national insecurity australia

Much of this book goes beyond my expertise but there isa theme and the chapters leave a significant question for allAustralians. What does it mean to be Australian?

I do not believe for one minute that the Governmentunderstands or knows what many Australians feel in theirminds and hearts about this country. We are too close to theUnited States. We do not have to be that close to maintainthe alliance and to be a good friend. We do not wish to besubmerged by an all-pervasive, all-powerful United States orby global forces from outside the world.

There is a sense of independence, of pride in Australia,shared, I believe, by people from every different background.

This book seeks to expose what the authors believe isthe undermining of that Australia, the erosion of self, theerosion of independence and of self-esteem. Different partsof the book will impact differently on different people butthe questions and issues exposed in the book should bestudied carefully.

Rt Hon. Malcolm Fraser, former Prime Minister of Australia

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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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NATIONALINSECURITYTHE HOWARD GOVERNMENT’S

BETRAYALOF AUSTRALIA

Linda Weiss, Elizabeth Thurbonand 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 ortransmitted in any form or by any means, electronic or mechanical, includingphotocopying, recording or by any information storage and retrieval system,without prior permission in writing from the publisher. The AustralianCopyright Act 1968 (the Act) allows a maximum of one chapter or 10 per centof this book, whichever is the greater, to be photocopied by any educational institutionfor its educational purposes provided that the educational institution(or body that administers it) has given a remuneration notice to CopyrightAgency Limited (CAL) under the Act.

Allen & Unwin83 Alexander StreetCrows Nest NSW 2065AustraliaPhone: (61 2) 8425 0100Fax: (61 2) 9906 2218Email: [email protected]: www.allenandunwin.com

National Library of AustraliaCataloguing-in-Publication entry:

Weiss, Linda (Linda M.).National insecurity: the Howard government’s betrayal of Australia.

Bibliography.ISBN 978 1 74175 051 5 (pbk.).

1. Howard, John, 1939– . 2. Australia—Foreign relations—United States. 3. United States—Foreign relations—Australia. 4. Australia—Politics and government—1996–.I. Thurbon, Elizabeth. II. Mathews, John, 1946– . III.Title.

327.94073

Typeset in 11.5/16 pt Joanna by Midland Typesetters, AustraliaPrinted in Australia by McPherson’s Printing Group

10 9 8 7 6 5 4 3 2 1

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mailto:[email protected]

http://www.allenandunwin.com

CONTENTS

Acknowledgments viii

Acronyms 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.

viii

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ACRONYMS

AAC Australian Aluminium Council

ABA Australian Beef Association

ABARE 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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x NATIONAL INSECURITY

CCA Cattle Council of Australia

COOL Country of Origin Labelling (for beef )

CSG Crystalline Silicon on Glass (photovoltaic cells)

DHA Department of Health and Ageing

DMO Defence Materiel Organisation

DoD Department of Defence

ELISA Enzyme-Linked ImmunoSorbent Assay (test for BSE)

EW&C Early Warning and Control aircraft

EWSPS Electronic Warfare Self-Protection Suite

FDA Food and Drug Administration (US)

FTA Free Trade Agreement

GHGs Greenhouse Gas emissions

GNEP Global Nuclear Energy Partnership

HLW High Level (radioactive) Waste

IAEA International Atomic Energy Agency

IEA International Energy Agency

IRA Import Risk Assessment

IVIg Intravenous Immunoglobin

JPCAA Joint Public Committee of Accounts and Audits

JSF Joint Strike Fighter project

MBM Meat and Bone Meal

MLA Meat and Livestock Australia

MRET Mandatory Renewable Energy Target

NBA National Blood Authority

NFF National Farmers Federation

NNPT Nuclear Non-Proliferation Treaty

OIE World Organisation for Animal Health (Organisation

Internationale d’Epizootes)

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PFA Plasma Fractionation Arrangement

RECs Renewable Energy Certificates

SRMs Specified Risk Materials (for BSE)

UAV Unmanned Aerial Vehicle

UIF Uranium Industry Framework

UNESCO United Nations Educational Scientific and Cultural

Organisation

USDA US Department of Agriculture

USTR US Trade Representative (office of )

vCJD (Human) variant Creutzfeldt Jacob Disease

WHO World Health Organization

WTO World Trade Organization

Acronyms xi

xi

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THE AUSTRALIAN ANOMALY

The Howard Government has for the past decade loudly pro-

claimed 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

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 vigor-

ously promotes itself as the guardian of national security, but whose

actions, choices and commitments in critical policy domains effec-

tively 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 sustain-

able 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

2 NATIONAL INSECURITY


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 equip-

ment 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 govern-

ment 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 adminis-

tration’s search for a nuclear fuel waste dump. On a scale of 1 to

The Aus t ra l i an anoma ly 3


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 dis-

advantageous 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



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



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 exam-

ine 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 criti-

cal 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



a political leadership act so consistently against the security, pros-

perity, 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 domes-

tic 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 sub-

merging 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 follow-

ing chapters, and this proposition soon crumbles.



There is no question that Howard is a keen user of the lan-

guage 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 nor-

mal, 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 con-

clude, 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



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 affirm-

ation 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 pur-

poses, 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 how-

ever, 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



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 govern-

ment—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 relation-

ship with the US transparent, openly campaigning for the

Republicans and impugning an entire side of the US political sys-

tem (accusing it of unwittingly aiding and abetting the terrorists by

seeking an exit strategy from Iraq). By stepping outside his mand-

ate 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



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 repre-

hensible. 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 polit-

ical 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 manip-

ulation 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



domestic and international conditions that have tragically con-

verged to favour Howard’s personal-political ambitions. And

finally, it is about the people of Australia, who must pay the price.



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 poten-

tial 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

2


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 over-

turn 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 CREATINGENERGY INSECURITY

Affordable and stable energy supplies are critical to a country’s

security and prosperity. Global warming has added a new dimen-

sion 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 pru-

dence—at the very least an openness to the mounting evidence of

climate change, not aggressive denial. Prudential leadership in the



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 con-

nected 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 them-

selves 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 democ-

racies. Each choice has momentous consequences for Australia’s

energy security.

First, on global warming, the Howard leadership has con-

sistently 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

Energy 15


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 environ-

ment 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 inter-

national 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.



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.nicholsoncartoons.com.au>

THE NUCLEAR REVIVAL—PREPARINGAUSTRALIA 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,

Energy 17


http://www.nicholsoncartoons.com.au


Australia is not contemplating the domestic use of nuclear power’.2 But

global warming has given the industry a new lease of life. By mid-

2006, 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, com-

bined 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


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 exist-

ing 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 termino-

logical 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

Energy 19


power generating purposes. The GNEP is described on its own

website as ‘a consortium of nations with advanced nuclear tech-

nologies’ 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 build-

ing 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 grow-

ing economies (like India and China) will be able to participate,

subject to ‘stringent safeguards’, and without gaining the techno-

logical 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 termi-

nological 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:



We in the United States and a few allied countries (France,

Germany, Japan et al.) need to kick-start the nuclear power indus-

try. 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 respons-

ible ‘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

Energy 21


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



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 con-

cerning 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 includ-

ing 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 accom-

plished with existing technology’—an amazing statement given the

Energy 23


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 well-

developed 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 pro-

posals 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 trans-

parent, 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’.



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 contemplat-

ing 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 pur-

pose 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 commercial-

isation—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

Energy 25


over the past 18 years, and the hopes of so many Australian scien-

tists 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 non-

signatory of the NNPT. Nonetheless, Australia is set to enter a

major export contract with India. Washington has given the green



light as part of the US tilt towards India (ostensibly to counter-

balance 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 chair-

manship of the aforementioned Dr John White and his company

Global Renewables Ltd. This UIF report, most of which was con-

cerned 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 process-

ing 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

Energy 27


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 off-

limits 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 compro-

mises, the Bill that was eventually adopted by Congress requires

that the President provide an annual report detailing India’s compli-

ance 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



renewable energies company. The plans involve ANFL in ‘facilitat-

ing 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 block-

ing 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 Australian-

made 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 ECONOMYAND 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

Energy 29


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 emis-

sions 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 green-

house 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 inter-

national 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 state-

ments like ‘We are only 2 per cent of the world’s emissions’ or

‘Our total emissions are small compared with those of China’.



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 non-

ferrous 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, alumin-

ium smelting enjoys a privileged status in this country, thanks to

Energy 31


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 repre-

sents 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



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 arrange-

ments.’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 emis-

sions 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 inter-

national action on climate change. But there is a pattern in the

actions of the Howard Government (illustrated in the chapters of

Energy 33


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 green-

house gas commitments.

After its election in 1996, the first item of business in inter-

national 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



and a strident enunciation of ‘principles’ issued for public consump-

tion, 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 secur-

ing 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 deforest-

ation. 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

Energy 35


not be ratifying Kyoto. Since then Australia’s position has hard-

ened 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 environment-

alist 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



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.

Energy 37


Despite the fact that he had invented a new technique for detect-

ing 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 recog-

nised 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.



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 green-

house 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 alter-

native 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

Energy 39


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 there-

fore ‘compromised’.23

More damning was the response from the economics profes-

sion. 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



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 for-

eign 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 solutionNow 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 tech-

nology 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

Energy 41


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 indus-

tries? How did it turn Australians into fossil fools? Simple. Keep the

discussions within the family.

Keeping it all in the familyJust 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 environ-

mental 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.



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 govern-

ment 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 emis-

sions 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

Energy 43



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 stress-

ing 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 government-

commissioned review to increase renewables support (the MRET)


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 tech-

nologies (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 prob-

ability 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

Energy 45


Minister’s nephew. ‘Keeping it in the family’ is a pretty good

description of energy policy in the Howard years.

SABOTAGING EXISTING ENERGYALTERNATIVES

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.



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 renew-

able 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 oppor-

tunities 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

Energy 47


(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 estab-

lished 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, pre-

vailed (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 ‘chil-

dren 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


incentives to companies to make investments in renewable ener-

gies 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 invest-

ment 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 govern-

ment’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

Energy 49


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 recommend-

ation.) 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 gov-

ernment’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.



(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 amaze-

ment 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 col-

leagues 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 recom-

mendation he wanted) that predicted an ‘average loss of life of

one parrot per year’ if the wind farm went ahead.

Energy 51


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 invest-

ment 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 plan-

ning 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 whatso-

ever from a hostile federal government. The possibility of building



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.

Energy 53


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 scien-

tists 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 govern-

ment of New South Wales offered some support to commercialise

the CSG technology developed at UNSW, through the privatis-

ation 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



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 Ger-

many.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 every-

where, except Australia. Shi recently visited his alma mater at

UNSW and made a donation of funds to the research and devel-

opment 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

Energy 55


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 dimin-

ishing 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 revolu-

tion, 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



power at the other through integrated and flexible computer-

controlled 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 non-

mandatory 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

Energy 57


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 bio-

fuels 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



wind energy. An independent producer of wind turbines, Suzlon,

has risen to become one of the world’s top five wind turbine pro-

ducers, 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 environ-

mental 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 employ-

ment 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

Energy 59


agent’ of nuclear fuel, paving the way to our receiving nuclear

wastes from the rest of the world. To make this politically palat-

able, 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 com-

pany, 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



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 Aust-

ralia’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 emission-

free (sun, wind, biofuels, geothermal) to substitute increasingly

for the fossil-fuel intensive industries of the past. Informed com-

mentators 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 cor-

porations 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 renew-

able energy industries. And a large element in Howard’s energy

choices would seem to be simple contrariness when it comes to

Energy 61


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 personal-

political. 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



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.

Energy 63


RURAL INDUSTRIES

Imagine a country whose beef industry is the envy of the world.

It maintains its dominance of world markets through a combin-

ation 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 com-

petitors 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

3


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 sen-

sitive 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 gov-

ernment 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



by government lawyers and a High Court judgment that disquali-

fies itself from having jurisdiction.

This amazing country, where the government actively seeks to

undermine the competitive advantages of its own rural industries

and thereby reduce the security of its farming population, actually

exists. This is Australia under the Howard Government.

THE GREAT AUSTRALIAN GIFT: SERVING UPRURAL INDUSTRIES ON A PLATTER

Advancing the goals of a trading partner at the expense of one’s

own national security (especially in economic and human health)

is arguably exceptional in the developed world of independent

nation-states. But the case of Australian agriculture offers at least

two examples of such exceptional behaviour: beef and pork.

These cases are similar in that they both show the government’s

willingness to place American interests over and above Australian

economic and health security purportedly in the name of advanc-

ing our special relationship. But they are also different in that

they reveal the contrasting strategies employed by the Howard

Government to silence the local interests they betray. We will

examine each of these cases separately.

Little pig, little pig, let me in!

America is often depicted as the big bad wolf of the international

trade regime, demanding access to foreign markets under

Rura l i ndus t r i es 67


conditions that threaten the viability of local industries. But while

the United States sometimes makes demands that place local

industries in danger, there are a variety of avenues available to

governments to protect themselves from American huffing and

puffing—if they want to protect themselves.

For example, America has long huffed and puffed about Aust-

ralia’s strict quarantine standards. These standards keep Australian

agricultural produce clean and green and thus competitive, even in

the face of tough foreign competition. Now, US farmers, through

their hyperactive lobby groups, routinely declare Australian quar-

antine standards a violation of international trade rules and

demand that they be dismantled. Such claims have been shown to

be little more than hot air. As an island nation, Australia has the

legal right under WTO rules to adopt any standards it sees fit to

protect its clean, green status, so long as those standards are based

on science and are not unduly trade restrictive. (In other words, as

long as its protections are aimed at keeping pests and diseases, not

imports, at bay.) So, while America may huff and puff on this

issue, the Australian government has every right to maintain its

traditional ‘house of bricks’ approach to quarantine should it so

choose, and to call on the WTO for backup against US pressure

should it require support.

Over the past decade however, the Howard Government has

willingly traded Australia’s ‘house of bricks’ stance on quarantine

for a ‘house of straw’ approach, and nowhere is this clearer than

in the pork industry. In the case of pork, the wolf didn’t even have

to blow. It just cleared its throat a little before pushing on an open

door and walking right in, bringing with it exposure to one of the



world’s most devastating pig diseases—Post Weaning Multi-

Systemic Wasting Syndrome (PMWS).

The pork story begins with the Howard Government’s

decision to initiate negotiations for a free trade agreement with

the United States. (Yes, the Australian government asked the

Americans for the deal, not the other way around.) The deal was

to be the crowning glory of Howard’s prime ministership. No

other developed nation had entered into a free trade agreement

with the world’s superpower (which should perhaps have sounded

warning bells, not welcome bells, for Howard). In brokering such

a deal, Howard would not only be setting an international pre-

cedent, but also deepening Australian ties with its powerful friend,

or in Howard’s approximate words, raising our economic relationship

to the same level as our security relationship.

As we argue in other chapters, for Howard, a ‘closer’ relation-

ship with the United States equals a ‘better’ relationship (in

personal-political terms, at least), regardless of the terms for

Australia. Thus from the outset of the trade negotiations it was

clear to many, including the Americans, that Howard wanted this

deal primarily for its symbolic value, whatever the economic costs

involved. We know this because Howard insisted on signing the

deal even after the Australian negotiators advised him to walk

away from it on national interest grounds.

Howard’s determination to push ahead with a deal he knew

to be disadvantageous to the national interest goes some way

towards explaining how Australia’s precious quarantine standards

ended up on the negotiating table. American lobbyists made it

clear from the very beginning that they would not back a deal



unless Australia reviewed its quarantine standards on various agri-

cultural commodities, including pork. And if the Americans were

not going to sign without this concession, then Australia had to

give in. And give in it did. According to the Office of the US Trade

Representative (USTR) and the Congressional Research Service, a

commitment was made by the Howard Government to address

quarantine barriers to pork and apple imports as a part of

the deal.1

Australia’s commitment to ‘address’ its ‘quarantine barriers’

in these areas was carried out by Biosecurity Australia (the body

responsible for setting import standards), which announced and

swiftly completed a review of import protocols for pork, apples,

and a variety of other products before the deal was even signed. We

have detailed elsewhere the highly contentious nature of the

Import Risk Analyses (IRAs) that were conducted during the FTA

negotiations. First came the release of the IRA into apples, pro-

posing quarantine standards so bizarrely inadequate that the

document was eventually referred to a Senate Committee for

review. The Senate found that the report was seriously flawed and

recommended it be re-done.2 This was not before the industry had

spent hundreds and thousands of dollars demonstrating the deep

flaws in the science employed by Biosecurity Australia. Then came

the IRA into banana imports, which was again referred to a Senate

inquiry and again revealed as proposing inadequate protections,

based on questionable science.3

Finally came the pork IRA. This IRA proposed quarantine pro-

tocols so weak that, according to independent CSIRO modeling,

they would virtually guarantee—with a 95 to 99 per cent degree



of certainty—the introduction of the devastating piglet disease

PMWS into Australia within a decade. PMWS had devastated

almost every other pig-producing country in the world over

the past decade, costing billions of dollars. Australia is one of

the few countries remaining free of the disease. Again without

explanation, the government refused to overturn this IRA, despite

another damning Senate inquiry report.4 Instead it pushed ahead

with its implementation, much to the outrage of Australian pork

producers.

This was a most bizarre scenario, an Australian industry effec-

tively being told by its own government: we have decided to change

the rules to allow pork imports, even though this will almost certainly

expose you to a disease that will kill around 30 per cent of your piglets

each year. We aren’t obliged to make these changes under international

law. We just thought it would be a nice symbol of our goodwill to

America.

Having been abandoned by their own government, Australian

pig producers had little option than to pool their money and

launch, through their peak national body, Australian Pork

Limited, a lawsuit against the government, challenging the legality

of the government’s Import Risk Analysis (IRA) for pork. The

landmark case was heard in the Federal Court in May 2005. In a

major coup for the industry, Justice Murray Wilcox declared the

decision to open Australia to pork imports under conditions

stipulated by Biosecurity Australia ‘so unreasonable that no

reasonable person could have made it’, and suspended import

licences.5 In his findings, Justice Wilcox was damning of

Biosecurity Australia’s analysis of the risk involved in relation



to PMWS, calling it ‘bizarre . . . especially having regard to

concerns expressed by successive Australian governments about

maintenance of high quarantine standards’. He found that the

decision to recommend the commencement of pork imports

under the proposed protocols was almost entirely lacking in

science. His words are worth quoting:

. . . the necessary scientific research had not been done.

The Panel had no material whatever upon which it could

base a judgment . . . Because of the absence of inform-

ation, and logic, in the Panel’s final step . . . This is not

merely a case of an opinion that is unsound. The ultimate

opinion formed by the Panel was unjustifiable.6

So if the decision to allow pork imports was not based on science,

what was it based on? Political calculation, of course. If Australia

had not moved on the issue of pork, the FTA would not have

been signed, and Howard’s dream of leading the first developed

country in the world to sign an FTA with the United States

would not have been met. Clearly, attaining his dream was

more important to Howard than the livelihood of the nation’s

2300 pig farmers.

But the tale does not end here. Despite Wilcox’s damning

finding, the government, determined that the pork imports

should go ahead, appealed the Wilcox decision to the full bench of

the Federal Court. That’s right. The government chose to fight its

own industry to force them to accept a decision that would almost

certainly wound them deeply.7 The case was heard in September



2005. In a remarkable turn, the full bench of the Federal Court

(consisting of three judges, Heerey, Branson and Lander) found

two to one in favour of the government. The industry was now

faced with a situation in which two judges (Heerey and Lander),

despite expressing concerns about the scientific processes

involved, believed the government had acted lawfully, and two

judges (Branson and Wilcox) who felt it had not acted lawfully, and

who were willing to condemn the government’s position in the

strongest possible language.8

With nothing left to lose, the industry decided to seek special

leave to appeal the decision to the High Court. This leave was

rejected in November 2005, not on the merits of the case itself,

but on jurisdictional grounds.9 The High Court declared itself

as not having the right to rule on such a case. This decision,

surely as bizarre as the preceding ones, meant that the govern-

ment was construed as being unaccountable to the courts for

its policy decisions, without regard to the merits of the case. And

that was the end of the road for Australia’s pig farmers. Even

though the decision was split two-two in the Federal Court,

imports would resume, and with them the ‘virtual certainty’

of PMWS infection, and nothing more, legally, could be done

to stop it.

It is worth noting the stakes involved in this case. If the full

bench of the Federal Court had found in favour of the pork

industry, or the High Court had heard the case and ruled for

the industry, then Australia’s entire quarantine decision-making

system would have been thrown into disarray. Given the decisions

Biosecurity Australia had been making over the past five years,



one might argue that this would have been a good thing. But it

is clear that the judges were considering no small issue. The

ramifications would have been felt far beyond the pork industry.

There are two lessons from this story. Under the Howard

Government, and during negotiation of the Australia–US FTA in

particular, Australia has shifted from a ‘house of bricks’ to a

‘house of straw’ approach to quarantine. While there has cer-

tainly been pressure from the United States to do so, the

Australian government was under no legal obligation to effect

this shift. Rather, the shift reflects a calculated choice on the part

of the government to prioritise a closer personal relationship

with the United States, even over and above the livelihood of

Australian farmers. Howard must be given full credit for this

shift. Howard’s ministers have not always been on side. As the US

President of the California Table Grape Commission put it to her

constituency in 2002 on the eve of a breakthrough in Australian

quarantine, ‘The Australian Minister of Agriculture, however, is

opposed and “has worked very hard to keep your grapes out of

that market”.’10 Second, the government has been willing to go to

great lengths to defend its new priorities, taking its own industry

to court, using the public purse to fight the interests of ordinary

Australians in having a clean green agricultural sector. This situa-

tion would be comical if it were not so tragic for the farmers

involved.

On this unhappy note, we turn to the case of beef. This is a

more complex story, but one that every Australian should under-

stand as it places at risk not only animal health, but human health

as well.



AUSTRALIAN BEEF: LEAN, CLEAN AND UNDER SIEGE

There is no disputing the economic significance of Australia’s

beef industry, one of the country’s great success stories. In spite

of a relatively small domestic market, it has grown to become the

world’s second largest beef exporter (after Brazil).11 Australian

exports now dominate the quality markets of Japan and Korea,

two of the highest value beef markets in the world. Australia’s

strong market position is underpinned by its unique disease-free

status; Australia is currently one of the very few countries to

be free of Bovine Spongiform Encephalopathy (BSE), thanks

to strict regulations on animal feeding and importation adopted

in 1966. Under current policy, Australia does not import beef or

live cattle from countries that have suffered BSE outbreaks,

including the United States. In trade terms, Australia’s BSE-free

status gives the country a powerful competitive advantage over

other beef producers, allowing Australian beef to sell into key

markets like Japan which do not accept beef imports from coun-

tries with a history of BSE.12 Australia’s BSE-free status also

means that Australians can safely eat beef without worrying

about contracting the human variant of BSE, namely Creutzfeldt

Jacob disease (CJD)—a major public health advantage. Australia’s

strict quarantine standards are central to the competitiveness of

its beef exports. It is not surprising that the US targeted

Australian quarantine standards during the negotiations for the

Australia–US Free Trade Agreement.



What is surprising is that the Howard Government agreed to

put Australian quarantine standards on the FTA negotiating table,

signing a special side letter on BSE with the Americans. In the BSE

Side Letter, Australia agreed to support the United States in its

quest to have international BSE standards ‘simplified’ (read ‘weak-

ened’) so that the United States could resume its beef exports to

Japan and Korea—Australia’s top export markets—countries

which had banned US beef following its BSE outbreak. In one fell

swoop, Australia was transformed from independent player to

American pawn in international beef trade, and all without a peep

from the Australian beef industry.

The issue surfaced to public attention in late 2005, well after

the signing of the BSE Side Letter, when there were mooted

moves to abandon the public health measure of removing all

beef from supermarket shelves should BSE be discovered among

Australian cattle. These policy proposals were floated in

September 2005 by the peak councils of the beef industry, and

received an immediate response from the federal government,

with Agricultural Minister Peter McGauran indicating that

Cabinet would respond favourably to these calls.13

Just how this remarkable turn of events came to pass is a

somewhat complex tale that begins and ends with American

interests and Howard’s efforts to advance them at all costs, even

when they compromise Australia’s security. It is necessary to

start with a brief examination of US interests in the international

beef trade to understand how Australia’s commitments under

the FTA Side Letter were designed to advance those interests.



America’s shifting interests in international beef trade

American interests in international beef trade changed substan-

tially in 2003 in response to its embroilment in the international

BSE saga, a saga that had raged since 1986. In that year, inter-

national trade in beef came to a standstill with the discovery in

Britain of a brain-wasting disease affecting cattle. This disease was

identified as Bovine Spongiform Encephalopathy or ‘Mad Cow’

disease. Within months, BSE had been detected in a number of

other European countries. Then in 1996, the killer news broke:

this fatal disease could be transmitted to humans through the

consumption of infected meat, resulting in a new version of

Creutzfeld-Jacob disease, a wasting disease of the brain. This was

known at the time as a disease of the elderly, a sporadic condition

occurring at a rate of one in a million. The new version struck

the young, and was invariably fatal. The resulting hysteria led to

thousands of cattle slaughtered across the United Kingdom and

Europe, and saw the erecting of trade barriers against beef from

infected countries.

Few countries managed to remain insulated from this unfold-

ing disaster. Australia, which had maintained strict controls on

animal and animal feed imports since the 1960s, was one of them.

So Australia experienced a boom in exports to countries like Japan

and the United States, which refused to buy beef from infected

nations, regardless of the screening and control measures in place.

Until recently, it appeared that the United States would also escape

unscathed, until the detection of its first mad cow in 2003, and



a second case in 2004, followed by a third. America was immedi-

ately exposed to the same treatment it had exacted upon infected

countries: its beef exports were suddenly rejected by most import-

ing nations.

With the shoe firmly on the other foot, the United States

changed its hard-line approach to BSE and began a campaign

to have other countries re-admit its beef products, adopting a

three-pronged strategy: to defend a ‘low BSE risk’ profile rather

than a ‘BSE-free’ classification; to have international guidelines

revised to recognise America’s ‘low BSE risk’ status; and to

pressure other countries to accept the revised international guide-

lines, which would pave the way for the resumption of US beef

exports.

