United States of America Farming Subsidies
The Hon. Dr ARTHUR CHESTERFIELD-EVANS [5.30 p.m.]: I move:
That this House views with concern the passage by the Congress of the United States of America of Resolution 2646, the Agriculture, Conservation and Rural Enhancement Act of 2002, which provides subsidies to American farmers that:
(a) will distort world commodity prices thereby affecting the livelihood of New South Wales farmers and member states of the Cairns Group, and
(b) contradicts the free-market agenda espoused by successive Presidential administrations.
It might be noted that this motion has been sitting on the notice paper since 30 April 2003, which was just after the Farm Subsidy Bill was passed. It also might be noted that there have been a number of changes in the situation with regard to free trade since that time, in particular, the free trade agreement between Australia and the United States of America that had significant subsidies retained with restrictions of trade to Australian farmers within the United States of America and also intellectual property laws, which of course have a great deal of significance in relation to the maintenance of intellectual property and a deficit that Australia will have to pay in that area.
There was a lot of controversy about the passage of that free trade agreement at that time and I foreshadow some amendments to this motion to take those aspects into account and to make the motion as it will read more relevant to the changed circumstances since this was put on the notice paper. I think members will agree, particularly from the point of view of farmers, and indeed from the point of view of Australia generally, that free trade agreements are extremely important and Australia did not do well in terms of the agreements with the United States of America. I think the political pressure to come to a decision had an adverse effect in relation to that free trade agreement also. But that is separate from the Rural Enhancement Act of 2002, which, in essence, provided immense subsidies to American farmers.
It might be noted that Australia is a developed country in terms of its income per capita, but in terms of the percentage of its economy, which is dependent on commodities, it is almost a developing country. The problem we have had and the reason we have been leaders of the Cairns Group is because of that unfortunate accident of history that we are very much price takers in regard to goods and subsidies, particularly initiated by the European Union [EU] to maintain their farms, and they are not all paid directly as subsidies to the price of commodities—which they used to be paid in terms of butter mountains and white wine lakes—they are also paid to maintain the rural environment.
That is extremely significant in maintaining the farmers and enabling those farmers to produce commodities at much less than cost price; they are getting far more income than they are generating from those commodities. Then there are reciprocal subsidies from the United States of America, which maintain their farmers when they are producing goods that would not allow them to live viably, and of course that depresses the world price. This has had an immense effect.
It might be noted that the Agriculture, Conservation and Rural Enhancement Act 2002 was indeed brought in by President George Bush, who at that time got fewer votes than his rival Al Gore, and it reversed the courageous approach to free trade policy that had been introduced by President Clinton in the Freedom and Farm Act of 1996, which had been seen as a watershed in United States trade policy as it tried to end taxpayer-backed subsidies. George Bush, who called himself a free trader, said in his press release:
The final provisions of the farm bill are also consistent with America's international trade obligations, which will strengthen our ability to open foreign markets for American farm products … I am pleased that this farm bill provides a generous and reliable safety net for our Nation's farmers and ranchers.
This is complete doublespeak and nonsense. It is quite inconsistent with the United States international trade obligations as it gives big subsidies to farmers in the United States of America, which makes it harder for other farmers to compete as it lowers world prices and makes United States farmers likely to overproduce also. The IMF Managing Director, Horst Koehler, called it "unconscionable". Canada's agricultural Minister, Lyle Vanclief, said to CNN that the subsidies were "a serious blow to US credibility to negotiate lower US barriers". The New South Wales Farmers Association President, Mal Peters, said that he was not happy about the situation. The Washington Post, in an article by Republican John Boehner on 3 May 2002, called it "turning the clock back 50 years in federal farm policy".
There are a number of ways that trade can be damaged: direct barriers to imports; quotas for imports; subsidies to local producers, such as these; non-tariff barriers, such as quarantine regulations, or just red tape; customs inspections; packaging and labelling regulations, et cetera. This is clearly a subsidy so gross it will distort the markets and make it unlikely that the United States of America can be relied upon to do the right thing in the free trade agreement that Australia was negotiating at that time, and I think time has borne that out. There is some doubt about the exact value of the subsidies. At the time, the best information was that the Act would provide about $A137.8 billion of subsidies over 10 years to inefficient American farmers, and cost Australian farmers about $US16.2 billion. Other estimates were $US180 billion.
The Australian Democrats believe in individual initiative and enterprise, and recognise the need for self-fulfilment. While we believe in and support economic enterprise, we do not want the Australian economy or the global economy to be dominated by the interests of large corporate monopolies in the economic interests of larger national economies. We believe in fair trade, not free trade. We want a level playing field for national economies to compete in the global marketplace. Australia has taken the lead in reducing tariff barriers, such as reducing or removing tariffs. We have also removed a substantial amount of subsidies to our primary industry sector.
Economic theory states that subsidies distort prices and help sustain uncompetitive and inefficient industries. While past Federal Labor and Coalition governments have jumped first into liberalising trade, our trade partners in Western Europe, North-East Asia and especially North America are still dragging their feet in removing trade barriers on primary industries. This motion concerns the passage of the Agriculture, Conservation and Rural Enhancement Act, or the Farm Subsidy Bill, by the American Congress and its ratification by George W. Bush in May 2002.
The Democrats believe that this is a glowing example of hypocrisy in America's long-term policy stance to break down barriers to global trade. It seems that our so-called allies in America will shaft us if they have the opportunity to make money. The billions of dollars in farm subsidies will distort world markets and force even more Australian farmers off the land. Australia has been a good ally to America. We were a nuclear target during the Cold War because we accommodated American military installations. I believe that the Howard Government has lied to the people of Australia about Saddam's links to global terror and Iraq's weapons of mass destruction, and has hitched our wagon to the American President in America's war against terrorism at great expense to the Federal budget. It is a poor result that the Americans have rewarded our strong alliance with such subsidies.
It is ironic that Congress supported the bill even after the Bush Administration released a report stating that subsidies would stimulate excess production, inflate land rents and largely benefit a small number of big farms. So American farm families may suffer in the long term as well. An article in the Washington Post by John Boehner and Cal Dooley dated 2 May 2002 and entitled "This Terrible Farm Bill" makes a good case. In 1996 Congress took a historic step to rein in federal agricultural subsidies with the Freedom to Farm Act. Farmers who planted row crops such as corn, wheat and soy beans were supposed to be free from government intervention that stipulated how much they could produce. In return, government subsidies to farmers would be gradually phased out, making farming subject to the free market system.
Boehner and Dooley observed that under the new Act farmers would continue to have flexibility to plant what they chose but generous farm subsidies would be tied to production. Over the past few years current subsidy levels have led to overproduction and lower prices, and more than 40 per cent of net farm income in America now comes from the Federal government. These new and expanded programs represent a 76 per cent increase in agricultural spending from the coffers of the American Treasury. Unlike John Howard, the Australian Democrats actually value Australia's sovereignty and identity, and it is great to see people out there who share this concern, especially with respect to these trade agreements.
The two agreements—the General Agreement on Trade in Services and the free trade agreement with America—have the potential to subject our national sovereignty to the interests of other countries and even corporations. Even economists and trade experts are divided on the question: Will the trade agreement be of benefit to Australia? While I have more to say, I will seek to adjourn the debate so that I can comment on the American-Australian free trade agreement, which has arisen since I moved the motion.
Debate adjourned on motion by the Hon. Dr Arthur Chesterfield-Evans.