National Insecurity: The Howard Government's Betrayal of Australia

Nat Insecurity-PAGES 26/4/07 8:43 AM Page i Much of this book goes beyond my expertise but there is a theme and the ...

Author: Linda Weiss | Elizabeth Thurbon | John Mathews

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Nat Insecurity-PAGES

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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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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).


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NATIONAL INSECURITY THE HOWARD GOVERNMENT’S

BETRAYAL OF AUSTRALIA Linda Weiss, Elizabeth Thurbon and John Mathews


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First published in Australia in 2007 Copyright © Linda Weiss, Elizabeth Thurbon, John Mathews, 2007 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act. Allen & Unwin 83 Alexander Street Crows Nest NSW 2065 Australia Phone: (61 2) 8425 0100 Fax: (61 2) 9906 2218 Email: [email protected] Web: www.allenandunwin.com National Library of Australia Cataloguing-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, Australia Printed in Australia by McPherson’s Printing Group 10 9 8 7 6 5 4 3 2 1


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CONTENTS Acknowledgments Acronyms

viii ix

1

The Australian anomaly

1

2

Energy

13

3

Rural industries

65

4

Culture

95

5

Defence

133

6

Blood

175

7

Political strategy and political cringe

221

Appendix: Side Letter on Blood Plasma

247

Notes

249

Bibliography

287


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ACKNOWLEDGMENTS LW, ET and JM would like to thank those Australian and American government and industry representatives who shared with us so honestly their ideas and experiences—you know who you are! A huge thanks to the talented team at Allen and Unwin, especially our remarkable publisher Elizabeth Weiss, wonderful publicist Kelly Doust, and excellent production team, particularly Catherine Taylor and Pedro Almeida. Our gratitude to the Burleigh crew for their suggestions and insights. And last but not least, ET would like to thank Caru Candra, Anthony Jebb and Kenneth Wallace, for the journey.

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ACRONYMS AAC ABA ABARE

Australian Aluminium Council Australian Beef Association Australian Bureau of Agriculture and Resource Economics ACA Australian Coal Association ACRE Australian Cooperative Research Centre on Renewable Energy ADF Australian Defence Force AFC Australian Film Commission AFTRS Australian Film Television and Radio School AMIC Australian Meat Industry Council ANAO Australian National Audit Office ANFL Australian Nuclear Fuel Leasing ARCBS Australian Red Cross Blood Service ASC Australian Submarine Corporation AUSFTA Australia-US Free Trade Agreement BSE Bovine Spongiform Encephalopathy ix


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CCA COOL CSG DHA DMO DoD ELISA EW&C EWSPS FDA FTA GHGs GNEP HLW IAEA IEA IRA IVIg JPCAA JSF MBM MLA MRET NBA NFF NNPT OIE

Cattle Council of Australia Country of Origin Labelling (for beef ) Crystalline Silicon on Glass (photovoltaic cells) Department of Health and Ageing Defence Materiel Organisation Department of Defence Enzyme-Linked ImmunoSorbent Assay (test for BSE) Early Warning and Control aircraft Electronic Warfare Self-Protection Suite Food and Drug Administration (US) Free Trade Agreement Greenhouse Gas emissions Global Nuclear Energy Partnership High Level (radioactive) Waste International Atomic Energy Agency International Energy Agency Import Risk Assessment Intravenous Immunoglobin Joint Public Committee of Accounts and Audits Joint Strike Fighter project Meat and Bone Meal Meat and Livestock Australia Mandatory Renewable Energy Target National Blood Authority National Farmers Federation Nuclear Non-Proliferation Treaty World Organisation for Animal Health (Organisation Internationale d’Epizootes)


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Acronyms

PFA RECs SRMs UAV UIF UNESCO USDA USTR vCJD WHO WTO

Plasma Fractionation Arrangement Renewable Energy Certificates Specified Risk Materials (for BSE) Unmanned Aerial Vehicle Uranium Industry Framework United Nations Educational Scientific and Cultural Organisation US Department of Agriculture US Trade Representative (office of ) (Human) variant Creutzfeldt Jacob Disease World Health Organization World Trade Organization

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1 THE AUSTRALIAN ANOMALY

The Howard Government has for the past decade loudly proclaimed itself the champion of national security—its leader adopting the ‘tin hat’ as his crown.1 John Howard has lost no opportunity to declare himself a ‘nationalist’; and together with his ministerial team, makes much ado about governing ‘in the national interest’. Indeed, under Howard, the Coalition government has sought to make ‘security’ and the national interest its defining feature—taking the country to war in Iraq to defend against terrorism; keeping illegal immigrants aggressively at bay; and softening the rule of law to observe and apprehend persons suspected of subversive activities. More than any postwar Prime Minister before him, John Howard has placed national security at the centre of his claim to leadership. 1


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In National Insecurity we expose the myth of the Howard Government’s security-enhancing credentials. Our argument is that while Howard’s team has been working assiduously to maintain the symbolism of security—the ceremonial flag-waving, the naval sweeps to the north, the farewelling of the troops—in its actual policy choices it has been pursuing a remarkably different course with quite different outcomes. In the five sectors we examine— energy, rural industry, culture, defence, blood—the preferences, decisions and commitments made by Howard and his team do much to disadvantage Australia’s interests and diminish our security. In short, in National Insecurity we uncover a central paradox at the heart of the Howard Government: a government that vigorously promotes itself as the guardian of national security, but whose actions, choices and commitments in critical policy domains effectively undermine that security and trample the national interest. In a highly interconnected world, it is widely agreed that national security embraces much more than conventional defence against physical attack. It also means having self-sufficiency in blood and blood products; choosing defence equipment based on its superior performance and strategic relevance; securing sustainable energy supplies; and maintaining uncompromising standards for animal and plant health. And while admittedly not a ‘security’ issue so much as a ‘national interest’ one, we can add to this list maintaining a vibrant and viable domestic cultural sector since it goes to the heart of a country’s values, independence and sense of its own achievements. In each of these sectors critical to Australia’s interests we find a government-led counter-force at work: a self-sufficient blood


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sector, which postwar governments have worked hard to achieve, now directly threatened by Howard’s commitment to open the national blood market to US commercial interests; defence equipment that is routinely purchased because it is American rather than because it is the best, most reliable or most suited to the nation’s strategic needs; energy plans that block the growth of sustainable options and carve out a high-risk future as a nuclear waste disposal site; a decisive shift in quarantine rules from disease prevention to disease management in catering to US commercial interests in the rural sector; and a cultural sector, once nurtured by bipartisan support, shrunk to the point of oblivion after a decade of desertion and derision, replaced with American stories, voices and values. Our examination of key decisions taken in these five sectors draws attention to the anomalous nature of the Australian experience. Under Prime Minister Howard, the Australian government has shown itself to be a uniquely willing ‘ally’ of the United States in the battle to destroy our nation’s unique advantage in agricultural export markets; fight our industries’ right to defend themselves against disease-compromised US imports; risk our nation’s safe and secure supply of blood products so that a US firm can tender for Australian contracts; override competitive processes and marginalise domestic defence suppliers to favour American contractors (even when superior or more suitable local alternatives may be available); refuse to support a United Nations agreement to promote our own cultural industries; reject an independent energy security policy in favour of following the Carbon Club’s addiction to fossil fuel and most recently the Bush administration’s search for a nuclear fuel waste dump. On a scale of 1 to


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10, if 5 is security-neutral, our findings lead us to rank Howard’s pattern of policy choices at 0 to 2. Since these are sectors critical to a country’s security, economic prosperity, and values—that is its national interests—it stands to reason that national governments normally strive to avoid measures that threaten these sectors’ viability. That a government might not just fail to avoid but actively countenance measures disadvantageous to its own country—in so many critical policy areas—is arguably without precedent in the modern world. By most normal standards of governing in developed democracies, Australia appears to be a conspicuously deviant case demanding analysis and explanation.

A PATTERN OF BETRAYAL In National Insecurity we trace these deviant decisions at the political level, and marshal the evidence to demonstrate that they constitute a ‘pattern of betrayal’ by the Howard Government of its own country. ‘Betrayal’ is not a term to be used lightly. And we do not use it thus. We do not use it to describe an isolated event or one-off action, or a series of innocent mistakes, or actions pursued under duress. We reserve this description for a very special application— for a whole cluster of actions that are consistent in one respect above all: they are neither supportive of, nor neutral towards, Australia’s interests. On the contrary, these actions work to the great disadvantage of our security, our long-term prosperity and


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our values. When all the evidence is laid before us, ‘betrayal’ is the one term that closely fits the pattern we trace. We have been researching this evidence since 2004—a fateful year for Australia. It was the year our government signed a trade agreement with the United States, much to the intense dismay of its own negotiators who advised the government to walk away from the deal, and much to the disquiet of expert advisors—just about every non-aligned expert in the land willing to use their wits and speak freely.2 For a government that marketed itself on the claim to superior security and economic credentials, here was robust evidence of a stupendous contradiction—a deal that not only failed to deliver substantial benefits to Australia, but which was actually damaging to its national interests, both economic and social.3 In view of what was being done in Australia’s name in the trade arena, it seemed important to expand our research into other areas. In that fateful year, we began to pay much closer attention to what the Howard Government was doing in other policy sectors vital to Australia’s interests.4 We became Howard watchers. The rationale was this: if our Prime Minister could go so far as to knowingly damage his country’s own economic prospects with the trade deal, what else might he (and his loyal team) be prepared to do? And to what purpose? To find the answers to these questions, we have cast our research net as widely as possible to include sectors critical to the national interest, where policy shifts and controversial decisions have emerged most dramatically over the course of Howard’s tenure. Chief candidates for this analytical treatment are the


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nation’s supply of blood and blood products; the government’s acquisition of defence equipment; the nation’s energy security and not least its cultural and rural industries. We set out to examine the critical choices, the commitments, and the policy shifts taken in each of these sectors, posing a simple question in each case: how are Australia’s interests affected? Peering through the national interest lens we were struck by the anomalous nature of the outcomes. That is to say that none of the government’s critical undertakings in these sectors advance Australia’s interests; all of them undermine or submerge its interests; and some have been decidedly security diminishing by any measure. Many other political commentators have noted the US-centric choices of the Howard Government in particular policy areas, suggesting how they disadvantage the national interest.5 But this book is the first to pull these disparate and often impressionistic observations together, to ground them in extensive research, to extend them into new decision-making arenas, and to identify a pattern—a strategic consistency in the government’s choices that raises serious questions about the allegiance of our political leadership and the legitimacy of its national security credentials. We close our exposition by offering a comprehensive explanation for this betrayal.

THE ARGUMENT But we cannot leave the analysis there. After all, incredulity is the natural response to such a finding: ‘Betrayal? Why on earth would


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a political leadership act so consistently against the security, prosperity, and values of its own country? It doesn’t make any sense.’ Indeed, it does not—at least not if one adopts the usual national interest perspective. Disbelief would be our own initial reaction to such a thesis. And the reason is that like most people, we assume that the premise for government action is promoting or defending the national interest. That is after all what governments are supposed to prioritise in their foreign dealings (if not always in their domestic ones). But consider for a moment a gestaltswitch—adopt a different perspective—and these actions begin to make a different kind of sense. As we shall demonstrate in subsequent chapters, the Coalition government under Howard’s leadership has been serving a different set of interests—those that align closely with the commercial and political interests of the White House, its President and the Republican Party specifically and of the United States more generally. Ah-ha! The US alliance! It is tempting to try to link the various US–centric choices we examine in blood, energy, defence, culture and rural industry to some sort of ‘alliance building’ exercise, to explain away the choices as a way of strengthening our national security by removing all boundaries to what is ‘ours’ and by submerging what is ‘ours’ under ‘theirs’. It’s a startling idea, one that Howard’s political spin-doctors might not be too uncomfortable promoting, and superficially plausible if you do not think about it too closely. But start to peer into the substance behind the labels ‘alliance building’ and ‘national security’, as we do in the following chapters, and this proposition soon crumbles.


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There is no question that Howard is a keen user of the language of alliance and national security since this offers a politically acceptable, impersonal way of justifying US-centric choices that might conflict with Australia’s interests. But we argue that Howard’s choices should not be confused with ‘alliance building’ or ‘security-enhancing’ measures; nor are they intended that way. While virtually all leaders since WWII have been committed to the alliance, Howard’s readiness to oblige the Bush administration exceeds what most reasonable people would regard as either normal, necessary or prudent for a healthy state-to-state relationship. Several eminent commentators from different sides of the political spectrum have offered insights into what is right or wrong with Howard’s approach to the alliance—too obsequious, too craven, too sycophantic, too servile, too inexperienced are just some of the negative characterisations to have surfaced in recent years.6 While broadly agreeing with these analyses, we take a different view about the drivers behind Howard’s pro-US policy choices. Howard has made the choices that we document in this book not because he seeks to do good for Australia’s security (the opposite outcome being the usual result), but because he seeks to do good for himself and the party that keeps him in power. Howard’s use of the alliance is driven overwhelmingly, we conclude, by a political (read also ‘personal’) calculation, not a security one. This is admittedly a strong conclusion that at first blush may seem beyond belief. However, when one considers the evidence assembled in this book, this conclusion appears inescapable. Fundamentally, Howard’s appeal to the idea of the alliance (as distinct from its reality) rests on a political calculation of his own


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devising. We propose—and shall argue at length in the concluding chapter when all the evidence is presented—that any convincing explanation for Howard’s authorship of this erosion of the Australian interest must also take into account Howard’s peculiar political trajectory which has shaped a personal quest for affirmation and recognition—the status or prestige factor. Howard’s tenure in office would appear to be framed by a long-standing search for status, manifested in his over-eagerness to serve American interests and to be liked by the American President. It has also been framed by an unremitting drive to expunge and overturn initiatives associated with his Labor predecessors. One of Howard’s greatest political achievements has been to mask this agenda in the language of alliance building, instrumentalising the idea of the alliance for chiefly personal and domestic political purposes, as distinct from geopolitical or security-enhancing motives. Of course, as we indicate in the concluding chapter, Howard and his government do not operate in a vacuum, and at any other time in history the security diminishing actions we detail in the chapters that follow may have been tempered or negated by an effective political opposition, a more independent or inquisitive media, or a different kind of American administration. Unfortunately however, indeed tragically, domestic and international circumstances have worked only to support and amplify Howard’s human failings; his quest for political status at all costs—even at the cost of his own country’s security and livelihood. In this respect it would appear that it is the famous social scientist Max Weber, rather than military philosopher Carl von Clausewitz (both heavyweight German thinkers) who might offer


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a better way of coming to grips with the choices that underpin Howard’s pattern of betrayal. While Clausewitzians would emphasise the ‘geopolitics’ or play of international forces in shaping national choices (the Howard Government’s official construction for signing on to a disadvantageous trade deal, for example), Weberians would inject the search for status and prestige into their power analysis. On the evidence, we conclude that Howard’s unprecedented willingness to serve US political and commercial interests, no matter what the cost to Australia, makes little sense outside his drive for recognition and standing. While there is some cultural basis to this American followership—a form of ‘political cringe’ on the part of senior figures in the government—Howard’s peculiar trajectory has given this ‘insecurity’ a new and dangerous twist. What has perhaps done most to unmask Howard’s political project were the Prime Minister’s skirmishes in early 2007 with the US Democrats and his attack on their presidential aspirant, Senator Barack Obama. As Howard imprudently weighed in to US electoral politics, he made the partisan and personal nature of his relationship with the US transparent, openly campaigning for the Republicans and impugning an entire side of the US political system (accusing it of unwittingly aiding and abetting the terrorists by seeking an exit strategy from Iraq). By stepping outside his mandate as the elected leader of this country in order to champion the Republican cause, Howard has demonstrated that the alliance counts for less than his personal relationship with George W. Bush. That the alliance is too important to be used for such personal objectives—that it must be respected primarily as a relationship


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between peoples, not people, goes without saying; thankfully the US–Australia alliance is sufficiently long-standing and robust to outlive Howard’s personalisation and politicisation of it. But the main point, to be developed at the end of our discussion of the evidence, and as the Obama episode has made abundantly clear is that strengthening ‘the alliance’ (as a geopolitical-security relationship between two nations) is not the paramount priority of Prime Minister Howard. It should be emphasised that the substance of this book and the thrust of our argument do not concern the United States or what its government may or may not have done to damage Australia’s interests. That the United States pursues its interests with skill and determination is neither remarkable nor reprehensible. America is not the target of our analysis. Only the Australian government can be held to account for the decisions taken in its name. Nor do we enter the debate about the intrinsic value of the American alliance, which clearly has bipartisan political backing, is broadly supported in the Australian community, and is generally understood to be Australia’s most vital security arrangement.7 Rather, this book is about the Howard Government’s manipulation of the idea of the Australia–US alliance, and ultimately Howard’s debasement of the alliance for personal-political ends. It is about the politically calculated use of ‘alliance building’ language to justify policy decisions that neither strengthen the alliance nor advance Australian interests, but rather serve the personal-political goal of status-building through association with the world’s leading superpower. It is about the strange set of


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domestic and international conditions that have tragically converged to favour Howard’s personal-political ambitions. And finally, it is about the people of Australia, who must pay the price.


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2 ENERGY

Let us take you to a strange and wondrous land. Imagine a country that was blessed with abundant supplies of energy resources—glorious sunshine, copious wind, wave power potential unparalleled, geothermal resources and land aplenty to grow biofuels—but insisted that its future lay with digging up coal and burning it or shipping it abroad. Imagine a country that argued late into the night at the Kyoto global warming conference in 1997 to get a special deal, trying everyone’s patience, and then refused to ratify the treaty because George W. Bush wasn’t going to ratify it either. Imagine a country that accepted Chinese students to do PhDs in its leading university-based solar power research centres and then sent them back to China to start photovoltaic businesses and grow wildly rich, but never allowed its own entrepreneurs to do the same. 13


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Or a country that adopted the world’s first mandatory target for renewable energies to help meet Kyoto targets, but then refused to extend those targets as soon as the Bush administration turned its back on Kyoto, killing off the wind energy industry that had flourished under its protection. Or a country that finished off the rest of its wind energy industry by allowing its Environment Minister to arbitrarily overturn an approved wind farm on the grounds that it might kill one orange-bellied parrot a year. To cap it all, what about a country whose Prime Minister found nuclear religion in 2006 after being invited to Washington and into the ‘nuclear fuel’ club. Now, with the Prime Minister’s blessing, the country is on its way to becoming the world’s nuclear waste dump. A fitting end for such a country some might say? Welcome to Australia under the Howard Government.

THE HOWARD APPROACH TO CREATING ENERGY INSECURITY Affordable and stable energy supplies are critical to a country’s security and prosperity. Global warming has added a new dimension to this national interest equation because the carbon-based energy we rely on is fast destroying our own habitat. Governing in the national interest would therefore dictate a degree of prudence—at the very least an openness to the mounting evidence of climate change, not aggressive denial. Prudential leadership in the


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national interest would dictate a policy response that seeks to be part of the solution, not an exacerbation of the problem. Changing the energy security equation and addressing the connected problem of global warming are challenges that confront leaders across the globe. However, vested economic and political interests everywhere slow down the capacity to change. When leaders have incentives to preserve the status quo in pursuit of power and privilege, when they know they will not have to suffer the political or economic costs of their actions and are confident of escaping punishment for inaction, they succeed in insulating themselves from the damaging consequences of their policy choices.1 Halting this self-destructive spiral is not just a local Australian problem. However, in at least three ways, leadership choices over the past ten years have made the Australian experience in the energy field quite distinctive in the world of developed democracies. Each choice has momentous consequences for Australia’s energy security. First, on global warming, the Howard leadership has consistently denied its relevance or reality, as well as any likelihood of its connection with human activity—sneering at the Kyoto initiative in company with the world’s worst polluter. Howard maintained this denial until 2006, when public awareness of the problem’s severity made his position untenable. Second, on alternative energy supplies, the Howard leadership has taken special care, via acts of both commission and omission, to inhibit the development of renewable energy industries in Australia, a country blessed with unlimited sunshine, wind, and geothermal energy sources. Third, in 2006, John Howard himself committed


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Australia to a US-led partnership promoting nuclear energy as a solution to the hitherto ‘non problem’ of global warming. As we show, Howard’s objective has been to create a receptive environment for a US-centric strategy in which it will appear ‘natural’ for Australia not simply to ramp-up uranium exports, but also to serve as a recipient of and receptacle for other countries’ nuclear wastes. Terminological innovation (brought by Howard from Washington) has been key to creating an environment receptive to this plan. In the future, Australia will not be selling nuclear fuel but leasing it. And like any good property owner it will expect its leased material to be returned—in the form of radioactive waste. ‘Nuclear leasing’ has become the jewel in the crown of Howard’s energy strategy. Howard has consistently sold his energy choices as being in the national interest, while, in reality, undermining the nation’s real security. He has done so in three ways: by following the lead of the United States and refusing to become part of an international treaty to curb global warming; by curbing the growth of alternative (renewable) energy sources, leaving the country as a hopeless laggard in the brightest industries of the twenty-first century and instead subsidising fossil-fuel producers; and by bequeathing Australia as a future radioactive waste dump for the world, to be used principally by US nuclear operators and US-sanctioned nuclear operators in India (and probably China). We present the evidence that fleshes out these points. Stripping back the language used to deflect, disguise and conceal these actions, we will show how the Howard Government has effectively undermined the energy security of Australia.


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Let us start with the most recent episode involving nuclear energy—a picture-perfect piece of wedge politics assiduously promoted by the Prime Minister, as illustrated in the Nicholson cartoon.