Step One: defend a ‘low BSE risk’ status Since 2003, the United States has sought vigorously to defend

a ‘low BSE risk’ image to prevent panic and protect markets at

home and abroad. To this end, instead of trying to ascertain the

true extent of BSE infection, the US Department of Agriculture

(USDA) and other agencies have employed a minimalist

approach to BSE testing and tracking. As we detail elsewhere,

America’s BSE testing systems appear specifically designed to

demonstrate a low level of risk, and its testing regime continues

to lag well behind international norms.14 As a result, the extent

of BSE infection in the United States remains an unknown and is

in all probability much higher than the government maintains.

(The United States still claims that it has only ever found three

cases of BSE inside its borders.) While this might be dangerous



from an animal and human health perspective, the defence of

America’s ‘low BSE risk’ image is essential to the second step

of its BSE strategy.

Step Two: revise international guidelines torecognise a ‘low BSE risk’ statusPrior to its mad cow discovery in 2003, the United States stead-

fastly refused to import beef from any country affected by BSE, and

traded on its valuable ‘BSE-free’ status, a status bestowed by the

World Organisation for Animal Health (OIE).15 Since 2003, America

has changed its tune on the fairness of the OIE’s BSE-free label—

why should other countries enjoy this designation if it is no longer

available to the leader of the Free World? The United States has

argued vigorously for the revision of the OIE’s ‘unfair’ and ‘exces-

sively complex’ risk-categorisation system. The official line of US

government and industry is that America has only reported three

cases of BSE so far, and one of those was allegedly in an imported

cow, so why should it be so discriminated against? According to the

argument by the United States, risk classification should not be

based on the number of affected cows reported and ‘BSE-free’

should no longer be the benchmark against which countries are to

be judged. Rather, the guidelines should reflect the testing and

tracking regimes that a country has in place which would reflect

their ability to prevent the spread of BSE at home and abroad.

In May 2005, due chiefly to US pressure, the risk-classification

term ‘BSE-free’ was removed from the OIE lexicon. Where the

OIE had traditionally classified countries as either BSE-free; BSE

provisionally free; minimal risk; moderate risk; or high risk, under



the new system countries are now classified as either ‘negligible

risk’, ‘controlled risk’ or ‘undetermined risk’ of contracting the

disease.16 (OIE 2005). To be classified as ‘negligible risk’, a country

must demonstrate it has adequate surveillance mechanisms in

place. It must also be able to confirm that it has had either no cases,

or only imported cases, of BSE in the past seven years. If a country

can demonstrate that it has only had imported cases of BSE, the

final requirement to show that appropriate feed bans have been in

place for the past eight years can be waived.

Under such a system, the United States might have found itself

placed in the same risk category as Australia, by claiming that

(until its more recent outbreaks) the infected cow was a Canadian

import. With the discovery of homegrown Mad Cow disease in

2004 and 2006, however, it now finds itself in the ‘controlled risk’

category. But this suits US purposes. For under OIE guidelines, it

is inadmissible to refuse exports from ‘controlled risk’ countries as

long as they have adequate testing and tracking systems and feed

controls in place. And how are these systems verified? Not by an

on-the-ground inspection by the OIE itself; the OIE is a bureau-

cratic body only, without any field staff of its own. Rather, the OIE

simply takes the word of member countries, who fill out the requisite

forms to say that they are in compliance with OIE testing and tracking

standards. Those familiar with the well-documented limitations of

America’s BSE tracking and testing regime would quiver in their

boots at the implications of this system.17 Nevertheless , now that

the United States has declared that it complies with OIE testing,

tracking and feeding standards, it can demand that countries

recognising the OIE accept its beef. This brings us to the final



part of America’s international BSE strategy: compelling others

to comply with these US-friendly guidelines. And this is where

Australia comes in.

Step Three: compel other countries to comply withthe new international guidelinesOIE guidelines are just that, guidelines, not law. Countries that feel

they have reason to demand more stringent protections from BSE

than the OIE provides—as Australia and Japan have done since the

BSE crisis began—are entirely justified in demanding a higher

level of protection than the OIE affords. But this is clearly not

in America’s economic interests. The challenge for the United

States has been to secure other countries’ compliance, particularly

Japan’s, with OIE guidelines to help re-open markets to American

beef.

Despite heavy American pressure, Japan has proved to be par-

ticularly resistant to US demands. This is perhaps not surprising,

given that Japan is still reeling from US pressure in other areas of

disease-implicated food trade, most recently the case of fire-blight

affected apples.18 Japan made its position on the OIE very clear in

2004—it would under no circumstances allow the OIE to adjudi-

cate on its beef dispute with the United States. In 2004, a ‘secret’

letter from the US Secretary of Agriculture to her Japanese

counterpart proposing an OIE-mediated approach to resolving

the impasse was very publicly and embarrassingly rebuffed by the

Japanese government through the Japanese media.19

With its diplomatic efforts in tatters, the United States fell

back on the threat of trade sanctions to force Japan to accept its



beef. It also adopted another, more insidious strategy in its quest to

re-enter the Japanese market and that was to have other clean and

green countries accept OIE standards, effectively isolating Japan

and making its resistance to US pressure less tenable. It was in this

context that the Australia–US FTA Side Letter was negotiated. In

this letter, Australia agrees to comply with OIE guidelines itself

and to join the United States in seeking to compel other countries

to follow OIE guidelines. The side letter symbolises Australia’s shift

from independent player to compliant pawn in the international

trade regime.

ACCEPTING THE ROLE OF PAWN IN AMERICA’SINTERNATIONAL BSE STRATEGY

The BSE Side Letter, which constitutes a binding commitment for

both parties,20 makes no mention of Australia’s current BSE-free

status, nor does it accord any recognition to the science-based stan-

dards that have kept Australia free of the disease. Instead, under

the side letter, Australia agrees to cooperate with the United States

in addressing the BSE issue in a ‘science-based, comprehensive, and

cohesive manner’—as if this had not been the case beforehand.

The Letter also notes that ‘science-based responses . . . ensure food

safety and protect animal health while avoiding unnecessary

barriers to international trade’. A reasonable interpretation of

this phrase in the context of the FTA is that Australia’s ban on

imported beef from the BSE-affected United States has been ‘un-

scientific’ and an ‘unnecessary barrier to international trade’.21



Australia’s most significant commitment under the side letter,

however, is its pledge to work with the United States, under the

auspices of the OIE, to help ‘review BSE standards’ internationally

(a task completed in May 2005) and to encourage other countries

to apply the new OIE standards. As noted above, a principal aim of

these standards is to establish a framework under which countries

affected by BSE may continue to export their beef products;

according to the OIE, countries experiencing a BSE outbreak

should not automatically have their exports rejected (OIE 2004). As

Australia is a country that does automatically reject all beef

imports from countries affected by BSE, its commitment to

acknowledge the importance of OIE guidelines and to encourage

other countries to apply them strongly suggests that Australia too

will apply them—or risk charges of hypocrisy. This would clear

the way for our acceptance of beef products from BSE-affected

countries under OIE conditions.

The side letter helps advance America’s international BSE

strategy in three main ways. First, it compels Australia to co-

operate with America in revising international guidelines on

BSE. As noted above, these 2005 revisions did away with the

risk designation ‘BSE-free’, and introduced a new set of risk

categorisations. These categorisations make it possible for the

United States to sell into markets that had previously insisted

upon a BSE-free status.

Second, the Letter compels Australia to acknowledge the

importance of, and thus also comply with, OIE guidelines;

Australia’s commitment to encourage other countries to adopt

OIE standards implies that we too must follow them.



And finally, the Letter makes Australia’s agreement to work

within the OIE framework in BSE a legally enforceable obligation.

Outside the FTA context, OIE guidelines carry no force of law. It

is open to any country to ignore OIE guidelines or to insist on

more stringent standards as Australia currently does. For example,

even though the OIE says it is safe to import beef from some parts

of Brazil (a country infected with foot and mouth disease), many

countries, the United States included, do not accept OIE guide-

lines in this area and do not import beef from Brazil.22 However,

once embodied in bilateral trade agreements, such as the

US–Australia FTA, the OIE standards change their character and

become binding on the signatory countries, in the sense that a

departure from the standards could trigger a trade dispute

between the countries.

Clearly then, the side letter signals the reversal of Australia’s

long-standing import ban on beef from BSE-affected countries.

And as countries like Japan import from Australia primarily

because of our stringent approach to BSE, this reversal is set to

undermine our appeal in the Japanese market and pave the way

for US re-entry. Of course, the government denies any suggestion

that the side letter represents a shift in Australia’s approach to BSE

regulation. There was no mention of the side letter by the

Australian government when the deal was signed, and according

to Liberal Senator Bill Heffernan, Chair of the Senate’s Rural and

Regional Affairs and Transport Legislation Committee, the side

letter is a harmless document that ‘binds us to bloody nothing’.23

But this begs the question, if it binds us to ‘bloody nothing’, if it

represents no change in Australia’s approach to BSE regulation,



then why have a legally binding side letter at all? Why not just

exchange informal undertakings outside and independent of the

trade agreement? Given the contentious nature of international

beef trade over the past few years, and the war being waged

between Japan and the United States on this issue, the claim that

the BSE Side Letter is of no political or economic significance

rings rather hollow. And it would be news to the Americans as

they had the problem that the Letter was designed to address. The

Howard Government, in turn, had the problem of keeping

its explosive undertaking out of the public realm or at least

minimising its exposure. So in the absence of a government con-

fession and in the presence of official denial, we turn to careful

probing of the (economic and political) context in which the side

letter was negotiated. In this context, only one plausible inter-

pretation stands: the intention of the side letter is to lock in

Australian support for changes in international quarantine

standards for beef—standards that negate our own ‘BSE free’

status and tilt the playing field in America’s favour.

Slim Pickings: Australia’s ‘reward’ for itscompliance with US objectives

To secure Australian compliance, the United States no doubt had

to offer at least a minimal concession in the trade talks with

Australia; so it conceded gradually extended quotas (over an

18-year period) for Australian beef imports into the United States.

(And thereafter, a new protectionist mechanism, in the form of

a ‘price-based safeguard’, will apply to Australian beef outside



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



analysis that we have been doing, in terms of trying to

make sure that consumers are safe in terms of what they

eat from beef, but that this is not used as a protectionist

measure. And so probably the best news for us in the sanitary

and phytosanitary area is the cooperation on that issue so that we

can open up some of our markets to beef globally, particularly in

Japan and Korea.24

EXPLAINING INDUSTRY COMPLIANCE:HOW SILENCE WAS SECURED

Why would the beef industry in Australia allow its interests to be

so brutally sidelined in favour of those of a foreign power? There

is no shortage of industry representation in Australia, with the

National Farmers Federation (NFF), Cattle Council of Australia

(CCA), and Meat and Livestock Australia (MLA) all purporting to

represent Australian beef producers. How can their silence on this

issue and their apparent acquiescence in serving US goals be

explained?

We need to scratch below the surface to look at both cor-

porate ownership patterns in the Australian beef industry and the

institutional character of industry representation.

Corporate ownership: who is ‘we’? We is US.

The US beef industry is heavily concentrated with just four cor-

porate groups controlling 84 per cent of the meat-processing



industry.25 Even more interesting is the cross-ownership that has

been allowed to develop under an Australian government appar-

ently eager to promote US interests. The second largest US beef

processor, Swift and Company (a division of ConAgra) has now

acquired the business of Australia’s largest beef processor,

Australian Meat Holdings (AMH), which has become known as

Swift Australia. Commenting on its second-quarter results in

2005, Swift and Company stated that Swift Australia was already a

strong contributor to overall Swift revenues and profits, which

have risen despite the US problems with BSE: ‘Swift Australia con-

tinues to deepen its presence in the Asian market to capitalise on

the void left by the absence of North American beef ’.26 In other

words, Swift wins if Australia retains its strong position in Japan

and Korea, and Swift wins if the United States regains its position

in these markets.

But the general point to emphasise is not that it is difficult

to draw the line between Australian and US interests. On the

contrary, the point is that as an American subsidiary repatriating

the bulk of its profits and responding to the policies of its US

parent, Swift has no stake at all either in supporting quarantine

standards that sustain an Australian competitive advantage, a BSE-

free status, or in maintaining its high value-added markets in Asia.

The interests of the giant middlemen like Swift are completely

distinct from those of the producers. The Swifts of the world win

if ‘we’ (Australian producers) lose quarantine status and markets,

and win if we retain the status quo. The Swifts’ parents, however,

win a great deal more if we lose. For what they seek is nothing

less than the ability to source cheaply and supply globally without



being fettered by strict quarantine regulatory standards. The

industry’s peak representative bodies have been co-opted

by the interests of these (mainly US-owned) packer–distributors

and the costs of serving these interests are shifted onto Australia’s

producers.

Australian meat industry institutionalrepresentation

At face value, Australian beef producers seem well represented

(even over-represented) at the national level, by the NFF, the MLA

and the CCA. In reality, the representation of Australian cattle

interests is deeply controversial and disputed. The peak council for

the industry, the CCA, was founded in the early 1980s, as the

successor to a long and troubled history of beef industry represen-

tation in Australia.27 It is the designated peak council of Australian

beef producers which sits within the wider, carefully crafted

‘representational’ structure of Australia’s rural industries headed

by the National Farmers Federation. (Each rural industry—beef,

poultry, sheep, wool, sugar, and so on—has a peak council that is

given government authority to represent the interests of that

industry. All the peak councils are then represented collectively at

the national level by the National Farmers Federation.)

Under a Memorandum of Understanding (MOU) signed with

the then Minister for Agriculture, John Anderson, the CCA is

given access to compulsory levies paid by the beef raisers and

producers. Yet it is not a representative body. According to the

Australian Beef Association (ABA), a maverick body representing



the 160,000 beef producers in Australia, fewer than 15 per cent

are members of the CCA. Cattle producers have minimal direct

representation on the CCA national council.

Over its 20-year history, the CCA has adopted policies that

have become indistinguishable from those pursued by the

Liberal–National Party Coalition, which has governed in

Canberra over the past decade and more. The result is a policy-

making network based on an organisational structure that is

government-led rather than industry-driven. It is through this

organisational structure that the government could most effectively

secure CCA compliance with its industry-damaging concessions

to the United States. Indeed, the CCA has been a key driver of

changes to Australia’s BSE policies. In October 2005, seemingly

out of the blue, the CCA announced its dissatisfaction with

Australia’s ‘all beef off the shelves’ policy in the event of a BSE

outbreak and asked the government for a review of this policy

or more likely, was instructed by the government to request such

a review in the knowledge that Australia would shortly be relaxing

its stance on importing beef from BSE-affected countries to

comply with the trade agreement.28 The CCA’s suggestion was

predictably received warmly by the government, which duly

initiated a cabinet review and was about to recommend a change

to this policy when news of its imminent shift unexpectedly broke

(thanks to a cabinet leak) and prompted a public outcry. It was

in the public debate that followed that the existence of the little

known side letter to the FTA was revealed, and the behind-

the-scenes role of the United States exposed—all without any

authoritative interpretation being offered of the side letter by



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.



The policy differences between the two organisations are

clear. The CCA as well as the MLA support the FTA with the

United States—despite the miserable (and apparently largely irrel-

evant) concessions made to beef. But on BSE, the ABA issued a

public call in early October 2005 for Howard to resolve what was

described as a ‘suicidal Canberra power struggle over BSE’.30

The ABA Vice-Chairman, Brad Bellinger, said Howard’s personal

intervention was needed to bring sanity into the postures being

adopted by the departments of agriculture and trade. He argued

that the prospect of Australia banning the sale of its own beef

within Australia while allowing the import of beef from countries

with BSE was making Australia the laughing stock of the world

beef industry.

In a broader setting, the concordance between government

policies and industry policies is usually attributed to capture of the

government agencies by industry bodies. The United States is a

case in point where, for example, it is widely recognised that the

pharmaceutical industry has ‘captured’ the FDA, while the major

food industry groups and the big meat industry corporations such

as Tyson, Swift, Cargill et al. have ‘captured’ the US Department

of Agriculture.31

In Australia, a reverse process of pre-emption or capture seems

to have taken place, whereby it is the Howard Government that is

doing the capturing of the industry associations. In what appears

to be an all-out effort to serve the American administration and its

business partners, Howard’s team has been systematically winning

support for this US-centric policy behind the scenes by rewarding

trade and industry associations that go along with the policy and



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.



CULTURE

Imagine a country with the world’s longest tradition of feature film

production, whose artistic professionals—from actors and directors

to musicians and technicians—rank consistently among the world’s

best, despite the country’s small size. This country’s artistic renown

is due in no small part to a long-standing bi-partisan commitment

to develop a vibrant, domestic cultural sector (think film, TV,

literature, music) as the cornerstone of a more independent, reflec-

tive and creative nation. The effectiveness of this commitment—

which emerged in the late 1960s—was apparent from the outset,

the film industry being a case in point. Between 1970 and 1985,

this country produced more than 400 feature films, more than

during the rest of its entire film-making history. The country, it

seemed, was laying the foundations for the long-term development

of its local system of self-representation—a system which, by the

95

4


late 1980s, was feeling the pressure from an influx of cheap, mass-

produced cultural imports (especially films and TV shows) from

the United States.

Now imagine a country where this bipartisan commitment to

local self-representation comes under attack—not from without,

but within. And this attack is led by the very party that initiated

the policy of cultural independence more than 40 years previously.

The attack is subtle, at first. It begins with the highest levels of the

ruling party falling silent on the role of local cultural industries

and their contribution to the nation’s social values and economic

prosperity. But the attack soon becomes explicit. The government

begins to publicly link support for ‘the arts’ with support for the

opposition party, making local cultural industries a subject of

partisan political derision. Then the financial squeeze is applied to

cultural institutions, not enough to bring them to their knees but

enough to instil a deep sense of insecurity, rendering them less

likely to criticise the government for their neglect. Then the

government runs interference directly into cultural output—

censoring films, TV shows, plays that are deemed to run an anti-

government line.

But the most savage blows to the country’s cultural industries

are played out on the international stage. First, the government

waters down its commitment to maintain adequate outlets

for local cultural expression in a free trade agreement with

the world’s leading cultural exporter, the United States. Then, the

climax: the government’s shock refusal to sign the landmark

Convention on the Protection and Promotion of the Diversity of

Cultural Expression, adopted by the United Nations in October



2005. This convention is the international community’s response

to the onslaught of cheap cultural exports from America—exports

which have been flooding cinemas, TV and radio stations world-

wide, undermining avenues for the expression of local culture and

identity and threatening the sector’s dual role in reinforcing social

values and contributing to the national economy. Instead of

ratifying the convention, which affirms the social and economic

importance of local cultural industries and the responsibility of

governments to support them, this country turns its back on

the 148 signatories, and by abstaining sides instead with the

United States.

The result of this decade-long assault on the country’s cultural

sector is predictably destructive—domestic feature film production

and investment stagnates, as does local television drama produc-

tion, leading to a doubling of the country’s deficit in audiovisual

trade. All this while other countries, English and non-English

speaking alike, are expanding their support for local industries in

response to the American challenge. The corrosive impact on the

country’s values is much more subtle and insidious.

Now stop imagining and open your eyes. This is Australia

after a decade of Howard rule.

CULTURE MATTERS

Why does the dramatic decline of a country’s cultural sector

deserve attention in a book about national insecurity? The answer

is that the cultural sector is central to the national interest in two

Cu l tu re 97


ways, both for the social values it represents and the economic

contribution it makes. In the following section, we will see how

the contribution of so-called ‘creative industries’ to economic

growth in developed economies has ballooned in recent decades,

rising to become the first and second most important sectors in

the United States and the United Kingdom respectively. In recog-

nition of their lead status, governments around the world have

been pouring resources into these industries’ development. In

most industrialised economies, a decline in the fortunes of the

nation’s cultural industries would be perceived as a matter of

great concern with significant implications for the national econ-

omy. In most normal industrialised countries, that is.

Governments support their cultural industries for reasons

other than their economic contribution. For they are the mirror

into which a society peers and finds itself reflected both as it is

(warts and all) and as it would like to be. This is the social values

side of the equation; it is why governments around the world tend

to be more sensitive to the wellbeing of their cultural sector,

and to the impact of imports on local industries in particular.

This is not an issue of foreign exclusion; there is no question that

exposure to the cultural products of other nations can be bene-

ficial and enriching. Foreign exclusion has never been an issue in

Australia where exposure to foreign products, most recently with

television and film, has been at a high level for more than a cen-

tury. The issue is, as in all things, one of balance. It is when

imports soar at the expense of a country’s own creative industries,

and when the imported product is overwhelmingly from one

powerful source that the problems begin. Under such conditions,



slowly, subtly, cultural corrosion takes place. We develop an aver-

sion to our own accents, a distaste for our own stories, a distance

from our own distinctive habitat. The foreign voice becomes the

new standard.

With America as the world’s dominant cultural exporter,

Australia is at particular risk of such cultural saturation. Australia

does not have the natural protective barrier of language that

non-English speaking countries do. In these countries, even if

American cultural imports are high, the foreign content does

not overwhelm because it continues to be dubbed in the local

vernacular. People still hear their own voices. But consider what

can start to happen in English-speaking countries where this

natural barrier does not exist. The local voice is slowly but surely

squeezed out and the American voice becomes the standard, even

to the point where we begin to cringe at the way we sound. Local

theatre companies begin to adopt American accents for plays that

hardly require it, as did, for example, the Sydney Theatre

Company for Fat Pig, staged in 2006—a story with obvious

thematic relevance to Australia and which could have been set

in any developed country, yet which somehow had to be told in an

American accent. Australian singers, in genres from hip hop to

country and rock, begin to take on the American accent that now

dominates commercial radio music programming in this country.

And so rare becomes the local accent in television drama that

we begin to find it harder to understand than rapidly spoken

American dialects.1

So what, some might say. What’s so important about hearing

our own voice? The idea that it is important to have access to our

Cu l tu re 99


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



on themselves, they would realise that our own approach to

cultural consumption is similarly extreme—in the opposite direc-

tion. Where in America the vast majority of television and film

content is locally made and less than 5 per cent imported, in

Australia the reverse is true. In Australia the domestic share of the

national film box office is less than 3 per cent.3 And in the period

from September 2002 to April 2003, no less than 76 per cent of all

new programs shown on Australian TV were foreign, dominated

by products from the United States. By comparison, France had

33 per cent foreign TV programs, Germany and the United

Kingdom 9 per cent, and the United States the lowest of all with

just 4 per cent.4

And of Australia’s imported television material, around 70 per

cent is from the United States. In Europe, much smaller figures

have been enough to generate heated national debate and inspire

the drafting and signing of an international treaty aimed at pro-

tecting and promoting national cultural industries against the

onslaught of American cultural exports. But as we show, not only

has the Howard Government failed to address this onslaught and

the concomitant decline of Australia’s own cultural industries, it

has actually hastened their demise. In this chapter, we examine the

Howard Government’s abandonment of Australian cultural

industries and the economic and social implications of such a

move. We begin by detailing the growing economic significance

of cultural industries in developed economies in recent decades,

and the dimensions of the Australian industries’ decade of decline

under Howard.

Cu l tu re 101


A SOFT TOPIC? THINK AGAIN . . .

Hard-headed economic realists take note. If you are still reading

this chapter thinking ‘Culture? Who cares? What about the impor-

tant economic stuff ?’, consider this: cultural industries represent

big bikkies, in fact the biggest bikkies, for some countries, par-

ticularly the United States.5 Since 1996, cultural products have

been America’s largest export, worth more than automobiles,

agriculture, aerospace and defence. Over the past decade, cultural

industries have grown at three times the rate of the overall US

economy. According to UNESCO data, the US share of audio-

visual cultural products globally (film, TV, etc.) rose from 36 per

cent in 1992 to over 52 per cent ten years later, in 2002.6 This

dominance of US global cultural exports is due largely to the

low cost of American cultural products and its leadership in

technologies that facilitate their creation and distribution (think

software, multimedia, and audiovisual technologies).7

Perhaps not surprisingly, in the latest round of international

trade wars, culture is where it’s at. Over the past decade,

America’s domination of cultural trade combined with its aggres-

sive push to extend international trade rules to cultural products

has generated deep resentment among both developed and

developing countries. The roots of this resentment are as much

economic as social. Since the 1980s, the creation and delivery of

cultural products has become increasingly technologically

intensive, to the point where domestic capacity in this sector is

recognised as both an indicator of, and catalyst for, a nation’s

technological competitiveness. Moreover, the characteristics of the



typical cultural sector workforce (creative, innovative, technologi-

cally savvy) are now widely recognised as those necessary to

secure competitiveness in a much wider set of high-tech, high

value-added industries, from engineering to science and medi-

cine.8 As a result, it is now common for governments to depict the

development of a vibrant domestic cultural sector not only as

a social imperative, but also as a technological and economic

imperative as well.9

It is therefore understandable that America’s calls for the ‘nor-

malisation’ of international trade in cultural products— elimination

of tariffs, quotas, subsidies and local content requirements—have

met with such fierce international opposition. Indeed, while it is

now de rigeur in international trade circles to talk about cultural

‘goods’ and ‘services’, the vast majority of governments continue to

insist that these are fundamentally different from other traded com-

modities. For this reason, governments everywhere (including the

United States) continue to employ and to expand a host of policies

aimed at ensuring the viability of local cultural industries, from tax

concessions to local content requirements.

All of this makes the past decade of cultural sector neglect

in Australia even more puzzling. The dimensions of the decline of

Australia’s cultural industries over this period are staggering, par-

ticularly when contrasted with successes in other countries, both

English and non-English speaking. Take feature film production as

an example. Under the Howard Government, we have witnessed a

decline in Australian films’ share in national box office earnings,

while local shares in other countries, from the United Kingdom

and Canada to Japan and Korea have increased. Figure 4.1 shows

Cu l tu re 103


that Korea’s and Japan’s domestic share accounts for over 50 and

40 per cent respectively, while Australia’s had declined to less than

3 per cent in 2005. This is a culture swamped by imports, largely

from the United States. And the English language excuse does not

stand up in the face of the United Kingdom’s recent revival. Even

Canada, which also battles geographical proximity to the United

States, has managed to increase its box office share and now out-

performs Australia.

