Trade agreements are the constitutions of the global economy. They set the limits on what nation-states can and can’t do.
It will be about as easy to change the words of the Australia-US Free Trade Agreement as it is to change those in our own Constitution. The first Australian Constitution was an Act of the British Parliament, passed when Brittannia ruled the waves and pretty much everything else. The next Australian constitution might be the proposed free trade agreement with the world’s current strategic, economic and cultural superpower, the United States. This might be what post-colonialism feels like.
I happen to think Australia desperately needs trade agreements. Small countries might get beaten up a little when they’re created, but they get beaten up even more when they’re not. I do, however, much prefer the multilateral kind where lots of countries are involved. You tend not to get beaten up in such targeted ways.
Australia cannot choose to do without a relationship with the US, the world’s largest economy, Australia’s largest individual trading partner and a long-standing strategic ally. But it does have choices about the nature of that relationship, and about the other relationships it chooses to pursue alongside it.
Why an FTA with the US?
The federal government commissioned two reports on the proposed FTA with the US - one on the direct economic benefits, the second on its ‘wider implications’.
The report on the direct economic benefits found that an FTA would improve economic welfare and gross domestic product in both countries. The percentage increases would be larger for Australia than for the US, because we’re a little country getting improved access to a much bigger market; they are a big country getting improved access to a small market.
Australian GDP would eventually be 0.33 per cent higher and US GDP 0.02 per cent higher as a result of the FTA. Turning that into figures for how much extra the average Australian would be able to spend as a result of the higher rate of economic growth - for Australia’s current population, in today’s dollars, the total value of the increase in spending we would each be able to do over the next twenty years would be less than $US500 ($A750). For the US, it would be even smaller - just $US35 per person.
Those figures assume all barriers to trade between the US and Australia are removed. That’s not going to happen. For example, we know that most of the vast US farm subsidies are not going to be touched. So at best, the direct economic benefits per Australian are going to total considerably less than $A750 over the next 20 years.
For Australia, this is not nothing, but it’s small. What makes it significant, first, is that in an era of bilateral trade deals, this is the biggest one we’re likely to get. Second, the particular markets to which Australian producers get better access matter a lot for the particular Australians who produce the products. So if you produce sugar or dairy or beef, better access to the currently tightly-controlled US markets for those products might be very important. It might make the difference as to whether the country town you live in has got much of a future.
So - the direct economic impact of any FTA is likely to be small, but very important for some people and places. The picture is similar for the US - the direct economic impact of any FTA with Australia is likely to be miniscule, but important for some people, places and industry sectors. It’s certainly important for US audiovisual producers. It’s one US industry that has a trade surplus. The Australian market has long been one which, though small, has had a very big appetite for US product. And the words of any free trade deal with Australia will provide an important precedent for other bilateral deals with bigger countries and regions.
Recognising that the direct economic benefits were likely to be small, the Australian government also commissioned a report on the wider implications.
‘[F]ree trade agreements,’ the authors of this report said, ‘perform a larger role in today’s globalised world than simple removal of trade barriers - they are instruments to promote closer relations between economies’.
They saw the US as the model economy for Australia to get itself closer to. They want Australian managers to get closer to US management techniques, Australian policy-makers to get closer to US policy approaches and the Australian economy to perform like the US economy.
A central attraction of the US economy for the report’s authors was the fact that it is the home of the so-called New Economy or the Information Economy: ‘the ultimate bonus from an FTA for Australia will be integration with the economy at the heart of the Information Age and the attendant improvement of business culture that will follow from being able to draw on the world’s best’.
In this context, an FTA with the US is partly about badging: ‘An FTA with the US can be symbolically important to help dispel Australia’s ‘Old Economy’ image’. More broadly, ‘Australia’s major challenge in investment promotion in the United States is simply to be noticed.’ A good way to be noticed is to get the president to negotiate a trade deal with you. A ‘commitment by the US Administration to negotiate an FTA with another country is seen as tacit endorsement, first by the Administration and then by the Congress, of the country concerned and the state of its economy.’ Trade Minister Mark Vaile calls it ‘an opportunity to ‘turn heads’ in the United States.’
