Much of this book goes beyond my expertise but there is a theme and the chapters leave a significant question for all Australians. What does it mean to be Australian? I do not believe for one minute that the Government understands or knows what many Australians feel in their minds and hearts about this country. We are too close to the United States. We do not have to be that close to maintain the alliance and to be a good friend. We do not wish to be submerged by an all-pervasive, all-powerful United States or by global forces from outside the world. There is a sense of independence, of pride in Australia, shared, I believe, by people from every different background. This book seeks to expose what the authors believe is the undermining of that Australia, the erosion of self, the erosion of independence and of self-esteem. Different parts of the book will impact differently on different people but the questions and issues exposed in the book should be studied carefully. Rt Hon. Malcolm Fraser, former Prime Minister of Australia
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Transcript
Much of this book goes beyond my expertise but there isa theme and the chapters leave a significant question for allAustralians. What does it mean to be Australian?
I do not believe for one minute that the Governmentunderstands or knows what many Australians feel in theirminds and hearts about this country. We are too close to theUnited States. We do not have to be that close to maintainthe alliance and to be a good friend. We do not wish to besubmerged by an all-pervasive, all-powerful United States orby global forces from outside the world.
There is a sense of independence, of pride in Australia,shared, I believe, by people from every different background.
This book seeks to expose what the authors believe isthe undermining of that Australia, the erosion of self, theerosion of independence and of self-esteem. Different partsof the book will impact differently on different people butthe questions and issues exposed in the book should bestudied carefully.
Rt Hon. Malcolm Fraser, former Prime Minister of Australia
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This page intentionally left blank
Linda Weiss is Professor of Government and International
Relations at the University of Sydney and a Fellow of the
Academy of Social Sciences. Her work on globalisation and
national governance has been translated into several languages.
She is currently writing a book on US development strategy and
the rise of America Inc.
Elizabeth Thurbon is Senior Lecturer in the School of Social
Sciences and International Studies at the University of NSW. She
publishes on the political economy of industrial strategy in East
Asia, Australia and the United States.
John Mathews is Professor of Strategic Management in the
Graduate School of Management at Macquarie University, and
is currently writing on energy issues and a North–South biopact
for biofuels.
They are authors of How to Kill a Country: Australia’s Devastating
Trade Deal with the United States (Allen & Unwin, 2004).
All rights reserved. No part of this book may be reproduced ortransmitted in any form or by any means, electronic or mechanical, includingphotocopying, recording or by any information storage and retrieval system,without prior permission in writing from the publisher. The AustralianCopyright Act 1968 (the Act) allows a maximum of one chapter or 10 per centof this book, whichever is the greater, to be photocopied by any educational institutionfor its educational purposes provided that the educational institution(or body that administers it) has given a remuneration notice to CopyrightAgency Limited (CAL) under the Act.
Allen & Unwin83 Alexander StreetCrows Nest NSW 2065AustraliaPhone: (61 2) 8425 0100Fax: (61 2) 9906 2218Email: [email protected]: www.allenandunwin.com
National Library of AustraliaCataloguing-in-Publication entry:
Weiss, Linda (Linda M.).National insecurity: the Howard government’s betrayal of Australia.
Bibliography.ISBN 978 1 74175 051 5 (pbk.).
1. Howard, John, 1939– . 2. Australia—Foreign relations—United States. 3. United States—Foreign relations—Australia. 4. Australia—Politics and government—1996–.I. Thurbon, Elizabeth. II. Mathews, John, 1946– . III.Title.
327.94073
Typeset in 11.5/16 pt Joanna by Midland Typesetters, AustraliaPrinted in Australia by McPherson’s Printing Group
The pork farmers are so outraged at this that they launch a legal
challenge against their own government to force it to keep the
quarantine standards in place. But they find themselves opposed
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by government lawyers and a High Court judgment that disquali-
fies itself from having jurisdiction.
This amazing country, where the government actively seeks to
undermine the competitive advantages of its own rural industries
and thereby reduce the security of its farming population, actually
exists. This is Australia under the Howard Government.
THE GREAT AUSTRALIAN GIFT: SERVING UPRURAL INDUSTRIES ON A PLATTER
Advancing the goals of a trading partner at the expense of one’s
own national security (especially in economic and human health)
is arguably exceptional in the developed world of independent
nation-states. But the case of Australian agriculture offers at least
two examples of such exceptional behaviour: beef and pork.
These cases are similar in that they both show the government’s
willingness to place American interests over and above Australian
economic and health security purportedly in the name of advanc-
ing our special relationship. But they are also different in that
they reveal the contrasting strategies employed by the Howard
Government to silence the local interests they betray. We will
examine each of these cases separately.
Little pig, little pig, let me in!
America is often depicted as the big bad wolf of the international
trade regime, demanding access to foreign markets under
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conditions that threaten the viability of local industries. But while
the United States sometimes makes demands that place local
industries in danger, there are a variety of avenues available to
governments to protect themselves from American huffing and
puffing—if they want to protect themselves.
For example, America has long huffed and puffed about Aust-
ralia’s strict quarantine standards. These standards keep Australian
agricultural produce clean and green and thus competitive, even in
the face of tough foreign competition. Now, US farmers, through
their hyperactive lobby groups, routinely declare Australian quar-
antine standards a violation of international trade rules and
demand that they be dismantled. Such claims have been shown to
be little more than hot air. As an island nation, Australia has the
legal right under WTO rules to adopt any standards it sees fit to
protect its clean, green status, so long as those standards are based
on science and are not unduly trade restrictive. (In other words, as
long as its protections are aimed at keeping pests and diseases, not
imports, at bay.) So, while America may huff and puff on this
issue, the Australian government has every right to maintain its
traditional ‘house of bricks’ approach to quarantine should it so
choose, and to call on the WTO for backup against US pressure
should it require support.
Over the past decade however, the Howard Government has
willingly traded Australia’s ‘house of bricks’ stance on quarantine
for a ‘house of straw’ approach, and nowhere is this clearer than
in the pork industry. In the case of pork, the wolf didn’t even have
to blow. It just cleared its throat a little before pushing on an open
door and walking right in, bringing with it exposure to one of the
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world’s most devastating pig diseases—Post Weaning Multi-
Systemic Wasting Syndrome (PMWS).
The pork story begins with the Howard Government’s
decision to initiate negotiations for a free trade agreement with
the United States. (Yes, the Australian government asked the
Americans for the deal, not the other way around.) The deal was
to be the crowning glory of Howard’s prime ministership. No
other developed nation had entered into a free trade agreement
with the world’s superpower (which should perhaps have sounded
warning bells, not welcome bells, for Howard). In brokering such
a deal, Howard would not only be setting an international pre-
cedent, but also deepening Australian ties with its powerful friend,
or in Howard’s approximate words, raising our economic relationship
to the same level as our security relationship.
As we argue in other chapters, for Howard, a ‘closer’ relation-
ship with the United States equals a ‘better’ relationship (in
personal-political terms, at least), regardless of the terms for
Australia. Thus from the outset of the trade negotiations it was
clear to many, including the Americans, that Howard wanted this
deal primarily for its symbolic value, whatever the economic costs
involved. We know this because Howard insisted on signing the
deal even after the Australian negotiators advised him to walk
away from it on national interest grounds.
Howard’s determination to push ahead with a deal he knew
to be disadvantageous to the national interest goes some way
towards explaining how Australia’s precious quarantine standards
ended up on the negotiating table. American lobbyists made it
clear from the very beginning that they would not back a deal
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unless Australia reviewed its quarantine standards on various agri-
cultural commodities, including pork. And if the Americans were
not going to sign without this concession, then Australia had to
give in. And give in it did. According to the Office of the US Trade
Representative (USTR) and the Congressional Research Service, a
commitment was made by the Howard Government to address
quarantine barriers to pork and apple imports as a part of
the deal.1
Australia’s commitment to ‘address’ its ‘quarantine barriers’
in these areas was carried out by Biosecurity Australia (the body
responsible for setting import standards), which announced and
swiftly completed a review of import protocols for pork, apples,
and a variety of other products before the deal was even signed. We
have detailed elsewhere the highly contentious nature of the
Import Risk Analyses (IRAs) that were conducted during the FTA
negotiations. First came the release of the IRA into apples, pro-
posing quarantine standards so bizarrely inadequate that the
document was eventually referred to a Senate Committee for
review. The Senate found that the report was seriously flawed and
recommended it be re-done.2 This was not before the industry had
spent hundreds and thousands of dollars demonstrating the deep
flaws in the science employed by Biosecurity Australia. Then came
the IRA into banana imports, which was again referred to a Senate
inquiry and again revealed as proposing inadequate protections,
based on questionable science.3
Finally came the pork IRA. This IRA proposed quarantine pro-
tocols so weak that, according to independent CSIRO modeling,
they would virtually guarantee—with a 95 to 99 per cent degree
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of certainty—the introduction of the devastating piglet disease
PMWS into Australia within a decade. PMWS had devastated
almost every other pig-producing country in the world over
the past decade, costing billions of dollars. Australia is one of
the few countries remaining free of the disease. Again without
explanation, the government refused to overturn this IRA, despite
another damning Senate inquiry report.4 Instead it pushed ahead
with its implementation, much to the outrage of Australian pork
producers.
This was a most bizarre scenario, an Australian industry effec-
tively being told by its own government: we have decided to change
the rules to allow pork imports, even though this will almost certainly
expose you to a disease that will kill around 30 per cent of your piglets
each year. We aren’t obliged to make these changes under international
law. We just thought it would be a nice symbol of our goodwill to
America.
Having been abandoned by their own government, Australian
pig producers had little option than to pool their money and
launch, through their peak national body, Australian Pork
Limited, a lawsuit against the government, challenging the legality
of the government’s Import Risk Analysis (IRA) for pork. The
landmark case was heard in the Federal Court in May 2005. In a
major coup for the industry, Justice Murray Wilcox declared the
decision to open Australia to pork imports under conditions
stipulated by Biosecurity Australia ‘so unreasonable that no
reasonable person could have made it’, and suspended import
licences.5 In his findings, Justice Wilcox was damning of
Biosecurity Australia’s analysis of the risk involved in relation
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to PMWS, calling it ‘bizarre . . . especially having regard to
concerns expressed by successive Australian governments about
maintenance of high quarantine standards’. He found that the
decision to recommend the commencement of pork imports
under the proposed protocols was almost entirely lacking in
science. His words are worth quoting:
. . . the necessary scientific research had not been done.
The Panel had no material whatever upon which it could
base a judgment . . . Because of the absence of inform-
ation, and logic, in the Panel’s final step . . . This is not
merely a case of an opinion that is unsound. The ultimate
opinion formed by the Panel was unjustifiable.6
So if the decision to allow pork imports was not based on science,
what was it based on? Political calculation, of course. If Australia
had not moved on the issue of pork, the FTA would not have
been signed, and Howard’s dream of leading the first developed
country in the world to sign an FTA with the United States
would not have been met. Clearly, attaining his dream was
more important to Howard than the livelihood of the nation’s
2300 pig farmers.
But the tale does not end here. Despite Wilcox’s damning
finding, the government, determined that the pork imports
should go ahead, appealed the Wilcox decision to the full bench of
the Federal Court. That’s right. The government chose to fight its
own industry to force them to accept a decision that would almost
certainly wound them deeply.7 The case was heard in September
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2005. In a remarkable turn, the full bench of the Federal Court
(consisting of three judges, Heerey, Branson and Lander) found
two to one in favour of the government. The industry was now
faced with a situation in which two judges (Heerey and Lander),
despite expressing concerns about the scientific processes
involved, believed the government had acted lawfully, and two
judges (Branson and Wilcox) who felt it had not acted lawfully, and
who were willing to condemn the government’s position in the
strongest possible language.8
With nothing left to lose, the industry decided to seek special
leave to appeal the decision to the High Court. This leave was
rejected in November 2005, not on the merits of the case itself,
but on jurisdictional grounds.9 The High Court declared itself
as not having the right to rule on such a case. This decision,
surely as bizarre as the preceding ones, meant that the govern-
ment was construed as being unaccountable to the courts for
its policy decisions, without regard to the merits of the case. And
that was the end of the road for Australia’s pig farmers. Even
though the decision was split two-two in the Federal Court,
imports would resume, and with them the ‘virtual certainty’
of PMWS infection, and nothing more, legally, could be done
to stop it.
It is worth noting the stakes involved in this case. If the full
bench of the Federal Court had found in favour of the pork
industry, or the High Court had heard the case and ruled for
the industry, then Australia’s entire quarantine decision-making
system would have been thrown into disarray. Given the decisions
Biosecurity Australia had been making over the past five years,
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one might argue that this would have been a good thing. But it
is clear that the judges were considering no small issue. The
ramifications would have been felt far beyond the pork industry.
There are two lessons from this story. Under the Howard
Government, and during negotiation of the Australia–US FTA in
particular, Australia has shifted from a ‘house of bricks’ to a
‘house of straw’ approach to quarantine. While there has cer-
tainly been pressure from the United States to do so, the
Australian government was under no legal obligation to effect
this shift. Rather, the shift reflects a calculated choice on the part
of the government to prioritise a closer personal relationship
with the United States, even over and above the livelihood of
Australian farmers. Howard must be given full credit for this
shift. Howard’s ministers have not always been on side. As the US
President of the California Table Grape Commission put it to her
constituency in 2002 on the eve of a breakthrough in Australian
quarantine, ‘The Australian Minister of Agriculture, however, is
opposed and “has worked very hard to keep your grapes out of
that market”.’10 Second, the government has been willing to go to
great lengths to defend its new priorities, taking its own industry
to court, using the public purse to fight the interests of ordinary
Australians in having a clean green agricultural sector. This situa-
tion would be comical if it were not so tragic for the farmers
involved.
On this unhappy note, we turn to the case of beef. This is a
more complex story, but one that every Australian should under-
stand as it places at risk not only animal health, but human health
as well.
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AUSTRALIAN BEEF: LEAN, CLEAN AND UNDER SIEGE
There is no disputing the economic significance of Australia’s
beef industry, one of the country’s great success stories. In spite
of a relatively small domestic market, it has grown to become the
world’s second largest beef exporter (after Brazil).11 Australian
exports now dominate the quality markets of Japan and Korea,
two of the highest value beef markets in the world. Australia’s
strong market position is underpinned by its unique disease-free
status; Australia is currently one of the very few countries to
be free of Bovine Spongiform Encephalopathy (BSE), thanks
to strict regulations on animal feeding and importation adopted
in 1966. Under current policy, Australia does not import beef or
live cattle from countries that have suffered BSE outbreaks,
including the United States. In trade terms, Australia’s BSE-free
status gives the country a powerful competitive advantage over
other beef producers, allowing Australian beef to sell into key
markets like Japan which do not accept beef imports from coun-
tries with a history of BSE.12 Australia’s BSE-free status also
means that Australians can safely eat beef without worrying
about contracting the human variant of BSE, namely Creutzfeldt
Jacob disease (CJD)—a major public health advantage. Australia’s
strict quarantine standards are central to the competitiveness of
its beef exports. It is not surprising that the US targeted
Australian quarantine standards during the negotiations for the
Australia–US Free Trade Agreement.
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What is surprising is that the Howard Government agreed to
put Australian quarantine standards on the FTA negotiating table,
signing a special side letter on BSE with the Americans. In the BSE
Side Letter, Australia agreed to support the United States in its
quest to have international BSE standards ‘simplified’ (read ‘weak-
ened’) so that the United States could resume its beef exports to
Japan and Korea—Australia’s top export markets—countries
which had banned US beef following its BSE outbreak. In one fell
swoop, Australia was transformed from independent player to
American pawn in international beef trade, and all without a peep
from the Australian beef industry.
The issue surfaced to public attention in late 2005, well after
the signing of the BSE Side Letter, when there were mooted
moves to abandon the public health measure of removing all
beef from supermarket shelves should BSE be discovered among
Australian cattle. These policy proposals were floated in
September 2005 by the peak councils of the beef industry, and
received an immediate response from the federal government,
with Agricultural Minister Peter McGauran indicating that
Cabinet would respond favourably to these calls.13
Just how this remarkable turn of events came to pass is a
somewhat complex tale that begins and ends with American
interests and Howard’s efforts to advance them at all costs, even
when they compromise Australia’s security. It is necessary to
start with a brief examination of US interests in the international
beef trade to understand how Australia’s commitments under
the FTA Side Letter were designed to advance those interests.
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America’s shifting interests in international beef trade
American interests in international beef trade changed substan-
tially in 2003 in response to its embroilment in the international
BSE saga, a saga that had raged since 1986. In that year, inter-
national trade in beef came to a standstill with the discovery in
Britain of a brain-wasting disease affecting cattle. This disease was
identified as Bovine Spongiform Encephalopathy or ‘Mad Cow’
disease. Within months, BSE had been detected in a number of
other European countries. Then in 1996, the killer news broke:
this fatal disease could be transmitted to humans through the
consumption of infected meat, resulting in a new version of
Creutzfeld-Jacob disease, a wasting disease of the brain. This was
known at the time as a disease of the elderly, a sporadic condition
occurring at a rate of one in a million. The new version struck
the young, and was invariably fatal. The resulting hysteria led to
thousands of cattle slaughtered across the United Kingdom and
Europe, and saw the erecting of trade barriers against beef from
infected countries.
Few countries managed to remain insulated from this unfold-
ing disaster. Australia, which had maintained strict controls on
animal and animal feed imports since the 1960s, was one of them.
So Australia experienced a boom in exports to countries like Japan
and the United States, which refused to buy beef from infected
nations, regardless of the screening and control measures in place.
Until recently, it appeared that the United States would also escape
unscathed, until the detection of its first mad cow in 2003, and
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a second case in 2004, followed by a third. America was immedi-
ately exposed to the same treatment it had exacted upon infected
countries: its beef exports were suddenly rejected by most import-
ing nations.
With the shoe firmly on the other foot, the United States
changed its hard-line approach to BSE and began a campaign
to have other countries re-admit its beef products, adopting a
three-pronged strategy: to defend a ‘low BSE risk’ profile rather
than a ‘BSE-free’ classification; to have international guidelines
revised to recognise America’s ‘low BSE risk’ status; and to
pressure other countries to accept the revised international guide-
lines, which would pave the way for the resumption of US beef
exports.
Step One: defend a ‘low BSE risk’ status Since 2003, the United States has sought vigorously to defend
a ‘low BSE risk’ image to prevent panic and protect markets at
home and abroad. To this end, instead of trying to ascertain the
true extent of BSE infection, the US Department of Agriculture
(USDA) and other agencies have employed a minimalist
approach to BSE testing and tracking. As we detail elsewhere,
America’s BSE testing systems appear specifically designed to
demonstrate a low level of risk, and its testing regime continues
to lag well behind international norms.14 As a result, the extent
of BSE infection in the United States remains an unknown and is
in all probability much higher than the government maintains.
(The United States still claims that it has only ever found three
cases of BSE inside its borders.) While this might be dangerous
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from an animal and human health perspective, the defence of
America’s ‘low BSE risk’ image is essential to the second step
of its BSE strategy.
Step Two: revise international guidelines torecognise a ‘low BSE risk’ statusPrior to its mad cow discovery in 2003, the United States stead-
fastly refused to import beef from any country affected by BSE, and
traded on its valuable ‘BSE-free’ status, a status bestowed by the
World Organisation for Animal Health (OIE).15 Since 2003, America
has changed its tune on the fairness of the OIE’s BSE-free label—
why should other countries enjoy this designation if it is no longer
available to the leader of the Free World? The United States has
argued vigorously for the revision of the OIE’s ‘unfair’ and ‘exces-
sively complex’ risk-categorisation system. The official line of US
government and industry is that America has only reported three
cases of BSE so far, and one of those was allegedly in an imported
cow, so why should it be so discriminated against? According to the
argument by the United States, risk classification should not be
based on the number of affected cows reported and ‘BSE-free’
should no longer be the benchmark against which countries are to
be judged. Rather, the guidelines should reflect the testing and
tracking regimes that a country has in place which would reflect
their ability to prevent the spread of BSE at home and abroad.
In May 2005, due chiefly to US pressure, the risk-classification
term ‘BSE-free’ was removed from the OIE lexicon. Where the
OIE had traditionally classified countries as either BSE-free; BSE
provisionally free; minimal risk; moderate risk; or high risk, under
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the new system countries are now classified as either ‘negligible
risk’, ‘controlled risk’ or ‘undetermined risk’ of contracting the
disease.16 (OIE 2005). To be classified as ‘negligible risk’, a country
must demonstrate it has adequate surveillance mechanisms in
place. It must also be able to confirm that it has had either no cases,
or only imported cases, of BSE in the past seven years. If a country
can demonstrate that it has only had imported cases of BSE, the
final requirement to show that appropriate feed bans have been in
place for the past eight years can be waived.
Under such a system, the United States might have found itself
placed in the same risk category as Australia, by claiming that
(until its more recent outbreaks) the infected cow was a Canadian
import. With the discovery of homegrown Mad Cow disease in
2004 and 2006, however, it now finds itself in the ‘controlled risk’
category. But this suits US purposes. For under OIE guidelines, it
is inadmissible to refuse exports from ‘controlled risk’ countries as
long as they have adequate testing and tracking systems and feed
controls in place. And how are these systems verified? Not by an
on-the-ground inspection by the OIE itself; the OIE is a bureau-
cratic body only, without any field staff of its own. Rather, the OIE
simply takes the word of member countries, who fill out the requisite
forms to say that they are in compliance with OIE testing and tracking
standards. Those familiar with the well-documented limitations of
America’s BSE tracking and testing regime would quiver in their
boots at the implications of this system.17 Nevertheless , now that
the United States has declared that it complies with OIE testing,
tracking and feeding standards, it can demand that countries
recognising the OIE accept its beef. This brings us to the final
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part of America’s international BSE strategy: compelling others
to comply with these US-friendly guidelines. And this is where
Australia comes in.
Step Three: compel other countries to comply withthe new international guidelinesOIE guidelines are just that, guidelines, not law. Countries that feel
they have reason to demand more stringent protections from BSE
than the OIE provides—as Australia and Japan have done since the
BSE crisis began—are entirely justified in demanding a higher
level of protection than the OIE affords. But this is clearly not
in America’s economic interests. The challenge for the United
States has been to secure other countries’ compliance, particularly
Japan’s, with OIE guidelines to help re-open markets to American
beef.
Despite heavy American pressure, Japan has proved to be par-
ticularly resistant to US demands. This is perhaps not surprising,
given that Japan is still reeling from US pressure in other areas of
disease-implicated food trade, most recently the case of fire-blight
affected apples.18 Japan made its position on the OIE very clear in
2004—it would under no circumstances allow the OIE to adjudi-
cate on its beef dispute with the United States. In 2004, a ‘secret’
letter from the US Secretary of Agriculture to her Japanese
counterpart proposing an OIE-mediated approach to resolving
the impasse was very publicly and embarrassingly rebuffed by the
Japanese government through the Japanese media.19
With its diplomatic efforts in tatters, the United States fell
back on the threat of trade sanctions to force Japan to accept its
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beef. It also adopted another, more insidious strategy in its quest to
re-enter the Japanese market and that was to have other clean and
green countries accept OIE standards, effectively isolating Japan
and making its resistance to US pressure less tenable. It was in this
context that the Australia–US FTA Side Letter was negotiated. In
this letter, Australia agrees to comply with OIE guidelines itself
and to join the United States in seeking to compel other countries
to follow OIE guidelines. The side letter symbolises Australia’s shift
from independent player to compliant pawn in the international
trade regime.
ACCEPTING THE ROLE OF PAWN IN AMERICA’SINTERNATIONAL BSE STRATEGY
The BSE Side Letter, which constitutes a binding commitment for
both parties,20 makes no mention of Australia’s current BSE-free
status, nor does it accord any recognition to the science-based stan-
dards that have kept Australia free of the disease. Instead, under
the side letter, Australia agrees to cooperate with the United States
in addressing the BSE issue in a ‘science-based, comprehensive, and
cohesive manner’—as if this had not been the case beforehand.
The Letter also notes that ‘science-based responses . . . ensure food
safety and protect animal health while avoiding unnecessary
barriers to international trade’. A reasonable interpretation of
this phrase in the context of the FTA is that Australia’s ban on
imported beef from the BSE-affected United States has been ‘un-
scientific’ and an ‘unnecessary barrier to international trade’.21
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Australia’s most significant commitment under the side letter,
however, is its pledge to work with the United States, under the
auspices of the OIE, to help ‘review BSE standards’ internationally
(a task completed in May 2005) and to encourage other countries
to apply the new OIE standards. As noted above, a principal aim of
these standards is to establish a framework under which countries
affected by BSE may continue to export their beef products;
according to the OIE, countries experiencing a BSE outbreak
should not automatically have their exports rejected (OIE 2004). As
Australia is a country that does automatically reject all beef
imports from countries affected by BSE, its commitment to
acknowledge the importance of OIE guidelines and to encourage
other countries to apply them strongly suggests that Australia too
will apply them—or risk charges of hypocrisy. This would clear
the way for our acceptance of beef products from BSE-affected
countries under OIE conditions.
The side letter helps advance America’s international BSE
strategy in three main ways. First, it compels Australia to co-
operate with America in revising international guidelines on
BSE. As noted above, these 2005 revisions did away with the
risk designation ‘BSE-free’, and introduced a new set of risk
categorisations. These categorisations make it possible for the
United States to sell into markets that had previously insisted
upon a BSE-free status.
Second, the Letter compels Australia to acknowledge the
importance of, and thus also comply with, OIE guidelines;
Australia’s commitment to encourage other countries to adopt
OIE standards implies that we too must follow them.
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And finally, the Letter makes Australia’s agreement to work
within the OIE framework in BSE a legally enforceable obligation.
Outside the FTA context, OIE guidelines carry no force of law. It
is open to any country to ignore OIE guidelines or to insist on
more stringent standards as Australia currently does. For example,
even though the OIE says it is safe to import beef from some parts
of Brazil (a country infected with foot and mouth disease), many
countries, the United States included, do not accept OIE guide-
lines in this area and do not import beef from Brazil.22 However,
once embodied in bilateral trade agreements, such as the
US–Australia FTA, the OIE standards change their character and
become binding on the signatory countries, in the sense that a
departure from the standards could trigger a trade dispute
between the countries.
Clearly then, the side letter signals the reversal of Australia’s
long-standing import ban on beef from BSE-affected countries.
And as countries like Japan import from Australia primarily
because of our stringent approach to BSE, this reversal is set to
undermine our appeal in the Japanese market and pave the way
for US re-entry. Of course, the government denies any suggestion
that the side letter represents a shift in Australia’s approach to BSE
regulation. There was no mention of the side letter by the
Australian government when the deal was signed, and according
to Liberal Senator Bill Heffernan, Chair of the Senate’s Rural and
Regional Affairs and Transport Legislation Committee, the side
letter is a harmless document that ‘binds us to bloody nothing’.23
But this begs the question, if it binds us to ‘bloody nothing’, if it
represents no change in Australia’s approach to BSE regulation,
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then why have a legally binding side letter at all? Why not just
exchange informal undertakings outside and independent of the
trade agreement? Given the contentious nature of international
beef trade over the past few years, and the war being waged
between Japan and the United States on this issue, the claim that
the BSE Side Letter is of no political or economic significance
rings rather hollow. And it would be news to the Americans as
they had the problem that the Letter was designed to address. The
Howard Government, in turn, had the problem of keeping
its explosive undertaking out of the public realm or at least
minimising its exposure. So in the absence of a government con-
fession and in the presence of official denial, we turn to careful
probing of the (economic and political) context in which the side
letter was negotiated. In this context, only one plausible inter-
pretation stands: the intention of the side letter is to lock in
Australian support for changes in international quarantine
standards for beef—standards that negate our own ‘BSE free’
status and tilt the playing field in America’s favour.
