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Environment Pays Dearly For Free Trade

Australian Financial Review, May 20, 2004, By Peter Garrett

The price for economic growth always means further degradation in the natural world says Peter Garrett.

The government would have you believe there are no losers out of the proposed free-trade agreement (FTA) with the United States. The government says it's worth billions of dollars to the economy: how can we possibly lose?

The truth is, the free-trade agreement is a very bad deal for Australia's natural environment.

Now it's signed (still subject to ratification in the Australian parliament and the US Congress), the FTA will have dramatic implications for Australia's law-making processes, and force governments to think twice before introducing important environmental and public health regulations for fear of sparking a trade dispute or having to compensate US investors.

In reality, it will also have substantial negative and irreversible consequences for the health of Australia's environment, which we cannot afford to ignore.

There was a good deal of talk about the economic benefits of the FTA. A recent report from the Centre for International Economics (CIE), commissioned by the federal government, concludes that "in a decade from now the most probable effect of the free-trade agreement on Australia's real gross domestic product (GDP) is an increase of $6.1 billion per year, or nearly 0.7 per cent above what it might otherwise be".

What this report failed to acknowledge is that, with our current laws and policies, economic growth is almost always accompanied by a commensurate increase in environmental degradation.

In Australia, the CSIRO has estimated that each dollar increase in GDP requires the consumption of an additional 37 litres of water, an additional three square metres of land disturbance and the burning of an additional 10 megajoules of fossil energy.

The increase, therefore, in Australia's water consumption, land degradation and energy use from a projected $6.1 billion annual increase in GDP will be substantial.

The FTA will oblige Australian governments to pay compensation to US companies when Australian environmental laws "significantly interfere" with their investments.

For instance, new anti-tree clearing or water conservation laws that significantly interfere with the profits of US agricultural companies operating in Australia may require that compensation be paid.

Effectively, this grants US companies greater rights to compensation under Australian law than you or I, or Australian companies, have under our own legal system.

Australian governments will be exposed to millions, possibly billions, of dollars in compensation payments. Governments no doubt will think carefully about the financial implications before introducing important public health and environmental laws.

NSW, Victoria and the ACT governments have raised concerns about this risk and the fact that other trade agreements have provided environmental exemptions.

The government-commissioned CIE report on the FTA contains a half-baked and rushed review of its potential environmental impact.

The CIE's report fails to consider several key elements, including the impact on Australia's waterways of changed economic activities.

It is an indictment on Australia's trade negotiation process that it does not require a proper environmental impact assessment nor provide the Australian parliament with a power of veto.

This stands in stark contrast to the process in the United States where specific trade legislation sets out clearly the environmental, social and economic objectives for the US in trade negotiations. The US also requires an environmental impact assessment of an agreement before signing, and grants Congress a right of veto over any agreement that is not in the national interest.

Two things need to happen now.

First, the Australian parliament should refuse to ratify the FTA.

Second, new trade legislation is needed to ensure that in future Australia establishes trade relations with other countries that promote both a productive economy and a healthy environment.

Peter Garrett Is President of The Australian Conservation Foundation