Two years on from the report’s assessment, it is less clear that the New Economy and the business practices and economic performance of the US are quite the World’s Best Practice models they may have seemed. But it was always surprising that the case for an free trade agreement rested so centrally on such subjective and difficult-to-quantify factors.
The language that keeps coming up for the kind of relationship we’re pursuing is ‘deep integration’. Said trade minister Mark Vaile in June 2003: ‘We have an opportunity to negotiate deeper integration with not only the world’s largest economy, but also the world’s pre-eminent strategic power.’
The funny thing about the rationale for this state-of-the-art strategic and economic relationship is that it’s also a cultural relationship. Indeed, for its strongest supporters, that’s the best thing about it.
What might this ‘deeper integration’ mean? Personally, I adore a lot of Hollywood movies. My idea of dreamy winter Sunday afternoon is a double bill at the Astor in St Kilda - Singin’ in the Rain plus An American in Paris; Breakfast at Tiffany’s plus Roman Holiday; Badlands plus Mean Streets. I don’t think I’m alone in thinking US TV drama is in the middle of a golden age. But ‘deeper integration’? Go past your local multiplex cinema or DVD store and see the movies on offer, or look at the Foxtel program guide. You’ve got to wonder how much deeper it can get.
And if ‘turning heads in America’ is the aim, you might ask whether Cate Blanchett and Hugo Weaving and Baz Luhrmann and Steve Irwin and the Olympic Opening Ceremony might play a little bit of role.
The second thing I want to do is make a few brief points on some of the key arguments we hear in favour of removing government assistance, and completely opening international markets for cultural products.
First, that free trade is about free speech and free expression. One of the great seductions. In the 1960s, Australia made less than two feature films a year. In recent years we’ve made about 30, although we only made 19 in 2002-03. Many are supported by government agencies, though far from all of them. So there’s much more speaking, and there’s much more trading.
Some people might think The Secret Life of Us would have been commissioned by the Ten Network even without an Australian drama quota. Their 18-39 audience would have demanded it. Yeah? How are they feeling after the audience numbers for White Collar Blue, After the Deluge and Crash Burn? Fine shows, but not quite delivering the numbers advertisers look for. Do you think it might be getting a little tempting for executives at television companies with unsurprisingly unsentimental shareholders to fill the next hole in the schedule with something from across the Pacific that doesn’t cost quite so much and involve quite so many risks? Especially television companies which, if the Senate gets its way, will be able to be completely foreign owned? Would the Nine Network, which couldn’t work out how to make successful long-form local drama for decades, have stuck at the task if it hadn’t had to? Would we have ever had the era of Water Rats, Halifax, Stingers and McLeod’s Daughters?
And ask any country teenager how their life changed when they first got Triple J in their town.
Government support, if it’s well-targeted, can get some great things to happen that wouldn’t otherwise happen. More speech, more trade.
Second, some suggest that even if the imperfect markets of old might have justified intervention, there is now a much greater diversity of distribution possibilities and much reduced costs of production, distribution and marketing as a result of digital technology. Anyone with a digital camera, a decent mike, a G4 or G5 Macintosh with an editing application and a broadband connection to the Internet is already able to make whatever they like and send it to whoever they like.
These are hugely important developments. But they are not the only things that are happening. Cultural production is getting bigger and smaller simultaneously. The credit-card movie that becomes a blockbuster, like The Blair Witch Project, still seems more an exception than a rule. The rule is still set by Harry Potter and Lord of the Rings and Star Wars. The electronic games market is increasingly hit-driven. The scale of its projects is increasing massively. Spiralling Hollywood movie budgets; the huge advances paid to high-profile authors; licensing fees paid for the most successful TV program formats - all suggest that the old economic realities of the most globally prominent cultural products are surviving despite profound technological, economic and social changes.