Source: Nicholson of The Australian newspaper, <www.nicholson cartoons.com.au>

THE NUCLEAR REVIVAL—PREPARING AUSTRALIA AS A WASTE DUMP After the disasters at Three Mile Island and Chernobyl, nuclear power as an energy source lost its appeal in most countries. Leading nuclear reactor companies had not built a nuclear power station for the past 20 years. Even the Prime Minister’s own white paper of 2004 on energy matters noted that: ‘While industrialised countries on average generate 24 per cent of electricity from nuclear power,


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Australia is not contemplating the domestic use of nuclear power’.2 But global warming has given the industry a new lease of life. By mid2006, the Prime Minister was impressing on Australia the nuclear energy debate that we ‘had to have’. What was the catalyst for this sudden change of tune? Nothing less than a new proposal from the Bush White House—an ‘exciting’ proposal that would have Australia playing a novel role in the international nuclear fuel cycle. The prospects for nuclear energy in a new, greenhouse-gas aware world have not been lost on US nuclear energy interests. Big profits are foreseen by companies like General Electric and General Atomics (owner and operator of the Beverley uranium mine in Australia) that once saw the industry as defunct. They have been busy preparing a master plan for the new era—one that re-creates the conditions for a revived nuclear energy industry and builds export markets based on the aspirations of new industrial powers like India and China—without letting them formally into the nuclear club. The idea at the centre of the plan is simple: a proposal for dealing with radioactive nuclear waste. It is acknowledged that the reason nuclear energy went off the boil in the 1970s and 1980s was not just Three Mile Island and Chernobyl, although these shocking accidents certainly played a significant part. The critical issue was the lack of a credible solution to the waste disposal problem, combined with public concern over nuclear weapons proliferation. Strategists in the White House knew that they had to find a solution to these concerns to have any hope of putting nuclear energy back on the map, especially as an export earner for US 18


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firms. Rather than seeking to deal with each issue separately, the Washington administration decided to mobilise potential foreign stakeholders via the same kind of ‘partnership principle’ that has worked so well for America in other sectors such as aviation (as we detail in Chapter 5 on the analysis of the Joint Strike Fighter project). The aim is to link each issue within a new Global Nuclear Energy Partnership (GNEP), in which the United States and existing nuclear powers take on the role of supplying reactor-ready nuclear fuels to customer countries like India and China, and then take back the spent material at the end of the power generation process. In this way the risk of proliferation using civil nuclear materials is minimised, while the problem of waste disposal is also removed from the hands of these customer countries.3 But the plan does not stop there. It is capped with a terminological innovation of truly devilish inspiration. Rather than ‘sell’ nuclear fuel to customer countries, the United States and its GNEP partners will instead ‘lease’ it, and as owners they will accept the wastes as simply ‘returning’ what is theirs. Nuclear fuel ‘leasing’ becomes the new game for the GNEP powers. This is where Australia enters the picture. White House strategists see Australia as the perfect place to supply nuclear fuel raw material to the world on terms that will restrict possibilities of nuclear weapons proliferation—and then accept and store the spent fuel somewhere in the vast Australian continent. Australia’s new role in this US-conceived nuclear partnership is to be the leasing agent of choice in the global nuclear fuel cycle. The GNEP presents itself as a responsible new arrangement under which there can be ‘peaceful’ nuclear proliferation for civil


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power generating purposes. The GNEP is described on its own website as ‘a consortium of nations with advanced nuclear technologies’ which would provide ‘fuel and reactors sized to meet the grid and industry needs . . . of other countries’.4 Notice how this establishes that GNEP is about promoting an export industry for the United States; ‘other countries’ with aspirations towards building nuclear power industries are to have their reactors and fuel needs catered for by the United States rather than building them for themselves. The webpage goes on to make it clear that growing economies (like India and China) will be able to participate, subject to ‘stringent safeguards’, and without gaining the technological capabilities to operate a complete fuel cycle. The text makes it clear that the United States will be using the International Atomic Energy Agency (IAEA) as its instrument for ensuring that such countries have access to nuclear fuel only under terms which involve controls over fuel processing and reprocessing, and return of spent fuel rods to the supplier country. This is where the terminological innovation of ‘leasing’ makes its entrance. As described by the GNEP webpage, under a leasing approach ‘fuel suppliers would provide fresh fuel to fuel users for their conventional nuclear power plants.’ The text notes that because it would take time to develop the necessary technologies to support fuel leasing, the United States is ‘reaching out to international partners’ to establish an interim ‘reliable fuel services approach’. Australia is one of these ‘reliable’ international partners that can be designated as a supplier of ‘fuel services’ and as a recipient of spent fuel, under a ‘leasing’ arrangement. Let’s translate this innocuous-sounding statement into clearer terms:


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We in the United States and a few allied countries (France, Germany, Japan et al.) need to kick-start the nuclear power industry. We haven’t built a new reactor in years, and won’t again unless something can be done about the dual fears of nuclear proliferation and unsafe nuclear waste disposal. So let’s establish an organisation that addresses both fears by exercising control over the supply of raw material (uranium) and the disposal of nuclear waste. First we resolve the proliferation issue by redefining uranium supply as the ‘leasing’ of nuclear materials to dubious countries like India and China. This implies that we need a reliable country to supply the raw materials and then accept the waste materials in return. What about Australia? It’s a reliable ally, politically trustworthy. We’ll get Australia involved in accepting waste materials by labelling it the responsible ‘owner’ of nuclear material who also takes charge of that material at the end of the leasing cycle. This way, we can control access to the raw material and impose international controls over disposal, preventing countries that are not party to the Nuclear Non-Proliferation Treaty (NNPT) from disposing of wastes in their own countries. This might sound like a big ask, even of a close friend like Australia, but America’s wish is typically Howard’s command. The Americans would have been confident of his agreement to participate in this ‘leasing scheme’. But even the Americans must have been surprised at Howard’s enthusiastic response to the whole leasing idea, following a meeting to discuss the same in Washington on 15 May 2006 with George W. Bush and the


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Secretary of Energy, Sam Bodman. Giving an impromptu press conference at his hotel later that evening, an excited Howard bubbled away about leasing and owning, getting himself muddled (deliberately or accidentally?) into making the claim that Australia would not get involved in ‘leasing’ nuclear materials. ‘There are no proposals to hand on this issue,’ he said.5 But of course that is the whole point of the exercise. And that is why Australia has indeed set up a company called Australian Nuclear Fuel Leasing under the chairmanship of Dr John White, a key figure who has worked behind the scenes to bring about this apotheosis of the ‘special relationship’ between Australia and the United States.6 But the question of how to set in place an effective screen for these US-centric plans needed some thought. Since the main plan—to enter the waste disposal business—was not going to be popular at home (it certainly wasn’t welcome in the United States), something would be needed to deflect attention. So the idea for an inquiry into nuclear power generation in Australia began to take shape. Howard wasted no time in following through, catching even his own Office and Department unawares as they scrambled to set up an inquiry on the run, their boss still in transit after the May 15th briefings. In less than a month, an inquiry was established under Ziggy Switkowski’s chairmanship. It issued its provisional report in November and a final report just a month later, all accomplished in less than half a year—Olympic speed for a government!7 The Switkowski Report on uranium mining, processing and nuclear energy reassured many who had feared that it might strongly endorse the creation of a nuclear power industry on


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Australian shores. In reality it was cold comfort for those concerned about a nuclear future for Australia. For interspersed among its ‘reasonable’ recommendations and arguments are the nuggets designed to set the scene for Australia’s expansion of uranium mining and its entry into the nuclear waste disposal industry. This is evident throughout the report with the use of phrases such as ‘increased Australian involvement in the nuclear fuel cycle’ (p. 2), or phrases pointing to an expectation for ‘Australia to expand its role in the nuclear power industry’ (p. 9) or for Australia ‘to extend its nuclear energy activities beyond uranium mining’ (p. 13), all ‘softening-up’ phrases designed to neutralise the full negative impact of what lies behind the language, making it appear both sensible and necessary for Australia to expand its role both as supplier of raw material and as recipient of nuclear waste. By contrast, the comments concerning the building and operating of nuclear power plants are all projected out to a sufficiently safe time horizon with nothing happening before 2016 at the earliest, and 2020 more likely, with a totally hypothetical guess at a ‘fleet of 25 reactors by the year 2050’. No one could hold the Howard Government to this as an undertaking. On uranium mining, the report states carefully that Australia ‘will increase production’ from existing mines and that as demand is expected to rise, so other suppliers of uranium including Canada, Kazakhstan, Namibia, Russia and the United States will all be increasing production and opening new mines. The implication is clear—Australia should be doing the same. On waste disposal, again the words are carefully chosen. ‘Safe disposal of long-lived intermediate and high-level waste can be accomplished with existing technology’—an amazing statement given the


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fact that nowhere in the world is safe disposal being practised. Then it says: ‘Australia has a number of geologically suitable areas for deep disposal of radioactive waste.’ On p. 75 we read in more detail that while ‘safe management’ of all categories of radioactive waste has been ‘demonstrated’ for decades [but not practised, we note], no country has yet been able to implement ‘permanent underground disposal of high-level radioactive waste [nor, we might add, any form of disposal of any form of waste]. The report goes on to note that there is a ‘scientific and technical consensus that high-level waste can be safely disposed of in deep geological repositories’ and that ‘several countries are proceeding with welldeveloped and thoroughly researched plans for such disposal’ [by which we take the report to be referring to the US Yucca Mountain proposals, which are now a dead letter, or European proposals for a deep storage site in Austria which may—or may not— open by 2015]. A key final sentence, namely that ‘Australia should be one of these countries’ is not there; however, the implication is clear for all to read. The very next paragraph makes this transparent, where the report goes on to say that Australia ‘already manages radioactive wastes arising from uranium mining and the medical, research and industrial use of radioactive materials’, while the country is expected to ‘soon build a management facility for Commonwealth LLW [low level waste] and ILW [intermediate level waste]’ and will ‘ultimately require a deep repository’ (p. 75). This sentence, which was inserted only after the draft report had been released, is a clear indication of what is being sought in this report, namely establishing the idea that waste disposal in Australia is ‘inevitable’.


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Australia’s inevitable role as waste recipient is reinforced by the very next sentence, which reads: ‘Should Australia move to nuclear power generation, facilities will eventually be required for management of HLW [high level waste], including its eventual disposal’ (p. 75). Again the shift is from what other countries are contemplating doing, to what Australia would have to do anyway if it entered the nuclear power generation game. The connecting sentence: ‘Australia might as well get into the waste disposal game’ is left unsaid, but again it is clearly implied by the careful choice of words and the logic of the argument. Howard will just have to wait for the right opportunity to fill in the missing sentence, namely: ‘It’s only logical that Australia should play a role in waste disposal.’ If you imagine that all this is being done for the sound purpose of advancing the country technologically or maximising its economic gains, think again. On this subject, the prospects for Australia to play a role in nuclear fuel processing, ‘adding value’ to uranium exports through beneficiation or enrichment, the Switkowski Report is uncompromisingly clear: there will be no such role for Australia. The report casually downplays the prospects for an Australian firm to enter the business of fuel enrichment using locally produced technology in a single, dismissive paragraph. More tellingly, the Australian invention of a process for isotope separation using laser excitation (SILEX), spun off as a commercial company in 1988—an invention perpetually on the point of commercialisation—was in May 2006 licensed exclusively to the US company General Electric (GE), and would only be able to be utilised in Australia by GE with agreement of the US government.8 Despite the millions of dollars of public funds poured into this technology


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over the past 18 years, and the hopes of so many Australian scientists and technologists, this technology has been squandered in 2006 with a ‘gift’ to the United States of a world exclusive licence. Switkowski et al. merely comment that ‘GE owns the exclusive commercialisation rights in return for milestone payments and royalty payments if the technology is successfully deployed’ (p. 39). What had started as a major public R&D project that promised to add value to a commodity export is passed to a private company for development, and this private company then sells full rights to the technology to a US corporation that has strong ties to the US defence industrial complex. And that’s the end of the road for SILEX as an Australian innovation. What other country would so sideline its economic interests and dismiss so cavalierly its own technological innovations?

PREPARING THE GROUND FOR A NUCLEAR WASTE DUMP Importation of radioactive waste into Australia is currently illegal; it is prohibited by the Customs (Prohibited Imports) Regulations 1956 and the Commonwealth Radioactive Waste Management Act 2005. So proposals have to be crafted in a way that gets around these restrictions. Furthermore uranium can only be exported (under current regulations) to countries that have signed the Nuclear Non-Proliferation Treaty (NNPT). India is well known as a nonsignatory of the NNPT. Nonetheless, Australia is set to enter a major export contract with India. Washington has given the green


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light as part of the US tilt towards India (ostensibly to counterbalance the rise of China). So Howard has to find a way to sell uranium to a country that has not signed the NNPT. Enter the ingenious idea of leasing as opposed to selling uranium. The ground for these shifts had already been prepared by the Uranium Industry Framework Steering Group, under the chairmanship of the aforementioned Dr John White and his company Global Renewables Ltd. This UIF report, most of which was concerned with getting proposals for new uranium mining operations in Australia past indigenous communities, also introduced the concept of ‘uranium stewardship’ which, as we learn from a later report means an alternative to a ‘punitive and regulatory’ approach (that is, no regulatory limits to the behaviour of uranium miners)! White has reportedly developed a draft proposal, under the auspices of the UIF, for a nuclear waste disposal site and nuclear fuel processing facility in South Australia. It was in South Australia that the last proposal to establish a nuclear fuel dump was discussed, and finally defeated, over the years 1998 to 2004.9 India shows how it will all work. India is not a signatory to the NNPT, yet it is in the market for nuclear fuel to power its growing nuclear energy industry. The United States wants to be the supplier of choice of both nuclear fuel and of reactors. Boosting India’s nuclear claims is also a way to check China’s rise. The US Congress was locked in debate for several months in 2006 over whether (and how) to allow India to buy US nuclear reactors and fuel. Final approval came in December 2006, opening the way to civilian nuclear trade between the two countries (or rather towards US exports to India, since India is not in the business of


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selling the US reactors or fuel). The legislation before the Congress provides for an exemption to American law to allow civilian trade with India in exchange for Indian safeguards and inspections at 14 of its civilian nuclear plants, but eight military plants would be offlimits at India’s insistence. (An exemption is needed because US law forbids nuclear trade with any country that refuses to submit to full international inspection, and India is such a country.) After compromises, the Bill that was eventually adopted by Congress requires that the President provide an annual report detailing India’s compliance with inspections (of its civilian facilities only) and with its cooperation in confronting Iran over its nuclear program. India would also need an exemption from the rules of the Nuclear Suppliers Group, the nations that export nuclear material.10 This is where Australia will be expected to play its role under the GNEP. Its uranium could be shipped to the United States for conversion into nuclear fuel (for example, by General Atomics’ affiliate, Nuclear Fuels Ltd) and then to India for use in reactors, with the spent fuel rods being shipped to Australia, under the ‘nuclear fuel leasing’ model, for underground disposal. Note that there is no proposal that Australia do any of this conversion of uranium into nuclear fuel itself, nor is there any proposal that Australia formally become a member of the GNEP at this stage. The decisions over the routing of fuel rods and spent fuel around the world would be made by US corporations. Australia’s junior status in the nuclear league is clearly underlined. The commercial machinery for these activities has already been set up in Australia, in the form of Australian Nuclear Fuel Leasing (ANFL), established under the cover of Dr John White’s


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renewable energies company. The plans involve ANFL in ‘facilitating and managing the enrichment, fabrication, leasing, transport and storage of 15 to 20 per cent of the world’s nuclear fuels’. White has already committed $45 million of his own company’s funds to these arrangements. White’s costings are reported to be based on charging $3000 per kilogram for leased nuclear fuel packages to a target market of around 2000 tonnes of fabricated fuel a year, meaning ANFL stands to make over $6 billion per year. Move over uranium exports to make way for ‘nuclear fuel leasing’ and a considerable waste disposal industry for Australia.11 While the Howard Government has been stalling and blocking the creation of safe, economically attractive renewable energy industries, it has been secretly preparing the stage for the launch of its own ‘alternative energy’ plan in the form of the Uranium Industry Framework and the proposals for the ANFL company. The absence from the plan of any proposal to deploy Australianmade technology in intermediate steps of the nuclear fuel cycle merely underlines the point that the country is to be used as source and sink for raw materials and spent fuel. Is it in Australia’s interests to become a nuclear waste dump, and if so, why the subterfuge?

CHAMPION OF THE SMOKESTACK ECONOMY AND THE CARBON CLUB Leading the world in greenhouse gas emissions We now backtrack to consider the Howard Government’s record on greenhouse gas (GHG) issues and global warming, and its


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dogged defence of fossil fuel interests in Australia over the past decade. The facts can be stated simply: Australia started the Howard years as the world’s worst emitter of greenhouse gases on a per capita basis, and after ten years of bluff and bluster by Howard and his ministers, Australia finished the decade as the world’s worst per capita offender. If anything, Australia’s reliance on fossil fuel-intensive exports (like coal, iron ore and alumina) was greater at the end of the decade than at the beginning. Before we examine Howard’s failure to address Australia’s GHG emissions and fossil fuel reliance, and his studied support of America’s Carbon Club, let us quickly sketch a realistic picture of Australia’s GHG emissions problem. Australia is far and away the world’s worst emitter of greenhouse gases on a per capita base. In 2001, Australia was emitting twice the level of all industrialised countries on a per capita basis: over 25 tonnes of carbon dioxide equivalent per head—compared with slightly over 20 tonnes for the United States, just over 10 tonnes for Germany, the United Kingdom and Russia, just under 10 tonnes for Japan and around 13 tonnes for all developed countries.12 Moreover, Australia’s total emissions, which the government frequently implies are small by international standards because of its small population, are actually very large—they are larger than the emissions of France and of Italy, countries with more than twice Australia’s population. Nevertheless, the Howard Government dismisses the facts of Australia’s smokestack by massaging the brute facts with statements like ‘We are only 2 per cent of the world’s emissions’ or ‘Our total emissions are small compared with those of China’.


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The principal sources of Australia’s GHG emissions are, firstly, the mix of electricity generating activities, most of which are based on burning coal; the private transport sector (which is notoriously inefficient—average car fuel efficiency in Australia has not improved since 1971 and is now worse than in China); and nonferrous minerals processing, almost all of which is aluminium smelting. This extremely dirty industry, in addition to being a principal source of GHG emissions, is also a recipient of generous subsidies of some $210 to $250 million per year, through extremely favourable electricity tariffs.13 It is worth noting that aluminium smelting is an industry that is largely foreign owned; the six smelters are owned mostly by Alcoa (US), Pechiney (France), Rio Tinto (UK), VAW (Norway) and a consortium of Japanese companies. ‘Australian’ smelters produce over 13,000 kilograms of carbon dioxide per tonne of aluminium, compared with just under 10,000 in Asia and Africa, and just under 4000 in North America and Europe, and less than 1000 in Latin America, where smelters use electricity largely from hydroelectric sources. The average level of GHG emissions across the world is just over 5000 kilogram carbon dioxide per tonne of aluminium. This means that Australia is more than twice as dirty as the world average (which includes smelters in Africa and Asia).14 This is an unpalatable reality that the Howard Government will never mention and never acknowledge. Australian production of aluminium is the most GHG emission-intensive in the world because the electricity used is largely derived from burning coal, whereas in other countries it is largely derived from hydroelectric sources. Moreover, aluminium smelting enjoys a privileged status in this country, thanks to


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what must be the most generous electricity subsidy in the world. The chief beneficiary of this policy of subsidising GHG emitters is Aluminium Company of America, known as Alcoa. It is also the most vocal in its behind-the-scenes opposition to any action that might be taken to place a limit on GHG emissions. In fact, Alcoa— or the Australian subsidiary of the US multinational giant—is a charter member of what might be called the ‘Carbon Club’. Yet at home in the United States, the company courts publicity as a responsible corporation, anxious to invest in new technologies that reduce GHG emissions from aluminium smelters.

Howard’s approach to Australia’s GHG problem: breaking with the past Howard’s approach to Australia’s GHG emissions problem represents a sharp break with preceding governments, which both acknowledged Australia’s emission levels as problematic and actively explored ways to reduce the country’s reliance on fossil fuel export industries. The policies of these governments were not always successful. For example, the Hawke–Keating plan to ‘add value’ to raw material exports through moving up the value chain met with little success (no doubt because so many of the exports were controlled by foreign multinationals who had little interest in processing raw materials in Australia), and these policies had virtually no impact on the country’s fossil fuel reliance. But these governments unquestionably took Australia’s GHG emissions problem seriously. The Hawke administration, led by the Science Minister Barry Jones, played a leading role as an early respondent


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to global warming concerns. Jones created the Commission for the Future in 1985, and one of its first projects was to raise the profile of the issue of global warming and the threat it posed to the planet, not just to Australia. In 1988, the Commission staged a major event in Melbourne on global warming where leading speakers on the emerging science of climate change were given a platform. In the same year, an international conference of climate scientists was staged in Toronto, where the goal of reducing carbon dioxide emissions by approximately 20 per cent from their 1988 levels by the year 2005 was envisaged. The Toronto statement put the matter as one where the industrialised nations have a responsibility to lead the way, both through ‘their national energy policies and their bilateral and multilateral assistance arrangements.’15 Australia was then one of the first governments to officially adopt these Toronto targets. In October 1990, Federal Cabinet agreed to adopt an interim planning target of stabilising emissions of greenhouse gases (e.g. carbon dioxide, methane and nitrous oxide) . . . based on 1988 levels, by the year 2000, and reducing these emissions by 20% by the year 2005.16 The Howard Government’s approach to Australia’s GHG emissions problem represents a sharp break with this approach. What the Howard Government had inherited from the Hawke–Keating government was a clear position that Australia supported international action on climate change. But there is a pattern in the actions of the Howard Government (illustrated in the chapters of


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this book) where the tendency is to seek out and sabotage any major policy initiative that they may have inherited from Labor. So Howard identified this as an issue on which his government would take a diametrically opposed position, which externalised the costs of inaction onto others at some future date. Howard had well-established lines to the fossil fuel lobby and wasted no time in conveying what Australia’s new negotiating position at Kyoto would be. This would have the effect of shoring up support for fossil fuel intensive exports, where US-owned corporations are prominent, as well as poking a finger in the eye of Labor’s greenhouse gas commitments. After its election in 1996, the first item of business in international energy affairs for the Howard Government was the upcoming meeting in Kyoto, sponsored by the United Nations, where the nations of the world were due to debate greenhouse gas emissions policy. There was no George W. Bush at that time to offer Howard a clear signal. The US delegation to Kyoto was led by Vice President Al Gore, then as now a clear opponent of policies that favour global warming. Howard was guided only by his desire to do the opposite of his Labor predecessors. Howard issued a lengthy Prime Ministerial statement a few weeks before the Kyoto conference convened, on 20 November 1997, entitled ‘Safeguarding the Future: Australia’s response to climate change’.17 It was vintage Howard with the document’s omissions as revealing as its positive statements. There is no acknowledgment that Australia is a leading emitter of greenhouse gases or that we have international obligations in the matter. There is no hint of the fossil fuel interests that lurk behind the statement. Instead there is bluster


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and a strident enunciation of ‘principles’ issued for public consumption, such as the principle that Australia will not allow itself to be treated unfairly by the rest of the world, and that Australia will not accept any international regime that will involve the country in making economic sacrifices. These are code for the hidden message: We will protect our vested economic interests in fossil fuel mining and exports at all costs, and oppose all initiatives that we see as threatening these interests. In the event, the Australian Minister for the Environment, Senator Robert Hill, enjoyed a success at Kyoto, not in terms of leading international action to curb GHG emissions but in securing a special deal for Australia that would allow it to have weaker targets than other countries (because of its fossil fuel intensive industries). On top of that, Hill secured a last-minute concession (after the conference clock had been stopped at midnight) that Australia would be able to set against its carbon dioxide reduction targets the positive contribution made by its reversal of deforestation. These carbon ‘sinks’ meant that Australia now faced the easiest targets in the developed world. In effect, Australia was allowed to keep targets for GHG emissions in 2008 at a point higher than for any other country because it was able to set against them the supposed contribution of forestation or non-land clearance. If every country had demanded the same concession, Kyoto would have collapsed.18 Australia’s dogged stance on Kyoto and global warming has been a consistent mantra of denial, refusal and deceit ever since the Kyoto conference of 1997, particularly after George W. Bush announced publicly in March 2001 that the United States would


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not be ratifying Kyoto. Since then Australia’s position has hardened and the country has been in the ideological front line in echoing the US position that global warming is ‘just a theory’ and that to ratify Kyoto would involve making unacceptable economic sacrifices. It is only in 2007 that Howard and his government have relaxed this stance, with the Prime Minister announcing, as he presented the 2007 ‘Australian of the Year’ award to environmentalist Tim Flannery, that he had become a ‘climate change realist’.

Problem? What Problem? Over the course of a decade, three different arguments have been wheeled out to justify ignoring calls for action on global warming: global warming is ‘just a theory’; curbing carbon emissions would do irretrievable damage to Australian jobs and exports; and, more recently, to the extent that a problem exists, technology will fix it. Let us briefly review these before asking why the Howard team has sought to maintain such specious arguments in the face of so much counter evidence. Global warming is ‘just a theory’ To maintain the ‘just a theory’ story on global warming, Howard’s team had to do some pretty unpleasant things behind the scenes. For one thing, they had to ignore their own officials. Ms Gwen Andrews, who headed the Australian Greenhouse Office from 1998 until 2002, was one such. Ms Andrews revealed to The Age in 2005 (just after Australia signed up to the ‘anti-Kyoto’ Asia-Pacific


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Partnership), that in her four years in the job, she had never once been asked by John Howard for a briefing on climate change.19 This was at a time when the government was weighing up whether to ratify Kyoto or not. What can one say about such contempt for protocol that even an official advisory body is ignored in pursuit of defending some favoured interests? Second, the Howard ministers had to suppress all views to the contrary among the scientific community. They could not do much about people in the universities (except close down their R&D centres, which they did—hence the closure of the Cooperative Research Centre for Renewable Energy (ACRE)).20 But they could sack or muzzle scientists employed by the government-controlled national R&D institute, CSIRO. And, as if following the Bush rule book on what to do about climate scientists, they did precisely this. Consider just one case the experience of Dr Roger Francey, a former climate scientist employed at the CSIRO Division of Marine and Atmospheric Research in Melbourne, who was ‘let go’ in 2005. He had won a Federation Fellowship (Australia’s highest scientific award) for his work in measuring atmospheric levels of carbon dioxide. But then his division, confronted by a government that aggressively uses the public purse to punish dissenting voices, ‘recosted’ the exercise and found that it could not continue with the research. Dr Francey was forced to hand back his research grant and took early retirement. None of this would be possible without willing officials at the country’s most prestigious science body following orders by reining in ‘non-conformist’ views and putting pressure on the scientific staff to ‘toe the line’. Another case involved Dr Fred Prata who was ‘let go’ in January 2006.


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Despite the fact that he had invented a new technique for detecting trace materials in the atmosphere of potentially great value for the airline industry, he was shown the door. Dr Prata’s former boss at the Division, Dr Graeme Pearman, has spoken out about the muzzling of scientists in CSIRO.21 This is not quite the ‘climate of fear’ created under the Bush administration against scientists who speak out on global warming. But it runs a close second in seeking to maintain the fiction that global warming is ‘just a theory’. Curbing greenhouse gases will ‘ruin the Australian economy’ Another favoured posture has been to claim that even if the theory were correct, it would be too ‘economically disadvantageous’ for Australia to curb its greenhouse gas emissions—whether by signing up to Kyoto or by reducing its dependence on fossil fuels (in particular coal, a major export). This is also the line pushed by the US administration. But it does not match the evidence or the experience of other countries, where the building of new industries and jobs around renewable energies is now well recognised as not just good for the earth’s climate but also good for business. Indeed, renewable energy is poised to become one of the world’s fastest growing sectors, and countries that are taking their security seriously are not allowing themselves to be locked in to a carbon future. From Europe to Latin America, political leaders are looking to develop renewables—for example, wind energy in Denmark and Spain; solar energy in Germany; biofuels in Brazil.


