How Diplomatic Lobbying Affected the US-Australia Free Trade Agreement Negotiations

Introduction

The first of January, 2005 marked a new beginning for the country of USA and Australia in their quest towards prosperity, economic integration, and a strong partnership. As heralded by the Australian government of the time, “one in a lifetime deal” that tied them to the world's biggest economy and the most powerful country. Thus, it came into force the Australia-US Free Trade Agreement (AUSFTA) as a bilateral trading partnership between the two countries. The Trade Agreement that was proposed by the USA to Australia as long back as in 1945, but not until the strong tie between George W Bush and John Howard, that the proposal finally started moulding into shape. With President Bush giving a green signal for the Free Trade Agreement to be taken forward in 2001, the Centre for International Economics (CIE) was deputed by the Australian Department of Foreign Affairs and Trade (DFAT) in 2004 to make an analysis of the Economic Impact of the AUSFTA on the Australian Trade Front. CIE concluded in the prospects of large economic gains of the country. Thus the two governments celebrated the initiation of a ‘win-win' trade agreement which would go beyond economic impacts and would result in a strong partnership between the two countries in the next round of WTO DOHA multilateral trade negotiations and result in a successful relationship with their counterparts in the Asia Pacific region (Stoler, 2004).With this Trade agreement coming into force Australia had concluded its second preferential trade agreement after its first with Singapore. Thus, Australia marked its departure from its previous policy of unilateral and multilateral trade system (Armstrong, 2015). By moving towards the path of bilateral trade agreements, Australia gave up its previous policy of non-discriminatory trade liberalisation. Since the early 1970s and throughout 1980-90, Australia had embarked on its journey towards liberalisation and multilateral trade agreements. Different business groups had benefitted from such trade agreements. The general public opinion was in favour of these agreements. FTAs are valued in general because they are helpful in implementing such institutional patterns which in the long run not only help in solving business problems but also pave the way for increased trade liberalisation (Stoler, 2004). Like all other trade agreements, even in the AUSFTA, the different business groups and other major interest groups played an important role in the decision-making process. The Trade minister and the Department of Foreign Affairs and Trade were in constant consultation with the different interest groups to discuss the terms of the trade. The Business Council of Australia (BCA), a group of big Australian businesses were in favour of the treaty, the National Farmers' Federation through dissatisfied by total exclusion of sugar was finally won over by extensive concessions. The situation was similar to the dairy representatives, who despite being speculated high gain group, could not gain much (Lantis, 2008). The meat and Cattle council was in complete opposition considering the exclusion of tariff cuts on beef imports. The Australian Manufacturing Workers were also in the opposition as they went forward to publish a report in 2004, predicting an economic downfall and heavy job losses. Doctors were deeply concerned, and the independence and advantages of the Pharmaceutical Benefits Scheme (PBS) were deeply endangered, as the PBS advisory committee which was an independent statutory body for Australia seemed to lose its significance (Lantis, 2008). The public opinion was highly confused. Most of the public (almost 80%) favoured the treaty; however, a majority of them were unclear on the terms of the treaty. Even studies like that of ACIL stands in perfect contrast to the prospective speculations by CIE. According to the ACIL, the treaty would result in increasing trade diversion (removal of trading ties, or decrease in trading relations), especially with Asian counterparts (Stoler, 2004). Despite the vast number of opposing interest groups, the Coalition/ National government of Australia could pass on the FTA as their strong ties with the USA and a growing edge in economic matters. Moreover, the agreement was signed in the backdrop of war against terror and the Australian government's support of the invasion of Afghanistan and Iraq. The AUSFTA became increasingly tied to Australia's military stance. Hence it became imperative for the Australian government to sign the treaty to show their solidarity with the US government. According to many experts, this treaty was a pure murder of the Australian economy in which the National government sold off the nation and cheated on the Australians (Weiss, 2004). According to Grossman and Helpman FTAs are likely to be formed only when there is a considerable number of interest groups formed of exporters benefiting from the FTA are lobbying in favour of the FTA (Qui, 2004). In such cases, the FTA increases protection for these rather than decrease advantages as was with the case of Australia under study. When looked at from this perspective, the lobbying interest group seems to have had no impact on the AUSFTA. While at the same time many believe that foreign lobbying does play a significant role in trade negotiations especially in FTAs and organisations like BCA had many foreign companies lobbying in favour of the FTA (Gawande, 2006). Also, the overwhelming credit the Congressional Liaison Office (CLO), Australia's in-house lobbying firm took after the formation of the AUSFTA, seems to play in favour of Diplomatic lobbying being a major factor affecting the AUSFTA. Diplomatic lobbying, as well as paid lobbying, has been a significant part of America's political history. It is a direct antecedent of freedom of speech, expression, and profitable business. Many countries have their representative lobbies in the American congress, CLO being the Australian wing. Hence in this paper, we will take a closer look into the reasons and consequences of the AUSFTA, from the vantage point of diplomatic lobbying - how effective or ineffective it was in the passing of the AUSFTA legislation.