Slim Pickings: Australia’s ‘reward’ for itscompliance with US objectives
To secure Australian compliance, the United States no doubt had
to offer at least a minimal concession in the trade talks with
Australia; so it conceded gradually extended quotas (over an
18-year period) for Australian beef imports into the United States.
(And thereafter, a new protectionist mechanism, in the form of
a ‘price-based safeguard’, will apply to Australian beef outside
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quota whenever US beef prices fall below a specified level.) To
put this quota increase in perspective, the annual concession
to Australia is equivalent to one day’s beef consumption in the
United States. Even by the standards of the gross lopsidedness
that pervades the US–Australia bilateral deal, the disparity in this
arrangement is unusual. There is a more perplexing dimension to
this agreement; the quota extension applies only to the lowest
grade of beef (for example, processed meat for hamburgers, the
cheap end of the market). And perhaps most significantly, our
quota concessions do not come into effect until US beef exports
resume their pre-BSE levels, or no later than three years.
The explicit link between our quota ‘prize’ with America’s
successful re-establishment in international markets lends weight
to our reading of the side letter and its relationship to America’s
quest for market expansion: the sooner we help the United States
re-establish its international presence by cooperating on BSE,
the sooner we may claim our quota ‘benefits’. The US Trade
Representative responsible for negotiating the FTA, Robert
Zoellick, is unequivocal in his view of the relationship between
the FTA Side Letter, a revision of Australia’s approach to BSE, and
America’s quest for re-entry into Japanese (and Korean) markets:
What I would emphasise in this area most of all, and there
will be a side letter that reflects this, is that independently
[sic] Australia has been examining the scientific basis of
dealing with BSE and beef. This is subject to final steps in
Australia and cabinet review, but the scientific analysis at
least as described to me is very similar in terms of the
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analysis that we have been doing, in terms of trying to
make sure that consumers are safe in terms of what they
eat from beef, but that this is not used as a protectionist
measure. And so probably the best news for us in the sanitary
and phytosanitary area is the cooperation on that issue so that we
can open up some of our markets to beef globally, particularly in
Japan and Korea.24
EXPLAINING INDUSTRY COMPLIANCE:HOW SILENCE WAS SECURED
Why would the beef industry in Australia allow its interests to be
so brutally sidelined in favour of those of a foreign power? There
is no shortage of industry representation in Australia, with the
National Farmers Federation (NFF), Cattle Council of Australia
(CCA), and Meat and Livestock Australia (MLA) all purporting to
represent Australian beef producers. How can their silence on this
issue and their apparent acquiescence in serving US goals be
explained?
We need to scratch below the surface to look at both cor-
porate ownership patterns in the Australian beef industry and the
institutional character of industry representation.
Corporate ownership: who is ‘we’? We is US.
The US beef industry is heavily concentrated with just four cor-
porate groups controlling 84 per cent of the meat-processing
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industry.25 Even more interesting is the cross-ownership that has
been allowed to develop under an Australian government appar-
ently eager to promote US interests. The second largest US beef
processor, Swift and Company (a division of ConAgra) has now
acquired the business of Australia’s largest beef processor,
Australian Meat Holdings (AMH), which has become known as
Swift Australia. Commenting on its second-quarter results in
2005, Swift and Company stated that Swift Australia was already a
strong contributor to overall Swift revenues and profits, which
have risen despite the US problems with BSE: ‘Swift Australia con-
tinues to deepen its presence in the Asian market to capitalise on
the void left by the absence of North American beef ’.26 In other
words, Swift wins if Australia retains its strong position in Japan
and Korea, and Swift wins if the United States regains its position
in these markets.
But the general point to emphasise is not that it is difficult
to draw the line between Australian and US interests. On the
contrary, the point is that as an American subsidiary repatriating
the bulk of its profits and responding to the policies of its US
parent, Swift has no stake at all either in supporting quarantine
standards that sustain an Australian competitive advantage, a BSE-
free status, or in maintaining its high value-added markets in Asia.
The interests of the giant middlemen like Swift are completely
distinct from those of the producers. The Swifts of the world win
if ‘we’ (Australian producers) lose quarantine status and markets,
and win if we retain the status quo. The Swifts’ parents, however,
win a great deal more if we lose. For what they seek is nothing
less than the ability to source cheaply and supply globally without
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being fettered by strict quarantine regulatory standards. The
industry’s peak representative bodies have been co-opted
by the interests of these (mainly US-owned) packer–distributors
and the costs of serving these interests are shifted onto Australia’s
producers.
Australian meat industry institutionalrepresentation
At face value, Australian beef producers seem well represented
(even over-represented) at the national level, by the NFF, the MLA
and the CCA. In reality, the representation of Australian cattle
interests is deeply controversial and disputed. The peak council for
the industry, the CCA, was founded in the early 1980s, as the
successor to a long and troubled history of beef industry represen-
tation in Australia.27 It is the designated peak council of Australian
beef producers which sits within the wider, carefully crafted
‘representational’ structure of Australia’s rural industries headed
by the National Farmers Federation. (Each rural industry—beef,
poultry, sheep, wool, sugar, and so on—has a peak council that is
given government authority to represent the interests of that
industry. All the peak councils are then represented collectively at
the national level by the National Farmers Federation.)
Under a Memorandum of Understanding (MOU) signed with
the then Minister for Agriculture, John Anderson, the CCA is
given access to compulsory levies paid by the beef raisers and
producers. Yet it is not a representative body. According to the
Australian Beef Association (ABA), a maverick body representing
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the 160,000 beef producers in Australia, fewer than 15 per cent
are members of the CCA. Cattle producers have minimal direct
representation on the CCA national council.
Over its 20-year history, the CCA has adopted policies that
have become indistinguishable from those pursued by the
Liberal–National Party Coalition, which has governed in
Canberra over the past decade and more. The result is a policy-
making network based on an organisational structure that is
government-led rather than industry-driven. It is through this
organisational structure that the government could most effectively
secure CCA compliance with its industry-damaging concessions
to the United States. Indeed, the CCA has been a key driver of
changes to Australia’s BSE policies. In October 2005, seemingly
out of the blue, the CCA announced its dissatisfaction with
Australia’s ‘all beef off the shelves’ policy in the event of a BSE
outbreak and asked the government for a review of this policy
or more likely, was instructed by the government to request such
a review in the knowledge that Australia would shortly be relaxing
its stance on importing beef from BSE-affected countries to
comply with the trade agreement.28 The CCA’s suggestion was
predictably received warmly by the government, which duly
initiated a cabinet review and was about to recommend a change
to this policy when news of its imminent shift unexpectedly broke
(thanks to a cabinet leak) and prompted a public outcry. It was
in the public debate that followed that the existence of the little
known side letter to the FTA was revealed, and the behind-
the-scenes role of the United States exposed—all without any
authoritative interpretation being offered of the side letter by
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the Parliament or by the courts. Still, Australia’s commitments
to the United States under the FTA remain. Despite public
questioning of a review of BSE policy, the government continues
to push ahead with the review of its BSE position, with the
CCA’s full support. But the CCA’s actions have not been without
consequences.
THE ABA AND THE FIGHTBACK FROM THE BUSH
The extreme non-representative character of the CCA and the
compliance of the MLA have had repercussions in the Australian
bush where cattle farmers still care about what happens to their
industry. A group of such farmers have taken matters into
their own hands and have started a new organisation called the
Australian Beef Association. This organisation is now fighting
the CCA on its own turf, namely the beef industry and its policies
for cattle farmers. Just as trade unions have to fight occasional
representation battles, so trade and industry associations have to
do likewise. One such battle is now underway in Australia
between the CCA and the ABA.
The CCA describes the ABA as ‘an extremist minority group,
more intent on an agenda of self-promotion through fear and
confusion, than progressing the issues which will influence the
profitability and future of Australian beef producers’.29 There is
no confusion there as to whether the CCA sees the ABA as friend
or foe.
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The policy differences between the two organisations are
clear. The CCA as well as the MLA support the FTA with the
United States—despite the miserable (and apparently largely irrel-
evant) concessions made to beef. But on BSE, the ABA issued a
public call in early October 2005 for Howard to resolve what was
described as a ‘suicidal Canberra power struggle over BSE’.30
The ABA Vice-Chairman, Brad Bellinger, said Howard’s personal
intervention was needed to bring sanity into the postures being
adopted by the departments of agriculture and trade. He argued
that the prospect of Australia banning the sale of its own beef
within Australia while allowing the import of beef from countries
with BSE was making Australia the laughing stock of the world
beef industry.
In a broader setting, the concordance between government
policies and industry policies is usually attributed to capture of the
government agencies by industry bodies. The United States is a
case in point where, for example, it is widely recognised that the
pharmaceutical industry has ‘captured’ the FDA, while the major
food industry groups and the big meat industry corporations such
as Tyson, Swift, Cargill et al. have ‘captured’ the US Department
of Agriculture.31
In Australia, a reverse process of pre-emption or capture seems
to have taken place, whereby it is the Howard Government that is
doing the capturing of the industry associations. In what appears
to be an all-out effort to serve the American administration and its
business partners, Howard’s team has been systematically winning
support for this US-centric policy behind the scenes by rewarding
trade and industry associations that go along with the policy and
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punishing those that identify with and seek to defend an Australian
constituency.32
What we therefore call a case of ‘government capture’ of an
industry may well be a novel phenomenon in the world of liberal
democracies. In the case of the Australian beef industry, it is
the government capture of the CCA that best accounts for the
Council’s subservience, and the industry’s silence, in placing US
interests ahead of its own.
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CULTURE
Imagine a country with the world’s longest tradition of feature film
production, whose artistic professionals—from actors and directors
to musicians and technicians—rank consistently among the world’s
best, despite the country’s small size. This country’s artistic renown
is due in no small part to a long-standing bi-partisan commitment
to develop a vibrant, domestic cultural sector (think film, TV,
literature, music) as the cornerstone of a more independent, reflec-
tive and creative nation. The effectiveness of this commitment—
which emerged in the late 1960s—was apparent from the outset,
the film industry being a case in point. Between 1970 and 1985,
this country produced more than 400 feature films, more than
during the rest of its entire film-making history. The country, it
seemed, was laying the foundations for the long-term development
of its local system of self-representation—a system which, by the
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late 1980s, was feeling the pressure from an influx of cheap, mass-
produced cultural imports (especially films and TV shows) from
the United States.
Now imagine a country where this bipartisan commitment to
local self-representation comes under attack—not from without,
but within. And this attack is led by the very party that initiated
the policy of cultural independence more than 40 years previously.
The attack is subtle, at first. It begins with the highest levels of the
ruling party falling silent on the role of local cultural industries
and their contribution to the nation’s social values and economic
prosperity. But the attack soon becomes explicit. The government
begins to publicly link support for ‘the arts’ with support for the
opposition party, making local cultural industries a subject of
partisan political derision. Then the financial squeeze is applied to
cultural institutions, not enough to bring them to their knees but
enough to instil a deep sense of insecurity, rendering them less
likely to criticise the government for their neglect. Then the
government runs interference directly into cultural output—
censoring films, TV shows, plays that are deemed to run an anti-
government line.
But the most savage blows to the country’s cultural industries
are played out on the international stage. First, the government
waters down its commitment to maintain adequate outlets
for local cultural expression in a free trade agreement with
the world’s leading cultural exporter, the United States. Then, the
climax: the government’s shock refusal to sign the landmark
Convention on the Protection and Promotion of the Diversity of
Cultural Expression, adopted by the United Nations in October
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2005. This convention is the international community’s response
to the onslaught of cheap cultural exports from America—exports
which have been flooding cinemas, TV and radio stations world-
wide, undermining avenues for the expression of local culture and
identity and threatening the sector’s dual role in reinforcing social
values and contributing to the national economy. Instead of
ratifying the convention, which affirms the social and economic
importance of local cultural industries and the responsibility of
governments to support them, this country turns its back on
the 148 signatories, and by abstaining sides instead with the
United States.
The result of this decade-long assault on the country’s cultural
sector is predictably destructive—domestic feature film production
and investment stagnates, as does local television drama produc-
tion, leading to a doubling of the country’s deficit in audiovisual
trade. All this while other countries, English and non-English
speaking alike, are expanding their support for local industries in
response to the American challenge. The corrosive impact on the
country’s values is much more subtle and insidious.
Now stop imagining and open your eyes. This is Australia
after a decade of Howard rule.
CULTURE MATTERS
Why does the dramatic decline of a country’s cultural sector
deserve attention in a book about national insecurity? The answer
is that the cultural sector is central to the national interest in two
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ways, both for the social values it represents and the economic
contribution it makes. In the following section, we will see how
the contribution of so-called ‘creative industries’ to economic
growth in developed economies has ballooned in recent decades,
rising to become the first and second most important sectors in
the United States and the United Kingdom respectively. In recog-
nition of their lead status, governments around the world have
been pouring resources into these industries’ development. In
most industrialised economies, a decline in the fortunes of the
nation’s cultural industries would be perceived as a matter of
great concern with significant implications for the national econ-
omy. In most normal industrialised countries, that is.
Governments support their cultural industries for reasons
other than their economic contribution. For they are the mirror
into which a society peers and finds itself reflected both as it is
(warts and all) and as it would like to be. This is the social values
side of the equation; it is why governments around the world tend
to be more sensitive to the wellbeing of their cultural sector,
and to the impact of imports on local industries in particular.
This is not an issue of foreign exclusion; there is no question that
exposure to the cultural products of other nations can be bene-
ficial and enriching. Foreign exclusion has never been an issue in
Australia where exposure to foreign products, most recently with
television and film, has been at a high level for more than a cen-
tury. The issue is, as in all things, one of balance. It is when
imports soar at the expense of a country’s own creative industries,
and when the imported product is overwhelmingly from one
powerful source that the problems begin. Under such conditions,
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slowly, subtly, cultural corrosion takes place. We develop an aver-
sion to our own accents, a distaste for our own stories, a distance
from our own distinctive habitat. The foreign voice becomes the
new standard.
With America as the world’s dominant cultural exporter,
Australia is at particular risk of such cultural saturation. Australia
does not have the natural protective barrier of language that
non-English speaking countries do. In these countries, even if
American cultural imports are high, the foreign content does
not overwhelm because it continues to be dubbed in the local
vernacular. People still hear their own voices. But consider what
can start to happen in English-speaking countries where this
natural barrier does not exist. The local voice is slowly but surely
squeezed out and the American voice becomes the standard, even
to the point where we begin to cringe at the way we sound. Local
theatre companies begin to adopt American accents for plays that
hardly require it, as did, for example, the Sydney Theatre
Company for Fat Pig, staged in 2006—a story with obvious
thematic relevance to Australia and which could have been set
in any developed country, yet which somehow had to be told in an
American accent. Australian singers, in genres from hip hop to
country and rock, begin to take on the American accent that now
dominates commercial radio music programming in this country.
And so rare becomes the local accent in television drama that
we begin to find it harder to understand than rapidly spoken
American dialects.1
So what, some might say. What’s so important about hearing
our own voice? The idea that it is important to have access to our
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own voice, let alone to our own stories, is by no means novel. In
fact, it is the unquestioned foundation of cultural policy in other
jurisdictions, most notably the United States, which regularly
engages in ‘cultural cleansing’. In the United States, less than 2 per
cent of all television content is foreign, while foreign films’ share
of the US national box office in 2005 was only 6 per cent.2 But still,
America prefers to ‘cleanse’ even the foreign English-language
shows they screen at home, so jealously defended are the national
voice and values. When Australia’s genre-busting Mad Max was
released in the United States, it had to be overdubbed with
American accents so as not to offend local ears. Nor can hit shows
be imported intact. It seems they too must be adapted to
American tastes and values. Both British television hits The Office
and Ab Fab needed remaking to reflect American accents and
American-style humour, and to tone down the sexual references
to conform with local values (at the same time as keeping import
costs down). This predisposition to adapt the foreign does not
seem to lend itself to reciprocity. Notoriously protective of their
own cultural products, Americans wouldn’t dream of adapting
their own products to foreign tastes. When Sydney University
students staged a production of Death of A Salesman, the play’s
American copyright holders refused permission to change the
names of American towns to Australian ones on the grounds that
this would be tampering with the integrity of the piece, which
was about ‘American’ values and stories. And this was not even a
commercial production!
Australians might be tempted to criticise the American
approach as extreme. But if Australians were to turn the mirror
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on themselves, they would realise that our own approach to
cultural consumption is similarly extreme—in the opposite direc-
tion. Where in America the vast majority of television and film
content is locally made and less than 5 per cent imported, in
Australia the reverse is true. In Australia the domestic share of the
national film box office is less than 3 per cent.3 And in the period
from September 2002 to April 2003, no less than 76 per cent of all
new programs shown on Australian TV were foreign, dominated
by products from the United States. By comparison, France had
33 per cent foreign TV programs, Germany and the United
Kingdom 9 per cent, and the United States the lowest of all with
just 4 per cent.4
And of Australia’s imported television material, around 70 per
cent is from the United States. In Europe, much smaller figures
have been enough to generate heated national debate and inspire
the drafting and signing of an international treaty aimed at pro-
tecting and promoting national cultural industries against the
onslaught of American cultural exports. But as we show, not only
has the Howard Government failed to address this onslaught and
the concomitant decline of Australia’s own cultural industries, it
has actually hastened their demise. In this chapter, we examine the
Howard Government’s abandonment of Australian cultural
industries and the economic and social implications of such a
move. We begin by detailing the growing economic significance
of cultural industries in developed economies in recent decades,
and the dimensions of the Australian industries’ decade of decline
under Howard.
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A SOFT TOPIC? THINK AGAIN . . .
Hard-headed economic realists take note. If you are still reading
this chapter thinking ‘Culture? Who cares? What about the impor-
tant economic stuff ?’, consider this: cultural industries represent
big bikkies, in fact the biggest bikkies, for some countries, par-
ticularly the United States.5 Since 1996, cultural products have
been America’s largest export, worth more than automobiles,
agriculture, aerospace and defence. Over the past decade, cultural
industries have grown at three times the rate of the overall US
economy. According to UNESCO data, the US share of audio-
visual cultural products globally (film, TV, etc.) rose from 36 per
cent in 1992 to over 52 per cent ten years later, in 2002.6 This
dominance of US global cultural exports is due largely to the
low cost of American cultural products and its leadership in
technologies that facilitate their creation and distribution (think
software, multimedia, and audiovisual technologies).7
Perhaps not surprisingly, in the latest round of international
trade wars, culture is where it’s at. Over the past decade,
America’s domination of cultural trade combined with its aggres-
sive push to extend international trade rules to cultural products
has generated deep resentment among both developed and
developing countries. The roots of this resentment are as much
economic as social. Since the 1980s, the creation and delivery of
cultural products has become increasingly technologically
intensive, to the point where domestic capacity in this sector is
recognised as both an indicator of, and catalyst for, a nation’s
technological competitiveness. Moreover, the characteristics of the
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typical cultural sector workforce (creative, innovative, technologi-
cally savvy) are now widely recognised as those necessary to
secure competitiveness in a much wider set of high-tech, high
value-added industries, from engineering to science and medi-
cine.8 As a result, it is now common for governments to depict the
development of a vibrant domestic cultural sector not only as
a social imperative, but also as a technological and economic
imperative as well.9
It is therefore understandable that America’s calls for the ‘nor-
malisation’ of international trade in cultural products— elimination
of tariffs, quotas, subsidies and local content requirements—have
met with such fierce international opposition. Indeed, while it is
now de rigeur in international trade circles to talk about cultural
‘goods’ and ‘services’, the vast majority of governments continue to
insist that these are fundamentally different from other traded com-
modities. For this reason, governments everywhere (including the
United States) continue to employ and to expand a host of policies
aimed at ensuring the viability of local cultural industries, from tax
concessions to local content requirements.
All of this makes the past decade of cultural sector neglect
in Australia even more puzzling. The dimensions of the decline of
Australia’s cultural industries over this period are staggering, par-
ticularly when contrasted with successes in other countries, both
English and non-English speaking. Take feature film production as
an example. Under the Howard Government, we have witnessed a
decline in Australian films’ share in national box office earnings,
while local shares in other countries, from the United Kingdom
and Canada to Japan and Korea have increased. Figure 4.1 shows
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that Korea’s and Japan’s domestic share accounts for over 50 and
40 per cent respectively, while Australia’s had declined to less than
3 per cent in 2005. This is a culture swamped by imports, largely
from the United States. And the English language excuse does not
stand up in the face of the United Kingdom’s recent revival. Even
Canada, which also battles geographical proximity to the United
States, has managed to increase its box office share and now out-
performs Australia.
Figure 4.1: Domestic film’s share of total national box
office (per cent)
Source: All figures in this chapter are compiled by the authors fromdata obtained in February 2007 from the Australian Film Commission’sstatistical website: ‘Get the Picture’: <www.afc.gov.au/gtp/>
considerations are being over-ridden by the Prime Ministerial-led
desire to be useful to the American administration. There has, of
course, long been a perception surrounding defence procurement
that Australia pays America ‘protection money’ as a kind of insur-
ance that US assistance may be called upon if needed in the future.
In reality, Australia’s military debts are few, having already fought
on behalf of the Americans in numerous wars of US making.
Pandering for personal reasons thus presents itself as a more likely
motivation for this bizarre purchasing decision.
The tank tale gets worse. When the then Minister Robert Hill
announced the purchase of the tanks in 2004, he stated the very
opposite of what the deal eventually entailed: that ‘Australian
industry is expected to be involved in the provision of through-life
support for the Abrams’. Intended to sugar a lemon for the
Australian public, the words ‘expected to’ rather than ‘will’ were
code for a deal under which Australian industry stood to be
roundly excluded. Not even the repairs of the tanks are being
handled in Australia—flying in the face of explicit undertakings
given at the time that the contract was let. The first tanks arrived
from the US supplier, General Dynamics, in September 2006, but
by January in 2007 it was being reported that local Australian
firms were being excluded from maintenance work.7
As for the ‘strategic’ significance of the tanks (designed during
the Cold War to withstand Soviet tanks), this is seriously ques-
tioned in the United States itself, where alternatives such as
mobile armoured gun units are being sought.8 In US eyes, the
strategic importance of the Abrams tank lay in its indestructibility,
a view echoed by the Australian government, whose press release
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assured that ‘The new tanks will also provide our soldiers greatly
increased levels of protection and survivability on the modern
battlefield’.9 This was in July 2004. Just a few months later, US
media were reporting a very different story—the tank was a death
trap. The experience of the Iraq war, where at least 80 of the
behemoths were put out of action by early 2005, shows that
the tank’s armour (with up-front protection) can be penetrated
with surprising ease by the low-tech bombs and rocket-propelled
grenades of Iraqi insurgents. So much for strategic advantage.
Could our decision-makers have been so ignorant of the Abrams’
performance when the deal was signed? If so, they were surely not
so blind when the first consignment arrived in December 2006.
As if matters could not get worse, the tanks being sent to
Australia will not even have their original level of up-front protec-
tion; the depleted uranium facing that made them ‘indestructible’
has been replaced with a composite coating to make the tanks
lighter, but still not light enough for ADF landing vehicles.10 This
lends credence to the view that in the case of the Abrams tanks,
the Howard Government has opted for integration dependency
with respect to US global military strategy, while damaging
Australia’s own military capabilities and national security.
Sea: combat systems for the Collins-classsubmarines
The Collins-class submarines have been one of the success stories
of Australian domestic military procurement and national self-
reliance. It has been described (in a none too favourable report by
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McIntosh and Prescott) as ‘Australia’s most important strategic
asset for the decades starting 2000 . . . and Australia’s most ambi-
tious and technically advanced defence industrial project ever.’11
But the Australian submarine suffered from a large defect in
the eyes of Howard Government ministers: it was a legacy of the
Labor (Hawke–Keating) governments. This made it a candidate
for repudiation by the incoming Howard Government, which was
always anxious to score political points by attacking the work
of its predecessor. Howard and his ministers commissioned report
after report to emphasise technical hitches, hitches that would
be expected in any large-scale and technically advanced public
procurement project, let alone one of this magnitude.
Nevertheless, the submarine itself, ‘which has been as much
criticised at home as it has been feted abroad’,12 is widely acknow-
ledged as a principal strategic asset of the Royal Australian Navy;
and its performance in exercises with the US submarine force have
earned it the acclaim of US Admirals.13
It is the combat system of the subs, the software to the subs’
hardware, that has given so much heartache, none of which can
be laid at the door of the prime contractor, the Australian Sub-
marine Corporation (ASC). This combat system was originally
entrusted to the US contractor Rockwell, against the wishes of the
Swedish designers of the sub, Kockums. By the early 1990s it was
obvious that the combat system was the source of most of the
submarine project’s problems. The ASC, the prime contractor,
effectively served notice on Rockwell in September 1993 that it
was in breach of its contractual obligations—a step that would
then enable the ASC to contract with a more reliable supplier. But
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the Department of Defence (DoD) overrode this and allowed
Rockwell to remain in charge of the under-performing combat
system for several more years. This was the situation inherited by
the Howard Government when it came to power in 1996.
The continuing problems with the combat system of the sub-
marines led the Howard Government to call once again for tenders
in 2000–2001 and initiate a selection process. This was based on the
clear recommendations of the McIntosh/Prescott Report of 1999
into the whole submarine project (a report commissioned by the
Howard Government). Accordingly, in February 2000, the DoD
released a Request for Proposal to four combat system suppliers
and the ASC for a new combat system.14 Two contenders were
shortlisted by the DoD—the American firm Raytheon’s Combat
Control System (CCS) Mk2 and the German STN Atlas ISUS-90
System. At the same time, a shortlist for new torpedoes was also
compiled including the Raytheon Mk 49 Mod 4 heavyweight
torpedo and the Italian Whitehead Alenia Sistemi Subacquei
(WASS) Black Shark. This was the Defence procurement system
operating as it should, free from political interference.
But shortly after Bush’s election in mid-2001, there was a
sudden change. The open, competitive selection process was
abruptly terminated. The government intervened with an alter-
native and over-arching political agreement, ‘Statement of
Principles for Submarine Cooperation’ signed serendipitously on
11 September 2001 by US and Australian admirals in Washington.15
This agreement between the United States and Australian Navies
clearly signalled that future purchases would be made with the
prime criterion being ‘interoperability’ between the navies.
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Interoperability means that the Australian Navy will use the same
technologies as those chosen by the US Navy, not that the United
States will adopt Australian technologies. Then Minister Peter Reith
rationalised the move as: ‘. . . these arrangements will give Australia
even better access to US military technology which gives us a vital
edge in capability and operations.’16 Whether that vague goal was
realised or not, the effect of the signing of this agreement was to
lock the Australian DoD into purchase of exclusively US submarine
systems.
The intervention cut clean across the standard procurement
process, and placed the supply of the combat system for the
Australian submarines directly in the hands of the US Navy, in full
knowledge of the fact that the US Navy had had no experience
of building or operating conventional-class submarines for over
40 years. The intervention went directly against the recommen-
dation of the government-commissioned McIntosh/Prescott
Report, namely that proposals for the combat system should be
called for ‘using only proven in-service systems’.17
The government’s claim that Australia needed to purchase a
US system to secure a ‘vital edge’ (as Reith put it) was simply
asserted without regard to the objective evidence. Ten of the
world’s conventional submarine fleets had successfully put in
place the Atlas ISUS 90 system, including Germany, Italy, South
Korea, Turkey, South Africa and Greece. The ISUS-90 had been
successfully interfaced with US, UK, German and Italian weapons
systems. The Israeli military had utilised the ISUS 90 system in a
Dolphin class submarine, through which it controlled deployment
of the US Harpoon missile. Neither networking nor joint training
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were hindered by Israel’s acquisition of a non-US system. What
was so special about Australia’s needs that only the Raytheon
system was suitable for purchase? Clearly the Minister’s ‘technical
necessity’ claim fails the reality test. Indeed, the Raytheon system
was a wholly unproven derivative of a system for larger nuclear
powered boats. This posed a major problem: how to adapt the
system designed for nuclear submarines for the Australian case
of conventional submarines; and how to interface the CCS
system with new Collins technology, particularly the sonars.