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Compared with such a prudential approach to energy security, the Australian government’s behaviour has been altogether out of step. One looks in vain for a comparable case of rear-vision mirror driving, sustained for over a decade, and proclaimed as a virtue. Howard’s team has gone to extraordinary lengths to justify a future tied solely to producing and consuming fossil fuels, repeating at every opportunity the mantra that coal exports are the lifeblood of the Australian economy, (closely followed by aluminium and iron ore), and that signing up to Kyoto would be an economic disaster for Australia. To support their claim that Kyoto would mean unacceptably high costs for the Australian economy, they called on a report replete with the requisite economic modelling. Funnily enough, the Australian Bureau of Agricultural and Resource Economics (ABARE) report was funded by the fossil fuel industries, to the tune of $50,000 from each interested party. Bodies such as the Australian Coal Association, the Australian Aluminium Council and several big oil suppliers such as Exxon Mobil and Texaco (now Chevron) stumped up the funds to support a study that would quantify and inflate the ‘losses’ that the industries would purportedly suffer if reductions in emissions were to be imposed. The model used in the report not only duly inflated the ‘costs’ of action to curb greenhouse gas emissions but in the interests of keeping the message simple, it also made sure to exclude the benefits that might flow to other sectors and the economy as a whole through developing alternative energy technologies and export industries based on them.22 A case was brought to the Commonwealth Ombudsman by the Australian Conservation Foundation and a damning judgment


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was delivered: the economic model used by the government was vulnerable to ‘allegations of undue influence by vested interests’ and that the government’s position on global warming was therefore ‘compromised’.23 More damning was the response from the economics profession. So distorted was the ABARE report with its cowboy approach to costing, that it was denounced publicly by 131 professional economists. In flat contradiction of the government’s line, the economists concluded that ‘policy options are available that would slow climate change without harming living standards in Australia, and these may in fact improve Australian productivity in the long run’.24 Further reports commissioned after 2002 failed to provide the clear-cut evidence the government needed in order to justify its hard line on this matter, so they were simply set aside. The Prime Minister then took control of the policy once again, apparently sensing that things were getting out of hand. George W. Bush had withdrawn the United States from the Kyoto process and Howard was following the Bush line. Australia’s interests in fossil-fuel mining and exports, and in processing minerals like aluminium, must take precedence over alternative initiatives. To support renewable energies would send the wrong signal, according to Howard, and undermine the government’s opposition to making any concessions on global warming. This was the theme, now stated even more stridently, in the Energy white paper Securing Australia’s Energy Future issued under the personal authority of the Prime Minister in June 2004.25 Launching this paper, Howard said the nation’s energy needs would continue to be met by coal and other fossil fuels.26 He


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claimed that fossil fuel exports underpinned the economy, earning more than $24 billion per year in revenues. What he did not say was how much of these revenues are repatriated every year to foreign firms as part of their profits—firms like Alcoa, Exxon-Mobil and Rio Tinto. Nor would he admit the scale of their impact on GHG emissions.27 Technology will provide the solution Now that global warming can no longer be dismissed as mere theory, a new mantra had to be found: GHG emissions can be solved by technology. Enter the new promise of ‘clean coal’ which means the stripping of emissions from coal-fired power stations of carbon dioxide, liquefying and then pumping it out of sight into deep underground storage. The only problem is that the technology does not exist. Responsible bodies such as the International Energy Agency (IEA) predict that its use is at least decades away, if it can ever be seriously contemplated at all. In the pursuit of this mythical ‘clean coal’ technology, the Howard Government pours public money into new Cooperative Research Centres, while drying up the funding of actually existing, workable alternatives, namely wind, solar, biomass, and geothermal solutions that are being developed and applied across the globe. Putting so much emphasis on ‘clean coal’ technology is also a way of diverting emphasis from the hard changes that a future government will have to implement, such as raising the price paid for electricity by aluminium smelters, changing the fuel mix of power station operators and improving the fuel efficiency standards of private transport.28 Because the Howard Government


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sees more political pain than gain from these steps it promotes instead the shallow pretence of acting in the nation’s economic interest by promoting clean coal. How did the Howard Government reach and sustain its position of consistently supporting the arguments of the GHG polluters and denying the claims of the renewable energy industries? How did it turn Australians into fossil fools? Simple. Keep the discussions within the family. Keeping it all in the family Just one month before the White Paper on energy was issued ( June 2004)—the paper which cemented Australia’s claim to be the world champion GHG emitter—the Prime Minister held a meeting in Canberra attended by a select few. We know this because the notes on the meeting, drafted by one of the attendees (Sam Walsh, acting chairman of Rio Tinto), found their way to a source that was prepared to publish them—the Australia Institute in Canberra, a think tank headed by Australia’s foremost environmental economist and respected policy analyst, Clive Hamilton. The notes on this meeting make for such interesting reading that we reproduce Hamilton’s account in full: On 6th May the Prime Minister hosted a meeting with the heads of major fossil fuel producing and using firms, including Alcoa, Edison Mission Energy, BHP Billiton and Boral. A set of meeting notes made by Sam Walsh, Acting Chairman of Rio Tinto, fell off the back of the proverbial truck.


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The Prime Minister, flanked by senior advisers and public service heads, opened the meeting by saying he was looking for policy ideas to head off the Tambling Report, which his government had commissioned to consider the future of energy policy. Grant Tambling, a former Coalition Senator, recommended the extension of the Mandatory Renewable Energy Target (MRET). This was the wrong answer. Instead of extending MRET the Prime Minister planned to set up a $1.5 billion technology fund and wanted some ideas that would pass the ‘pub test’. Later in the meeting, the Minister [for Industry, Tourism and Resources] Ian Macfarlane said that MRET had worked ‘too well’ in stimulating investment in renewables, especially wind power. Ignoring existing renewable energy, which is commercially available and raring to go, the government has convinced itself that we cannot reduce our greenhouse gas emissions without major technological breakthroughs. This is code for protecting the coal industry, mainly through the promotion of geosequestration. This is why the government can say that MRET has worked too well and so must be abolished. Minister Macfarlane noted that there had been a ‘roaring silence’ from industry after the Tambling Report, except for the renewables industry which had been ‘very vocal and in some ways the Agenda has got away from us.’ Mr Walsh noted:

He commented that the Sydney Morning Herald and the media had created a problem for government and there was

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a need to convince the Sydney Morning Herald as well as the Prime Minister’s ‘pub test’ as the matter had become very political. ‘There was a need’, Minister Macfarlane said, ‘for the government to defend themselves from Mark Latham’s thrust to sign Kyoto and implement a 5 per cent MRET scheme by 2010’.

After further discussion the Minister closed the meeting stressing the need for ‘absolute confidentiality’. He said that if the Renewables industry found out there would be a huge outcry.29

No doubt, conspiracy theorists would find little to astonish in the existence of this secretive gathering plotting to block the potential competition. What does astonish is the coldly calculated actions injurious to the national interest, starkly evident in the Prime Minister’s decision that there must be no path to success for renewables, that there is to be no effort made to secure a balance or mixed basket of energy supplies. On the contrary, the name of the game is to pull out all the stops for a fossil-fuel intensive future with its special-interest partners. Was the meeting successful in ensuring that fossil fuel interests were well represented in the government’s energy White Paper? You bet. The White Paper accomplished this in five ways. First, it rejected an earlier recommendation by a governmentcommissioned review to increase renewables support (the MRET)


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to 5 per cent by 2010—far from ambitious by rest-of-world standards. Second, it reflected the position of BHP and Billiton by describing as ‘premature’ any move to establish an emissions trading scheme (going against the recommendation of an earlier review chaired by former Resources Minister Warwick Parer). Third, it gave strong support for research into geostorage, describing the technology as the ‘key’ to low-emission use of fossil fuels. Fourth, it established a $500 million fund to support low-emission technologies (clean coal technologies) that are decades away. Finally, it promised $1.5 billion in fuel excise relief.30 Contrast this with the denial of fuel excise relief to the ethanol industry described below. So the May meeting, and the many others that in all probability took place in secret had their intended effect. Industry duly fell into line and issued statements of support for the government White Paper, and opposition was simply overridden or ignored. This Carbon Club partnership between the Howard team and the industry is again illustrated in the industry’s orchestrated response to the White Paper. To ensure that the ‘right’ things were said, the government affairs official at Rio Tinto, Lyall Howard, sent out an email message to the big fossil fuel companies and industry associations. This email was leaked to the Australia Institute along with the Sam Walsh notes. The email described, two weeks before the release of the Prime Minister’s Energy Statement the contents of the statement and how industry should react to it. ‘The recipients are instructed to say that industry ‘welcomes the joint greenhouse program’ and that ‘Alternative policy approaches are against the national interest.’31 Lyall Howard is the Prime


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Minister’s nephew. ‘Keeping it in the family’ is a pretty good description of energy policy in the Howard years.

SABOTAGING EXISTING ENERGY ALTERNATIVES The prioritising of special interests over and above the nation’s energy security is amply revealed in the government’s studied neglect of the renewable energy industries that are rapidly being promoted by national authorities across the globe. This willful neglect is in effect the third main strand to the Howard team’s subversion of the national interest in energy affairs. It has become clear to many leaders that not taking action now to link energy use and energy sourcing to the threats from global warming will far outweigh the costs of having to make such changes down the track. There is of course no magic bullet that will ‘fix’ the devil’s dilemma of needing ever more energy and having to cut emissions; the important point is that a political leadership which claims to act in the nation’s best interests will be guided by prudence not arrogance. At the very least, prudence dictates that ensuring a country has a diverse basket of practicable energy sources is neither luxury nor chimera but a necessary insurance policy. Above all, this means diversification—boosting existing renewables and newly emergent renewable technologies (now par for the course in most developed economies);32 reducing dependence on carbon, and ceasing the massive subsidisation of carbon emitters. The Howard team seeks none of these measures.


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Instead, it seeks to tie Australia’s future to more carbon-intensive energy production. This story of calculated neglect is all the more striking in view of the country’s very real comparative advantages in the renewable industries—from solar and wind to biofuels and geothermal energy. With just a small tweaking of the rules of the game and small adjustments to the massive subsidies that have long allowed carbon emitters to dominate the energy landscape, Australians could enjoy a much more diverse and climate-friendly source of energy. In all these sectors there have been unsurpassed opportunities for investment, employment, exports, profits and taxes— had they not been stifled as a matter of policy. The Howard Government has not simply ignored these alternatives; it has actively sought to block them. The most telling moment in this disturbing story was the ‘debate’ in Australia over the Mandatory Renewables Energy Target (MRET) and its virtual suspension. We shall start with this tale, before briefly considering the cases of wind and solar energy and biofuels.

Australia’s MRET: here today, gone tomorrow An unexpected fallout from the Prime Minister’s 1997 statement, Safeguarding the Future: Australia’s response to Climate Change was a commitment to introduce a Mandatory Renewables Energy Target (MRET) and a system of Renewable Energy Certificates (REC) to implement it. The stated objective of the 1997 paper was a reduction of one-third from ‘business-as-usual’ GHG emissions between the years 1990 (retrospectively) and 2010. As part of the


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(largely voluntary) measures there was a commitment to create an Australian Greenhouse Office (established and then ignored, as noted above) and support for renewable energies. This support soon translated into a target stipulating that by 2010 no less than 2 per cent of electricity was to be generated from renewable sources. A Renewables Target Working Group was then established in early 1999 to take this idea further; it brought together representatives from state and federal government and the power sector, but revealingly excluded environmentalists and community groups.33 Its report, issued in May 1999, endorsed the 2 per cent target mentioned in the Prime Minister’s 1997 statement. The Cabinet was divided over this issue, with pressure being brought to bear by the aluminium smelting and power generating companies, all of whom seemed to view the MRET purely in terms of unwelcome price increases for their own industries. But in this case the Environment Minister, Senator Robert Hill, prevailed (a rare event in the Howard cabinet). Either the Prime Minister had his eye on other things (it was the time of vigorous debate over immigration that culminated in the infamous ‘children overboard’ claim in October 2001), or Senator Hill was being rewarded for his strong performance at Kyoto. In any event, over the objections of Alcoa and power producers like American Electric Power and TXU, the Renewable Energy (Electricity) Bill was introduced in June 2000, and the MRET was defined by it in April 2001. And then something funny happened. The policy actually worked. This wasn’t the usual window-dressing that characterised Howard Government initiatives in energy matters. It offered real 48


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incentives to companies to make investments in renewable energies because they could secure long-term contracts for the sale of the energy to power companies. And the power companies could offer such contracts because they could use them to claim Renewable Energy Certificates under the MRET. A virtuous circle was created, precisely because the MRET was a mandated scheme and not a voluntary one. Australia’s MRET attracted a lot of international attention and partially offset the opprobrium levelled at the country on account of its rejection of Kyoto. It unleashed a torrent of investment in renewables, particularly in wind energy, which saw boom years in 2002 and 2003. But from the perspective of the Howard Government it was all working too well. As the Industry Minister Ian Macfarlane later stated at the secret meeting called by the Prime Minister in May 2004, the wind industry people were getting ‘ahead of the agenda’ and were not echoing the government’s line that global warming was ‘just a theory’. They had to be stopped. The government executed a volte-face and set up a committee to review the operation of the MRET within just two years of its taking off. (Such an early review of new legislation is uncommon, to say the least.) This review was rushed through under the aegis of a new working group, under the chairmanship of Grant Tambling, former parliamentary secretary and Senator for the Northern Territory, which started work in March 2003. The Tambling Review reported in January 2004, upsetting everyone with its recommendation that the MRET continue unchanged. It upset the renewables industry that could see how effective the


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MRET was and wanted the target to be raised to 10 per cent. And it upset the Howard Government, in particular the Prime Minister, because it didn’t recommend scrapping the MRET altogether. (This was the reason for the alarm in Canberra and the calling of the secret meeting in May 2004, to see what could be done in the light of the disappointing Tambling recommendation.) The government eventually responded to the Tambling recommendations in August 2004, quietly confirming that the MRET targets would stay in place but would not be extended. This in itself was a death knell for the renewable energy industries that had to battle the artificially low prices for energy produced using cheap GHG-intensive coal.

Wind Australia was producing windmills as one of its first industries serving the rural sector; the Southern Cross windmills powering pumps to lift water from bores were a familiar sight across Australia’s farms. But it was not until the introduction of the government’s short-lived MRET scheme that Australia’s wind power industry really took off, backed by enthusiastic support at some state levels (notably in South Australia and Victoria). From 2001, new companies like Roaring Forties were established and ambitious plans were announced for building wind farms which would generate considerable quantities of electricity to feed into the electricity grid. International suppliers of wind turbines, like the Danish company Vestas, also made important investment decisions to build turbine-manufacturing facilities in Australia.


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(One site was at Portland in Victoria, just down the road from the Alcoa aluminium smelter whose American managers had been so influential in blocking any Australian progress in implementing Kyoto or in slowing GHG emissions.) This renewable industry was producing clean energy necessarily at costs above those of the ultra-cheap and ultra-dirty coal-fired power stations. In the absence of an extension of MRET, banks and finance houses refused to provide finance for wind farm schemes. The rest of the international wind power industry looked on in amazement as the Australian industry shot itself in the foot or submitted to voluntary euthanasia. The would-be world leader in wind became the straggler.34 But this was not enough for the Howard Government. The new Minister for the Environment, Senator Campbell, wanted to get in on the act. Apparently he had made promises to his colleagues in Victoria to the effect that he would help them block a proposed wind farm on environmental grounds. As Environment Minister, he called on previously unused powers as keeper of the National Heritage Act to block the Bald Hills wind farm proposed by Wind Power from going ahead in the name of saving the (now infamous) orange-bellied parrot. This wind farm proposal had been going through the approval process for two years; it had received state government approval, environmental clearance and even the vocal local opposition was dying down. But at the eleventh hour, Senator Campbell intervened, citing a report (the third report he had commissioned until he got the recommendation he wanted) that predicted an ‘average loss of life of one parrot per year’ if the wind farm went ahead.


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This action had the predictable effect. The promoters of the wind farm announced that they were withdrawing the proposal. It also had wider repercussions because it threw into doubt investment conditions for all other wind farm proposals.35 Within a week, further groups announced that they were withdrawing from the industry. The Australian group Roaring Forties, a joint venture between Hydro Tasmania and CLP Holdings in China, pulled the plug on $550 million worth of wind projects, citing investment uncertainty caused by the government’s decision. Roaring Forties also announced that it was withdrawing its application for planning permission for another project at Heemskirk in western Tasmania and would not go ahead with its $250 million Waterloo project in South Australia. This is a textbook example of how to kill an industry. You deliberately create uncertainty, which makes investment dry up. The orange-bellied parrot intervention implied a threat of federal intervention to block any future proposal, even if it had gone through lengthy approval processes. Ironically, the Bald Hills wind farm directly affected by the Senator’s intervention was allowed to go ahead in the end. It had a ‘happy’ ending. Senator Campbell’s intervention had been so outrageous and elicited such anger in the business community that in the end he was forced to back down.36 In January 2007, Ian Campbell was replaced as Minister for the Environment by Malcolm Turnbull. But the damage to the wider industry had been done. By the beginning of 2007 the wind industry in Australia was finding its feet again without MRET, and with no support whatsoever from a hostile federal government. The possibility of building


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a new industry that would create thousands of jobs and secure a green future for the country has been steadfastly postponed and ignored.

Solar Australia, the land of sunshine, is an obvious candidate for solar energy. So it was not without some irony that the fossil fuel industries slowed its development during the 1980s. Despite this, Australian universities and the CSIRO produced some world-class solar scientists and technologists at that time. Then came the Howard Government determined to follow the lead of the US administration by cutting back on solar research. Australia had been a world leader in solar energy research and development, going back to the 1940s, with support from both sides of politics. The major innovations in direct thermal heating of water using solar input date from these times. But Australia never managed to commercialise these direct thermal heating innovations on a mass scale through government failures that precede those of the Howard era. It is a well-observed tradition in Australia to watch home-grown innovations taken offshore and commercialised. In the case of direct solar heating, the lead has been taken by China, as well as Israel and Greece, where an industry now flourishes backed by an appropriate regulatory framework and high levels of domestic consumption. China is now the world’s largest user of direct solar input for water heating and is set to become the leader in reverse heating or cooling, using solar input. Australia should have been the world leader in this industry.


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In photovoltaics, which generate electricity direct from solar input, a similar story has been repeated, this time with active input (or lack thereof ) by the Howard Government. First, the research and development funding for all kinds of research on solar energy were cut, then discontinued. Solar scientists from CSIRO were laid off and forced to look for work in other countries. The Energy Research and Development Corporation was shut down, as was the Cooperative Research Centre for Renewable Energy. Despite this clear lack of support and active discouragement, some scientists persevered, such as Martin Green at the University of New South Wales (UNSW), and who continues to do world-class work. Martin Green and his colleagues at UNSW developed the Crystalline Silicon on Glass (CSG) technology that allowed a much thinner veneer of silicon to be laid down on a solar cell, producing a much higher energy output per unit silicon. Little encouragement was offered by the federal government for any industry-building initiative in the solar domain, neither in the area of direct solar heating of water nor in the photovoltaic sector.37 Meanwhile these areas have been forging ahead in Europe as national authorities from Spain through to Germany provide regulatory and infrastructural support. The Chinese authorities have also been quick to sponsor industry-building initiatives in solar technologies. Here in Australia the state government of New South Wales offered some support to commercialise the CSG technology developed at UNSW, through the privatisation of the state electricity utility into Pacific Power and a joint venture between Pacific Power and UNSW. This came to nothing when insufficient funds were allocated to bring the technology to


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commercial readiness and collapsed when Pacific Power itself lurched into bankruptcy. The result is that the CSG technology has been bought by German interests (CS Solar AG) and commercialised in Germany.38 There is a remnant of this technology left in Australia in the form of a research and development centre in Sydney. The federal government had no comment to make when the move offshore was announced. The scale of the opportunity politically shunned here is revealed in the story of one young Chinese PhD student who studied with Professor Martin Green at the Centre for Photovoltaic Engineering at UNSW. This student, Shi Zhengrong, is now one of China’s wealthiest entrepreneurs, making a fortune building solar cells through his company Suntech. As demand for this company’s product soars around the world, so Suntech’s exports rise. Shi sees opportunities everywhere, except Australia. Shi recently visited his alma mater at UNSW and made a donation of funds to the research and development centre because, he didn’t feel the [federal] government was providing an appropriate level of support.39 Suntech is now listed on the New York Stock exchange; the Howard Government ministers and government officials can apply for shares in the company that could have been built in their own country.

Biofuels The biofuels revolution has begun—but not in Australia. Led by Brazil and its sugarcane-based ethanol industry, country after country with abundant sunshine, monsoonal rainfall and land


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supply is scaling up biofuels production, to replace fossil fuel imports and to export to a growing world market. Ethanol has led the charge, driven by recognition throughout OECD countries that they must find substitutes for fossil fuels, reduce GHG emissions and enhance their energy security in light of diminishing global oil supplies. But biofuels encompass much more than ethanol; there is also biodiesel, produced from a variety of oil seeds such as cottonseed, linseed, soya bean and palm oil. Eventually biofuels will be produced from second generation processes that utilise a wide variety of biomass as feedstocks— from fast-growing forests, to grasses, to urban and municipal waste.40 Where does Australia, with its comparative advantages in biofuels and its huge potential as a second-generation biofuel supplier, fit into this picture under the Howard Government leadership? The answer is nowhere. Australia could easily have been part of this business revolution, given its long-standing role as one of the world’s most efficient producers of sugar. Instead the Howard Government has overseen the industry’s steady decline, most recently by paying sugar farmers public funds to leave the industry (on account of the failure to have sugar included in the US–Australia Free Trade Agreement).41 The industry’s decline could be turned around with regulatory or infrastructural support from the federal government to favour ethanol production. The Brazilian story shows what can be done to create markets where none existed. Companies in Brazil are now investing in state-of-the-art biorefineries that can take in sugar cane at one end and produce sugar, ethanol and electric


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power at the other through integrated and flexible computercontrolled production systems.42 In Australia there is not one combined sugar-ethanol biorefinery; there is only one sugar mill in the country that is using crushed cane as a feedstock for electric power generation at Rocky Point in southeast Queensland; the only world-class plant to produce ethanol is one linked to starch by-production rather than to sugar cane. The difficulty, as numerous businesses in Australia will attest, is securing finance for investment in these new industries in the absence of the regulatory support that would encourage ethanol use at the petrol pump. Financial institutions in Australia are very conservative, requiring up to five years guaranteed contracts for the output of new refineries. Without government support, indeed with positive government obstruction, it is very hard for businesses that want to invest in these new areas to secure finance. Take the Dalby biorefinery in Queensland for example. It has been on the drawing board ever since it was first publicly announced, its financing almost falling through at least twice. Yet in the United States, at least 40 such refineries are being built; in Brazil another 20; in Argentina, Colombia, and in Malaysia and elsewhere, dozens more biorefineries are being brought into being. But in Australia the massive effort needed to get just one biorefinery up and running has yet to bear fruit. On biofuels, the Howard Government set a paltry target of 350,000 litres of ethanol a year by 2010—a target that is nonmandatory and which would amount to less than 1 per cent of fuel consumption by that year. And while the oil majors, led by US firms Caltex and Mobil, are quick to comply with mandatory


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targets in countries like Brazil and in the EU, they are permitted to flout this voluntary target in Australia. In the meantime, a vicious public relations campaign waged by the oil industry against ethanol is allowed to run rampant. Not content with its previous efforts to stymie the biofuel industry, in order to protect the domestic market for petrofuels supplied by the mainly US-owned Exxon-Mobil and Caltex (Chevron), the federal government announced that initial exemption of biofuels from petrol taxes (the fuel excise exemption) would no longer hold after its expiry in 2015. Not a single country anywhere in the world has taken such a step; almost every country recognises the value of biofuels in reducing energy dependence on petrofuels and in reducing GHG emissions—except Australia.43 A final point is worth making. The Howard Government is fond of portraying India and China as two developing countries that would have to engage with the Kyoto process before Australia would see itself as bound to do so. But what Howard and his ministers don’t say is that India and China are already engaging with Kyoto, meaning they are moving in a big way into renewable energy sources.44 China, for example, is already the world’s largest user of solar energy for direct thermal heating, using technology largely derived from Australia, and is rapidly moving towards a leading position in solar photovoltaic cell production, again with technology acquired from Australia. And China’s Economic Development and Reform Commission has set a target for biofuels of 15 per cent of domestic consumption by 2015, which would put China second only to Brazil in the race to convert to biofuels. Meanwhile India is moving rapidly to the forefront in


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wind energy. An independent producer of wind turbines, Suzlon, has risen to become one of the world’s top five wind turbine producers, with factories recently built in the United States and China. Vestas, the Danish company that is the world leader, has also globalised and built a factory in Australia in expectation of a wind energy boom. Its hopes have not been realised.