Literature Review

The US-Australia Free trade Deal is a highly discussed and debated topic in the history of the political economy. We have varied literature on the same with different perspectives and viewpoints for us to understand the AUSFTA in a brighter light. Reports starting from the huge success of the deal to scholarly articles on the devastating economic impacts it had on the Australian economic scenario gives us a fair idea of the contradicting schools of thought on this remarkable international phenomenon. According to Weiss, Thurbon, and Matthews in “How to Kill a Country” they have blatantly pointed out the betrayal, the Australian government did with their countrymen by signing this deal. With a humorous undertone and a fresh air of fearless writing style makes the book highly engaging and fun to read. In this book, the deal is addressed as a means which threatens the core institutions of the country, one which sold off the country's autonomy in the hands of a foreign power (Weiss, 2004). The biggest disadvantage points that were clearly visible to the naked eyes where the PBS would be sabotaged and neither beef, wine nor agriculture had any clear gains for Australia in the hands of the deal. Sugar was another important issue. With the kind of high pricing USA followed in its sugar industry, the other related industries to sugar depended on these high prices for their own profits. Australian sugar did not seem to have an advantage in the US markets (Stoler, 2004). According to the CIE study projecting huge economic gains for Australia on the basis of this deal like an increase in Australian GDP by 4% till 2010, a 350 per cent increase in dairy exports by 2006 and a 0.8 per cent overall export rise and flow of huge investments in the Australian sectors of agriculture and mining; was based on the assumption that all trade barriers would be removed in the real sense (Stoler, 2004). However, that was not the case. In reality, AUSFTA resulted in deterioration of trade volume between Australia and the US and other Asian regions at large. Almost five clauses out of 27 deal clauses were responsible for trade loss (Armstrong, 2015). Even this deal can be remotely related to the recession of 2008. However, that is a different topic of discussion. There is also a clear implication of trade diversion as an outcome of this AUSFTA deal. Shiro Armstrong, in the paper, the economic impact of the Australia-US Free Trade Agreement tries to analyse on the actual impact of FTA on trade improvements. He is sceptical as to the lack of proper quantitative modelling in showing the correlation of the Preferential Trade Agreement with an increase in trade volume if any (Armstrong, 2015). Echoing in the same sentiments as Weiss, Thurbon, and Mathews, Anna Capling is highly critical of the impact of AUSFTA on the Australian economy. She argues that this deal was a complete opposite of Australia's multilateral policies and not of advantage for a small economy like Australia. According to her Australia would have been much better off by keeping its boundaries to a greater number of countries, rather than having a preferential trade agreement with an economy much larger and powerful to Australia's own size (Capling, 2004). The Australian government's acceptance of the clauses of meagre agricultural cuts made it even more difficult to bargain its position in multilateralism in the future. In regard to the causes and consequences of the AUSFTA, many claim it to be a diplomatic victory even though its economic impact seems quite evidently a failure after 15 years of study.

The bilateral relationship with the USA depends a lot on relationships with both the executive and legislative branches of the parliament. Regarding the AUSFTA, the E3 Visa and other fruitful outcomes of the US-Australia relationship a lot has been achieved by the Australian diplomats through their rapport with the US Congress and their long-term nurturing of delicate relationships (Tidwell, 2016). The US government works very differently to the Australian government, where there are strict party disciplines and a few key positions which bear a lot of power. While in the USA the power relationships are much more complicated and intertwined, hence the CLO has been held high in regards to their diplomatic prowess in the US Congress after the passage of the AUSFTA (Tidwell, 2016). However, whether this huge credit is justified or not is a matter of our study to introspect upon. The whole concept of political lobbying in shaping Trade Deals is in a very nascent. The studies related to the same are scarce, and a direct correlation is difficult to derive. For instance, certain quantitative variables show that in the case of Canada US FTA, different interest groups could not only affect the trade deal to their advantage, but foreign lobbying is possible by making the domestic government a key to the same (Stoyanov, 2014). However, such shreds of evidence in the case of AUSFTA and not available for our study.