In response, Raytheon emphasised the ‘potential access’ to a
preeminent level of technology through close cooperation with
the US Navy and the desirability of belonging to a US networked
system.18 Joint training and US assistance were also emphasised
in the bid.
Commentators on military affairs at this stage started raising
the possibility that the decision to shortlist the Raytheon system
was the result of US political pressure being exercised at the
government-to-government level.19 Similar suspicions were voiced
in Senate questioning of Australia’s Under-Secretary of Defence,
Michael Roche, in 2000. But US ‘aggressive advocacy’ on a state-
to-state level on behalf of its defence and civilian contractors is
hardly new. What is new is the extent to which the Australian door
has been opened to US suppliers, eliminating the need for such
‘pressure’. Roche responded by saying that he wished to ‘avoid
saying that there are other pressures’ and instead emphasised the
point that ‘there is an objective process going on that is assessing
the technology available in other countries against the need of the
Collins-class.’20
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Whatever ‘objective process’ existed at the time, it was defini-tively overruled in July 2001 when the Minister arbitrarily abortedthe tender process. This was just before the DoD TenderEvaluation Team was reportedly about to recommend procure-ment of the German STN Atlas bid. If the tendering process hadbeen allowed to proceed, the German bid would most likely havebeaten the American bid.21 The short-circuiting of this processsuggests that defence capability considerations were supplantedeither by an overriding preference for US equipment or by politicaldeference to US commercial interests. The July 2001 award of thetender to Raytheon was Howard’s first major gesture to the newincumbent of the White House, a sign that the new administrationcould count on Australia to be a generous supporter of its defenceindustry. ‘Paying tribute to Rome’ is the ancient way to describe it.Securing intimacy, glamour, and standing in the eyes of the WhiteHouse by enabling US defence interests to make handsome profitsfrom Australian government contracts is the modern version.Increased intimacy with the White House is thereby ensured forour PM and his team at the DoD (rationalised in the language of‘national security’ and alliance building). And increased intimacywith US Services is thereby secured for Australia’s defence forces(rationalised in the language of ‘technical superiority’). As onenaval consultant has observed:
The US is prepared to promote its industrial and com-mercial activities under the guise of alliance relationships;(while) the Australian Submarine community sees itself asan extension of the US Submarine community, and therebyused technology access as a convenient argument.22
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There is no question that in certain cases, buying American does
give the ADF access to superior technology. This is not at issue and
it would be foolish to claim otherwise. But the important qualifica-
tion is that it depends on the technology in question and on
whether at the hand-over stage Australia is delivered what was
promised. In some technologies, conventional submarines for
example, the Americans are not in the running. And in the case of
the Collins-class combat system, Raytheon’s major competitor,
STN Atlas, also promised access to US technology via its joint
arrangements with Lockheed Martin. In addition, STN Atlas
offered access to European technology. In any other context, the
German offer of dual access would have been rated as a bonus.
The inescapable conclusion is that it is not the technology per se,
but rather who is offering it that matters to the Howard
Government.
Air: the Joint Strike Fighter and the Super Hornet
The choice of the JSF as the sole contender for the RAAF was
a leap of blind faith, based on assumptions that have since
collapsed.23
The source of that blind faith was Prime Minister John Howard.
On 27 June 2002, then Defence Minister Senator Robert Hill
announced that Australia was joining the US Joint Strike Fighter
( JSF) program, getting in on the ‘ground floor’ by signing up to
the system design and development phase of the program.24 The
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JSF project, known as project AIR 6000, is undoubtedly the most
significant defence procurement Australia will have to undertake
over the next decade at a current cost of $16 billion. The project’s
scope and timing are driven by the need for new aircraft to replace
the ageing F-111 and F/A-18 Hornet aircraft fleets, scheduled to
retire in 2010 and 2015 respectively. Strategically, the new fighters
will be the single most important factor in determining Australia’s
capacity to defend our continent from conventional threats, and
they will be a key element of our ability to project strategic influ-
ence in our region.
For the United States too, the JSF represents a new approach
to military procurement, reflecting the role that Lockheed Martin,
the program’s sponsor, has come to play, as virtually a ‘state with-
in a state’ in the US military system. The Pentagon selected the
Lockheed Martin design in October 2001 as winner of the Joint
Strike Fighter competition, and from the outset it has been viewed
as an international program, one through which the United States
would spread the costs of development across multiple partners,
and recoup these costs through the price of admission to the
project on the part of collaborating countries. From the US per-
spective, the beauty of this arrangement is that the massive costs
of development are passed on to its partners, and the United
States gets the weapon of choice at a steep discount.
US partners, like Australia, are promised multiple benefits
including access to US technology, production contracts and
the opportunity to participate in the value chain created by the
project. Of course, no guarantees are given. Britain has already
threatened to pull out of the deal if the export version does not
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have the same stealth technology as the US version of the aircraft.
Australia has indicated similar concerns. But unlike Britain, which
has demanded and received a contractual guarantee of technology
transfer, Australia has backed off with a mere assurance from
the United States. The Defence Minister Brendan Nelson, after
meeting with US Defense Secretary Donald Rumsfeld in 2006, said
he was ‘confident that all of our requirements will be met on the
(F-35) JSF—the technology and data transfer’.25 This is code for:
‘Well at least we are on record as having tried to get a decent deal
for the country but we don’t want to push our friends too far.’ By
the time that delivery takes place, possibly as late as 2018 or even
2020, Howard and his Minister will not be around to account for
their so-called confidence.
From Australia’s perspective, the decision to go with the
Lockheed Martin JSF F-35 ‘Lightning II’ planes, years before the first
one is ready to fly and completely circumventing the usual order of
business in a procurement process, is a clear signal of the Howard
Government’s intention to move aggressively towards ever tighter
integration with future US aircraft (and seacraft) platforms.
How was this deal sold to a gullible Australian ministry? It was
first and foremost the Prime Minister’s decision, taken unilaterally
during a visit to Washington in early June 2002. Discussions with
President Bush were followed by a private briefing from the
plane’s makers, Lockheed Martin, in John Howard’s hotel room.
Howard seems to have succumbed easily and enthusiastically.
So enthusiastically it appears, that even senior Lockheed Martin
executives commented that they were ‘flabbergasted’ that
Australia had decided to make the purchase so quickly. ‘That was
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just amazing, it stopped everything in the room at the time,’ said
Lockheed’s international programs director for the JSF, Mike
Cosentino, about Australia’s surprise announcement. ‘This was
our first international customer so it was a memorable day.’26
Howard wasted no time in actively overriding procurement
processes that were in train at home. Just two weeks later, then
Defence Minister Hill announced that Australia was signing up to
the JSF and cancelling talks with all competing firms. As the
Canberra Times observed, the government took the decision to
commit to the JSF, despite the fact that the ‘Defence Department’s
own evaluation of the aircraft that might be suitable to replace the
RAAF’s F/A-18s and the F-111s was incomplete’.27
In strategic terms, how good is the F-35 and how does it
compare with competing products, both from US and non-US
sources? Defence makes the claim that the JSF is the best aircraft
to meet the ADF’s capability requirements. But as others have
pointed out, Defence has at no time offered any back up for this
claim; it has refused to specify openly and publicly and in full
detail the capabilities of the JSF that make it their preferred
choice. Understandably, the JSF announcement has sparked huge
controversy in the defence and policy community. Australia is cur-
rently faced with a major regional arms race in high-technology
weapons. Hundreds of advanced Russian Su-27 and Su-30 fighters
are being ordered from Russian plants, and are now license-built
in Asia. In the recent Cope India exercise flown between the latest
US Air Force F-15C variant and Indian Su-30s, the Indians matched
or outperformed the American F-15Cs. These are fourth gen-
eration fighters that are best matched by equally capable fourth
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generation planes like the Swedish Grippen, the French Raffale
and the British Eurofighter—all original contenders for Australia’s
AIR6000 tender hastily overturned by Howard’s intervention.28
Major sources of concern with the JSF project are that the
planes will not give Australia strategic superiority in its own region,
and that the planes might never be delivered, or be delivered so
late and with such cost overruns, that the Australian Defence chiefs
will bitterly regret the hasty decision that committed them to
the purchase. Understandably, the normally tight-knit defence
establishment in Australia has split over the JSF decision. Retired
Air Vice-Marshall Peter Criss has come out in open disagreement
over the choice on the grounds that it locks the Australian Air Force
into an extremely expensive aircraft (upwards of US$100 million per
plane) that is inferior to other alternatives, unsuited to Australia’s
strategic needs (‘unable to compete with proliferating SU-30 family
aircraft in the region, and lacks the required range or response
time’), and will leave the country with a huge capability gap as a
result of its rescheduled delivery date of 2018. A major controversy
erupted over the government’s failure to put in place a Plan B in
order to cover late delivery, creating a capability gap of almost a
decade for the RAAF—filled at the last minute with the announce-
ment of the Super Hornets purchase (see below).29
Numerous experts both in the United States and Australia
agree that the JSF is an inferior option compared with the US F-22
(Raptor); in view of the escalating costs of the JSF, this would now
make the Raptor the best option for Australia. But after reportedly
having offered it earlier to Australia, the United States has recently
issued a statement, to quell growing enthusiasm and speculation,
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that the Raptor will not be available for export.30 But how serious
was the Howard Government’s request? Presumably for Australia,
getting serious would mean pulling out of the JSF project and
upsetting the Bush–Howard pact with Lockheed Martin.31
So is there some joy for Australia from this, Howard’s latest
dip into the public purse? What does Australia get for its $300 mil-
lion down-payment on the JSF project? Well, it gets the right to bid
for development work as part of the global value chain being
created by Lockheed Martin. On the question of just how much
work Australian sub-contractors can expect, the estimates have
been predictably far from conservative. Conjuring up a completely
notional figure based on a wild guess, Industry Minister Ian
MacFarlane ventured the sum of AUD$4 billion in contracts
potentially becoming available.32 Unfortunately, as the wild
FTA guesstimates have shown, these notional 1 per cents have a
horrible habit of turning out to be closer to .01 per cent. Nothing
is guaranteed, as these political old-timers are well aware. Under
the JSF program Australian companies are considered Tier 3
suppliers, the least important in the value chain.33
In effect, the competitive tendering process that the govern-
ment has been at pains to claim as its preferred approach, and as
endorsed by such official inquiries as the Kinnaird Review, has
been totally abandoned. In its place an alternative system has been
put in train making Lockheed Martin, not the Australian govern-
ment, the new arbiter of who participates.34
It works like this. By signing up for the JSF, Australia will no
longer be able to make decisions over how Australian companies
might participate in the global production networks established to
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produce the planes.35 These networks, or value chains, are com-
pletely under the control of Lockheed Martin. This US-centred
procurement process for the JSF will effectively set the rules for
Australia’s future procurement decisions. In other words, the pro-
curement decision for highly specialised components of the planes
is taken out of the hands of the ADF and placed in those of the US
prime contractor for the JSF, Lockheed Martin, a vast sprawling
business empire that functions as a ‘state within a state’ in the
United States. Perhaps John Howard’s youngest son Richard, who
currently works for Washington lobbyist Clark and Weinstock as
an adviser for Lockheed Martin, will put in a good word for
Australian contractors—but then, given his father’s proclivity
for buying American, maybe not.
While it is the government’s prerogative to short-circuit a pro-
curement process if a particular product is evidently superior and
if continuation of bidding would be to the economic detriment of
contending companies, these circumstances certainly did not apply
in the case of AIR6000. The decision to favour the JSF was made
four years ahead of schedule with no comprehensive analysis of
Australia’s needs and of the various options for meeting them. In
international discussions of the F-35, the superior stealth capabili-
ties are frequently mentioned. But (in the absence of a contractual
guarantee) the stealth capabilities will not be included in the export
version of the fifth generation JSF, a ‘promised’ feature and major
selling point of the whole program.
That the project is running into problems in the United States
is signalled by the failure to mention the program at all in the
2006 Quadrennial Defense Review, an authoritative listing of all US
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military projects.36 In 2006 it emerged that the source code to the
software that runs the F-35 might not be released to participating
entities by Lockheed Martin. Without access to the source code,
the Australian RAAF would effectively be bound to Lockheed
Martin for decades, in stark contrast with the case of Australia’s
F/A-18s and F-111s where full maintenance can be performed
in Australia by Australian contractors. Here Lockheed Martin is
following a familiar practice of American business giants, known
as ‘bundling’—you take one part of my system, and you have to
take the rest and exclude all other firms. Microsoft is the prime
exponent, but at a lower technological level so is Coca-Cola with
its company drink refrigerators for retailers that are only allowed
to hold Coke products.
So bad is the bundling aspect of the affair that during 2006 the
United Kingdom seriously considered pulling out of the whole JSF
process if there was no early resolution of the source code issue.
Late intervention by the Pentagon and the signing of a new ‘tech-
nology transfer agreement’ between the United Kingdom and
the United States, in August 2006, averted this crisis but reveals the
dangers for all non-US participants. Norway, too, has complained
publicly of the role accorded it,37 putting out a statement in
November 2005 that ‘the government will undertake a thorough
review of JSF and Eurofighter programs, with special emphasis on
clarifying and quantifying the relationship between the cost of
participation and the resultant benefits to Norwegian industry’.38
Tellingly, the Australian officials, cowed into silence by the
Howard Government have not followed Norway’s lead. Instead
we find Defence Minister Nelson in Washington in December
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2006 signing Australia up for its involvement in the second round
production phase of the JSF process.39 Was this on the basis of the
Australian DoD gaining access to source codes and technology on a par
with the United Kingdom? The silence on this issue speaks for itself.
Plugging the gap: the subsequent Super Hornets purchaseAs an addendum to this story, the Howard Government
announced early in March 2007 that it would make a $6 billion
purchase of 24 Super Hornet planes (the F/A-18 F) to plug the gap
created between the planned retirement of the RAF’s current
fighter planes and the receding arrival date of the JSF F-35s. It is
worth pointing out that this purchase blatantly by-passes all pro-
curement guidelines, not making even a pretence of complying
with them; that it was deemed necessary only because of the gap
in future air cover created by the hasty decision to go with the
JSF; and that the aircraft have been in use with the US Navy since
1999 and are designed for take-off and landing on aircraft carriers,
not the land operations that they will be used for in Australia.40
Perhaps it is also worth pointing out that the Super Hornets were
designed and built in the US by McDonnell Douglas, which now
forms part of the Boeing military systems group (Boeing
Integrated Defense Systems, a new division formed in 2002 out of
McDonnell Douglas and Boeing’s Military Aircraft and Missile
Systems group and its Space and Communications systems
group), and that the newly retired President of Boeing Australia is
none other than Andrew Peacock, former Liberal leader and
latterly Australian ambassador to Washington. Peacock built
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Boeing’s operation in Australia into the largest outside the US, and
with the announcement of the Super Hornets purchase Boeing
stands to do very well.
IS AUSTRALIA AN ANOMALOUS CASE IN ITS‘BUY AMERICAN’ BIAS?
All three cases examined demonstrate a clear ‘buy American’ bias
on the part of Howard Government Defence ministers, from John
Moore to Peter Reith, Robert Hill and most recently Brendan
Nelson. Preferential sourcing from US companies, whether located
in Australia or the United States, is exercised at the highest political
level, frequently stemming from covert political briefings in
Washington, to be passed on to the DMO or the Services chiefs
as faits accomplis. The purchases are then pushed through the
system, bypassing the protocols of transparent and competitive
procurement procedures, and in some critical cases imposing
severe constraints on the ADF’s strategic capabilities (in the case
of the Abrams tank purchase), and on national control of future
contracting options (in the JSF case). Such cases are far from
exhaustive, though they are among the most costly for Australia’s
security.
At this point, the question arises: has Australia’s dependence
on foreign, in particular US, military supplies been deepened
under the Howard Government? The data on offshore military
procurement reveal how the tendency under the Howard
Government has been towards higher and higher levels of off-
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shore procurement, making Australia a clear outlier among
comparable countries. Whereas most countries have offshore
procurement levels of 10 per cent or less (and the United States
has less than 2 per cent), Chart 1 shows that levels of offshore pro-
curement in Australia up to the mid-1980s were typically around
70 per cent (or onshore procurement hovered around 30 per cent).
The level of onshore procurement rose rapidly under the Hawke–
Keating government, under the impact of the homegrown Anzac
frigate and Collins-class submarine projects; levels of onshore
procurement over the decade 1987 to 1997 averaged 61 per cent.
Since the election of the Howard Government, there has been a
marked shift away from onshore activity, down to an average of
just over 41 per cent in the years 1997 to 2001.41
Figure 5.1: Defence equipment spending—proportion of
expenditure undertaken in Australia, 1975–2000
Source: Thomson (2006: 34)
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80
60
% 40
20
10
Year
0
1975
/76
1977
/78
1979
/80
1981
/82
1983
/84
1985
/86
1987
/88
1989
/90
1991
/92
1993
/94
1995
/96
1997
/98
1999
/200
0
50
30
70
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Defence 159
At the same time, there is clear evidence as to the increase in the
foreign bias of our defence procurement, and particularly of an
increase in the bias towards the United States. Australia’s inter-
national ranking in terms of dependence on arms imports rose
dramatically from eighteenth in 1997 to fourteenth in 1999 and to
eleventh in 2002. Take note that if developing countries (the
world’s heaviest arms importers) were excluded from this rank-
ing, Australia would top the list in offshore buying. Moreover, the
US share of our arms imports rose from 50 per cent in 1998 to
65 per cent in 2003.42 This must be taken as a conservative measure
of a ‘buy American’ bias because it excludes a very high proportion
of government contracts to American-owned suppliers located in
Australia. If this were added, American contractors might be con-
suming up to 80 per cent of the nation’s defence procurement
budget. By most measures then, Australia stands as an anomalous
case in the developed world both in the degree to which it sources
foreign military equipment, and in particular its dependence on
the US as a military supplier. By the same indicators, Australia’s
anomalous dependence has been growing more severe under the
Howard Government.
Consider the examples displayed in the following text box,
which supplement the three cases already discussed.
The Unmanned Aerial Vehicle (UAV)
The deployment of an Australian designed and produced
Unmanned Aerial Vehicle (UAV) to the Solomon Islands in July
2003 highlighted Australia’s capability in a leading area of
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aviation and electronics technology. The Aerosonde UAVs,
jointly produced with the Defence Science Technology
Organisation (DSTO), were deployed to conduct surveillance of
remote areas and coastlines in support of the multinational
armed assistance provided to the Solomon Islands. The
deployment was heralded as an operational success, the
innovative UAVs feeding back live video footage to ground
commanders, all with no mission failures. Despite Army
requests for further utilisation of this effective system, the
government refused to purchase the proven and relatively
cheap UAV and instead opened a tendering process for a more
expensive, high-tech version. And then, as in other cases, the
government announced its intention to cut short this tendering
process and field test two American UAVs—Northrupp
Grumman’s Global Hawk and General Atomics’ Mariner. This
tender (known as JP129) provides for the acquisition of a
tactical UAV system capable of providing airborne surveillance,
reconnaissance, and target acquisition, the very area in which
the Aerosonde demonstrated proven ability. The channelling of
funds to the testing and development of an offshore product
and the exclusion of an Australian product of proven capability
seems an odd way to protect national security. The JP129
tender illustrates not only the significant potential of Australian
industry to more fully meet ADF capabilities, but also the
absence of Howard Government commitment to strengthening
Imagine a country that, after a long hard road, has achieved
national self-sufficiency in blood supply, creating a safe, secure,
and reliable system for the voluntary donation of blood and its
collection and distribution to health providers. It has also created
a formidable national champion and world-class company that
supplies most of the country’s essential blood products and pro-
vides similar services for other countries in the region.
But then, for no apparent reason, the government begins to
reverse the country’s commitment to self-sufficiency, going against
all domestic and international recommendations. First, the govern-
ment refuses to strengthen the national blood collection system
or to support the national champion’s potential to maximise its
domestic capacity. Then it begins to play funny games with the
champion’s contracts and sets up new avenues for increasing
imports of blood products from foreign suppliers, which up to
then had been restricted for reasons of national health security.
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Coincidentally, an American supplier is waiting in the wings to
meet this country’s new demand for imported blood products.
The government’s policy change favours this American supplier,
and gives it a large slice of the national champion’s market. Not
content with this slice, the supplier continues to encourage
the government to further open the local blood market in the
name of ‘healthy’ competition. Its persistence pays off when
the government attaches a side letter on blood products to a trade
agreement it has been negotiating with its special friend. The side
letter, co-written by the favoured American supplier, says the
Commonwealth Government will recommend that future con-
tracts for the supply of blood fractionation services be opened to
foreign bids. It also states that blood products from America will
no longer have to be clinically superior to locally-made products
in order to qualify for market entry; and that the country’s
requirements for ‘safety, quality and efficacy’ of imported blood
products must not create ‘obstacles to trade’ for US suppliers. The
government introduces the text of this arrangement not in the
body of the trade agreement but some months later, covertly, in a
legally binding side letter where it expects it will attract minimum
attention (see Appendix for full letter).
The American supplier cannot believe its luck. What an oblig-
ing lot, this government. It wouldn’t be nearly as easy to crack the
blood market in Japan and Europe. Calculating the hundreds of
millions of dollars this side letter will bring its way, the American
supplier publicly congratulates the obliging government for its
‘perspicacious’ decision.
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But the obliging government of this country isn’t off the hook
yet. It knows that its citizens (the electorate) won’t take kindly to
having their blood supply tampered with. Selling a riskier, inferior
system to the community will call for some crafty work. So the
government calls for a review of the country’s existing supply
arrangements for blood plasma. Perhaps this review can find some
problems with its national champion, which in turn can then be
fixed by allowing a US supplier to take over the contract. Of
course, this review must be seen as serious by the public, so it
takes a year and costs $3 million. But there is no question that,
in the government’s eyes. the review is a mere formality, for
more than a year in advance of the review and its findings, the
government gives a firm undertaking to its American friends that
whatever the outcome of the review, it will go ahead and recommend
opening the blood market to US suppliers.
However, in an unanticipated turn of events and most
inconveniently for the obliging government, the review resound-
ingly warns against changes to the current arrangements given
the high risks and costs involved. Even through the govern-
ment’s smokescreen, the review panel can see that all the
risk-management steps in the world amount to nothing more
than a second-rate option for a country with a first-rate system
already in place. A similarly thorough review (by the country’s
former Governor-General) just a few years earlier had reached
a similar conclusion.
Not to be deterred, the government restates its commitment
(recommendation) to introduce American interests into the coun-
try’s blood chain. To bring this about it must convince the states
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and territories in its jurisdiction that it is in their interests to get
on board.
The question is: why would a government knowingly and
apparently willingly seek to replace a superior system with an
inferior one, putting in jeopardy a world-class system based on
donor generosity? Why render its people more vulnerable in an
uncertain security environment, and on top of that do irreparable
damage to its national champion and its workforce?
This is the question facing Howard’s Australia.
ULTIMATE GIFT, ULTIMATE BETRAYAL
The questions we pose here go to the very heart of Australia’s
national security—the safety and security of its people. Why
would a government change a country’s long-standing contractual
arrangements that guarantee the safety and security of its blood
supply? Why seek to dismantle the system that currently protects
its people from the risks associated with blood product imports?
Why indeed would any government choose to jettison well-
established, cost-effective, and well-functioning arrangements that
secure one of the safest supplies of blood products in the world
for an inferior alternative? Why do this when the zero-sum logic
of that alternative would bring additional costs to Australia in the
form of job losses, investment and tax revenue foregone? Under
Howard’s preferred arrangements, Australian taxes that pay for
the blood products would create American jobs and enrich
American shareholders. Why would a government change course
in the absence of compelling and significant clinical and economic
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advantage? And why pursue such a course in complete disregard
of all independent expert advice to the contrary?This chapter tells the story of one of the most extreme acts
that a government could take against the national interest: thedecision to abandon the ideal of national self-sufficiency in bloodsupply and to open the Australian blood market to a foreignsupplier.1 We examine why the Howard Government has been somotivated to discontinue one of the world’s safest blood supplysystems in spite of long standing national goals, domestic supplycapacities and expert advice, and how the government’s actionshave been taken in the full knowledge of the significant risks andadverse consequences for its people.
AUSTRALIA’S WORLD-CLASS SYSTEM OFBLOOD SUPPLY
Australia has a longstanding policy of national self-sufficiency inblood and blood-products.2 The national regulatory body, theTherapeutic Goods Administration (TGA) supports this policy (atleast it did until 2004) through its drug registration guidelines,which state that:
Australia favours national self-sufficiency in products derivedfrom human blood or plasma, believing that a policy of notbeing reliant on donors in other countries is not only in thenational interest but an international responsibility.
Blood products sourced from foreign countries will beregistered only if the foreign product has a demonstrably signifi-cant clinical advantage over the local product (emphasis added:
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note that this last clause has been deleted since signing theFTA in 2004).3
While self-sufficiency is not complete, Australia has achieved a level
of self-reliance that most countries still aspire to. This has been
achieved through the close interaction of three major participants.
The first is a community of voluntary, non-paid donors within its
territory who give blood or plasma on a regular basis, enabling
more than 400,000 Australians each year to benefit from their gen-
erosity.4 The Australian Red Cross Blood Service (ARCBS) is the sec-
ond participant, responsible for collecting all the blood and plasma
designated for use in the Australian community. Following the prac-
tice of half a century, the Red Cross sends the plasma to CSL (for-
merly Commonwealth Serum Laboratories, now CSL Limited)—
the third vital participant in this trilogy of plasma production. CSL
is responsible for the fractionation of donated blood—that is, its
splitting into various fractions such as serum and immunoglobulins,
each serving different medical functions.
As our sole domestic manufacturer of plasma products since
1953, CSL has grown from its origins as a government entity during
World War I (1916) to become a listed public company in 1994, and
the world’s largest plasma fractionator. Its products, which include
albumin, immunoglobulins (IVIgs) and clotting factors, are used in
trauma situations and to treat serious medical conditions, including
auto-immune diseases, blood disorders (such as haemophilia),
severe infections, and serious burns. CSL’s specialist subsidiary, CSL
Bioplasma produces a dozen products of this nature in a special
plant built to meet Australia’s needs for blood plasma products.
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Continuity and security in the supply of blood products have
been achieved via long-term contracts between CSL and the
Commonwealth.5 CSL also undertakes ‘toll fractionation’ for
several other countries which lack their own national fractionator.
CSL uses separate processing facilities for plasma from overseas
sources as a risk management strategy. Until 2004 (when the
Australia–United States Free Trade Agreement was signed), blood
products could only be imported under two very specific circum-
stances: when the domestic supply could not meet clinical
demand; or when it was not economical to manufacture a
particular product in Australia due to limited demand.6 To be
registered for use in Australia, foreign suppliers typically had to
be able to demonstrate that their products were clinically superior
to those available domestically.7
The principle of self-sufficiency acknowledges the biosecurity
risks inherent in importing blood products.8 As the ARCBS explains,
self-sufficiency in blood is important to reduce the risk of infectious
agents such as Creutzfeldt-Jacob disease, West Nile virus and as yet
unidentified pathogens or contaminants entering the blood supply.
Policy endorsement of this principle has produced clear payoffs for
Australia. As one expert commentator reports:
In fact, statistics show that Australia has one of the safest
blood supplies in the world, with one of the lowest rates of
transfusion-transmitted infection in the world.9
While Australia has been one of the most successful exponents of
self-sufficiency and voluntary donation, these policy principles have
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robust international underpinnings. A 1975 World Health Assembly
(WHA) resolution (to which Australia is a signatory) aimed to
promote and protect the health and safety of both donors and
recipients of blood and blood products through ‘the development
of national blood services based on voluntary non-remunerated
donation of blood’.10 Today, international bodies like the WHA and
European Council continue to advocate self-sufficiency as a policy
goal. And to complement rather than thwart this national security
objective, the WTO provides clear scope for member countries to
exempt blood supply from commitments made under the
Government Procurement Agreement.11 Australia’s policy of self-
sufficiency has a firm grounding in international law.
