June 30, 2004


Way to go, John Kerry:

The US Congress is set to ratify the free trade agreement with Australia, after Democrat presidential candidate John Kerry declared his support for the deal.

Senator Kerry, who had earlier refused to take a stand on an issue dividing Democrat legislators, finally came out in favour of the agreement in a statement that was printed in the US Senate record.

"Australia is an important ally, and we must do all we can to ensure a healthy and vibrant relationship between our two nations," he said. "The United States has a trade surplus with Australia, and this agreement will boost our exports still further by eliminating Australian tariffs on our manufactured goods and on key agricultural exports."

Kerry had earlier wavered on this (well, it's his way). Still, he never outright opposed the free trade deal, unlike various US unions and possible VP candidate John Edwards.

Posted by Tim Blair at June 30, 2004 04:43 AM

I assume our sugar lobby still screwed Queensland, but this is a damned fine start.

Posted by: Andrew at June 30, 2004 at 04:50 AM

"I was against the deal before I was for it!"


Posted by: Roger Bournival at June 30, 2004 at 04:51 AM

Mea culpa, that's a straddle, not a flip-flop. With Captain Hairdo, I have trouble differentiating between the two...

Posted by: Roger Bournival at June 30, 2004 at 04:54 AM

It could be worse. Didn't I just read that Romania is now smuggling sugar into Hungary since the duties in the EU now make Hungarian sugar twice as costly as before? And isn't Romanian sugar made from sugar beets, which is about 4-6 times as costly as sugar cane? Way to go Eurocrats! Demonstrate that relative trade advantage. (Hey, one nice, big captive market of 350,000,000 right?)

Posted by: JorgXMcKie at June 30, 2004 at 04:56 AM

The US Congress is set to ratify the free trade agreement with Australia, after Democrat presidential candidate John Kerry declared his support for the deal

yes, congress hinges on his every word and whim

Posted by: Mr. Bingley at June 30, 2004 at 05:27 AM

yes, congress hinges on his every word and whim

Sheesh, about time you figured that out. In case you did not know, he served in Vietnam.

Posted by: Crusader at June 30, 2004 at 05:58 AM

John Kerry, power broker. Good one.

Posted by: R C Dean at June 30, 2004 at 06:30 AM

all that nuancey training finally coming in handy.

Posted by: Mr. Bingley at June 30, 2004 at 06:37 AM

You know, our society is damn good at creating new methods to enhance laziness.

How about those shopping cart corrals in the parking lots? I bought some stuff at Wal-Mart yesterday, and headed out to my car. I went to return my cart -- and there are exactly 5 carts already in there, end to end, not collapsed inside one another, so they take up the entire space within the perimeter of the corral.

I look around -- and every damn corral is exactly the same way -- carts just shoved in there any old way, instead of efficiently interconnected. Same with the supermarket in the distance, and the TJ Maxx next to it.

Is it really that fucking hard to push your damn cart INSIDE the one in front of it? How about if you pretend you're orchestrating shopping cart sex? Would that help??

Posted by: Bill in Boston at June 30, 2004 at 07:48 AM

Doesn't the fact that the so-called 'Free Trade Agreement' will boost the USA's exports to Australia even further, thus increasing the already large imbalance, give you even the slightest pause for thought about the benefits of the Agreement to us, Tim?

Posted by: Richard at June 30, 2004 at 08:24 AM

Kerry supports the free trade with Australia, but he rarely shows up in the Senate to actually vote for legislation since Kerry has missed about 95% of the Senate votes this year. Thus Kerry can say he supported it, but never voted for it.

Posted by: perfectsense at June 30, 2004 at 08:45 AM

IANA economist, but I'd think that if the US exports to Australia common goods much cheaper than Australia can make them, then Australians should have more pocket money to spend on local products and services.

Posted by: Steve in Houston at June 30, 2004 at 08:54 AM

did you ever wonder where those little hand baskets at the supermarket come from bill? well, now you know.

