FTA between Australia and America

Is economic welfare of producer - customer maximizing by the freest possible trade?

In theory free trade is a trade where we give you something for free and you give us something in return to maximize the bilateral benefits.
But what does free mean? Free means others do not regulate it (usually government) against the will of parties involved. But is it always beneficial or they are other issues that influence these agreements? Since the WW2 America plays main role in the world’s economy as well as the influence on the international trade if we like it of not. Some extremists may try to change this trend like Al Keida on the September 11th, but they can’t damage such a strong economic base.

In 21st century every country without exceptions is in some way influenced by globalization or may be we could say in a way Americanization.
This trend affects directly every one of us. Higher standards of living, more choices, greater business opportunities are what we interested in, but are it always beneficial? If so why do countries still trying to protect the amount of exports and imports? The idea behind would be if every country in the world would join the free trade agreement at the same rime under the same condition, it would mean great amount of positive outcome for everyone, but because we know this can’t possible happened at least for next 100 years we are looking at the situation from the other point of view. “You slit your throat and I will slit mine in return.” The opposite of free trade is what we refer to as protecionalism. These are the regulations for exchanging goods with other countries and they are usually set and controlled by government.

This regulation restricts imports and the most common are tariffs, which are the traditional methods that schedule duties on imports in general. There are other different regulations like “ variable levy “, which are commonly used on agricultural product and they trying to keep price of home made products lower then the imports. Other limitation known as “quota limits” limits the amount of the particular product that can be imported in a time period. Sometimes the export may be restricted as a result of “ voluntary agreement” between two involved parties, which avoids stronger controls and regulation for the importing country. Therefore Australia and New Zealand restrained their meat export to United Stated between years 1968-1971. During 1950’ even Japan restricted it’s export of cotton textiles to US under the “ voluntary agreement” but soon after other countries started taking advantage by increasing their imports of textiles to US. US immediately took steps by negotiating Long –Term Agreement in 1963. Even thought that America is first in the row to develop FTA in the whole world, most of the states in US have different regulations and ways of dealing with trade.

California is one of the most restricted and has been declared unconstitutional with federal prerogatives in international business. In 1960’s in Alabama they restricted private road builders from buying from foreign supplies. There are many other restrictions in terms of trade. The question rises if these regulations still support Fair Trade laws or US are only trying to protect their domestic sector. Here are few examples of how the radicilarism in US can work and how are Americans protecting themselves from a trade. In one State on the south of America shop selling Japanese clothing had to have a sigh of: “ Be American, Buy American; the job you save may be your own”. Florida has a large population of Cuban refugees, some of them ended up going to jail for practicing medicine without a license, although there were qualified and recognized doctors in their home country, because of language differences. Even native doctors were complaining about Florida refusing to honor licenses issued in other states, and Florida’s Examiners reportedly withheld action against one of the Florida’s licenses that had 2 deads on his hands.

In 1947 in Geneva GATT was first negotiated by 23 countries. Today General Agreement on Tariffs and Trade has over 100 members and they have regular meetings in Geneva. GATT includes code principles and rules, quantitative restrictions and exceptions that the counties agreed to, as well as list of product and tariffs (change in tariffs). The countries also agreed to not discriminate any new member, who decides to join GATT. Japan become a member in 1955 and had become a victim of this provision.

Australia and US agreed on bilateral trade agreement on 4th of March 2004. This agreement was designed to reduce trade barriers and enhance the relationship between the countries. Surprise was that part of the deal was the Australian pharmaceutical benefits scheme (national drug subsidy exclusively operated by federal government) and it included the creation of independent review body to examine drugs rejected by Pharmaceutical Benefits Advisory Committee. Under existing legislation only Advisory Committee can recommend drugs for subsidy and Australian Prime Minister John Howard is pulling this agreement to the end even thought it will undermine Australian public health, but he will keep his “Big Bro” on a good side. Australian FTA only follows the pattern of trade agreements by the US (e.g. Jordan, Chile, Singapore). The FTA will also bring some positives, like the globalization effect on patenting of pharmaceutical technologies like AIDS/HIV virus, because some medicine is already available, very expensive and hard to get will be available in developing countries.

The greatest risk for Australia may result from having different opinions about Australian’s obligation to provide an independent review of decision made by PBAC, because this term hasn’t been specified. The problem will start when US starts putting pressure on Australian government to reduce the price of the drugs and make concession on drugs listing and US in not willing to negotiate on intellectual property in trade agreement. This agreement will bring worries to Australian public, and will strenhening US position and the monopolistic globalization. The US is at the moment negotiating or about to start negotiating with another 13 countries, which are gambling with their public health system and giving all the aces to US.