SUMMING UP Global warming adds a new dimension to the energy security equation since the kind of energy we use—carbon-producing fossil fuels—is fast destroying our own habitat, endangering our way of life, and threatening to create massive flows of environmental refugees. By aggressively protecting the status quo, the political leadership can insulate itself in the short term but only by shifting the much larger costs of inaction onto society as a whole. Since coming to power in 1996, the Howard Government has disregarded all evidence of global warming and the damage caused by Australia’s emissions while intentionally marginalising renewable energy sources and foregoing their genuine employment and export opportunities. When in 2006 the public clamour for serious action on climate change became too great to ignore, the White House inadvertently came to the government’s rescue with its GNEP project. Early in 2007 the Prime Minister found a convenient sideshow in the form of promoting nuclear power as a ‘green’ energy source. Under the projected partnership Australia can expect to be allocated a role in this partnership as ‘leasing


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agent’ of nuclear fuel, paving the way to our receiving nuclear wastes from the rest of the world. To make this politically palatable, the government has presented its nuclear shift in terms of the potential expansion of a nuclear industry in Australia. If this was really the plan, then surely the government would be seeking to control its own technology or maximise its returns to the Australian economy—the very opposite to the course being taken. Without apology or explanation Australia’s publicly funded advanced technology (Silex) used in the development of a nuclear fuel enrichment industry is simply handed to an American company, General Electric, and subjected to a condition that it could be utilised in its country of origin only through the permission of the US government. Some ‘plan’ for local industry development. The costs to Australia of Howard’s political calculations on energy are high. First, a decade of Howard rule has locked the country ever more tightly into the grip of a fossil fuel-intensive resource industry, in many cases foreign-owned (coal, iron ore, aluminium smelting) and therefore less susceptible to domestic political pressure. These industries are emitting ever-increasing greenhouse gas levels and present an ever-increasing costly burden to restructure—as eventually they will have to be. Second, a decade of Howard Government denial over global warming has cost the country in terms of its international standing, and in terms of its scientific capacities in the area of climate science; most of Australia’s talent has been driven overseas by the nay-saying government and its intimidated public officials working in agencies like the CSIRO. And third, the US-following strategy of Howard has cost the country in terms of the lost industries based on renewable


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energies that we should have had and which would have been world-leading in such areas as biofuels, solar and wind energy. Instead we have only the skeletons of these industries due to the efforts made by the government to sabotage their growth. Accounting for policy choices so patently at odds with Australia’s national interests is a challenge. It is, after all, in Australia’s interest to pull its weight at home and in the international arena by facilitating rather than obstructing the transition to a cleaner and less costly future, to build new industries that are GHG emissionfree (sun, wind, biofuels, geothermal) to substitute increasingly for the fossil-fuel intensive industries of the past. Informed commentators in Australia describe it as a form of ‘policy autism’, meaning living in a fantasy world or removed from reality.45 Which of course it is. But Howard and Co. have chosen to inhabit that world. The question is why have they done so? Personal economic incentives cannot be discounted. The Howard Government insiders and associates secure attractive appointments with the resource-intensive corporations; the corporations in turn hang on to their perks (low electricity tariffs for example). Political favours to US corporate interests also loom large, as in the otherwise inexplicable sale of the exclusive licence of Silex technology to General Electric. Political prejudices and personal predispositions (sometimes mistaken for ideology), also play a part. Ingrained antipathy to the whole pro-environment movement also explains some of the actions—hence Howard’s otherwise irrational preference to block development of renewable energy industries. And a large element in Howard’s energy choices would seem to be simple contrariness when it comes to


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repudiating the legacy of the Hawke–Keating government, hence the readiness to reject Kyoto. As we canvass elsewhere, such as in Chapter 6 on blood supply, perhaps the most plausible explanation for Howard’s energy moves is that the whole policy process has become for him and his senior ministers a kind of game where the main aim is to ‘win’ the debate or argument on the table—even if it means having to defend the indefensible. This would account for the practice of ‘wedge politics’ where Howard is forced to recognise global warming but offers nuclear energy as the green ‘solution’ —thus neatly splitting the environmental movement. His Environment Minister also did it by setting the conservation of the orange-bellied parrot against the interests of the wind energy sector—again splitting the environmental movement which does not know which cause to support—conservation or renewable energies. The latest is a ‘game’ of nuclear waste disposal—where the outcome could be deadly for Australia, and long post-date the Howard Government. The larger proximate explanation for the choices we have documented in this chapter however would seem to be personalpolitical. It is the Prime Minister who is in lock-step with the Bush administration on energy policy across its many facets. Under Howard, the government was only too happy to follow the US lead in repudiating Kyoto and more recently in seeking to play a role in the new GNEP. The end point of Howard’s choices is to turn the country into a dumping ground for other peoples’ nuclear wastes, and into a happy hunting ground for US resource companies like Alcoa, Utah and General Atomics. It is the price


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our Prime Minister deems worth paying for the status and recognition from his US counterparts that he appears so much to crave. That he should have so far succeeded in disguising his status-seeking ambitions as security-seeking, alliance-building actions is his crowning political achievement.


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3 RURAL INDUSTRIES

Imagine a country whose beef industry is the envy of the world. It maintains its dominance of world markets through a combination of excellent production techniques, marketing prowess and scrupulous attention to quarantine protection, maintaining a clean and green reputation. Then along comes Mad Cow disease (Bovine Spongiform Encephalopathy or BSE). The country’s competitors all fall foul of the disease and see their exports dwindle. But this country keeps BSE at bay through stringent quarantine standards, enhancing its advantages in export markets. Now this clean and green country has a great and powerful friend who is also a beef producer. This friend claims also to be BSE-free and adopts a zero tolerance approach to BSE in its beef imports policy. Soon this friend is (reluctantly) forced to declare 65


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itself BSE-positive. In the blink of an eye its policy position changes, and it pressures the World Organisation for Animal Health (the OIE) to develop a more relaxed approach to dealing with the dangers of meat exports from BSE-infected countries. Then a funny thing happens. The clean, green country enters into a free trade agreement with its great and powerful friend— an agreement that includes a side letter simply entitled ‘BSE’. (Those familiar with international trade agreements will know that ‘side letters’ are typically reserved for the most politically sensitive issues, taking them out of the text proper of the agreement, but they are nonetheless binding.) In the BSE Side Letter, our clean, green country undertakes to rethink its strict quarantine requirements and promote the weaker OIE standards on BSE. In doing so, it loses its unique source of advantage and allows beef exports from its friend to re-enter the prized Japanese and Korean markets. It executes this amazing manoeuvre without feeling any apparent repercussions from its cattle farmers, who seem to have been herded safely into an organisation called the National Farmers Federation—a political body where not a single cattle farmer sits on the board. And the beef industry is not the only rural industry sabotaged in this country. Its pork industry is also put at risk when the government lowers quarantine standards, going against all scientific evidence that this will expose the country to the devastating pig disease, Post-Weaning Multi-Systemic Wasting Syndrome. 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 disqualifies 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 UP RURAL 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 advancing 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 Australia’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 quarantine 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 MultiSystemic 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 precedent, 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’ relationship 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 agricultural 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, proposing 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 protocols 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 effectively 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 information, 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 government 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 certainly 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 situation 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 understand 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 countries 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 ‘weakened’) 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 substantially in 2003 in response to its embroilment in the international BSE saga, a saga that had raged since 1986. In that year, international 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 unfolding 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 immediately exposed to the same treatment it had exacted upon infected countries: its beef exports were suddenly rejected by most importing 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 guidelines, 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 to recognise a ‘low BSE risk’ status Prior to its mad cow discovery in 2003, the United States steadfastly 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 ‘excessively 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 bureaucratic 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 with the new international guidelines OIE 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 particularly 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 adjudicate 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’S INTERNATIONAL 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 standards 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 ‘unscientific’ 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 cooperate 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 guidelines 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 confession 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 interpretation 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 its compliance 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 corporate 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 corporate 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 apparently 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 continues 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 BSEfree 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 institutional representation 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 representation 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 policymaking 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 behindthe-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 irrelevant) 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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4 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, reflective 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 95


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late 1980s, was feeling the pressure from an influx of cheap, massproduced 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 antigovernment 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 worldwide, 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 production, 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 recognition 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 economy. 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 beneficial 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 century. 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 aversion 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 direction. 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 protecting 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 important economic stuff ?’, consider this: cultural industries represent big bikkies, in fact the biggest bikkies, for some countries, particularly 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 audiovisual 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 aggressive 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, technologically 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 medicine.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 ‘normalisation’ 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 commodities. 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, particularly 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 outperforms Australia. Figure 4.1: Domestic film’s share of total national box office (per cent)

60 South Korea

50 Japan

40

France

30 UK

20

10 Australia

Canada

0 2000

2001

2002

2003

2004

2005

Source: All figures in this chapter are compiled by the authors from data obtained in February 2007 from the Australian Film Commission’s statistical website: ‘Get the Picture’: <www.afc.gov.au/gtp/>


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This decline mirrors the stagnation of Australia’s feature film production while other countries have substantially increased (in some cases doubled) domestic film output (Figure 4.2). Australia is producing less than other countries because we are investing less (Figure 4.3). Production investment in Australia has hardly moved over the past decade, while other English-speaking countries have been substantially increasing investment, and investment in non-English speaking countries has been booming. South Korea, which didn’t even rank in the top 20 investors in domestic film production in 2000, jumped to number eight in 2001, and now consistently outstrips Australia in the investment stakes. As a result, Australia’s international ranking in feature film production dropped from eleventh place in 2000 to eighteenth in 2005. In terms of our share of the national box office for feature films, we now rank alongside countries such as Latvia and Slovenia. A similar story can be told for local television content production, especially drama production, which in 2006 hit a ten-year low. As a result, the expanded avenues for cultural expression that accompanied the introduction of pay TV in Australia in the 1980s have been filled almost completely with foreign, predominantly US, television content. The economic implications of Australia’s poor production performance over the Howard decade have been profound, almost doubling the deficit for overall audiovisual trade (cinema film, TV content and videos) (Figure 4.4), and nearly tripling the deficit in royalties paid on TV content (Figure 4.5).


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Figure 4.2: Number of feature films produced 400 Japan

350 300 China

250 France

200 150

UK

100 Canada

South Korea

50

Australia

0 1995

2001

2002

2003

2004

2005

Figure 4.3: Production investment in feature films 2000

Japan

1800 France

1600

Millions of US dollars

1400 1200

UK

1000 800 600 400 South Korea Canada

200

China

Australia

0 1999

2000

2001

2002

2003

2004

2005

19 87 19 /88 89 19 /90 91 19 /92 92 19 /93 93 19 /94 94 19 /95 95 19 /96 96 19 /97 97 19 /98 98 19 /99 99 20 /00 00 20 /01 01 20 /02 02 20 /03 03 20 /04 04 /0 5

Millions of Australian dollars

87 19 /88 89 19 /90 91 19 /92 92 19 /93 93 19 /94 94 19 /95 95 19 /96 96 19 /97 97 19 /98 98 19 /99 99 20 /00 00 20 /01 01 20 /02 02 20 /03 03 20 /04 04 /0 5

19

Millions of Australian dollars

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Figure 4.4: Australia’s deficit in royalty trade—total audio400

visual trade

350

300

250

200

150

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50

0

Figure 4.5: Australia’s deficit in royalty trade—TV content

500

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A core contention of this chapter is that we cannot explain the recent woes of Australia’s cultural industries simply in terms of external factors, such as the availability of cheap US content. While external factors have certainly made it harder for an Australian industry to thrive, these factors have not had the same devastating impact on local production and investment in other countries as the figures above indicate. Rather, to comprehend Australia’s recent doldrums, we have to look to the changing nature of political leadership in this country, particularly the Howard Government’s sharp break with the bipartisan tradition of support for cultural industries that goes back to the 1960s, and its politically motivated assault on these industries. We briefly examine Australia’s history of bipartisan sponsorship of the arts in the name of social and economic advancement, before turning to the Howard Government’s role in the reversal of these industries’ fortunes.

A PROUD HISTORY OF BIPARTISAN CULTURAL PROMOTION For a relatively small nation, Australia has had a remarkable history of success in cultural production, particularly feature film production. Australia made the world’s first feature-length film in 1906. It followed that with a long line of locally and internationally acclaimed films with a distinctly Australian flavour (typically depicting bushranger escapades or snapshots of colonial life), albeit without a coordinated system of federal government support. But even in the absence of a federal support program, the


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significant contribution of the local film industry to the social fabric of Australia has long been appreciated at the highest levels of government. Following the takeover of Australia’s major film production and distribution channels and the resulting influx of American and British films in the 1920s, a royal commission was instigated to examine the impact and explore alternatives.10 Nevertheless, despite the squeeze, Australians continued to produce world-class films, and scored a first Academy Award in 1943 for Kokoda Front Line. Australia’s first local content requirements were put in place for radio in the 1940s and by Liberal Prime Minister Robert Menzies for television in 1960 (four years after its introduction). Both moves were in recognition of the desirability of Australians having the chance to tell their own stories, to hear their own voices, to explore and to better understand who we are and what we value as a people. Thanks to these quotas, television for Australians became, in David Malouf ’s words: . . . a mirror. Looking into it we would see our real faces at last, and how many and various we were: women who argued and had opinions, blacks, homosexuals, young people whose tastes and ideas were different from those of their elders . . . it gave us a new image of ourselves and a new version of local culture, a popular commercial culture that we too, these days, export to the world.11 It was with the election of Liberal Prime Minister John Gorton (1968–1971) that Australian cultural industries, particularly film and


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television, began to receive comprehensive federal government support. Gorton’s strategic targeting of Australian cultural industries was a part of his personal discomfort with Australia’s historic reliance on great and powerful friends for foreign and domestic policy direction, and his desire to create a more independent nation, a nation with a clear sense of national identity and purpose. A fervent nationalist, Gorton believed that Australians had to take control of their own military, economic and cultural destinies if we were ever to walk proudly on the international stage. No longer should Australians fight other people’s wars— Gorton began to withdraw Australian troops from Vietnam. No longer should Australians allow their natural resources to be controlled by foreign interests—Gorton opposed foreign ownership in key sectors and established the Australian Industry Development Corporation. And most importantly for the purposes of this chapter, no longer should Australians rely on other countries to tell us who we are, what to think and how to behave. So he developed Australia’s first national Arts policy, placing primary emphasis on the revival and development of our own film industry.12 Gorton’s motivation was not ‘stupid chauvinism’, as one of his film policy architects explains, but rather ‘a sense that we were not just a derivative culture where everything was to be derived from Great Britain, a sense that we could stand on our own feet’.13 To this end, Gorton established the Australia Council for the Arts and the Australian Film Development Corporation (to fund, market and distribute Australian films), and opened the National Film and Television Training School (now the Australian Film Television


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and Radio School, or AFTRS) to expand the pool of local creative talent.14 Gorton’s tenure as Prime Minister came to an untimely end in 1971,15 but his vision and commitment to the development of local cultural industries became an enduring legacy, built upon by successive prime ministers from both sides of politics.16 Following Gorton’s inaugural national Arts policy, the release of Arts policy platforms became key electoral events for both parties in successive elections. Of course, some leaders were more responsible than others for practical Arts policy outcomes. Labour Prime Minister Gough Whitlam (1972–1975) made one of the most significant contributions, breathing life into AFTRS and establishing the Australian Film Commission. The result of such contributions was the rapid expansion of local talent (AFTRS graduating such internationally acclaimed film-makers and directors as Gillian Armstrong, Philip Noyce, Chris Noonan, Bruce Beresford, Peter Weir, Phil Noyce, and Fred Schepisi) and the explosion of local film and television production during the 1970s and 1980s. While cultural industries were not insulated from the financial disciplines he applied to all sectors,17 Prime Minister Paul Keating (1991–1996) also deserves special mention. Not only did he develop the most comprehensive national cultural policy in Australian history, but he also explicitly linked, for the first time, cultural and economic development.18 Rightly or wrongly criticised by many for being excessively top-down and prescriptive in its approach, Keating’s 1994 Creative Nation policy document was the clearest political statement yet of a perceived relationship between vibrant cultural industries and national economic


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growth (something the United States has long understood and acted upon): This cultural policy is also an economic policy. Culture creates wealth . . . Culture adds value, it makes an essential contribution to innovation, marketing and design. It is a badge of our industry. The level of our creativity substantially determines our ability to adapt to new economic imperatives. It is a valuable export in itself and an essential accompaniment to the export of other commodities. It attracts tourists and students. It is essential to our economic success.19 Keating’s vision was for the development of a new lead export sector centred on the so-called creative industries and encompassing mainly multi-media goods and services. These new creative industries would eventually replace our traditional lead exports based on resources (mining, agriculture and lower value-added manufactures), which were subject to destabilising price fluctuations and increasing competition from lower-wage economies.20 The Keating government was at the forefront of international thinking on the potential for cultural industries to rejuvenate postindustrial economies; many of the government’s policy ideas in this area were later taken up by governments of the United Kingdom, Canada and New Zealand.21 Keating’s promotion of such industries was not however purely economically motivated. Keating was renowned for his love of the finer things in life (think Italian suits, French clocks),


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and his passion for the arts was well known. Keating was also passionately committed to questions of Australia’s evolving cultural identity. These questions spanned a diversity of issues, from a greater recognition of the indigenous contribution to who we are, to the impact of changing patterns of immigration and multiculturalism, and the implications of Australia’s economic integration with Asia for our sense of place in the world. A commitment to cultural industry promotion might be seen as a natural by-product of an interest in questions of national cultural development and change. The election of Howard marked a major shift in the government’s attitude towards local cultural industries and, for the first time since the 1960s, a reversal in these industries’ fortunes.

THE HOWARD LEGACY: ABANDONING AUSTRALIAN CULTURE The shift in the government’s approach towards Australia’s cultural industries was subtle at first, distinguished more by what was not said rather than what was. Where Keating had spent his final years in power ramping up the rhetoric about the social and economic importance of local cultural industries, Howard was almost completely silent on this topic from the outset. One high profile Australian cultural economist has noted of Howard’s silence: ‘It may reasonably be surmised that (Howard) neither knows of, nor cares about, contemporary art in any of its manifestations’.22 But any idea that his initial silence reflected an indifference towards


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the arts was soon shattered. Within a year of his election, Australian arts had been clearly designated as collateral damage in Howard’s war on Labor legacies. Within the decade, the Howard Government was willing to publicly declare on the international stage the irrelevance of Australian culture in a transparent effort to curry favour with the United States. Howard launched his 1996 prime ministerial bid with the promise to rule ‘For All of Us’. The clear implication of this slogan was that Keating had ruled only in the interests of ‘some’ Australians. And who were these ‘some’? Keating, Howard argued, was wont to privilege ‘special interest’ or ‘minority’ groups, particularly indigenous and ethnic groups (recall Keating’s emphasis on multiculturalism), but also artists—people notoriously concerned with questions of identity (a topic close to Keating’s heart). In Howard’s view as propagated for electoral advantage, Keating had left the interests of ‘ordinary’ or ‘mainstream’ (read ‘white AngloCeltic’) Australians behind in his grand quest to explore and expand the idea of what it meant to be Australian in the late twentieth century. That this might be a period marked by increasing economic integration with our regional neighbours and shifting immigration patterns was of no consequence to the political calculation being made by Howard. And it was apparently a very successful gambit. It is now widely accepted that Keating’s push to challenge Australians’ self-image, particularly our relationship with our Asian neighbours, was a key factor in his 1996 electoral loss. And it was this aspect of Keating’s legacy that was seized upon in the 1996 election campaign, during which Howard promised to reclaim Australia for ‘ordinary’ or ‘mainstream’ Australians.


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The Howard line during the election was that mainstream Australians already know who they are, thanks very much, and have the right to be relaxed and comfortable about being ordinary Aussie ‘blokes‘ (and ‘sheilas’, presumably). Sensing an impatience with the Labor leadership ‘yammering on’ about national identity and (multi)cultural change, Howard insisted that ordinary Australians have no need for cultural navel gazing, and worked hard from the beginning of his tenure to identify with the ‘average’ or ‘mainstream’ Australians, or ‘blokes’ as he liked to call them: ‘I’d like to be seen as an average Australian bloke. I can’t think of . . . I can’t think of a nobler description of anybody than to be called an average Australian bloke.’23 From the perspective of burying Labor’s legacy, this was the first essential step.24 A glimpse of Howard’s hostility towards Keating’s commitment to publicly exploring Australian identity and culture was revealed in his 1997 Australia Day speech: The symbols we hold dear as Australians and the beliefs that we have about what it is to be an Australian are not things that can ever be imposed from above by political leaders of any persuasion. They are not things that can be generated by (a) self-appointed cultural elite who seek to tell us what our identity ought to be. Rather they are feelings and attitudes that grow out of the spirit of the people. But it was not until 1998 that Howard launched an all out attack on Keating’s pet interests of Australian culture and identity,


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designating our cultural industries as a Labor legacy to be derided and dismantled. First, Howard personally dismissed a plan by his Arts Minister to significantly expand cultural funding, reportedly with the comment ‘there are no votes in arts’. Then, the dagger: a direct attack on Labor’s proposed increase in Arts funding, as the government proclaimed in a series of television advertisements that a vote for Labor was a vote for ‘elite arts’. The effect was dramatic: it was as if supporting the arts had suddenly become politically unacceptable, ‘elitist’ and against the interests of ‘mainstream’ or ‘ordinary’ Australians. (That this was an obvious fallacy given the number of Australians who frequent the cinema each weekend—not to mention watch television—had no bearing on Howard’s political calculation.) Clearly in Howard’s Australia, only ‘ordinary’ or ‘mainstream’ pursuits like sport would be deemed to hold valuable political currency. Anything vaguely reminiscent of the Keating era of cultural promotion was a political no-no. In this way Howard had drawn the battle lines for the 1998 election campaign between Labor and Australia’s so-called cultural ‘elite’ on the one hand, and Howard and his ‘mainstream’ or ‘ordinary Australians’ on the other. Never mind that Australia’s cultural successes were as much a Liberal as Labor legacy. Australia’s cultural industries were now tarnished by their association with Keating. Under Howard there would be no more promoting Australian excellence in the arts. Instead, cultural industries would become the subject of party political derision. While the government maintained the pretence that it was committed to cultural industries to ward off the uproar that


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met its populist campaign, the political mood towards cultural industries cooled perceptibly in Australia from this point on.25 Increasingly, support for the arts was seen as politically risky in that it might indicate a party was out of touch with ‘mainstream’ or ‘ordinary’ Australians. In stark contrast to past practice, Liberal and Labor Arts policy launches became subdued affairs—if they were held at all.26 Little by little, cultural policy slipped off the national agenda. As Robyn Nevin, one of Australia’s most celebrated theatre identities and former director of the Sydney Theatre Company, observed in 2004: It could be argued (today that) the arts are off the national agenda. Neutralised by absence of debate. They simply aren’t talked about at the top level of Federal Government. A major new railway, and its significance is undisputed, can attract the presence and the comments of the prime minister of Australia, but not the opening of a new theatre, the Sydney theatre, also of national and international significance.27 In a rare public attack on the government’s neglect, then Labor spokesperson for the Arts, Peter Garrett, noted in 2006: I ask a simple question: . . . can you remember the last time a senior member of the Federal Government . . . declared their strong support and unbridled enthusiasm for Australian art and culture? Can you remember the last time the Prime Minister or the Treasurer offered up their view on the value of creativity, of encouraging expression, of


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the importance of telling our own stories? It is no secret that the number of unmet invitations to senior government ministers to arts events continues to pile up to the roof.28 What is perhaps more troubling than the self-censorship of our politicians on the importance of cultural industries and their declining ‘productivity’ is the relative silence of the industry itself.29 There is of course the rare public statement, like that of Nevin cited above, but she was rumoured to have been rebuked by her colleagues in the arts establishment for her criticism of Howard, deserved though it may have been.30 So how can we explain the relative silence of industry leaders and their reluctance to draw attention to the government’s neglect of the industry? Again we find evidence of Howard’s strategy of silencing dissent, which in the cultural sector has been twopronged. First, the financial squeeze has been applied to cultural institutions (including funding bodies like the Australia Council, as well as artistic companies themselves like Opera Australia), not enough to bring them to their knees, but enough to instill a deep sense of insecurity, rendering them less likely to criticise the government for their neglect. As Jill Berry, General Manager of the Bell Shakespeare company puts it, the Howard Government is ‘allowing companies to survive, but not thrive’ and as a result, many are ‘too terrified’ to criticise the government for fear of further cuts: ‘There is a perception of “Open your mouth and you’re dead.” It’s hilarious stuff.’31 Perhaps the most significant financial squeeze has been Howard’s extension of Keating’s ‘efficiency dividend’ to Australia


