Testimony Before the International Trade Commission in Support of the United States-Australian Free Trade Agreement

Testimony of Myron Brilliant, U.S. Chamber of Commerce Vice President for Asia, Before the International Trade Commission (Public Hearing) in Support of the United States-Australian Free Trade Agreement
 

February 6, 2003

Introduction

Madam Chairwoman and Commissioners, thank you for this opportunity to testify in front of the International Trade Commission on the economic effects of the United States-Australia Free Trade Agreement. I am Myron Brilliant, Vice President, Asia, of the U.S. Chamber of Commerce. The U.S. Chamber is the world's largest business federation representing three million businesses of every size, sector and region. The U.S. Chamber of Commerce strongly supports this step toward advancing trade and economic prosperity with one of America's most important allies in Asia. We believe an FTA with Australia can be leveraged to promote multilateral and regional initiatives to liberalize trade and investment, and recommend that the Administration include in the FTA a preamble on how the agreement will further U.S. trade liberalization objectives in the WTO and the Asia-Pacific region.

The bilateral FTA will bring tangible commercial benefits to U.S. workers. The United States is already Australia's largest source of imports and second-largest export destination. Two-way U.S.-Australia trade is valued at US$25.6 billion annually. The United States enjoys a substantial trade surplus, about US$8 billion, with Australia, representing Australia's largest single bilateral trade deficit and the United States' second-largest trade surplus. An FTA with Australia will enhance this economic relationship by eliminating remaining trade and investment barriers between our two countries.

FTA Negotiation Objectives

It is an honor today for the U.S. Chamber to present our views on specific areas in the FTA that are critical to our members in the negotiation. We urge the adoption of the following negotiating objectives of the U.S.-Australia FTA.

I. Sectoral Issues

Services
American services companies are doing substantial business in Australia, but additional potential exists in the services markets if certain barriers are removed. These areas include, but are not limited to, media, broadcasting, computer and related services, and express delivery services. We recommend the following: First, the FTA should aim to eliminate remaining restrictions in these sectors and any others that are not linked to national security concerns. Second, we strongly urge both sides to recognize express delivery as a distinct services sector, and define the term "express delivery." Express delivery services consist of the expedited collection, transport and delivery of documents, printed matter, parcels and/or other goods, while tracking the location of, and maintaining control over, such items throughout the supply of the service. Third, we recommend removal of the discriminatory requirement by the Australian Broadcasting Authority's (ABA) Content Standards that 55 percent of all television programming broadcast between 6:00 a.m. and midnight be of Australian origin. Instead, the ABA should let market forces determine programming allocations.

Pharmaceutical
U.S. Chamber pharmaceutical member companies recognize the importance of Australia's Pharmaceutical Benefits Scheme (PBS) as an integral part of the Australian healthcare system. However, our members are concerned about the existence of certain pharmaceutical and health care policies that constitute significant trade barriers. They include pricing and reimbursement practices that fail to recognize the value of patented, innovative medicines researched and developed by U.S. pharmaceutical manufacturers. Our key priorities in the U.S.-Australia FTA include adherence to global scientific standards for new drug approvals and pharmaceutical regulation; effective protection of intellectual property rights; adoption of policies that recognize the value of innovation, and the provision of appropriate support for innovative biomedical research and development; and a commitment to refrain from trade-distorting, abusive or discriminatory price controls, consistent with GATT Article III:4 and III:9. Adoption of these policies will allow our pharmaceutical companies to compete on a more commercially viable basis.

Agriculture
The U.S. and Australia share the same views on the importance of liberalizing the agriculture sector globally, as evident in our cooperation in WTO agriculture negotiations. It is critical, therefore, that the U.S.-Australia FTA reflects these multilateral commitments, which would provide enhanced opportunities for both U.S. and Australian companies in our respective marketplaces. Chamber members have particular interest for the FTA to provide additional market access in certain food and perishable or cyclical agriculture products, and eliminate Australia's export monopoly arrangements for wheat, barley, sugar, and rice. We also look for the FTA to eliminate Australia's use of sanitary and phytosanitary (SPS) measures to restrict trade.

Electronic Commerce
The United States and Australia share an interest in promoting the growth of E-commerce. They accordingly share an interest in maintaining a liberal and open trade environment for the digital economy and the FTA should contain provisions that ensure such a liberal and open trade environment. The E-commerce provisions should:

• affirm the principle of avoiding barriers that impede the use of E-commerce;
• provide for non-discriminatory treatment of electronically delivered products (digital products);
• affirm that electronically-delivered services are covered by the FTA's commitments on services;
• prohibit customs duties for digital products delivered electronically; and
• provide that customs valuation of digital products delivered on hard media will be based on value of the media alone.