AUSTRALIAN EXCEPTIONALISM: SECURINGTHEN SURRENDERING SELF-SUFFICIENCY
Given the premium placed on self-sufficiency in international
circles, it follows that countries achieving or approaching self-
sufficiency do not sign away their right to protect their supply
arrangements for blood and blood products. Australia has achieved
self-sufficiency in fresh blood, is almost self-sufficient in plasma-
derived products, but has no policy to achieve sufficiency in
synthetic blood (genetically engineered) products.12 Many countries
strive to follow in Australia’s footsteps. Japan, which bans paid
donors, has stepped up domestic blood collection in order to build
a reserve of blood plasma sufficient to meet all domestic demand by
2008. The United States is singular in having achieved complete self-
sufficiency—but only by relying on an army of paid donors.
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The exceptionalism of the Australian case arises from the
spectacle of a government striving to overturn the nation’s self-
sufficiency policy achievements—critically by urging a radical
change to its plasma fractionation arrangements which would
favour offshore processing by a foreign (read ‘US’) supplier. No
government spokesman or agency can openly admit to this fact
but the hard evidence is incontestable, as we show in the section
that follows (see also text box starting on page 187).
Even more perplexing than the government’s willingness to
surrender self-sufficiency is its choice of foreign partner in this
dangerous dance: American firm Baxter International, CSL’s main
rival and a company with a questionable track record.
Baxter has long expressed dissatisfaction with Australia’s
system of blood procurement (even though Baxter currently
benefits from a lucrative Australian contract for its expensive
synthetic products).13 Baxter Healthcare, a US affiliate of Baxter
International,14 claims that CSL has an unfair advantage in its
home market and that Australian ‘taxpayers may be paying too
much’ for blood products.15 Baxter’s allegations of unfairness
and overcharging on the part of CSL might seem a bit rich to
those who are aware of the company’s own privileged position
in Australia’s blood market, and the prices it charges for its
synthetic blood products. Baxter’s expressions of concern for
Australian taxpayers and their value for money may also ring
hollow to those aware of the activities of its affiliate companies:
one prosecuted in the US for defrauding its own citizens, and
another Australian subsidiary found to be rigging the Australian
procurement market.
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It is of course true that Australians deserve value for money in
their purchases of blood-related products and services. But, con-
trary to Baxter’s claims, all evidence suggests that they currently
enjoy such value: from CSL. In 2001, a CSL benchmarking study
revealed that Australian prices for plasma products average 75 per
cent of prices in major European markets.16 But this has not
prevented the Australian government from endorsing Baxter’s
allegations of overpricing by CSL. In 2002, the Department of
Health and Ageing (DHA) declared that the pricing arrangements
of plasma in Australia ‘were unlikely to be the most advan-
tageous available’. Importantly, this declaration was exposed as
baseless by the Australian National Audit Office (ANAO), which
revealed the DHA had made this statement without doing
any cost comparisons with alternative options.17 CSL’s pricing
model was actually endorsed recently by the Flood Report as a
benchmark for value for money. In its 2006 report, the Flood
committee recommended that all future contracts with foreign
suppliers include tiered pricing—which is the established model
in CSL contracts.18
Despite the baselessness of DHA and Baxter’s claims regarding
the ‘value for money’ of CSL products, the Howard Government
has continued to work closely with Baxter to facilitate the com-
pany’s entry to the Australian market. The primary mechanism
employed to this end was a side letter attached to the Australia–US
Free Trade Agreement in 2004 (see Appendix). In the section that
follows, we outline the details of this side letter before examining
the alliance between the Howard Government and Baxter and how
this collaboration has played out since the signing of the FTA.
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OPENING AUSTRALIA’S BLOOD SUPPLY TO US BIDDERS
In May 2004, three months after the Australian and US govern-
ments sealed a bilateral trade agreement, a side letter was
attached to that document. The Side Letter on Blood Plasma, as it
is called, forms ‘an integral part of the Free Trade Agreement and
is subject to the dispute settlement provisions of the Agreement’;
it contains five core commitments that the Howard Government
has made to the US side (see Appendix). In essence, these are:
1) to conclude all contracts with the Australian national cham-
pion, CSL, no later than 2009;
2) to recommend that all future tenders for the supply of
plasma fractionation services be opened up to US
companies;
3) to exempt US firms from the Australian regulatory require-
ment that imports of blood plasma products be ‘clinically
superior’ to Australian-produced products;
4) To alter or adjust Australian requirements for ‘safety, quality,
and efficacy’ of blood products should they create
obstacles to trade for a US supplier; (that is, such require-
ments are ‘not to be prepared, adopted or applied’ if the
effect is to make US trade difficult);19 and
5) to review Australia’s current contracting arrangements
with its national champion, such review to be concluded
no later than 1 January 2007.
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The existence of these undertakings is not contested; their mean-
ing is also not in dispute. There are three key concessions in this
letter. First is the implied disavowal of Australia’s long-standing
policy goal of self-sufficiency in the provision of blood and blood
products (points 1, 2). Second is the lowering of national regula-
tory standards in order to lend a trade advantage to a US supplier
with different or less stringent standards being acceptable if
involving imports from a US company (points 3, 4). Finally, there
is the sequencing anomaly in which the government makes
known what its recommendation will be, open tendering, a good
two years in advance of that review’s completion (point 5) (and
setting a new standard for that old adage, ‘never instigate a review
for which you don’t already know the outcome’).
How did such a set of commitments come to be part of the
trade agreement in the first place? And why a side letter? To the
first question, the simplest answer is that they are there because
CSL’s American challenger, Baxter Healthcare, wanted to expand
its Australian market. To this end, the US Trade team, in the
tradition of ‘America Inc.’s’ collaborative export strategy, sup-
ported its national champion by including blood products in their
agenda for the negotiations.20
Baxter tells this story quite candidly to the Australian parlia-
ment in its April 2004 submission to the Joint Standing Committee
on Treaties. An oddity of this submission is that it seeks to explain
Baxter’s role in bringing about the side letter fully one month
before the side letter has been signed and released to the public.
Baxter explains that it had been knocking at the door of Australian
public procurement for several years, seeking to change what it
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Blood 187
saw as Australia’s ‘overly high standards against plasma derivativeimports’ and ‘the pre-nomination of only one supplier’. It there-fore ‘referred its concern to the United States government whichthen added the issue to its agenda, and in 2003 the topic was dis-cussed at length in the FTA negotiations’. The side letter outlinesthe results of those negotiations.21
Baxter’s tactic of declaring that the government’s bloodprocurement system was not consistent with its policies on ‘trans-parency and competition’22 might seem ludicrous from a nationalinterest perspective. But like so many other US players before itwho found a willing ally in John Howard, Baxter’s ploy paid off.By agreeing to recommend competition in the blood market,Howard showed himself to be extremely compliant in re-orderingnational priorities—‘competition’ (or at least some semblance of it)should henceforth take precedence over the country’s policy of self-sufficiency in the national blood supply arrangements (see boxbelow).
Did Baxter get everything it asked for? It would seem sofrom Baxter’s effusive response. For the company goes on to‘compliment’ the government on its ‘perspicacity’ and ‘com-mends Australia’s FTA negotiators’ for achieving this ‘mutually[sic] beneficial solution’.23
The side letter’s rationale and impact: government spiel 24
versus the real deal
(1) ‘It is only sensible that this arrangement (i.e., the
government’s longstanding contract with national firm
CSL) is reviewed from time to time’ 25
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Sadly this makes a mockery of the comprehensive review under-
taken just three years earlier which warned that changes to the
CSL contract would not be in the national interest (see text box
on page 201).
(2) ‘Australia’s policy on self-sufficiency in blood pro-
ducts will not be affected [by the side letter]’ 26
In fact, the opposite is the case with the government having gone
as far as to redefine the concept of self-sufficiency in this context
to mean the right of Australia to use ‘plasma collected from
Australian blood donors’.27 Blood products produced domesti-
cally, although included in the government’s policy statement of
self-sufficiency have here disappeared from the definition.28
(3) ‘Decisions in the future, as now, will be based on
delivering the safest and most clinically effective treat-
ments for Australians’ 29
This contradicts explicit undertakings (and subsequent actions
taken), which remove ‘clinical superiority’ as a requirement for
registering/marketing imported US blood products. As DFAT
stipulates:
Australia has undertaken not to require that blood plasma
products produced in the United States demonstrate signif-
icant clinical advantage over Australian produced products.
This obliges Australia to remove the requirement in
Appendix 19 of the Australian Guidelines for the Registration
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Blood 189
of Drugs that foreign products demonstrate significant
clinical advantage over local products for registration in
Australia.30
(4) ‘If the review of plasma fractionation arrangements
results in agreement to move to tender processes consis-
tent with the Government Procurement Chapter, Australia
has undertaken to remove this exception to the provisions
of the Government Procurement Chapter’ 31
And if it doesn’t? The government will simply ignore it. In short,
the review’s recommendations will only be taken into account if
it accords with the government’s intention to open up the blood
market. According to its own media release, the government is
ignoring the review’s recommendations to desist from open
tendering.
In accordance with the government’s commitment under
the AUSFTA, the Commonwealth is recommending that
future arrangements for the supply of [plasma products] be
done through tender processes consisted with AUSFTA
Chapter 15 (Government Procurement). The review report
recommends a different outcome.32
(5) This paragraph [paragraph 4 of the side letter concern-
ing regulatory requirements] acknowledges the importance
of each party maintaining regulatory requirements for
ensuring the safety, quality and efficacy of blood plasma
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190 NATIONAL INSECURITY
products and supply of blood fractionation services . . .
However, consistent with our obligations under the World
Trade Organization Technical Barriers to Trade Agreement,
regulatory requirements should not unnecessarily
obstruct trade.33
If our policy had been inconsistent with WTO rules, why didn’t
we change them 12 years ago when we joined? Why now and
not then? The answer is because they are not inconsistent at all.
Unfortunately for the government’s case, it obscures one large
inconvenient truth: the WTO requires no such service to be
included in the GPA in the first place. In fact, blood fractionation
services are expressly a candidate for exclusion from the GPA on
the strategic grounds of national health security.
So why a side letter? Since the issue is one that centrally concerns
public procurement (the government purchase of blood plasma
products through a contract with the private sector), why didn’t
the government simply include plasma fractionation in the pro-
curement section (Chapter 15) of the trade deal and be done with
it? Why did it explicitly exempt supply of blood products from the
procurement chapter, only to reverse that exemption in an under-
taking given two months later in a side letter? What was the
rationale for this two-step dance?
The first point to make is that the government has never
provided a justification for the side letter. So we have to tease out,
on the basis of logic and available evidence, what the political
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calculations might have been. First and foremost, a national back-
lash had to be avoided. It would not do to include blood products
upfront in an explicit procurement deal with the United States—an
item which, in view of its life and death nature, other advanced
countries pursuing self-sufficiency seek to exempt from procure-
ment agreements on national interest grounds. To have taken such
a transparent course as opening up the blood procurement market
in the FTA would have put the Howard Government’s ‘aggressive
exceptionalism’ under the spotlight, raising serious questions about
its domestic mandate. After all, under the WTO, all countries have
the right to exempt from international procurement agreements
those areas deemed strategic or sensitive on national (health and
military) security grounds.34 So Howard could not invoke the need
to ‘conform’ with ‘international practice’ standards to justify the
inclusion of such a sensitive issue in the trade deal (see box starting
on page 187). Indeed, conformity in this arena would actually mean
keeping blood off the procurement agenda altogether, the very
opposite of the course the Howard Government intended to take,
via the detour of the side letter.
To give the US what it wanted and avoid the immediate
political fallout at home, a two-step dance was the safer option:
On one hand, you take pains to dissociate blood plasma from the
Government Procurement deal by explicitly exempting plasma
fractionation from that chapter’s provisions; on the other, you
promise the US side to remove that exemption further down the
track by following a different course, which you then spell out
in the side letter, worded in accordance with US (government–
Baxter) guidelines. Here you give the necessary advance assurances
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to the Americans that you will recommend open tendering and
remove all health regulations that might stand in the way of the
US contender; in return the US side agrees to exercise patience. So
by this route you also get the political space in which to set up a
review that ostensibly will endorse your betrayal of the national
interest. As such, the side letter is an obvious choice for dealing
with a politically explosive issue.
Of course, being more removed from the public glare helps
too as only the experts read the side letters and media attention
rapidly wanes after the main text is first released. Here is the acid
test: inform Australians of the commitments the federal govern-
ment has made to the United States on the future of our blood
plasma products and see how they respond. Like the majority of
people, Australians tend to care about the things that affect them
personally and directly or have the potential to do so. Blood and its
products are one such candidate since anyone is a potential recipi-
ent. Almost one in three Australians will use a plasma product in
his or her lifetime.35 The ability to keep the plasma fractionation
betrayal out of the public spotlight would be important to the
Prime Minister’s success in delivering the nation’s blood market to
US firms. It would seem even more important if one were to con-
sider which firm Howard was proposing to favour with Australia’s
version of the FDA—has been equally vigilant in the
Australian context since giving the green light to Advate,
the first genetically engineered clotting treatment made
without added animal or human proteins.51
This is the firm that the Howard Government sees as a preferred
alternative to CSL. In view of the company’s record, it would seem
hard to sustain the view, implied in Howard’s plan for the Australian
blood market, that a shift to the US challenger is a shift in the right
direction. If a company cannot be trusted to represent its products
truthfully at home under the nose of its own regulator, what might
it be tempted to do out of reach of someone else’s regulator?
Such questions go to what the 2006 Flood Report defines as
the lynchpin of the Australian system: the trust invested by the
donor community in offering the gift of blood. This report,
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the result of the review of Australia’s fractionation arrangements
promised in the FTA, has provided a glimmer of hope for
Australians, and a glitch in the Howard Government’s plans to
simply hand over the market to Baxter.
It is unlikely that Howard expected the official review prom-
ised in the FTA to so resoundingly reject his recommendation to
further open the Australian market to foreign products. Such find-
ings could only prove embarrassing for the government. The
Flood Report, released at the end of 2006 (and not to be confused
with the report by Philip Flood into Australia’s national intelli-
gence agencies), warns that any change to the national system
involving overseas production of our blood products would entail
a high-risk, high-cost, non-advantageous option for Australians
(see box on page 199).52 To minimise potential embarrassment,
the review’s findings were not released until the Christmas holiday
season, they received barely a mention in the media and the Flood
Report’s rigorous rejection of Howard’s recommendation was
silently passed over in official press releases.
But if the past offers any guide to the government’s likely
response, the adverse findings of the 2006 Flood Report will not
deter the Prime Minister from trying to drive through his recom-
mendation. The present government would not be the first to
endorse reviews that support its preferences and disown reviews
that it disagrees with. But it has developed something of a track
record in this area, overriding expert views whenever they fail to
tell it what it wants to hear. The Flood Report, like many before it,
seems destined to be disregarded in the same manner. Two consid-
erations make that outcome less likely in this case. One is the need
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Blood 199
to bring the states and territories on side. At the time of writing,
most stand opposed to Howard’s recommendation. The second is
the huge public outcry that this issue is likely to unleash, making it
too risky to run in an election year. Howard may be forced, against
his leanings, to leave the nation’s blood system intact.
Key conclusions of the 2006 Flood Review53
* Overseas fractionation of Australian plasma would involve sig-
nificant transitional costs and, because of yield considerations,
there would be the potential for an ongoing shortfall in the supply
of IVIg and other plasma-derived products. The consequent need
to source these products via imports would have implications for
the national self-sufficiency policy.
* There are potential supply chain risks involved in overseas
fractionation of Australian plasma. While some of the risk
scenarios are of low probability, their consequences would be
expensive and disruptive.
* Public opinion in Australia is strongly in favour of maintaining
the current plasma fractionation arrangements, particularly with
regard to the role of the ARCBS and the domestic handling of
the donation of ‘the gift of blood’.
* When the transitional costs, the risks, and the indeterminate
yield ratios of overseas fractionation are considered against the
national self-sufficiency objective . . . then overseas fractionation
of Australian plasma is not an advantageous option for Australia.
* Australia should maintain its reservation regarding the pro-
curement of blood fractionation services under the AUSFTA.
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UNRAVELLING THE AUSTRALIAN SYSTEM:PUSHING ON AN OPEN DOOR
In light of Baxter’s questionable track record, and the steadfast
approach of the US government in working with its companies
to increase their market share abroad, it may be tempting for
Australians to direct their ire over the blood fiasco towards America.
The fact that the US government actively promotes its commercial
interests and advocates for its corporate champions is, however,
neither controversial nor remarkable. What is remarkable, indeed
anomalous by the standards of other sovereign powers, is that
the government of Australia has increasingly acted in the same
manner—aiding and abetting America Inc.—and abandoning the
interests of its own citizens. Blood is not the only sector in which
we have observed such exceptional behaviour. The most blatant but
by no means singular cases (driving national standards down with
the aim of conceding Australian foreign and domestic markets to
US interests) have been perpetrated in Australia’s beef and pork
sectors, as seen in Chapter 3.54 As such, it is not ‘pushy American
firms’ that are to blame for the disturbing decisions examined.
Rather, it is the Australian government which has actively cham-
pioned the interests of the foreign power in this case, over and
above the health security of its own population.
In the case of the Prime Minister’s team at the Department of
Health (formerly the Department of Health and Ageing) seeking
to dislodge CSL’s position as prime public contractor, there appear
to be two different yet complementary drivers, external and inter-
nal. US intervention via the 2003–2004 bilateral trade negotiations
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Blood 201
was clearly the catalyst for the government in publicly proposing
a change to the nation’s blood procurement system. However, the
stage was being set some years earlier, quite independently of
those international trade negotiations, as the DHA began seeking
alternative sources of supply in the late 1990s; this culminated in
its 2002 decision not to renew its long-standing contractual
arrangements with CSL (see box below). These internally derived
decisions, whatever their precise domestic drivers (economic
cringe, dislike of CSL as a creation of the Hawke–Keating govern-
ment), found their essential complement and rationale for policy
change in the US bilateral trade demands.
The attack from within: opening the door
to foreign supply
1999 Blood Review (Stephen Report) established. Terms of
reference include assessing value of continuing supply contract
with CSL.
2001 Stephen Report released. Strongly recommends con-
tinuing existing supply arrangements by extending the CSL
contract.
2001 Government ignores Stephen Report recommendation.
Sets up high-level Steering Committee to deliberate the Future
of Plasma Fractionation and Diagnostic Products Arrangements.
Rushes through decision not to extend five-year contract option
with CSL in favour of importing more blood products without
undertaking any cost or risk assessment of alternative options.
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202 NATIONAL INSECURITY
2002 DHA explores ways to enlarge the market for foreign
sources of supply. Extols innovative virtues of synthetic plasma
(recombinants) over the pure blood products produced by CSL,
without any assessment of the costs or therapeutic benefits
compared to other therapies.
2004 One major regulatory change following signing of the FTA.
Elimination of the requirement that imported blood products
demonstrate clinical superiority over locally sourced products.
2004 Two new policy changes following signing of the FTA. Both
entail greater reliance on imports: (1) a shift to artificial blood
therapies; (2) new arrangements to source more IVIg overseas
rather than via CSL.
2006 Under new ‘Contingency Measures’, the government now
imports at least 18 per cent of the nation’s IVIg.
The larger point highlighted by the evidence presented is that the
United States did not have to push very hard, for it was knocking
on an open door. The door began to open before the end of the
1990s, as revealed in a series of audit reports by the Australian
National Audit Office (ANAO) (which examined the DHA’s 2002
decision not to renew its contract with CSL), and comments by
the Joint Public Committee of Accounts and Audits ( JPCAA), in
addition to the Blood Review of 2001 (also known as the Stephen
Report).
Australia’s first major review of its plasma fractionation
services since the privatisation of CSL was set up in 1999 by the
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then Minister for Health and Aged Care. It was carried out by an
independent authority, the former Governor-General Sir Ninian
Stephen.55 Completed in 2001, the Stephen Report recommended
radical changes to the funding formula and administration of the
blood sector, but it found that the country’s blood needs were best
provided through CSL as the national provider and called for con-
tinuity of self-sufficiency as an important national goal for
Australia.
Tellingly, the Stephen Report also offers material evidence that
the Howard Government was already, at the turn of the decade,
considering its options for opening the blood market. Two of the
terms of reference of the report had particular reference to
the federal government’s consideration as to whether or not
to exercise its option to extend the Plasma Fractionation
Arrangement (PFA) unilaterally after the contract’s expiry on
30 June 2004. In a suggestive passage, the report makes clear that
the government was entertaining the prospect of dealing with,
and perhaps, sponsoring the location of a US supplier in Australia.
It observes the high entry costs which would be incurred by a
‘second fractionator’ in Australia, noting that these might be bear-
able for an entrant with ‘sales in the US market’ (see box on
page 204). But it warns against such a course as ‘inefficient and
costly’. To favour entry of a new onshore fractionator would be
economic insanity when CSL already has surplus capacity. How
would favouring offshore fractionation be different? The Stephen
Report verdict suggested that this would diminish our national
capacity, increase dependence on less reliable sources, and place
Australia in a vulnerable position (see box on following page).
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Conclusions of the Stephen Report56
The economic and social benefits of a [competitive] tendering
system for fractionation services are unclear and uncertain.
Tendering may provide a discipline on prices. There are high
costs associated with contract fractionation such as regulation
and approval. The availability of appropriate and sufficient
plasma fractionation capacity in the international market place is
uncertain, and may place Australia in a vulnerable position. CSL
has surplus capacity that is directly regulated by the TGA. A
national plasma fractionation facility has been a major driving
force in the development of Australia’s blood sector and blood
supply. It affords Australia a high level of control of the safety,
quality and adequacy of future supplies provided that national
policy and strong regulatory oversight are maintained.
Sponsored or facilitated entry of a second fractionator is likely
to be inefficient and costly. The Australian market is small. The
costs of entry are high in terms of both capital costs and regula-
tory approvals. While high costs may be sustainable to a new
entrant given potential revenues under a Plasma Fractionation
Agreement or by sales in the United States market, CSL has sur-
plus capacity and the costs of expansion of existing plant are less
than those relating to a new plant. There is no credible prospect
of entry by a competing fractionator into the Australian market.
The Stephen Report recommended that the Commonwealth
Government enter into a second PFA with CSL at the expiry of
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the then current agreement ( June 2004).57 But Howard’s team at
Health ploughed on regardless, brushing aside this aspect of the
report, setting up another committee to rush through a different
recommendation and announcing a slew of new policy initiatives
to expand blood product imports—starting with recombinants
(artificial blood), followed by new contingency measures to
increase plasma-derived imports (such as IVIg).
Disregarding the Stephen Report’s clear recommendation, the
Department of Health quickly formed a high-level Steering
Committee for the Future of Plasma Fractionation and Diagnostic
Products Arrangements in December 2001. At its final meeting in
April 2002, the Steering Committee decided to recommend that
the PFA extension option not be exercised and that instead, CSL
be given a short-term contract.
The manner in which the government manoeuvred to restrict
the scope of CSL’s contract adds robust support for the proposi-
tion that Howard’s team was keen to sideline CSL in favour of a
foreign (preferably US) supplier. The fact that DHA ignored
the most basic protocol of evaluating costs and effectiveness of
alternatives in deciding not to extend the CSL contract suggests
something more than an oversight.
Not surprisingly, this decision by the Department of Health
and its breach of procedure sparked intense controversy and
generated a number of audit reports, reviews, and official criti-
cism in Parliament, including a call from the JPCAAs for ‘a timely
performance review of Health’s handling of the PFA extension
review’. Upon concluding its review, the office of the Auditor
General found that the Department of Health’s performance was
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seriously inadequate at every level. Indeed, the audit report on
the Department of Health’s handling of the CSL contract makes
fascinating reading. On the surface, it tells a story of (apparent)
government incompetence and obfuscation buoyed by false
arrogance in the mishandling of the CSL contract. But at a less
superficial level, it offers up a different story—one that suggests
moves to dislodge the national fractionator even before the FTA
was mooted.
So what did the ANAO find in its investigation of the
Department of Health’s mismanagement? In a nutshell, it found
that the Steering Committee had insufficient and scarcely credible
information on which to base their advice to the Minister on the
value of the PFA extension option. Health’s own record of its
decision (dated May 2002) left no doubt that it had given no
consideration at all to the major value the Commonwealth
obtained from its two-tier pricing system in the CSL contract. To
acknowledge this reality would have contradicted the Steering
Committee’s own conclusion ‘that the current pricing arrange-
ments were unlikely to be the most advantageous available to the
Commonwealth’. The inconvenient facts divulged by the ANAO
showed of course the opposite, that the government was gaining
from steadily lower prices under its two-tier pricing arrangement
with CSL, which saw the share of payments for products at the
lower price increase by more than four-fold over the 1996–2002
period. The JPCAA had also commented that:
. . . current Australian plasma product prices were sub-
stantially less than the corresponding prices on European
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and other commercial markets—on the face of it, good
value-for-money, and a justification for exercising the PFA
extension option.58
In short, this Parliamentary Committee was insisting that theCommonwealth was getting a good deal out of its contract withCSL. And over a projected ten-year period starting in 1994, theanticipated costs of the PFA were deemed on target. The SteeringCommittee set up within the Department of Health chose toignore this evidence, along with all other real data on the costs ofalternative options, instead basing its conclusion on ‘scenarioanalysis’ (in this case, projections based entirely on assumptions,and without regard to the available evidence). Even officials fromthe Department of Finance at a June 2002 meeting with Healthwere taken aback (‘expressed their concern’) about the inadequaterisk analysis Health had undertaken, particularly regarding costs.59
The resulting discrepancies divulged by the ANAO report readlike a manual in ‘How to tell your Minister what he wants to hear’:
• Don’t bother putting any time or effort into a reviewwhose conclusions you know in advance.
• Don’t include information on the actual benefits of theexisting arrangements or the risks and drawbacks ofthe alternative one to be favoured.
• Don’t refer to real data showing value-for-money obtainedunder the current system compared with alternativeoptions for future supply.
• Don’t consult CSL about your decision to terminate itscontract.
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• Don’t bother to notify the government of your (Health’s)
recommendation (to terminate CSL’s contract) in a timely
manner because they need little time to consider the
recommendation they have sought from the outset.
Is this mere incompetence? If so, we should all quake in our boots
at the implications. Incompetence is of course the only allowable
interpretation the ANAO can offer in an official report.60 But the
cumulative actions (of commission and omission) on this one
particular theme (whether or not to extend CSL’s contract) are
too neat to dismiss as innocent incompetence. These actions
are consistent with a different interpretation, that is to say, with a
politically contrived outcome. Health, it would appear, was simply
doing what it was told by the government. This explanation is made
more plausible by virtue of being consistent with the more general
pattern of departmental behaviour in Canberra—one that responds
to a ‘pervasive climate of uncertainty, fear and retribution’ set in
train ‘by the expanding army of ministerial advisers’—partisan
minders, gatekeepers, enforcers, who ensure ‘that public servants
know what ministers want and give it to them’.61
Compare the dramatic shift in the five years between 1999
and 2004. In 1999, Health still appeared to endorse national self-
sufficiency, stating in its own words to the ANAO that its objective
was:
. . . to maintain an ongoing, nationally self-sufficient supply
of plasma products by ensuring, inter alia, that CSL
remained a viable entity within the domestic blood
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sector—this objective being consistent with the policy of
the Government of the day and successive governments.62
By 2004, the government’s policy reorientation was clear. In
responding to the criticisms of the JPCAA for the DHA’s bizarre
handling of the contract with CSL, Howard’s team at Health
sought to justify their actions by claiming that CSL products were
becoming outmoded and that some countries were switching to
artificial blood products (like the genetically-engineered recom-
binants produced by Baxter).63 The DHA went on to suggest
that government policy—the desire for self-sufficiency in the
Australian blood product markets—was becoming less relevant
ten years on as blood-derived products could be increasingly sub-
stituted by artificial products. The DHA further advised the
Committee that ‘if Australia followed the overseas trend and
shifted to recombinant products then the scope for alternative sources
of supply would increase significantly’.64 But in addition to sourcing
more artificial blood products, the DHA made it clear that it was
also considering sourcing more blood-based products and that ‘alter-
nate supply could become available through an overseas supplier or through
toll fractionation’.65 It was only logical to decide against extending
the original contract, if this argument could be believed.
