Free Trade Agreements – Are they an Oxymoron?

Stop Press.

Why do we put up with governments who do nothing for our national security?

It is Friday March 3 2017 at 08.00 hrs. On ABC AM this morning at about 10minutes 29 seconds into the programme, Andrew Davies from the Australian Strategic Policy Institute, announced we only have about three weeks supply of petrol in store in Australia — three weeks!! (search in the archive for the AM programme of March 3, otherwise you will get today’s programme) He raises the possibility of any tension between America and China could close off the sea route through the South China Sea and so cut of our supply of fuel from Singapore, on whom we are almost totally reliant. The story gets worse because it is not a new problem, there is a story in The Conversation from 2013 which forecast an impending fuel supply crisis unless the government of the day took strong action. It didn’t happen. The point needs to be made made it wouldn’t need a full blown war to disrupt fuel supplies, just a disagreement between the world super powers and the shipping routes that service Australia could close and we would run out of not only fuel but everything we import by sea.

There has been a push in Queensland by Bob Katter and others to make ethanol from sugar, maybe we should be looking at all the alternative sources of fuel and stop associating these policy issues with the people who propose them? We smile smugly and a demonstrate willingness to indulge other countries like Europe, Canada and America when they use all manner of materials to make vehicle fuels and so make them independent of the Middle East. The Canadian government has helped finance canola mills to produce motor fuel. America is now, I believe, self sufficient in oil. They are no longer reliant on the Middle East — we are!

Image result for pictures of ship gas carriersAustralia sits on a great big natural gas tank, it stretches from east to west and from north to south. Passions are inflamed (sorry) whenever natural gas is mentioned, but it is there and it is ours and we should be using it.   We own an unlimited supply of natural gas, which when converted to CNG and LNG will power every engine we use in our transport systems.  And here we are with three weeks supply of petrol and we have been sweet talked into allowing major resource companies to export our gas and in so doing leave us vulnerable and not in control of our future. We need to decide whether out future lies with utilizing our natural resource, our gas, or worrying about five weeks supply of petrol and how secure that supply is.

Don’t say CNG  and LNG are for the future, they are here now. This is what the US Department of Energy wrote recently: Natural gas powers about 150,000 vehicles in the United States and roughly 15.2 million vehicles worldwide. Natural gas vehicles (NGVs) are good choices for high-mileage, centrally fueled fleets. CNG tank technology and safety are improving and in many cases CNG can provide operators with adequate range for their operations. For vehicles needing to travel long distances, liquefied natural gas (LNG) is a good choice. The advantages of natural gas as a transportation fuel include its domestic availability, widespread distribution infrastructure, low cost, and inherently clean-burning qualities.

What is in STOP PRESS is a perfect example of the damage being done to this country by poor policy and poor negotiators. The rest of the story is no better.

FTAs – are they worth it for agriculture?

I start with an admission I have never been able to work out why Free Trade Agreements (FTAs), have been hailed by successive governments and eminent politicians both in this country and around the free world, as being the answer to the international need for well structured long-term international trade, especially in agriculture. FTAs are good for agriculture, that is what has been drummed into us. I think the evidence is that this is wrong. I am not alone as you will see. It is my view that FTAs have been a disaster for agriculture.

Agriculture has gone from a position of being in control of its own destiny, to being controlled by those who have no interest in the long term prosperity and welfare of those in agriculture. The birthright of agriculture in Australia has been sacrificed by successive government on the altar of economic theory and greed, which time has shown doesn’t work for anyone except the high priests in the world of finance.  The prime example is that as the world has doubled in population in the last fifty years the real value of agricultural produce, food, has declined. That is what Free Trade Agreements have brought to us.

In the 21st century agriculture in Australia is technically supreme, it has few if any peers. It has been responsible for leading the world with inventions and innovations, from the ‘combine’ harvester, the ‘stump jump’ plough to dry land crop establishment using minimum tillage, which eventually developed into the Australian version of No Till farming, which changed the face of grain farming.

