Current Account Deficit Grows to $31 bn, seems unpayable -- Free Trade, WTO
My interest lies in the ongoing debate regarding free trade. Having read publications from the USA, and followed the local debate for some time, I have come to the inconclusive opinion that maybe free trade, as argued back in the thirties, in its purist form, was a good idea. It was a form of barter, your excess produce for goods you wanted and could not produce yourself. While this was equal, it was equal.
However, as time went on Australia's export contracts would, increasingly, be written in foreign currencies. So there was a need to sell to obtain the required currency to finance import purchases. Had they been able to write the export contracts in Australian currency our trading position would have been one of strength. Our trading partners would have had to sell to us, in order to gain Australian currency, to finance their purchases from us.
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This was managed to a certain degree, but two other obstacles to good trading emerged, even though our external trade is not in any serious imbalance.
The first of these was the floating of the dollar. No one ever quite knows how much a currency fluctuation will effect a contracted price. Not so long ago the "little Aussie battler," in relation to the greenback, was worth twice what it is worth today.
Some time ago coal miners negotiated a 12% decrease in coal prices to Japan, shortly afterwards the dollar was devalued against the Yen, which in effect gave the importers an actual 17% discount. This was similar to the devastation foreign currency loans from Switzerland caused when our currency value was manipulated down in relation to the Swiss currency.
The second problem emerged when Australia's foreign currency reserves were run down, if not depleted. This problem has been managed, incorrectly as it turns out, by encouraging foreign investment.
As this foreign currency came into Australia it was immediately used to finance some imports, and also to correctly finance funds exiting the country. These included profits, dividends and interest. When Australia expends these funds they have to resort to borrowing foreign currency, to keep the lines of trade open and pay the above.
Hence, last year we had a current account deficit of about 31 billion dollars and a frightening, unpayable, foreign debt. No matter what we do now, our position can only get worse if we continue to push for more and more international trade.
It is an incredible fact that if in one year we were able to trade equally, we would still go further into debt because of the insatiable demand for interest on the foreign debt as it now stands, repatriation of profits, dividends and investments. If a solution exists it has not been published.
Our free trade has become anything but free. -- © Neil Forscutt, NSW, in Progress, Melbourne, July-August 1999, page 14.
Useful links about "Free" Trade:
International Labor Organisation - Report on Child labour
Human Rights for Workers - the crusade against global sweatshops
Suffer the little children - a special series published by the Ottawa Sun
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