New distribution possibilities, particularly the internet, are helping to break down some of the power of incumbents. But almost everywhere you look, you also see consolidation, especially in pay TV and in telecommunications. There’ll be more if the government gets its way on media ownership.
So let’s celebrate any reductions in costs and new distribution opportunities which help more creators to connect with wider audiences and users and with each other. But let’s also remember that the blockbusters in a truly global market place will be bigger than ever. That will make it at least as hard as it has ever been for small producers to create them, or to create other works which get noticed.
Third, especially in 2003, some people have argued that, although a case for supporting the local audiovisual industry can be made, the industry hasn’t been delivering. If the industry can’t perform even with the generous assistance it receives, maybe Australia would be better off trading away some of the capacity to help it in the future as part of a broader deal to gain better access to US markets for other products where Australians can compete.
If the Australian film industry is in crisis, it seems to me it’s a complicated kind of a crisis.
Over the last decade, audiences have flocked to newly-built multiplex cinemas showing movies from around the world. Local exhibitors - Village Roadshow, Hoyts and Greater Union - expanded then, in some cases, retreated from overseas markets. Australian performers and creative talent achieved extraordinary visibility through major international awards and roles in some of the biggest motion pictures of the era. Foreign-financed production and post-production of films, TV programs and electronic games in Australia increased sharply. Overseas organisations established or expanded production facilities, regional offices and Australian-based agencies.
Yet Australian movies’ share of the local box office fell and the country’s trade deficit in audiovisual royalties ballooned. That’s got a lot to do with the structural changes in the business - multiplex cinemas and multichannel TV. These provide new challenges, not an excuse to chuck it all in.
Australia is a complicated place, positioned between the confidence of these global successes, and the ongoing economic difficulties of producing and distributing high-cost, high-impact cultural forms with particular resonance for Australia and Australians. It’s a place that has learned, as an earlier government put it, ‘that there is much to gain and little to fear from being open to the world. It is as true of the culture as it is of the economy.’ But it has also learned lessons about the strategies needed to sustain creative independence and the industrial scale and sophistication which underpins it.
Finally, a word about history.
One of the things I think you get from looking at history is a sense of when you might be in the middle of it. I happen to think the words we finally agree upon, perhaps in the next few weeks, to express our trading relationship with the US, represent a truly decisive moment in Australian politics, economics and culture.
Moments like this have come around a few times. In December, it will be ten years since negotiators closed the deal that created the World Trade Organisation. The last item on the table in that round of talks, famously, was ‘audiovisual services’. Countries like Australia retained the power to maintain, adapt and introduce new government measures to support them.
It’s also about 40 years since the question of trade in TV programs was first discussed in the WTO’s predecessor, the GATT. Back then, in the early 1960s, the US moved to limit the forms of support governments could offer to the local TV program production industries which were emerging to service the new medium. They didn’t succeed.
I’d often wondered what Australia’s position - the Menzies government’s position - was at the time. A month or so ago I dug around in the files at the National Archives to find out.
The Australian negotiators were briefed to oppose the American position. It was in 1960 that the rule was introduced requiring all TV advertisements in Australia to be Australian. This was done to provide some measure of help to the local film industry. It was also around this time that the first Australian TV program quotas were imposed, requiring commercial TV licensees to show 40% Australian programs, and at least one hour a week between 7.30 and 9.30pm of programs which were ‘distinctly Australian in content and character’.
Of course, these days, the idea that there would be only one hour a week of prime time programming on each commercial network that was ‘distinctly Australian in content and character’ seems bizarre.
The Australian delegation’s riding instructions were that Australia ‘would prefer to retain complete freedom of action and not enter into any commitment on the matter, particularly at a time when the television industry in Australia is in its infancy and the lines of its development are uncertain’.
Why did Australia oppose the powerful Americans? At the time, the British, who we looked to for advice, required around 85% of programming on the BBC and ITV stations to come from British or British Commonwealth sources. Quotas were cool, though not in America.
These days, we’re looking to take our policy advice from a different empire.
Let’s hope we’re big enough to get a plan of our own this time.