On what evidence did the DHA base this important policy
shift away from self-sufficiency? None of any substance, it would
seem. For the ANAO report takes the DHA to task for its arbitrary
decision-making and persistent disregard for professional proto-
cols, and above all for making no attempt to assess or compare
either the cost or clinical effectiveness of the new blood substitutes
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with the CSL product. Nor did Health make any reference to
which countries or how many of them were using the products, or
for what purposes, and with what success. (Witness the US FDA’s
vigorous warning to Baxter for hard-selling its latest recombinant
with ‘false and misleading’ claims.) Since the DHA had been found
wanting on a large number of dimensions—its competence and
skill base, its contract management—it seems reasonable to
ponder what kind of research, knowledge or expertise the DHA
called upon in order to make this important policy shift away from
self-sufficiency.
When the Committee raised its concern about the issue of clin-
ical quality and the safety of blood products that could be sourced
from suppliers other than CSL, Health merely (or inadvertently?)
confirmed the policy shift the government was seeking. Health
simply assured the Committee that there were ‘numerous other
companies around the world that could supply blood-based prod-
ucts and [that like Baxter] . . . are already supplying recombinant
products.’
As each step shows, the government was clearly opening the
door to foreign supply and a rival fractionator in advance of
the trade deal with the United States. Two new policy changes
(and one significant regulatory change discussed above) followed
in 2004 with the signing of the AUSFTA, all of which increase
reliance on imports. The first was a shift to artificial blood
therapies, as a result of which demand for the local product (CSL’s
Biostate) fell steadily during 2004 to 2005. The second policy
change was the introduction of new contingency arrangements to
source from overseas greater quantities of IVIg, a blood-derived
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plasma product. Under such measures, the government now
imports at least 18 per cent of the nation’s IVIg, used in treating
a growing number of medical conditions including diarrhoea
and colitis. (Apparently, Australia uses significantly more IVIg
per capita than in Europe or Japan, which raises the interesting
question as to what may be driving changes in medical fashion here
but not elsewhere. Are our medical practitioners better informed
than elsewhere, or are they more susceptible to the marketing
machine of pharma companies?) In what seems a deliberate move
to weaken self-reliance, the National Blood Authority (NBA),
charged with overseeing CSL’s contract with the government, has
chosen to import greater quantities of IVIg rather than having
it produced locally. Revealingly, the NBA acknowledges that this
is in order ‘to avoid total reliance on CSL’.66
Both CSL and the Red Cross vigorously oppose the contin-
gency measures which allow greater quantities of blood-derived
imports, for these are sourced predominantly from paid donors in
countries with higher-risk factors. It is well established that ‘blood
sourced from paid donors is less safe than blood from non-
remunerated donors’.67 The safety of the US blood supply in
particular is considered at risk because of the substantial influx of
migration to the United States from Central and South America;
such immigrants tend to be disadvantaged and more likely to
supplement low incomes with blood donation. Deadly infections
like the Chagas parasite have migrated north with the poor.
Researchers claim that ‘Such factors have led to major concerns
about the safety of blood products in the United States, where
paid donation accounts for about 55 per cent of the blood
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supply’.68 Given this background, the Australian Red Cross, sup-
ported by the CSL, has called for a ban on plasma imports.69
This particular policy shift (to increase IVIg imports) is also
highly significant for the case we are establishing. The govern-
ment claims imports are the best solution to the problem of
increased demand. The relevant facts are that CSL has been the
country’s main provider of IVIg; it currently has surplus capacity
and is working to improve yield. The Red Cross Blood Service for
its part claims it can source domestically the extra plasma required
if the government backs its initiatives to do so. Both the Red Cross
and CSL are at a loss to understand why the government would
turn its back on the self-sufficiency option and choose to import
rather than support a superior source in its own jurisdiction. Both
bodies have made the case that self-sufficiency in IVIg can be
regained if the government agrees to support the ARCB in
increasing its collection of donor plasma. Bizarrely, the govern-
ment (via the Health Department) uses its lack of support—
the Red Cross is struggling to collect enough donor plasma, the
starting base for IVIg—as justification for going offshore.
The larger point to be made, as all these moves illustrate,
is that well before the side letter, Howard and his team have
been pushing through policy changes that effectively erode self-
sufficiency and transfer a larger slice of the blood products market
to offshore suppliers. By the time Baxter called on its trade repre-
sentative (in 2002 to 2003) to negotiate with the Howard team, it
was already pushing on that open door.
The fact is that if fractionation were to be allowed to proceed
offshore, Australia would lose control over the safety and quality
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of its blood products. It would be completely dependent on
assurances made by an offshore processor like Baxter (or some
US equivalent) whose record to date gives few grounds for
confidence.
Of course, the Howard Government can make as many assur-
ances as it likes, but they count for naught once it surrenders
blood fractionation to offshore processors. How would the TGA
regularly monitor ‘segregation’ of Australian blood from foreign
blood (not to mention monitoring of production processes) when
its regulatory reach ends in its own territory? If the pattern
observed with Biosecurity’s approach to protecting Australian
farms against quarantine threats offers any clue as to how things
might proceed, monitoring will very likely mean accepting the
word of the foreign supplier. The Biosecurity experience should
give pause for concern. While the agency was supposedly safe-
guarding the nation’s agriculture from exotic pests and diseases, it
was casually handing out import licences for beef from a foot-and-
mouth diseased region without so much as a minimal safety
check.70
The more important point is that no Australian government
until now has sought to sell its people the pretence that open
tendering for blood contracts (competition) is a privileged or even
relevant principle for building national self-sufficiency in the blood
sector to ensure safety and security of supply. Why do so now?
Could Howard and his team really believe their own rhetoric? The
Prime Minister may be many things, but he is no fool. He knows
that he can use words like competition, free market and trans-
parency to make it sound as if objective principles are being
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followed and that even if contested, they at least serve to mask
unpleasant political agendas that have nothing to do with eco-
nomic processes or even ideology. In this context, in addition to
alleging an inability to meet growing demand, what else could
the government fall back on to try to justify an unpopular and
indefensible policy switch? Hence the silly pretence that the
change is about enhancing competition and transparency. One
glance at DFAT’s website confirms the hard sell in its effort to
address a roll call of public concerns about the government’s new
approach to blood fractionation.71 Under ‘What is tendering?’ for
example, we are told that:
Tendering in the government sector is where an agency
seeks competitive offers from the market (tenders) through a
competitive process (requests for tender). Usually this would
be an open, competitive process . . .
Just in case the reader missed the message, open tendering equals
‘competition’ equals good. The hope seems to be that if this
message can be sold to the public, any potential objections will be
stifled. Never mind that we de-prioritise safety and security and
self-sufficiency of supply, that we make ourselves more reliant on
a less reliable fractionator in a more risk-prone environment, that
we send billions of our tax dollars to feed offshore profits, invest-
ments and jobs. No, just fasten on what we allegedly get in
return—more competition. All of this is for public consumption;
the government is well aware that a US supplier can never com-
pete in the real sense (as the Flood Report and its predecessor, the
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Stephen Report, both make clear), or replace all the benefits lost
to the Australian community and the national economy.
SUMMING UP
The policy and regulatory shifts authorised by Prime Minister
Howard lead to one conclusion. That the stage has been set for
increased foreign control and supply of Australia’s blood products
where there was none in the past. It takes little imagination to see
how the changes already in train threaten to deliver a severe blow
to a world-class system developed in the national interest. The
entire thrust and effect of such changes is clear: shifting a bigger
slice of the blood procurement pie to US suppliers rather than
strengthening our own capacities. In particular, the undertakings
given by Howard’s team to the United States in the side letter,
most recently restated in defiance of its own commissioned
review, leads us to conclude that the PM acts out of a divided
allegiance, in fundamental disregard for the national interest.
The case we have established in this chapter stands regardless
of the final outcome of the side letter. The key point we have
made is that the Prime Minister’s willingness to expose the
Australian community to significantly higher health risks and
economic costs, not to mention supply shortages in a high-risk
security environment, appears to him an acceptable price for this,
yet another, US-centric policy choice. Electoral backlash and the
threat of losing office may not be considered an acceptable price.
But such potential developments aside, the fact of the Howard
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Government’s intent and its betrayal of the national interest will
remain undiminished.
As all independent experts have concluded, the increased
potential for tainted blood to enter the system is only one of the
many downsides of a policy to ship plasma offshore for processing
and rely on increased imports of blood-derived products. Quite
another is the weakened capacity to rapidly respond to major
emergencies that urgently require large quantities of plasma, such
as a natural disaster or terrorist attack, to say nothing of the prob-
lems of coping with new challenges like contaminated supply if
shipping is hampered, or the siphoning off of high-quality
Australian blood for use in foreign markets.72 To all this one must
add the longer-term cost of the steady corrosion of the voluntary
unpaid donor system that presently sustains a safe and secure
blood supply.73
The million-dollar question is what motivates the Howard
Government to elevate the strategic goals of a US company over
those of the national champion? We have demonstrated in this
chapter that Howard and his team at the Department of Health
and DFAT have worked assiduously to meet all the items on
the wish list of their American counterparts; they have readily
accommodated the strategic goals of a US supplier which involve
opening the Australian system to blood product imports, remov-
ing high regulatory standards that would otherwise be imposed
on foreign suppliers, and effectively engineering steady erosion of
the three pillars of the Australian blood sector. Why would an
Australian government want to do this? How does it reconcile
actions that are so clearly at odds with the interests of the national
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champion itself, with the integrity of the blood supply, and with
the public health of the Australian people?
In the particular case of blood one can find no convincing eco-
nomic incentive or rationale. That is to say, we have no evidence
that John Howard or his ministers are in the pocket of Baxter. Nor
is there any compelling public rationale—the Australian arrange-
ments are world class, hardly in need of an American remedy, least
of all one provided by Baxter as CSL’s chief American rival. Why a
government would set itself so much at odds with the national
interest of the country it governs, as is so emphatically the case in
the blood market saga, is a question raised by its actions in several
other significant arenas examined in this book.
The national interest test in the case of blood is straight-
forward. To determine whether safety and self-sufficiency are
indeed non-negotiable priorities of any given Australian govern-
ment, one need merely ask: how would such a government act?
Would it abandon, would it even consider abandoning, its domes-
tic contracting arrangements which, according to virtually all
blood sector experts and stakeholders, currently deliver ‘the safest
and most clinically effective treatments for Australians’?
What if the national interest is the wrong perspective and John
Howard’s priority were a different one; what if ‘national interest’
did not much enter the picture? Some might deduce from the
many similar government actions on several different fronts exam-
ined in this book that the larger objectives are to ‘deliver the best
and most pleasing outcomes for America’. There is something to
this, but as we show in the concluding chapter, it is too simple.
Howard is driven by a mix of motives—primarily personal and
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political—though mostly packaged in the language of security
and the alliance. Some policy shifts, like the ones we have seen in
the blood sector, offer Howard an opportunity to kill two birds
with the one stone as it were: to serve the current US administra-
tion (and build up personal credit) and sink Labor’s legacy (its
creation of a national-champion plasma fractionator in CSL).
Consider for a moment this line of reasoning. If US-pleasing (and
legacy-sinking) outcomes were among Howard’s key drivers, it
would then be entirely reasonable to expect his government to
favour an open tendering arrangement that would accommodate
a powerful, preferred US bidder. Then such a government would
also take care to remove any regulatory obstacles in the path of US
suppliers—such as the requirement that blood product imports be
clinically superior to the local product, or that plasma processing
take place on Australian soil where regulatory controls can be
rigorously applied. These conditions would simply be labelled as
anti-competitive, non-transparent, and obstacles to trade in order
to drown the calls to prioritise national security in health. They
would be complemented by claims that only imports can meet
rising demand for blood products. And they would nicely comple-
ment the earlier measures, documented above, which are aimed at
eroding the national champion’s market pre-eminence. This is
precisely the path Howard and his government have chosen. The
one obstacle in their way is the states and territories whose agree-
ment on this question is essential.
There is another possible dimension to this story and others
like it (the nuclear energy issue, for example, in Chapter 2). Put
simply, it may well be that Howard and his ministers don’t see any
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of this as a national interest issue, because for them it is part of a
hugely enjoyable political game. Akin to a challenging type of
sport, the game is ultimately about doing whatever it takes to win.
Winning—having your decisions prevail—can be addictive and
lead you to lose sight of the purpose of governing. If this interpre-
tation is on track, then we can already see a covert government
campaign under way to retrieve ground lost to the 2006 Review
and to soften up the public to the idea of increasing plasma
imports. It begins with some odd placements of government-fed
stories to certain trusted scribes of The Australian, first hammering
away at the CSL’s supposedly privileged position, then targeting
the Red Cross’s apparent intransigence in helping to meet plasma
shortages; thus the government is offering a solution to these
shortages, suggesting the Red Cross accept blood from donors
currently excluded because of possible exposure to mad cow
disease during residency in the United Kingdom (for which there
is no test).74 We can expect more such stories, all carefully
constructed to paint the government as keen supporter of self-
sufficiency suddenly faced with unparalleled challenges and
forced to canvas options (take risky blood or accept more imported
plasma) that only unreasonable people would reject. If read cold,
in the absence of the relevant background, this is precisely the
artful lie that would prevail. The tragic outcome for Australia
is that while the government wins, our national health security is
diminished.
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POLITICAL STRATEGY AND POLITICAL CRINGE
Let us begin by restating the central paradox at the heart of the
Howard Government: a leadership that loudly and proudly lays
claim to possessing the highest national security credentials and to
governing in the national interest, while at the same time pushing
through a string of choices that jeopardise Australia’s real security
and effectively betray its interests in one sector after another.
In this final chapter we draw the threads of our argument
together. Having identified this paradox and observed that such a
bizarre pattern of behaviour makes Australia an exceptional case,
we now ask what accounts for it. What are the underlying drivers
of this behavioural pattern and how could it be sustained and
defended over a decade without arousing furious opposition
and dissent?
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In each of the sectors examined, we have established beyond
reasonable doubt that the Howard-led government has sought to
act with the best interests of the United States in mind, providing
America Inc.1 with what it seeks—be it privileged access to our
blood sector, or termination of our unique safety requirements
to facilitate capture of our quality beef markets, or creation of a
friendly waste dump for spent nuclear fuel, or an open cheque
book for unsuitable, untried, outdated military equipment. To this
roll call of security-diminishing choices of the Howard
Government, one should add the damage done to our national
interest in the pro-Hollywood refusal to grow an independent
cultural industry—a unique stance among the English-speaking
nations.
We have selected only some of the more arresting cases. Many
more could be added, including the way that the Howard
Government has connived with the current US administration,
enabling its arbitrary determinations to trample the rights of
Australian citizens: the way the government has allowed one of its
citizens, David Hicks, (whether guilty or innocent) to be held
indefinitely (five years in all) without trial or charges being laid, in
defiance of all military and civilian codes of conduct; or the lesser
known case of Hew Griffiths held without trial for almost three
years in a Sydney jail for allegedly transgressing US copyright
law—from his Australian home. Griffiths, who has not travelled
outside Australia in 38 years (since he immigrated from Britain at
age seven), now faces extradition to the United States to face
charges. The years he has spent incarcerated in Australia waiting to
be collected by the Americans (already longer than any sentence
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likely to be handed out under Australian law) are unlikely to count
against any American sentence he receives.2
Our cases demonstrate that in spite of large costs to our own
national security and interests, servile pandering to America Inc.
has become the leitmotif and policy pattern of the federal govern-
ment under John Howard’s tenure. We choose these words with
care: servile means ‘befitting an enslaved or menial class/lacking
spirit or independence’; while pandering means ‘to provide gratifi-
cation for others’ desires’. Servile pandering is the common thread
that ties together the policy choices we have examined in National
Insecurity. What they show in each case is how Prime Minister
Howard and his government have effectively placed or sought to
place US interests (be they diplomatic or commercial) ahead of
Australia’s interests—ahead of its self-sufficiency in blood supplies,
ahead of its safety standards and export advantage in beef, ahead
of growing its own cultural industry, ahead of its future energy
safety and security, and not least, ahead of the independent
capabilities of its military and protection of its troops (procuring
military equipment because it is American, rather than because it
is the best for Australian defence requirements). The Howard
Government has not always succeeded in pushing through these
choices. Some, like those affecting the nation’s blood supply, have
not been resolved at the time of writing. But that is not the point.
Whether it ultimately succeeds or not, the point is that the
government has tried—and continues to try by waging a covert
campaign to back its US-centric recommendation to open the
blood market to American suppliers.3
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AUSTRALIAN EXCEPTIONALISM
At one level, the actions we have documented seem to make nosense. After all, one expects that a democratically elected govern-ment will typically act to protect and advance the interests ofthe country it governs and the citizens it represents. This is areasonable assumption since comparative analysis establishes thatmodern leaders are most eager to avoid alienating their nation’spatrimony (spending their blood and treasure); on the contrarythey are eager to increase it. In the words of Stanford UniversityProfessor, Josef Joffe, ‘Nations act not to do [favours] for others,but to do well for themselves’. If normal countries act thus, this isless out of selfishness than prudence, for ‘It is their blood andtreasure that must be spent’.4
Australia under Howard is the exception that proves the rule.We know of no precedent in the modern world of democracies inwhich the political class has sought systematically to privilege theinterests of a foreign power over its own in matters to do withthe national safety, security, and future economic welfare of itspeople. Only nineteenth-century oligarchies in Latin America,with their comprador class of subservient local elites come any-where close to such behaviour.
To find a comparable case of a leader voluntarily alienatingthe nation’s patrimony, we have to go back 2140 years, to the timeof Rome and the famous incident of the Pergamene bequest toRome. So before we ponder the sources of the Australian excep-tion, let us briefly examine the case of Pergamon’s bequest. As astudy in giving away one’s country to a foreign power (in 133BC),we find certain parallels with the experience closer to home.
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The Pergamene bequest
In the 130s BC, when Rome was emerging as a world power but
did not yet have a formal empire, the various small kingdoms and
principalities of Asia Minor (today’s Turkey) vied with one another
for Roman preferment. But one kingdom outdid all the others
in pandering to Rome. This was the kingdom of Pergamon or
Pergamum, ruled by the Attalid dynasty for over 150 years, from
as far back as 283BC. By the time of heirless King Attalus III, the
last in the line, it was clear that Rome would soon rule Pergamon.
Under these circumstances, Attalus felt that it would be better
to shape that rule with his own signature than leave the matter to
conquest. So he left his entire kingdom to Rome—a bequest that
was as astonishing and shocking at the time as it would be today.
The actions of Attalus III had a great impact in Rome itself,
which received news of the bequest just as it became engulfed
in the land reform struggles unleashed by the populist tribune
Tiberius Gracchus. Gracchus immediately claimed the Pergamene
bequest as a fund to help settle Roman military veterans on public
lands. But this was bitterly opposed by the Senate, and so the
Pergamene bequest probably exacerbated this most critical politi-
cal struggle in the life of the Roman Republic. There are several
features of the Pergamene bequest that attract our attention,
because of their potential to provide parallels with more recent
political developments in the twenty-first century.
First, the Pergamene bequest was shaped by great power
politics. The Attalid dynasty was famous in the Ancient World for
having risen to greatness on the backs of adjacent powers—first
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the Seleucid dynasty in Syria and then the Romans. The Attalid
monarchs saw their own future as being based not on their
own strength but on their ability to negotiate alliances and profit
from them.
Second, the Pergamene bequest was oriented towards the
anticipation of future developments. Attalus III saw that Rome was
becoming the undisputed master in the western hemisphere, and it
was only a matter of time before it would claim full imperial con-
trol over the Hellenistic principalities of Asia Minor. Being without
a trusted heir, he saw his bequest as a means of providing for an
orderly transition to such an arrangement. He was also smart
enough to provide in his will for the perpetual freedom of his own
city of Pergamon to retain its self-governing autonomy within a
Roman province (which was respected by the Roman Senate).
Third, the Pergamene bequest was a dramatic and shocking
piece of political theatre. It did in fact have far-reaching repercus-
sions in Rome itself. After Tiberius Gracchus had been done away
with, the Senate turned its attention to accepting the Pergamene
bequest and sending first some commissioners, and then an army,
to claim the prize. Pergamon and its lands were organised into
Rome’s first formally recognised and organised province, that of
Asia Minor, giving the Roman Empire its formal beginnings at this
point. (Provinces had previously been recognised simply as
a sphere of influence of a Roman commander. Now they had a
formal governor or proconsul, and there was systematic taxation
exercised through tax-farmers.)
Finally, the Pergamene bequest was an intensely personal and
political act. Attalus III did not take any of his countrymen into his
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confidence. It was his own judgment that Pergamon had no political
future other than through alliance with Rome. And he wished to
influence that future in a way that drew upon the goodwill created
over more than a century of active alliance while Rome was itself
feeling its way towards western domination and imperial sway. 5
History has never known such an extreme case of one politi-
cal leader that pandered so much to the interests of another power
as to give away his principality. But the parallels with what John
Howard and his government have been doing in one sector after
another, particularly since entering into the trade deal with the
United States, are not so far-fetched.
First, Howard’s desire to bind tightly with the United States
(while much more intensely personal and political, as indicated
below) is often rationalised in more domestically palatable terms
as a responsiveness to great power politics. There are sides to be
taken in the world in the twenty-first century and Howard is eager
to be seen as foremost in taking the US side.
Second, Howard’s hyper-American stances are framed by his
apparent sense that this will stand Australia in good stead in the
future. His calculation has a rational foundation and his stand con-
sistent with a long tradition of Australian governments making a
similar choice—from the ANZUS Alliance to ‘All the way with
LBJ’ enunciated by Holt during the Vietnam War. Unlike his peers,
Howard is less concerned to limit slavish followership when dis-
advantageous for Australia.
Third, compromising Australia’s security and putting its
resources at the disposal of another power would be a shocking
piece of political theatre if it were as explicit as a one-off bequest.
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The process is necessarily more gradual, less arresting, and pro-
duces more muted resistance. But like the proverbial frog that
cooks slowly from the inside out as the temperature of the water
is gradually turned up, the changes are ultimately no less dramatic
for being less immediately noticeable.
Finally, and most specifically, Howard’s hyper-American
stance is a very personal and very political affair. It appears to be
driven by an intensely personal quest for recognition and standing,
and an intensely political calculation that one’s ‘enemies’ at home
can be silenced in the alliance’s name [read ‘national security’],
ironically to the point where these personal and political aspira-
tions are allowed to override the very national interest goals that
the alliance is supposed to secure.
ACCOUNTING FOR EXCEPTIONALISM
We have pointed to a pattern of behaviour that runs across a very
wide spectrum of cases. We have come to the conclusion that this
amounts to a pattern of betrayal because it systematically breaches
the implicit contract between a government and its citizens which
says, when dealing with foreign powers, you are there to represent
the interests of your country(wo)men because it is their ‘blood
and treasure’ that must be spent. Betrayal seems an apt term in
this case since to betray means ‘to fail or desert in time of need’ or
‘to prove false’.
The question is why a political leader and his team would act in
this way. What is it that so motivates Howard and his government
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to be so careless of the national interest? Is there a strategy that
helps to explain the pattern identified? Conventional theories of
state behaviour, which assume national interest concerns drive
foreign policy choices, hold little explanatory value given the ques-
tion at hand. We take inspiration, as mentioned in the opening
chapter, from renowned political sociologist Max Weber in devel-
oping a more actor-centred political explanation for the Australian
anomaly. We present our explanation of Howard’s US-centric
choices by way of scenario building, where inevitably we must
make some assumptions regarding the motivations that underpin
the relevant political actions. Understanding individual motivation
in social interaction is of course widely practised from a socio-
logical perspective. Our scenario building is firmly grounded in
factual material concerning what is already known of Howard’s
background and of the goals he has pursued. The few assumptions
that we do make are based on well-known and publicly docu-
mented aspects of Howard’s political life.
Suppose that during your decades-long quest to become
leader of your party and then Prime Minister, you have spent
many years in the political wilderness, having to endure savage
taunts from the opposition as well as endless slights and put-
downs, and spectacular shows of disloyalty and disrespect
(manifested in the use of very unpleasant nicknames) from within
your own party.6 Devastating for a more sensitive soul, these per-
sonal setbacks do not deter you from your course.7 ‘Politics’ is the
only game worth playing, your life’s achievement, the source of
your identity—you have to make it work.8 As resentment hardens
your resolve, it fuels a determination to be seen as someone who
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counts, to get to the top and to prove your enemies wrong. You
are methodical and disciplined. You bide your time; your luck
changes and you become Prime Minister. What kind of goals do
you pursue so that you can uproot your enemies and gain that
long sought after status and credibility as a leader?
First and foremost, you want to be seen as someone of stand-
ing and stature. You calculate that in your own environment
political standing is largely something that is externally bestowed
and to that end it will do no harm to make oneself a willing instru-
ment of the leaders who run the show of the greatest power on
earth. You find it is not easy to instrumentalise yourself and your
country under Bill Clinton’s presidency; there are more rebuffs
than accolades from this quarter, especially after your role in the
East Timor debacle and the mangling of critical intelligence.9 But
George W. Bush’s election gives you mileage. You can literally and
metaphorically uncork the champagne to celebrate what you feel
is an elective affinity with the new President. As someone who has
also been personally derided and mercilessly lampooned, he may
have an inkling of what it is you are seeking and the price you will
be prepared to pay for it.
Second, you want to make the alliance with the United States
as intimate as possible, to lock it in and cement the country’s
future to it. The alliance has been ticking over quite nicely with-
out you for more than fifty years. But you decide to talk it up at
every opportunity to make it seem as though it is something quite
fresh and fabulous that has suddenly come to life under your
tenure. So you go further than any other political leader and pull
out all the stops to make a great many things appear to revolve
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around it. You dump all earlier programs for self reliance and
the defence of Australia and instead embark on turning the
nation’s defence strategy into a component of US global strategy.
Although you are keen to sell the alliance at home as a long-term
security insurance for Australia, security is not its primary value to
you. Its greatest value to you is personal and political: by making
US-centric choices the chief criterion of your government (at
times at great cost to your own people) you propose to elevate
your personal standing in the White House (and thus at home),10
and by using the alliance to rationalise your (security-diminishing)
choices at home, you plan to keep opposition forces domestically
in check. ‘The alliance’ is no longer a means to enhancing the
nation’s security; it has become the end itself.11
Third, you want to cleanse the country of, and distance the
government from, any significant legacy of the Labor years. Labor
equals the enemy. So your desire to do damage to Labor, to oblit-
erate its legacy, to overturn its policies even if eventually (re-)
claiming them as your own are often all-consuming passions. It
means that you are sometimes forced to trash policies and pro-
grams that build on or continue earlier Liberal measures.12And if
this, inadvertently, also buys you favour with Bush, so much the
better. Under your tenure, it becomes more important to act against
the interests of Labor than to act in the interests of Australia. As one
of the most respected analysts of your Party puts it,
. . . the primal opposition which structures [your] thinking is
not Australian and un-Australian, but Liberal and Labor. It
is this opposition that fuels [your] aggression, feeds [your]
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self-righteousness . . . and gives [you] the sharpness of focus
to seize on the opportunities which fate presents and exploit
them so ruthlessly for political advantage. For [you], if some-
thing is championed by Labor, then this is sufficient reason
to oppose it, no matter what the merits of the case.13
So what course of action do you follow in order to achieve
these goals? First, you ally yourself personally, and your govern-
ment, as closely as possible with the positions taken by the United
States. You seek to make yourself indispensable to the current US
leadership. This may at times prove painful (President Clinton
proving much less amenable to your overtures), but with President
Bush, you can make more headway. You can now begin to show
your loyalty in earnest. You instruct your officials at the UN to vote
with the United States whenever the opportunity presents.14
You further ingratiate yourself by committing Australia to
American adventures, such as the war in Iraq. This kind of eager-
beaver followership is not entirely popular; it means having to
fabricate or conceal intelligence and to strike down those who
oppose going to war on a lie. But that is a political cost you can
deal with by pulling out the loyalty-to-the-alliance card.