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Council grants. The efficiency dividend is a system under which all government-funded institutions have 1 per cent shaved off their budget each year to force them to find efficiencies. Under Howard, the dividend was extended to Australia Council grants themselves (as opposed to just its administrative operations), and to artistic companies, leaving many companies in an unsustainable financial situation.32 There are, of course, other ways of instilling a sense of financial vulnerability, such as allocating funds on a project-byproject rather than an ongoing basis, and the Howard Government has drawn on all of these in its ‘survive not thrive’ approach to cultural institutions. The financial squeeze has become so serious for some, like Opera Australia and the Sydney Dance Company, that even Alan Jones, conservative social commentator, has jumped to their defence, criticising the government for their neglect and arguing for more funding for these world-class Australian institutions to prevent their financial collapse.33 In a political climate where support for the arts is not admired (and indeed often openly criticised in the mainstream press) it is increasingly difficult for Australian cultural institutions to make up the shortfall in government funding with private sponsorship. The Bell Shakespeare Company has been without a principal sponsor for the past five years. Opera Australia also lacks a principal sponsor and has been forced to stage fewer works each year as a cost-cutting exercise. The Melbourne International Arts Festival, perhaps our leading arts festival, didn’t have a principal sponsor in 2005. As a result, artistic companies have been placed in the unenviable position of having to fight each other for the few willing sponsors. Jill Berry, cited above, sees this as ‘a profound issue. The major arts


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companies are about to cannibalise each other’s supporters. It’s a fight out there’.34 The second prong of the government’s strategy for silencing dissent has been directly interfering in cultural output. The Howard Government’s proclivity for censoring or threatening to censor anything considered critical of government policy or Howard’s version of Australian history has been well documented. Examples abound, from the self-censoring impact of the 2005 sedition laws and the 2006 ABC ‘anti-bias’ regulations, to the censoring or attempted censoring of National Museum exhibits, television broadcasting (for example, The Glass House), plays (Through The Wire, The Wages of Spin, Two Brothers) and even computer games (Escape from Womerah).35 It is important to note here the fallacy of arguments that excuse a lack of government support for the arts on the grounds of so-called ‘quality’ issues. There are a number of media and political commentators who argue that Australian film, theatre, dance and other cultural industries have only themselves to blame for their flagging fortunes over the past decade.36 If they only produced work of quality, interest and relevance to mainstream Australians, there would be more revenue from ticket sales and these companies would be less reliant on the government to support them or ‘bail them out’ of financial difficulty.37 But this argument completely misses the point. The reality is that the Australian artistic community is being stripped of the financial resources to produce anything at all. If the government were genuinely committed to a vibrant cultural industry but was worried about the direction the industry was taking, it would do


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something constructive to enliven and reorient it, as the British government is currently doing. The British government has identified creative industries as the new driver of the British economy, but realises that you can’t drive without vision and resources. In 2005, the British Chancellor Gordon Brown announced a £12 million project to identify 2000 Britons to undertake an industry-backed Cultural Leadership Program and then lead Britain’s cultural sector into the future, raising the contribution that the music, visual and performing arts and other cultural industries make to national economic growth.38 In stark contrast to Britain, the Australian government under Howard isn’t even interested in finding out how much the creative industries might contribute to the Australian economy. During the 1990s, in response to the technological developments that were sweeping the cultural sector, the British government undertook a major re-evaluation of the formal definitions of industrial sectors. Under the new heading of the ‘Creative Industries Sector’, the government identified all of the industries that ‘have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property’, from ‘cultural industries’ classically defined (film, TV, etc.) to such activities as design, publishing and software.39 This enabled the government to form a clear understanding of the contribution being made by the creative sector to the British economy. It found that the creative industries are now the second largest contributor to the economy, behind only financial services. No wonder the British government is keen to look after this sector’s interests. In Australia however,


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after years of lobbying by the opposition (driven by the efforts of Labor Senator Kate Lundy), the government is still to conduct a similar assessment of this sector and its contribution to the Australian economy. If track record counts, then Howard and his government have zero commitment to the future of an Australian cultural sector. A stark confirmation is provided by the government’s failure to ratify the United Nations Convention on the Protection and Promotion of the Diversity of Cultural Expressions, adopted by UNESCO in October 2005, effectively declaring its view of the irrelevance of Australian culture to the rest of the world and rendering Australia a ‘cultural pariah’ in the international community.40

ABANDONING AUSTRALIAN SELFREPRESENTATION ON THE INTERNATIONAL STAGE The disturbing story of the government’s desertion and dismantling of Australian cultural industries comes to a climax with the Howard Government’s failure to ratify the United Nations Convention on Cultural Diversity, in a transparent attempt to pander to American interests. The meeting in question, staged at UNESCO in Paris, was focused on the international community’s response to the onslaught of cheap cultural exports from America, which have been flooding cinemas, TV and radio stations worldwide, undermining avenues for the expression of


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local culture and identity. Instead of ratifying the treaty, which affirms the social and economic importance of local cultural industries and the responsibility of governments to support them, the Australian delegation—in a last-minute turnabout under instructions from DFAT—turned its back on the 148 signatories, siding instead with the United States, Israel, and three tiny developing economies. Australia effectively declared: we don’t think that this is important enough an issue to have a position on. We don’t think that we have a responsibility to publicly declare the significance of Australian cultural industries or the importance of supporting and promoting them. How could a government refuse to sign such a landmark treaty, especially given the obvious decline of its cultural sector over the past decade, and the overwhelming endorsement of the convention by nearly every other nation on earth? A part of the answer has to do of course with the government’s Labor-hating response to the arts (detailed for energy in Chapter 2). But there was another motivation, Howard’s desire to move in lock-step with the United States, overriding any Australian interest in the matter.

Background to the UNESCO Convention In 2001, the 31st Session of the UNESCO General Conference unanimously adopted the UNESCO Universal Declaration on Cultural Diversity. This legal instrument recognised cultural diversity, for the first time, as a ‘common heritage of humanity’ (Article.1), and identified its defence as an ethical imperative ‘inseparable from respect for human dignity’ (Article. 4). Moreover,


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the declaration stated that, as vectors of identity, values and meanings, cultural goods and services ‘cannot be treated as mere commodities or consumer goods’ (Article 8).41 The unanimity with which the declaration was adopted gave its major supporters (including France, Canada, Germany and Greece) a mandate to push for the institutionalisation of those principles within a binding agreement. After many meetings and much elaboration, the Convention on the Protection and Promotion of the Diversity of Cultural Expressions came up for the vote in October 2005 at UNESCO’s General Conference.42 The convention gives countries the sovereign right to ‘adopt measures and policies to protect and promote the diversity of cultural expressions within their territory’ (Article 2(2)). So what does this mean exactly and why was a convention on protecting cultural expressions deemed necessary by UNESCO members? The main concern driving the convention’s development over the past decade has been the realisation that America’s billion-dollar American entertainment industry had, thanks to globalisation and technological advancements, encroached significantly upon local cultures: In the language of UNESCO, ‘cultural diversity’ is not what outsiders might imagine it to mean. That is, rather than promoting, say, ethnic traditions, minority languages or integration of immigrants, it has become the buzz phrase for opposition to cultural homogeneity à l’américaine.43 UN members viewed the convention as necessary to enable all countries to withstand America’s cultural onslaught. For while


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countries like France and Korea have the diplomatic capacity to resist American demands for unlimited access to their cultural markets, smaller countries do not. And it is no secret that America has been taking advantage of this power imbalance in one-on-one trade negotiations with less developed countries, insisting upon the inclusion of cultural market access in bilateral trade agreements and securing concessions it could not achieve in the multilateral World Trade Organization (WTO) forum. Needless to say, the United States was not enamoured of the UNESCO Convention and was one of the two ‘nays’ opposing it. In justifying its opposition, the United States argued that the convention could be used by dictators to control information and restrict freedom of speech or other fundamental freedoms.44 It also attacked the perceived anti-Americanism of the convention’s language. As one diplomat fumed, ‘this is all about some antiglobalisation attack on so-called American hegemony and cultural imperialism in the name of the great cultural exception’.45 At the heart of its concerns however lie its trade interests and it has argued fiercely against the convention’s trade distorting effects. The United States wants the agreement to be ‘redrafted so that it cannot be misinterpreted to authorise governments to impose protectionist trade measures in the guise of protecting culture’.46 However, other strong exporters of film and music such as Japan, India, and Brazil did not share these concerns and were happy to approve the language and principles behind the convention. Moreover, trade analysts have noted that, given its weak dispute settlement provisions, the convention is probably not legally enforceable, and not a real threat to US commercial interests.47


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This, however, did not stop the United States from crying foul and attempting to rally other countries not to sign. In the end, however, US lobbying was not successful. Only one other country voted against the agreement: Israel. And Australia was one of only four countries that abstained, along with Honduras, Nicaragua and Liberia. However, US lobbying did prevent a proposal to have all cultural issues removed from the WTO’s umbrella and placed under the ‘protective aegis of UNESCO’.48 And despite the legal parity of the convention in relation to other international legal instruments, it does not override previously existing bilateral agreements—like the Australia–United States bilateral trade deal.

ABSTAINING FROM CULTURE: EXPLAINING THE AUSTRALIAN ANOMALY So why did Australia abstain from the UNESCO Convention, ignoring the lead of every developed country in the world, apart from the US and Israel (which is in no danger of losing its cultural identity any time soon)? There was very little discussion of the convention by politicians in Australia, which was not surprising given the marginalisation of cultural issues over the past decade. One of the few official comments was made by Rod Kemp, the then Minister for Sport and the Arts, in his address to the 33rd Session of the UNESCO General Conference: Australia would sincerely hope for complete consensus on a quality international instrument that enhances the standing


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of UNESCO by genuinely protecting and promoting the diversity of cultural expressions in a manner consistent with other international obligations. The current draft Convention does not appear to meet this objective.49 However it is hard to believe that Kemp’s concerns about the wording of the convention were based on any objective reading, given that every other major exporter of cultural goods, besides the United States, was satisfied with the final text. So what of political pressure from the United States? Can this explain Australia’s decision to abstain? This has certainly been implied by some commentators, who have argued that ‘Close allies or countries that feared pressure like the Australians abstained from the vote’.50 But one wonders how much pressure would have been needed to sway Australia on the issue, given the Howard Government’s disdain for its own cultural sector. Indeed, Australian industry representatives who watched the drama unfold and who lobbied the government to sign certainly didn’t find a government that was invested either way in the outcome. Rather, they observed during their discussions with the Arts Ministry a general lack of interest in the whole affair, as if the convention were irrelevant to Australian interests. No doubt this lack of high-level interest in the convention made it possible for the Americans to influence the government’s position where it had failed in other countries. We have it on reliable authority from UNESCO-affiliated sources that the hard workers in Australia’s delegation to UNESCO had actually intended to sign the treaty; the Minister may have been indifferent,


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but he had not instructed the Australian delegation to reject or abstain from the convention. But at the very last minute, the delegation received unexpected instructions from the Department of Foreign Affairs and Trade (DFAT) to abstain. Apparently the United States had woken up to the implications of the convention only at the last minute (they routinely ignored UNESCO deliberations, seeing them as pathologically antiAmerican) and called belatedly on Australian support. And in the absence of high-level commitment to the issue Australia agreed at once to abstain. The last-minute decision to abstain came as no surprise to the cultural industry, which had seen a similar level of brutal disregard for its interests displayed during the negotiations for the free trade agreement (FTA) with the United States during 2003–2004. Much of the FTA negotiations were centred round the issue of local content requirements. The United States wanted Australia to weaken its local content rules for television (despite the fact that we have one of the most open markets in the world). Australian industry representatives were fiercely opposed to this idea but knew they would have a tough time negotiating with the Americans. As a somewhat fragmented bunch, the industry scrambled to present a cohesive voice to the government, in the form of the Australian Coalition for Cultural Diversity (based on international models of collaboration in the cultural sector). The Australian industry coalition took a hard line from the outset, and despite US pressure refused to give any numerical figure for quota limits. In the Australian industry coalition’s view, local content quotas should be off the table and the government should


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have the right to set content quotas into the future as it saw fit. This coalition was encouraged by the approach of the Australian negotiators, who kept promising them that local content caps were indeed off the table, and were considered a deal-breaking issue by the Australian government. But the Cultural Coalition was thwarted by a clever American negotiating tactic. They argued that ‘we don’t want reductions in your quotas, just a cap of existing ones’. This was extremely hard to argue against without sounding unreasonable. And despite their repeated assurances, it soon became clear to the industry that the Australian negotiators would not be holding the promised ‘no quotas’ line. The government decided that this was not a dealbreaking issue for them after all. Having been backed into a corner, the Cultural Coalition realised that they had little option but to agree to America’s request to cap existing quotas. But this did not mean that the losses were minimised. Under Annex I, Australia’s existing local content quotas for commercial television are ‘bound’ or kept at a ‘standstill’ level that cannot be increased, and if they are reduced in the future they cannot later be restored to existing levels. As Greg Duffy put it in a talk to the Evatt Foundation: ‘This is a significant restriction on Australian democracy, restricting our ability to determine our own levels of local content and development of the local audiovisual industry.’51 Moreover, the concessions we gave away in the area of multichannelling, which in early 2007 was yet to be introduced to Australia (but thought likely to become the new standard mode of delivery) means that local content requirements will actually fall


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well below the stated 55 per cent threshold specified in the deal because of the way that quotas are to be restricted according to channels operated. Again, Duffy captures the implications: There is no requirement for the local content to be of any particular mix of programming including drama, documentaries, or children’s programs, and many within the industry fear that content requirements could be satisfied with one genre of programming—such as sport or reality television. In any event, the government has effectively announced a significant cultural policy by means of a trade agreement without any public debate or discussion with the community, parliament or industry on the implications of that policy on [sic] Australia. Unless the AUSFTA is rescinded, the government has locked future generations into very low Australian content requirements on new multichannel television services.52 The irony of the deal is that Australia became a signatory to UScontent saturation at the very time that other countries, from the United Kingdom to the United States, were strengthening support for their own audiovisual industries. As one representative of Australia’s cultural industry pointed out: . . . at the very time that American negotiators were pressuring their Australian counterparts here in Canberra to trade away our cultural future (and at the same time that the Australian Prime Minister was giving the US hopes of


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success), the US Congress was passing laws that amount to a $US597 million ($AUD 850 million) subsidy to US film-makers and TV producers. Congress did this by re-defining filmmakers as ‘manufacturers’ and giving them access to tax breaks.53

SUMMING UP In failing to ratify the UNESCO Convention and signing a bilateral deal that provides unprecedented access to its cultural markets, Australia has made itself the willing pawn of the United States in its drive to break down barriers to American cultural exports around the world—even though this has meant writing off our own cultural industries. The fact that our cultural industries were viewed by Howard and his government as a Labor legacy made it a simple political calculation for him to trade them away in such a blasé fashion. Even if the Howard Government’s actions were to win it recognition for favours rendered in Washington, the benefits may be short lived. For, like the Iraq adventure, America’s quest to dominate cultural markets is likely to have negative long-term implications for the United States and Australia. This point has been recognised by some of America’s leading thinkers, such as Jeffrey E. Garten, Former Secretary of Commerce and International Trade under Clinton, who warns that American ‘cultural imperialism is no joke’:


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‘[America] should recognize that strong cultures abroad are in America’s self interest. Amid the disorientation that comes with globalization, countries need cohesive national communities grounded in history and tradition. Only with these in place can they unite in the tough decisions necessary to building modern societies. If societies feel under assault, insecurities will be magnified, leading to policy paralysis, strident nationalism and anti-Americanism.’54 Garten warns against his country’s focus on short-term profit from unabated cultural exports and failure to support local cultural industries in other countries lest the United States finds itself the focus of massive backlash: ‘Protecting national cultures could soon become a defensive rallying point for societies buffeted by globalization and undergoing tumultuous change’.55 In the case of our own national culture, Garten’s message is one most properly addressed to the Howard Government. Unless this advice is heeded in the future and the Howard position is reversed, it is hard to imagine that this particular Australian story will have a happy ending.


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5 DEFENCE

Imagine a country that goes ‘all the way with the USA’ in its strategic alliances and military procurement, prioritising favours for its American friends over the capability of its own Defence forces. A country that ignores its own industrial infrastructure and instead buys American tanks and other weapons that are wholly unsuitable for use in its own territory, and make sense only as adjuncts to US military engagements abroad. A country that undermines its own success in building Collinsclass submarines by sourcing the combat system for the subs from an American supplier which has no experience of conventional (non-nuclear) submarines. A country that signs up for a new fighter plane, the Joint Strike Force, more than a decade before the plane is ready to fly, in order to become a partner in the project and helps subsidise the costs for US firm Lockheed Martin, sacrificing all control over its own capacity to play a role in the value chain for the aircraft. 133


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A country where the specifications for new military equipment are repeatedly and brazenly changed by the government in order to prevent its own companies from bidding for contracts and allowing them to be awarded to American suppliers. A country whose largest bureaucracy, the Defence Materiel Organisation, is largely unknown, and where the best efforts of middle-level officials are overruled by arbitrary political interventions. A country that makes a gift of its territory for US signals bases that are involved in the deepest space-based espionage work, yet never uses these bases as the rationale for reciprocity in dealings with the United States, even when supplied with sub-standard and dangerous military equipment. A country that fought a large foreign aggressor and staved off invasion through its own efforts to be ‘Armed and Ready’ yet has learnt nothing from its own history, placing its security almost entirely in the hands of one powerful ally. A country that has essentially sold itself ‘lock, stock and barrel’ to its US partners, lured by the intimacy and glamour of deepening integration with the US military. Welcome to Australia under the Howard Government.

THE HOWARD APPROACH TO CREATING MILITARY INSECURITY Few would disagree that the defence of one’s own country, through the capacity to repel potential invaders and project influence in the region, is the ultimate measure of national security. If


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a government places another goal above the necessity to defend the country it is elected to govern, then it is abandoning ‘national security’ in the most fundamental way. It is therefore with considerable irony that we should find the Prime Minster and his senior ministers pursuing a strategy of pandering to American interests in the defence sector while packaging their actions in the language of national security. As shown in this chapter, a pandering strategy can be particularly bad for national security when it influences the purchasing of defence equipment. If in a certain country the head of state and his team consistently choose to buy American for reasons other than those purchases being best for the task, or best value, or best for the nation’s long-haul defence, then security is compromised. And if, even after the government’s own experts apprise that country’s head of state of the risks involved, he still persists with those purchases, then it is clear that national security is not the goal he is chasing. Before proceeding with our analysis, it is important to draw a clear distinction between the decisions being driven by the Howard Government on one hand, and on the other the important role played by the Australian Defence Force (ADF) and its various arms—naval, airforce and army, and by the procurement agency, the Defence Material Organisation (DMO), responsible for maintaining the military capabilities of the ADF. It would appear that these institutions seek to serve Australia’s interests well in spite of being subjected to undue political interference.1 These institutions are not the focus of our analysis; rather our focus is the pattern of defence procurement shaped by the Howard Government.


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While there has been considerable controversy over the massive costs and mishandling of recent defence purchases, especially their unprecedented burden on the public purse, our argument takes a different tack. We will show that the Howard Government has developed an extreme bias in its approach to choosing defence equipment. This bias has two aspects: a basic ‘buy American’ orientation, (which can be defended where there are no valid contenders or superior alternatives); and within that proAmerican bias, a marked leaning towards equipment choices that portend a drastic diminution of sovereign control over defence capability in the long haul. Interwoven with, and as a direct consequence of, these defence procurement choices is another side to this story of betrayal—the unravelling of Australia’s defence industrial base under Howard’s tenure. Taken to its extreme, the government’s US-oriented procurement leads to what might be called integration dependency: making Australia’s defence forces increasingly reliant on the United States, in both strategic and operational terms, effectively turning them into an appendage of the US military forces and their global deployments.2 Consistent with this approach, the Howard Government has encouraged a ‘buy American’ bias, enabling it to override all previous efforts to maintain transparent and competitive procurement processes. These previous efforts, encapsulated in a review of procurement commissioned by the Howard Government itself (the Kinnaird review),3 had an eye on purchasing the best in the world as well as maintaining an adequate industrial defence capability at home. Both goals have


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been abandoned in pursuit of the Prime Minister’s overarching efforts to gratify the current US administration, making critical procurement decisions that serve US commercial interests. By the same token, such decisions also serve to make Australian defence strategy an increasingly subordinate element within US global strategy. In this chapter we discuss the substance and the effects of this ‘Buy American’ approach, both in terms of its falling short of the proclaimed advantages (for example when US military contractors turn out to be providing sub-standard or unsafe equipment), and in terms of its dismantling of an independent industrial capability in the Australian defence sector. Our analysis will focus on three major case studies of procurement from each of the services: Abrams tanks by the Army; a combat system for the Australianmade Collins-class submarines by the Navy; and the Air Force’s choice of a new fighter plane, the Joint Strike Force (which will very likely not see any planes delivered before 2018, if at all). We set these cases in the wider context of the strategic culture in Australia and the diverging views involved in the ‘Defence of Australia’ doctrine and the US-centric alternative pursued by Howard and his government. The case we establish will show that in critical areas of defence procurement the Howard Government exhibits a Buy American bias, and that this bias effectively displaces the domestic industrial base of national security, resulting in major defence acquisitions that are frequently found to be either unreliable, unsafe, or unsuited to Australian conditions.


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NATIONAL SECURITY SUBORDINATED: LAND, SEA, AND AIR We will take three major examples of defence procurement to illustrate how national security has been compromised in the defence field—one from the Army, one from the Navy and one from the Air Force. In each case, we choose an acquisition program and demonstrate how that acquisition biases the service towards tighter integration and deeper dependency on US strategic interests. Our analysis in each reveals how the purchase serves US commercial interests at the cost of Australia’s national interest in maintaining a broad spectrum of defence capabilities and independent options.

Land: purchase of Abrams M1A1 tanks In July 2004, the Australian Department of Defence (DoD) signed an agreement with the US government to purchase 59 reconditioned, second-hand Abrams tanks, specifically, the M1A1 version.4 The package amounted to $539 million. The initial proposal—overridden by the Abrams deal—was to replace 100 German-made Leopard tanks, which had originally been ordered by the Whitlam Government in 1974 and given excellent service over 25 years. Defence officials argue that the Abrams tanks are low risk and offer immediate value in that they are immediately available and ‘inter-operable’ with US forces. Almost immediately, however, serious doubts arose about the wisdom of this deal. First, the high cost means that only 59 tanks can be purchased to substitute for the 100 lighter Leopards. Half of the tanks will, on average, be out of service at any one time, due to long delays


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in servicing by the US contractors. As we will see, Australian maintenance contractors were bypassed as part of the deal, another large cost of the US acquisition. This dramatic reduction in fleet size is the first source of concern. Second, the tanks have an expected life span of only ten years because they are already second-hand. By contrast, the Leopards have been in service for 25 years. Third, the Abrams tanks weigh in at over 60 tonnes each, making them by far the heaviest piece of armour used by the Australian Army. Eighteen US tank transporters had to be purchased especially to move them around the country. This has serious consequences. It means that the tanks cannot be airlifted by any ADF transport plane, and would have to be shipped (literally) to any theatre of engagement, in fact, one at a time, in small transport ships. As pointed out publicly by Lieutenant-General Peter Leahy, the Abrams tanks cannot be loaded onto the Navy’s six heavy landing craft, let alone its smaller LCM8 landing craft.5 This also means that the tanks cannot be used in the defence of the Australian continent, because they are too heavy for roads and bridges. So how will the tanks strengthen Australia’s defence capability? A case can be made that the tanks will strengthen Australia’s capacity to intervene in anti-insurgent activity to our immediate north. But they were clearly not designed originally for such skirmishing. What they will do is lock in Australia’s strategic options more closely to those of the United States. Insofar as the ADF can use the Abrams tanks in combat operations, it can do so only as an adjunct to a US-led military engagement, presumably far from Australia. The purchase of the tanks places severe constraints and limits on Australia’s strategic options.


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Source: Nicholson of The Australian newspaper, <www.nicholson cartoons.com.au>

Or perhaps, as Nicholson suggests in his cartoon, the purchase of the tanks is simply a means to bestow a gift on our powerful friend, a way of John Howard saying to the White House occupants: think of us as an open purse for your commercial interests. The Abrams tank deal certainly is a boon for their manufacturer, General Dynamics Corporation, whose tanks business has shrunk to almost nothing since the end of the Cold War. With the US military moving to the production and use of lighter armed vehicles,6 the only work now being done by General Dynamics in the tank sector is reconditioning older models. If considerations like providing a market for ailing American firms are motivating Australia’s procurement decisions, (and the pattern of defence purchasing points strongly to that conclusion), then strategic


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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 insurance 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 questioned 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 protection; 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-class submarines The Collins-class submarines have been one of the success stories of Australian domestic military procurement and national selfreliance. 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 ambitious 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 acknowledged 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 Submarine 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 submarines 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 alternative 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 recommendation 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 stateto-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 definitively overruled in July 2001 when the Minister arbitrarily aborted the tender process. This was just before the DoD Tender Evaluation Team was reportedly about to recommend procurement of the German STN Atlas bid. If the tendering process had been allowed to proceed, the German bid would most likely have beaten the American bid.21 The short-circuiting of this process suggests that defence capability considerations were supplanted either by an overriding preference for US equipment or by political deference to US commercial interests. The July 2001 award of the tender to Raytheon was Howard’s first major gesture to the new incumbent of the White House, a sign that the new administration could count on Australia to be a generous supporter of its defence industry. ‘Paying tribute to Rome’ is the ancient way to describe it. Securing intimacy, glamour, and standing in the eyes of the White House by enabling US defence interests to make handsome profits from Australian government contracts is the modern version. Increased intimacy with the White House is thereby ensured for our PM and his team at the DoD (rationalised in the language of ‘national security’ and alliance building). And increased intimacy with US Services is thereby secured for Australia’s defence forces (rationalised in the language of ‘technical superiority’). As one naval consultant has observed: The US is prepared to promote its industrial and commercial activities under the guise of alliance relationships; (while) the Australian Submarine community sees itself as an extension of the US Submarine community, and thereby used 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 qualification 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 influence 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 within 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 perspective, 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 currently 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 generation 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 announcement 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 million 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 government 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 government, 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 completely 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 procurement 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 procurement 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 capabilities 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 ‘technology 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 purchase As 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 procurement 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 procurement 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 80 70 60

%

50 40 30 20 10

19 75

/7 19 6 77 /7 19 8 79 /8 19 0 81 /8 19 2 83 /8 19 4 85 /8 19 6 87 /8 19 8 89 /9 19 0 91 /9 19 2 93 /9 19 4 95 /9 19 6 97 /9 19 99 8 /2 00 0

0

Year

Source: Thomson (2006: 34)


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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 international 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 ranking, 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 consuming 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 the domestic industrial base.