Figure 4.1: Domestic film’s share of total national box

office (per cent)

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


60South Korea

Japan

France

UK

Australia Canada

50

40

30

20

10

02000 2001 2002 2003 2004 2005


http://www.afc.gov.au/gtp

http://www.afc.gov.au/gtp

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 eigh-

teenth 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 pro-

duction, 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 audio-

visual trade (cinema film, TV content and videos) (Figure 4.4),

and nearly tripling the deficit in royalties paid on TV content

(Figure 4.5).

Cu l tu re 105


Figure 4.2: Number of feature films produced

Figure 4.3: Production investment in feature films


2000

South Korea

Japan

France

UK

Canada

Australia China

1800

Mill

ions

of U

S d

olla

rs

1600

1000

400

200

01999 2001 2002 2003 2004 2005

1400

600

1200

800

2000

400

South Korea

Japan

France

UK

Canada

Australia

China

350

300

200

100

50

01995 2001 2002 2003 2004 2005

250

150


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

visual trade

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

Cu l tu re 107

400

350

300

Mill

ions

of A

ustr

alia

n do

llars

200

100

50

0

1987

/88

1989

/90

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

250

150

500

400

300

Mill

ions

of A

ustr

alia

n do

llars

200

100

50

0

1987

/88

1989

/90

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

250

150

450

350


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 Govern-

ment’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 pro-

duction. 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



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 pro-

duce 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

Cu l tu re 109


television, began to receive comprehensive federal government

support. Gorton’s strategic targeting of Australian cultural indus-

tries 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 pur-

pose. 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 owner-

ship in key sectors and established the Australian Industry

Development Corporation. And most importantly for the pur-

poses 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



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 suc-

cessive 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 criti-

cised 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

Cu l tu re 111


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 substan-

tially 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 encompass-

ing 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 fluctua-

tions 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 post-

industrial 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),



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 com-

mitment 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 govern-

ment’s attitude towards local cultural industries and, for the first

time since the 1960s, a reversal in these industries’ fortunes.

THE HOWARD LEGACY: ABANDONINGAUSTRALIAN 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 com-

pletely 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

Cu l tu re 113


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, partic-

ularly 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 Anglo-

Celtic’) Australians behind in his grand quest to explore and

expand the idea of what it meant to be Australian in the late twen-

tieth 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 cal-

culation 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.



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 commit-

ment 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 feel-

ings 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,

Cu l tu re 115


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 ‘main-

stream’ 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 ‘main-

stream’ 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



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 cele-

brated 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 inter-

national 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

Cu l tu re 117


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 two-

pronged. 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



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-by-

project 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 institu-

tions 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 posi-

tion of having to fight each other for the few willing sponsors. Jill

Berry, cited above, sees this as ‘a profound issue. The major arts

Cu l tu re 119


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



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 under-

take an industry-backed Cultural Leadership Program and then

lead Britain’s cultural sector into the future, raising the contrib-

ution 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 under-

took 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, pub-

lishing 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,

Cu l tu re 121


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 SELF-REPRESENTATION ON THE INTERNATIONALSTAGE

The disturbing story of the government’s desertion and dismant-

ling 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



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 devel-

oping 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 con-

vention 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 ‘in-

separable from respect for human dignity’ (Article. 4). Moreover,

Cu l tu re 123


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 bind-

ing 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 cul-

tural 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 technolog-

ical 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



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 anti-

globalisation 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

Cu l tu re 125


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 Hon-

duras, 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



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 con-

vention 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 in-

tended to sign the treaty; the Minister may have been indifferent,

Cu l tu re 127


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 anti-

American) 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 dis-

regard 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 con-

tent quotas should be off the table and the government should



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 deal-

breaking 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 develop-

ment of the local audiovisual industry.’51

Moreover, the concessions we gave away in the area of multi-

channelling, 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

Cu l tu re 129


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, docu-

mentaries, 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 tele-

vision services.52

The irony of the deal is that Australia became a signatory to US-

content 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 pres-

suring 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



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 film-

makers 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 Com-

merce and International Trade under Clinton, who warns that

American ‘cultural imperialism is no joke’:

Cu l tu re 131


‘[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 neces-

sary 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 cul-

tural 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.



DEFENCE

Imagine a country that goes ‘all the way with the USA’ in its strate-

gic 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 Collins-

class 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

5


A country where the specifications for new military equip-

ment 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 CREATINGMILITARY INSECURITY

Few would disagree that the defence of one’s own country,

through the capacity to repel potential invaders and project influ-

ence in the region, is the ultimate measure of national security. If



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 con-

siderable 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 impor-

tant 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.

Defence 135


While there has been considerable controversy over the mas-

sive 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 pro-

American 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 con-

sequence 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 procure-

ment 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



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 Australian-

made 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.

Defence 137


NATIONAL SECURITY SUBORDINATED:LAND, SEA, AND AIR

We will take three major examples of defence procurement to illus-

trate 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 demon-

strate 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 recon-

ditioned, 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



in servicing by the US contractors. As we will see, Australian main-

tenance 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 skir-

mishing. 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.

Defence 139


Source: Nicholson of The Australian newspaper, <www.nicholsoncartoons.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 occu-

pants: 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





considerations are being over-ridden by the Prime Ministerial-led

desire to be useful to the American administration. There has, of

course, long been a perception surrounding defence procurement

that Australia pays America ‘protection money’ as a kind of insur-

ance that US assistance may be called upon if needed in the future.

In reality, Australia’s military debts are few, having already fought

on behalf of the Americans in numerous wars of US making.

Pandering for personal reasons thus presents itself as a more likely

motivation for this bizarre purchasing decision.

The tank tale gets worse. When the then Minister Robert Hill

announced the purchase of the tanks in 2004, he stated the very

opposite of what the deal eventually entailed: that ‘Australian

industry is expected to be involved in the provision of through-life

support for the Abrams’. Intended to sugar a lemon for the

Australian public, the words ‘expected to’ rather than ‘will’ were

code for a deal under which Australian industry stood to be

roundly excluded. Not even the repairs of the tanks are being

handled in Australia—flying in the face of explicit undertakings

given at the time that the contract was let. The first tanks arrived

from the US supplier, General Dynamics, in September 2006, but

by January in 2007 it was being reported that local Australian

firms were being excluded from maintenance work.7

As for the ‘strategic’ significance of the tanks (designed during

the Cold War to withstand Soviet tanks), this is seriously ques-

tioned in the United States itself, where alternatives such as

mobile armoured gun units are being sought.8 In US eyes, the

strategic importance of the Abrams tank lay in its indestructibility,

a view echoed by the Australian government, whose press release

Defence 141


assured that ‘The new tanks will also provide our soldiers greatly

increased levels of protection and survivability on the modern

battlefield’.9 This was in July 2004. Just a few months later, US

media were reporting a very different story—the tank was a death

trap. The experience of the Iraq war, where at least 80 of the

behemoths were put out of action by early 2005, shows that

the tank’s armour (with up-front protection) can be penetrated

with surprising ease by the low-tech bombs and rocket-propelled

grenades of Iraqi insurgents. So much for strategic advantage.

Could our decision-makers have been so ignorant of the Abrams’

performance when the deal was signed? If so, they were surely not

so blind when the first consignment arrived in December 2006.

As if matters could not get worse, the tanks being sent to

Australia will not even have their original level of up-front protec-

tion; the depleted uranium facing that made them ‘indestructible’

has been replaced with a composite coating to make the tanks

lighter, but still not light enough for ADF landing vehicles.10 This

lends credence to the view that in the case of the Abrams tanks,

the Howard Government has opted for integration dependency

with respect to US global military strategy, while damaging

Australia’s own military capabilities and national security.

Sea: combat systems for the Collins-classsubmarines

The Collins-class submarines have been one of the success stories

of Australian domestic military procurement and national self-

reliance. It has been described (in a none too favourable report by



McIntosh and Prescott) as ‘Australia’s most important strategic

asset for the decades starting 2000 . . . and Australia’s most ambi-

tious and technically advanced defence industrial project ever.’11

But the Australian submarine suffered from a large defect in

the eyes of Howard Government ministers: it was a legacy of the

Labor (Hawke–Keating) governments. This made it a candidate

for repudiation by the incoming Howard Government, which was

always anxious to score political points by attacking the work

of its predecessor. Howard and his ministers commissioned report

after report to emphasise technical hitches, hitches that would

be expected in any large-scale and technically advanced public

procurement project, let alone one of this magnitude.

Nevertheless, the submarine itself, ‘which has been as much

criticised at home as it has been feted abroad’,12 is widely acknow-

ledged as a principal strategic asset of the Royal Australian Navy;

and its performance in exercises with the US submarine force have

earned it the acclaim of US Admirals.13

It is the combat system of the subs, the software to the subs’

hardware, that has given so much heartache, none of which can

be laid at the door of the prime contractor, the Australian Sub-

marine Corporation (ASC). This combat system was originally

entrusted to the US contractor Rockwell, against the wishes of the

Swedish designers of the sub, Kockums. By the early 1990s it was

obvious that the combat system was the source of most of the

submarine project’s problems. The ASC, the prime contractor,

effectively served notice on Rockwell in September 1993 that it

was in breach of its contractual obligations—a step that would

then enable the ASC to contract with a more reliable supplier. But

Defence 143


the Department of Defence (DoD) overrode this and allowed

Rockwell to remain in charge of the under-performing combat

system for several more years. This was the situation inherited by

the Howard Government when it came to power in 1996.

The continuing problems with the combat system of the sub-

marines led the Howard Government to call once again for tenders

in 2000–2001 and initiate a selection process. This was based on the

clear recommendations of the McIntosh/Prescott Report of 1999

into the whole submarine project (a report commissioned by the

Howard Government). Accordingly, in February 2000, the DoD

released a Request for Proposal to four combat system suppliers

and the ASC for a new combat system.14 Two contenders were

shortlisted by the DoD—the American firm Raytheon’s Combat

Control System (CCS) Mk2 and the German STN Atlas ISUS-90

System. At the same time, a shortlist for new torpedoes was also

compiled including the Raytheon Mk 49 Mod 4 heavyweight

torpedo and the Italian Whitehead Alenia Sistemi Subacquei

(WASS) Black Shark. This was the Defence procurement system

operating as it should, free from political interference.

But shortly after Bush’s election in mid-2001, there was a

sudden change. The open, competitive selection process was

abruptly terminated. The government intervened with an alter-

native and over-arching political agreement, ‘Statement of

Principles for Submarine Cooperation’ signed serendipitously on

11 September 2001 by US and Australian admirals in Washington.15

This agreement between the United States and Australian Navies

clearly signalled that future purchases would be made with the

prime criterion being ‘interoperability’ between the navies.



Interoperability means that the Australian Navy will use the same

technologies as those chosen by the US Navy, not that the United

States will adopt Australian technologies. Then Minister Peter Reith

rationalised the move as: ‘. . . these arrangements will give Australia

even better access to US military technology which gives us a vital

edge in capability and operations.’16 Whether that vague goal was

realised or not, the effect of the signing of this agreement was to

lock the Australian DoD into purchase of exclusively US submarine

systems.

The intervention cut clean across the standard procurement

process, and placed the supply of the combat system for the

Australian submarines directly in the hands of the US Navy, in full

knowledge of the fact that the US Navy had had no experience

of building or operating conventional-class submarines for over

40 years. The intervention went directly against the recommen-

dation of the government-commissioned McIntosh/Prescott

Report, namely that proposals for the combat system should be

called for ‘using only proven in-service systems’.17

The government’s claim that Australia needed to purchase a

US system to secure a ‘vital edge’ (as Reith put it) was simply

asserted without regard to the objective evidence. Ten of the

world’s conventional submarine fleets had successfully put in

place the Atlas ISUS 90 system, including Germany, Italy, South

Korea, Turkey, South Africa and Greece. The ISUS-90 had been

successfully interfaced with US, UK, German and Italian weapons

systems. The Israeli military had utilised the ISUS 90 system in a

Dolphin class submarine, through which it controlled deployment

of the US Harpoon missile. Neither networking nor joint training

Defence 145


were hindered by Israel’s acquisition of a non-US system. What

was so special about Australia’s needs that only the Raytheon

system was suitable for purchase? Clearly the Minister’s ‘technical

necessity’ claim fails the reality test. Indeed, the Raytheon system

was a wholly unproven derivative of a system for larger nuclear

powered boats. This posed a major problem: how to adapt the

system designed for nuclear submarines for the Australian case

of conventional submarines; and how to interface the CCS

system with new Collins technology, particularly the sonars.

In response, Raytheon emphasised the ‘potential access’ to a

preeminent level of technology through close cooperation with

the US Navy and the desirability of belonging to a US networked

system.18 Joint training and US assistance were also emphasised

in the bid.

Commentators on military affairs at this stage started raising

the possibility that the decision to shortlist the Raytheon system

was the result of US political pressure being exercised at the

government-to-government level.19 Similar suspicions were voiced

in Senate questioning of Australia’s Under-Secretary of Defence,

Michael Roche, in 2000. But US ‘aggressive advocacy’ on a state-

to-state level on behalf of its defence and civilian contractors is

hardly new. What is new is the extent to which the Australian door

has been opened to US suppliers, eliminating the need for such

‘pressure’. Roche responded by saying that he wished to ‘avoid

saying that there are other pressures’ and instead emphasised the

point that ‘there is an objective process going on that is assessing

the technology available in other countries against the need of the

Collins-class.’20



Whatever ‘objective process’ existed at the time, it was defini-tively overruled in July 2001 when the Minister arbitrarily abortedthe tender process. This was just before the DoD TenderEvaluation Team was reportedly about to recommend procure-ment of the German STN Atlas bid. If the tendering process hadbeen allowed to proceed, the German bid would most likely havebeaten the American bid.21 The short-circuiting of this processsuggests that defence capability considerations were supplantedeither by an overriding preference for US equipment or by politicaldeference to US commercial interests. The July 2001 award of thetender to Raytheon was Howard’s first major gesture to the newincumbent of the White House, a sign that the new administrationcould count on Australia to be a generous supporter of its defenceindustry. ‘Paying tribute to Rome’ is the ancient way to describe it.Securing intimacy, glamour, and standing in the eyes of the WhiteHouse by enabling US defence interests to make handsome profitsfrom Australian government contracts is the modern version.Increased intimacy with the White House is thereby ensured forour PM and his team at the DoD (rationalised in the language of‘national security’ and alliance building). And increased intimacywith US Services is thereby secured for Australia’s defence forces(rationalised in the language of ‘technical superiority’). As onenaval consultant has observed:

The US is prepared to promote its industrial and com-mercial activities under the guise of alliance relationships;(while) the Australian Submarine community sees itself asan extension of the US Submarine community, and therebyused technology access as a convenient argument.22

Defence 147


There is no question that in certain cases, buying American does

give the ADF access to superior technology. This is not at issue and

it would be foolish to claim otherwise. But the important qualifica-

tion is that it depends on the technology in question and on

whether at the hand-over stage Australia is delivered what was

promised. In some technologies, conventional submarines for

example, the Americans are not in the running. And in the case of

the Collins-class combat system, Raytheon’s major competitor,

STN Atlas, also promised access to US technology via its joint

arrangements with Lockheed Martin. In addition, STN Atlas

offered access to European technology. In any other context, the

German offer of dual access would have been rated as a bonus.

The inescapable conclusion is that it is not the technology per se,

but rather who is offering it that matters to the Howard

Government.

Air: the Joint Strike Fighter and the Super Hornet

The choice of the JSF as the sole contender for the RAAF was

a leap of blind faith, based on assumptions that have since

collapsed.23

The source of that blind faith was Prime Minister John Howard.

On 27 June 2002, then Defence Minister Senator Robert Hill

announced that Australia was joining the US Joint Strike Fighter

( JSF) program, getting in on the ‘ground floor’ by signing up to

the system design and development phase of the program.24 The



JSF project, known as project AIR 6000, is undoubtedly the most

significant defence procurement Australia will have to undertake

over the next decade at a current cost of $16 billion. The project’s

scope and timing are driven by the need for new aircraft to replace

the ageing F-111 and F/A-18 Hornet aircraft fleets, scheduled to

retire in 2010 and 2015 respectively. Strategically, the new fighters

will be the single most important factor in determining Australia’s

capacity to defend our continent from conventional threats, and

they will be a key element of our ability to project strategic influ-

ence in our region.

For the United States too, the JSF represents a new approach

to military procurement, reflecting the role that Lockheed Martin,

the program’s sponsor, has come to play, as virtually a ‘state with-

in a state’ in the US military system. The Pentagon selected the

Lockheed Martin design in October 2001 as winner of the Joint

Strike Fighter competition, and from the outset it has been viewed

as an international program, one through which the United States

would spread the costs of development across multiple partners,

and recoup these costs through the price of admission to the

project on the part of collaborating countries. From the US per-

spective, the beauty of this arrangement is that the massive costs

of development are passed on to its partners, and the United

States gets the weapon of choice at a steep discount.

US partners, like Australia, are promised multiple benefits

including access to US technology, production contracts and

the opportunity to participate in the value chain created by the

project. Of course, no guarantees are given. Britain has already

threatened to pull out of the deal if the export version does not

Defence 149


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



just amazing, it stopped everything in the room at the time,’ said

Lockheed’s international programs director for the JSF, Mike

Cosentino, about Australia’s surprise announcement. ‘This was

our first international customer so it was a memorable day.’26

Howard wasted no time in actively overriding procurement

processes that were in train at home. Just two weeks later, then

Defence Minister Hill announced that Australia was signing up to

the JSF and cancelling talks with all competing firms. As the

Canberra Times observed, the government took the decision to

commit to the JSF, despite the fact that the ‘Defence Department’s

own evaluation of the aircraft that might be suitable to replace the

RAAF’s F/A-18s and the F-111s was incomplete’.27

In strategic terms, how good is the F-35 and how does it

compare with competing products, both from US and non-US

sources? Defence makes the claim that the JSF is the best aircraft

to meet the ADF’s capability requirements. But as others have

pointed out, Defence has at no time offered any back up for this

claim; it has refused to specify openly and publicly and in full

detail the capabilities of the JSF that make it their preferred

choice. Understandably, the JSF announcement has sparked huge

controversy in the defence and policy community. Australia is cur-

rently faced with a major regional arms race in high-technology

weapons. Hundreds of advanced Russian Su-27 and Su-30 fighters

are being ordered from Russian plants, and are now license-built

in Asia. In the recent Cope India exercise flown between the latest

US Air Force F-15C variant and Indian Su-30s, the Indians matched

or outperformed the American F-15Cs. These are fourth gen-

eration fighters that are best matched by equally capable fourth

Defence 151


generation planes like the Swedish Grippen, the French Raffale

and the British Eurofighter—all original contenders for Australia’s

AIR6000 tender hastily overturned by Howard’s intervention.28

Major sources of concern with the JSF project are that the

planes will not give Australia strategic superiority in its own region,

and that the planes might never be delivered, or be delivered so

late and with such cost overruns, that the Australian Defence chiefs

will bitterly regret the hasty decision that committed them to

the purchase. Understandably, the normally tight-knit defence

establishment in Australia has split over the JSF decision. Retired

Air Vice-Marshall Peter Criss has come out in open disagreement

over the choice on the grounds that it locks the Australian Air Force

into an extremely expensive aircraft (upwards of US$100 million per

plane) that is inferior to other alternatives, unsuited to Australia’s

strategic needs (‘unable to compete with proliferating SU-30 family

aircraft in the region, and lacks the required range or response

time’), and will leave the country with a huge capability gap as a

result of its rescheduled delivery date of 2018. A major controversy

erupted over the government’s failure to put in place a Plan B in

order to cover late delivery, creating a capability gap of almost a

decade for the RAAF—filled at the last minute with the announce-

ment of the Super Hornets purchase (see below).29

Numerous experts both in the United States and Australia

agree that the JSF is an inferior option compared with the US F-22

(Raptor); in view of the escalating costs of the JSF, this would now

make the Raptor the best option for Australia. But after reportedly

having offered it earlier to Australia, the United States has recently

issued a statement, to quell growing enthusiasm and speculation,



that the Raptor will not be available for export.30 But how serious

was the Howard Government’s request? Presumably for Australia,

getting serious would mean pulling out of the JSF project and

upsetting the Bush–Howard pact with Lockheed Martin.31

So is there some joy for Australia from this, Howard’s latest

dip into the public purse? What does Australia get for its $300 mil-

lion down-payment on the JSF project? Well, it gets the right to bid

for development work as part of the global value chain being

created by Lockheed Martin. On the question of just how much

work Australian sub-contractors can expect, the estimates have

been predictably far from conservative. Conjuring up a completely

notional figure based on a wild guess, Industry Minister Ian

MacFarlane ventured the sum of AUD$4 billion in contracts

potentially becoming available.32 Unfortunately, as the wild

FTA guesstimates have shown, these notional 1 per cents have a

horrible habit of turning out to be closer to .01 per cent. Nothing

is guaranteed, as these political old-timers are well aware. Under

the JSF program Australian companies are considered Tier 3

suppliers, the least important in the value chain.33

In effect, the competitive tendering process that the govern-

ment has been at pains to claim as its preferred approach, and as

endorsed by such official inquiries as the Kinnaird Review, has

been totally abandoned. In its place an alternative system has been

put in train making Lockheed Martin, not the Australian govern-

ment, the new arbiter of who participates.34

It works like this. By signing up for the JSF, Australia will no

longer be able to make decisions over how Australian companies

might participate in the global production networks established to

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produce the planes.35 These networks, or value chains, are com-

pletely under the control of Lockheed Martin. This US-centred

procurement process for the JSF will effectively set the rules for

Australia’s future procurement decisions. In other words, the pro-

curement decision for highly specialised components of the planes

is taken out of the hands of the ADF and placed in those of the US

prime contractor for the JSF, Lockheed Martin, a vast sprawling

business empire that functions as a ‘state within a state’ in the

United States. Perhaps John Howard’s youngest son Richard, who

currently works for Washington lobbyist Clark and Weinstock as

an adviser for Lockheed Martin, will put in a good word for

Australian contractors—but then, given his father’s proclivity

for buying American, maybe not.

While it is the government’s prerogative to short-circuit a pro-

curement process if a particular product is evidently superior and

if continuation of bidding would be to the economic detriment of

contending companies, these circumstances certainly did not apply

in the case of AIR6000. The decision to favour the JSF was made

four years ahead of schedule with no comprehensive analysis of

Australia’s needs and of the various options for meeting them. In

international discussions of the F-35, the superior stealth capabili-

ties are frequently mentioned. But (in the absence of a contractual

guarantee) the stealth capabilities will not be included in the export

version of the fifth generation JSF, a ‘promised’ feature and major

selling point of the whole program.

That the project is running into problems in the United States

is signalled by the failure to mention the program at all in the

2006 Quadrennial Defense Review, an authoritative listing of all US



military projects.36 In 2006 it emerged that the source code to the

software that runs the F-35 might not be released to participating

entities by Lockheed Martin. Without access to the source code,

the Australian RAAF would effectively be bound to Lockheed

Martin for decades, in stark contrast with the case of Australia’s

F/A-18s and F-111s where full maintenance can be performed

in Australia by Australian contractors. Here Lockheed Martin is

following a familiar practice of American business giants, known

as ‘bundling’—you take one part of my system, and you have to

take the rest and exclude all other firms. Microsoft is the prime

exponent, but at a lower technological level so is Coca-Cola with

its company drink refrigerators for retailers that are only allowed

to hold Coke products.

So bad is the bundling aspect of the affair that during 2006 the

United Kingdom seriously considered pulling out of the whole JSF

process if there was no early resolution of the source code issue.

Late intervention by the Pentagon and the signing of a new ‘tech-

nology transfer agreement’ between the United Kingdom and

the United States, in August 2006, averted this crisis but reveals the

dangers for all non-US participants. Norway, too, has complained

publicly of the role accorded it,37 putting out a statement in

November 2005 that ‘the government will undertake a thorough

review of JSF and Eurofighter programs, with special emphasis on

clarifying and quantifying the relationship between the cost of

participation and the resultant benefits to Norwegian industry’.38

Tellingly, the Australian officials, cowed into silence by the

Howard Government have not followed Norway’s lead. Instead

we find Defence Minister Nelson in Washington in December

Defence 155


2006 signing Australia up for its involvement in the second round

production phase of the JSF process.39 Was this on the basis of the

Australian DoD gaining access to source codes and technology on a par

with the United Kingdom? The silence on this issue speaks for itself.

Plugging the gap: the subsequent Super Hornets purchaseAs an addendum to this story, the Howard Government

announced early in March 2007 that it would make a $6 billion

purchase of 24 Super Hornet planes (the F/A-18 F) to plug the gap

created between the planned retirement of the RAF’s current

fighter planes and the receding arrival date of the JSF F-35s. It is

worth pointing out that this purchase blatantly by-passes all pro-

curement guidelines, not making even a pretence of complying

with them; that it was deemed necessary only because of the gap

in future air cover created by the hasty decision to go with the

JSF; and that the aircraft have been in use with the US Navy since

1999 and are designed for take-off and landing on aircraft carriers,

not the land operations that they will be used for in Australia.40

Perhaps it is also worth pointing out that the Super Hornets were

designed and built in the US by McDonnell Douglas, which now

forms part of the Boeing military systems group (Boeing

Integrated Defense Systems, a new division formed in 2002 out of

McDonnell Douglas and Boeing’s Military Aircraft and Missile

Systems group and its Space and Communications systems

group), and that the newly retired President of Boeing Australia is

none other than Andrew Peacock, former Liberal leader and

latterly Australian ambassador to Washington. Peacock built



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-

Defence 157


shore procurement, making Australia a clear outlier among

comparable countries. Whereas most countries have offshore

procurement levels of 10 per cent or less (and the United States

has less than 2 per cent), Chart 1 shows that levels of offshore pro-

curement in Australia up to the mid-1980s were typically around

70 per cent (or onshore procurement hovered around 30 per cent).

