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The Blunder Down Under

It's received minimal if any media attention in the US, but January 1 marked the start of a new free trade pact between Australia and the US. However, the deal is pretty one-sided, most of Australia's biggest exports to the US face quotas and other restrictions, whereas 99 percent of all American goods face no additional rules. Opposition to the free trade accord was much stronger in Australia than the US, making it an open question why the Government there acceeded to nearly every American demand.

The conspiracy theory that rules Down Under is that it has a lot to do with Rupert Murdoch's reorganization of NewsCorp from Adelaide to New York City. News Corp owns half of the cable networks in Australia. With the Fox brand now being technically an American product, he would find "local content rules" limiting what he can show that is produced outside the Commonwealth. The free trade agreement scraps those rules for cable, allowing Rup to show whatever he wants whether it is made in New York, Sydney, London, or Los Angeles.

But there's another reason even less talked about. The largest import in Australia from American by far is aircraft and aircraft parts. This is because while Australia is almost the same size physically as the US, it has only about 1/10 the number of people. Roads in the Outback are few, and air travel on small planes is crucial. And suffice to say, international travel is only possible from Australia by plane, and usually on very long flights. Boeing, Gulfstream and Cessna all look like winners. But Australia's biggest export to the US, beef, faces quotas. And the next biggest export, alcoholic beverages, is one third the monetary volume of US aircraft exports alone.

Absent is liquified natural gas. Australia has large offshore deposits of natural gas which is already sold to Japan and now China. Previously America has relied on its own natural gas deposits, but now supplies are running thin. LNG, as it is known industry wide, can be transported over long distances. Terminals to receive LNG are being built all across the California coast anticipating this future need. And under the free trade agreement, the Australians will find no barriers to ship their LNG to us as very competitive prices, irrespective of beef quotas.

The short-term aspects for the free trade accord appear dreadful for Australia. But long-term, perhaps inadvertantly, things look pretty sunny for the Commonwealth's trade relationship with America.

posted by Thomas at 1:01 AM 0 comments