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Project Echidna: Electronic Warfare Self-Protection Suite (EWSPS) In 2004, the Australian Air Force sought tenders for Project AIR 5416 (Echidna), an Electronic Warfare Self-Protection Suite (EWSPS) consisting of radar warning, missile warning and infrared counter-measure systems for ADF aircraft, specifically the C130J aircraft.43 A novel Australian product was tendered for this module as well as an established American product. According to Defence officials, the Australian product satisfied all the capability requirements and outperformed the American bid on initial testing. The local product was also preferable since it carried with it the benefits of domestic through-life support and maintenance, greater technology access and the development of a niche Australian capability with export potential. Despite this, the Services officials administering the field-test phase continued to change the requirements to maximise the ability of the American product to satisfy capability needs. The Australian company went through six field tests, each time modifying the product to meet the new demands. Yet, after each field test, the Services drafted a new set of requirements that would better match the performance capabilities of the American contender. The Australian company eventually relinquished its bid once it became clear that the Services would continue to change the requirements in order to ensure the American product won the contract.44

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Early Warning and Control (EW&C) aircraft According to an aerospace engineer at Tenix, Australia’s largest domestic defence firm, the RAAF’s Request for Tender for the Airborne Early Warning and Control aircraft detailed specifications identical to the Boeing 757—a sure sign that the US firm was the preordained contractor.45 More telling was the inclusion of exact technical requirements that were not mission-critical and were irrelevant to the quality of submissions. For instance, the required range of the aircraft was listed to exactly the same specification as that of the Boeing 757, despite the fact that this feature was entirely tangential to the capability needs for which the aircraft was being procured. The inclusion of such a restrictive specification, especially where it was not vital to the aircraft capability, indicates rather clearly that the tender had been tailored to a piece of equipment already selected. Unsurprisingly, Boeing won the contract over local contender Tenix, despite Tenix proposing a solution $20 million cheaper than their American competitor.

All of this might be fine if we were getting value for money— excellent equipment, access to advanced technology, higher levels of capability. Unfortunately, there is much evidence that points in the opposite direction, towards lower and lower standards of equipment, in some cases to lethal equipment that costs Australian servicemen and women dearly. Some of the most egregious cases where Australia is supplied with sub-standard or export-only scaled-back versions of equipment where key


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technological features are withheld by US suppliers, or downright dangerous equipment, are displayed in the following box. Sea Sprite helicopters In 1997 the Royal Australian Navy ordered 11 of the Sea Sprite helicopters from US supplier Kaman. But subsequent poor management of US technology transfer led to delays of several years and major cost blowouts. The biggest problem was when the US Navy refused to deliver the mission-control system used to operate the helicopters, which eventually meant that the weapons systems had to be integrated with a different mission control system.46 These problems looked to be resolved in 2000 when US Defense Secretary William Cohen and Australian Defence Minister John Moore signed an agreement intended to ‘enhance’ Australia’s access to US defence technology by exempting Australia from most US arms export regulations. However, this agreement met with opposition in the US Congress and was lambasted in a House of Representatives Committee Report.47 When the helicopters were finally delivered, six years over schedule, they were found to be substandard, deemed a hazard by the RAN (up to 40 defects, including an inability to operate in bad weather and low-light conditions), and slated for the scrap heap. In March 2007 the project was finally canned.

Radar detection system Australia was exposed to American protectionism when it implemented a US-imported radar detection system for the FA-18


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Hornets. After integration, the RAAF tested the radar system in a mock dogfight with Singaporean fighter jets. The radar system was designed to let a pilot know when their fighter jet was under missile lock by another fighter. In the training exercise, the radar system failed to detect the FA-16 Singaporean jets. Further testing confirmed that the Americans had exported a weapons system tailored to avoid detection of any American aircraft, a feature that was not disclosed in the sales negotiations. The Singaporean fighter jets were American-built and undetectable by Australia’s newly implemented radar system. This case is significant in two respects. The modification compromised Australian security and reduced the value of the purchase. More importantly, the modification was not disclosed to the Australian government before sale (an expectation in defence acquisitions, especially among allies).48 The lesson would seem to be that the very superiority for which US equipment is singled out for preferential purchasing is not necessarily delivered in export versions of the product in spite of undertakings given. It also lends support to the observation that national security requirements are being exploited for commercial gain by American firms, culminating in deceptive marketing (with or without the complicity of the US government).

There is a hint on the part of Howard Government ministers that perhaps things have been allowed to go too far, and that some of the more egregious mistakes and oversights might be seen to be


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leading to an irreversible decline in Australian defence industrial capacity. There is a hint that some of the more extreme decisions taken in the recent past might need to be reconsidered, or not replicated too soon or too openly. Indeed, the current Minister for Defence, Brendan Nelson, has recently begun to sing the song of industrial self-reliance, notably in a speech to the Australian– British Chamber of Commerce in November 2006. Here the Minister made several points including the need to prioritise national industrial defence capability; the preparation of a ‘defence self-reliance’ paper every two years; and the stipulation that for every project proposal exceeding $50 million there be a requirement that ‘the proposal should bring forward a welldeveloped cost-effective analysis of the potential role of Australian industry in the project and to what extent there is Australian industry capability that could contribute to the proposal’.49 The Minister’s speech clearly reveals misgivings about the policies pursued by the Prime Minister himself and his Defence portfolio predecessors. Whether or not this is rhetorical cover for a ‘buy American’ bias that has gone too far, it stands as an implicit admission that Team Howard’s approach has worked against, not for, national security.

WHY ARE THESE DECISIONS BEING TAKEN? In the case of weapons procurement, the Howard team seeks to offer a robust defence of its approach. It goes like this: if Australia is to maintain its strategic and military alliance with the United


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States, then it must generate mechanisms for keeping up with US technological developments in weapons systems and equipment, aircraft, and seacraft. The best way to do this, say the ministers at DoD and DFAT, is to enmesh Australia in these systems as a prime consumer and active participant in US military activities and exercises. In other words, they argue that Australian self-reliance is outmoded and with it a doctrine of ‘Defence of Australia’ (DoA). A virtually complete integration of Australian defence forces with those of the United States is our best guarantee of military security. How does this approach depart from previous practice and what are the ramifications for Australia’s defence industrial capability and its strategic preparedness? We need to situate these procurement decisions in the broader strategic culture that permeates Australian defence institutions under Howard.50

The ‘strategic culture’ of Australia and the Howard years What kind of wars should the ADF be arming for, and for what kind of strategic engagements should it be planning? These are deep questions that are addressed at certain intervals by the Defence White Papers in Australia, which are subjected to debate by security specialists.51 Some commentators point to the fact that the ADF, along with many similar national defence forces, is faced with a variety of fresh challenges—people smuggling, terrorist attacks, money laundering, drug trafficking and other unconventional threats—which call for fresh strategic thinking and a new approach to defence procurement. The East Timor conflict, where


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Australia found itself leading a UN intervention force where conventional military doctrine (that is, air and naval support for troops) was not needed, was a turning point for such debates.52 As a strong advocate of this perspective, Sydney University’s Alan Dupont goes so far as to specify the kinds of military equipment that a refashioned ADF should be commissioning: The future is lower cost, modular, multi-purpose platforms equipped with miniaturised missiles and drones, lethal microbots and ‘dial-a-yield’ munitions supported by integrated C4ISR and real-time sensor-to-shooter architecture.53 Whether this cyber-force of cyber-warriors equipped with ‘C4ISR’ capabilities (C4ISR refers to ‘Command, control, communications, computers, plus intelligence, surveillance and reconnaissance capabilities’) is really what the ADF should be striving for is an interesting question. But Dupont argues forcefully that conventional defence planning by the ADF, and successive Defence White Papers in Australia under the Howard Government, have paid little attention to what a force intervening in Pacific island conflicts such as in the Solomons or Fiji might look like and what it might need.54 By contrast, there remains the improbable but severely damaging threat of an attack on the Australian mainland, or (more likely) an attack on Australia’s northern air or sea defences, which demands technologically sophisticated conventional weapons planning and procurement as called for by ‘traditional’ commentators such as Hugh White or Paul Dibb in agreement with former Defence White Papers and the ‘Defence of Australia’ (DoA) doctrine. As


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Dibb puts it: ‘. . . even if the risk of any armed attack on Australia is low, the consequences of misjudging it would be serious’.55 In support of this view, White concludes that ‘The real choices we face today show that, even after September 11, our own backyard still takes priority. The ability to operate independently of the United States is still important. And we still need to prepare to fight conventional wars’.56 To meet such potential threats, the ADF clearly needs to plan for, and procure, conventional defence systems such as naval destroyers and patrol boats, submarines, surveillance and attack aircraft, troop carriers and helicopter gunships. But on the evidence presented here, recent purchases make little sense from either perspective. The Howard Government seems to trump both parties to this debate, preferring instead to make military procurement a means to a higher end, as a means of ‘paying tribute to Rome’. Take the decision to procure Abrams tanks where the tanks fit neither into a ‘mobile, light quick interventionist’-style ADF nor a ‘conventional defence of Australia’-style ADF. Rather, they commit and constrain the ADF’s use of such tanks to participating in some long-range military exercise as part of a US-led military force in some theatre far from Australia. The tanks are too heavy, too immobile and too big for Australian conditions to be useful for any other purpose.

National self-reliance Australia has been under serious threat of invasion only once in nearly 220 years as a white settler country. The threat came in 1941


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and 1942 as Japanese navy and troops swept south and east across the Pacific in the most astonishing coordinated campaign. On 8 December 1941, a Japanese fleet attacked the American naval base at Pearl Harbor, sinking three battleships and two destroyers among others. On the same day Japanese forces invaded Hong Kong, as well as Shanghai and the Philippines; Japan also used Vichy French bases in French Indochina (Vietnam) to mount an invasion of Malaya, which was then used as springboard for the attack on Singapore, which fell on 15 February 1942. Japanese invasions of Dutch East Indies (Indonesia) and Papua-New Guinea followed (apparently inspired by the prospect of oil). There was consternation in Australia at this turn of events as the wartime Labor Cabinet, led by John Curtin, struggled to come to terms with the new realities. As we all know, these Japanese victories were not followed up by an immediate attack on Australia. Instead the Japanese naval assault on Port Moresby in New Guinea was thwarted in the Battle of the Coral Sea in May 1942 and by the disastrous outcome— for the Japanese—of the Battle of Midway, in June 1942, when the Japanese lost three aircraft carriers and the Americans one. Japanese forces then engaged in a land assault on Port Moresby, which necessitated crossing the Kokoda Track. It was here that they met under-gunned and under-manned fresh Australian recruits who managed to beat the Japanese back along the track, inflicting the first real reverse on land on the Japanese military machine. There is a widely held view that Australia was wide open to Japanese attack and ripe for the taking, and that it was only the US


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victory at the Battle of Midway that saved Australia from imminent invasion. This view is grounded in a misconception that Australia was unprotected; that it had made no serious war preparations, lulled by a false sense of security in the British fleet and the defences of Singapore; and that it was only US military and industrial might that saved Australia. Yet a close look at the most carefully assembled evidence reveals these to be baseless assumptions. As path-breaking archival research now shows, Australia had been preparing for a possible confrontation with Japan for most of the 1930s and had built a credible threat in terms of industrial military capability through these years under the policy label of military/national ‘self-containment’. The Japanese navy was willing to launch an assault on Australia (as it did in the bombing raids over Darwin and the submarine attack on Sydney Harbour) but the army was not so willing as it was well-informed on the subject of Australian military preparations. After the Battle of Midway, when the tide turned against Japan, it was Australian military supplies—from ammunition and small arms to tanks, ships and fighter aircraft—that proved to be the most effective weapons in driving back the Japanese. Moreover it was Australia’s scientific and technological strength that proved decisive in curbing Allied casualties against an increasingly desperate Japanese force. Australian technological innovations included jungle warfare communications systems (for example, field telephone lines that were coated with bug-resistant materials) and tents, clothing suited for jungle warfare, and the supreme Australian innovation of the world’s first antibiotic, penicillin, which was first used in military theatres in the Pacific campaigns against the Japanese.


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This military preparedness was, beyond a shadow of doubt, what saved Australia from Japanese invasion in 1942. Such is the thesis of the painstakingly researched book by Andrew Ross, Armed and Ready (1995). This seminal study overturns the doubts about Australia’s readiness and instead shows how some determined industrialists, government officials, and politicians managed in spite of the obstacles to build credible weapons and munitions industrial systems in Australia.57 The lessons of these experiences during the Pacific war are clear. Australia would have succumbed to Japanese invasion had it placed its faith in the British (who were not a force in the Pacific theatre after the fall of Singapore) or in the Americans, who left Australia to resist the Japanese attack along the Kokoda Track on their own. This was one military experience, some might object, and today the conditions would be very different. Perhaps they would. Perhaps the United States would jump to an Australian call for assistance. But the Howard Government doctrine of defence through ever tighter integration with its ally, making the ADF an adjunct of the US armed forces, steers Australia away from the defence preparedness that once saved this country from invasion. How ironic that the boast of the Howard years—‘Trust us because we know how to protect Australia’s security’—should prove to be so hollow at its core, in the domain of military preparedness and the defence industrial base. By all accounts, turning Australia into a subservient adjunct of the US military machine (or anyone else’s for that matter) would seem to be a poor recipe for national security.58


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SUMMING UP It might be argued that Australia has few options when it comes to defence other than to align itself with great and powerful friends, and that it has few bargaining chips to play in the deadly game of defence. Certainly this is the impression that Howard and his ministerial team seek to create by insisting on the desirability, indeed necessity, of near-total ‘interoperability’ with US naval and air force systems and of comprehensive cooperation agreements (such as that covering submarines and, more recently, the purchase of the JSF fighters). But there is one major factor left out of such calculations, one which is very rarely mentioned in public debate in Australia. That factor is the continued occupation by the United States of highly strategic bases in Australia, known euphemistically as the ‘joint facilities’, the most significant being Pine Gap. Let us venture the claim that a ‘normal country’ which entertained the presence of major US bases on its soil would see them as a premise for requiring greater reciprocity in defence procurement dealings with the United States. At the very least, given that premise, a ‘normal country’ would not sit back and allow US contractors to supply its armed forces with second-rate equipment, at inflated prices, and never insist on receiving what it has paid for. But that is the way that the federal government plays its cards. Ever since the Menzies government announced in 1962 that a secret US base would be established in Australia at the NorthWest Cape, in Western Australia, the ‘joint facilities’ as they are known have been the source not of improved dealings in the defence


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procurement relationship, but the subject of secrecy, evasion and deception.59 Under the Howard Government the bases have disappeared altogether as a topic of public discussion. Try the following exercise. Bring up the website of the Australian DoD and in the window labelled ‘Search’ type in ‘Pine Gap’—no results. Try ‘joint facilities’—no results. Try ‘Nurrungar’—again, no results. As far as the official website of the DoD under Howard Government ministers is concerned, the US bases in Australia do not exist. But the reality is that the US bases in Australia are an essential feature of the strategic relationship between Australia and the United States. Supporters of the bases, in short most Australians, also understand that they remain the single most important target in the country in the event of nuclear war. They serve as listening posts for the US National Security Agency (NSA), which is far and away the most important of the US Intelligence agencies; headed by Pine Gap, they provide essential transmission facilities for the US nuclear-armed fleets in the Indian and Pacific Oceans. Given this overwhelming strategic significance, not without some risk on the part of the host population, it would be reasonable to expect that our government would for the most part operate from a position of ‘national interest first’ when securing defence equipment for its armed forces.


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6 BLOOD

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 provides 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 government 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. 175


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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 contracts 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 obliging 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 resoundingly warns against changes to the current arrangements given the high risks and costs involved. Even through the government’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 country’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 wellestablished, 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: the decision to abandon the ideal of national self-sufficiency in blood supply and to open the Australian blood market to a foreign supplier.1 We examine why the Howard Government has been so motivated to discontinue one of the world’s safest blood supply systems in spite of long standing national goals, domestic supply capacities and expert advice, and how the government’s actions have been taken in the full knowledge of the significant risks and adverse consequences for its people.

AUSTRALIA’S WORLD-CLASS SYSTEM OF BLOOD SUPPLY Australia has a longstanding policy of national self-sufficiency in blood and blood-products.2 The national regulatory body, the Therapeutic Goods Administration (TGA) supports this policy (at least it did until 2004) through its drug registration guidelines, which state that: Australia favours national self-sufficiency in products derived from human blood or plasma, believing that a policy of not being reliant on donors in other countries is not only in the national interest but an international responsibility. Blood products sourced from foreign countries will be registered only if the foreign product has a demonstrably significant clinical advantage over the local product (emphasis added:


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note that this last clause has been deleted since signing the FTA 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 generosity.4 The Australian Red Cross Blood Service (ARCBS) is the second participant, responsible for collecting all the blood and plasma designated for use in the Australian community. Following the practice of half a century, the Red Cross sends the plasma to CSL (formerly 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 circumstances: 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 selfsufficiency has a firm grounding in international law.

AUSTRALIAN EXCEPTIONALISM: SECURING THEN SURRENDERING SELF-SUFFICIENCY Given the premium placed on self-sufficiency in international circles, it follows that countries achieving or approaching selfsufficiency 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 plasmaderived 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 selfsufficiency—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 selfsufficiency 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, contrary 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 advantageous 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 company’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 governments 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 champion, 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 requirement 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 requirements 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 meaning 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 regulatory 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, supported its national champion by including blood products in their agenda for the negotiations.20 Baxter tells this story quite candidly to the Australian parliament 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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saw as Australia’s ‘overly high standards against plasma derivative imports’ and ‘the pre-nomination of only one supplier’. It therefore ‘referred its concern to the United States government which then added the issue to its agenda, and in 2003 the topic was discussed at length in the FTA negotiations’. The side letter outlines the results of those negotiations.21 Baxter’s tactic of declaring that the government’s blood procurement system was not consistent with its policies on ‘transparency and competition’22 might seem ludicrous from a national interest perspective. But like so many other US players before it who 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-ordering national priorities—‘competition’ (or at least some semblance of it) should henceforth take precedence over the country’s policy of selfsufficiency in the national blood supply arrangements (see box below). Did Baxter get everything it asked for? It would seem so from Baxter’s effusive response. For the company goes on to ‘compliment’ the government on its ‘perspicacity’ and ‘commends 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 undertaken 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 products 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 domestically, 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 treatments 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 significant 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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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 consistent 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 concerning 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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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 procurement 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 undertaking 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 backlash 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 procurement 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 government 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 recipient. 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 consider which firm Howard was proposing to favour with Australia’s plasma fractionation contract: Baxter International.

THE AMERICAN CHALLENGER The United States is the only country fully self-sufficient in blood products and blood supplies. This is no accident, but rather the


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result of a multi-faceted policy in which biotechnology plays a major role. For the past 35 years, the United States has pursued a strategic industry policy for commercial biotechnology linked to its earlier defence conversion program following the Vietnam War.36 A strategic biotechnology policy aimed primarily at agriculture and secondarily at the pharmaceutical industry has been pursued via massive development subsidies, intellectual property transfers, public procurement contracts and regulatory protection.37 In this context, Baxter International has followed the trajectory of many other national champion beneficiaries of US policy, transforming from an exclusive supplier to the military in World War II into a global business empire specialising in health-care products.38 As one of Fortune’s top 500 companies, Baxter has built a strong domestic base and global presence in the blood product sector. However since 2003, its plasma fractionation business in the United States has been shrinking, perhaps due in part to its involvement in ‘tainted blood’ litigation. Access to the relatively safe Australian market offers an attractive alternative, hence the company’s recourse to the office of the US Trade Representative (USTR) which leads US negotiation teams in bilateral and multilateral trade talks, to help achieve its goals. In its 2006 annual report on foreign trade barriers, the USTR included Baxter’s complaint about so-called ‘barriers’ to the provision of blood plasma products in the Australian market, noting that: ‘While foreign blood products may be approved for sale in Australia, the exclusive contract [with CSL] makes it virtually impossible for foreign firms to sell their products in Australia except to fill shortages or provide products not otherwise available


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in Australia.’39 The USTR is being disingenuous in its pretence that blood is just like any other tradeable commodity or that national self-sufficiency is not an internationally endorsed security policy. But let us overlook the posturing and ask a different question: is the CSL challenger a worthy contender for the nation’s blood supply? If blood procurement were indeed opened to tender, then the prime competitor for CSL would be Baxter Healthcare, a US subsidiary of Baxter International. Since the government seems determined to facilitate Baxter’s entry to the nation’s plasma fractionation business, we must entertain the possibility that the company and its products have some special qualities that would place it well ahead of Australia’s own national champion. Baxter can certainly boast a run of successful marketing outcomes, having managed to displace a growing share of the plasma product market with its artificial blood products, Recombinate and Advate.40 Although artificial therapies can produce life-threatening allergic reactions and other severe immune responses, they are considered to reduce the risk of viral transmission compared with plasma-derived products. This ‘safer than plasma’ line is the basis of Baxter’s marketing strategy. In July 2003, Baxter International won approval from the FDA for its next generation blood-clotting drug for haemophilia patients. Investment analysts commented at the time that approval of Advate was critical to turn around some of Baxter’s problems caused by a slump in world sales of blood therapies, because ‘the company planned to price the drug at a premium’. It was also intimated that hard marketing would be equally critical to convince doctors to switch products and to ‘convince customers that the drug is an improvement over


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Baxter’s Recombinate and other rival haemophilia clotting treatments made with either animal or human proteins’.41 One cannot accuse Baxter of neglecting its marketing. Artificial blood products (recombinants) now account for 34 per cent of the global market, compared with a declining share for plasma products.42 But Baxter’s enthusiasm for selling its recombinant products may sometimes go too far; it collected a warning from the FDA for distributing false and misleading information.43 In fact, this warning could not have come as a surprise. Alongside the marketing successes of its recombinants, Baxter International has notched up quite a few demerits in its track record. Consider the list of criminal and other publicly documented offences in which Baxter and its health care offshoots have been embroiled: •

•

•

Rigging the market. Baxter Healthcare sought to block its competitors in the Australian market by coercive bundling of products in procurement contracts with the State and Territory governments.44 Defrauding government medical programs. One of Baxter’s spin-off companies, Caremark, was the focus of one of the United State’s biggest fraud cases of the 1990s. The company (reportedly offloaded by Baxter during the investigations) was found guilty of defrauding government medical programs and was made to pay $161 million in criminal and civil fines.45 Corrupting lawmakers to weaken US federal laws that protect consumers from dangerous products. On an annual basis, Baxter International spends hundreds of


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•

•

•

thousands of dollars trying to influence legislators to water down safeguards for consumers. In the first half of 1996, for example, Baxter spent $160,000 buying influence in Congress to weaken federal laws that protect consumers from dangerous products.46 Supplying faulty or unsafe products that need to be recalled. Every year, some of Baxter’s products need to be recalled or withdrawn by the FDA, some of which result in fatalities or serious injury. Most recently, the company had to initiate a worldwide recall of its Meridian Haemodialysis Instrument.47 Supplying numerous tainted blood products; defendant in multiple lawsuits. Baxter Healthcare’s record on blood products is far from unblemished. Numerous lawsuits have been filed against Baxter by haemophiliacs who were infected by HIV-tainted blood during the early 1980s. These suits have been filed not only by Americans48 but also by Japanese and European citizens.49 In 1994, the company was again found to be delivering tainted blood products and was forced to cease manufacturing and implement a worldwide withdrawal of Gammagard Immune Globulin Intravenous (IGIV), another plasma product used by haemophiliacs, on the grounds that a number of patients who had used the product had become infected with Hepatitis C.50 Promoting false and misleading product information. In 2004, the FDA issued a serious warning to Baxter Healthcare for distributing false and misleading product


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information on Advate (its newest bestselling plasma substitute) to the medical and patient community. The FDA’s warning letter accused Baxter of distributing a marketing sheet and patient brochures for Advate that deceived the public (patient and medical community) into thinking its product was not only free of serious side-effects but also safer and more effective than its competitors’ products, when there was no such evidence. Baxter was caught marketing Advate as the new wonder therapy by minimising its adverse effects and overstating its comparative benefits. Since Baxter’s recombinants have marginalised rival therapies in the Australian market, one may ask whether the TGA—the Therapeutic Goods Administration, 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 promised in the FTA to so resoundingly reject his recommendation to further open the Australian market to foreign products. Such findings 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 intelligence 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 recommendation. 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 considerations make that outcome less likely in this case. One is the need


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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 significant 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 procurement 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 championed 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 internal. US intervention via the 2003–2004 bilateral trade negotiations


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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 government), 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 continuing 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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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 continuity 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 bearable 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 regulatory 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 surplus 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 proposition 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 criticism 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 arrangements 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 substantially 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 the Commonwealth was getting a good deal out of its contract with CSL. And over a projected ten-year period starting in 1994, the anticipated costs of the PFA were deemed on target. The Steering Committee set up within the Department of Health chose to ignore this evidence, along with all other real data on the costs of alternative options, instead basing its conclusion on ‘scenario analysis’ (in this case, projections based entirely on assumptions, and without regard to the available evidence). Even officials from the Department of Finance at a June 2002 meeting with Health were taken aback (‘expressed their concern’) about the inadequate risk analysis Health had undertaken, particularly regarding costs.59 The resulting discrepancies divulged by the ANAO report read like a manual in ‘How to tell your Minister what he wants to hear’: • •

•

•

Don’t bother putting any time or effort into a review whose conclusions you know in advance. Don’t include information on the actual benefits of the existing arrangements or the risks and drawbacks of the alternative one to be favoured. Don’t refer to real data showing value-for-money obtained under the current system compared with alternative options for future supply. Don’t consult CSL about your decision to terminate its contract.