The level of onshore procurement rose rapidly under the Hawke–

Keating government, under the impact of the homegrown Anzac

frigate and Collins-class submarine projects; levels of onshore

procurement over the decade 1987 to 1997 averaged 61 per cent.

Since the election of the Howard Government, there has been a

marked shift away from onshore activity, down to an average of

just over 41 per cent in the years 1997 to 2001.41

Figure 5.1: Defence equipment spending—proportion of

expenditure undertaken in Australia, 1975–2000

Source: Thomson (2006: 34)


80

60

% 40

20

10

Year

0

1975

/76

1977

/78

1979

/80

1981

/82

1983

/84

1985

/86

1987

/88

1989

/90

1991

/92

1993

/94

1995

/96

1997

/98

1999

/200

0

50

30

70


Defence 159

At the same time, there is clear evidence as to the increase in the

foreign bias of our defence procurement, and particularly of an

increase in the bias towards the United States. Australia’s inter-

national ranking in terms of dependence on arms imports rose

dramatically from eighteenth in 1997 to fourteenth in 1999 and to

eleventh in 2002. Take note that if developing countries (the

world’s heaviest arms importers) were excluded from this rank-

ing, Australia would top the list in offshore buying. Moreover, the

US share of our arms imports rose from 50 per cent in 1998 to

65 per cent in 2003.42 This must be taken as a conservative measure

of a ‘buy American’ bias because it excludes a very high proportion

of government contracts to American-owned suppliers located in

Australia. If this were added, American contractors might be con-

suming up to 80 per cent of the nation’s defence procurement

budget. By most measures then, Australia stands as an anomalous

case in the developed world both in the degree to which it sources

foreign military equipment, and in particular its dependence on

the US as a military supplier. By the same indicators, Australia’s

anomalous dependence has been growing more severe under the

Howard Government.

Consider the examples displayed in the following text box,

which supplement the three cases already discussed.

The Unmanned Aerial Vehicle (UAV)

The deployment of an Australian designed and produced

Unmanned Aerial Vehicle (UAV) to the Solomon Islands in July

2003 highlighted Australia’s capability in a leading area of



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.


Defence 161

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 con-

tinued 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 con-

tender. 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



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 specific-

ation, 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


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 man-

agement 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 oper-

ate 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 imple-

mented a US-imported radar detection system for the FA-18

Defence 163



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 test-

ing 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 ver-

sions 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 com-

plicity 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


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 well-

developed cost-effective analysis of the potential role of Aust-

ralian industry in the project and to what extent there is

Australian industry capability that could contribute to the pro-

posal’.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

Defence 165


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 exer-

cises. 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 unconven-

tional threats—which call for fresh strategic thinking and a new

approach to defence procurement. The East Timor conflict, where



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 equip-

ment 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 inte-

grated 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 inter-

esting 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 atten-

tion 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 damag-

ing 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

Defence 167


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 sup-

port 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 con-

ventional 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



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

Defence 169


victory at the Battle of Midway that saved Australia from immin-

ent invasion. This view is grounded in a misconception that

Australia was unprotected; that it had made no serious war prepar-

ations, 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 assump-

tions. 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 sub-

ject 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.



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 deter-

mined 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

Defence 171


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 pur-

chase 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 enter-

tained the presence of major US bases on its soil would see them

as a premise for requiring greater reciprocity in defence procure-

ment dealings with the United States. At the very least, given that

premise, a ‘normal country’ would not sit back and allow US con-

tractors 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



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

<http://www.defence.gov.au/index.htm> and in the window

labelled ‘Search’ type in ‘Pine Gap’—no results. Try ‘joint facili-

ties’—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 under-

stand 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.

Defence 173


http://www.defence.gov.au/index.htm

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 pro-

vides similar services for other countries in the region.

But then, for no apparent reason, the government begins to

reverse the country’s commitment to self-sufficiency, going against

all domestic and international recommendations. First, the govern-

ment refuses to strengthen the national blood collection system

or to support the national champion’s potential to maximise its

domestic capacity. Then it begins to play funny games with the

champion’s contracts and sets up new avenues for increasing

imports of blood products from foreign suppliers, which up to

then had been restricted for reasons of national health security.

175

6


Coincidentally, an American supplier is waiting in the wings to

meet this country’s new demand for imported blood products.

The government’s policy change favours this American supplier,

and gives it a large slice of the national champion’s market. Not

content with this slice, the supplier continues to encourage

the government to further open the local blood market in the

name of ‘healthy’ competition. Its persistence pays off when

the government attaches a side letter on blood products to a trade

agreement it has been negotiating with its special friend. The side

letter, co-written by the favoured American supplier, says the

Commonwealth Government will recommend that future con-

tracts for the supply of blood fractionation services be opened to

foreign bids. It also states that blood products from America will

no longer have to be clinically superior to locally-made products

in order to qualify for market entry; and that the country’s

requirements for ‘safety, quality and efficacy’ of imported blood

products must not create ‘obstacles to trade’ for US suppliers. The

government introduces the text of this arrangement not in the

body of the trade agreement but some months later, covertly, in a

legally binding side letter where it expects it will attract minimum

attention (see Appendix for full letter).

The American supplier cannot believe its luck. What an oblig-

ing lot, this government. It wouldn’t be nearly as easy to crack the

blood market in Japan and Europe. Calculating the hundreds of

millions of dollars this side letter will bring its way, the American

supplier publicly congratulates the obliging government for its

‘perspicacious’ decision.



But the obliging government of this country isn’t off the hook

yet. It knows that its citizens (the electorate) won’t take kindly to

having their blood supply tampered with. Selling a riskier, inferior

system to the community will call for some crafty work. So the

government calls for a review of the country’s existing supply

arrangements for blood plasma. Perhaps this review can find some

problems with its national champion, which in turn can then be

fixed by allowing a US supplier to take over the contract. Of

course, this review must be seen as serious by the public, so it

takes a year and costs $3 million. But there is no question that,

in the government’s eyes. the review is a mere formality, for

more than a year in advance of the review and its findings, the

government gives a firm undertaking to its American friends that

whatever the outcome of the review, it will go ahead and recommend

opening the blood market to US suppliers.

However, in an unanticipated turn of events and most

inconveniently for the obliging government, the review resound-

ingly warns against changes to the current arrangements given

the high risks and costs involved. Even through the govern-

ment’s smokescreen, the review panel can see that all the

risk-management steps in the world amount to nothing more

than a second-rate option for a country with a first-rate system

already in place. A similarly thorough review (by the country’s

former Governor-General) just a few years earlier had reached

a similar conclusion.

Not to be deterred, the government restates its commitment

(recommendation) to introduce American interests into the coun-

try’s blood chain. To bring this about it must convince the states

Blood 177


and territories in its jurisdiction that it is in their interests to get

on board.

The question is: why would a government knowingly and

apparently willingly seek to replace a superior system with an

inferior one, putting in jeopardy a world-class system based on

donor generosity? Why render its people more vulnerable in an

uncertain security environment, and on top of that do irreparable

damage to its national champion and its workforce?

This is the question facing Howard’s Australia.

ULTIMATE GIFT, ULTIMATE BETRAYAL

The questions we pose here go to the very heart of Australia’s

national security—the safety and security of its people. Why

would a government change a country’s long-standing contractual

arrangements that guarantee the safety and security of its blood

supply? Why seek to dismantle the system that currently protects

its people from the risks associated with blood product imports?

Why indeed would any government choose to jettison well-

established, cost-effective, and well-functioning arrangements that

secure one of the safest supplies of blood products in the world

for an inferior alternative? Why do this when the zero-sum logic

of that alternative would bring additional costs to Australia in the

form of job losses, investment and tax revenue foregone? Under

Howard’s preferred arrangements, Australian taxes that pay for

the blood products would create American jobs and enrich

American shareholders. Why would a government change course

in the absence of compelling and significant clinical and economic



advantage? And why pursue such a course in complete disregard

of all independent expert advice to the contrary?This chapter tells the story of one of the most extreme acts

that a government could take against the national interest: thedecision to abandon the ideal of national self-sufficiency in bloodsupply and to open the Australian blood market to a foreignsupplier.1 We examine why the Howard Government has been somotivated to discontinue one of the world’s safest blood supplysystems in spite of long standing national goals, domestic supplycapacities and expert advice, and how the government’s actionshave been taken in the full knowledge of the significant risks andadverse consequences for its people.

AUSTRALIA’S WORLD-CLASS SYSTEM OFBLOOD SUPPLY

Australia has a longstanding policy of national self-sufficiency inblood and blood-products.2 The national regulatory body, theTherapeutic Goods Administration (TGA) supports this policy (atleast it did until 2004) through its drug registration guidelines,which state that:

Australia favours national self-sufficiency in products derivedfrom human blood or plasma, believing that a policy of notbeing reliant on donors in other countries is not only in thenational interest but an international responsibility.

Blood products sourced from foreign countries will beregistered only if the foreign product has a demonstrably signifi-cant clinical advantage over the local product (emphasis added:

Blood 179


note that this last clause has been deleted since signing theFTA in 2004).3

While self-sufficiency is not complete, Australia has achieved a level

of self-reliance that most countries still aspire to. This has been

achieved through the close interaction of three major participants.

The first is a community of voluntary, non-paid donors within its

territory who give blood or plasma on a regular basis, enabling

more than 400,000 Australians each year to benefit from their gen-

erosity.4 The Australian Red Cross Blood Service (ARCBS) is the sec-

ond participant, responsible for collecting all the blood and plasma

designated for use in the Australian community. Following the prac-

tice of half a century, the Red Cross sends the plasma to CSL (for-

merly Commonwealth Serum Laboratories, now CSL Limited)—

the third vital participant in this trilogy of plasma production. CSL

is responsible for the fractionation of donated blood—that is, its

splitting into various fractions such as serum and immunoglobulins,

each serving different medical functions.

As our sole domestic manufacturer of plasma products since

1953, CSL has grown from its origins as a government entity during

World War I (1916) to become a listed public company in 1994, and

the world’s largest plasma fractionator. Its products, which include

albumin, immunoglobulins (IVIgs) and clotting factors, are used in

trauma situations and to treat serious medical conditions, including

auto-immune diseases, blood disorders (such as haemophilia),

severe infections, and serious burns. CSL’s specialist subsidiary, CSL

Bioplasma produces a dozen products of this nature in a special

plant built to meet Australia’s needs for blood plasma products.



Continuity and security in the supply of blood products have

been achieved via long-term contracts between CSL and the

Commonwealth.5 CSL also undertakes ‘toll fractionation’ for

several other countries which lack their own national fractionator.

CSL uses separate processing facilities for plasma from overseas

sources as a risk management strategy. Until 2004 (when the

Australia–United States Free Trade Agreement was signed), blood

products could only be imported under two very specific circum-

stances: when the domestic supply could not meet clinical

demand; or when it was not economical to manufacture a

particular product in Australia due to limited demand.6 To be

registered for use in Australia, foreign suppliers typically had to

be able to demonstrate that their products were clinically superior

to those available domestically.7

The principle of self-sufficiency acknowledges the biosecurity

risks inherent in importing blood products.8 As the ARCBS explains,

self-sufficiency in blood is important to reduce the risk of infectious

agents such as Creutzfeldt-Jacob disease, West Nile virus and as yet

unidentified pathogens or contaminants entering the blood supply.

Policy endorsement of this principle has produced clear payoffs for

Australia. As one expert commentator reports:

In fact, statistics show that Australia has one of the safest

blood supplies in the world, with one of the lowest rates of

transfusion-transmitted infection in the world.9

While Australia has been one of the most successful exponents of

self-sufficiency and voluntary donation, these policy principles have

Blood 181


robust international underpinnings. A 1975 World Health Assembly

(WHA) resolution (to which Australia is a signatory) aimed to

promote and protect the health and safety of both donors and

recipients of blood and blood products through ‘the development

of national blood services based on voluntary non-remunerated

donation of blood’.10 Today, international bodies like the WHA and

European Council continue to advocate self-sufficiency as a policy

goal. And to complement rather than thwart this national security

objective, the WTO provides clear scope for member countries to

exempt blood supply from commitments made under the

Government Procurement Agreement.11 Australia’s policy of self-

sufficiency has a firm grounding in international law.

AUSTRALIAN EXCEPTIONALISM: SECURINGTHEN SURRENDERING SELF-SUFFICIENCY

Given the premium placed on self-sufficiency in international

circles, it follows that countries achieving or approaching self-

sufficiency do not sign away their right to protect their supply

arrangements for blood and blood products. Australia has achieved

self-sufficiency in fresh blood, is almost self-sufficient in plasma-

derived products, but has no policy to achieve sufficiency in

synthetic blood (genetically engineered) products.12 Many countries

strive to follow in Australia’s footsteps. Japan, which bans paid

donors, has stepped up domestic blood collection in order to build

a reserve of blood plasma sufficient to meet all domestic demand by

2008. The United States is singular in having achieved complete self-

sufficiency—but only by relying on an army of paid donors.



The exceptionalism of the Australian case arises from the

spectacle of a government striving to overturn the nation’s self-

sufficiency policy achievements—critically by urging a radical

change to its plasma fractionation arrangements which would

favour offshore processing by a foreign (read ‘US’) supplier. No

government spokesman or agency can openly admit to this fact

but the hard evidence is incontestable, as we show in the section

that follows (see also text box starting on page 187).

Even more perplexing than the government’s willingness to

surrender self-sufficiency is its choice of foreign partner in this

dangerous dance: American firm Baxter International, CSL’s main

rival and a company with a questionable track record.

Baxter has long expressed dissatisfaction with Australia’s

system of blood procurement (even though Baxter currently

benefits from a lucrative Australian contract for its expensive

synthetic products).13 Baxter Healthcare, a US affiliate of Baxter

International,14 claims that CSL has an unfair advantage in its

home market and that Australian ‘taxpayers may be paying too

much’ for blood products.15 Baxter’s allegations of unfairness

and overcharging on the part of CSL might seem a bit rich to

those who are aware of the company’s own privileged position

in Australia’s blood market, and the prices it charges for its

synthetic blood products. Baxter’s expressions of concern for

Australian taxpayers and their value for money may also ring

hollow to those aware of the activities of its affiliate companies:

one prosecuted in the US for defrauding its own citizens, and

another Australian subsidiary found to be rigging the Australian

procurement market.

Blood 183


It is of course true that Australians deserve value for money in

their purchases of blood-related products and services. But, con-

trary to Baxter’s claims, all evidence suggests that they currently

enjoy such value: from CSL. In 2001, a CSL benchmarking study

revealed that Australian prices for plasma products average 75 per

cent of prices in major European markets.16 But this has not

prevented the Australian government from endorsing Baxter’s

allegations of overpricing by CSL. In 2002, the Department of

Health and Ageing (DHA) declared that the pricing arrangements

of plasma in Australia ‘were unlikely to be the most advan-

tageous available’. Importantly, this declaration was exposed as

baseless by the Australian National Audit Office (ANAO), which

revealed the DHA had made this statement without doing

any cost comparisons with alternative options.17 CSL’s pricing

model was actually endorsed recently by the Flood Report as a

benchmark for value for money. In its 2006 report, the Flood

committee recommended that all future contracts with foreign

suppliers include tiered pricing—which is the established model

in CSL contracts.18

Despite the baselessness of DHA and Baxter’s claims regarding

the ‘value for money’ of CSL products, the Howard Government

has continued to work closely with Baxter to facilitate the com-

pany’s entry to the Australian market. The primary mechanism

employed to this end was a side letter attached to the Australia–US

Free Trade Agreement in 2004 (see Appendix). In the section that

follows, we outline the details of this side letter before examining

the alliance between the Howard Government and Baxter and how

this collaboration has played out since the signing of the FTA.



OPENING AUSTRALIA’S BLOOD SUPPLY TO US BIDDERS

In May 2004, three months after the Australian and US govern-

ments sealed a bilateral trade agreement, a side letter was

attached to that document. The Side Letter on Blood Plasma, as it

is called, forms ‘an integral part of the Free Trade Agreement and

is subject to the dispute settlement provisions of the Agreement’;

it contains five core commitments that the Howard Government

has made to the US side (see Appendix). In essence, these are:

1) to conclude all contracts with the Australian national cham-

pion, CSL, no later than 2009;

2) to recommend that all future tenders for the supply of

plasma fractionation services be opened up to US

companies;

3) to exempt US firms from the Australian regulatory require-

ment that imports of blood plasma products be ‘clinically

superior’ to Australian-produced products;

4) To alter or adjust Australian requirements for ‘safety, quality,

and efficacy’ of blood products should they create

obstacles to trade for a US supplier; (that is, such require-

ments are ‘not to be prepared, adopted or applied’ if the

effect is to make US trade difficult);19 and

5) to review Australia’s current contracting arrangements

with its national champion, such review to be concluded

no later than 1 January 2007.

Blood 185


The existence of these undertakings is not contested; their mean-

ing is also not in dispute. There are three key concessions in this

letter. First is the implied disavowal of Australia’s long-standing

policy goal of self-sufficiency in the provision of blood and blood

products (points 1, 2). Second is the lowering of national regula-

tory standards in order to lend a trade advantage to a US supplier

with different or less stringent standards being acceptable if

involving imports from a US company (points 3, 4). Finally, there

is the sequencing anomaly in which the government makes

known what its recommendation will be, open tendering, a good

two years in advance of that review’s completion (point 5) (and

setting a new standard for that old adage, ‘never instigate a review

for which you don’t already know the outcome’).

How did such a set of commitments come to be part of the

trade agreement in the first place? And why a side letter? To the

first question, the simplest answer is that they are there because

CSL’s American challenger, Baxter Healthcare, wanted to expand

its Australian market. To this end, the US Trade team, in the

tradition of ‘America Inc.’s’ collaborative export strategy, sup-

ported its national champion by including blood products in their

agenda for the negotiations.20

Baxter tells this story quite candidly to the Australian parlia-

ment in its April 2004 submission to the Joint Standing Committee

on Treaties. An oddity of this submission is that it seeks to explain

Baxter’s role in bringing about the side letter fully one month

before the side letter has been signed and released to the public.

Baxter explains that it had been knocking at the door of Australian

public procurement for several years, seeking to change what it



Blood 187

saw as Australia’s ‘overly high standards against plasma derivativeimports’ and ‘the pre-nomination of only one supplier’. It there-fore ‘referred its concern to the United States government whichthen added the issue to its agenda, and in 2003 the topic was dis-cussed at length in the FTA negotiations’. The side letter outlinesthe results of those negotiations.21

Baxter’s tactic of declaring that the government’s bloodprocurement system was not consistent with its policies on ‘trans-parency and competition’22 might seem ludicrous from a nationalinterest perspective. But like so many other US players before itwho found a willing ally in John Howard, Baxter’s ploy paid off.By agreeing to recommend competition in the blood market,Howard showed himself to be extremely compliant in re-orderingnational priorities—‘competition’ (or at least some semblance of it)should henceforth take precedence over the country’s policy of self-sufficiency in the national blood supply arrangements (see boxbelow).

Did Baxter get everything it asked for? It would seem sofrom Baxter’s effusive response. For the company goes on to‘compliment’ the government on its ‘perspicacity’ and ‘com-mends Australia’s FTA negotiators’ for achieving this ‘mutually[sic] beneficial solution’.23

The side letter’s rationale and impact: government spiel 24

versus the real deal

(1) ‘It is only sensible that this arrangement (i.e., the

government’s longstanding contract with national firm

CSL) is reviewed from time to time’ 25


Sadly this makes a mockery of the comprehensive review under-

taken just three years earlier which warned that changes to the

CSL contract would not be in the national interest (see text box

on page 201).

(2) ‘Australia’s policy on self-sufficiency in blood pro-

ducts will not be affected [by the side letter]’ 26

In fact, the opposite is the case with the government having gone

as far as to redefine the concept of self-sufficiency in this context

to mean the right of Australia to use ‘plasma collected from

Australian blood donors’.27 Blood products produced domesti-

cally, although included in the government’s policy statement of

self-sufficiency have here disappeared from the definition.28

(3) ‘Decisions in the future, as now, will be based on

delivering the safest and most clinically effective treat-

ments for Australians’ 29

This contradicts explicit undertakings (and subsequent actions

taken), which remove ‘clinical superiority’ as a requirement for

registering/marketing imported US blood products. As DFAT

stipulates:

Australia has undertaken not to require that blood plasma

products produced in the United States demonstrate signif-

icant clinical advantage over Australian produced products.

This obliges Australia to remove the requirement in

Appendix 19 of the Australian Guidelines for the Registration



Blood 189

of Drugs that foreign products demonstrate significant

clinical advantage over local products for registration in

Australia.30

(4) ‘If the review of plasma fractionation arrangements

results in agreement to move to tender processes consis-

tent with the Government Procurement Chapter, Australia

has undertaken to remove this exception to the provisions

of the Government Procurement Chapter’ 31

And if it doesn’t? The government will simply ignore it. In short,

the review’s recommendations will only be taken into account if

it accords with the government’s intention to open up the blood

market. According to its own media release, the government is

ignoring the review’s recommendations to desist from open

tendering.

In accordance with the government’s commitment under

the AUSFTA, the Commonwealth is recommending that

future arrangements for the supply of [plasma products] be

done through tender processes consisted with AUSFTA

Chapter 15 (Government Procurement). The review report

recommends a different outcome.32

(5) This paragraph [paragraph 4 of the side letter concern-

ing regulatory requirements] acknowledges the importance

of each party maintaining regulatory requirements for

ensuring the safety, quality and efficacy of blood plasma



products and supply of blood fractionation services . . .

However, consistent with our obligations under the World

Trade Organization Technical Barriers to Trade Agreement,

regulatory requirements should not unnecessarily

obstruct trade.33

If our policy had been inconsistent with WTO rules, why didn’t

we change them 12 years ago when we joined? Why now and

not then? The answer is because they are not inconsistent at all.

Unfortunately for the government’s case, it obscures one large

inconvenient truth: the WTO requires no such service to be

included in the GPA in the first place. In fact, blood fractionation

services are expressly a candidate for exclusion from the GPA on

the strategic grounds of national health security.

So why a side letter? Since the issue is one that centrally concerns

public procurement (the government purchase of blood plasma

products through a contract with the private sector), why didn’t

the government simply include plasma fractionation in the pro-

curement section (Chapter 15) of the trade deal and be done with

it? Why did it explicitly exempt supply of blood products from the

procurement chapter, only to reverse that exemption in an under-

taking given two months later in a side letter? What was the

rationale for this two-step dance?

The first point to make is that the government has never

provided a justification for the side letter. So we have to tease out,

on the basis of logic and available evidence, what the political


calculations might have been. First and foremost, a national back-

lash had to be avoided. It would not do to include blood products

upfront in an explicit procurement deal with the United States—an

item which, in view of its life and death nature, other advanced

countries pursuing self-sufficiency seek to exempt from procure-

ment agreements on national interest grounds. To have taken such

a transparent course as opening up the blood procurement market

in the FTA would have put the Howard Government’s ‘aggressive

exceptionalism’ under the spotlight, raising serious questions about

its domestic mandate. After all, under the WTO, all countries have

the right to exempt from international procurement agreements

those areas deemed strategic or sensitive on national (health and

military) security grounds.34 So Howard could not invoke the need

to ‘conform’ with ‘international practice’ standards to justify the

inclusion of such a sensitive issue in the trade deal (see box starting

on page 187). Indeed, conformity in this arena would actually mean

keeping blood off the procurement agenda altogether, the very

opposite of the course the Howard Government intended to take,

via the detour of the side letter.

To give the US what it wanted and avoid the immediate

political fallout at home, a two-step dance was the safer option:

On one hand, you take pains to dissociate blood plasma from the

Government Procurement deal by explicitly exempting plasma

fractionation from that chapter’s provisions; on the other, you

promise the US side to remove that exemption further down the

track by following a different course, which you then spell out

in the side letter, worded in accordance with US (government–

Baxter) guidelines. Here you give the necessary advance assurances

Blood 191


to the Americans that you will recommend open tendering and

remove all health regulations that might stand in the way of the

US contender; in return the US side agrees to exercise patience. So

by this route you also get the political space in which to set up a

review that ostensibly will endorse your betrayal of the national

interest. As such, the side letter is an obvious choice for dealing

with a politically explosive issue.

Of course, being more removed from the public glare helps

too as only the experts read the side letters and media attention

rapidly wanes after the main text is first released. Here is the acid

test: inform Australians of the commitments the federal govern-

ment has made to the United States on the future of our blood

plasma products and see how they respond. Like the majority of

people, Australians tend to care about the things that affect them

personally and directly or have the potential to do so. Blood and its

products are one such candidate since anyone is a potential recipi-

ent. Almost one in three Australians will use a plasma product in

his or her lifetime.35 The ability to keep the plasma fractionation

betrayal out of the public spotlight would be important to the

Prime Minister’s success in delivering the nation’s blood market to

US firms. It would seem even more important if one were to con-

sider which firm Howard was proposing to favour with Australia’s

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



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 traject-

ory 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 pro-

vision 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

Blood 193


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 out-

comes, 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



Baxter’s Recombinate and other rival haemophilia clotting treat-

ments 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 dis-

tributing 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 dur-

ing 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

Blood 195


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 con-

sumers 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 com-

pany had to initiate a worldwide recall of its Meridian

Haemodialysis Instrument.47

• Supplying numerous tainted blood products; defen-

dant in multiple lawsuits. Baxter Healthcare’s record on

blood products is far from unblemished. Numerous law-

suits 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 prod-

uct 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



information on Advate (its newest bestselling plasma sub-

stitute) 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 mar-

keting Advate as the new wonder therapy by minimising its

adverse effects and overstating its comparative benefits.

Since Baxter’s recombinants have marginalised rival thera-

pies 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,

Blood 197


the result of the review of Australia’s fractionation arrangements

promised in the FTA, has provided a glimmer of hope for

Australians, and a glitch in the Howard Government’s plans to

simply hand over the market to Baxter.