You also calculate you can increase your standing with Bush
and his administration by proposing a generous trade deal. Even
if it ultimately backfires and turns out largely to America’s
advantage and to Australia’s detriment, you handle the potential
political fallout by a deft combination of buying off the losers and
intimidating the critics of the deal and by feeding the right spin
to a compliant media. You are confident in any case that most
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people turn glassy-eyed on trade issues, neatly fencing off such
subjects from exposure on talk-back radio. You also take special
care to listen to US companies based in your country, allowing
them when necessary to speak on behalf of Australian industry;
you even invite some of them to help shape federal energy policy
and grant them the licence to act in ways they would be loath to
do at home.15
You rush eagerly to Washington when Bush calls in order to
embrace the proposals he pushes your way: ‘How about putting
your country’s future air combat capabilities in the hands of US
conglomerate Lockheed Martin?’ No problem, when can we sign
up? ‘And what about taking on the role of nuclear waste disposal
site in our new nuclear energy partnership plan? Let’s call it a
‘leasing’ arrangement—you lease the raw material and the spent
fuel gets returned to you.’ Great idea, no worries! And just in case
this is not enough to demonstrate your loyalty, you send your
youngest son to the United States to work on the campaign for the
re-election of George W. Bush. By the fourth term of your tenure
you identify yourself so closely with Bush and the Republicans,
that you step completely outside your mandate to hurl abuse at
the US opposition and one of their presidential aspirants. So much
for alliance building.
As for the negative driver, this is not one you wish to trumpet.
But it is such a powerful motivator that it tempts you to try to sink
or undo a host of measures that work to Australia’s advantage,
just because they happen to be associated with Labor’s tenure.
You do this even when these may have built on earlier Liberal
efforts, such as Australia’s cultural industry. Sometimes the
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prospect of jettisoning something associated with Labor also
offers up opportunities to serve America Inc. (such as the case of
blood sector contracts for plasma fractionation). As a principled
opportunist you find these occasions difficult to resist, even when
it means trampling the national interest. You will therefore have
few qualms about alienating major Australian assets, or attacking
important Australian institutions, or denying assistance to smart
Australian initiatives whenever the Labor legacy looms into view
and these begin to look too much like success stories from the
wrong camp. So you will think little of giving the national blood
champion’s contract to a US company, or demonising the world-
class Collins Class submarines, or presiding over a shrinking local
film industry, or sabotaging renewable energy initiatives.
As our exposition has suggested, we offer a three-fold explan-
ation for the Howard Government’s pattern of betrayal—for why
Howard and his carefully chosen and closely managed ministerial
team have prioritised American interests to Australia’s disadvantage
in so many critical sectors. Since the Prime Minister has centralised
power around his own person and framed the big decisions of his
government, we place primary emphasis on Howard’s own motiva-
tions. What drives the person behind the title? We posit as the most
important driver a quest for recognition and standing in which
status-affirmation is sought from an important external actor, the
United States. If Max Weber were alive, it is likely he would cite
it as an interesting case of how ‘status deprivation’ may orient
a political leader in unexpected directions in the quest to bolster
his political fortunes and build prestige into the power of office. The
pursuit of a close relationship with the US and its President,
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although necessarily constructed in the official terms of alliance
building, we conclude is powerfully driven by a status-deficit, a
quest for the recognition sorely missing in Howard’s 25-year climb
up the political ladder (hence the exaggerated importance attached
to being seen as a friend of the US President, being welcomed at the
White House, invited to the ranch, and so on).
Secondly, Howard seeks to identify himself and the Coalition
with alliance enhancement for domestic political (power) rather
than purely geopolitical (security) reasons. Behind the apparent
obsession with the US alliance lies a political calculus: it means that
certain government actions that more or less blatantly favour US
interests over Australian ones (as in those cases already examined)
can be sold as essential alliance-building, security-strengthening
measures. This ostensibly helps to keep domestic opponents in
check at the same time as gaining credit for Howard abroad.
Finally, but by no means least, John Howard is driven by a
determination to obliterate Labor’s policy legacy whenever the
opportunity presents itself, no matter how that might conflict
with or undermine the national interest. Labor created a blood
supply champion in the form of CSL—so Howard seeks to under-
mine it. Labor favoured a greenhouse gas emissions policy—so
Howard ignores it, in line with the United States. Labor esteemed
the arts—so Howard mocks them with the sardonic comment
that he stands for the average bloke. (And if Labor-legacy destruc-
tion also converges with a US-obliging measure, then so much the
better.) It is fortunate indeed that Labor never advocated eggs
for breakfast, because if they did, Howard would surely have
outlawed the keeping of chickens.
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Our analysis rests on the assumption that Howard has the
capacity to shape the policy landscape and drive his preferences
through. But this is no mere assumption. It is no secret that
Howard has controlled the government’s agenda by massively
reshaping the political system, shifting power from the public
service to the ministerial offices, and centralising control in the
Office of Prime Minister and Cabinet. Little escapes Howard’s
notice: ‘Discipline’, ‘attention to detail’, and a hands-on style
(right down to signing off on his ministers’ travel arrangements)
are the key to his capacity.16 It is testimony to the Prime Minister’s
capacity that his team has been variously described by journalists,
both conservative and moderate, right across the media as the
‘most controlling’ of any Australian government’, ‘octopus-like’
in its control of information, and headed by a ‘control freak’
whose ministerial team has instigated a ‘pervasive climate of
uncertainty, fear and retribution’.17 As former head of the Prime
Minister’s Department, Max Moore-Wilton, puts it, ‘There’s no
doubt that he leads his government, the Coalition Government,
and he leads his party . . . He leads from the front.’18 In short, ‘No
one has any doubt that this is his government.’19
The immediate question our analysis raises is: How does the
Prime Minister get others to sign on to his project? We cannot
simply assume that everyone in the Howard team sees the world
in the same way. But they do want the same thing—to stay in
power, preferably forever. Howard has offered them a recipe and a
strategy. But more than that, he offers his loyal followers a share
of the ‘loot’. The loot in this case may be honours or promotions,
lucrative perks and appointments, plum postings abroad or
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sinecures post-politics. Those who toe the line and stay the course
are amply rewarded. This may mean sometimes having to engage
in unpopular or unsavoury actions (‘dis-inviting’ Nelson Mandela;
ignoring the distress of a sinking ship and its drowning occu-
pants); it may mean having to incur the wrath of a particular
sector (by lowering quarantine standards that protect Australian
produce against diseased imports), or becoming a reviled public
figure (Peter Reith who carried the burden of the children over-
board affair). But no matter how ugly things might get in the
course of duty, one does this in the knowledge that the Prime
Minister always rewards the party faithful.20 But stray from the
course and oppose the Prime Minister and you will not only get
no loot, you will be banished from court.
POLITICAL CRINGE AS A LEADERSHIP TRAIT
But the deeper question is why would such a leadership strategy
gain traction in Australia? It would certainly get short shrift in
France and Germany, and make no headway at all in Spain and
Sweden, to say little of the reaction it would face in Japan
and South Korea. Our explanation for the Australian exception
(read ‘pattern of betrayal’) has placed more emphasis inward than
outward—on Howard the man and his personal and political
drivers, on a leader for whom the alliance is first and foremost a
political calculus, only secondarily a security issue.
In order to answer our question, we must set Howard in a
wider context. To make sense of such a leader, we need to focus
on Howard as leader of a country whose professional culture
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has long harboured within it important elements that express
an insidious self-dislike. Those elements include a tendentious
downplaying or denial of the country’s own achievements, contri-
butions and strengths. This politico-cultural syndrome—‘foreign
equals superior’, ‘overseas trumps local’—has been widely
observed as a trait that tends to prevail at the higher leadership
levels rather than at the grass roots. It also permeates the major
sectors of society, whether the political and business world, the
professions, or cultural and academic circles. Although originally
expressed as a cultural cringe and discussed as a tendency specific
to the local cultural-literary-artistic world,21 this mindset has never
been confined to the (high) cultural sphere; it is one that is broadly
influential in the world of politics and business. Whether it is the
dominant mindset or not is unimportant; what matters is that it is
influential, and that its influence may be heightened or down-
played by what governments do.
We emphasise the political nature of this mindset because of
the influence that political leadership tends to play in strengthen-
ing or weakening its hold. The impact of this powerful cultural
syndrome begins (finds its apotheosis) at the top with the Prime
Minister. John Howard is both product and today’s chief per-
petrator of this cultural trait (also known as the political cringe).
We speculate that Howard’s personal trajectory has helped to
entrench the mindset—one that doesn’t simply favour the foreign
(in this case, American), but both subtly and directly denies value
to the local. The United States has long been the Prime Minister’s
preferred other. In another era it would have been Britain, the
target of former leader Robert Menzies’ adulation. Menzies,
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however, did not exhibit the sort of personal insecurities and
cold political calculation that could so seriously distort the lens of
national interest—or perhaps he just lived in simpler times.
Howard’s cultural disdain (or political cringe) towards
Australian achievements stands at odds with his self-presentation.
As Prime Minister, John Howard works hard at being perceived as
a positive nationalist, rushing hither and thither to every military
event,22 seizing opportunities to stage state-like functions where
one can rally the community around national symbols. Howard
has so usurped the ceremonial role of the Governor-General—
from farewelling Australian troops to opening the Olympics and
acting as chief mourner at national memorial services—that
around 80 per cent of Australians can’t even name the nation’s
Head of State.23 This is nationalism in an important, but narrow
symbolic sense. Howard’s symbolic nationalism gives weight to
the shared experiences of community, which he uses for political
ends, as platforms from which to speak to ordinary Australians in
a language they can connect with.24 Much of this sort of national-
ism is costless, comes easily to him, and contributes to his appeal.
All the more reason then why it is odd for a political leader to feel
the need to publicly and consistently declare he is a nationalist, as
if somehow his loyalties and priorities were in doubt.25 As indeed
they are. For while the ability to manipulate the symbols, to speak
from the nation’s ‘centre’ is not to be underrated,26 it is one’s
actions that are most telling.
The Prime Minister, while master exponent of symbolic
nationalism has eschewed substantive nationalism (the desire to
preserve one’s country’s gifts and build on its achievements that
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comes from self-regard). By willingly putting the nation’s blood
and treasure at the disposal of another sovereign power, Howard
has failed to give his nationalism substance.27 Precisely here,
the Prime Minister’s public utterances about standing up for the
national interest are wildly out of kilter with his actions (and those
approved under his watch). It is in Howard’s actions that the polit-
ical cringe mindset is revealed. In documenting those actions, we
have found a pattern of critical choices more consistent with pro-
moting the national interests of the United States (and most
recently the interests of its Republican Party) than promoting the
real security, values, or economic prosperity of Australia.
Liberal leaders of the past have not always succumbed to
political cringe. As we have seen, there are plenty of instances
where Liberal leaders, like John Gorton, pursued policies that
valued Australian assets, interests, and institutions and sought to
strengthen them. We submit that where cultural confidence and
a strong sense of place has allowed some leaders, both Liberal
and Labor, to see virtue in striving to lift the country to higher
attainments, the cultural disdain of the current leader allows
him to see mostly folly and self-defeat in such ambitions. How
could Australians ever hope to achieve excellence or greatness
(outside sport) in the big departments of life? Under the present
ministerial mindset, so many such efforts and the policies that
underpin them seem to merit mockery, not emulation.
The important point is that the strength of such a mindset—
whether it means that you defer to a foreign government, buy its
civilian and military equipment, appoint its managers to locally-
grown firms, consult its experts, or fete its stars, critics, and
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celebrities—can be greatly diminished or magnified by the
political leadership of the day. Above all, the mindset gets reflected
and reproduced in the critical choices the government makes:
whether to boost the fortunes of American players in the
Australian blood market or bolster the capacities of the national
champion and lock-in self-sufficiency; whether to funnel billions
of dollars to US defence companies or foster the local capabilities
that sustain a defence industrial base; whether to choose products
because they are produced by one’s most important ally, or
because they offer advantages over those of contenders; whether
to subsidise foreign greenhouse polluters or remove the cap on
growth of local renewables; whether to aid the US to recoup its
beef markets or maintain your own high food safety standards;
whether to allow Hollywood’s saturation of the market or to
insist on growing an independent cultural industry.
POLITICAL CLEANSING OF AUSTRALIANINSTITUTIONS (OR HOW DOES HE GET AWAYWITH IT?)
Seriously damaging choices like those made by the Howard
Government have not passed unnoticed. Quite the contrary, they
have provoked extensive critical commentary by expert analysts.
But speaking out against unreasonable or unacceptable policies
should come with a health warning: do so at your own risk. The
brave-hearted who have spoken out, whether as shocked insider
observers or as disinterested experts, have often been either
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marginalised and overridden, or else threatened, demonised and
summarily banished from public life. As the pre-eminent analyst
of the Liberal-party puts it, ‘Those who voice informed opinions
which disagree with Howard’s position have been marginalised
and then dismissed’.28 The past decade is littered with the victims
of Howard’s aggressive intolerance for criticism or dissent.
In one sector after another, we see this process at work in
the way that journalists and researchers have documented the
strategic silencing of dissent. The Howard team has moved
systematically to secure its tenure by expunging the sources of
potential opposition, cutting off the free flow of information,
and removing critical checks and balances that limit power and
demand accountability.29 This debasement of the currency of
Australian institutions is both broad and deep. If one examines
what has transpired in the public service, the military and intelli-
gence services, the Senate, the media, our institutions of higher
learning and research (the ARC, CSIRO), as well as the statutory
authorities, one is led to conclude that Howard’s contempt for the
nation’s institutions is profound.30
‘Incestuous amplification’ is nonetheless a dangerous strategy.
It means surrounding oneself with those who agree, excluding
contrary views, and punishing critics so that the outcomes you
want are foregone conclusions. (Fortunately in a democracy like
Australia, unlike Soviet dissidents who were sent to the gulag,
critics who point to Howard Government wrongdoings are at
worst demonised or painted as mentally unstable and sent into
involuntary retirement.)31 But populating your decision group
with all those who (claim to) think identically to you so that the
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outcome is a foregone conclusion is not only a travesty of an open
society. It is also dangerous because it enables unlimited power,
fosters unaccountable government, and produces the disastrous
decisions that can lead a country to go to war on a false pretext—
hence the Iraq debacle. What Al Gore has called ‘the worst strate-
gic mistake in the history of the US’ and a ‘calamitous American
adventure’ was made in precisely this manner.32
As the critical checks on unlimited power continue to be
degraded and destroyed and the sources of criticism silenced in
this country, we must expect many more security-diminishing
decisions like those we have documented in this book. The Prime
Minister has applied himself with rigour and determination to this
project and the political cleansing of the landscape of Australian
institutions appears almost complete. This is a bad legacy for the
country, whichever party may be in power in the future. We
cannot but agree with the following prognosis:
There is a danger that John Howard’s form of political state-
craft will become entrenched as the national political norm.
The prime minister’s now routine manipulation of the truth
[and we would add: structural intolerance of disagreement]
poses significant problems for the long-term integrity of
our national institutions, including the great departments
of state. As time goes by, all are in danger of becoming
complicit in protecting the political interests of the govern-
ment rather than advancing the national interest of the
country. There must be a new premium attached to truth in
public life.33
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Is there any way out of this seemingly inexorable process that
drives Howard and his team to ever more reckless ‘games’ with
Australian interests? Truth in public life is by no means the whole
solution. But it is surely a base line for any party genuinely oriented
to governing in the national interest.
THE HOWARD TRAGEDY
Finally it is important to be quite clear about the purpose and
implications of our analysis which is neither anti-American nor
opposed to the American Alliance. Our focus has been the
Howard Government and its leader, John Howard. We have
sought to show that the choices made by this government have
diminished security in the process of pandering to a foreign
power. That American firms and the US economy are the intended
beneficiaries of Howard’s choices is beyond question. But the
benefits they win are not the subject of our analysis. Our task has
been to make sense of the pattern of betrayal that we have identi-
fied. We consider it important to try to understand why a political
leadership would be prepared to sell short its own country’s inter-
ests to favour those of a foreign power. The disturbing conclusion
to this exceptional case is that Howard’s actions have not only
jeopardised Australia’s real security, future prosperity, and values.
They have also left the alliance in a weakened state—on one hand,
tarnished by Howard’s imprudent personalisation of the relation-
ship and, on the other, debased by his overriding policy emphasis
on being liked (for being compliant), rather than being respected
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(for being sufficiently independent and self-regarding). As one
distinguished Australian intellectual highly regarded in Washing-
ton circles has observed, ‘Being liked is not the game in Washington,
it’s being respected.’34 An alliance only has meaning and substance
if the parties to it are autonomous. It seems deeply ironical that in
playing politics with the American alliance, Howard’s team should
end up diminishing this important strategic asset, in the process
creating something approaching a national tragedy.
Malcolm Turnbull, before becoming a Howard Cabinet min-
ister, when he was a forthright leader of the Australian Republican
movement, famously claimed that Howard had ‘broken the
nation’s heart’ in his manipulation of the failed referendum on
becoming a republic. Our conclusion leads to a similar kind of
observation, in that we see Howard himself as a tragic figure lead-
ing his country to a tragic outcome. Again, we do not use the
term lightly. For the ancient Greeks, a tragedy meant not some-
thing that is sad, but a series of converging elements that lead
inexorably to the downfall of a ‘great’ or ‘powerful’ person, an
outcome typically hastened by this person’s character flaws and
via manipulation by the gods. Leaving the gods to one side, in the
case of John Howard we see a figure who was once ridiculed, but
who stayed the course and persevered until his luck changed, and
who framed his political choices thereafter in such a way that his
standing and prestige would be enhanced. By edging closer to the
US President, and delivering favours to the United States, and
being rewarded with recognition abroad, he found that his pres-
tige at home grew as well, even while he was trampling Australian
interests in the process. The tragedy is that in any other period in
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history, Howard’s human failings—his ‘character flaw’—his desire
for status and his willingness to trade anything, even the national
interest, to bolster his personal-political positioning, would have
encountered a natural ceiling. His security-compromising actions
would have been exposed by an effective political opposition,
lampooned by an insightful and independent media, perhaps
even gently criticised by allies with an interest in an armed and
ready Australia. But the gods were conspiring against Howard,
and Australia, in this instance. For Howard’s personal foibles and
resulting security-diminishing actions have been facilitated and en-
couraged by a confluence of enabling forces at home and abroad.
The most significant of these are the presence of a strongly
mercantilist United States intent on seeking to expand its
commercial power abroad to counter rising Chinese and Indian
influence (and looking for every opportunity to manipulate
Howard’s US-centric stance to this end), and the absence of an
effective opposition and media at home that might expose his self-
serving political calculations. Howard has found himself in a
self-reinforcing cycle. Doing favour for the United States might
have started as an exercise in brinkmanship and prestige enhance-
ment. It might have been extended through the advantages
of sharing the loot with the members of his team. But it has
now become a kind of game with no other goal than to win, to
diminish the Labor opposition, and to cement his place in history.
This is a process that can only lead Howard himself, and the
country, to an unfortunate end: it is in this precise sense a tragedy.
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APPENDIX: SIDE LETTER ON BLOOD PLASMA
18 May 2004The Honourable Robert B. ZoellickUnited States Trade Representative600 17th Street, NWWashington, DC 20508
Dear Ambassador Zoellick
In connection with the signing on this date of the Australia-United StatesFree Trade Agreement (the “Agreement”), I have the honour to confirmthe following understanding reached by the Governments of Australiaand the United States during the course of the negotiation regardingtreatment to be accorded products derived from blood plasma (“bloodplasma products”) and blood fractionation services for the production ofsuch products:
1. Any contract with a central government entity of Australiafor blood fractionation services in effect on the date of entryinto force of the Agreement shall conclude no later than31 December 2009, or earlier if Australia deems it appro-priate.
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2. Australia shall undertake a review of its arrangements for thesupply of blood fractionation services that shall conclude nolater than 1 January 2007. The Commonwealth Governmentwill recommend to Australia’s States and Territories thatfuture arrangements for the supply of such services be donethrough tender processes consistent with Chapter 15(Government Procurement) of the Agreement.
3. Should the Commonwealth and State and Territory govern-ments reach agreement to make future arrangements for thesupply of blood fractionation services through tenderprocesses consistent with Chapter 15, Australia shall with-draw its Annex 15-A, Section 5 reservation regarding theprocurement of such services.
4. A Party may require any producer of blood plasma productsor supplier of blood fractionation services to fulfil require-ments necessary for ensuring the safety, quality, and efficacyof such products. Such requirements shall not be prepared,adopted, or applied with a view to, or with the effect of,creating unnecessary obstacles to trade.
5. A Party may require that blood plasma products for use inits territory be derived from blood plasma collected in theterritory of that Party.
6. Australia confirms that it will not apply any requirement foran applicant for approval of the marketing and distributionof a U.S. blood plasma product to demonstrate significantclinical advantage over Australian-produced products.
7. Article 21.2(c) (Scope of Application) of the Agreement shallapply to paragraphs 1 through 6.
I have the honour to propose that this letter and your letter in reply con-firming that your Government shares this understanding shall constitutean integral part of the Agreement.
Yours sincerely
Mark VaileMinister for Trade
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NOTES
1 THE AUSTRALIAN ANOMALY
1 Peter Hartcher, ‘A bit battered, but the hat still fits’, 16 February2007, The Sydney Morning Herald.
2 On the advice of his negotiating team, Trade Minister at thetime, Mark Vaile is reported to have urged Howard to walk awayfrom the deal. See Tony Kevin, ‘Labor must hold its nerve on theFTA’, The Canberra Times, 21 July 2004; and Christine Wallace,‘Bush rebuff stunned negotiators’, The Australian, 25 February2004. Noteworthy among the many opponents of the deal arethe views of trade experts Ann Capling (2004) and RossGarnaut, ‘FTA worsens our woeful trade outlook’, TheAustralian, 10 February 2004.
3 See Weiss, Thurbon, Mathews (2004).4 A stocktaking of the FTA’s impacts has yet to be undertaken;
among other things it will show a soaring trade deficit inAmerica’s favour, reflecting massive royalty and copyright out-flows, takeovers of innovative local firms, and the displacementof locally sourced and Asian components with more expensiveUS imports.
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5 See for example Grant (2004); Borgu (2004) or Hamilton (2004),as discussed in the following chapters.
6 For somewhat more nuanced expressions that nevertheless con-vey the same sense, see for example Owen Harries, ‘Don’t gettoo close to the US’, The Australian, 17 February 2004; OwenHarries, ‘End of simplicity’, The Australian, 1 December 2006;Bruce Grant (2004); Bruce Haigh, ‘Howard will sink with Bush’,On Line Opinion, 26 February 2007, available at: <http://www.onlineopinion.com.au/view.asp?article=5540>; or Richard Wool-cott and Paul Barratt, ‘Coping with the Alliance’, New Matilda,available at newmatilda.com. On the reason for ‘clamouring’ tobe invited to participate in the Iraq invasion force, Manne (2006:23) observes that Howard saw the moment he ‘had been waitingfor during his entire political life had finally arrived’.
7 Grant (2004: 107).
2 ENERGY
1 Jared Diamond in his book Collapse (2004), analysed the paradig-matic case of this insulation from accountability in his accountof the collapse of an entire society on Easter Island, where elitecompetition over religious totems encouraged over-consumptionof wood supplies, ultimately destroying the islanders’ survivalchances.
2 Energy Task Force, Department of Prime Minister and Cabinet,Securing Australia’s Energy Future (Commonwealth of Australia,Canberra 2004), p. 135, available at <http://www.pmc.gov.au/publications/energy_future/index.htm>.
3 On the Global Nuclear Energy Partnership, see the expositionby Edwin S. Lyman (2006) of the Union of Concerned Scientists;and on nuclear matters generally in Australia, see Falk, Greenand Mudd (2006).
4 See GNEP website, at: <http://www.gnep.energy.gov/gnepReliableFuelServices.html>.
5 Press briefing by Prime Minister, Hay Adams Hotel, WashingtonDC, 15 May 2006, available at <http://www.pm.gov.au/News/interviews/Interview1938.html>.
6 See Julie Macken, ‘Nuclear debate, part one: the plan’, NewMatilda, Wednesday 8 November 2006, available at <http://www.newmatilda.com/home/articledetail.asp?ArticleID=1913>.
7 See The Uranium Mining, Processing and Nuclear EnergyReview (Chair: Dr Ziggy Switkowski) 2006, available at<http://www.dpmc.gov.au/umpner/reports.cfm>.
8 See statements regarding the GE contract on the SILEX website,at: <http.//www.silex.com.au>.
9 For a discussion of the prospects for a high-level waste facility inAustralia, see Taylor (2006).
10 See ‘U.S.–India nuclear legislation advances in Congress’,International Herald Tribune, 9–10 Dec 2006.
11 Note that Australia remains simply an exporter of uranium, theraw material, although this fact is glossed over when the issue of‘nuclear fuel leasing’ is discussed. See Julie Macken, op. cit. andPaul Toohey, ‘The Big U-turn’, The Bulletin, 17 November 2006,available at: <http://bulletin.ninemsn.com/article.aspx?id=161844>.
12 See Turton (2004). This paper, by a respected researcher at theInternational Institute for Applied Systems Analysis, Austria,utilises the most comprehensive data available, through nationalsubmissions to the UNFCCC secretariat.
13 As Turton (2004) points out, eliminating these subsidies (thuscharging the full price for electricity consumed) would have theeffect of driving the industry to improve its efficiency or shuttingdown, with minimal dislocation to Australia.
14 See Turton (2002) on the aluminium smelting industry inAustralia, available at <http://www.tai.org.au/documentsdownloads/DP44.pdf>.
15 Toronto conference statement, ‘The Changing Atmosphere:Implications for Global Security’ (WMO 1989).
16 To set against this, Cabinet also agreed not to adopt measures thatwould be harmful economically or in trade terms, and would notmove in advance of actions taken by other major greenhouse gasproducing countries (that is, the US). See Foster (2000), p. 7.
17 Prime Ministerial Statement 1997: ‘Safeguarding the Future:Australia’s response to climate change’, Office of the PM, avail-able at: <http://www.pm.gov.au/news/media_releases/1997/GREEN.html>.
18 This special treatment involves recognition of the role of landclearing and its reversal, creating carbon ‘sinks’—an option notmade available to any other country. On this, see Hamilton(2001), especially Chapter 2, for a succinct account.
19 See Richard Baker, ‘How big energy won the climate battle’, TheAge, 30 July 2006; and the PhD Thesis by Pearse (2005) on thebusiness response to climate change in Australia.
20 See Murdoch University website, ‘The Australian CooperativeResearch Centre on Renewable Energy (ACRE) has ceased toexist’, at <http://wwwphys.murdoch.edu.au/acre/>.
21 See Jo Chandler, ‘Shown the door: scientists say cloudy thinkingcost them their jobs’, The Sydney Morning Herald, Weekend edition,11–12 February 2006, p. 7, available at <http://www.smh.com.au/news/national/shown-the-door-scientists-say-cloudy-thinking-cost-them-theirjobs/2006/02/10/1139542402662.html>.