From modest beginnings in 1788 to today, Australian farmers and scientists bred a merino sheep capable of producing a fibre which is astonishing in its versatility and impossible to replicate with a man made fibre. The fact that we have ignored the value of our intellectual property and we and others have progressively eaten about 90 million sheep since 1990 is almost unbelievable.  Future generations will be left to contemplate why as a wool industry, we never really saw it as part of our remit to go into ‘business’ and process our wool from the sheep’s back to producing the finest cloth in the world. We left that to others because it was a ‘dirty business’, so we let them make money from it while we battled the auction system to sell our wool, always it seemed for less than it was worth.

Now merino wool is in danger of becoming a cottage industry in Australia. Let the South Africans and Argentina show us what could have been.

There is nothing free in FTAs.

As technically supreme and inventive as we are, we are among the worst trade negotiators in the world. We have given away or the inventors have taken overseas more world beating technology than most of us care to think about. Others get benefits straight away, we have to wait years. I am not alone in that view, the person being interviewed by Trevor Chappell on the Late Night Show on ABC Radio, Dr Mark McGovern, made the same point, we are lousy negotiators. It’s along interview but well worth about 45 minutes of your time. Take time to listen to Mark’s every word and contemplate what he says. You will hear many words of wisdom and downright common sense, particularly for agriculture. Those who have spent long nights driving will know Trevor Chappell as one of the best broadcasters in Australia. He doesn’t disappoint with this interview.

Dr Mark McGovern currently lectures in international economics and finance for international business at QUT. Make up your own mind regarding what you think of Mark and his views on FTAs, I won’t spoil your fun. I’ll bet you agree with him — if you don’t let me know why. For me the interview is priceless, about 15 minutes into the discussion Mark encapsulates in a few words the effect that Free Trade Agreements have on an economy especially but not only on an agricultural economy like Australia’s, but on a national economy.  His explanation is so simple it hurts.  Free Trade Agreements, he says, can take away from a country ‘the ability to take care of itself’.

In the twenty first century, can we take care of ourselves?

Australia has ten FTAs currently in force with China, Japan, Republic of Korea, New Zealand, Singapore, Thailand, US, Chile, the Association of South East Asian Nations (ASEAN) (with New Zealand) and Malaysia. The Trans Pacific Pact (TPP) is dead and buried as far as the President of  the United States of America is concerned. There are countries still running around trying to breath life into the beast, including Australia, yet ask the average man and woman in Australia what they know about FTAs and the TPP and you are almost certain to get a blank stare or a shrug of the shoulders.

Can we take care of ourselves in the twenty first century? The answer is so obviously no. Look around and see what we import which at one time we made ourselves. In 1965 albeit with a population of 11.3 million compared to today of about 24.0 million, we certainly could take care of ourselves and we did. So what went wrong?

Before it’s too late, we can learn from history.

We can learn from history. In 1841 the population of England, Ireland, Scotland and Wales was about 26.7 million. In 1939 it was 46 million.

In 1815 Britain imposed tariffs, known as the Corn Laws, on all grain imports. America was starting to have a surplus of wheat. The Corn Laws (wheat, barley and oats) were introduced to protect the British landed gentry and keep ‘cheap food’ out of the market. Most farmers were tenant farmers who paid rent to the owners of the land, among the biggest land owners were and are to this day, the Roman Catholic and the Church of England, the Universities and of course the Crown and the Aristocracy.

As the population moved from the country to the city there was a renegotiation between farmers and landowners designed to protect the status quo. Wages for farm workers were increased but not sufficiently to stop what started as a drift and turned into a stampede of workers into the city.

People working in the factories and mines could no longer grow their own food, but they needed a good diet if they were to work the long hours demanded by the factory and mine owners. Because grain was protected and expensive, this had to be reflected in the wages. So began a political fight between the captains of industry, the nouveau riche and those who grew the grain. One wanted to reduce wages and the other fought for the tariffs and high prices.