It is unlikely that Howard expected the official review prom-

ised in the FTA to so resoundingly reject his recommendation to

further open the Australian market to foreign products. Such find-

ings could only prove embarrassing for the government. The

Flood Report, released at the end of 2006 (and not to be confused

with the report by Philip Flood into Australia’s national intelli-

gence agencies), warns that any change to the national system

involving overseas production of our blood products would entail

a high-risk, high-cost, non-advantageous option for Australians

(see box on page 199).52 To minimise potential embarrassment,

the review’s findings were not released until the Christmas holiday

season, they received barely a mention in the media and the Flood

Report’s rigorous rejection of Howard’s recommendation was

silently passed over in official press releases.

But if the past offers any guide to the government’s likely

response, the adverse findings of the 2006 Flood Report will not

deter the Prime Minister from trying to drive through his recom-

mendation. The present government would not be the first to

endorse reviews that support its preferences and disown reviews

that it disagrees with. But it has developed something of a track

record in this area, overriding expert views whenever they fail to

tell it what it wants to hear. The Flood Report, like many before it,

seems destined to be disregarded in the same manner. Two consid-

erations make that outcome less likely in this case. One is the need



Blood 199

to bring the states and territories on side. At the time of writing,

most stand opposed to Howard’s recommendation. The second is

the huge public outcry that this issue is likely to unleash, making it

too risky to run in an election year. Howard may be forced, against

his leanings, to leave the nation’s blood system intact.

Key conclusions of the 2006 Flood Review53

* Overseas fractionation of Australian plasma would involve sig-

nificant transitional costs and, because of yield considerations,

there would be the potential for an ongoing shortfall in the supply

of IVIg and other plasma-derived products. The consequent need

to source these products via imports would have implications for

the national self-sufficiency policy.

* There are potential supply chain risks involved in overseas

fractionation of Australian plasma. While some of the risk

scenarios are of low probability, their consequences would be

expensive and disruptive.

* Public opinion in Australia is strongly in favour of maintaining

the current plasma fractionation arrangements, particularly with

regard to the role of the ARCBS and the domestic handling of

the donation of ‘the gift of blood’.

* When the transitional costs, the risks, and the indeterminate

yield ratios of overseas fractionation are considered against the

national self-sufficiency objective . . . then overseas fractionation

of Australian plasma is not an advantageous option for Australia.

* Australia should maintain its reservation regarding the pro-

curement of blood fractionation services under the AUSFTA.


UNRAVELLING THE AUSTRALIAN SYSTEM:PUSHING ON AN OPEN DOOR

In light of Baxter’s questionable track record, and the steadfast

approach of the US government in working with its companies

to increase their market share abroad, it may be tempting for

Australians to direct their ire over the blood fiasco towards America.

The fact that the US government actively promotes its commercial

interests and advocates for its corporate champions is, however,

neither controversial nor remarkable. What is remarkable, indeed

anomalous by the standards of other sovereign powers, is that

the government of Australia has increasingly acted in the same

manner—aiding and abetting America Inc.—and abandoning the

interests of its own citizens. Blood is not the only sector in which

we have observed such exceptional behaviour. The most blatant but

by no means singular cases (driving national standards down with

the aim of conceding Australian foreign and domestic markets to

US interests) have been perpetrated in Australia’s beef and pork

sectors, as seen in Chapter 3.54 As such, it is not ‘pushy American

firms’ that are to blame for the disturbing decisions examined.

Rather, it is the Australian government which has actively cham-

pioned the interests of the foreign power in this case, over and

above the health security of its own population.

In the case of the Prime Minister’s team at the Department of

Health (formerly the Department of Health and Ageing) seeking

to dislodge CSL’s position as prime public contractor, there appear

to be two different yet complementary drivers, external and inter-

nal. US intervention via the 2003–2004 bilateral trade negotiations



Blood 201

was clearly the catalyst for the government in publicly proposing

a change to the nation’s blood procurement system. However, the

stage was being set some years earlier, quite independently of

those international trade negotiations, as the DHA began seeking

alternative sources of supply in the late 1990s; this culminated in

its 2002 decision not to renew its long-standing contractual

arrangements with CSL (see box below). These internally derived

decisions, whatever their precise domestic drivers (economic

cringe, dislike of CSL as a creation of the Hawke–Keating govern-

ment), found their essential complement and rationale for policy

change in the US bilateral trade demands.

The attack from within: opening the door

to foreign supply

1999 Blood Review (Stephen Report) established. Terms of

reference include assessing value of continuing supply contract

with CSL.

2001 Stephen Report released. Strongly recommends con-

tinuing existing supply arrangements by extending the CSL

contract.

2001 Government ignores Stephen Report recommendation.

Sets up high-level Steering Committee to deliberate the Future

of Plasma Fractionation and Diagnostic Products Arrangements.

Rushes through decision not to extend five-year contract option

with CSL in favour of importing more blood products without

undertaking any cost or risk assessment of alternative options.



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


then Minister for Health and Aged Care. It was carried out by an

independent authority, the former Governor-General Sir Ninian

Stephen.55 Completed in 2001, the Stephen Report recommended

radical changes to the funding formula and administration of the

blood sector, but it found that the country’s blood needs were best

provided through CSL as the national provider and called for con-

tinuity of self-sufficiency as an important national goal for

Australia.

Tellingly, the Stephen Report also offers material evidence that

the Howard Government was already, at the turn of the decade,

considering its options for opening the blood market. Two of the

terms of reference of the report had particular reference to

the federal government’s consideration as to whether or not

to exercise its option to extend the Plasma Fractionation

Arrangement (PFA) unilaterally after the contract’s expiry on

30 June 2004. In a suggestive passage, the report makes clear that

the government was entertaining the prospect of dealing with,

and perhaps, sponsoring the location of a US supplier in Australia.

It observes the high entry costs which would be incurred by a

‘second fractionator’ in Australia, noting that these might be bear-

able for an entrant with ‘sales in the US market’ (see box on

page 204). But it warns against such a course as ‘inefficient and

costly’. To favour entry of a new onshore fractionator would be

economic insanity when CSL already has surplus capacity. How

would favouring offshore fractionation be different? The Stephen

Report verdict suggested that this would diminish our national

capacity, increase dependence on less reliable sources, and place

Australia in a vulnerable position (see box on following page).

Blood 203



Conclusions of the Stephen Report56

The economic and social benefits of a [competitive] tendering

system for fractionation services are unclear and uncertain.

Tendering may provide a discipline on prices. There are high

costs associated with contract fractionation such as regulation

and approval. The availability of appropriate and sufficient

plasma fractionation capacity in the international market place is

uncertain, and may place Australia in a vulnerable position. CSL

has surplus capacity that is directly regulated by the TGA. A

national plasma fractionation facility has been a major driving

force in the development of Australia’s blood sector and blood

supply. It affords Australia a high level of control of the safety,

quality and adequacy of future supplies provided that national

policy and strong regulatory oversight are maintained.

Sponsored or facilitated entry of a second fractionator is likely

to be inefficient and costly. The Australian market is small. The

costs of entry are high in terms of both capital costs and regula-

tory approvals. While high costs may be sustainable to a new

entrant given potential revenues under a Plasma Fractionation

Agreement or by sales in the United States market, CSL has sur-

plus capacity and the costs of expansion of existing plant are less

than those relating to a new plant. There is no credible prospect

of entry by a competing fractionator into the Australian market.

The Stephen Report recommended that the Commonwealth

Government enter into a second PFA with CSL at the expiry of


the then current agreement ( June 2004).57 But Howard’s team at

Health ploughed on regardless, brushing aside this aspect of the

report, setting up another committee to rush through a different

recommendation and announcing a slew of new policy initiatives

to expand blood product imports—starting with recombinants

(artificial blood), followed by new contingency measures to

increase plasma-derived imports (such as IVIg).

Disregarding the Stephen Report’s clear recommendation, the

Department of Health quickly formed a high-level Steering

Committee for the Future of Plasma Fractionation and Diagnostic

Products Arrangements in December 2001. At its final meeting in

April 2002, the Steering Committee decided to recommend that

the PFA extension option not be exercised and that instead, CSL

be given a short-term contract.

The manner in which the government manoeuvred to restrict

the scope of CSL’s contract adds robust support for the proposi-

tion that Howard’s team was keen to sideline CSL in favour of a

foreign (preferably US) supplier. The fact that DHA ignored

the most basic protocol of evaluating costs and effectiveness of

alternatives in deciding not to extend the CSL contract suggests

something more than an oversight.

Not surprisingly, this decision by the Department of Health

and its breach of procedure sparked intense controversy and

generated a number of audit reports, reviews, and official criti-

cism in Parliament, including a call from the JPCAAs for ‘a timely

performance review of Health’s handling of the PFA extension

review’. Upon concluding its review, the office of the Auditor

General found that the Department of Health’s performance was

Blood 205


seriously inadequate at every level. Indeed, the audit report on

the Department of Health’s handling of the CSL contract makes

fascinating reading. On the surface, it tells a story of (apparent)

government incompetence and obfuscation buoyed by false

arrogance in the mishandling of the CSL contract. But at a less

superficial level, it offers up a different story—one that suggests

moves to dislodge the national fractionator even before the FTA

was mooted.

So what did the ANAO find in its investigation of the

Department of Health’s mismanagement? In a nutshell, it found

that the Steering Committee had insufficient and scarcely credible

information on which to base their advice to the Minister on the

value of the PFA extension option. Health’s own record of its

decision (dated May 2002) left no doubt that it had given no

consideration at all to the major value the Commonwealth

obtained from its two-tier pricing system in the CSL contract. To

acknowledge this reality would have contradicted the Steering

Committee’s own conclusion ‘that the current pricing arrange-

ments were unlikely to be the most advantageous available to the

Commonwealth’. The inconvenient facts divulged by the ANAO

showed of course the opposite, that the government was gaining

from steadily lower prices under its two-tier pricing arrangement

with CSL, which saw the share of payments for products at the

lower price increase by more than four-fold over the 1996–2002

period. The JPCAA had also commented that:

. . . current Australian plasma product prices were sub-

stantially less than the corresponding prices on European



and other commercial markets—on the face of it, good

value-for-money, and a justification for exercising the PFA

extension option.58

In short, this Parliamentary Committee was insisting that theCommonwealth was getting a good deal out of its contract withCSL. And over a projected ten-year period starting in 1994, theanticipated costs of the PFA were deemed on target. The SteeringCommittee set up within the Department of Health chose toignore this evidence, along with all other real data on the costs ofalternative options, instead basing its conclusion on ‘scenarioanalysis’ (in this case, projections based entirely on assumptions,and without regard to the available evidence). Even officials fromthe Department of Finance at a June 2002 meeting with Healthwere taken aback (‘expressed their concern’) about the inadequaterisk analysis Health had undertaken, particularly regarding costs.59

The resulting discrepancies divulged by the ANAO report readlike a manual in ‘How to tell your Minister what he wants to hear’:

• Don’t bother putting any time or effort into a reviewwhose conclusions you know in advance.

• Don’t include information on the actual benefits of theexisting arrangements or the risks and drawbacks ofthe alternative one to be favoured.

• Don’t refer to real data showing value-for-money obtainedunder the current system compared with alternativeoptions for future supply.

• Don’t consult CSL about your decision to terminate itscontract.

Blood 207


• Don’t bother to notify the government of your (Health’s)

recommendation (to terminate CSL’s contract) in a timely

manner because they need little time to consider the

recommendation they have sought from the outset.

Is this mere incompetence? If so, we should all quake in our boots

at the implications. Incompetence is of course the only allowable

interpretation the ANAO can offer in an official report.60 But the

cumulative actions (of commission and omission) on this one

particular theme (whether or not to extend CSL’s contract) are

too neat to dismiss as innocent incompetence. These actions

are consistent with a different interpretation, that is to say, with a

politically contrived outcome. Health, it would appear, was simply

doing what it was told by the government. This explanation is made

more plausible by virtue of being consistent with the more general

pattern of departmental behaviour in Canberra—one that responds

to a ‘pervasive climate of uncertainty, fear and retribution’ set in

train ‘by the expanding army of ministerial advisers’—partisan

minders, gatekeepers, enforcers, who ensure ‘that public servants

know what ministers want and give it to them’.61

Compare the dramatic shift in the five years between 1999

and 2004. In 1999, Health still appeared to endorse national self-

sufficiency, stating in its own words to the ANAO that its objective

was:

. . . to maintain an ongoing, nationally self-sufficient supply

of plasma products by ensuring, inter alia, that CSL

remained a viable entity within the domestic blood



sector—this objective being consistent with the policy of

the Government of the day and successive governments.62

By 2004, the government’s policy reorientation was clear. In

responding to the criticisms of the JPCAA for the DHA’s bizarre

handling of the contract with CSL, Howard’s team at Health

sought to justify their actions by claiming that CSL products were

becoming outmoded and that some countries were switching to

artificial blood products (like the genetically-engineered recom-

binants produced by Baxter).63 The DHA went on to suggest

that government policy—the desire for self-sufficiency in the

Australian blood product markets—was becoming less relevant

ten years on as blood-derived products could be increasingly sub-

stituted by artificial products. The DHA further advised the

Committee that ‘if Australia followed the overseas trend and

shifted to recombinant products then the scope for alternative sources

of supply would increase significantly’.64 But in addition to sourcing

more artificial blood products, the DHA made it clear that it was

also considering sourcing more blood-based products and that ‘alter-

nate supply could become available through an overseas supplier or through

toll fractionation’.65 It was only logical to decide against extending

the original contract, if this argument could be believed.

On what evidence did the DHA base this important policy

shift away from self-sufficiency? None of any substance, it would

seem. For the ANAO report takes the DHA to task for its arbitrary

decision-making and persistent disregard for professional proto-

cols, and above all for making no attempt to assess or compare

either the cost or clinical effectiveness of the new blood substitutes

Blood 209


with the CSL product. Nor did Health make any reference to

which countries or how many of them were using the products, or

for what purposes, and with what success. (Witness the US FDA’s

vigorous warning to Baxter for hard-selling its latest recombinant

with ‘false and misleading’ claims.) Since the DHA had been found

wanting on a large number of dimensions—its competence and

skill base, its contract management—it seems reasonable to

ponder what kind of research, knowledge or expertise the DHA

called upon in order to make this important policy shift away from

self-sufficiency.

When the Committee raised its concern about the issue of clin-

ical quality and the safety of blood products that could be sourced

from suppliers other than CSL, Health merely (or inadvertently?)

confirmed the policy shift the government was seeking. Health

simply assured the Committee that there were ‘numerous other

companies around the world that could supply blood-based prod-

ucts and [that like Baxter] . . . are already supplying recombinant

products.’

As each step shows, the government was clearly opening the

door to foreign supply and a rival fractionator in advance of

the trade deal with the United States. Two new policy changes

(and one significant regulatory change discussed above) followed

in 2004 with the signing of the AUSFTA, all of which increase

reliance on imports. The first was a shift to artificial blood

therapies, as a result of which demand for the local product (CSL’s

Biostate) fell steadily during 2004 to 2005. The second policy

change was the introduction of new contingency arrangements to

source from overseas greater quantities of IVIg, a blood-derived



plasma product. Under such measures, the government now

imports at least 18 per cent of the nation’s IVIg, used in treating

a growing number of medical conditions including diarrhoea

and colitis. (Apparently, Australia uses significantly more IVIg

per capita than in Europe or Japan, which raises the interesting

question as to what may be driving changes in medical fashion here

but not elsewhere. Are our medical practitioners better informed

than elsewhere, or are they more susceptible to the marketing

machine of pharma companies?) In what seems a deliberate move

to weaken self-reliance, the National Blood Authority (NBA),

charged with overseeing CSL’s contract with the government, has

chosen to import greater quantities of IVIg rather than having

it produced locally. Revealingly, the NBA acknowledges that this

is in order ‘to avoid total reliance on CSL’.66

Both CSL and the Red Cross vigorously oppose the contin-

gency measures which allow greater quantities of blood-derived

imports, for these are sourced predominantly from paid donors in

countries with higher-risk factors. It is well established that ‘blood

sourced from paid donors is less safe than blood from non-

remunerated donors’.67 The safety of the US blood supply in

particular is considered at risk because of the substantial influx of

migration to the United States from Central and South America;

such immigrants tend to be disadvantaged and more likely to

supplement low incomes with blood donation. Deadly infections

like the Chagas parasite have migrated north with the poor.

Researchers claim that ‘Such factors have led to major concerns

about the safety of blood products in the United States, where

paid donation accounts for about 55 per cent of the blood

Blood 211


supply’.68 Given this background, the Australian Red Cross, sup-

ported by the CSL, has called for a ban on plasma imports.69

This particular policy shift (to increase IVIg imports) is also

highly significant for the case we are establishing. The govern-

ment claims imports are the best solution to the problem of

increased demand. The relevant facts are that CSL has been the

country’s main provider of IVIg; it currently has surplus capacity

and is working to improve yield. The Red Cross Blood Service for

its part claims it can source domestically the extra plasma required

if the government backs its initiatives to do so. Both the Red Cross

and CSL are at a loss to understand why the government would

turn its back on the self-sufficiency option and choose to import

rather than support a superior source in its own jurisdiction. Both

bodies have made the case that self-sufficiency in IVIg can be

regained if the government agrees to support the ARCB in

increasing its collection of donor plasma. Bizarrely, the govern-

ment (via the Health Department) uses its lack of support—

the Red Cross is struggling to collect enough donor plasma, the

starting base for IVIg—as justification for going offshore.

The larger point to be made, as all these moves illustrate,

is that well before the side letter, Howard and his team have

been pushing through policy changes that effectively erode self-

sufficiency and transfer a larger slice of the blood products market

to offshore suppliers. By the time Baxter called on its trade repre-

sentative (in 2002 to 2003) to negotiate with the Howard team, it

was already pushing on that open door.

The fact is that if fractionation were to be allowed to proceed

offshore, Australia would lose control over the safety and quality



of its blood products. It would be completely dependent on

assurances made by an offshore processor like Baxter (or some

US equivalent) whose record to date gives few grounds for

confidence.

Of course, the Howard Government can make as many assur-

ances as it likes, but they count for naught once it surrenders

blood fractionation to offshore processors. How would the TGA

regularly monitor ‘segregation’ of Australian blood from foreign

blood (not to mention monitoring of production processes) when

its regulatory reach ends in its own territory? If the pattern

observed with Biosecurity’s approach to protecting Australian

farms against quarantine threats offers any clue as to how things

might proceed, monitoring will very likely mean accepting the

word of the foreign supplier. The Biosecurity experience should

give pause for concern. While the agency was supposedly safe-

guarding the nation’s agriculture from exotic pests and diseases, it

was casually handing out import licences for beef from a foot-and-

mouth diseased region without so much as a minimal safety

check.70

The more important point is that no Australian government

until now has sought to sell its people the pretence that open

tendering for blood contracts (competition) is a privileged or even

relevant principle for building national self-sufficiency in the blood

sector to ensure safety and security of supply. Why do so now?

Could Howard and his team really believe their own rhetoric? The

Prime Minister may be many things, but he is no fool. He knows

that he can use words like competition, free market and trans-

parency to make it sound as if objective principles are being

Blood 213


followed and that even if contested, they at least serve to mask

unpleasant political agendas that have nothing to do with eco-

nomic processes or even ideology. In this context, in addition to

alleging an inability to meet growing demand, what else could

the government fall back on to try to justify an unpopular and

indefensible policy switch? Hence the silly pretence that the

change is about enhancing competition and transparency. One

glance at DFAT’s website confirms the hard sell in its effort to

address a roll call of public concerns about the government’s new

approach to blood fractionation.71 Under ‘What is tendering?’ for

example, we are told that:

Tendering in the government sector is where an agency

seeks competitive offers from the market (tenders) through a

competitive process (requests for tender). Usually this would

be an open, competitive process . . .

Just in case the reader missed the message, open tendering equals

‘competition’ equals good. The hope seems to be that if this

message can be sold to the public, any potential objections will be

stifled. Never mind that we de-prioritise safety and security and

self-sufficiency of supply, that we make ourselves more reliant on

a less reliable fractionator in a more risk-prone environment, that

we send billions of our tax dollars to feed offshore profits, invest-

ments and jobs. No, just fasten on what we allegedly get in

return—more competition. All of this is for public consumption;

the government is well aware that a US supplier can never com-

pete in the real sense (as the Flood Report and its predecessor, the



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

Blood 215


Government’s intent and its betrayal of the national interest will

remain undiminished.

As all independent experts have concluded, the increased

potential for tainted blood to enter the system is only one of the

many downsides of a policy to ship plasma offshore for processing

and rely on increased imports of blood-derived products. Quite

another is the weakened capacity to rapidly respond to major

emergencies that urgently require large quantities of plasma, such

as a natural disaster or terrorist attack, to say nothing of the prob-

lems of coping with new challenges like contaminated supply if

shipping is hampered, or the siphoning off of high-quality

Australian blood for use in foreign markets.72 To all this one must

add the longer-term cost of the steady corrosion of the voluntary

unpaid donor system that presently sustains a safe and secure

blood supply.73

The million-dollar question is what motivates the Howard

Government to elevate the strategic goals of a US company over

those of the national champion? We have demonstrated in this

chapter that Howard and his team at the Department of Health

and DFAT have worked assiduously to meet all the items on

the wish list of their American counterparts; they have readily

accommodated the strategic goals of a US supplier which involve

opening the Australian system to blood product imports, remov-

ing high regulatory standards that would otherwise be imposed

on foreign suppliers, and effectively engineering steady erosion of

the three pillars of the Australian blood sector. Why would an

Australian government want to do this? How does it reconcile

actions that are so clearly at odds with the interests of the national



champion itself, with the integrity of the blood supply, and with

the public health of the Australian people?

In the particular case of blood one can find no convincing eco-

nomic incentive or rationale. That is to say, we have no evidence

that John Howard or his ministers are in the pocket of Baxter. Nor

is there any compelling public rationale—the Australian arrange-

ments are world class, hardly in need of an American remedy, least

of all one provided by Baxter as CSL’s chief American rival. Why a

government would set itself so much at odds with the national

interest of the country it governs, as is so emphatically the case in

the blood market saga, is a question raised by its actions in several

other significant arenas examined in this book.

The national interest test in the case of blood is straight-

forward. To determine whether safety and self-sufficiency are

indeed non-negotiable priorities of any given Australian govern-

ment, one need merely ask: how would such a government act?

Would it abandon, would it even consider abandoning, its domes-

tic contracting arrangements which, according to virtually all

blood sector experts and stakeholders, currently deliver ‘the safest

and most clinically effective treatments for Australians’?

What if the national interest is the wrong perspective and John

Howard’s priority were a different one; what if ‘national interest’

did not much enter the picture? Some might deduce from the

many similar government actions on several different fronts exam-

ined in this book that the larger objectives are to ‘deliver the best

and most pleasing outcomes for America’. There is something to

this, but as we show in the concluding chapter, it is too simple.

Howard is driven by a mix of motives—primarily personal and

Blood 217


political—though mostly packaged in the language of security

and the alliance. Some policy shifts, like the ones we have seen in

the blood sector, offer Howard an opportunity to kill two birds

with the one stone as it were: to serve the current US administra-

tion (and build up personal credit) and sink Labor’s legacy (its

creation of a national-champion plasma fractionator in CSL).

Consider for a moment this line of reasoning. If US-pleasing (and

legacy-sinking) outcomes were among Howard’s key drivers, it

would then be entirely reasonable to expect his government to

favour an open tendering arrangement that would accommodate

a powerful, preferred US bidder. Then such a government would

also take care to remove any regulatory obstacles in the path of US

suppliers—such as the requirement that blood product imports be

clinically superior to the local product, or that plasma processing

take place on Australian soil where regulatory controls can be

rigorously applied. These conditions would simply be labelled as

anti-competitive, non-transparent, and obstacles to trade in order

to drown the calls to prioritise national security in health. They

would be complemented by claims that only imports can meet

rising demand for blood products. And they would nicely comple-

ment the earlier measures, documented above, which are aimed at

eroding the national champion’s market pre-eminence. This is

precisely the path Howard and his government have chosen. The

one obstacle in their way is the states and territories whose agree-

ment on this question is essential.

There is another possible dimension to this story and others

like it (the nuclear energy issue, for example, in Chapter 2). Put

simply, it may well be that Howard and his ministers don’t see any



of this as a national interest issue, because for them it is part of a

hugely enjoyable political game. Akin to a challenging type of

sport, the game is ultimately about doing whatever it takes to win.

Winning—having your decisions prevail—can be addictive and

lead you to lose sight of the purpose of governing. If this interpre-

tation is on track, then we can already see a covert government

campaign under way to retrieve ground lost to the 2006 Review

and to soften up the public to the idea of increasing plasma

imports. It begins with some odd placements of government-fed

stories to certain trusted scribes of The Australian, first hammering

away at the CSL’s supposedly privileged position, then targeting

the Red Cross’s apparent intransigence in helping to meet plasma

shortages; thus the government is offering a solution to these

shortages, suggesting the Red Cross accept blood from donors

currently excluded because of possible exposure to mad cow

disease during residency in the United Kingdom (for which there

is no test).74 We can expect more such stories, all carefully

constructed to paint the government as keen supporter of self-

sufficiency suddenly faced with unparalleled challenges and

forced to canvas options (take risky blood or accept more imported

plasma) that only unreasonable people would reject. If read cold,

in the absence of the relevant background, this is precisely the

artful lie that would prevail. The tragic outcome for Australia

is that while the government wins, our national health security is

diminished.