22 See ABARE 1995 Global Climate Change Report.23 Commonwealth Ombudsman, ‘Report of the investigation into
ABARE’s external funding of climate change economic model-ling’, 1998, available at <http://www.comb.gov.au/common
24 Hamilton (2001) op. cit., p. 56. 25 See ‘Securing Australia’s Energy Future’, Energy Task Force
(2004), available at <http://www.dpmc.gov.au/publications/energy_future/> As environmental scholar Peter Christoffobserves: ‘The White Paper outlines an eight-year national planthat is . . . brazen in its aggressive affirmation of continuingfossil fuel use, bold in its confrontation with the government’sestablished critics of its energy and climate change policies, andchallenging for the renewable energy sector, which it antagon-izes’ (Christoff 2004).
26 Energy Task Force, Department of Prime Minister and Cabinet,Securing Australia’s Energy Future (Commonwealth of Australia,Canberra, 2004).
27 In 2006 the Lowy Institute issued a report on Australia’s decade-and-a-half commodities-driven boom (Quiet Boom by Dr JohnEdwards, chief economist of HSBC), where it is argued that infact the contribution of the minerals sector to the Australianeconomy is exaggerated, and much of the benefit is lost becauseof foreign ownership.
28 On the changes needed, see the comments by one of us,Mathews (2007a).
29 See Clive Hamilton, ‘Climate follies’, Newsletter #40, Sep 2004,p. 11, The Australia Institute, Canberra, available at<http://www.tai.org.au/documents/downloads/NL40.pdf>.
30 Richard Baker, op cit.31 See Clive Hamilton, ‘Keeping it in the family’, op cit.32 See the report of the Renewable Energy Policy Network for the
21st Century (REN 21 2006) for a survey of investment activityin renewable energies industries around the world.
33 For a comprehensive account of Australia’s MRET, see Kent andMercer (2006). The official website for MRET can be found at<http://www.greenhouse.gov.au/markets/mret/>.
34 For a recent review of the wind industry in Australia, seeDiesendorf (2006).
35 See the article by one of us ( JM) in New Matilda, ‘Orange-belliedpolitics’, 17 May 2006, available at <http://www.newmatilda.com/home/articledetail.asp?ArticleID=1562>.
36 See ABC Radio, PM program, 4 August 2006, ‘Campbell underpressure after wind farm backdown’, available at <http://www.abc.net.au/pm/content/2006/s1706710.htm>.
37 At the ANU, world-class work continued to be done in the solarcollector/solar tower technology, which is now being commer-cialised by the Australian company Solar Systems Ltd. The devel-opment is supported by a $1 million grant under the federalgovernment’s Renewable Energy Commercialisation Program<www.greenhouse.gov.au/renewable/recp/>. $1 million doesnot go very far in international new industry creation schemes.
38 See the press release announcing CS Solar AG’s capital raising, inJanuary 2005, at <http://www.nrel.gov/ncpv/thin_film/docs/gei_csg_pressrelease.pdf>.
39 Remark by Senator Christine Milne, leader of the Democrats, innewspaper report ‘“Climate of fear” in solar research’, byRosslyn Beeby, The Canberra Times, 30 May 2006.
40 Out of a huge literature, see for example Worldwatch Institute,Biofuels for Transportation (2006). A useful running commentaryis maintained by the Biopact weblog, at <www.biopact.com>.
41 See our discussion in How to Kill a Country (Weiss, Thurbon &Mathews 2004).
42 See the discussion by one of us in Mathews (2007b).43 On exemptions of biofuels from fuel excise taxes, see for exam-
ple the House of Lords report from the Select Committee on
European Union, “The EU strategy on biofuels: from field tofuel”, November 2006, available at <http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeucom/267/26702.htm>.
44 See the discussion by one of us in Mathews (2007c). 45 On ‘policy autism’ see Christoff (2005); and on ‘keeping it in the
family’ see Hamilton (2004), op cit.
3 RURAL INDUSTRIES
1 See USTR, ‘U.S. and Australia complete Free Trade Agreement’,8 February 2004, available at <http://www.ustr.gov/Document_Library/Press_Releases/2004/February/US_Australia_Complete_Free_Trade_Agreement.html>.
2 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2005. ‘Administration ofBiosecurity Australia: Revised Draft Import Risk Analysis forApples from New Zealand’, AGPS, Canberra. Available at<http://www.aph.gov.au/senate/committee/rrat_ctte/apples04/report/index.htm>.
3 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2005. ‘Administration ofBiosecurity Australia: Revised Draft Import Risk Analysis forBananas from The Philippines’, AGPS, Canberra. Available at <http://www.aph.gov.au/Senate/committee/rrat_ctte/bananas/report/index.htm>.
4 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2004. ‘Biosecurity Australia’sImport Risk Analysis for Pig Meat’, AGPS, Canberra. Reportavailable at <http://www.aph.gov.au/SENATE/committee/rrat_ctte/completed_inquiries/2002-04/pork/report/report.pdf>.
5 Australian Pork Ltd, ‘Pork industry wins quarantine battle’,Press Release, 27 May 2005; available at <http://www.australianpork.com.au/media/Pork%20industry%20wins%20quarantine%20battle%204%2Edoc>.
6 Federal Court of Australia 2005, Australian Pork Ltd v Director ofAnimal and Plant Quarantine, FCA 671, 27 May 2005; available at<http://www.austlii.edu.au/au/cases/cth/federal_ct/2005/671.html>.
7 Australian Pork Ltd, ‘Australian Pork’s legal challenge to thepig meat IRA’, Press Release, October 2005; available at<http://www.apl.au.com/media/APL%20Pork%20Legal%20Challenge.pdf>.
8 Federal Court of Australia – Full Court 2005, Director of Animaland Plant Quarantine v Australian Pork Ltd, FCAFC 206(16 September 2005); available at <http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/206.html>.
9 High Court of Australia, Result of Applications for specialleave to appeal, Sydney, 18 November 2005. Available at<http://www.hcourt.gov.au/reg istry/slresults/18-11-05S.htm> For a sample of press coverage, see: ABC NewsOnline,‘Pork producers lose High Court bid over imports’, 18 November2005, available at <http://www.abc.net.au/news/australia/nsw/northcoast/200511/s1509699.htm>.
10 Cited in ‘Australia allows California fresh grapes’, Western FarmPress, 16 March 12002. <http://westernfarmpress.com/mag/farming_australia_allows_california/>.
11 This section is based on the authors’ AJIA article, Weiss,Thurbon and Mathews (2006).
12 Japan itself is not BSE free, but it tests all slaughtered domesticcattle for BSE before it enters the human food chain, and it doesnot import beef from countries infected with BSE—until itannounced in December 2005 that it would resume someimports of beef from the US.
13 ‘Govt considers relaxing its mad cow disease policy’, AustralianAssociated Press, 7 September 2005.
14 See Weiss, Thurbon, and Mathews (2006).15 OIE stands for the French nomenclature Organisation
Internationale d’Epizootes, or International Animal HealthOrganization.
16 OIE Code, BSE, Chapter 2.3.13; available at <http://www.oie.int/downld/SC/2005/bse_2005.pdf>.
17 As we detail at length in our AJIA paper, although American offi-cials routinely claim that they have a ‘world class’ tracking andtesting system for BSE, US testing levels fall far below inter-national norms. Indeed, there is a substantial body of evidence(much of which has been published by the New Scientist Journal)to suggest that America’s testing regime is structured so as tomake the discovery of BSE cases highly unlikely. Indeed, NewScientist has reported that the US may be in the grip of a BSE epi-demic, the existence of which is suppressed by the limitations ofits testing system. See Weiss, Thurbon and Mathews (2006) fordetails.
18 Japan had imposed import restrictions on US apple exports in1994 in order to protect itself from fire blight. The US appealedto the WTO’s Dispute Settlement Body, which found in 2003that Japan’s requirements for orchard inspections—for 500-metrebuffer zones between infected trees and trees with apples in-tended for export to Japan, and chlorine fumigation—wereinvalid since they were not based on ‘scientific’ evidence—adespicably constructed ‘technicality’, but enough to get USlawyers over the line. At the time that this ruling ran out on30 June 2004, Japan and the US had met several times, but Japanwas holding a firm line in defence of its apple orchards—although it had issued a revision to its requirements. But the USinsisted on full retraction, and imposed trade sanctions worth
$143.4 million—the estimated trade loss from the banned appleexports (Weiss, Thurbon and Mathews 2004).
19 See for example Kyodo News report, carried by Dow JonesNewswires, ‘Japan Ag Ministry denies progress in Japan-USBSE talks’, 30 August 2004; available through TradeObservatory, at <http://www.tradeobservatory.org/headlines.cfm?refID=37025>.
20 The Australian Minister for Trade, Mark Vaile, states in the finalparagraph of the letter: ‘I have the honour to propose thatthis Letter and your Letter in reply confirming that yourGovernment shares this understanding shall constitute anintegral part of the Agreement’. In the Australian government’sguide to the Australia–US FTA, under the section entitled ‘WhatParts of the Free Trade Agreement are Legally Binding’,any side letter stipulated as ‘constituting an integral part ofthe Agreement’ is said to be ‘a legally binding part of theAgreement’ (Australian Government 2004: 4).
21 Chapter 7 of the FTA also commits Australia to ‘respecting’America’s quarantine-related regulatory systems and risk assess-ment even where America’s regulatory systems and riskassessment processes are substantially lower than our own—notto mention considerably lower than those of Europe and Japan,as we show below.
22 Somewhat ironically, Australia did until recently accept OIEguidelines on importing beef from Brazil. These guidelines,however, were exposed as seriously inadequate in 2004, whenBrazil experienced an outbreak of foot and mouth disease(FMD) in zones from which Australia had been importing, andwhich had been declared safe by the OIE. This led Australia’sBiosecurity Chief John Cahill to declare in 2005 that Australiawould no longer rely solely on OIE guidelines in setting its FMDquarantine standards (ABC TV 2005), raising further questions
about Australia’s agreement to prioritise OIE guidelines on BSEin the FTA.
23 Official Committee Hansard, Senate, Rural and Regional Affairsand Transport Legislation Committee, Estimates, 1 November2005, p. 78, available at <www.aph.gov.au/hansard/senate/commttee/S8862.pdf>.
24 ‘Transcript of press conference by US Trade Representative,Ambassador Bob Zoellick, and Australia’s Minister for Trade,Mark Vaile, on conclusion of FTA negotiations, Washington,Sunday, 8 February 2004’, emphasis added. Available at<http://www.ustr.gov/assets/Document_Library/Transcripts/2004/February/asset_upload_file425_5406.pdf>.
25 Ray (2005).26 Swift and Company, ‘Swift & Company reports second-quarter
results’, Media Release, 13 January 2005. Available at <www.swiftbrands.com/media/releases/Financials12Jan2005.pdf>.
27 See Griffiths (1998) for an analysis of the Australian meat indus-try from the perspective of the institutions (or lack thereof ) thatmade it less competitive with foreign rivals.
28 If you change your domestic rules to say it is safe to continueselling local beef even in the event of a local BSE outbreak, thenyour position on refusing the imported beef from countries withBSE is arguably undermined.
29 ‘ABA—No friend of Australian beef producers’, Cattle Councilof Australia, Media Release MR2004/32, 26 October. Availableat <www.cattlecouncil.com.au/images/4_PUBLICATIONS/MediaReleases/MediaReleases2004/MR2004_32_ABA_No_Friend_of_Australian_Beef_Producers.pdf>.
30 ‘ABA calls on PM to resolve Canberra’s suicidal power struggleover BSE regulations’, Press Release, 5 October 2005, available at<www.austbeef.com.au/Public/newslist.asp?svr=topnews&IsEvent=0&service=topnews&pgs=50&rid=15403&pct=&ct=&>.
31 The theory of ‘regulatory capture’ advanced by Nobel LaureateGeorge Stigler in 1971 has been widely employed to explain USpolicy outcomes across a range of industries, particularly agri-culture (Stigler 1971).
32 Author correspondence and interviews with representatives ofABA and Australia Pork Limited.
4 CULTURE
1 ‘Lost—and no wonder: On the small screen not only the accentsare thick’, The Sydney Morning Herald, ‘Spectrum’, 17 February2007. Spectrum p. 10.
2 See Australian Film Commission, Get the Picture (statisticaldatabase), available at <http://www.afc.gov.au/gtp/acompboxofficeozshare.html>.
3 ibid. 4 Greg Duffy, ‘Australian Television Content: The new culture
vultures’, Evatt Foundation Paper, June 2005, available at<http://evatt.labor.net.au/publications/papers/127.html>.
5 ‘Cultural industries’ are typically defined as ‘those industriesthat combine the creation, production and commercialisationof contents which are intangible and cultural in nature’ (seeUNESCO Cultural Industries and Enterprises website at:<http://www.unesco.org/culture/industries/trade/html_eng/question1.shtml>). These include ‘goods’ (for example. films,TV shows, books, plays, etc., all typically protected by copy-right); ‘services’ (for example, libraries, museums); and thosehigh-tech activities centred on the production and distribution ofcultural content (for example, audiovisual/multimedia tech-nologies). The term ‘creative industries’ is sometimes usedinterchangeably with ‘cultural industries’, but often refers to abroader category, encompassing such activities as architecture,fashion design and even advertising.
6 See Van Grasstek, ‘Treatment of cultural goods and services ininternational trade agreements’, UNESCO, Singapore 2005,p. 15, available at <http://www.unescobkk.org/fileadmin/user_upload/culture/Cultural_Industries/Singapore_Feb_05/Treatment_of_cultural_goods_and_services_GRASSTEK.pdf>.
7 American cultural exports are so cheap because America is ableto mass produce films, TV shows, etc., at home and recover thecosts of production in its large domestic market. With costsrecovered at home, the United States can afford to then exportthe same product overseas at bargain basement prices, typicallypricing local cultural content out of the market.
8 On the potential relationship between the creative industries andeconomic dynamism in the Australian context see Cunningham(2006). Other works in this vein include Wilenius (2002) andFlorida (2002).
9 For an overview of the emerging focus of governments fromthe United Kingdom to the United States, Asia and the Pacificon ‘creative industry’ promotion (variously defined) seeCunningham (2006). See also Jeni Harvie, ‘Movies, music workwonders for economy’ The Australian, 22 November 2005, p. 7.
10 It failed to halt the ensuing decline of Australian film produc-tion. For a history of the early years of feature film productionin Australia—a period during which it led the world—see ‘TheFirst Wave of Australian Feature Film Production: From EarlyPromise to Fading Hopes’, The Australian Film Commission,available at <http://www.afc.gov.au/downloads/policies/early%20history_final1.pdf>.
11 David Malouf, ‘The Making of Australian Consciousness’, TheBoyer Lectures, broadcast on ABC Radio National, 13 December1998, available at <http://www.abc.net.au/rn/boyers/98boyer5.htm>.
12 Few book-length treatments on Gorton’s contribution to thedevelopment of a more militarily, economically and culturallyindependent Australia exist. For the most balanced examinationof his contribution to Australian political life, see Hancock(2002).
13 Barry Jones, speech to parliament on the occasion of Gorton’s80th Birthday, Hansard, 9 September 1991, p. 960. As PrimeMinister, Gorton broke with the Liberal Party’s conservativeposition on a range of social, economic and military issues,which drew the ire of many in his own party. Following his lossof the leadership thanks to internal battles, Gorton resignedfrom the Liberal party and later even voted Labor and appearedin Labor election advertisements.
14 The AFTRS was conceptualised by Peter Coleman, Barry Jonesand Philip Adams, who had been commissioned by Gorton totravel overseas and report back on how other countries werebuilding the local talent base to support domestic cultural indus-tries. Gorton accepted every one of the recommendationsproduced in the resulting report.
15 Ironically, it was Gorton’s penchant for the arts that helped bringhim undone; an infamous visit to Liza Minnelli’s dressing roomafter a show at Sydney’s Chequers nightclub was one of the inci-dents that contributed to his downfall.
16 For a comprehensive overview of cultural policies from Gortonto Howard, see Throsby (2006).
17 Keating was particularly critical of the Australia Council and itsfunding strategies (Gallasch 2005: 39).
18 This is not to downplay the contribution of those governmentsbetween Whitlam and Keating, Fraser in particular was particu-larly active, redeveloping the National Institute of Dramatic Arts(NIDA) and introducing additional tax incentives for film pro-duction, among other things.
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19 Creative Nation: Commonwealth Cultural Policy Statement,October 1994, p. 7, available at <http://www.nla.gov.au/creative.nation/contents.html>.
20 The reaction of artists involved in the ‘new media’ arena toKeating’s Creative Nation statement was not entirely positive.Many felt they were ‘being cast as service providers, cash cowsin the new techno-economy.’ (See Gallasch op cit., p. 43).Nevertheless, the fact that Keating had a vision for the arts andwas willing to place the sector at the centre of national policymaking now sees him recalled as Australia’s Prime Ministerfor the Arts. Gallasch provides an enlightening examination ofAustralia’s world-class new media arts sector and the reversalof its fortunes under a decade of Howard Government and its‘political cooling of the climate for the arts’ (op cit, p. 7).
21 On Keating’s legacy in this area see Stevenson (2000); on theUnited Kingdom, Canada and New Zealand see Volkerling(2001).
22 Throsby (2006). 23 See Liz Jackson’s interview with John Howard, Four Corners,
ABC TV, broadcast 19 February 1996, available at <http://www.abc.net.au/4corners/content/2004/s1212701.htm>.
24 See Judith Brett (2005) for an enlightening examination of theway in which Howard sought, from the beginning of his tenure,to distinguish himself from Keating and endear himself to‘ordinary Australians’ by speaking ‘from’ the nation—as justanother ‘Aussie bloke’—as opposed to ‘to’ the nation (as part ofa governing ‘elite’).
25 On the response of the industry to liberal campaign see‘Government Ads: Insult To Injury’, Lauren Martin and JoyceMorgan, The Sydney Morning Herald, 2 October 1998, p. 21.
26 This is not to detract from the hard work of some individualmembers of parliament who have toiled behind the scenes to
address the innumerable problems facing the industry, such asSenator Kate Lundy, Shadow Minister for the Arts during 2004–05. Nevertheless, in the negative political climate detailed above,such individuals found themselves swimming against the tide.
27 ‘Nevin chides Howard over the Arts’, Tony Stephens, The SydneyMorning Herald, 22 January 2004, p. 2.
28 ‘Today’s Philistines’, Peter Garrett, Keynote Address to theAustralian Council of University Art and Design Schools AnnualConference, 28 September 2006, available at <http://www.petergarrett.com.au/c.asp?id=229>.
29 Apart from a few notable exceptions, including Graeme Murphyand Janet Vernon, who resigned as Directors from the SydneyDance Company in July 2006 citing ‘political indifference’ andresulting funding pressures on the company as the reason fortheir departure. See Paech, Vanessa., ‘War, Sport and Apathydrive creators away’, Arts Hub Australia, July 14 2006, availableat <http://www.artshub.com.au/au/news.asp?sId=97856>.
30 As David Marr reported in his 2005 Philip Parsons MemorialLecture ‘(Nevin) wasn’t thanked. Though she hadn’t said any-thing particularly rude, she had broken the rule of the trade thatcomplaints are kept in house’ ‘Theatre Under Howard’ PhilipParsons Memorial Lecture, Currency Press, 2005, available at<http://www.currencyhouse.org.au/documents/ch_d_parsons2005_david_marr.pdf>.
31 Cited in ‘Broken Arts—Cringe or Whinge?’, Rosemary Neill,The Australian, 16 April 2005.
32 For an overview of the efficiency dividend and its budgetaryimplications for arts companies see ‘Dying to be efficient’, DavidUren, The Australian , 31 March 2005, p. 14. Uren cites, forexample, the findings of a recent review into the impact of thedividend on Australian symphony orchestras, which found that‘with costs rising on average by 4 per cent a year, a company
that gets 80 per cent of its money from the government andis subject to the efficiency dividend has to increase its non-government income by almost 16 per cent a year just to standstill.’
33 See Neill, op cit. 34 Cited in ibid.35 See for example, ‘A Wallet full of Censorship’, David Marr, The
Sydney Morning Herald, 10 October 2005, p. 13; ‘Alert andAlarmed: Art Under Fire’, Lauren Martin, Garry Shead, MartinWesley-Smith, Stephen Sewell, Rosie Scott, Jonathan Biggins,Robert Connolly and Thomas Keneally, The Sydney MorningHerald, 29 November 2005, p. 18.
36 See for example, Andrew Bolt, ‘$1.6 billion Whinge’, Sun Herald,20 January 2004, p. 21; Padraic P. McGuinness, ‘Time we all sawthe bigger picture’, The Sydney Morning Herald, 24 June 2000, p. 36.
37 Although Australia’s cultural sector hardly places an inordinateburden on the public purse. As Stuart Cunningham points out:‘In quantum terms, the tax dollar spend on the arts is very smallindeed and judicious increases are certainly called for. TheProductivity Commission . . . estimates that Culture andRecreation, the sector where the arts are placed, received lessthan 1% of its income from the public purse. Compare this tothe enormous 14.3% allocated to some manufacturing sectors,and 9.5% to textiles, clothing and footwear. Clearly, the idea thatthe arts are more heavily subsidised by our hard-earned taxdollar than other sectors is laughable.’ Cited in KatherineBrisbane, ‘Imagining a Creative Nation’, Elizabeth Jolley Lecture,delivered at the Alexander Library Theatre, WA, on 3 August2006, p. 2–3. Available at <http://www.currencyhouse.org.au/documents/ch_d_kbrisbane_jolley2006.pdf>.
38 ‘Call for New Culture Leaders, Peter Aspden, Financial Times,21 June 2006, p. 2.
42 For details on the process of drafting of the convention see<http://portal.unesco.org/culture/en/ev.php-URL_ID=11281&URL_DO=DO_ TOPIC&URL_SECTION=201.html>.
43 Alan Riding, ‘Next lone U.S. dissent: Cultural diversity pactEntr’acte’, International Herald Tribune, 12 October 2005, Section 3,p. 2.
44 Molly Moore, ‘UN Body Endorses Cultural Protection’,Washington Post, 21 October 2005, p. 14.
45 Quoted in Emma-Kate Symons, ‘US fumes over cultural snub’,The Australian, 22 October 2005, p. 27.
46 See the US State Department Fact Sheet on the Convention,October 11 2005, available at <http://usinfo.state.gov/is/Archive/2005/Oct/13-882512.html>. The co-head of the USdelegation also stated that ‘this convention is actually abouttrade . . . (and) clearly exceeds the mandate of UNESCO’ andwent on to say that the text was ‘deeply flawed and fundamentallyincompatible with (the agency’s) obligation to promote the freeflow by word and image’ (Richard Martin quoted in ‘UNESCOAdopts Convention to Protect Diversity’, Julio Godoy, Inter PressService News Agency, 20 October 2005). The US Ambassador toUNESCO, Louise Oliver, said that the measure was ‘too prone toabuse for us to support’ (quoted in Moore, op cit).
47 ‘UNESCO Overwhelmingly Approves Cultural DiversityTreaty’, Bridges Weekly Trade News Digest, Vol.9, No.36, October2005. Available at <http://www.ictsd.org/weekly/05-10-26/story4.htm>.
48 Riding, 2005, op.cit.49 Address to the 33rd session of the UNESCO General
Conference, Ross Kemp, 5 October 2005. Available at< h t t p : / / w w w. m i n i s t e r. d c i t a . g ov. a u / k e m p / m e d i a /speeches/address_to_the_33_rd_session_of_the_unesco_general_conference>.
50 ‘Against Hollywood and Globalization: UNESCO and CulturalDiversity’, Florian Roetzer, Telepolis, October 21 2005. Availableat: <http://nyc.indymedia.org/en/2005/11/59989.html>.
51 Greg Duffy, ‘Australian Television Content: The New CultureVultures’ Evatt Foundation Paper, November 2005. Available at<http://evatt.labor.net.au/publications/papers/127.html>.
52 Ibid., emphasis added.53 ‘Australian cultural diversity under threat’, Australian Society of
Authors, 7 November 2003, available at <http://www.adelaideinstitute.org/Australia/diversity.htm>.
54 Jeffrey E. Garten, ‘Cultural Imperialism is No Joke’, BusinessWeek, 30 November 1998, p. 28.
55 Ibid.
5 DEFENCE
1 On politicisation of the military and intelligence services, see theinside story by Andrew Wilkie who resigned from the Office ofNational Assessments (ONA) in March 2003, in protest over themanipulation of intelligence in the lead-up to the Iraqi war(Wilkie 2004) and on politicisation of intelligence generally seeCollins and Reed (2005); on the politicisation of the publicservice see Barker (2007).
2 We coin this term to emphasise the downside of defence inte-gration, as opposed to the one-sided emphasis on the benefitsalluded to by Howard Government ministers.
3 See Kinnaird (2003). 4 ‘M1A1 Abrams tank agreement signed’, Minister for Defence,
9 July 2004. Available at <http://www.defence.gov.au/minister/Hilltpl.cfm?CurrentId=4021>.
5 Tom Allard, ‘Monster tanks would sink landing craft’, TheSydney Morning Herald, 11 March 2004.
6 This is an option pursued in Australia with the Bushmastertroop transport vehicle—under-funded and poorly supported(Cummine 2005).
7 Michael McKinnon, ‘Tank U-turn as parts sent to US for repairs’,The Australian, 2 January 2007.
8 An immediate alternative to the Abrams tanks was available inthe form of the self-propelled gun (SPG) which Brown (2004)argues would be a better alternative to the expensive and cum-bersome tanks. He says ‘Our principal security issues do notinvolve large-scale ground warfare.’ If the real security risks arepeople smugglers or terrorists, then ‘tanks are no use at all’. SeeGary Brown, ‘Why buy Abrams tanks? We need to look at moreappropriate options’, Online Opinion, 31 March 2004, available at<http://www.onlineopinion.com.au/view.asp?article=2104>.
9 ‘M1A1 Abrams tank agreement signed’, 9 July 2004, Minister forDefence, Media release 132/2004, available at <http://www.defence.gov.au/minister/2004/90704.doc>.
10 Brian Robins and Gerard Ryle, ‘Defence’s billion dollar bungles’,The Sydney Morning Herald, 1 May 2004. Available at <http://www.smh.com.au/articles/2004/04/30/1083224588493.html>.
11 See the report by McIntosh and Prescott (1999).12 Brendan Nicholson, ‘Collins sub shines in US war game’, The
Age, 13 October 2002.13 ‘Top US Admiral lauds quality of Australian Collins subs’,
Defence Daily International , Vol. 1, No. 30, 27 October 2000.
14 For overviews on the Collins-class submarine project seeDikkenberg (2001) and Kelton (2004); as well as the report fromthe Senate Standing Committee on Foreign Affairs, Defence andTrade (2006), particularly the favourable judgment on the projecton pages 53–60.
15 The Ministry of Defence stated: ‘The Government has decidedthat a comprehensive arrangement with the US Navy on sub-marine issues is in Australia’s best strategic interests and hastherefore decided that the selection of the combat system forthe Collins Class submarines cannot proceed at this time’. See‘Submarine combat system’, Minister of Defence, Media release,2001, available at <http://www.minister.defence.gov.au/2001/244.doc>; and ‘Australia and US sign submarine cooperationagreement’, Minister of Defence, 11 September 2001, available at<http://www.defence.gov.au/minister/Reithtpl.cfm?CurrentId=984>.
16 ’Submarine combat system’, Minister of Defence, 2001, avail-able at <http://www.minister.defence.gov.au/2001/244.doc>.
17 See the report by McIntosh and Prescott (1999: 29).18 On network-centric military doctrine (meaning the use of
inter-operable IT and electronic systems), see for exampleSchmidtchen (2005).
