Notes from (Down) Under Ground

General elections are probably[1] imminent in Australia. Both the campaign and the outcome will be tied more closely to events in the United States than is usual, for two reasons. First, the current Australian government has been easily the most reliable supporter of the Bush Administration anywhere in the developed world (and probably anywhere in the world), even if no-one much outside Australia has noticed. It’s one of the few governments not to have ratified the Kyoto Protocol, and John Howard was the first to answer Bush and Blair in the call for troops in Iraq. With election campaigns likely to run in parallel, what’s good (bad) for Bush is good (bad) for Howard, and, to a much lesser extent, vice versa. If Howard waits until November and Bush loses, his whole foreign policy will lose its rationale. If Howard were to lose office in October, the parallel with Spain would be obvious, and damaging for Bush, though no doubt it would be no more than one day’s bad headlines.

The other potentially big issue involving the US is the so-called Free Trade Agreement between Australia and the US.

After just about every economist in the country said that the trade aspects of the deal were trivial, and just about everyone who looked at the Intellectual Property issues (including extension of the term of copyright and a more favourable deal for pharmaceutical companies supplying our Pharmaceutical Benefits Scheme) said it would be a disaster, the opposition Labor Party still decided to support the deal, but demanded what appeared to be a couple of face-saving amendments to the implementing legislation[2]. One, regarding cultural protection for film and TV was accepted, but the other, trying to restrict misuse of drug patents through ‘evergreening’ caused a violent controversy. After initially objecting, the government accepted the amendments and the legislation implementing the Agreement was passed a couple of weeks ago.

That seemed to be that, but now the Americans are saying they might not ‘certify’ the legislation (that is, accepted that it implements the FTA). Given that the trade aspects of the deal are massively loaded in favor of the US (Australia removes all its restrictions, but gets no extra access to the US sugar markets, and not much for other ag products), the only possible reason for this is that the pharmaceutical sections of the deal are absolutely critical to the US side. Until the issue blew up, however, the Australian government was telling everyone that this part of the deal was a meaningless procedural concession designed to placate the Americans without giving up anything of substance. Obviously this is not the case.

Because of the Olympics and the children overboard scandal (see below) the issue has yet to return to the headlines. When it does, everyone will be faced with interesting choices. The longer the Americans hold off certification, the higher-profile the issue will become. If they hold off, but certify before the election, this will be seen as a (relatively minor) win for Labor. If they don’t certify [a decision is due in late October] it will be double or nothing. The government will say that Labor has wrecked this marvellous deal, and, presumably, propose to remove the amendments. Labor will have little choice but to demand renegotiation of the entire agreement, hopefully with a Kerry Administration. I suppose the whole thing will be too eyeglazingly complex for a US audience as yet almost entirely unaware of the existence of the FTA (and, in many cases, of the existence of Australia), but the Democrats ought to be able to make something of the role of Big Pharma in all this.

The whole issue has been briefly overshadowed by a scandal left over from the 2001 election. Howard looked like losing until he succeeded in manufacturing a crisis over refugees arriving in northern Australia by boat. In the course of the debate he claimed that refugees on one ship had thrown their children overboard, with the objective of forcing the Australian Navy to rescue them. It came out not long after the election that this wasn’t true, but (as with Iraqi WMD) Howard claimed not to have been told. It’s now been proved, pretty conclusively, that he was told, and it seems likely that he had a good idea of the truth within a couple of days of the original statement, weeks before the election.

The scandal has energised both the people who were horrified by the whole episode, and the racists who were enthused by Howard. The people in the middle, who bought the law-and-order panic about border protection at the time have mostly changed their minds and would like to forget the whole thing ever happened. But being exposed as a liar on this count can’t help Howard if he has to sell a complex and implausible story about the FTA.

Interesting times ahead

fn1. The timing is decided by the incumbent Prime Minister, subject to a maximum parliamentary term of three years. Since the last election was in November 2001, convention requires that the election be held sometime this year. Because the parliament elected in 2001 did not sit until 2002, it would technically be possible to hold off until 2005, but that would generally be viewed as a sign of desperation. Leaders who have stretched their term in this way have almost invariably lost.

fn2. Not changes in the Agreement itself.