II. General Provisions

We urge the adoption of the following negotiating objectives for the benefit of the American companies and employees doing business with Australia:

Investment
Access to foreign markets through trade and investment is fundamental for maintaining the economic prosperity that the United States has enjoyed over the past decade and essential to the well being and continued success of U.S. industries, consumers and workers. The Chamber urges that the FTA reaffirm Australia's efforts to eliminate any unfair performance requirements, such as requiring the investor to export a given level of goods and services, as a condition for investment. Australian foreign investment laws require that all foreign investors submit to a screening process for approval that provides the Australian Foreign Investment Review Board the authority to deny applications based on "national interest." We recommend that the U.S.-Australian FTA aim to eliminate the screening process or make it more transparent for foreign investment approval. In addition, the United States has consistently supported the development of rules to protect U.S. investors abroad. These rules are now codified in dozens of investment agreements that the U.S. has signed, including the investment chapter of the NAFTA. Among the most important of these provisions is the guarantee of fair and equitable treatment, the protection against unlawful expropriation and an effective and binding investor-state dispute settlement procedure. We strongly recommend that the investment chapter in the U.S.-Australia FTA, in particular the provision on investor-state dispute settlement process, incorporate investment protections similar to those found in Chapter 11 of the NAFTA.

Anticompetitive Practices
As part of the FTA, both sides should prohibit practices that unfairly restrict competition, represent unreasonable restraints of trade, or unreasonably restrain imports. Examples of such anticompetitive practices include, but are not limited to, cartels, monopolies, price-fixing, illegal tying arrangements, illegal financial incentives or inducements in restraint of trade, agreements to divide markets, refusals to deal with imports, and restrictive distribution arrangements. Both sides should also agree to effectively enforce their competition laws and regulations through, inter alia: 1) the provision of adequate staffing and resources; 2) the application of comprehensive laws and regulations regarding competition, and penalties sufficient to punish and deter anticompetitive conduct; and 3) support for effective private sector compliance programs.

Government Procurement
Australia is not a signatory to the WTO Agreement on Government Procurement. Because U.S. companies have a significant interest in the Australian government procurement market, we recommend that the FTA include commitments on this matter that will lead to transparent and predictable procedures and access for American companies in regards to government procurements in Australia.

Customs Cooperation
U.S. companies are generally pleased with Australian customs clearance procedures, but it could be improved in several areas. We suggest the following recommendations: 1) Separate the fiscal clearance from the border (barrier screen) clearance process and provide importers with the option of making their filings on a periodic (monthly, quarterly and annual) basis under a regime similar to income tax filing regimes; 2) Increase the de minimis thresholds to AU$1,500; 3) Limit the number of data elements required to complete a customs declaration to only those elements required to establish ownership and control over the shipment; 4) Institute a simplified immediate release clearance scheme for goods traded between parties; and 5) Allow personal effects to be cleared by customs examination/x-ray alone.

Intellectual Property Rights
Australia is a member of the World Intellectual Property Organization (WIPO), and is a party to most multilateral IPR agreements. While its copyright infringement level is low by international standards, there are areas for improvements. These areas include: parallel importation of DVDs from the U.S.; copyright piracy issues, in particular increased protection in the digital environment; bio invention patent protection; and lack of protection of test data for certain chemical entities. We urge that the U.S.-Australia FTA address these critical issues as they adversely affect U.S. products in the Australian market.

The United States has long been an advocate of enforcement of intellectual property (IP) rights because it believes enforcement of patents and copyrights benefits not only owners of IP but also the consumers of such products. The Trade Promotion Act (TPA) supports this position with negotiating objectives that include a call for full implementation of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) of the Uruguay Round Agreements. It also establishes as a negotiating objective that any new trade agreement should reflect a standard of IP protection similar to that found in the United States. U.S. law is consistent with TRIPS, and the FTA with Australia should at the very least reaffirm the TRIPS agreement, and ideally, build on this agreement to ensure that IP protection keeps pace with developments in technology and distribution methods.

Australian Tariffs
Australia's tariffs are generally low through its domestic tariff reduction programs, but there are areas that can even be reduced further. These areas include, but are not limited to, textiles and distilled spirits. Australia is the third largest market for U.S. exports of distilled spirits, with sales to Australia of $47.7 million in 2000, more than 88 percent of which consisted of Bourbon and other whiskies. The FTA should to seek to lower or eliminate Australia's tariffs.

Rules of Origin
We support the FTA to contain effective rules of origin provisions that discourage transshipments and other potential abuses of the benefits of the FTA and provide for partial FTA treatment on finished goods not qualified/entitled wholly to FTA duty free treatment. Under this provision the value of originating content contained in goods traded between the parties would be subject to duty free treatment.

Labor and Environment
First and foremost, the Chamber prefers the Administration to negotiate a "clean" FTA that does not include labor and environmental provisions. While we support bilateral efforts to improve the environment and ensure improvement in the quality and conditions of workers, we do not believe that it is appropriate to address social and labor issues within trade agreements. The U.S. Chamber has consistently maintained that the best means to achieve improvements in labor and environmental conditions is to pursue these improvements in separate, albeit parallel, efforts. Linking trade and labor serves neither objective.

Summary

The U.S. Chamber strongly supports the U.S.-Australia FTA negotiations. Members of the U.S. Chamber of Commerce have enjoyed significant success doing business in Australia, and an FTA with Australia would generate increased commercial and investment opportunities in that market. Launching free trade negotiations between the two of the most dynamic and open economies in the Pacific is not only in the economic interests of both nations, but should serve to strengthen regional liberalization initiatives.

While the Chamber supports the FTA negotiations, at the end of the day the negotiations must remove trade barriers and increase market access in key industries. The Chamber looks forward to working with our government and the Australian government to ensure that U.S. corporate priorities are addressed in the negotiations.

This concludes my testimony. Thank you, Madame Chairwoman and Commissioners. I will be pleased to respond to any questions.