Since the 1950s studies on the economic impact of FTAs have been initiated; however, we have very few studies that concentrate on the sustainability of such agreements. It is concluded by many experts that the sustainability of FTAs depends a lot on how many interest groups lobbies in favour of it. A general study on multi-sector trade and their sustainability gives us an insight into the different variables contributing to a trade deals sustainability. For instance, interest group lobbying, FTA opposition and supporters and the extent of different the trade deal encompasses in itself all contributes to the sustainability of the trade deal (Qui, 2004). Even if all groups are not in favour of the FTA, the government when it takes, a higher number of interest groups in the decision-making process, the FTA seems to fare well overall (Qui, 2004). Rather than dealing in a particular, focus on profitability in narrow ground, it is better to conclude multi-sector deals for sustainability (Qui, 2004).

In our case, the AUSFTA was a multi-sector deal though some sectors seem to have lost rather than gain anything economically as a consequence of the trade. Though the scholarly study shows that political lobbying does impact economic decisions and trade policies to a great extent and there are proclaimed claims of CLO and other political stewards as to the victory of political diplomacy in concluding this deal however there is still a lack of enough studies to back these claims. The economic impacts of the are majorly claimed as a failure for both the countries, while some like that of Weiss, Thurbon, and Mathews are of the view that it was a very clever play on the part of America while Australia was not only naive but also sold itself in the hands of a few politicians for whom the trade deal was no more than a military tie-up with the most powerful country. Hence further in this paper, we would study if indeed the AUSFTA was “once in a generation opportunity for Australia” as proclaimed by most of its leaders of the time and an astounding victory of the CLO in building an everlasting tie with the world's greatest power (Qui, 2004). Rather if it was a complete failure, in which Australians fooled themselves at the cost of “special relationship” with one of its closest allies America (Weiss, 2004). If it was really a victory for diplomatic lobbying which benefited the large number of sectors who were actually the major export profit groups or it was a different kind of diplomatic victory in which political rather economic interests resulted in lobbying by a few bureaucrats who sold off the fate of the country for their own selfish motives.

To understand Preferential Trade agreements in greater depth we have also undertaken the study of similar other treaties around the world and the different factors influencing them where we have delved into the causes and consequences of trade agreements in the Asia Pacific region and also theories related to regionalism and bilateralism (Dent, 2004). A certain scholarship has provided us with the literature on arguments against free trade. For instance, Free trade does not always result in a mutual gain to all its stakeholders. Rather they are of not much consequence in improving economic situations. In today's economic situation, one country gains economic superiority only by competing with the resources of another country (Gamory, 2000). In our rich literature on the cost and benefits of AUSFTA, we find such literature in which the AUSFTA, is considered one of no major consequence in the economic arena, positive or negative (Waincymer, 2008).

To understand the US foreign policy, trade policy and attitude towards interest group, we have taken up a series of studies on the US international strategies. Many scholars are of the view that the AUSFTA was a result of US foreign policy against terror. It was an initiative to bring Australia in their party to its action against Afghanistan and Iraq. However, in this policy of gaining political legitimacy, just as the US involved in some positive coalition methods like economic linkages and military partnership, at the same time it involved in several negative coalition methodologies like political coercion and economic threats (Randall, 2008). Similarly, USA had a complex diplomatic lobbying policy where rather than a straight technical mechanism of policymaking, interest group politics played a major role in any policy­making decision with a complex web of influential people across the process (Gawande, 2006). Foreign lobbying is equally powerful as domestic is and has a statistically significant impact on trade policy. However, arithmetic modelling shows that both trade and non-trade barriers negatively related to lobbying activities. Through historical analysis of 8 sectors like clothing, automobile, steel, semi-conductor, lumber, wheat and textile Anne Krueger tries to make an understanding of the political and economic factors of protectionism in trade, and the means and ways in America to confer such protectionism. She also concludes that current policies are not aimed towards public welfare and failing in their economic efficiency (Krueger, 1996) Finally by studying and analysing the legacy of Howard government, his trade policy determinants, his shift from strict protectionism to sudden multilateralism then suddenly from multilateralism to bilateralism we have tried to analyse the reasons of his concluding the controversial trade deal. How important a factor was his close ties with Bush administration, whether he acted according to interest group lobbying all culminates into our understanding of the Australia USA Free Trade Agreement. In the light of the changing international scenario, the WTO situations and other Asia Pacific Region factors and their impact in the moulding of this trade deal. Finally, through all our studies, we have tried to understand the main diplomatic groups who successfully brought the AUSFTA, how it benefitted or not benefitted the USA and Australia and finally impacted the international trade scenario. Factors like trade diversion and other indirect effects of the Preferential Trade Agreement has also been considered to understand the impacts of the trade agreement in a holistic fashion. Most importantly, we have assessed if the trade agreement was a useful economic tool or a mere political tool for diplomatic agendas. The study has been completely based on qualitative research methodology.

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