The conclusion of a free trade agreement between the United States and Australia has been greeted with mixed emotions. The deal has been applauded for significantly lowering duties on manufactured goods. It also strengthens the U.S.-Australia strategic partnership. But free trade advocates worry about the exemptions and the signal it sends to global trade negotiators. Contrary to assertions that such deals can be the building blocks of regional and global agreements, the precedents set by this FTA are disturbing.
Australia is America's 13th largest export market, and it buys more goods from the U.S. than from any other country. In 2002, two-way trade totaled about $28 billion, with the U.S. enjoying a $9 billion surplus. Washington and Canberra began their negotiations on an FTA nearly a year ago. They were largely viewed as a political reward to Australian Prime Minister John Howard for his support for the U.S. war in Iraq. Both governments hoped to conclude negotiations in time for major elections that will be held in November in the U.S. and likely later in the year in Australia.
The negotiations were difficult. The main sticking point was agricultural products, which have powerful lobbies in both countries. The logjam was only broken last week, when Mr. Howard and U.S. President George W. Bush spoke on the phone to close the deal.