In 1846 Prime Minister William Pitt gave in to the inevitable and after a long and at times bitter political battle the Corn Laws were repealed. This is a huge subject on its own, because at the same time as the Corn Laws were repealed the potato crop failed in Ireland and that caused a famine and mass migration from Ireland, mainly to America. The repeal of the Corn Laws gradually drove British agriculture into a recession in which it stayed, apart from a brief period during WWI, until 1945. A hundred years of agricultural recession.

In a period of about fifty years, Britain went from ‘taking care of itself’ to being reliant on other nations for its ‘cheap’ food to feed the Industrial Revolution. The Great Plains in America and Canada were starting to produce and there was an abundance of ‘cheap’ grain for a hungry Britain.

In 1862 the Congress in America passed the ‘Homestead Act’ which led to the settlement of the Mid-West. It must have been an amazing sight to behold. In 1860 America had constructed about 31,000 miles of railways; by 1880, in 20 years, this had increased to about 94,000 miles. There is a touch of déjà vu in what follows, think of Ukraine.

The railway companies in America encouraged farmer settlers by promising to transport their crops, for a couple of years, for less than cost. Due to technological progress of shipping, there was for the first time plenty of cheap steam ships to transport their crops across the seas. This drove down transport costs: in 1873 the cost of transporting a ton of grain from Chicago to Liverpool was £3. 7 shillings., in 1880 it was £2. 1 shilling and in 1884 £1. 4 shillings. Liverpool became one of the busiest ports in the world not only receiving grain from America and Canada, but wool and cotton to feed the mills and the looms of the Industrial Revolution.

In 1848 for the first time in history the urban population in Britain exceeded the rural population.

And so to War.

At the outbreak of World War I, Germany, aware that Britain could not feed its people with home grown food, tried unsuccessfully to blockade the Atlantic Ocean and stop the food ships reaching Liverpool.

When World War II was declared in 1939, Germany again started an Atlantic blockade in another attempt to starve Britain. At that time, incredibly, Britain was importing over 50 million tonnes of food and materials a year, over a million tons a week, half of which was food. Britain was totally dependent on ‘cheap food’ from the rest of the world. The Battle for the Atlantic  was the battle to feed a nation and provide iron, steel and timber to build armaments to fight what became the Battle of Britain. The Battle for the Atlantic lasted for the duration of the War and the losses were horrific and seldom recognised these days.

Victory was achieved at a huge cost: between 1939 and 1945, 3,500 Allied merchant ships (totaling 14.5 million gross tons) and 175 Allied warships were sunk and some 72,200 Allied naval and merchant seamen lost their lives.[1] The Germans lost 783 U-boats and approximately 30,000 sailors killed, three-quarters of Germany’s 40,000-man U-boat fleet.[2](Wikipedia)

At the start of the Atlantic blockade British farmers ripped up every field of pasture it could and once again learned how to grow crops. Women left the cities and went and worked on the land and formed the Women’s Land Army. Combined with the efforts of all the people growing food where ever they could, Britain survived and together with its Allies, fed the people.

After the War.

Barnaby trade #1
Fig 1. Nothing has changed. Our net exports to 2012/13 were declining.

By now you must be wondering what has all of this got to do with the challenges we are facing in agriculture in Australia? We go back to the first question ‘Are we now, as a nation, in a position to take care of ourselves?  The answer has to be a resounding no!

Britain, on the other hand at the end of WWII, decided that they would ‘never again’ be reliant on the rest of the world for cheap food to feed the nation.

With that objective in mind the National Farmers Union (NFU) met with the new Labour Government and started what became an annual ‘Price Review’. Broadly speaking the Price Review was negotiated by farmers with the government to agree and set down the minimum price farmers would receive for what they produced. If prices fell below the minimum price, the government made up the difference. So began subsidies. Europe was already doing something similar, America followed.

