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http://www.bizjournals.com/industries/agriculture/general/2004/12/20/milwaukee_focus1.html


The Business Journal of Milwaukee


>From the December 20, 2004 print edition
Mixed results: Business leaders, farmers debate merits of free trade pact with
Australia
David Schuyler
How Wisconsin companies do business in the land down under will change Jan. 1
with the start of a new free trade agreement between the United States and
Australia. 

Whether the new agreement, approved by the U.S. House of Representatives and 
the
Senate in July with bipartisan support, will help or hurt Wisconsin business 
is
still up for debate. The agreement will occur at the objection of state dairy
industry advocates and some state legislators, who believe it will drive some
dairy farmers out of business. 

State trade experts say Wisconsin manufacturers stand to fare much better. At
inception, the Australia-United States Free Trade Agreement will drop 99 
percent
of all Australian manufacturing tariffs, which average about 5 percent. In 
all,
more than 99 percent of all tariffs on manufactured and consumer goods between
the two countries will be eliminated. 

As a result of the agreement, Wisconsin and other U.S. firms will gain a 5
percent pricing advantage, making them more competitive against other foreign
firms that still face tariffs, said Christian Bartley, executive director of 
the
World Trade Center Wisconsin in Milwaukee. Manufactured goods comprise 99 
percent
of all state exports to Australia. 

"Overall, it's going to be a benefit," Bartley said. 

Through the first three quarters of 2004, Australia represents the 
ninth-largest
export market for Wisconsin products, according to data from the U.S. Census
Bureau's Foreign Trade Division. State exports totaled $236.2 million as of
September 2004, up 16 percent compared with $203.3 million at the same time 
last
year. State exports to Australia totaled $279.9 million for all of 2003. 

Forecast is unclear 
Despite the promising forecasts, the overall impact on Wisconsin business 
remains
unclear. Officials from many of the state companies expected to benefit from 
the
agreement are not yet certain how much their companies will gain from the
agreement. 

Companies contacted included those that have operations in Australia and those
that sell products in that country -- including label and sign maker Brady 
Corp.,
Milwaukee; Joy Global Inc., Milwaukee; Mercury Marine, Fond du Lac; financial
services technology company Fiserv Inc., Brookfield; and software provider
TeraMedica Inc., Wauwatosa, which recently landed a contract with a firm in
Sydney. 

TeraMedica executive vice president Paul Schmelzer said his firm stands to
benefit from the free trade agreement, but it's too early to say by how much. 

Fiserv anticipates significantly expanding its operations in Australia, where
Fiserv is in the midst of negotiations on a check-processing contract with 
three
of the largest banks in Australia. If successful, the company could add about 
750
employees from the banks in the three financial institutions' check processing
joint venture. Nonetheless, the free trade agreement is expected to have 
little
impact. 

"It really doesn't change anything for us," said Chuck Doherty, a spokesman 
for
Fiserv, which has an office in the Sydney area. "We've been there since the
mid-80s." 

The market is also a significant distance away from the United States, and 
that
distance shelters the Aussie market from U.S. firms, said Michael Waxman, a
corporate law and trade regulation attorney at Godfrey & Kahn S.C., 
Milwaukee. 

"It's a very protected market," said Waxman. "The cost of shipping is
prohibitive, depending on what you're shipping." 

Hurts dairy farming 
The state dairy industry is expressing the greatest concern. Dairy industry
advocates, Gov. Jim Doyle and Wisconsin's U.S. Sens. Russ Feingold (D-Wis.) 
and
Herb Kohl (D-Wis.) opposed the agreement on various grounds. 

In a letter to the chairman of the U.S. International Trade Commission, 
Feingold
cited data from the Office of the U.S. Trade Representative indicating that
increased quotas allowed under the agreement would result in a threefold 
increase
in imports of Australian dairy products, flooding the U.S. market, driving 
prices
down and putting some U.S. farmers out of business. 

A 2001 report on the impact of a free trade agreement performed by Australian
consulting firm Centre for International Economics agreed that Australian 
dairy
exports to the United States would rise 350 percent, but from a relatively 
small
base. The $260 million in additional exports would represent only 1 percent of
the value of U.S. farm milk, and would push prices down by 0.1 percent. 

The U.S. International Trade Commission agreed in a May 2004 report, which 
said
"the additional quantities of Australian dairy products entering the U.S. 
market
as a result of the agreement are relatively small in comparison with current
levels of domestic dairy production and consumption." At the height of quota
limits, imports of milk protein would represent 0.3 percent of total U.S.
production, the report said. 

Regardless of whether the impact is large or small, some agricultural and 
dairy
industry advocates see the number of trade agreements being pushed by 
President
George W. Bush's administration placing heavy competitive burdens on farmers. 
In
recent years, the United States completed free trade agreements with Chile,
Singapore, Morocco and Central America-Dominican Republic. 

With multiple free trade agreements, some economic forecasts indicate the 
United
States eventually will become a net importer of foods, said Sue Beitlich,
president of the Wisconsin Farmers Union, an organization in Chippewa Falls 
that
represents food producers in Wisconsin. 

"If we're continually going to do these bilateral trade agreements, 
collectively,
all of these will really hurt the farmer," Beitlich said. 

Small reservations 
Representatives of small businesses also expressed reservations about the 
trade
pact, but only because it represented "another free trade agreement," said 
David
Glass, the Australian consulate-general in Chicago who represents Australia
throughout the Midwest. 

Australia is an attractive market for the United States, which in 2003 
exported
$19 billion in goods and services to Australia in 2003, while importing about 
$10
billion, resulting in a surplus of $9 billion, according to the Office of the
U.S. Trade Representative. Australia buys more goods and services from the 
United
States than any other country. 

Key U.S. imports to Australia include automotive parts, machinery, computers,
electronic products, chemicals and wood and paper products. Of those 
industries,
Wisconsin is strong in machinery manufacturing, computers and electronics, 
which
represent the two largest merchandise exports to Australia in 2003, according 
to
Bartley at the World Trade Center Wisconsin. Wisconsin also is strong in the 
auto
parts and wood and paper products industries. 

Australia is also a fairly wealthy country with a strong Australian dollar
compared with the U.S. dollar, a fact that gives the Aussies strong purchasing
power of U.S. goods, said attorney Waxman. 

The country's English-speaking population helps minimize cultural barriers to
trade between the countries, international trade experts say. 

"The most important thing for Wisconsin businesses to keep in mind is that
Australia has a dynamic, high-wage economy, speaks English, and has a trust in
American products," said consulate-general Glass. 

"American products are highly valued in Australia because of the quality," 
Glass
said. 

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