The power to deal : the domestic origins of the shift in Australia's trade policy in the 1990s and early 2000s

Abstract

In mid-1997 the Cabinet of the Howard government decided to approve the negotiation of explicitly preferential trade agreements, overturning a political consensus that had developed over the preceding five decades that trade policy should be non·discriminatory. The move indicated a fundamental shift in the intent of trade policy, from being primarily a tool for productivity-enhancing domestic economic reform to become much more closely integrated with the government's domestic and international political aims. The purpose of this thesis is to assess how and why this polit,-y shift, with its far-reaching implications for economic development, occurred. In seeking to develop an account of the Howard government's decision to negotiate preferential trade agreements, two propositions regarding state behaviour and trade policy formation are examined. The first, which was espoused by the Howard government itself, is that the decision to negotiate preferential trade agreements was a pragmatic response to a changing international policy environment characterized by faltering progress toward multilateral trade liberalization and the proliferation of preferential trade agreements. The second proposition, which owes much to work in the field of political economy, is that trade policy is driven and shaped by the demands of politically influential material-based societal interests. In examining these propositions this study concludes that the international environment is a necessary, but not in itself a sufficient, factor in explaining the policy shift. Similarly, although organized economic interests were important in helping implement the government's decision to negotiate preferential trade agreements, they did not drive it. Instead, the evidence gathered indicates that the Howard government's decision to negotiate preferential trade agreements, though influenced by developments in international trade policy and supported by some private interests, was driven by partisan political considerations. The findings of this study indicate that Prime Minister John Howard and senior colleagues viewed trade policy primarily as an instrument to help advance geopolitical goals and domestic political and electoral ascendancy rather than as a means to drive economic development and reform, and used it to that end. In executing this strategy Howard and his advisers were aided by a political institutional architecture in which an electorally-successful prime minister could wield substantial trade policymaking authority - an arrangement that fostered policy entrepreneurship of the kind that led to the negotiation of the Australia-United States Free Trade Agreement.