oh and i got this article that talks about preferential trade from 2004 anyways. here it is and its got a summary with it as well.
Preferential trade is closer to mark
By Ross Gittins
February 11, 2004
The first thing to understand about the free trade agreement with the United States is that, despite the name, it's got nothing to do with free trade. In consequence, the second thing is that, despite the grandiose claims being made, it doesn't amount to much.
Assuming the deal goes ahead, you'll need a microscope to see the difference it makes to our economy - as the Howard Government's own studies show.
But whether you love it or hate it, don't blame the economic rationalists. Most of them disapprove of preferential trade deals between countries, so they were frozen out of the process.
No, this deal is the result of horse-trading between the protectionists on both sides of the Pacific. The object of the game was to persuade the other guy (we mustn't say "bloke" any more) to give up more of his protection than you gave up of yours.
So who won? We can surmise that Uncle Sam drove a harder bargain than his Little Mate, but we won't actually know for weeks. The text of the agreement hasn't been released, so we have to rely on what each side tells us about it.
And here's a surprise. Each horse-trader is claiming to have wiped the floor with the other. Our trade people, for instance, are claiming to have won huge concessions from the Americans, while giving away nothing. Read the dishonest pap on their website and you'll find not a single negative is acknowledged.
Fortunately, match our lies against the Americans' and you get a vague outline of the truth and a fair idea of what our Government won't tell us.
The main thing we wanted from the Americans was exemptions from the huge protection they give their farmers. As everyone knows, they didn't give us much. (But don't waste any tears on our canegrowers. Their industry ought to be efficient but isn't, thanks to decades of assistance from state and federal governments. Their present outrage is the raving of a drug addict with withdrawal symptoms. Their threats have worked and John Howard says he'll resume giving them money to feed their habit, which you and I will pay for via higher prices for everything that's sweet.)
For their part, the main thing the Americans wanted from us was a better deal for their exporters of services and intellectual property. Less restrictions on American foreign investors, lower local-content requirements for TV and other media, changes to our patent and copyright rules to suit US companies and a say in our Pharmaceutical Benefits Scheme.
This is where our politicians and trade officials are refusing to tell us what they agreed to. This is where, as the truth dribbles out, we'll discover who are the losers from the deal and who'll be paying for the farmers' gains. It's where the deal is most likely to unravel and be judged unacceptable by the Senate.
The debate over the PBS has a lot further to run. Howard assures us the changes to the PBS won't raise the prices we pay for prescriptions. Rather, they may mean more drugs are put on the subsidised list - and "I wouldn't have thought the Australian public would object to that", he says.
Well, not to more cheap drugs, no. But to covering the resulting higher cost of the scheme through higher taxes? Don't worry, "prices" won't go up, but "costs" will. What mugs Honest John takes us for!
Moving right along, we come to trade in manufactured goods. Our people tell us that, with the odd exception, our manufactures will be able to enter the US completely free of tariffs (import duties). Wow.
Howard claims this means our present $12 billion-a-year trade deficit with the US will fall.
But the Americans are telling their public that with the odd exception, their manufactures will be able to enter Australia completely free of duty. Oh!
And they claim it means American manufacturers will clean up, selling us $2.6 billion more goods a year, and creating lots of new jobs for American workers.
Note, however, that this aspect of the deal isn't nearly as radical as it sounds. Why not? Because, barring those exceptions, the general level of duty applying to goods imported into Australia is 5 per cent or less.
For goods entering America, the rates are even lower. So abolishing import duties won't make a big difference. Whether the value of our dollar at any time happens to be up or down will have a much bigger influence over our competitiveness than the presence or absence of 2 to 5 per cent import duties.
Even so, you would expect the trade deal to lead to an increase in the two-way trade between Australia and the US. A fair bit of that increase, however, would involve us importing stuff from the US rather than elsewhere, and exporting to the US rather than to Asia.
(This "diversion" of trade from other countries is why free-trade agreements aren't actually about free trade, but are merely preferential deals between countries. It's also why economic rationalists disapprove, and leave FTAs to the protectionists.)
But though the deal should lead to an increase in trade with the US, it's far from clear this would mean reducing our trade deficit rather than increasing it. On the historical record, our appetite for their manufactured exports is a lot keener than their appetite for ours.
And the likelihood of the deficit getting bigger rather than smaller is heightened by the new bureaucratic world of "rules of origin" we'd be joining. Duty-free entry to the US market is permitted only for those Australian goods that are genuinely Australian-made.
The reverse applies to US goods coming here, of course. But it may be that our manufacturers are more likely to be using an unacceptably high proportion of components imported from third countries than US manufacturers are.
If so, we'd be at a disadvantage. And guess what the answer is? It's for our manufacturers to source their components more from the US than from other countries. It turns out there's a lot of protectionism hidden inside so-called free-trade agreements. And that's equally true of American politicians speechifying about trade.
Summary –
Economic rationalist – an economist who is in favor of removing government regulations that inhibit free enterprise and trade.
Key Points –
This “FTA” is actually a preferential trade agreement.
The overall impact to Australia will be minor.
Details of the deal are yet to be revealed.
Australia aimed to reduce US agriculture sector protection.
US sought lower restrictions to foreign investment, media ownership, intellectual property and pharmaceutical industry.
Manufacturers trade is largely duty free already (2-5%)
Likely that the increase in trade with US will only occur because of reduced trade with others.