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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 selfsufficiency, 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 recombinants 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 substituted 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 ‘alternate 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 protocols, 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 clinical 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 products 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 contingency 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 nonremunerated 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, supported 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 government 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 government (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 selfsufficiency and transfer a larger slice of the blood products market to offshore suppliers. By the time Baxter called on its trade representative (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 assurances 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 safeguarding the nation’s agriculture from exotic pests and diseases, it was casually handing out import licences for beef from a foot-andmouth 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 transparency 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 economic 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, investments 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 compete 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 problems 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, removing 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 economic 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 arrangements 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 straightforward. To determine whether safety and self-sufficiency are indeed non-negotiable priorities of any given Australian government, one need merely ask: how would such a government act? Would it abandon, would it even consider abandoning, its domestic 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 examined 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 administration (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 complement 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 agreement 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 interpretation 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 selfsufficiency 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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7 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? 221


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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 government 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 gratification 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 no sense. After all, one expects that a democratically elected government will typically act to protect and advance the interests of the country it governs and the citizens it represents. This is a reasonable assumption since comparative analysis establishes that modern leaders are most eager to avoid alienating their nation’s patrimony (spending their blood and treasure); on the contrary they are eager to increase it. In the words of Stanford University Professor, Josef Joffe, ‘Nations act not to do [favours] for others, but to do well for themselves’. If normal countries act thus, this is less out of selfishness than prudence, for ‘It is their blood and treasure 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 in which the political class has sought systematically to privilege the interests of a foreign power over its own in matters to do with the national safety, security, and future economic welfare of its people. Only nineteenth-century oligarchies in Latin America, with their comprador class of subservient local elites come anywhere close to such behaviour. To find a comparable case of a leader voluntarily alienating the nation’s patrimony, we have to go back 2140 years, to the time of Rome and the famous incident of the Pergamene bequest to Rome. So before we ponder the sources of the Australian exception, let us briefly examine the case of Pergamon’s bequest. As a study 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 political 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 control 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 repercussions 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 political 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 consistent 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 disadvantageous 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 produces 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 aspirations 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 question at hand. We take inspiration, as mentioned in the opening chapter, from renowned political sociologist Max Weber in developing 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 sociological 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 documented 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 putdowns, 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 personal 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 standing 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 instrument 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 without 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 obliterate 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 programs 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 something 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 government, 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 eagerbeaver 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 worldclass 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 explanation 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 motivations. 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 undermine 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 destruction 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 occupants); 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 overboard 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, contributions 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 downplayed by what governments do. We emphasise the political nature of this mindset because of the influence that political leadership tends to play in strengthening 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 perpetrator 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 nationalism 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 political cringe mindset is revealed. In documenting those actions, we have found a pattern of critical choices more consistent with promoting 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 locallygrown 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 AUSTRALIAN INSTITUTIONS (OR HOW DOES HE GET AWAY WITH 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 intelligence 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 strategic 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 statecraft 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 government 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 identified. We consider it important to try to understand why a political leadership would be prepared to sell short its own country’s interests 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 relationship 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 Washington 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 minister, 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 leading his country to a tragic outcome. Again, we do not use the term lightly. For the ancient Greeks, a tragedy meant not something 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 prestige 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 encouraged 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 selfserving 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 enhancement. 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 2004 The Honourable Robert B. Zoellick United States Trade Representative 600 17th Street, NW Washington, DC 20508 Dear Ambassador Zoellick In connection with the signing on this date of the Australia-United States Free Trade Agreement (the “Agreement”), I have the honour to confirm the following understanding reached by the Governments of Australia and the United States during the course of the negotiation regarding treatment to be accorded products derived from blood plasma (“blood plasma products”) and blood fractionation services for the production of such products: 1. Any contract with a central government entity of Australia for blood fractionation services in effect on the date of entry into force of the Agreement shall conclude no later than 31 December 2009, or earlier if Australia deems it appropriate. 247


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2. Australia shall undertake a review of its arrangements for the supply of blood fractionation services that shall conclude no later than 1 January 2007. The Commonwealth Government will recommend to Australia’s States and Territories that future arrangements for the supply of such services be done through tender processes consistent with Chapter 15 (Government Procurement) of the Agreement. 3. Should the Commonwealth and State and Territory governments reach agreement to make future arrangements for the supply of blood fractionation services through tender processes consistent with Chapter 15, Australia shall withdraw its Annex 15-A, Section 5 reservation regarding the procurement of such services. 4. A Party may require any producer of blood plasma products or supplier of blood fractionation services to fulfil requirements necessary for ensuring the safety, quality, and efficacy of 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 in its territory be derived from blood plasma collected in the territory of that Party. 6. Australia confirms that it will not apply any requirement for an applicant for approval of the marketing and distribution of a U.S. blood plasma product to demonstrate significant clinical advantage over Australian-produced products. 7. Article 21.2(c) (Scope of Application) of the Agreement shall apply to paragraphs 1 through 6. I have the honour to propose that this letter and your letter in reply confirming that your Government shares this understanding shall constitute an integral part of the Agreement. Yours sincerely

Mark Vaile Minister for Trade


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NOTES 1 THE AUSTRALIAN ANOMALY 1 Peter Hartcher, ‘A bit battered, but the hat still fits’, 16 February 2007, The Sydney Morning Herald. 2 On the advice of his negotiating team, Trade Minister at the time, Mark Vaile is reported to have urged Howard to walk away from the deal. See Tony Kevin, ‘Labor must hold its nerve on the FTA’, The Canberra Times, 21 July 2004; and Christine Wallace, ‘Bush rebuff stunned negotiators’, The Australian, 25 February 2004. Noteworthy among the many opponents of the deal are the views of trade experts Ann Capling (2004) and Ross Garnaut, ‘FTA worsens our woeful trade outlook’, The Australian, 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 in America’s favour, reflecting massive royalty and copyright outflows, takeovers of innovative local firms, and the displacement of locally sourced and Asian components with more expensive US imports. 249


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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 convey the same sense, see for example Owen Harries, ‘Don’t get too close to the US’, The Australian, 17 February 2004; Owen Harries, ‘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: ; or Richard Woolcott and Paul Barratt, ‘Coping with the Alliance’, New Matilda, available at newmatilda.com. On the reason for ‘clamouring’ to be invited to participate in the Iraq invasion force, Manne (2006: 23) observes that Howard saw the moment he ‘had been waiting for during his entire political life had finally arrived’. 7 Grant (2004: 107). 2 ENERGY 1 Jared Diamond in his book Collapse (2004), analysed the paradigmatic case of this insulation from accountability in his account of the collapse of an entire society on Easter Island, where elite competition over religious totems encouraged over-consumption of wood supplies, ultimately destroying the islanders’ survival chances. 2 Energy Task Force, Department of Prime Minister and Cabinet, Securing Australia’s Energy Future (Commonwealth of Australia, Canberra 2004), p. 135, available at . 3 On the Global Nuclear Energy Partnership, see the exposition by Edwin S. Lyman (2006) of the Union of Concerned Scientists; and on nuclear matters generally in Australia, see Falk, Green and Mudd (2006).


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4 See GNEP website, at: . 5 Press briefing by Prime Minister, Hay Adams Hotel, Washington DC, 15 May 2006, available at . 6 See Julie Macken, ‘Nuclear debate, part one: the plan’, New Matilda, Wednesday 8 November 2006, available at . 7 See The Uranium Mining, Processing and Nuclear Energy Review (Chair: Dr Ziggy Switkowski) 2006, available at . 8 See statements regarding the GE contract on the SILEX website, at: . 9 For a discussion of the prospects for a high-level waste facility in Australia, 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, the raw material, although this fact is glossed over when the issue of ‘nuclear fuel leasing’ is discussed. See Julie Macken, op. cit. and Paul Toohey, ‘The Big U-turn’, The Bulletin, 17 November 2006, available at: . 12 See Turton (2004). This paper, by a respected researcher at the International Institute for Applied Systems Analysis, Austria, utilises the most comprehensive data available, through national submissions to the UNFCCC secretariat. 13 As Turton (2004) points out, eliminating these subsidies (thus charging the full price for electricity consumed) would have the effect of driving the industry to improve its efficiency or shutting down, with minimal dislocation to Australia.


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14 See Turton (2002) on the aluminium smelting industry in Australia, available at . 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 that would be harmful economically or in trade terms, and would not move in advance of actions taken by other major greenhouse gas producing 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, available at: . 18 This special treatment involves recognition of the role of land clearing and its reversal, creating carbon ‘sinks’—an option not made 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’, The Age, 30 July 2006; and the PhD Thesis by Pearse (2005) on the business response to climate change in Australia. 20 See Murdoch University website, ‘The Australian Cooperative Research Centre on Renewable Energy (ACRE) has ceased to exist’, at . 21 See Jo Chandler, ‘Shown the door: scientists say cloudy thinking cost them their jobs’, The Sydney Morning Herald, Weekend edition, 11–12 February 2006, p. 7, available at . 22 See ABARE 1995 Global Climate Change Report. 23 Commonwealth Ombudsman, ‘Report of the investigation into ABARE’s external funding of climate change economic modelling’, 1998, available at . Hamilton (2001) op. cit., p. 56. See ‘Securing Australia’s Energy Future’, Energy Task Force (2004), available at As environmental scholar Peter Christoff observes: ‘The White Paper outlines an eight-year national plan that is . . . brazen in its aggressive affirmation of continuing fossil fuel use, bold in its confrontation with the government’s established critics of its energy and climate change policies, and challenging for the renewable energy sector, which it antagonizes’ (Christoff 2004). Energy Task Force, Department of Prime Minister and Cabinet, Securing Australia’s Energy Future (Commonwealth of Australia, Canberra, 2004). In 2006 the Lowy Institute issued a report on Australia’s decadeand-a-half commodities-driven boom (Quiet Boom by Dr John Edwards, chief economist of HSBC), where it is argued that in fact the contribution of the minerals sector to the Australian economy is exaggerated, and much of the benefit is lost because of foreign ownership. On the changes needed, see the comments by one of us, Mathews (2007a). See Clive Hamilton, ‘Climate follies’, Newsletter #40, Sep 2004, p. 11, The Australia Institute, Canberra, available at . Richard Baker, op cit. See Clive Hamilton, ‘Keeping it in the family’, op cit. See the report of the Renewable Energy Policy Network for the 21st Century (REN 21 2006) for a survey of investment activity in renewable energies industries around the world.


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33 For a comprehensive account of Australia’s MRET, see Kent and Mercer (2006). The official website for MRET can be found at . 34 For a recent review of the wind industry in Australia, see Diesendorf (2006). 35 See the article by one of us ( JM) in New Matilda, ‘Orange-bellied politics’, 17 May 2006, available at . 36 See ABC Radio, PM program, 4 August 2006, ‘Campbell under pressure after wind farm backdown’, available at . 37 At the ANU, world-class work continued to be done in the solar collector/solar tower technology, which is now being commercialised by the Australian company Solar Systems Ltd. The development is supported by a $1 million grant under the federal government’s Renewable Energy Commercialisation Program <www.greenhouse.gov.au/renewable/recp/>. $1 million does not go very far in international new industry creation schemes. 38 See the press release announcing CS Solar AG’s capital raising, in January 2005, at . 39 Remark by Senator Christine Milne, leader of the Democrats, in newspaper report ‘“Climate of fear” in solar research’, by Rosslyn 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 commentary is 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 example the House of Lords report from the Select Committee on


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European Union, “The EU strategy on biofuels: from field to fuel”, November 2006, available at . 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 . 2 Parliament of Australia: Senate: Standing Committee on Rural and Regional Affairs and Transport 2005. ‘Administration of Biosecurity Australia: Revised Draft Import Risk Analysis for Apples from New Zealand’, AGPS, Canberra. Available at . 3 Parliament of Australia: Senate: Standing Committee on Rural and Regional Affairs and Transport 2005. ‘Administration of Biosecurity Australia: Revised Draft Import Risk Analysis for Bananas from The Philippines’, AGPS, Canberra. Available at . 4 Parliament of Australia: Senate: Standing Committee on Rural and Regional Affairs and Transport 2004. ‘Biosecurity Australia’s Import Risk Analysis for Pig Meat’, AGPS, Canberra. Report available at .


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5 Australian Pork Ltd, ‘Pork industry wins quarantine battle’, Press Release, 27 May 2005; available at . 6 Federal Court of Australia 2005, Australian Pork Ltd v Director of Animal and Plant Quarantine, FCA 671, 27 May 2005; available at . 7 Australian Pork Ltd, ‘Australian Pork’s legal challenge to the pig meat IRA’, Press Release, October 2005; available at . 8 Federal Court of Australia – Full Court 2005, Director of Animal and Plant Quarantine v Australian Pork Ltd, FCAFC 206 (16 September 2005); available at . 9 High Court of Australia, Result of Applications for special leave to appeal, Sydney, 18 November 2005. Available at For a sample of press coverage, see: ABC NewsOnline, ‘Pork producers lose High Court bid over imports’, 18 November 2005, available at . 10 Cited in ‘Australia allows California fresh grapes’, Western Farm Press, 16 March 12002. . 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 domestic cattle for BSE before it enters the human food chain, and it does not import beef from countries infected with BSE—until it announced in December 2005 that it would resume some imports of beef from the US.


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13 ‘Govt considers relaxing its mad cow disease policy’, Australian Associated 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 Health Organization. 16 OIE Code, BSE, Chapter 2.3.13; available at . 17 As we detail at length in our AJIA paper, although American officials routinely claim that they have a ‘world class’ tracking and testing system for BSE, US testing levels fall far below international 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 to make the discovery of BSE cases highly unlikely. Indeed, New Scientist has reported that the US may be in the grip of a BSE epidemic, the existence of which is suppressed by the limitations of its testing system. See Weiss, Thurbon and Mathews (2006) for details. 18 Japan had imposed import restrictions on US apple exports in 1994 in order to protect itself from fire blight. The US appealed to the WTO’s Dispute Settlement Body, which found in 2003 that Japan’s requirements for orchard inspections—for 500-metre buffer zones between infected trees and trees with apples intended for export to Japan, and chlorine fumigation—were invalid since they were not based on ‘scientific’ evidence—a despicably constructed ‘technicality’, but enough to get US lawyers over the line. At the time that this ruling ran out on 30 June 2004, Japan and the US had met several times, but Japan was holding a firm line in defence of its apple orchards— although it had issued a revision to its requirements. But the US insisted on full retraction, and imposed trade sanctions worth


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$143.4 million—the estimated trade loss from the banned apple exports (Weiss, Thurbon and Mathews 2004). See for example Kyodo News report, carried by Dow Jones Newswires, ‘Japan Ag Ministry denies progress in Japan-US BSE talks’, 30 August 2004; available through Trade Observatory, at . The Australian Minister for Trade, Mark Vaile, states in the final paragraph of the letter: ‘I have the honour to propose that this Letter and your Letter in reply confirming that your Government shares this understanding shall constitute an integral part of the Agreement’. In the Australian government’s guide to the Australia–US FTA, under the section entitled ‘What Parts of the Free Trade Agreement are Legally Binding’, any side letter stipulated as ‘constituting an integral part of the Agreement’ is said to be ‘a legally binding part of the Agreement’ (Australian Government 2004: 4). Chapter 7 of the FTA also commits Australia to ‘respecting’ America’s quarantine-related regulatory systems and risk assessment even where America’s regulatory systems and risk assessment processes are substantially lower than our own—not to mention considerably lower than those of Europe and Japan, as we show below. Somewhat ironically, Australia did until recently accept OIE guidelines on importing beef from Brazil. These guidelines, however, were exposed as seriously inadequate in 2004, when Brazil experienced an outbreak of foot and mouth disease (FMD) in zones from which Australia had been importing, and which had been declared safe by the OIE. This led Australia’s Biosecurity Chief John Cahill to declare in 2005 that Australia would no longer rely solely on OIE guidelines in setting its FMD quarantine standards (ABC TV 2005), raising further questions


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about Australia’s agreement to prioritise OIE guidelines on BSE in the FTA. Official Committee Hansard, Senate, Rural and Regional Affairs and Transport Legislation Committee, Estimates, 1 November 2005, p. 78, available at <www.aph.gov.au/hansard/senate/ commttee/S8862.pdf>. ‘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 . Ray (2005). Swift and Company, ‘Swift & Company reports second-quarter results’, Media Release, 13 January 2005. Available at <www. swiftbrands.com/media/releases/Financials12Jan2005.pdf>. See Griffiths (1998) for an analysis of the Australian meat industry from the perspective of the institutions (or lack thereof ) that made it less competitive with foreign rivals. If you change your domestic rules to say it is safe to continue selling local beef even in the event of a local BSE outbreak, then your position on refusing the imported beef from countries with BSE is arguably undermined. ‘ABA—No friend of Australian beef producers’, Cattle Council of Australia, Media Release MR2004/32, 26 October. Available at <www.cattlecouncil.com.au/images/4_PUBLICATIONS/ MediaReleases/MediaReleases2004/MR2004_32_ABA_No_ Friend_of_Australian_Beef_Producers.pdf>. ‘ABA calls on PM to resolve Canberra’s suicidal power struggle over 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 =&>.


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31 The theory of ‘regulatory capture’ advanced by Nobel Laureate George Stigler in 1971 has been widely employed to explain US policy outcomes across a range of industries, particularly agriculture (Stigler 1971). 32 Author correspondence and interviews with representatives of ABA and Australia Pork Limited. 4 CULTURE 1 ‘Lost—and no wonder: On the small screen not only the accents are thick’, The Sydney Morning Herald, ‘Spectrum’, 17 February 2007. Spectrum p. 10. 2 See Australian Film Commission, Get the Picture (statistical database), available at . 3 ibid. 4 Greg Duffy, ‘Australian Television Content: The new culture vultures’, Evatt Foundation Paper, June 2005, available at . 5 ‘Cultural industries’ are typically defined as ‘those industries that combine the creation, production and commercialisation of contents which are intangible and cultural in nature’ (see UNESCO Cultural Industries and Enterprises website at: ). These include ‘goods’ (for example. films, TV shows, books, plays, etc., all typically protected by copyright); ‘services’ (for example, libraries, museums); and those high-tech activities centred on the production and distribution of cultural content (for example, audiovisual/multimedia technologies). The term ‘creative industries’ is sometimes used interchangeably with ‘cultural industries’, but often refers to a broader category, encompassing such activities as architecture, fashion design and even advertising.


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6 See Van Grasstek, ‘Treatment of cultural goods and services in international trade agreements’, UNESCO, Singapore 2005, p. 15, available at . 7 American cultural exports are so cheap because America is able to mass produce films, TV shows, etc., at home and recover the costs of production in its large domestic market. With costs recovered at home, the United States can afford to then export the same product overseas at bargain basement prices, typically pricing local cultural content out of the market. 8 On the potential relationship between the creative industries and economic dynamism in the Australian context see Cunningham (2006). Other works in this vein include Wilenius (2002) and Florida (2002). 9 For an overview of the emerging focus of governments from the United Kingdom to the United States, Asia and the Pacific on ‘creative industry’ promotion (variously defined) see Cunningham (2006). See also Jeni Harvie, ‘Movies, music work wonders for economy’ The Australian, 22 November 2005, p. 7. 10 It failed to halt the ensuing decline of Australian film production. For a history of the early years of feature film production in Australia—a period during which it led the world—see ‘The First Wave of Australian Feature Film Production: From Early Promise to Fading Hopes’, The Australian Film Commission, available at . 11 David Malouf, ‘The Making of Australian Consciousness’, The Boyer Lectures, broadcast on ABC Radio National, 13 December 1998, available at .


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12 Few book-length treatments on Gorton’s contribution to the development of a more militarily, economically and culturally independent Australia exist. For the most balanced examination of his contribution to Australian political life, see Hancock (2002). 13 Barry Jones, speech to parliament on the occasion of Gorton’s 80th Birthday, Hansard, 9 September 1991, p. 960. As Prime Minister, Gorton broke with the Liberal Party’s conservative position on a range of social, economic and military issues, which drew the ire of many in his own party. Following his loss of the leadership thanks to internal battles, Gorton resigned from the Liberal party and later even voted Labor and appeared in Labor election advertisements. 14 The AFTRS was conceptualised by Peter Coleman, Barry Jones and Philip Adams, who had been commissioned by Gorton to travel overseas and report back on how other countries were building the local talent base to support domestic cultural industries. Gorton accepted every one of the recommendations produced in the resulting report. 15 Ironically, it was Gorton’s penchant for the arts that helped bring him undone; an infamous visit to Liza Minnelli’s dressing room after a show at Sydney’s Chequers nightclub was one of the incidents that contributed to his downfall. 16 For a comprehensive overview of cultural policies from Gorton to Howard, see Throsby (2006). 17 Keating was particularly critical of the Australia Council and its funding strategies (Gallasch 2005: 39). 18 This is not to downplay the contribution of those governments between Whitlam and Keating, Fraser in particular was particularly active, redeveloping the National Institute of Dramatic Arts (NIDA) and introducing additional tax incentives for film production, among other things.


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19 Creative Nation: Commonwealth Cultural Policy Statement, October 1994, p. 7, available at . 20 The reaction of artists involved in the ‘new media’ arena to Keating’s Creative Nation statement was not entirely positive. Many felt they were ‘being cast as service providers, cash cows in the new techno-economy.’ (See Gallasch op cit., p. 43). Nevertheless, the fact that Keating had a vision for the arts and was willing to place the sector at the centre of national policy making now sees him recalled as Australia’s Prime Minister for the Arts. Gallasch provides an enlightening examination of Australia’s world-class new media arts sector and the reversal of 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 the United 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 . 24 See Judith Brett (2005) for an enlightening examination of the way 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 just another ‘Aussie bloke’—as opposed to ‘to’ the nation (as part of a governing ‘elite’). 25 On the response of the industry to liberal campaign see ‘Government Ads: Insult To Injury’, Lauren Martin and Joyce Morgan, The Sydney Morning Herald, 2 October 1998, p. 21. 26 This is not to detract from the hard work of some individual members of parliament who have toiled behind the scenes to


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address the innumerable problems facing the industry, such as Senator 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. ‘Nevin chides Howard over the Arts’, Tony Stephens, The Sydney Morning Herald, 22 January 2004, p. 2. ‘Today’s Philistines’, Peter Garrett, Keynote Address to the Australian Council of University Art and Design Schools Annual Conference, 28 September 2006, available at . Apart from a few notable exceptions, including Graeme Murphy and Janet Vernon, who resigned as Directors from the Sydney Dance Company in July 2006 citing ‘political indifference’ and resulting funding pressures on the company as the reason for their departure. See Paech, Vanessa., ‘War, Sport and Apathy drive creators away’, Arts Hub Australia, July 14 2006, available at . As David Marr reported in his 2005 Philip Parsons Memorial Lecture ‘(Nevin) wasn’t thanked. Though she hadn’t said anything particularly rude, she had broken the rule of the trade that complaints are kept in house’ ‘Theatre Under Howard’ Philip Parsons Memorial Lecture, Currency Press, 2005, available at . Cited in ‘Broken Arts—Cringe or Whinge?’, Rosemary Neill, The Australian, 16 April 2005. For an overview of the efficiency dividend and its budgetary implications for arts companies see ‘Dying to be efficient’, David Uren, The Australian , 31 March 2005, p. 14. Uren cites, for example, the findings of a recent review into the impact of the dividend on Australian symphony orchestras, which found that ‘with costs rising on average by 4 per cent a year, a company


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that gets 80 per cent of its money from the government and is subject to the efficiency dividend has to increase its nongovernment income by almost 16 per cent a year just to stand still.’ See Neill, op cit. Cited in ibid. See for example, ‘A Wallet full of Censorship’, David Marr, The Sydney Morning Herald, 10 October 2005, p. 13; ‘Alert and Alarmed: Art Under Fire’, Lauren Martin, Garry Shead, Martin Wesley-Smith, Stephen Sewell, Rosie Scott, Jonathan Biggins, Robert Connolly and Thomas Keneally, The Sydney Morning Herald, 29 November 2005, p. 18. See for example, Andrew Bolt, ‘$1.6 billion Whinge’, Sun Herald, 20 January 2004, p. 21; Padraic P. McGuinness, ‘Time we all saw the bigger picture’, The Sydney Morning Herald, 24 June 2000, p. 36. Although Australia’s cultural sector hardly places an inordinate burden on the public purse. As Stuart Cunningham points out: ‘In quantum terms, the tax dollar spend on the arts is very small indeed and judicious increases are certainly called for. The Productivity Commission . . . estimates that Culture and Recreation, the sector where the arts are placed, received less than 1% of its income from the public purse. Compare this to the enormous 14.3% allocated to some manufacturing sectors, and 9.5% to textiles, clothing and footwear. Clearly, the idea that the arts are more heavily subsidised by our hard-earned tax dollar than other sectors is laughable.’ Cited in Katherine Brisbane, ‘Imagining a Creative Nation’, Elizabeth Jolley Lecture, delivered at the Alexander Library Theatre, WA, on 3 August 2006, p. 2–3. Available at . ‘Call for New Culture Leaders, Peter Aspden, Financial Times, 21 June 2006, p. 2.