Blood 219


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

7


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



likely to be handed out under Australian law) are unlikely to count

against any American sentence he receives.2

Our cases demonstrate that in spite of large costs to our own

national security and interests, servile pandering to America Inc.

has become the leitmotif and policy pattern of the federal govern-

ment under John Howard’s tenure. We choose these words with

care: servile means ‘befitting an enslaved or menial class/lacking

spirit or independence’; while pandering means ‘to provide gratifi-

cation for others’ desires’. Servile pandering is the common thread

that ties together the policy choices we have examined in National

Insecurity. What they show in each case is how Prime Minister

Howard and his government have effectively placed or sought to

place US interests (be they diplomatic or commercial) ahead of

Australia’s interests—ahead of its self-sufficiency in blood supplies,

ahead of its safety standards and export advantage in beef, ahead

of growing its own cultural industry, ahead of its future energy

safety and security, and not least, ahead of the independent

capabilities of its military and protection of its troops (procuring

military equipment because it is American, rather than because it

is the best for Australian defence requirements). The Howard

Government has not always succeeded in pushing through these

choices. Some, like those affecting the nation’s blood supply, have

not been resolved at the time of writing. But that is not the point.

Whether it ultimately succeeds or not, the point is that the

government has tried—and continues to try by waging a covert

campaign to back its US-centric recommendation to open the

blood market to American suppliers.3

Po l i t i ca l s t r a tegy and po l i t i ca l c r i nge 223


AUSTRALIAN EXCEPTIONALISM

At one level, the actions we have documented seem to make nosense. After all, one expects that a democratically elected govern-ment will typically act to protect and advance the interests ofthe country it governs and the citizens it represents. This is areasonable assumption since comparative analysis establishes thatmodern leaders are most eager to avoid alienating their nation’spatrimony (spending their blood and treasure); on the contrarythey are eager to increase it. In the words of Stanford UniversityProfessor, Josef Joffe, ‘Nations act not to do [favours] for others,but to do well for themselves’. If normal countries act thus, this isless out of selfishness than prudence, for ‘It is their blood andtreasure that must be spent’.4

Australia under Howard is the exception that proves the rule.We know of no precedent in the modern world of democracies inwhich the political class has sought systematically to privilege theinterests of a foreign power over its own in matters to do withthe national safety, security, and future economic welfare of itspeople. Only nineteenth-century oligarchies in Latin America,with their comprador class of subservient local elites come any-where close to such behaviour.

To find a comparable case of a leader voluntarily alienatingthe nation’s patrimony, we have to go back 2140 years, to the timeof Rome and the famous incident of the Pergamene bequest toRome. So before we ponder the sources of the Australian excep-tion, let us briefly examine the case of Pergamon’s bequest. As astudy in giving away one’s country to a foreign power (in 133BC),we find certain parallels with the experience closer to home.



The Pergamene bequest

In the 130s BC, when Rome was emerging as a world power but

did not yet have a formal empire, the various small kingdoms and

principalities of Asia Minor (today’s Turkey) vied with one another

for Roman preferment. But one kingdom outdid all the others

in pandering to Rome. This was the kingdom of Pergamon or

Pergamum, ruled by the Attalid dynasty for over 150 years, from

as far back as 283BC. By the time of heirless King Attalus III, the

last in the line, it was clear that Rome would soon rule Pergamon.

Under these circumstances, Attalus felt that it would be better

to shape that rule with his own signature than leave the matter to

conquest. So he left his entire kingdom to Rome—a bequest that

was as astonishing and shocking at the time as it would be today.

The actions of Attalus III had a great impact in Rome itself,

which received news of the bequest just as it became engulfed

in the land reform struggles unleashed by the populist tribune

Tiberius Gracchus. Gracchus immediately claimed the Pergamene

bequest as a fund to help settle Roman military veterans on public

lands. But this was bitterly opposed by the Senate, and so the

Pergamene bequest probably exacerbated this most critical politi-

cal struggle in the life of the Roman Republic. There are several

features of the Pergamene bequest that attract our attention,

because of their potential to provide parallels with more recent

political developments in the twenty-first century.

First, the Pergamene bequest was shaped by great power

politics. The Attalid dynasty was famous in the Ancient World for

having risen to greatness on the backs of adjacent powers—first



the Seleucid dynasty in Syria and then the Romans. The Attalid

monarchs saw their own future as being based not on their

own strength but on their ability to negotiate alliances and profit

from them.

Second, the Pergamene bequest was oriented towards the

anticipation of future developments. Attalus III saw that Rome was

becoming the undisputed master in the western hemisphere, and it

was only a matter of time before it would claim full imperial con-

trol over the Hellenistic principalities of Asia Minor. Being without

a trusted heir, he saw his bequest as a means of providing for an

orderly transition to such an arrangement. He was also smart

enough to provide in his will for the perpetual freedom of his own

city of Pergamon to retain its self-governing autonomy within a

Roman province (which was respected by the Roman Senate).

Third, the Pergamene bequest was a dramatic and shocking

piece of political theatre. It did in fact have far-reaching repercus-

sions in Rome itself. After Tiberius Gracchus had been done away

with, the Senate turned its attention to accepting the Pergamene

bequest and sending first some commissioners, and then an army,

to claim the prize. Pergamon and its lands were organised into

Rome’s first formally recognised and organised province, that of

Asia Minor, giving the Roman Empire its formal beginnings at this

point. (Provinces had previously been recognised simply as

a sphere of influence of a Roman commander. Now they had a

formal governor or proconsul, and there was systematic taxation

exercised through tax-farmers.)

Finally, the Pergamene bequest was an intensely personal and

political act. Attalus III did not take any of his countrymen into his



confidence. It was his own judgment that Pergamon had no political

future other than through alliance with Rome. And he wished to

influence that future in a way that drew upon the goodwill created

over more than a century of active alliance while Rome was itself

feeling its way towards western domination and imperial sway. 5

History has never known such an extreme case of one politi-

cal leader that pandered so much to the interests of another power

as to give away his principality. But the parallels with what John

Howard and his government have been doing in one sector after

another, particularly since entering into the trade deal with the

United States, are not so far-fetched.

First, Howard’s desire to bind tightly with the United States

(while much more intensely personal and political, as indicated

below) is often rationalised in more domestically palatable terms

as a responsiveness to great power politics. There are sides to be

taken in the world in the twenty-first century and Howard is eager

to be seen as foremost in taking the US side.

Second, Howard’s hyper-American stances are framed by his

apparent sense that this will stand Australia in good stead in the

future. His calculation has a rational foundation and his stand con-

sistent with a long tradition of Australian governments making a

similar choice—from the ANZUS Alliance to ‘All the way with

LBJ’ enunciated by Holt during the Vietnam War. Unlike his peers,

Howard is less concerned to limit slavish followership when dis-

advantageous for Australia.

Third, compromising Australia’s security and putting its

resources at the disposal of another power would be a shocking

piece of political theatre if it were as explicit as a one-off bequest.



The process is necessarily more gradual, less arresting, and pro-

duces more muted resistance. But like the proverbial frog that

cooks slowly from the inside out as the temperature of the water

is gradually turned up, the changes are ultimately no less dramatic

for being less immediately noticeable.

Finally, and most specifically, Howard’s hyper-American

stance is a very personal and very political affair. It appears to be

driven by an intensely personal quest for recognition and standing,

and an intensely political calculation that one’s ‘enemies’ at home

can be silenced in the alliance’s name [read ‘national security’],

ironically to the point where these personal and political aspira-

tions are allowed to override the very national interest goals that

the alliance is supposed to secure.

ACCOUNTING FOR EXCEPTIONALISM

We have pointed to a pattern of behaviour that runs across a very

wide spectrum of cases. We have come to the conclusion that this

amounts to a pattern of betrayal because it systematically breaches

the implicit contract between a government and its citizens which

says, when dealing with foreign powers, you are there to represent

the interests of your country(wo)men because it is their ‘blood

and treasure’ that must be spent. Betrayal seems an apt term in

this case since to betray means ‘to fail or desert in time of need’ or

‘to prove false’.

The question is why a political leader and his team would act in

this way. What is it that so motivates Howard and his government



to be so careless of the national interest? Is there a strategy that

helps to explain the pattern identified? Conventional theories of

state behaviour, which assume national interest concerns drive

foreign policy choices, hold little explanatory value given the ques-

tion at hand. We take inspiration, as mentioned in the opening

chapter, from renowned political sociologist Max Weber in devel-

oping a more actor-centred political explanation for the Australian

anomaly. We present our explanation of Howard’s US-centric

choices by way of scenario building, where inevitably we must

make some assumptions regarding the motivations that underpin

the relevant political actions. Understanding individual motivation

in social interaction is of course widely practised from a socio-

logical perspective. Our scenario building is firmly grounded in

factual material concerning what is already known of Howard’s

background and of the goals he has pursued. The few assumptions

that we do make are based on well-known and publicly docu-

mented aspects of Howard’s political life.

Suppose that during your decades-long quest to become

leader of your party and then Prime Minister, you have spent

many years in the political wilderness, having to endure savage

taunts from the opposition as well as endless slights and put-

downs, and spectacular shows of disloyalty and disrespect

(manifested in the use of very unpleasant nicknames) from within

your own party.6 Devastating for a more sensitive soul, these per-

sonal setbacks do not deter you from your course.7 ‘Politics’ is the

only game worth playing, your life’s achievement, the source of

your identity—you have to make it work.8 As resentment hardens

your resolve, it fuels a determination to be seen as someone who



counts, to get to the top and to prove your enemies wrong. You

are methodical and disciplined. You bide your time; your luck

changes and you become Prime Minister. What kind of goals do

you pursue so that you can uproot your enemies and gain that

long sought after status and credibility as a leader?

First and foremost, you want to be seen as someone of stand-

ing and stature. You calculate that in your own environment

political standing is largely something that is externally bestowed

and to that end it will do no harm to make oneself a willing instru-

ment of the leaders who run the show of the greatest power on

earth. You find it is not easy to instrumentalise yourself and your

country under Bill Clinton’s presidency; there are more rebuffs

than accolades from this quarter, especially after your role in the

East Timor debacle and the mangling of critical intelligence.9 But

George W. Bush’s election gives you mileage. You can literally and

metaphorically uncork the champagne to celebrate what you feel

is an elective affinity with the new President. As someone who has

also been personally derided and mercilessly lampooned, he may

have an inkling of what it is you are seeking and the price you will

be prepared to pay for it.

Second, you want to make the alliance with the United States

as intimate as possible, to lock it in and cement the country’s

future to it. The alliance has been ticking over quite nicely with-

out you for more than fifty years. But you decide to talk it up at

every opportunity to make it seem as though it is something quite

fresh and fabulous that has suddenly come to life under your

tenure. So you go further than any other political leader and pull

out all the stops to make a great many things appear to revolve



around it. You dump all earlier programs for self reliance and

the defence of Australia and instead embark on turning the

nation’s defence strategy into a component of US global strategy.

Although you are keen to sell the alliance at home as a long-term

security insurance for Australia, security is not its primary value to

you. Its greatest value to you is personal and political: by making

US-centric choices the chief criterion of your government (at

times at great cost to your own people) you propose to elevate

your personal standing in the White House (and thus at home),10

and by using the alliance to rationalise your (security-diminishing)

choices at home, you plan to keep opposition forces domestically

in check. ‘The alliance’ is no longer a means to enhancing the

nation’s security; it has become the end itself.11

Third, you want to cleanse the country of, and distance the

government from, any significant legacy of the Labor years. Labor

equals the enemy. So your desire to do damage to Labor, to oblit-

erate its legacy, to overturn its policies even if eventually (re-)

claiming them as your own are often all-consuming passions. It

means that you are sometimes forced to trash policies and pro-

grams that build on or continue earlier Liberal measures.12And if

this, inadvertently, also buys you favour with Bush, so much the

better. Under your tenure, it becomes more important to act against

the interests of Labor than to act in the interests of Australia. As one

of the most respected analysts of your Party puts it,

. . . the primal opposition which structures [your] thinking is

not Australian and un-Australian, but Liberal and Labor. It

is this opposition that fuels [your] aggression, feeds [your]



self-righteousness . . . and gives [you] the sharpness of focus

to seize on the opportunities which fate presents and exploit

them so ruthlessly for political advantage. For [you], if some-

thing is championed by Labor, then this is sufficient reason

to oppose it, no matter what the merits of the case.13

So what course of action do you follow in order to achieve

these goals? First, you ally yourself personally, and your govern-

ment, as closely as possible with the positions taken by the United

States. You seek to make yourself indispensable to the current US

leadership. This may at times prove painful (President Clinton

proving much less amenable to your overtures), but with President

Bush, you can make more headway. You can now begin to show

your loyalty in earnest. You instruct your officials at the UN to vote

with the United States whenever the opportunity presents.14

You further ingratiate yourself by committing Australia to

American adventures, such as the war in Iraq. This kind of eager-

beaver followership is not entirely popular; it means having to

fabricate or conceal intelligence and to strike down those who

oppose going to war on a lie. But that is a political cost you can

deal with by pulling out the loyalty-to-the-alliance card.

You also calculate you can increase your standing with Bush

and his administration by proposing a generous trade deal. Even

if it ultimately backfires and turns out largely to America’s

advantage and to Australia’s detriment, you handle the potential

political fallout by a deft combination of buying off the losers and

intimidating the critics of the deal and by feeding the right spin

to a compliant media. You are confident in any case that most



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



prospect of jettisoning something associated with Labor also

offers up opportunities to serve America Inc. (such as the case of

blood sector contracts for plasma fractionation). As a principled

opportunist you find these occasions difficult to resist, even when

it means trampling the national interest. You will therefore have

few qualms about alienating major Australian assets, or attacking

important Australian institutions, or denying assistance to smart

Australian initiatives whenever the Labor legacy looms into view

and these begin to look too much like success stories from the

wrong camp. So you will think little of giving the national blood

champion’s contract to a US company, or demonising the world-

class Collins Class submarines, or presiding over a shrinking local

film industry, or sabotaging renewable energy initiatives.

As our exposition has suggested, we offer a three-fold explan-

ation for the Howard Government’s pattern of betrayal—for why

Howard and his carefully chosen and closely managed ministerial

team have prioritised American interests to Australia’s disadvantage

in so many critical sectors. Since the Prime Minister has centralised

power around his own person and framed the big decisions of his

government, we place primary emphasis on Howard’s own motiva-

tions. What drives the person behind the title? We posit as the most

important driver a quest for recognition and standing in which

status-affirmation is sought from an important external actor, the

United States. If Max Weber were alive, it is likely he would cite

it as an interesting case of how ‘status deprivation’ may orient

a political leader in unexpected directions in the quest to bolster

his political fortunes and build prestige into the power of office. The

pursuit of a close relationship with the US and its President,



although necessarily constructed in the official terms of alliance

building, we conclude is powerfully driven by a status-deficit, a

quest for the recognition sorely missing in Howard’s 25-year climb

up the political ladder (hence the exaggerated importance attached

to being seen as a friend of the US President, being welcomed at the

White House, invited to the ranch, and so on).

Secondly, Howard seeks to identify himself and the Coalition

with alliance enhancement for domestic political (power) rather

than purely geopolitical (security) reasons. Behind the apparent

obsession with the US alliance lies a political calculus: it means that

certain government actions that more or less blatantly favour US

interests over Australian ones (as in those cases already examined)

can be sold as essential alliance-building, security-strengthening

measures. This ostensibly helps to keep domestic opponents in

check at the same time as gaining credit for Howard abroad.

Finally, but by no means least, John Howard is driven by a

determination to obliterate Labor’s policy legacy whenever the

opportunity presents itself, no matter how that might conflict

with or undermine the national interest. Labor created a blood

supply champion in the form of CSL—so Howard seeks to under-

mine it. Labor favoured a greenhouse gas emissions policy—so

Howard ignores it, in line with the United States. Labor esteemed

the arts—so Howard mocks them with the sardonic comment

that he stands for the average bloke. (And if Labor-legacy destruc-

tion also converges with a US-obliging measure, then so much the

better.) It is fortunate indeed that Labor never advocated eggs

for breakfast, because if they did, Howard would surely have

outlawed the keeping of chickens.



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



sinecures post-politics. Those who toe the line and stay the course

are amply rewarded. This may mean sometimes having to engage

in unpopular or unsavoury actions (‘dis-inviting’ Nelson Mandela;

ignoring the distress of a sinking ship and its drowning occu-

pants); it may mean having to incur the wrath of a particular

sector (by lowering quarantine standards that protect Australian

produce against diseased imports), or becoming a reviled public

figure (Peter Reith who carried the burden of the children over-

board affair). But no matter how ugly things might get in the

course of duty, one does this in the knowledge that the Prime

Minister always rewards the party faithful.20 But stray from the

course and oppose the Prime Minister and you will not only get

no loot, you will be banished from court.

POLITICAL CRINGE AS A LEADERSHIP TRAIT

But the deeper question is why would such a leadership strategy

gain traction in Australia? It would certainly get short shrift in

France and Germany, and make no headway at all in Spain and

Sweden, to say little of the reaction it would face in Japan

and South Korea. Our explanation for the Australian exception

(read ‘pattern of betrayal’) has placed more emphasis inward than

outward—on Howard the man and his personal and political

drivers, on a leader for whom the alliance is first and foremost a

political calculus, only secondarily a security issue.

In order to answer our question, we must set Howard in a

wider context. To make sense of such a leader, we need to focus

on Howard as leader of a country whose professional culture



has long harboured within it important elements that express

an insidious self-dislike. Those elements include a tendentious

downplaying or denial of the country’s own achievements, contri-

butions and strengths. This politico-cultural syndrome—‘foreign

equals superior’, ‘overseas trumps local’—has been widely

observed as a trait that tends to prevail at the higher leadership

levels rather than at the grass roots. It also permeates the major

sectors of society, whether the political and business world, the

professions, or cultural and academic circles. Although originally

expressed as a cultural cringe and discussed as a tendency specific

to the local cultural-literary-artistic world,21 this mindset has never

been confined to the (high) cultural sphere; it is one that is broadly

influential in the world of politics and business. Whether it is the

dominant mindset or not is unimportant; what matters is that it is

influential, and that its influence may be heightened or down-

played by what governments do.

We emphasise the political nature of this mindset because of

the influence that political leadership tends to play in strengthen-

ing or weakening its hold. The impact of this powerful cultural

syndrome begins (finds its apotheosis) at the top with the Prime

Minister. John Howard is both product and today’s chief per-

petrator of this cultural trait (also known as the political cringe).

We speculate that Howard’s personal trajectory has helped to

entrench the mindset—one that doesn’t simply favour the foreign

(in this case, American), but both subtly and directly denies value

to the local. The United States has long been the Prime Minister’s

preferred other. In another era it would have been Britain, the

target of former leader Robert Menzies’ adulation. Menzies,



however, did not exhibit the sort of personal insecurities and

cold political calculation that could so seriously distort the lens of

national interest—or perhaps he just lived in simpler times.

Howard’s cultural disdain (or political cringe) towards

Australian achievements stands at odds with his self-presentation.

As Prime Minister, John Howard works hard at being perceived as

a positive nationalist, rushing hither and thither to every military

event,22 seizing opportunities to stage state-like functions where

one can rally the community around national symbols. Howard

has so usurped the ceremonial role of the Governor-General—

from farewelling Australian troops to opening the Olympics and

acting as chief mourner at national memorial services—that

around 80 per cent of Australians can’t even name the nation’s

Head of State.23 This is nationalism in an important, but narrow

symbolic sense. Howard’s symbolic nationalism gives weight to

the shared experiences of community, which he uses for political

ends, as platforms from which to speak to ordinary Australians in

a language they can connect with.24 Much of this sort of national-

ism is costless, comes easily to him, and contributes to his appeal.

All the more reason then why it is odd for a political leader to feel

the need to publicly and consistently declare he is a nationalist, as

if somehow his loyalties and priorities were in doubt.25 As indeed

they are. For while the ability to manipulate the symbols, to speak

from the nation’s ‘centre’ is not to be underrated,26 it is one’s

actions that are most telling.

The Prime Minister, while master exponent of symbolic

nationalism has eschewed substantive nationalism (the desire to

preserve one’s country’s gifts and build on its achievements that



comes from self-regard). By willingly putting the nation’s blood

and treasure at the disposal of another sovereign power, Howard

has failed to give his nationalism substance.27 Precisely here,

the Prime Minister’s public utterances about standing up for the

national interest are wildly out of kilter with his actions (and those

approved under his watch). It is in Howard’s actions that the polit-

ical cringe mindset is revealed. In documenting those actions, we

have found a pattern of critical choices more consistent with pro-

moting the national interests of the United States (and most

recently the interests of its Republican Party) than promoting the

real security, values, or economic prosperity of Australia.

Liberal leaders of the past have not always succumbed to

political cringe. As we have seen, there are plenty of instances

where Liberal leaders, like John Gorton, pursued policies that

valued Australian assets, interests, and institutions and sought to

strengthen them. We submit that where cultural confidence and

a strong sense of place has allowed some leaders, both Liberal

and Labor, to see virtue in striving to lift the country to higher

attainments, the cultural disdain of the current leader allows

him to see mostly folly and self-defeat in such ambitions. How

could Australians ever hope to achieve excellence or greatness

(outside sport) in the big departments of life? Under the present

ministerial mindset, so many such efforts and the policies that

underpin them seem to merit mockery, not emulation.

The important point is that the strength of such a mindset—

whether it means that you defer to a foreign government, buy its

civilian and military equipment, appoint its managers to locally-

grown firms, consult its experts, or fete its stars, critics, and



celebrities—can be greatly diminished or magnified by the

political leadership of the day. Above all, the mindset gets reflected

and reproduced in the critical choices the government makes:

whether to boost the fortunes of American players in the

Australian blood market or bolster the capacities of the national

champion and lock-in self-sufficiency; whether to funnel billions

of dollars to US defence companies or foster the local capabilities

that sustain a defence industrial base; whether to choose products

because they are produced by one’s most important ally, or

because they offer advantages over those of contenders; whether

to subsidise foreign greenhouse polluters or remove the cap on

growth of local renewables; whether to aid the US to recoup its

beef markets or maintain your own high food safety standards;

whether to allow Hollywood’s saturation of the market or to

insist on growing an independent cultural industry.

POLITICAL CLEANSING OF AUSTRALIANINSTITUTIONS (OR HOW DOES HE GET AWAYWITH IT?)

Seriously damaging choices like those made by the Howard

Government have not passed unnoticed. Quite the contrary, they

have provoked extensive critical commentary by expert analysts.

But speaking out against unreasonable or unacceptable policies

should come with a health warning: do so at your own risk. The

brave-hearted who have spoken out, whether as shocked insider

observers or as disinterested experts, have often been either



marginalised and overridden, or else threatened, demonised and

summarily banished from public life. As the pre-eminent analyst

of the Liberal-party puts it, ‘Those who voice informed opinions

which disagree with Howard’s position have been marginalised

and then dismissed’.28 The past decade is littered with the victims

of Howard’s aggressive intolerance for criticism or dissent.

In one sector after another, we see this process at work in

the way that journalists and researchers have documented the

strategic silencing of dissent. The Howard team has moved

systematically to secure its tenure by expunging the sources of

potential opposition, cutting off the free flow of information,

and removing critical checks and balances that limit power and

demand accountability.29 This debasement of the currency of

Australian institutions is both broad and deep. If one examines

what has transpired in the public service, the military and intelli-

gence services, the Senate, the media, our institutions of higher

learning and research (the ARC, CSIRO), as well as the statutory

authorities, one is led to conclude that Howard’s contempt for the

nation’s institutions is profound.30

‘Incestuous amplification’ is nonetheless a dangerous strategy.

It means surrounding oneself with those who agree, excluding

contrary views, and punishing critics so that the outcomes you

want are foregone conclusions. (Fortunately in a democracy like

Australia, unlike Soviet dissidents who were sent to the gulag,

critics who point to Howard Government wrongdoings are at

worst demonised or painted as mentally unstable and sent into

involuntary retirement.)31 But populating your decision group

with all those who (claim to) think identically to you so that the



outcome is a foregone conclusion is not only a travesty of an open

society. It is also dangerous because it enables unlimited power,

fosters unaccountable government, and produces the disastrous

decisions that can lead a country to go to war on a false pretext—

hence the Iraq debacle. What Al Gore has called ‘the worst strate-

gic mistake in the history of the US’ and a ‘calamitous American

adventure’ was made in precisely this manner.32

As the critical checks on unlimited power continue to be

degraded and destroyed and the sources of criticism silenced in

this country, we must expect many more security-diminishing

decisions like those we have documented in this book. The Prime

Minister has applied himself with rigour and determination to this

project and the political cleansing of the landscape of Australian

institutions appears almost complete. This is a bad legacy for the

country, whichever party may be in power in the future. We

cannot but agree with the following prognosis:

There is a danger that John Howard’s form of political state-

craft will become entrenched as the national political norm.

The prime minister’s now routine manipulation of the truth

[and we would add: structural intolerance of disagreement]

poses significant problems for the long-term integrity of

our national institutions, including the great departments

of state. As time goes by, all are in danger of becoming

complicit in protecting the political interests of the govern-

ment rather than advancing the national interest of the

country. There must be a new premium attached to truth in

public life.33



Is there any way out of this seemingly inexorable process that

drives Howard and his team to ever more reckless ‘games’ with

Australian interests? Truth in public life is by no means the whole

solution. But it is surely a base line for any party genuinely oriented

to governing in the national interest.

THE HOWARD TRAGEDY

Finally it is important to be quite clear about the purpose and

implications of our analysis which is neither anti-American nor

opposed to the American Alliance. Our focus has been the

Howard Government and its leader, John Howard. We have

sought to show that the choices made by this government have

diminished security in the process of pandering to a foreign

power. That American firms and the US economy are the intended

beneficiaries of Howard’s choices is beyond question. But the

benefits they win are not the subject of our analysis. Our task has

been to make sense of the pattern of betrayal that we have identi-

fied. We consider it important to try to understand why a political

leadership would be prepared to sell short its own country’s inter-

ests to favour those of a foreign power. The disturbing conclusion

to this exceptional case is that Howard’s actions have not only

jeopardised Australia’s real security, future prosperity, and values.

They have also left the alliance in a weakened state—on one hand,

tarnished by Howard’s imprudent personalisation of the relation-

ship and, on the other, debased by his overriding policy emphasis

on being liked (for being compliant), rather than being respected



(for being sufficiently independent and self-regarding). As one

distinguished Australian intellectual highly regarded in Washing-

ton circles has observed, ‘Being liked is not the game in Washington,

it’s being respected.’34 An alliance only has meaning and substance

if the parties to it are autonomous. It seems deeply ironical that in

playing politics with the American alliance, Howard’s team should

end up diminishing this important strategic asset, in the process

creating something approaching a national tragedy.