Posted by: Mr. Bingley at June 30, 2004 at 09:10 AM

Richard, has anyone ever pointed out to you that free trade generally isn't a zero-sum game? It's possible that both get to export more after a nice 'lil trade agreement (and as mentioned above, import less expensively), you know, even if one of the countries might get more of a boost, in absolute terms anyway. That country, unsurprisingly, will probably be the U.S. in this case. Doesn't mean Australia won't also profit from it.

Posted by: PW at June 30, 2004 at 09:59 AM

I note JFK's mercantilist's belief that the 'free trade' agreement would boost the already healthy trade suplus the US has with Australia is at odds with the Current Autstralia's mercantilist's belief that the 'free trade' agreement will reduce the large surplus the US has with us.

Which mercantilist is right or are they both wrong?

Posted by: Homer Paxton at June 30, 2004 at 11:37 AM

On being told of Mr Kerry's positon, Mark Latham was quoted as saying:

"Fuck, fuck, fuck, fuck, bum, bugger, shit, poo,..."

Posted by: Razor at June 30, 2004 at 12:50 PM

Bill, at least they're in the corral (even if not concertinaed) and not blocking the end of the car space you've just pulled into.

Posted by: ilibcc at June 30, 2004 at 12:59 PM

Here Followeth the Good Word on 'Comparative Advantage', as taught to me in High School in the 70's.

Suppose you have 2 countries, Kamaria and Erewhon.

Kamaria is dirt-poor and innefficient. They could produce either 2 oranges or 2 apples (or 1 orange and 1 apple), given some resources.

Erewhon is rich and efficient. They could produce 3 oranges or 6 apples ( or 2 oranges and 2 apples, or 1 orange and 4 apples), given the same resources.

If Kamaria just produces oranges, and Erewhon just produces apples, you get 2 oranges and 6 apples between the two.

If they decided to produce a minimal number of oranges via 'local industry', the best they could do is produce 2 oranges and 5 apples between them. 1+1, and 1+4.

So International trade and specialising in what you have a comparative advantage in (even though it may be an absolute disadvantage - it's still cheaper to produce both oranges and apples in Erewhon) maximises the real, tangible wealth.

Where it can go wrong is in the distribution of this increased wealth. Kamaria often ends up with only 1 orange and 1 apple (so is no better off than if it had gone it alone), and Erewhon gets 1 orange and 5 apples, due to tarrifs, or subsidies, or monopoly powers, or some other distortion of the market. A Free Trade agreement should give an outcome more like 1 orange + 1.5 apples for Kamaria, and 1 orange + 4.5 apples for Erewhon. Both benefit - but the Orangegrowers in Erewhon, and the Applegrowers in Kamaria, will scream.

As regards Trade Surplaces - if Australian consumers get to buy a book (produced in the US) for $10 instead of the same book (produced in the UK) for $15, who cares if the trade US trade deficit goes up by $10? Because the trade deficit with the UK goes down by $15. (Or surplace goes up by $15). Especially if we can partially offset it by selling 2 lots of $3 Beef in the US.

Free Trade is a non-zero-sum game : everyone *can* win. The devil is in the details - making sure there are no hidden pitfalls in distributing the extra wealth, and ensuring that the Orange and Applegrowers who are now unemployed get to find new jobs, as Apple and Orangegrowers respectively. Will these 'temporary dislocations' wipe out the benefits? What is the likelihood that a disruption of trade due to War will occur? It may be a good idea to have just a minimal orange/apple capability in both countries for strategic reasons. Make sure it really is minimal though, so as not to destroy the benefits. But that, as they say, is another story.

With Australia and the US, it's more of a case of 10 Oranges or 1 Apple vs 2 Oranges or 10 Apples. The benefits could indeed be huge, for both parties.

Posted by: Alan E Brain at June 30, 2004 at 01:15 PM

Bill in Boston: Of course not, that's how they breed!!

Posted by: kae at June 30, 2004 at 04:51 PM

Free Trade Agreement. It will free up the US markets to Australian manufactured goods. Pity we don't manufacture much anymore.

Posted by: kae at June 30, 2004 at 04:55 PM