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39 See the UK Department of Culture, Media and Sport website: . 40 Throsby (2006). 41 Universal Declaration on Cultural Diversity, available at . 42 For details on the process of drafting of the convention see . 43 Alan Riding, ‘Next lone U.S. dissent: Cultural diversity pact Entr’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 . The co-head of the US delegation also stated that ‘this convention is actually about trade . . . (and) clearly exceeds the mandate of UNESCO’ and went on to say that the text was ‘deeply flawed and fundamentally incompatible with (the agency’s) obligation to promote the free flow by word and image’ (Richard Martin quoted in ‘UNESCO Adopts Convention to Protect Diversity’, Julio Godoy, Inter Press Service News Agency, 20 October 2005). The US Ambassador to UNESCO, Louise Oliver, said that the measure was ‘too prone to abuse for us to support’ (quoted in Moore, op cit). 47 ‘UNESCO Overwhelmingly Approves Cultural Diversity Treaty’, Bridges Weekly Trade News Digest, Vol.9, No.36, October 2005. Available at .


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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 Cultural Diversity’, Florian Roetzer, Telepolis, October 21 2005. Available at: . 51 Greg Duffy, ‘Australian Television Content: The New Culture Vultures’ Evatt Foundation Paper, November 2005. Available at . 52 Ibid., emphasis added. 53 ‘Australian cultural diversity under threat’, Australian Society of Authors, 7 November 2003, available at . 54 Jeffrey E. Garten, ‘Cultural Imperialism is No Joke’, Business Week, 30 November 1998, p. 28. 55 Ibid. 5 DEFENCE 1 On politicisation of the military and intelligence services, see the inside story by Andrew Wilkie who resigned from the Office of National Assessments (ONA) in March 2003, in protest over the manipulation of intelligence in the lead-up to the Iraqi war (Wilkie 2004) and on politicisation of intelligence generally see Collins and Reed (2005); on the politicisation of the public service see Barker (2007). 2 We coin this term to emphasise the downside of defence integration, as opposed to the one-sided emphasis on the benefits alluded to by Howard Government ministers.


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3 See Kinnaird (2003). 4 ‘M1A1 Abrams tank agreement signed’, Minister for Defence, 9 July 2004. Available at . 5 Tom Allard, ‘Monster tanks would sink landing craft’, The Sydney Morning Herald, 11 March 2004. 6 This is an option pursued in Australia with the Bushmaster troop 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 in the form of the self-propelled gun (SPG) which Brown (2004) argues would be a better alternative to the expensive and cumbersome tanks. He says ‘Our principal security issues do not involve large-scale ground warfare.’ If the real security risks are people smugglers or terrorists, then ‘tanks are no use at all’. See Gary Brown, ‘Why buy Abrams tanks? We need to look at more appropriate options’, Online Opinion, 31 March 2004, available at . 9 ‘M1A1 Abrams tank agreement signed’, 9 July 2004, Minister for Defence, Media release 132/2004, available at . 10 Brian Robins and Gerard Ryle, ‘Defence’s billion dollar bungles’, The Sydney Morning Herald, 1 May 2004. Available at . 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.


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14 For overviews on the Collins-class submarine project see Dikkenberg (2001) and Kelton (2004); as well as the report from the Senate Standing Committee on Foreign Affairs, Defence and Trade (2006), particularly the favourable judgment on the project on pages 53–60. 15 The Ministry of Defence stated: ‘The Government has decided that a comprehensive arrangement with the US Navy on submarine issues is in Australia’s best strategic interests and has therefore decided that the selection of the combat system for the Collins Class submarines cannot proceed at this time’. See ‘Submarine combat system’, Minister of Defence, Media release, 2001, available at ; and ‘Australia and US sign submarine cooperation agreement’, Minister of Defence, 11 September 2001, available at . 16 ’Submarine combat system’, Minister of Defence, 2001, available at . 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 example Schmidtchen (2005). 19 See A.W. Grazebrook, ‘US Pressure in RAN Submarine Competition’, Asia-Pacific Defence Reporter, August–September 2000. 20 Senate Hansard, ‘Question and Answer Exchange Between Senator 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-official Australian Strategic Policy Institute.


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22 Graeme Dunk, ‘The Collins Combat System’, Asia-Pacific Defence Reporter, December-January 2001, pp. 14–15. 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 Ministerial Statement, 27 June 2002, available at . 25 Quoted in Stewart Cameron, ‘US rules out deal on F-22’, The Australian, 14 February 2007. 26 Stewart Cameron, ‘RAAF fighter buy stuns US’, Weekend Australian, 26 October 2002, available at . 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 . 30 ‘US rules out deal on F-22 Raptor fighter jets’, Cameron Stewart, The Australian, 14 February 2007, available at . 31 ibid. 32 MacFarlane simply guessed that Australian contractors might get 1 per cent of the $400 billion project, which would provide Australian firms with access to $4 billion of notional work. See Joint Ministerial Statement (2002) op cit. 33 The international aspects of the program are split into three levels. The UK is the only Tier 1 supplier, reflecting its contribution of US$2 billion. Tier 2 suppliers are Italy and The Netherlands (contributing $1 billion and $800 million respectively). Tier 3 suppliers are Turkey ($175 million), Australia


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(US$144 million), Norway ($122 million), Denmark ($110 million) and Canada ($100 million). Israel and Singapore are ‘security cooperative participants’. See Wright (2006) for further discussion on this point. On the global supply chain aspects see for example: Borgu (2004); ‘An ‘enlightened’ decision? Australia and the Joint Strike Fighter’, Alan Stephens, Asia-Pacific Defence Reporter, February 2003: 6–8; Tewes (2006); Wright (2006). The latest issue of the Quadrennial Defense Review is 3 February 2006. It was widely expected that the Review might pare back the commitment to the JSF; but in fact it passes over the project in silence. See Tewes (2006) for further comment. ‘F-35 JSF program: US and UK reach technology transfer agreement’, Defence Industry Daily, 4 August 2006, available at . ‘Norway goes wobbly on JSF’, Defense News, 28 November 2005, available at . ‘Comments at signing of Joint Strike Fighter Memorandum of Understanding’, Minister of Defence, Washington, 12 December 2006, available at . See Patrick Walters and Cameron Stewart, ‘Six billion flight of fancy’, The Australian, 8 March 2007; available at . See Thomson (2006: 34). These are difficult data to secure, and Thomson (private communication) indicates that DoD is unable or unwilling to update these figures.


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42 These data are from the Stockholm International Peace Research Institute (SIPRI) Arms Transfer Database. 43 The specification for the EWSPS for C130J aircraft is contained in the Defence Capability Plan 2004, identified as Project AIR 5416 (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 for anonymity; 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 . 50 We draw on a distinguished literature in analysing earlier Australian 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 ; and, from the Armed Forces themselves, Lieutenant Colonel Hodson (2003). The White Papers analysed in this chapter go back 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?’, Paul Mann, Aviation Week & Space Technology, 22 April 2002, 158 (16): 56–7.


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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 . 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 convincing argument. 58 Several eminent thinkers from both sides of the political spectrum emphasise the value of greater self reliance in our military preparedness. See for example Aitkin (2007: 9); Cheeseman (1993); Kelton (2004); White (2002; 2006). 59 ‘Secrecy, evasion and deception’ is the title of Chapter 1 of Desmond Ball’s 1980 study, A suitable piece of real estate: American installations 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 into a number of different blood products) and the distribution of associated blood products. 2 As the Australian Red Cross Blood Service (ARCBS) defines it, self-sufficiency means ‘having enough blood and blood products to meet demand’ and achieving this ‘through a national blood program without having to source products from other countries’ (ARCBS 2004: 8). 3 Appendix 19 of the Australian Guidelines for the Registration of Drugs (AGRD). The AGRD became the Australian Regulatory Guidelines for Prescription Medicines (ARGPM) in 2004 and national self-sufficiency in blood products is protected in


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Appendix 9 of this document. The ARGPM, in accordance with the side letter, no longer contains the clause regarding the need to demonstrate clinical advantage (see below) (ARGPM 2004). Except where otherwise indicated, this section is based on ARCBS (2004: 7), the Flood Report (2006: 193) and the Stephen Report (2001: 86). Most recently, CSL signed a five-year contract with the National Blood Authority, which began in January 2005 when its 11-year contract ran out (‘CSL seals five-year Australian plasma products supply deal’, Paul Sonali, Reuters News, 23 December 2004). The National Blood Authority, created in 2003, now acts on behalf of all nine Australian governments, contracting with the fractionator to purchase the plasma products and providing these to hospitals and clinics free of charge. The Therapeutic Goods Administration (TGA) is responsible for regulating standards for all plasma used in Australia. Fact sheet: Plasma fractionation review (DHA 2006). Imported products – so-called ‘Defined Blood Products’ which are not manufactured in Australia, including both recombinant (synthetic) and plasma-derived products—could only be sold in the domestic market by being registered under two separate processes. The first was under Appendix 19 of the Australian Guidelines for the Registration of Drugs where registration was restricted to plasma products that demonstrated clinical superiority over the local product. Under the new Guidelines for the Registration of Drugs, this requirement was discarded to pave the way for a US supplier to take over CSL’s contract (see discussion of the side letter below); the ARCBS Submission to the Flood Review links this change to the government’s commitments given in the side letter (ARCBS 2006). The second is under the Orphan Drug Program (introduced in 1998), which allows the import of ‘orphan drugs’ (products used to treat,


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prevent or diagnose rare diseases) that may not be commercially viable in Australia (Stephen Report 2001: 152). See ARCBS (2004: 4); and Flood Report (2006). 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 . Cited in ARCBS (2004: 8). Article XXIII of the WTO’s Plurilateral Agreement on Government Procurement sets out the principles for exclusions, spelling out the right of signatory nations to exempt from open tendering those strategic areas deemed necessary for national safety and security: the safety and protection of human health, the safety and protection of animal and plant health, and military security. Use of IVIg in Australia is growing at an annual rate of 15 per cent as a result of new applications, leading to greater recourse to higher-risk imports using plasma from paid donors. See S. Parnell, ‘Blood sell’, The Australian, 10 March 2007. As the 2006 Flood Report on Australia’s Plasma Fractionation observes, Baxter is one of only three foreign suppliers that enjoys the benefits of restricted competition in our plasma procurement system. And benefit hugely it does by convincing the government to buy its pricey synthetic (non-plasma) products known as recombinants. In fact, after CSL, Baxter is the government’s next most favoured supplier, accounting for some $68 million dollars of the Australian blood products bill. To put this in perspective, Baxter’s slice of the pie is more than half of CSL’s entire contract income for plasma fractionation. Baxter International is one of the world’s largest producers of renal, intravenous therapy and blood products. See ‘CSL faces fight on home turf ’, Brett Foley, Australian Financial Review, 29 July 2003, available at <www.factiva.com>. Stephen Report (2001: 88).


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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: the taxes reinvested in the country, the investment and employment creation, the new tax revenue thereby generated, and the export income made possible by having a national fractionator like CSL. Send these activities and assets offshore with a foreign fractionator and all of these losses are turned into ‘costs’ to the national economy. So even if CSL’s prices were shown to be higher than average (which has not been shown), the benefits associated with local procurement would very likely still outweigh the foreign alternative. 19 Note that these conditions apply only to US firms because they are contained in the FTA with the United States. 20 ‘America Inc.’ is the term we use to convey the close collaboration between US government and US industry that takes place as a matter of routine in securing selected US interests in domestic and foreign markets. 21 See ‘Submission to the Joint Standing Committee on Treaties’, Baxter Healthcare Pty Ltd, 14 April 2004, available at . 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 to have policies that blood plasma products are derived from blood plasma collected in their own territory. This allows Australia to preserve its policy on using plasma collected from Australian blood donors’ (DFAT 2004b).


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28 According to a 2003 DHA submission, Australia aims for selfsufficiency in fresh blood products and plasma derived products, but not in alternatives to blood products (i.e. genetically engineered 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 Chapter of the Agreement applies to purchase of goods and services, except where specifically excluded, by listed government agencies. Procurement of Plasma Fractionation Services has been excluded from coverage of the Government Procurement Chapter (See Annex 15-E Services). 32 Tony Abbott, ‘Minister for Health and Ageing Press ReleasePlasma Fractionation Review’, 15 December 2006, emphasis added. Available at . 33 See DFAT (2004b). 34 From Article XXIII of the WTO’s Agreement on Government Procurement: ‘. . . nothing in this Agreement shall be construed to prevent any Party from imposing or enforcing measures: necessary to protect public . . . safety, human, animal or plant life or health . . .’ (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 billion 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 product markets are seen as a growth area, with rising demand for


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products like IVIg and new possibilities like artificial blood (recombinants). For the evidence on the US approach to procurement of innovation from US firms in agriculture, health, defence, IT and biotechnology more generally, see sources such as Hurt (2006); Weiss and Thurbon (2006); Ruttan (2006); and Connell (2004: 7–9). See USTR (2006: 31). As a savvy marketer, Baxter promotes its products by sponsoring and rewarding hospitals, medical and patient groups who buy its products, including the Haemophilia Society which advocates for Advate. See for example The Hemophilia Bulletin, available at . See ‘Baxter wins hemophilia drug OK’, Bruce Japsen, Chicago Tribune, 26 July 2003, available at . See Flood Report (2006: 53). US Food and Drug Administration 2004: ‘Warning Letter to Baxter Healthcare Corporation’, 25 May, see . See ‘ACCC institutes against Baxter Healthcare Pty Ltd’, News Release, 1 November 2002, Australian Competition and Consumer Commission, available at . See ‘Healthy penalties in Caremark fraud case’, Crawford Greenburg, Chicago Tribune, 17 June 1995, available at . See ‘Corporate Profile: Baxter International’, Congress Watch, 1998, available at . See ‘FDA notifies health care professionals of problem with Baxter Healthcare’s Meridian Haemodialysis Instrument’, US


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Food and Drug Administration, 16 December 2005, available at ; and see the Class 1 Recall Notice at . See ‘Sealed in blood’, Pittsburgh Post-Gazette, 7 May 1997, available at <www.factiva.com>. See ‘Illinois court denies class certification in blood products case’, Health Care Fraud Litigation Reporter, 10(10), 11 April 2005, available at <www.factiva.com> Pharmaceutical Litigation Reporter, 2002. ‘Baxter Healthcare loses appeal of $18 million damages 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 . See Business Wire 1994., available at <www.businesswire.com>; see also ‘The North Today’, 15 November 2003, available at <www.factiva.com>. See US FDA Warning Letter, 25 May 2004, available at . Ibid. pp. 205–07. See Flood Report (2006: 205–07), emphasis added. See our discussion of Australia’s role in US strategy to take back our beef markets in Japan by lowering our (‘BSE-free’) standards on mad cow, Weiss, Thurbon, and Mathews (2006); and for effects on Australian industry more generally, see Weiss, Thurbon and Mathews (2004). Sir Ninian Stephen was Governor-General of Australia from 1982 until 1989. Stephen Report (2001: 89). Under the Plasma Fractionation Agreement, the Commonwealth had a unilateral option to extend the contract with CSL to June 2009, provided this was done by June 2002.


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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 Health with 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¸ . 67 See Bambrick, Faunce and Johnston (2006). 68 Ibid. 69 The ARCBS has long argued that any departure from selfsufficiency in blood products would impact on Australia’s long standing policy and risk management strategy. It has been vocal in its opposition to moves to process blood overseas, and its chief executive has written to every donor voicing opposition to the proposal (ARCBS 2004). 70 See Weiss, Thurbon, and Mathews (2006). 71 Accessed in 2006 before the release of the review, and subsequently 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 cow blood ban’, The Weekend Australian, 10–11 March, 2007, p. 2.


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7 POLITICAL STRATEGY AND POLITICAL CRINGE 1 ‘America Inc.’ is the term we use for the US government-business partnership 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 the Alliance’, The Sydney Morning Herald, 16 February 2007. p. 11. 3 Hence feeding to the media the ‘shocking’ story of CSL being allocated 2 per cent of blood plasma collected for research and development purposes, painted as an ‘unfair subsidy’ to a private firm 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 Herald Tribune, 9 December 2006, p. 9. 5 Rostovtzeff (1928: 228–9). 6 On the list of nicknames, mostly coined by his Liberal colleagues, ‘the rat’ would appear to be the least offensive. The most offensive have been documented by Alan Ramsay in ‘In mugsville, where payback beats politeness’, The Sydney Morning Herald, 25 October 2003; the coining of such nicknames by Howard’s own colleagues suggests a deficit of respect to say the least. See, for example, M. McCallum, Run, Johnny, Run: The story of the 2004 election (Duffy & Snellgrove 2004). 7 Channel 9’s Helen Dalley puts it succinctly: ‘Written off politically in the 1980s after a drubbing at the polls, snubbed by his own party, sneered at in the media as Little Johnny, by the mid1990s, the nowhere man was being hailed the comeback kid.’ ‘Howard’s Way’, Sunday (TV program on Channel 9), screened on 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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9 10

11

12

13 14

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very much by political outcomes’. Similarly, Helen Dalley observes that when asked in a 1999 interview celebrating his quarter century as a taxpayer-funded MP ‘Personally, what do you feel was your greatest achievement?’ Howard’s revealing response 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 was successful.’ As Dalley puts it, Howard ‘saw his greatest achievement in political terms rather than anything he’d actually done for the country thus far’. ‘Howard’s Way’, ibid. Collins and Reed (2005); Wilkie (2007: 185). Thus when Howard says ‘Australia is treated with greater respect and taken more seriously on the world stage today than 10 years ago’, almost certainly he is tacitly referring to the perception he has of himself (as reported in the Sun Herald, 7 April 2006, p. 7). For many commentators, there is virtually no domain in which Australia has gained respect under Howard’s tenure; though many believe the respect it has lost has been considerable. Howard’s alliance exploitation game has cemented the alliance as the ‘Eleventh Commandment’, as former diplomat and DFAT official Bruce Grant (2004) has noted. Judith Brett offers an incisive analysis of Howard’s anti-Labor obsession, observing that he is driven to divide the world into ‘us’ and ‘them’: ‘Critics putting arguments and reasoned differences are treated as opponents and shoved into the Labor [read ‘enemy’] camp.’ (Brett 2005: 42). Brett (2005: 41–2; emphasis added). See this link ranking countries that vote most often with the US at the UN , behind Israel, Palau, and the Marshall Islands.


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15 For example, Alcoa’s influence on the federal government’s 2004 White Paper on Energy. 16 Wayne Errington and Peter Van Onselen, ‘You lucky, lucky bastard!’ The extent of John Howard’s political genius’ paper presented 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 fear Howard has instilled in the public service, see Barker (2007), and Michael Costello, ‘Fear Has Muzzled Australia’s Senior Federal Bureaucrats’, 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’, The Sydney Morning Herald, 21 January 2006, p. 51, and Pamela Williams, ‘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 term meant deference towards the cultural achievements of others. ‘unthinking admiration for everything foreign (especially English) which precluded respect for any excellence that might be found at home’ (1980: vii). Although criticised for overgeneralising (Hume 1993), the concept has broad resonance today: DEST’s website had this to say: ‘By cultural cringe we mean a knee-jerk, unthinking admiration for authorities overseas in places like England or, perhaps today, the USA.’ Environment Minister Robert Hill (1996–2001) defined a related term ‘environmental cringe’ in a 2000 address to the Sydney Institute as ‘Australia’s penchant for failing to assert its traditions and accomplishments.’ (see ); even business leaders in the IT and communications sector see ‘the Australian government’s cultural cringe’ as one of the ‘biggest issues’ hampering the uptake of excellent local products, simply because they are local (Lillia Guan, ‘Supporting Australian business’, Crikey.com, 2006, available at . As historian Mark McKenna notes, ‘Wherever there is a cup of tea to be had with the military, John Howard is there.’ (cited in Brett 2005: 38). See for example Jason Koutsoukis, ‘Ladies and Gentlemen, President Howard’, Sunday Age, 26 November 2006, p. 15. Judith Brett conveys this understanding of Howard with rare insight (2005: 32–40). Howard has emphasised that he is a ‘nationalist’ from one end of his tenure to the other. See his address to the Liberal Party Tasmanian State Council dinner in 1997: ‘I am not a centralist; I am a nationalist’ and in 2007 his press conference at the mouth of the Murray River: ‘I am a passionate Australian nationalist’. For the 1997 speech, see ; for the 2007 press conference, see . In a seminal essay on ‘Centre and Periphery’, anthropologist Edward Shils (1975) underscores the role of a central value system in creating social cohesion. Howard’s instinctive understanding of this point (expressed in efforts to invoke or exploit shared experiences and collective memories), too often discounted by his multicultural opponents, is expertly analysed by Judith Brett (2005: 40). She notes that ‘Because whenever he has evoked a national “us” he has been accused of really demonising a non-national “them”, Howard’s critics have been unable to develop any effective or plausible counter-strategies for talking to their fellow Australians. If you regard any talk of “us” as


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27

28 29

30 31

32

285

illegitimate, it is not clear to me whom you are going to talk to. Nations are not simply formed and defined by their opposition to or difference from some Other; they are also formed and defined by shared experiences and collective memories. They have centres as well as borders . . . Howard speaks persuasively from that centre.’ In reality, Howard has not ‘failed’ since, as we have shown, it has never been his project. On the contrary, judged by the UScentric political strategy that he has pursued, Howard has succeeded. Brett (2005: 43). Writing in the Australian Financial Review, Geoff Barker observes that ‘. . . under John Howard . . . Australia seems to be emulating aspects of countries like China, Singapore and Malaysia . . . countries where dictatorial or dominant governments have a security of tenure that allows them to implement long-term social, political and economic plans without the fear of being turned out of office.’ See ‘PM marginalises dissenters’, Australian Financial Review, 17 October 2005. See the comprehensive analysis by Clive Hamilton and others in the collection Silencing Dissent (2007). Former Army lieutenant colonel and senior intelligence analyst Andrew Wilkie describes his experience in Wilkie (2007: 191). Ridicule, on the other hand was reserved for the 43 eminent former Australian military and intelligence chiefs and senior diplomats who in a letter called for a return to ‘truth in government’—publicly lambasted by the PM’s minders as ‘doddering daiquiri diplomats’ and ‘disgruntled old men’. Distinguished war records it seems were no grounds for respect. See Grant (2004: 132–3). See remarks by Al Gore on NBC’s Today Show, with Matt Lauer, 6 December 2006, available at .


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33 Rudd (2006: 30). 34 Owen Harries, SBS Dateline, 27 July 2005. Harries, a radical conservative who commands respect on both sides of the Pacific, puts it candidly: ‘A reputation for being dumb but loyal and eager is not one to be sought.’ On the contrary, he argues, what the alliance needs is discrimination and balance plus a degree of scepticism: ‘Australia must learn to be as good an ally as it can be, while maintaining its freedom of choice.’ See ‘End of simplicity’, The Australian, 1 December 2006, p. 12). Similar points are made by former Liberal PM Malcolm Fraser, ‘The end of our independence?’ The Age, 14 July 2003, available at .


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