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Australia-US FTA still a drain on Australia’s economy

By Michael Cebon | February 10, 2009

Martin Feil kicks another goal in The Age today with an excellent article assessing the economic impact of the Australia-US Free Trade Agreement (AUSFTA) four years after it took affect on 1 January 2005.

As the Parliamentary Library noted in December, the AUSFTA has increased Australia’s merchandise imports from the US and reduced our exports, increasing the overall trade deficit with the US.

Feil builds on this analysis, noting that

The trade deficit numbers relate to trade in physical merchandise. They do not include income payments and payments for intangibles such as royalties, management fees, technical service fees and dividends. . .

Analysis of merchandise trade doesn’t take into account the potentially most devastating areas of one-way Australian market penetration created by the USAFTA.

The ABS economic indicator for 2007-08 shows Australia’s “income” deficit in the balance of payments has increased from $37 billion in 2005-06 to $45 billion in 2006-07 and $50 billion in 2007-08.

This is the statistical area where we simply don’t know what is going on, except that we are paying out much more than we are receiving. If we are supposed to become a service economy, the income flow needs to be the other way.

Global Trade Watch join’s Feil’s call for a full government review of this “free” trade agreement, especially in light of Kevin Rudd’s recent admission that the Global Financial Crisis has “called into question the prevailing neo-liberal economic orthodoxy of the past 30 years – the orthodoxy that has underpinned the national and global regulatory frameworks that have so spectacularly failed to prevent the economic mayhem which has now been visited upon us.”

If free trade is not a central neo-liberal economic orthodoxy, I don’t know what is.

Topics: Australian Trade Policy, Bilateral FTAs | Comments Off

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