19 See A.W. Grazebrook, ‘US Pressure in RAN SubmarineCompetition’, Asia-Pacific Defence Reporter, August–September2000.
20 Senate Hansard, ‘Question and Answer Exchange BetweenSenator Chris Schacht and Michael Roche’, CPD, Foreign Affairs,Defence and Trade Legislation Committee, 29 May 2000, p. 109;emphasis added.
21 See Borgu (2004), a commentary published by the quasi-officialAustralian Strategic Policy Institute.
23 Carl Kopp, ‘Turbulence hits choice of Joint Strike Fighter’,Australian Financial Review, 1 July 2004, p. 7.
24 ‘Australia to join Joint Strike Fighter program’, Joint MinisterialStatement, 27 June 2002, available at <http://www.minister.defence.gov.au/2002/311270602.doc>.
25 Quoted in Stewart Cameron, ‘US rules out deal on F-22’, TheAustralian, 14 February 2007.
26 Stewart Cameron, ‘RAAF fighter buy stuns US’, WeekendAustralian, 26 October 2002, available at <http://www.pprune.org/forums/showthread.php?t=70934>.
27 ‘JSF deal turns into super hornets nest’, The Canberra Times,14 February 2007.
28 See Borgu (2004: 4).29 For Vice Air Marshall Criss’s full statement, see US Defense
Industry Daily <http://www.defenseindustrydaily.com/2006/10/retired-raaf-vicemarshal-abandon-f35-buy-f22s-updated/index.php>.
30 ‘US rules out deal on F-22 Raptor fighter jets’, Cameron Stewart,The Australian, 14 February 2007, available at <http://www.news.com.au/story/0,23599,21222473-2,00.html>.
31 ibid.32 MacFarlane simply guessed that Australian contractors might
get 1 per cent of the $400 billion project, which would provideAustralian firms with access to $4 billion of notional work. SeeJoint Ministerial Statement (2002) op cit.
33 The international aspects of the program are split into threelevels. The UK is the only Tier 1 supplier, reflecting its con-tribution of US$2 billion. Tier 2 suppliers are Italy and TheNetherlands (contributing $1 billion and $800 million respec-tively). Tier 3 suppliers are Turkey ($175 million), Australia
(US$144 million), Norway ($122 million), Denmark ($110million) and Canada ($100 million). Israel and Singapore are‘security cooperative participants’.
34 See Wright (2006) for further discussion on this point.35 On the global supply chain aspects see for example: Borgu
(2004); ‘An ‘enlightened’ decision? Australia and the Joint StrikeFighter’, Alan Stephens, Asia-Pacific Defence Reporter, February2003: 6–8; Tewes (2006); Wright (2006).
36 The latest issue of the Quadrennial Defense Review is 3 February2006. It was widely expected that the Review might pare backthe commitment to the JSF; but in fact it passes over the projectin silence. See Tewes (2006) for further comment.
37 ‘F-35 JSF program: US and UK reach technology transfer agree-ment’, Defence Industry Daily, 4 August 2006, available at<http://www.defenseindustrydaily.com/2006/08/f35-jsf-program-us-uk-reach-technolog y-transfer-agreement/index.php>.
38 ‘Norway goes wobbly on JSF’, Defense News, 28 November 2005,available at <http://www.defensenews.com/story.php?F=1372822&C=europe>.
39 ‘Comments at signing of Joint Strike Fighter Memorandum ofUnderstanding’, Minister of Defence, Washington, 12 Decem-ber 2006, available at <http://www.defence.gov.au/minister/NelsonMinTranscripttpl.cfm?CurrentId=6261>.
40 See Patrick Walters and Cameron Stewart, ‘Six billion flightof fancy’, The Australian, 8 March 2007; available at<http://www.theaustralian.news.com.au/story/0,20867,21342853-28737,00.html>.
41 See Thomson (2006: 34). These are difficult data to secure, andThomson (private communication) indicates that DoD is unableor unwilling to update these figures.
42 These data are from the Stockholm International PeaceResearch Institute (SIPRI) Arms Transfer Database.
43 The specification for the EWSPS for C130J aircraft is containedin the Defence Capability Plan 2004, identified as Project AIR5416 (Echidna) (Department of Defence 2004: 33).
44 For details, see Cummine (2005).45 The following information on the EW&C bid was disclosed to
Ms Angela Cummine by the interviewee with a request foranonymity; see Cummine (2005) for details.
46 See Robins and Ryle (2004: 35).47 See US House of Representatives Committee on International
Relations (2004: 28).48 See Cummine (2005) for details. 49 ‘Future directions in industry policy’, Minister of Defence,
24 November 2006, available at <http://www.minister.defence.gov.au/2006/ACF607.doc>.
50 We draw on a distinguished literature in analysing earlierAustralian Defence acquisitions strategies, including Bruni(2002); Cain (1999); Coulthard-Clark (1999); Dibb (1986; 1992);Earnshaw (1998); Evans (2001); Marsh (2006) and Ross (1995).
51 See for example essays by Ball (2000), White (2002; 2006),Dupont (2003), ‘Tinker with defence policy and risk attack’,P. Dibb, On-Line Opinion, 15 November 2001, available at<http://www.onlineopinion.com.au/view.asp?article=1941>;and, from the Armed Forces themselves, Lieutenant ColonelHodson (2003). The White Papers analysed in this chapter goback to DoD 1994 and up to DoD 2005, including those for 2000,2003 and 2004.
52 See Ball (2000) for a discussion of these points. 53 See Dupont (2003: 71). For US views on such strategic issues,
see: ‘Modern military threats: Not all they might seem?’, PaulMann, Aviation Week & Space Technology, 22 April 2002, 158 (16):56–7.
54 Dupont (2003) op cit. 55 See: Dibb (2001); as well as ‘Why we still have to be ready to
fight’, Hugh White, The Age, 30 July 2003, available at<http://www.theage.com.au/ar t ic les/2003/07/29/1059244616540.html>.
56 See White (2003) op cit. 57 This book by Ross (1995) has attracted little attention in
Australia, despite the depth of research that underpins its con-vincing argument.
58 Several eminent thinkers from both sides of the political spec-trum emphasise the value of greater self reliance in our militarypreparedness. See for example Aitkin (2007: 9); Cheeseman(1993); Kelton (2004); White (2002; 2006).
59 ‘Secrecy, evasion and deception’ is the title of Chapter 1 ofDesmond Ball’s 1980 study, A suitable piece of real estate: Americaninstallations in Australia. The situation has hardly improved.
6 BLOOD
1 The national system of blood supply includes blood collection,plasma fractionation (the large-scale separation of plasma intoa number of different blood products) and the distribution ofassociated blood products.
2 As the Australian Red Cross Blood Service (ARCBS) defines it,self-sufficiency means ‘having enough blood and blood productsto meet demand’ and achieving this ‘through a national bloodprogram without having to source products from other coun-tries’ (ARCBS 2004: 8).
3 Appendix 19 of the Australian Guidelines for the Registration ofDrugs (AGRD). The AGRD became the Australian RegulatoryGuidelines for Prescription Medicines (ARGPM) in 2004 andnational self-sufficiency in blood products is protected in
Appendix 9 of this document. The ARGPM, in accordance withthe side letter, no longer contains the clause regarding the need todemonstrate clinical advantage (see below) (ARGPM 2004).
4 Except where otherwise indicated, this section is based onARCBS (2004: 7), the Flood Report (2006: 193) and the StephenReport (2001: 86).
5 Most recently, CSL signed a five-year contract with the NationalBlood Authority, which began in January 2005 when its 11-yearcontract ran out (‘CSL seals five-year Australian plasma productssupply deal’, Paul Sonali, Reuters News, 23 December 2004). TheNational Blood Authority, created in 2003, now acts on behalf ofall nine Australian governments, contracting with the fraction-ator to purchase the plasma products and providing these tohospitals and clinics free of charge. The Therapeutic GoodsAdministration (TGA) is responsible for regulating standards forall plasma used in Australia.
are not manufactured in Australia, including both recombinant(synthetic) and plasma-derived products—could only be sold inthe domestic market by being registered under two separateprocesses. The first was under Appendix 19 of the AustralianGuidelines for the Registration of Drugs where registration wasrestricted to plasma products that demonstrated clinical superi-ority over the local product. Under the new Guidelines for theRegistration of Drugs, this requirement was discarded to pavethe way for a US supplier to take over CSL’s contract (see discus-sion of the side letter below); the ARCBS Submission to theFlood Review links this change to the government’s commit-ments given in the side letter (ARCBS 2006). The second isunder the Orphan Drug Program (introduced in 1998), whichallows the import of ‘orphan drugs’ (products used to treat,
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prevent or diagnose rare diseases) that may not be commerciallyviable in Australia (Stephen Report 2001: 152).
8 See ARCBS (2004: 4); and Flood Report (2006).9 See Dr Brenton Wylie quoted in ‘Why infected donors’ blood
was given to patients’, Gerard Ryle, The Sydney Morning Herald,15 May 2003, available at <http://www.smh.com.au/articles/2003/05/14/1052885298025.html>.
10 Cited in ARCBS (2004: 8). 11 Article XXIII of the WTO’s Plurilateral Agreement on Govern-
ment Procurement sets out the principles for exclusions, spellingout the right of signatory nations to exempt from open tenderingthose strategic areas deemed necessary for national safety andsecurity: the safety and protection of human health, the safetyand protection of animal and plant health, and military security.
12 Use of IVIg in Australia is growing at an annual rate of 15 percent as a result of new applications, leading to greater recourseto higher-risk imports using plasma from paid donors. SeeS. Parnell, ‘Blood sell’, The Australian, 10 March 2007.
13 As the 2006 Flood Report on Australia’s Plasma Fractionationobserves, Baxter is one of only three foreign suppliers thatenjoys the benefits of restricted competition in our plasma pro-curement system. And benefit hugely it does by convincing thegovernment to buy its pricey synthetic (non-plasma) productsknown as recombinants. In fact, after CSL, Baxter is the govern-ment’s next most favoured supplier, accounting for some$68 million dollars of the Australian blood products bill. To putthis in perspective, Baxter’s slice of the pie is more than half ofCSL’s entire contract income for plasma fractionation.
14 Baxter International is one of the world’s largest producers ofrenal, intravenous therapy and blood products.
15 See ‘CSL faces fight on home turf ’, Brett Foley, AustralianFinancial Review, 29 July 2003, available at <www.factiva.com>.
17 ANAO (2003:18).18 Of course, value for money is reflected not simply in a one-off
contract price. It derives from a much larger calculation: thetaxes reinvested in the country, the investment and employmentcreation, the new tax revenue thereby generated, and the exportincome made possible by having a national fractionator likeCSL. Send these activities and assets offshore with a foreign frac-tionator and all of these losses are turned into ‘costs’ to thenational economy. So even if CSL’s prices were shown to behigher than average (which has not been shown), the benefitsassociated with local procurement would very likely still out-weigh the foreign alternative.
19 Note that these conditions apply only to US firms because theyare contained in the FTA with the United States.
20 ‘America Inc.’ is the term we use to convey the close collabora-tion between US government and US industry that takes place asa matter of routine in securing selected US interests in domesticand foreign markets.
21 See ‘Submission to the Joint Standing Committee on Treaties’,Baxter Healthcare Pty Ltd, 14 April 2004, available at <http://www.aph.gov.au/HOUSE/committee/jsct/usafta/subs/SUB14.pdf>.
22 Ibid.23 Ibid. 24 Indicated by the bold italicised font.25 See Davies (2004) on the health impacts of the AUSFTA.26 Ibid.27 To accommodate Paragraph 5 of the side letter, DFAT has stated
that ‘This paragraph acknowledges the right of governments tohave policies that blood plasma products are derived from bloodplasma collected in their own territory. This allows Australia topreserve its policy on using plasma collected from Australianblood donors’ (DFAT 2004b).
28 According to a 2003 DHA submission, Australia aims for self-sufficiency in fresh blood products and plasma derived products,but not in alternatives to blood products (i.e. genetically engin-eered recombinants).
29 See Davies (2004).30 See DFAT (2004b).31 See Paragraph 3 of the side letter (Reservation to Government
Procurement Chapter). The Government Procurement Chapterof the Agreement applies to purchase of goods and services,except where specifically excluded, by listed government agencies.Procurement of Plasma Fractionation Services has been excludedfrom coverage of the Government Procurement Chapter (SeeAnnex 15-E Services).
32 Tony Abbott, ‘Minister for Health and Ageing Press Release-Plasma Fractionation Review’, 15 December 2006, emphasisadded. Available at <http://www.health.gov.au/internet/ministers/publishing.nsf/Content/C0FCD37A22EC8436CA25724500AE646/$File/abb161.pdf>.
33 See DFAT (2004b).34 From Article XXIII of the WTO’s Agreement on Government
Procurement: ‘. . . nothing in this Agreement shall be construedto prevent any Party from imposing or enforcing measures: neces-sary to protect public . . . safety, human, animal or plant life orhealth . . .’ (GPA 1994).
35 See Flood Report (2006: 27).36 See Hurt (2006).37 America’s strategic targeting of plasma products was no stab in
the dark; in the global market, plasma products constitute a 6 bil-lion dollar industry on an annual basis, and the most costly part(40 per cent) of the production process lies in the raw material,plasma, which now costs over US$100 a litre. Blood productmarkets are seen as a growth area, with rising demand for
products like IVIg and new possibilities like artificial blood(recombinants).
38 For the evidence on the US approach to procurement of innova-tion from US firms in agriculture, health, defence, IT andbiotechnology more generally, see sources such as Hurt (2006);Weiss and Thurbon (2006); Ruttan (2006); and Connell (2004:7–9).
39 See USTR (2006: 31). 40 As a savvy marketer, Baxter promotes its products by sponsoring
and rewarding hospitals, medical and patient groups who buy itsproducts, including the Haemophilia Society which advocatesfor Advate. See for example The Hemophilia Bulletin, available at<http://www.carolkasper.com/11_5_05/BullAug2005.pdf>.
41 See ‘Baxter wins hemophilia drug OK’, Bruce Japsen, ChicagoTribune, 26 July 2003, available at <http://www.aegis.com/news/ct/2003/CT030708.html>.
42 See Flood Report (2006: 53).43 US Food and Drug Administration 2004: ‘Warning Letter to
Baxter Healthcare Corporation’, 25 May, see <http://www.fda.gov/foi/warning_letters/g4735d.htm>.
44 See ‘ACCC institutes against Baxter Healthcare Pty Ltd’, NewsRelease, 1 November 2002, Australian Competition andConsumer Commission, available at <http://www.accc.gov.au/content/index.phtml/itemId/88219>.
45 See ‘Healthy penalties in Caremark fraud case’, CrawfordGreenburg, Chicago Tribune, 17 June 1995, available at<http://www.aegis.com/news/ct/1995/CT950602.html>.
46 See ‘Corporate Profile: Baxter International’, Congress Watch,1998, available at <http://www.citizen.org/congress/civjus/prod_liability/biomaterials/profiles/articles.cfm?ID=5662>.
47 See ‘FDA notifies health care professionals of problem withBaxter Healthcare’s Meridian Haemodialysis Instrument’, US
Food and Drug Administration, 16 December 2005, available at<http://www.fda.gov/bbs/topics/NEWS/2005/NEW01275.html>; and see the Class 1 Recall Notice at <http://www.fda.gov/cdrh/recalls/recall-092805.html>.
48 See ‘Sealed in blood’, Pittsburgh Post-Gazette, 7 May 1997, avail-able at <www.factiva.com>.
49 See ‘Illinois court denies class certification in blood productscase’, Health Care Fraud Litigation Reporter, 10(10), 11 April 2005,available at <www.factiva.com> Pharmaceutical LitigationReporter, 2002. ‘Baxter Healthcare loses appeal of $18 milliondamages award’, 17(11), available at <www.factiva.com> and‘Japanese suits on HIV-tainted blood settled’, Andrew Pollack,The New York Times, 15 March 1996, available at <http://query.nytimes.com/gst/fullpage.html?sec=health&res=9E01E7DC1639F936A25750C0A960958260>.
50 See Business Wire 1994., available at <www.businesswire.com>;see also ‘The North Today’, 15 November 2003, available at<www.factiva.com>.
51 See US FDA Warning Letter, 25 May 2004, available at <http://www.fda.gov/foi/warning_letters/archive/g4735d.htm>.
52 Ibid. pp. 205–07.53 See Flood Report (2006: 205–07), emphasis added.54 See our discussion of Australia’s role in US strategy to take back
our beef markets in Japan by lowering our (‘BSE-free’) standardson mad cow, Weiss, Thurbon, and Mathews (2006); and foreffects on Australian industry more generally, see Weiss,Thurbon and Mathews (2004).
55 Sir Ninian Stephen was Governor-General of Australia from1982 until 1989.
56 Stephen Report (2001: 89).57 Under the Plasma Fractionation Agreement, the Common-
wealth had a unilateral option to extend the contract with CSLto June 2009, provided this was done by June 2002.
58 See JPCAA (2004: 24).59 JPCAA (2004: 21).60 In its review, the JPCAA commented that it was ‘surprised by
the apparent lack of planning and foresight shown by Healthwith regard to its handling of the PFA extension option review’(2004: 22).
61 Barker (2007: 126–7).62 See ANAO (1999: 52), emphasis added.63 These comments were recorded in 2004 by the JCPAA (2004:
23).64 Ibid., p. 24, emphasis added.65 Ibid., emphasis added.66 See ‘Bad blood over FTA’, Sean Parnell, The Australian, 16 May
2006, available on Bilaterals website¸ <http://www.bilaterals.org/article.php3?id_article=4725>.
67 See Bambrick, Faunce and Johnston (2006).68 Ibid. 69 The ARCBS has long argued that any departure from self-
sufficiency in blood products would impact on Australia’s longstanding policy and risk management strategy. It has been vocalin its opposition to moves to process blood overseas, and its chiefexecutive has written to every donor voicing opposition to theproposal (ARCBS 2004).
70 See Weiss, Thurbon, and Mathews (2006).71 Accessed in 2006 before the release of the review, and subse-
quently removed from the website. 72 These conclusions are succinctly put in Bambrick, Faunce and
Johnston (2006). 73 Both the Red Cross (ARCBS 2004) and the Stephen and Flood
Reports (2001; 2006) see this as a high probability. 74 See ‘Plasma Deal Delivers CSL an R&D winner’, The Australian,
17 February 2007, p. 29; Sean Parnell, ‘Abbott may lift mad cowblood ban’, The Weekend Australian, 10–11 March, 2007, p. 2.
1 ‘America Inc.’ is the term we use for the US government-businesspartnership and its institutionalised culture of cooperation,which drives US foreign defence and economic policy.
2 See Richard Ackland, ‘Another one sacrificed in the name of theAlliance’, The Sydney Morning Herald, 16 February 2007. p. 11.
3 Hence feeding to the media the ‘shocking’ story of CSL beingallocated 2 per cent of blood plasma collected for research anddevelopment purposes, painted as an ‘unfair subsidy’ to a privatefirm unreasonably shielded from international competition. See‘Plasma Deal Delivers CSL an R&D winner’, The Australian,17 February 2007, p. 29.
4 Josef Joffe, ‘Annan, an indecisive hero’, International HeraldTribune, 9 December 2006, p. 9.
5 Rostovtzeff (1928: 228–9).6 On the list of nicknames, mostly coined by his Liberal col-
leagues, ‘the rat’ would appear to be the least offensive. Themost offensive have been documented by Alan Ramsay in ‘Inmugsville, where payback beats politeness’, The Sydney MorningHerald, 25 October 2003; the coining of such nicknames byHoward’s own colleagues suggests a deficit of respect to say theleast. See, for example, M. McCallum, Run, Johnny, Run: The storyof the 2004 election (Duffy & Snellgrove 2004).
7 Channel 9’s Helen Dalley puts it succinctly: ‘Written off politi-cally in the 1980s after a drubbing at the polls, snubbed by hisown party, sneered at in the media as Little Johnny, by the mid-1990s, the nowhere man was being hailed the comeback kid.’‘Howard’s Way’, Sunday (TV program on Channel 9), screenedon 10 October 2004.
8 As veteran columnist for The Australian, Paul Kelly, observes,‘Politics is everything to John Howard and he judges himself
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very much by political outcomes’. Similarly, Helen Dalleyobserves that when asked in a 1999 interview celebrating hisquarter century as a taxpayer-funded MP ‘Personally, what doyou feel was your greatest achievement?’ Howard’s revealingresponse was: ‘Coming back. I was written off 10 years ago,almost to the day. I came back, I kept going and in the end I wassuccessful.’ As Dalley puts it, Howard ‘saw his greatest achieve-ment in political terms rather than anything he’d actually donefor the country thus far’. ‘Howard’s Way’, ibid.
9 Collins and Reed (2005); Wilkie (2007: 185). 10 Thus when Howard says ‘Australia is treated with greater respect
and taken more seriously on the world stage today than 10 yearsago’, almost certainly he is tacitly referring to the perception hehas of himself (as reported in the Sun Herald, 7 April 2006, p. 7).For many commentators, there is virtually no domain in whichAustralia has gained respect under Howard’s tenure; thoughmany believe the respect it has lost has been considerable.
11 Howard’s alliance exploitation game has cemented the allianceas the ‘Eleventh Commandment’, as former diplomat and DFATofficial Bruce Grant (2004) has noted.
12 Judith Brett offers an incisive analysis of Howard’s anti-Laborobsession, observing that he is driven to divide the world into‘us’ and ‘them’: ‘Critics putting arguments and reasoned differ-ences are treated as opponents and shoved into the Labor [read‘enemy’] camp.’ (Brett 2005: 42).
13 Brett (2005: 41–2; emphasis added).14 See this link ranking countries that vote most often with the US
at the UN <http://www.jewishvirtuallibrary.org/jsource/UN/UN_votes04.html. Australia did not appear in the rankingsprior to 2000; since then we have ranked in the top four>,behind Israel, Palau, and the Marshall Islands.
15 For example, Alcoa’s influence on the federal government’s 2004White Paper on Energy.
16 Wayne Errington and Peter Van Onselen, ‘You lucky, luckybastard!’ The extent of John Howard’s political genius’ paperpresented at the John Howard’s Decade Conference, ANU Canberra,March 2–3, 2006.
17 On the media, see Ester (2007), and on the culture of fearHoward has instilled in the public service, see Barker (2007), andMichael Costello, ‘Fear Has Muzzled Australia’s Senior FederalBureaucrats’, The Australian, 21 April 2006, p. 16.
18 ‘Howard’s Way’, ibid. 19 Louise Dodson, ‘At the centre of attention’, The Sydney Morning
Herald, 23 February 2006.20 For a long list of the plumb public service jobs awarded to
Howard supporters throughout his tenure see Louise Dodson,‘Plenty of Cheques, few balances for these plumb jobs’, TheSydney Morning Herald, 21 January 2006, p. 51, and PamelaWilliams, ‘Howard’s Legacy: An entrenched, hand picked elite’,Australian Financial Review, 16 July 2004, p. 1.
21 When coined by literary critic A. Phillips in the 1950s, the termmeant deference towards the cultural achievements of others.‘unthinking admiration for everything foreign (especiallyEnglish) which precluded respect for any excellence that mightbe found at home’ (1980: vii). Although criticised for overgener-alising (Hume 1993), the concept has broad resonance today:DEST’s website had this to say: ‘By cultural cringe we mean aknee-jerk, unthinking admiration for authorities overseas inplaces like England or, perhaps today, the USA.’ EnvironmentMinister Robert Hill (1996–2001) defined a related term ‘envi-ronmental cringe’ in a 2000 address to the Sydney Institute as‘Australia’s penchant for failing to assert its traditions and accom-plishments.’ (see <http://www.environment.gov.au/minister/
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env/2000/sp10feb00.html>); even business leaders in the IT andcommunications sector see ‘the Australian government’s culturalcringe’ as one of the ‘biggest issues’ hampering the uptake ofexcellent local products, simply because they are local (LilliaGuan, ‘Supporting Australian business’, Crikey.com, 2006, avail-able at <http://www.crn.com.au>.
22 As historian Mark McKenna notes, ‘Wherever there is a cup oftea to be had with the military, John Howard is there.’ (cited inBrett 2005: 38).
23 See for example Jason Koutsoukis, ‘Ladies and Gentlemen,President Howard’, Sunday Age, 26 November 2006, p. 15.
24 Judith Brett conveys this understanding of Howard with rareinsight (2005: 32–40).
25 Howard has emphasised that he is a ‘nationalist’ from one end ofhis tenure to the other. See his address to the Liberal PartyTasmanian State Council dinner in 1997: ‘I am not a centralist; Iam a nationalist’ and in 2007 his press conference at the mouth ofthe Murray River: ‘I am a passionate Australian nationalist’. Forthe 1997 speech, see <http://www.pm.gov.au/news/speeches/1997/taslib.html>; for the 2007 press conference, see <http://www.pm.gov.au/news/Interviews/Interview2351.html>.
26 In a seminal essay on ‘Centre and Periphery’, anthropologistEdward Shils (1975) underscores the role of a central valuesystem in creating social cohesion. Howard’s instinctive under-standing of this point (expressed in efforts to invoke or exploitshared experiences and collective memories), too often dis-counted by his multicultural opponents, is expertly analysed byJudith Brett (2005: 40). She notes that ‘Because whenever he hasevoked a national “us” he has been accused of really demonisinga non-national “them”, Howard’s critics have been unable todevelop any effective or plausible counter-strategies for talkingto their fellow Australians. If you regard any talk of “us” as
illegitimate, it is not clear to me whom you are going to talk to.Nations are not simply formed and defined by their oppositionto or difference from some Other; they are also formed anddefined by shared experiences and collective memories. Theyhave centres as well as borders . . . Howard speaks persuasivelyfrom that centre.’
27 In reality, Howard has not ‘failed’ since, as we have shown, ithas never been his project. On the contrary, judged by the US-centric political strategy that he has pursued, Howard hassucceeded.
28 Brett (2005: 43).29 Writing in the Australian Financial Review, Geoff Barker observes
that ‘. . . under John Howard . . . Australia seems to be emulat-ing aspects of countries like China, Singapore and Malaysia. . . countries where dictatorial or dominant governments have asecurity of tenure that allows them to implement long-termsocial, political and economic plans without the fear of beingturned out of office.’ See ‘PM marginalises dissenters’,Australian Financial Review, 17 October 2005.
30 See the comprehensive analysis by Clive Hamilton and others inthe collection Silencing Dissent (2007).
31 Former Army lieutenant colonel and senior intelligence analystAndrew Wilkie describes his experience in Wilkie (2007: 191).Ridicule, on the other hand was reserved for the 43 eminentformer Australian military and intelligence chiefs and seniordiplomats who in a letter called for a return to ‘truth in govern-ment’—publicly lambasted by the PM’s minders as ‘dodderingdaiquiri diplomats’ and ‘disgruntled old men’. Distinguished warrecords it seems were no grounds for respect. See Grant (2004:132–3).
32 See remarks by Al Gore on NBC’s Today Show, with Matt Lauer,6 December 2006, available at <http://thinkprogress.org/2006/12/06/gore-iraq-bush/>.
33 Rudd (2006: 30). 34 Owen Harries, SBS Dateline, 27 July 2005. Harries, a radical con-
servative who commands respect on both sides of the Pacific,puts it candidly: ‘A reputation for being dumb but loyal and eageris not one to be sought.’ On the contrary, he argues, what thealliance needs is discrimination and balance plus a degree ofscepticism: ‘Australia must learn to be as good an ally as itcan be, while maintaining its freedom of choice.’ See ‘End ofsimplicity’, The Australian, 1 December 2006, p. 12). Similarpoints are made by former Liberal PM Malcolm Fraser, ‘Theend of our independence?’ The Age, 14 July 2003, available at<http://www.theage.com.au/articles/2003/07/13/1058034872660.html>.
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