Malcolm Turnbull, before becoming a Howard Cabinet min-

ister, when he was a forthright leader of the Australian Republican

movement, famously claimed that Howard had ‘broken the

nation’s heart’ in his manipulation of the failed referendum on

becoming a republic. Our conclusion leads to a similar kind of

observation, in that we see Howard himself as a tragic figure lead-

ing his country to a tragic outcome. Again, we do not use the

term lightly. For the ancient Greeks, a tragedy meant not some-

thing that is sad, but a series of converging elements that lead

inexorably to the downfall of a ‘great’ or ‘powerful’ person, an

outcome typically hastened by this person’s character flaws and

via manipulation by the gods. Leaving the gods to one side, in the

case of John Howard we see a figure who was once ridiculed, but

who stayed the course and persevered until his luck changed, and

who framed his political choices thereafter in such a way that his

standing and prestige would be enhanced. By edging closer to the

US President, and delivering favours to the United States, and

being rewarded with recognition abroad, he found that his pres-

tige at home grew as well, even while he was trampling Australian

interests in the process. The tragedy is that in any other period in



history, Howard’s human failings—his ‘character flaw’—his desire

for status and his willingness to trade anything, even the national

interest, to bolster his personal-political positioning, would have

encountered a natural ceiling. His security-compromising actions

would have been exposed by an effective political opposition,

lampooned by an insightful and independent media, perhaps

even gently criticised by allies with an interest in an armed and

ready Australia. But the gods were conspiring against Howard,

and Australia, in this instance. For Howard’s personal foibles and

resulting security-diminishing actions have been facilitated and en-

couraged by a confluence of enabling forces at home and abroad.

The most significant of these are the presence of a strongly

mercantilist United States intent on seeking to expand its

commercial power abroad to counter rising Chinese and Indian

influence (and looking for every opportunity to manipulate

Howard’s US-centric stance to this end), and the absence of an

effective opposition and media at home that might expose his self-

serving political calculations. Howard has found himself in a

self-reinforcing cycle. Doing favour for the United States might

have started as an exercise in brinkmanship and prestige enhance-

ment. It might have been extended through the advantages

of sharing the loot with the members of his team. But it has

now become a kind of game with no other goal than to win, to

diminish the Labor opposition, and to cement his place in history.

This is a process that can only lead Howard himself, and the

country, to an unfortunate end: it is in this precise sense a tragedy.



APPENDIX: SIDE LETTER ON BLOOD PLASMA

18 May 2004The Honourable Robert B. ZoellickUnited States Trade Representative600 17th Street, NWWashington, DC 20508

Dear Ambassador Zoellick

In connection with the signing on this date of the Australia-United StatesFree Trade Agreement (the “Agreement”), I have the honour to confirmthe following understanding reached by the Governments of Australiaand the United States during the course of the negotiation regardingtreatment to be accorded products derived from blood plasma (“bloodplasma products”) and blood fractionation services for the production ofsuch products:

1. Any contract with a central government entity of Australiafor blood fractionation services in effect on the date of entryinto force of the Agreement shall conclude no later than31 December 2009, or earlier if Australia deems it appro-priate.

247


2. Australia shall undertake a review of its arrangements for thesupply of blood fractionation services that shall conclude nolater than 1 January 2007. The Commonwealth Governmentwill recommend to Australia’s States and Territories thatfuture arrangements for the supply of such services be donethrough tender processes consistent with Chapter 15(Government Procurement) of the Agreement.

3. Should the Commonwealth and State and Territory govern-ments reach agreement to make future arrangements for thesupply of blood fractionation services through tenderprocesses consistent with Chapter 15, Australia shall with-draw its Annex 15-A, Section 5 reservation regarding theprocurement of such services.

4. A Party may require any producer of blood plasma productsor supplier of blood fractionation services to fulfil require-ments necessary for ensuring the safety, quality, and efficacyof such products. Such requirements shall not be prepared,adopted, or applied with a view to, or with the effect of,creating unnecessary obstacles to trade.

5. A Party may require that blood plasma products for use inits territory be derived from blood plasma collected in theterritory of that Party.

6. Australia confirms that it will not apply any requirement foran applicant for approval of the marketing and distributionof a U.S. blood plasma product to demonstrate significantclinical advantage over Australian-produced products.

7. Article 21.2(c) (Scope of Application) of the Agreement shallapply to paragraphs 1 through 6.

I have the honour to propose that this letter and your letter in reply con-firming that your Government shares this understanding shall constitutean integral part of the Agreement.

Yours sincerely

Mark VaileMinister for Trade



NOTES

1 THE AUSTRALIAN ANOMALY

1 Peter Hartcher, ‘A bit battered, but the hat still fits’, 16 February2007, The Sydney Morning Herald.

2 On the advice of his negotiating team, Trade Minister at thetime, Mark Vaile is reported to have urged Howard to walk awayfrom the deal. See Tony Kevin, ‘Labor must hold its nerve on theFTA’, The Canberra Times, 21 July 2004; and Christine Wallace,‘Bush rebuff stunned negotiators’, The Australian, 25 February2004. Noteworthy among the many opponents of the deal arethe views of trade experts Ann Capling (2004) and RossGarnaut, ‘FTA worsens our woeful trade outlook’, TheAustralian, 10 February 2004.

3 See Weiss, Thurbon, Mathews (2004).4 A stocktaking of the FTA’s impacts has yet to be undertaken;

among other things it will show a soaring trade deficit inAmerica’s favour, reflecting massive royalty and copyright out-flows, takeovers of innovative local firms, and the displacementof locally sourced and Asian components with more expensiveUS imports.

249


5 See for example Grant (2004); Borgu (2004) or Hamilton (2004),as discussed in the following chapters.

6 For somewhat more nuanced expressions that nevertheless con-vey the same sense, see for example Owen Harries, ‘Don’t gettoo close to the US’, The Australian, 17 February 2004; OwenHarries, ‘End of simplicity’, The Australian, 1 December 2006;Bruce Grant (2004); Bruce Haigh, ‘Howard will sink with Bush’,On Line Opinion, 26 February 2007, available at: <http://www.onlineopinion.com.au/view.asp?article=5540>; or Richard Wool-cott and Paul Barratt, ‘Coping with the Alliance’, New Matilda,available at newmatilda.com. On the reason for ‘clamouring’ tobe invited to participate in the Iraq invasion force, Manne (2006:23) observes that Howard saw the moment he ‘had been waitingfor during his entire political life had finally arrived’.

7 Grant (2004: 107).

2 ENERGY

1 Jared Diamond in his book Collapse (2004), analysed the paradig-matic case of this insulation from accountability in his accountof the collapse of an entire society on Easter Island, where elitecompetition over religious totems encouraged over-consumptionof wood supplies, ultimately destroying the islanders’ survivalchances.

2 Energy Task Force, Department of Prime Minister and Cabinet,Securing Australia’s Energy Future (Commonwealth of Australia,Canberra 2004), p. 135, available at <http://www.pmc.gov.au/publications/energy_future/index.htm>.

3 On the Global Nuclear Energy Partnership, see the expositionby Edwin S. Lyman (2006) of the Union of Concerned Scientists;and on nuclear matters generally in Australia, see Falk, Greenand Mudd (2006).



http://www.onlineopinion.com.au/view.asp?article=5540


http://www.pmc.gov.au/publications/energy_future/index.htm

http://www.pmc.gov.au/publications/energy_future/index.htm

4 See GNEP website, at: <http://www.gnep.energy.gov/gnepReliableFuelServices.html>.

5 Press briefing by Prime Minister, Hay Adams Hotel, WashingtonDC, 15 May 2006, available at <http://www.pm.gov.au/News/interviews/Interview1938.html>.

6 See Julie Macken, ‘Nuclear debate, part one: the plan’, NewMatilda, Wednesday 8 November 2006, available at <http://www.newmatilda.com/home/articledetail.asp?ArticleID=1913>.

7 See The Uranium Mining, Processing and Nuclear EnergyReview (Chair: Dr Ziggy Switkowski) 2006, available at<http://www.dpmc.gov.au/umpner/reports.cfm>.

8 See statements regarding the GE contract on the SILEX website,at: <http.//www.silex.com.au>.

9 For a discussion of the prospects for a high-level waste facility inAustralia, see Taylor (2006).

10 See ‘U.S.–India nuclear legislation advances in Congress’,International Herald Tribune, 9–10 Dec 2006.

11 Note that Australia remains simply an exporter of uranium, theraw material, although this fact is glossed over when the issue of‘nuclear fuel leasing’ is discussed. See Julie Macken, op. cit. andPaul Toohey, ‘The Big U-turn’, The Bulletin, 17 November 2006,available at: <http://bulletin.ninemsn.com/article.aspx?id=161844>.

12 See Turton (2004). This paper, by a respected researcher at theInternational Institute for Applied Systems Analysis, Austria,utilises the most comprehensive data available, through nationalsubmissions to the UNFCCC secretariat.

13 As Turton (2004) points out, eliminating these subsidies (thuscharging the full price for electricity consumed) would have theeffect of driving the industry to improve its efficiency or shuttingdown, with minimal dislocation to Australia.

Notes 251


http://www.gnep.energy.gov/gnepReliableFuelServices.html

http://www.gnep.energy.gov/gnepReliableFuelServices.html

http://www.pm.gov.au/News/interviews/Interview1938.html


http://www.newmatilda.com/home/articledetail.asp?ArticleID=1913


http://www.dpmc.gov.au/umpner/reports.cfm

http://www.silex.com.au

http://bulletin.ninemsn.com/article.aspx?id=161844

http://bulletin.ninemsn.com/article.aspx?id=161844





14 See Turton (2002) on the aluminium smelting industry inAustralia, available at <http://www.tai.org.au/documentsdownloads/DP44.pdf>.

15 Toronto conference statement, ‘The Changing Atmosphere:Implications for Global Security’ (WMO 1989).

16 To set against this, Cabinet also agreed not to adopt measures thatwould be harmful economically or in trade terms, and would notmove in advance of actions taken by other major greenhouse gasproducing countries (that is, the US). See Foster (2000), p. 7.

17 Prime Ministerial Statement 1997: ‘Safeguarding the Future:Australia’s response to climate change’, Office of the PM, avail-able at: <http://www.pm.gov.au/news/media_releases/1997/GREEN.html>.

18 This special treatment involves recognition of the role of landclearing and its reversal, creating carbon ‘sinks’—an option notmade available to any other country. On this, see Hamilton(2001), especially Chapter 2, for a succinct account.

19 See Richard Baker, ‘How big energy won the climate battle’, TheAge, 30 July 2006; and the PhD Thesis by Pearse (2005) on thebusiness response to climate change in Australia.

20 See Murdoch University website, ‘The Australian CooperativeResearch Centre on Renewable Energy (ACRE) has ceased toexist’, at <http://wwwphys.murdoch.edu.au/acre/>.

21 See Jo Chandler, ‘Shown the door: scientists say cloudy thinkingcost them their jobs’, The Sydney Morning Herald, Weekend edition,11–12 February 2006, p. 7, available at <http://www.smh.com.au/news/national/shown-the-door-scientists-say-cloudy-thinking-cost-them-theirjobs/2006/02/10/1139542402662.html>.

22 See ABARE 1995 Global Climate Change Report.23 Commonwealth Ombudsman, ‘Report of the investigation into

ABARE’s external funding of climate change economic model-ling’, 1998, available at <http://www.comb.gov.au/common



http://www.tai.org.au/documentsdownloads/DP44.pdf


http://www.pm.gov.au/news/media_releases/1997/GREEN.html

http://www.pm.gov.au/news/media_releases/1997/GREEN.html

http://wwwphys.murdoch.edu.au/acre

http://www.smh.com.au/news/national/shown-the-door-scientists-say-cloudy-thinking-cost-them-theirjobs/2006/02/10/1139542402662.html








wealth/publish.nsf/AttachmentsByTitle/reports_1998_abare.pdf/$FILE/abare.pdf>.

24 Hamilton (2001) op. cit., p. 56. 25 See ‘Securing Australia’s Energy Future’, Energy Task Force

(2004), available at <http://www.dpmc.gov.au/publications/energy_future/> As environmental scholar Peter Christoffobserves: ‘The White Paper outlines an eight-year national planthat is . . . brazen in its aggressive affirmation of continuingfossil fuel use, bold in its confrontation with the government’sestablished critics of its energy and climate change policies, andchallenging for the renewable energy sector, which it antagon-izes’ (Christoff 2004).

26 Energy Task Force, Department of Prime Minister and Cabinet,Securing Australia’s Energy Future (Commonwealth of Australia,Canberra, 2004).

27 In 2006 the Lowy Institute issued a report on Australia’s decade-and-a-half commodities-driven boom (Quiet Boom by Dr JohnEdwards, chief economist of HSBC), where it is argued that infact the contribution of the minerals sector to the Australianeconomy is exaggerated, and much of the benefit is lost becauseof foreign ownership.

28 On the changes needed, see the comments by one of us,Mathews (2007a).

29 See Clive Hamilton, ‘Climate follies’, Newsletter #40, Sep 2004,p. 11, The Australia Institute, Canberra, available at<http://www.tai.org.au/documents/downloads/NL40.pdf>.

30 Richard Baker, op cit.31 See Clive Hamilton, ‘Keeping it in the family’, op cit.32 See the report of the Renewable Energy Policy Network for the

21st Century (REN 21 2006) for a survey of investment activityin renewable energies industries around the world.

Notes 253


http://www.dpmc.gov.au/publications/energy_future


http://www.tai.org.au/documents/downloads/NL40.pdf



http://www.tai.org.au/documents/downloads/NL40.pdf

33 For a comprehensive account of Australia’s MRET, see Kent andMercer (2006). The official website for MRET can be found at<http://www.greenhouse.gov.au/markets/mret/>.

34 For a recent review of the wind industry in Australia, seeDiesendorf (2006).

35 See the article by one of us ( JM) in New Matilda, ‘Orange-belliedpolitics’, 17 May 2006, available at <http://www.newmatilda.com/home/articledetail.asp?ArticleID=1562>.

36 See ABC Radio, PM program, 4 August 2006, ‘Campbell underpressure after wind farm backdown’, available at <http://www.abc.net.au/pm/content/2006/s1706710.htm>.

37 At the ANU, world-class work continued to be done in the solarcollector/solar tower technology, which is now being commer-cialised by the Australian company Solar Systems Ltd. The devel-opment is supported by a $1 million grant under the federalgovernment’s Renewable Energy Commercialisation Program<www.greenhouse.gov.au/renewable/recp/>. $1 million doesnot go very far in international new industry creation schemes.

38 See the press release announcing CS Solar AG’s capital raising, inJanuary 2005, at <http://www.nrel.gov/ncpv/thin_film/docs/gei_csg_pressrelease.pdf>.

39 Remark by Senator Christine Milne, leader of the Democrats, innewspaper report ‘“Climate of fear” in solar research’, byRosslyn Beeby, The Canberra Times, 30 May 2006.

40 Out of a huge literature, see for example Worldwatch Institute,Biofuels for Transportation (2006). A useful running commentaryis maintained by the Biopact weblog, at <www.biopact.com>.

41 See our discussion in How to Kill a Country (Weiss, Thurbon &Mathews 2004).

42 See the discussion by one of us in Mathews (2007b).43 On exemptions of biofuels from fuel excise taxes, see for exam-

ple the House of Lords report from the Select Committee on



http://www.greenhouse.gov.au/markets/mret



http://www.abc.net.au/pm/content/2006/s1706710.htm

http://www.abc.net.au/pm/content/2006/s1706710.htm

http://www.greenhouse.gov.au/renewable/recp

http://www.nrel.gov/ncpv/thin_film/docs/gei_csg_pressrelease.pdf


http://www.biopact.com

http://www.greenhouse.gov.au/markets/mret





European Union, “The EU strategy on biofuels: from field tofuel”, November 2006, available at <http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeucom/267/26702.htm>.

44 See the discussion by one of us in Mathews (2007c). 45 On ‘policy autism’ see Christoff (2005); and on ‘keeping it in the

family’ see Hamilton (2004), op cit.

3 RURAL INDUSTRIES

1 See USTR, ‘U.S. and Australia complete Free Trade Agreement’,8 February 2004, available at <http://www.ustr.gov/Document_Library/Press_Releases/2004/February/US_Australia_Complete_Free_Trade_Agreement.html>.

2 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2005. ‘Administration ofBiosecurity Australia: Revised Draft Import Risk Analysis forApples from New Zealand’, AGPS, Canberra. Available at<http://www.aph.gov.au/senate/committee/rrat_ctte/apples04/report/index.htm>.

3 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2005. ‘Administration ofBiosecurity Australia: Revised Draft Import Risk Analysis forBananas from The Philippines’, AGPS, Canberra. Available at <http://www.aph.gov.au/Senate/committee/rrat_ctte/bananas/report/index.htm>.

4 Parliament of Australia: Senate: Standing Committee on Ruraland Regional Affairs and Transport 2004. ‘Biosecurity Australia’sImport Risk Analysis for Pig Meat’, AGPS, Canberra. Reportavailable at <http://www.aph.gov.au/SENATE/committee/rrat_ctte/completed_inquiries/2002-04/pork/report/report.pdf>.

Notes 255


http://www.publications.parliament.uk/pa/ld200506/ldselect/ldeucom/267/26702.htm


http://www.ustr.gov/Document_Library/Press_Releases/2004/February/US_Australia_Complete_Free_Trade_Agreement.html



http://www.aph.gov.au/senate/committee/rrat_ctte/apples04/report/index.htm

http://www.aph.gov.au/senate/committee/rrat_ctte/apples04/report/index.htm

http://www.aph.gov.au/Senate/committee/rrat_ctte/bananas/report/index.htm


http://www.aph.gov.au/SENATE/committee/rrat_ctte/completed_inquiries/2002-04/pork/report/report.pdf










5 Australian Pork Ltd, ‘Pork industry wins quarantine battle’,Press Release, 27 May 2005; available at <http://www.australianpork.com.au/media/Pork%20industry%20wins%20quarantine%20battle%204%2Edoc>.

6 Federal Court of Australia 2005, Australian Pork Ltd v Director ofAnimal and Plant Quarantine, FCA 671, 27 May 2005; available at<http://www.austlii.edu.au/au/cases/cth/federal_ct/2005/671.html>.

7 Australian Pork Ltd, ‘Australian Pork’s legal challenge to thepig meat IRA’, Press Release, October 2005; available at<http://www.apl.au.com/media/APL%20Pork%20Legal%20Challenge.pdf>.

8 Federal Court of Australia – Full Court 2005, Director of Animaland Plant Quarantine v Australian Pork Ltd, FCAFC 206(16 September 2005); available at <http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/206.html>.

9 High Court of Australia, Result of Applications for specialleave to appeal, Sydney, 18 November 2005. Available at<http://www.hcourt.gov.au/reg istry/slresults/18-11-05S.htm> For a sample of press coverage, see: ABC NewsOnline,‘Pork producers lose High Court bid over imports’, 18 November2005, available at <http://www.abc.net.au/news/australia/nsw/northcoast/200511/s1509699.htm>.

10 Cited in ‘Australia allows California fresh grapes’, Western FarmPress, 16 March 12002. <http://westernfarmpress.com/mag/farming_australia_allows_california/>.

11 This section is based on the authors’ AJIA article, Weiss,Thurbon and Mathews (2006).

12 Japan itself is not BSE free, but it tests all slaughtered domesticcattle for BSE before it enters the human food chain, and it doesnot import beef from countries infected with BSE—until itannounced in December 2005 that it would resume someimports of beef from the US.



http://www.australianpork.com.au/media/Pork%20industry%20wins%20quarantine%20battle%204%2Edoc



http://www.austlii.edu.au/au/cases/cth/federal_ct/2005/671.html

http://www.austlii.edu.au/au/cases/cth/federal_ct/2005/671.html

http://www.apl.au.com/media/APL%20Pork%20Legal%20Challenge.pdf


http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/206.html

http://www.austlii.edu.au/au/cases/cth/FCAFC/2005/206.html

http://www.hcourt.gov.au/registry/slresults/18-11-05S.htm

http://www.hcourt.gov.au/registry/slresults/18-11-05S.htm

http://www.abc.net.au/news/australia/nsw/northcoast/200511/s1509699.htm

http://www.abc.net.au/news/australia/nsw/northcoast/200511/s1509699.htm

http://westernfarmpress.com/mag/farming_australia_allows_california

http://westernfarmpress.com/mag/farming_australia_allows_california






13 ‘Govt considers relaxing its mad cow disease policy’, AustralianAssociated Press, 7 September 2005.

14 See Weiss, Thurbon, and Mathews (2006).15 OIE stands for the French nomenclature Organisation

Internationale d’Epizootes, or International Animal HealthOrganization.

16 OIE Code, BSE, Chapter 2.3.13; available at <http://www.oie.int/downld/SC/2005/bse_2005.pdf>.

17 As we detail at length in our AJIA paper, although American offi-cials routinely claim that they have a ‘world class’ tracking andtesting system for BSE, US testing levels fall far below inter-national norms. Indeed, there is a substantial body of evidence(much of which has been published by the New Scientist Journal)to suggest that America’s testing regime is structured so as tomake the discovery of BSE cases highly unlikely. Indeed, NewScientist has reported that the US may be in the grip of a BSE epi-demic, the existence of which is suppressed by the limitations ofits testing system. See Weiss, Thurbon and Mathews (2006) fordetails.

18 Japan had imposed import restrictions on US apple exports in1994 in order to protect itself from fire blight. The US appealedto the WTO’s Dispute Settlement Body, which found in 2003that Japan’s requirements for orchard inspections—for 500-metrebuffer zones between infected trees and trees with apples in-tended for export to Japan, and chlorine fumigation—wereinvalid since they were not based on ‘scientific’ evidence—adespicably constructed ‘technicality’, but enough to get USlawyers over the line. At the time that this ruling ran out on30 June 2004, Japan and the US had met several times, but Japanwas holding a firm line in defence of its apple orchards—although it had issued a revision to its requirements. But the USinsisted on full retraction, and imposed trade sanctions worth

Notes 257


http://www.oie.int/downld/SC/2005/bse_2005.pdf




$143.4 million—the estimated trade loss from the banned appleexports (Weiss, Thurbon and Mathews 2004).

19 See for example Kyodo News report, carried by Dow JonesNewswires, ‘Japan Ag Ministry denies progress in Japan-USBSE talks’, 30 August 2004; available through TradeObservatory, at <http://www.tradeobservatory.org/headlines.cfm?refID=37025>.

20 The Australian Minister for Trade, Mark Vaile, states in the finalparagraph of the letter: ‘I have the honour to propose thatthis Letter and your Letter in reply confirming that yourGovernment shares this understanding shall constitute anintegral part of the Agreement’. In the Australian government’sguide to the Australia–US FTA, under the section entitled ‘WhatParts of the Free Trade Agreement are Legally Binding’,any side letter stipulated as ‘constituting an integral part ofthe Agreement’ is said to be ‘a legally binding part of theAgreement’ (Australian Government 2004: 4).

21 Chapter 7 of the FTA also commits Australia to ‘respecting’America’s quarantine-related regulatory systems and risk assess-ment even where America’s regulatory systems and riskassessment processes are substantially lower than our own—notto mention considerably lower than those of Europe and Japan,as we show below.

22 Somewhat ironically, Australia did until recently accept OIEguidelines on importing beef from Brazil. These guidelines,however, were exposed as seriously inadequate in 2004, whenBrazil experienced an outbreak of foot and mouth disease(FMD) in zones from which Australia had been importing, andwhich had been declared safe by the OIE. This led Australia’sBiosecurity Chief John Cahill to declare in 2005 that Australiawould no longer rely solely on OIE guidelines in setting its FMDquarantine standards (ABC TV 2005), raising further questions



http://www.tradeobservatory.org/headlines.cfm?refID=37025




about Australia’s agreement to prioritise OIE guidelines on BSEin the FTA.

23 Official Committee Hansard, Senate, Rural and Regional Affairsand Transport Legislation Committee, Estimates, 1 November2005, p. 78, available at <www.aph.gov.au/hansard/senate/commttee/S8862.pdf>.

24 ‘Transcript of press conference by US Trade Representative,Ambassador Bob Zoellick, and Australia’s Minister for Trade,Mark Vaile, on conclusion of FTA negotiations, Washington,Sunday, 8 February 2004’, emphasis added. Available at<http://www.ustr.gov/assets/Document_Library/Transcripts/2004/February/asset_upload_file425_5406.pdf>.

25 Ray (2005).26 Swift and Company, ‘Swift & Company reports second-quarter

results’, Media Release, 13 January 2005. Available at <www.swiftbrands.com/media/releases/Financials12Jan2005.pdf>.

27 See Griffiths (1998) for an analysis of the Australian meat indus-try from the perspective of the institutions (or lack thereof ) thatmade it less competitive with foreign rivals.

28 If you change your domestic rules to say it is safe to continueselling local beef even in the event of a local BSE outbreak, thenyour position on refusing the imported beef from countries withBSE is arguably undermined.

29 ‘ABA—No friend of Australian beef producers’, Cattle Councilof Australia, Media Release MR2004/32, 26 October. Availableat <www.cattlecouncil.com.au/images/4_PUBLICATIONS/MediaReleases/MediaReleases2004/MR2004_32_ABA_No_Friend_of_Australian_Beef_Producers.pdf>.

30 ‘ABA calls on PM to resolve Canberra’s suicidal power struggleover BSE regulations’, Press Release, 5 October 2005, available at<www.austbeef.com.au/Public/newslist.asp?svr=topnews&IsEvent=0&service=topnews&pgs=50&rid=15403&pct=&ct=&>.

