anyways; both industries are internationally competitive exporters. Neighbors, anyone?)
And I have no view, because I have insufficient knowledge, about the other major sticking point of the ngeotiations: pharmaceuticals. How a centralized government purchaser ought to be able to deal with private suppliers is a tricky business; one side has monopsony power, so the line between ‘negotiating’ and ‘price controls’ us a fine one. And, of course, U.S. pharma companies have (legitimate) short-term monopolies on their own drugs, through patent law; so forbidding the purchaser to work toward lower prices opens the way to extortionately high ones. The drug market is a strange one, and I really don’t have a sense of what the OZ/USFTA ideally should say about it, what the Medicare bill should say about it, whether reimportation should be allowed, etc., just like I don’t have a clear sense of what the right way to regulate heavily-regulated monopoly utilities is. These are second-best problems. Even though it might be the case that an open market with private actors would be best, given public or monopolistic actors, a more open market isn’t automatically preferable to a less.
Anyway, I’ve from time to time complained about the lack of progress on the agreement. I’d obviously have preferred greater U.S. movement on agriculture, and faster movement where there was any at all. But both as a matter of trade policy and as a matter of reaffirming an important alliance, I’m happy to see an agreement rather than yet another breakdown of talks, and I’m happy to see an agreement that appears to make some things better, with a lowering of Aussie tariffs on manufactured goods and of U.S. tariffs on some ag goods.
Now it’s time to worry about what Congress will do. If the U.S. can’t ratify a trade agreement that clearly helps U.S. exporters, with a developed country that is also a major ally, that’s a very bad sign. And yet I’m not wholly confident about it, especially during an election year.
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