Subsidies put money and profit into agriculture and that money flowed into industry and over the next thirty years British agriculture and agriculture around the world went through a revolution of technology and production increases. Currently the British Government claims that Britain is 76% self sufficient in food. 

There are calls for this figure to increase and make Britain once more less reliant on imported food. Technology is now allowing Britain to grow food it once imported. Independent from the EU the drive is to be less dependent on Europe for food.

Our ability to feed ourselves is deteriorating.

Figure 1 shows that our exports are declining and our imports are increasing. In 2015 Mark McGovern in The Conversation deals in detail with the effects of FTAs with New Zealand, Thailand and the United States. Suffice to say he presents a compelling case that FTAs so far, have not worked in our favour.

The lesson we can learn from the British experience is that once a nation loses the ability to take care of itself and the unexpected happens like a War, catastrophe is just around the corner. National sovereignty is threatened. National identity is threatened. Life as it is known is threatened. It would be easy for Australia to find itself in a perilous situation if hostilities broke out. Think oil and diesel.

Figure 2. Are we doing as well as we are being told by the Federal Government? We are running out of sheep. The cattle herd is as low as it has been for ages. We ate them as well during the drought in Qld. So where are we going?


Everything that is used in the majority of cropping programmes except for seed and maybe some chemicals is imported. If we ran out of spare parts for our tractors, trucks and seeders our cropping programmes would soon grind to a halt. I know it is is easy to say ‘when I was young’, but when I was young, everything we used to put the crop in, except the rock phosphate which was made into ‘super’, was made in Australia.

Even the shirt and coat on my back I could buy from the factory in Perth. Ever tried to buy an Australian made ‘Bluey’ recently? I ‘lent’ mine to my daughter. Some bugger will still be wearing it somewhere, because they never wear out. They were made with Australian merino wool of course.

We have stopped making motor cars. It was a wrong decision because every government in the world, I understand, subsidises their motor car industry. Ford and General Motors made the silly mistake of failing to make a smaller car in Australia. Now we are reliant on imports.

Just look at Figure 2 and contemplate the numbers on imports and exports for food — they make you miserable if you look for too long. We are slowly becoming a nation of processed food importers.

We have had over twenty years of experimenting with FTAs and as far as I can see, and in the opinion of Dr Mark, without wishing to speak for him, they have failed Australia. Now we have to face the failure not compound it with other agreements designed by politicians who are away with the economic theoretical fairies.

The time has come for rural Australia to take back the control of its destiny.  If we don’t we are, in the words of the prophet, ‘buggered’. We have to stop exporting our food processing industries. New Zealand has been making a fool of us. They have an FTA with China. China exports processed vegetables to New Zealand and New Zealand repacks them and they become a ‘Product of New Zealand from local and imported products’. When I asked what the local content was in a pack of mixed vegetables, I was told it was the peas.

Our major supermarkets claim they buy Australian produce and they do. Virtually all the fresh produce sold in Australia is grown in Australia. The challenge is to examine the fridges and have a look at where the ‘cheap‘ frozen food comes from. We are an island nation and we import 70% of our seafood. I have written about it before but 80% of the processed pig meat we eat is imported. We need to ask ourselves whether the food we import is really cheap.

There will never be another War.

Believe that and you believe in the tooth fairy. It may not be the nuclear holocaust that the world fears. What is real as far as Australia is concerned, being the holder of the worlds biggest assets in coal, iron ore, gas, uranium, cattle, no sheep anymore because we have eaten them, is that powers greater than ours may decide they will blockade this country until we do as they please. Just as the Germans planned to do after the WWI when the world believed it had gone through the War to end all Wars. In 1939 the Germans believed they could conquer Britain by starving them into submission. Could someone, another nation, do the same to us, not for just for food, but for everything else we own, even the gas?

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