Notes 259


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http://www.ustr.gov/assets/Document_Library/Transcripts/2004/February/asset_upload_file425_5406.pdf


http://www.swiftbrands.com/media/releases/Financials12Jan2005.pdf

http://www.swiftbrands.com/media/releases/Financials12Jan2005.pdf

http://www.cattlecouncil.com.au/images/4_PUBLICATIONS/MediaReleases/MediaReleases2004/MR2004_32_ABA_No_Friend_of_Australian_Beef_Producers.pdf



http://www.austbeef.com.au/Public/newslist.asp?svr=topnews&IsEvent=0&service=topnews&pgs=50&rid=15403&pct=&ct=&











31 The theory of ‘regulatory capture’ advanced by Nobel LaureateGeorge Stigler in 1971 has been widely employed to explain USpolicy outcomes across a range of industries, particularly agri-culture (Stigler 1971).

32 Author correspondence and interviews with representatives ofABA and Australia Pork Limited.

4 CULTURE

1 ‘Lost—and no wonder: On the small screen not only the accentsare thick’, The Sydney Morning Herald, ‘Spectrum’, 17 February2007. Spectrum p. 10.

2 See Australian Film Commission, Get the Picture (statisticaldatabase), available at <http://www.afc.gov.au/gtp/acompboxofficeozshare.html>.

3 ibid. 4 Greg Duffy, ‘Australian Television Content: The new culture

vultures’, Evatt Foundation Paper, June 2005, available at<http://evatt.labor.net.au/publications/papers/127.html>.

5 ‘Cultural industries’ are typically defined as ‘those industriesthat combine the creation, production and commercialisationof contents which are intangible and cultural in nature’ (seeUNESCO Cultural Industries and Enterprises website at:<http://www.unesco.org/culture/industries/trade/html_eng/question1.shtml>). These include ‘goods’ (for example. films,TV shows, books, plays, etc., all typically protected by copy-right); ‘services’ (for example, libraries, museums); and thosehigh-tech activities centred on the production and distribution ofcultural content (for example, audiovisual/multimedia tech-nologies). The term ‘creative industries’ is sometimes usedinterchangeably with ‘cultural industries’, but often refers to abroader category, encompassing such activities as architecture,fashion design and even advertising.


http://www.afc.gov.au/gtp/acompboxofficeozshare.html


http://evatt.labor.net.au/publications/papers/127.html

http://www.unesco.org/culture/industries/trade/html_eng/question1.shtml







Notes 261

6 See Van Grasstek, ‘Treatment of cultural goods and services ininternational trade agreements’, UNESCO, Singapore 2005,p. 15, available at <http://www.unescobkk.org/fileadmin/user_upload/culture/Cultural_Industries/Singapore_Feb_05/Treatment_of_cultural_goods_and_services_GRASSTEK.pdf>.

7 American cultural exports are so cheap because America is ableto mass produce films, TV shows, etc., at home and recover thecosts of production in its large domestic market. With costsrecovered at home, the United States can afford to then exportthe same product overseas at bargain basement prices, typicallypricing local cultural content out of the market.

8 On the potential relationship between the creative industries andeconomic dynamism in the Australian context see Cunningham(2006). Other works in this vein include Wilenius (2002) andFlorida (2002).

9 For an overview of the emerging focus of governments fromthe United Kingdom to the United States, Asia and the Pacificon ‘creative industry’ promotion (variously defined) seeCunningham (2006). See also Jeni Harvie, ‘Movies, music workwonders for economy’ The Australian, 22 November 2005, p. 7.

10 It failed to halt the ensuing decline of Australian film produc-tion. For a history of the early years of feature film productionin Australia—a period during which it led the world—see ‘TheFirst Wave of Australian Feature Film Production: From EarlyPromise to Fading Hopes’, The Australian Film Commission,available at <http://www.afc.gov.au/downloads/policies/early%20history_final1.pdf>.

11 David Malouf, ‘The Making of Australian Consciousness’, TheBoyer Lectures, broadcast on ABC Radio National, 13 December1998, available at <http://www.abc.net.au/rn/boyers/98boyer5.htm>.


http://www.unescobkk.org/fileadmin/user_upload/culture/Cultural_Industries/Singapore_Feb_05/Treatment_of_cultural_goods_and_services_GRASSTEK.pdf



http://www.afc.gov.au/downloads/policies/early%20history_final1.pdf

http://www.afc.gov.au/downloads/policies/early%20history_final1.pdf

http://www.abc.net.au/rn/boyers/98boyer5.htm

http://www.abc.net.au/rn/boyers/98boyer5.htm

http://www.unescobkk.org/fileadmin/user_upload/culture/Cultural_Industries/Singapore_Feb_05/Treatment_of_cultural_goods_and_services_GRASSTEK.p



12 Few book-length treatments on Gorton’s contribution to thedevelopment of a more militarily, economically and culturallyindependent Australia exist. For the most balanced examinationof his contribution to Australian political life, see Hancock(2002).

13 Barry Jones, speech to parliament on the occasion of Gorton’s80th Birthday, Hansard, 9 September 1991, p. 960. As PrimeMinister, Gorton broke with the Liberal Party’s conservativeposition on a range of social, economic and military issues,which drew the ire of many in his own party. Following his lossof the leadership thanks to internal battles, Gorton resignedfrom the Liberal party and later even voted Labor and appearedin Labor election advertisements.

14 The AFTRS was conceptualised by Peter Coleman, Barry Jonesand Philip Adams, who had been commissioned by Gorton totravel overseas and report back on how other countries werebuilding the local talent base to support domestic cultural indus-tries. Gorton accepted every one of the recommendationsproduced in the resulting report.

15 Ironically, it was Gorton’s penchant for the arts that helped bringhim undone; an infamous visit to Liza Minnelli’s dressing roomafter a show at Sydney’s Chequers nightclub was one of the inci-dents that contributed to his downfall.

16 For a comprehensive overview of cultural policies from Gortonto Howard, see Throsby (2006).

17 Keating was particularly critical of the Australia Council and itsfunding strategies (Gallasch 2005: 39).

18 This is not to downplay the contribution of those governmentsbetween Whitlam and Keating, Fraser in particular was particu-larly active, redeveloping the National Institute of Dramatic Arts(NIDA) and introducing additional tax incentives for film pro-duction, among other things.



19 Creative Nation: Commonwealth Cultural Policy Statement,October 1994, p. 7, available at <http://www.nla.gov.au/creative.nation/contents.html>.

20 The reaction of artists involved in the ‘new media’ arena toKeating’s Creative Nation statement was not entirely positive.Many felt they were ‘being cast as service providers, cash cowsin the new techno-economy.’ (See Gallasch op cit., p. 43).Nevertheless, the fact that Keating had a vision for the arts andwas willing to place the sector at the centre of national policymaking now sees him recalled as Australia’s Prime Ministerfor the Arts. Gallasch provides an enlightening examination ofAustralia’s world-class new media arts sector and the reversalof its fortunes under a decade of Howard Government and its‘political cooling of the climate for the arts’ (op cit, p. 7).

21 On Keating’s legacy in this area see Stevenson (2000); on theUnited Kingdom, Canada and New Zealand see Volkerling(2001).

22 Throsby (2006). 23 See Liz Jackson’s interview with John Howard, Four Corners,

ABC TV, broadcast 19 February 1996, available at <http://www.abc.net.au/4corners/content/2004/s1212701.htm>.

24 See Judith Brett (2005) for an enlightening examination of theway in which Howard sought, from the beginning of his tenure,to distinguish himself from Keating and endear himself to‘ordinary Australians’ by speaking ‘from’ the nation—as justanother ‘Aussie bloke’—as opposed to ‘to’ the nation (as part ofa governing ‘elite’).

25 On the response of the industry to liberal campaign see‘Government Ads: Insult To Injury’, Lauren Martin and JoyceMorgan, The Sydney Morning Herald, 2 October 1998, p. 21.

26 This is not to detract from the hard work of some individualmembers of parliament who have toiled behind the scenes to

Notes 263


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address the innumerable problems facing the industry, such asSenator Kate Lundy, Shadow Minister for the Arts during 2004–05. Nevertheless, in the negative political climate detailed above,such individuals found themselves swimming against the tide.

27 ‘Nevin chides Howard over the Arts’, Tony Stephens, The SydneyMorning Herald, 22 January 2004, p. 2.

28 ‘Today’s Philistines’, Peter Garrett, Keynote Address to theAustralian Council of University Art and Design Schools AnnualConference, 28 September 2006, available at <http://www.petergarrett.com.au/c.asp?id=229>.

29 Apart from a few notable exceptions, including Graeme Murphyand Janet Vernon, who resigned as Directors from the SydneyDance Company in July 2006 citing ‘political indifference’ andresulting funding pressures on the company as the reason fortheir departure. See Paech, Vanessa., ‘War, Sport and Apathydrive creators away’, Arts Hub Australia, July 14 2006, availableat <http://www.artshub.com.au/au/news.asp?sId=97856>.

30 As David Marr reported in his 2005 Philip Parsons MemorialLecture ‘(Nevin) wasn’t thanked. Though she hadn’t said any-thing particularly rude, she had broken the rule of the trade thatcomplaints are kept in house’ ‘Theatre Under Howard’ PhilipParsons Memorial Lecture, Currency Press, 2005, available at<http://www.currencyhouse.org.au/documents/ch_d_parsons2005_david_marr.pdf>.

31 Cited in ‘Broken Arts—Cringe or Whinge?’, Rosemary Neill,The Australian, 16 April 2005.

32 For an overview of the efficiency dividend and its budgetaryimplications for arts companies see ‘Dying to be efficient’, DavidUren, The Australian , 31 March 2005, p. 14. Uren cites, forexample, the findings of a recent review into the impact of thedividend on Australian symphony orchestras, which found that‘with costs rising on average by 4 per cent a year, a company



http://www.petergarrett.com.au/c.asp?id=229

http://www.petergarrett.com.au/c.asp?id=229

http://www.artshub.com.au/au/news.asp?sId=97856

http://www.currencyhouse.org.au/documents/ch_d_parsons2005_david_marr.pdf




that gets 80 per cent of its money from the government andis subject to the efficiency dividend has to increase its non-government income by almost 16 per cent a year just to standstill.’

33 See Neill, op cit. 34 Cited in ibid.35 See for example, ‘A Wallet full of Censorship’, David Marr, The

Sydney Morning Herald, 10 October 2005, p. 13; ‘Alert andAlarmed: Art Under Fire’, Lauren Martin, Garry Shead, MartinWesley-Smith, Stephen Sewell, Rosie Scott, Jonathan Biggins,Robert Connolly and Thomas Keneally, The Sydney MorningHerald, 29 November 2005, p. 18.

36 See for example, Andrew Bolt, ‘$1.6 billion Whinge’, Sun Herald,20 January 2004, p. 21; Padraic P. McGuinness, ‘Time we all sawthe bigger picture’, The Sydney Morning Herald, 24 June 2000, p. 36.

37 Although Australia’s cultural sector hardly places an inordinateburden on the public purse. As Stuart Cunningham points out:‘In quantum terms, the tax dollar spend on the arts is very smallindeed and judicious increases are certainly called for. TheProductivity Commission . . . estimates that Culture andRecreation, the sector where the arts are placed, received lessthan 1% of its income from the public purse. Compare this tothe enormous 14.3% allocated to some manufacturing sectors,and 9.5% to textiles, clothing and footwear. Clearly, the idea thatthe arts are more heavily subsidised by our hard-earned taxdollar than other sectors is laughable.’ Cited in KatherineBrisbane, ‘Imagining a Creative Nation’, Elizabeth Jolley Lecture,delivered at the Alexander Library Theatre, WA, on 3 August2006, p. 2–3. Available at <http://www.currencyhouse.org.au/documents/ch_d_kbrisbane_jolley2006.pdf>.

38 ‘Call for New Culture Leaders, Peter Aspden, Financial Times,21 June 2006, p. 2.

Notes 265


http://www.currencyhouse.org.au/documents/ch_d_kbrisbane_jolley2006.pdf

http://www.currencyhouse.org.au/documents/ch_d_kbrisbane_jolley2006.pdf

39 See the UK Department of Culture, Media and Sport website:<http://www.culture.gov.uk/what_we_do/Creative_industries/>.

40 Throsby (2006).41 Universal Declaration on Cultural Diversity, available at <http://

unesdoc .unesco.org/images/0012/001271/127160m.pdf>.

42 For details on the process of drafting of the convention see<http://portal.unesco.org/culture/en/ev.php-URL_ID=11281&URL_DO=DO_ TOPIC&URL_SECTION=201.html>.

43 Alan Riding, ‘Next lone U.S. dissent: Cultural diversity pactEntr’acte’, International Herald Tribune, 12 October 2005, Section 3,p. 2.

44 Molly Moore, ‘UN Body Endorses Cultural Protection’,Washington Post, 21 October 2005, p. 14.

45 Quoted in Emma-Kate Symons, ‘US fumes over cultural snub’,The Australian, 22 October 2005, p. 27.

46 See the US State Department Fact Sheet on the Convention,October 11 2005, available at <http://usinfo.state.gov/is/Archive/2005/Oct/13-882512.html>. The co-head of the USdelegation also stated that ‘this convention is actually abouttrade . . . (and) clearly exceeds the mandate of UNESCO’ andwent on to say that the text was ‘deeply flawed and fundamentallyincompatible with (the agency’s) obligation to promote the freeflow by word and image’ (Richard Martin quoted in ‘UNESCOAdopts Convention to Protect Diversity’, Julio Godoy, Inter PressService News Agency, 20 October 2005). The US Ambassador toUNESCO, Louise Oliver, said that the measure was ‘too prone toabuse for us to support’ (quoted in Moore, op cit).

47 ‘UNESCO Overwhelmingly Approves Cultural DiversityTreaty’, Bridges Weekly Trade News Digest, Vol.9, No.36, October2005. Available at <http://www.ictsd.org/weekly/05-10-26/story4.htm>.



http://www.culture.gov.uk/what_we_do/Creative_industries

http://www.culture.gov.uk/what_we_do/Creative_industries

http://unesdoc.unesco.org/images/0012/001271/127160m.pdf



http://portal.unesco.org/culture/en/ev.php-URL_ID=11281&URL_DO=DO_TOPIC&URL_SECTION=201.html

http://portal.unesco.org/culture/en/ev.php-URL_ID=11281&URL_DO=DO_TOPIC&URL_SECTION=201.html

http://usinfo.state.gov/is/Archive/2005/Oct/13-882512.html

http://usinfo.state.gov/is/Archive/2005/Oct/13-882512.html

http://www.ictsd.org/weekly/05-10-26/story4.htm

http://www.ictsd.org/weekly/05-10-26/story4.htm

48 Riding, 2005, op.cit.49 Address to the 33rd session of the UNESCO General

Conference, Ross Kemp, 5 October 2005. Available at< h t t p : / / w w w. m i n i s t e r. d c i t a . g ov. a u / k e m p / m e d i a /speeches/address_to_the_33_rd_session_of_the_unesco_general_conference>.

50 ‘Against Hollywood and Globalization: UNESCO and CulturalDiversity’, Florian Roetzer, Telepolis, October 21 2005. Availableat: <http://nyc.indymedia.org/en/2005/11/59989.html>.

51 Greg Duffy, ‘Australian Television Content: The New CultureVultures’ Evatt Foundation Paper, November 2005. Available at<http://evatt.labor.net.au/publications/papers/127.html>.

52 Ibid., emphasis added.53 ‘Australian cultural diversity under threat’, Australian Society of

Authors, 7 November 2003, available at <http://www.adelaideinstitute.org/Australia/diversity.htm>.

54 Jeffrey E. Garten, ‘Cultural Imperialism is No Joke’, BusinessWeek, 30 November 1998, p. 28.

55 Ibid.

5 DEFENCE

1 On politicisation of the military and intelligence services, see theinside story by Andrew Wilkie who resigned from the Office ofNational Assessments (ONA) in March 2003, in protest over themanipulation of intelligence in the lead-up to the Iraqi war(Wilkie 2004) and on politicisation of intelligence generally seeCollins and Reed (2005); on the politicisation of the publicservice see Barker (2007).

2 We coin this term to emphasise the downside of defence inte-gration, as opposed to the one-sided emphasis on the benefitsalluded to by Howard Government ministers.

Notes 267


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http://nyc.indymedia.org/en/2005/11/59989.html


http://www.adelaideinstitute.org/Australia/diversity.htm

http://www.adelaideinstitute.org/Australia/diversity.htm

3 See Kinnaird (2003). 4 ‘M1A1 Abrams tank agreement signed’, Minister for Defence,

9 July 2004. Available at <http://www.defence.gov.au/minister/Hilltpl.cfm?CurrentId=4021>.

5 Tom Allard, ‘Monster tanks would sink landing craft’, TheSydney Morning Herald, 11 March 2004.

6 This is an option pursued in Australia with the Bushmastertroop transport vehicle—under-funded and poorly supported(Cummine 2005).

7 Michael McKinnon, ‘Tank U-turn as parts sent to US for repairs’,The Australian, 2 January 2007.

8 An immediate alternative to the Abrams tanks was available inthe form of the self-propelled gun (SPG) which Brown (2004)argues would be a better alternative to the expensive and cum-bersome tanks. He says ‘Our principal security issues do notinvolve large-scale ground warfare.’ If the real security risks arepeople smugglers or terrorists, then ‘tanks are no use at all’. SeeGary Brown, ‘Why buy Abrams tanks? We need to look at moreappropriate options’, Online Opinion, 31 March 2004, available at<http://www.onlineopinion.com.au/view.asp?article=2104>.

9 ‘M1A1 Abrams tank agreement signed’, 9 July 2004, Minister forDefence, Media release 132/2004, available at <http://www.defence.gov.au/minister/2004/90704.doc>.

10 Brian Robins and Gerard Ryle, ‘Defence’s billion dollar bungles’,The Sydney Morning Herald, 1 May 2004. Available at <http://www.smh.com.au/articles/2004/04/30/1083224588493.html>.

11 See the report by McIntosh and Prescott (1999).12 Brendan Nicholson, ‘Collins sub shines in US war game’, The

Age, 13 October 2002.13 ‘Top US Admiral lauds quality of Australian Collins subs’,

Defence Daily International , Vol. 1, No. 30, 27 October 2000.



http://www.defence.gov.au/minister/Hilltpl.cfm?CurrentId=4021

http://www.defence.gov.au/minister/Hilltpl.cfm?CurrentId=4021


http://www.defence.gov.au/minister/2004/90704.doc

http://www.defence.gov.au/minister/2004/90704.doc

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14 For overviews on the Collins-class submarine project seeDikkenberg (2001) and Kelton (2004); as well as the report fromthe Senate Standing Committee on Foreign Affairs, Defence andTrade (2006), particularly the favourable judgment on the projecton pages 53–60.

15 The Ministry of Defence stated: ‘The Government has decidedthat a comprehensive arrangement with the US Navy on sub-marine issues is in Australia’s best strategic interests and hastherefore decided that the selection of the combat system forthe Collins Class submarines cannot proceed at this time’. See‘Submarine combat system’, Minister of Defence, Media release,2001, available at <http://www.minister.defence.gov.au/2001/244.doc>; and ‘Australia and US sign submarine cooperationagreement’, Minister of Defence, 11 September 2001, available at<http://www.defence.gov.au/minister/Reithtpl.cfm?CurrentId=984>.

16 ’Submarine combat system’, Minister of Defence, 2001, avail-able at <http://www.minister.defence.gov.au/2001/244.doc>.

17 See the report by McIntosh and Prescott (1999: 29).18 On network-centric military doctrine (meaning the use of

inter-operable IT and electronic systems), see for exampleSchmidtchen (2005).

19 See A.W. Grazebrook, ‘US Pressure in RAN SubmarineCompetition’, Asia-Pacific Defence Reporter, August–September2000.

20 Senate Hansard, ‘Question and Answer Exchange BetweenSenator Chris Schacht and Michael Roche’, CPD, Foreign Affairs,Defence and Trade Legislation Committee, 29 May 2000, p. 109;emphasis added.

21 See Borgu (2004), a commentary published by the quasi-officialAustralian Strategic Policy Institute.

Notes 269


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22 Graeme Dunk, ‘The Collins Combat System’, Asia-PacificDefence 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 MinisterialStatement, 27 June 2002, available at <http://www.minister.defence.gov.au/2002/311270602.doc>.

25 Quoted in Stewart Cameron, ‘US rules out deal on F-22’, TheAustralian, 14 February 2007.

26 Stewart Cameron, ‘RAAF fighter buy stuns US’, WeekendAustralian, 26 October 2002, available at <http://www.pprune.org/forums/showthread.php?t=70934>.

27 ‘JSF deal turns into super hornets nest’, The Canberra Times,14 February 2007.

28 See Borgu (2004: 4).29 For Vice Air Marshall Criss’s full statement, see US Defense

Industry Daily <http://www.defenseindustrydaily.com/2006/10/retired-raaf-vicemarshal-abandon-f35-buy-f22s-updated/index.php>.

30 ‘US rules out deal on F-22 Raptor fighter jets’, Cameron Stewart,The Australian, 14 February 2007, available at <http://www.news.com.au/story/0,23599,21222473-2,00.html>.

31 ibid.32 MacFarlane simply guessed that Australian contractors might

get 1 per cent of the $400 billion project, which would provideAustralian firms with access to $4 billion of notional work. SeeJoint Ministerial Statement (2002) op cit.

33 The international aspects of the program are split into threelevels. The UK is the only Tier 1 supplier, reflecting its con-tribution of US$2 billion. Tier 2 suppliers are Italy and TheNetherlands (contributing $1 billion and $800 million respec-tively). Tier 3 suppliers are Turkey ($175 million), Australia





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http://www.news.com.au/story/0,23599,21222473-2,00.html

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(US$144 million), Norway ($122 million), Denmark ($110million) and Canada ($100 million). Israel and Singapore are‘security cooperative participants’.

34 See Wright (2006) for further discussion on this point.35 On the global supply chain aspects see for example: Borgu

(2004); ‘An ‘enlightened’ decision? Australia and the Joint StrikeFighter’, Alan Stephens, Asia-Pacific Defence Reporter, February2003: 6–8; Tewes (2006); Wright (2006).

36 The latest issue of the Quadrennial Defense Review is 3 February2006. It was widely expected that the Review might pare backthe commitment to the JSF; but in fact it passes over the projectin silence. See Tewes (2006) for further comment.

37 ‘F-35 JSF program: US and UK reach technology transfer agree-ment’, Defence Industry Daily, 4 August 2006, available at<http://www.defenseindustrydaily.com/2006/08/f35-jsf-program-us-uk-reach-technolog y-transfer-agreement/index.php>.

38 ‘Norway goes wobbly on JSF’, Defense News, 28 November 2005,available at <http://www.defensenews.com/story.php?F=1372822&C=europe>.

39 ‘Comments at signing of Joint Strike Fighter Memorandum ofUnderstanding’, Minister of Defence, Washington, 12 Decem-ber 2006, available at <http://www.defence.gov.au/minister/NelsonMinTranscripttpl.cfm?CurrentId=6261>.

40 See Patrick Walters and Cameron Stewart, ‘Six billion flightof fancy’, The Australian, 8 March 2007; available at<http://www.theaustralian.news.com.au/story/0,20867,21342853-28737,00.html>.

41 See Thomson (2006: 34). These are difficult data to secure, andThomson (private communication) indicates that DoD is unableor unwilling to update these figures.

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http://www.theaustralian.news.com.au/story/0,20867,21342853-28737,00.html

42 These data are from the Stockholm International PeaceResearch Institute (SIPRI) Arms Transfer Database.

43 The specification for the EWSPS for C130J aircraft is containedin the Defence Capability Plan 2004, identified as Project AIR5416 (Echidna) (Department of Defence 2004: 33).

44 For details, see Cummine (2005).45 The following information on the EW&C bid was disclosed to

Ms Angela Cummine by the interviewee with a request foranonymity; see Cummine (2005) for details.

46 See Robins and Ryle (2004: 35).47 See US House of Representatives Committee on International

Relations (2004: 28).48 See Cummine (2005) for details. 49 ‘Future directions in industry policy’, Minister of Defence,

24 November 2006, available at <http://www.minister.defence.gov.au/2006/ACF607.doc>.

50 We draw on a distinguished literature in analysing earlierAustralian Defence acquisitions strategies, including Bruni(2002); Cain (1999); Coulthard-Clark (1999); Dibb (1986; 1992);Earnshaw (1998); Evans (2001); Marsh (2006) and Ross (1995).

51 See for example essays by Ball (2000), White (2002; 2006),Dupont (2003), ‘Tinker with defence policy and risk attack’,P. Dibb, On-Line Opinion, 15 November 2001, available at<http://www.onlineopinion.com.au/view.asp?article=1941>;and, from the Armed Forces themselves, Lieutenant ColonelHodson (2003). The White Papers analysed in this chapter goback to DoD 1994 and up to DoD 2005, including those for 2000,2003 and 2004.

52 See Ball (2000) for a discussion of these points. 53 See Dupont (2003: 71). For US views on such strategic issues,

see: ‘Modern military threats: Not all they might seem?’, PaulMann, Aviation Week & Space Technology, 22 April 2002, 158 (16):56–7.



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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<http://www.theage.com.au/ar t ic les/2003/07/29/1059244616540.html>.

56 See White (2003) op cit. 57 This book by Ross (1995) has attracted little attention in

Australia, despite the depth of research that underpins its con-vincing argument.

58 Several eminent thinkers from both sides of the political spec-trum emphasise the value of greater self reliance in our militarypreparedness. See for example Aitkin (2007: 9); Cheeseman(1993); Kelton (2004); White (2002; 2006).

59 ‘Secrecy, evasion and deception’ is the title of Chapter 1 ofDesmond Ball’s 1980 study, A suitable piece of real estate: Americaninstallations in Australia. The situation has hardly improved.

6 BLOOD

1 The national system of blood supply includes blood collection,plasma fractionation (the large-scale separation of plasma intoa number of different blood products) and the distribution ofassociated blood products.

2 As the Australian Red Cross Blood Service (ARCBS) defines it,self-sufficiency means ‘having enough blood and blood productsto meet demand’ and achieving this ‘through a national bloodprogram without having to source products from other coun-tries’ (ARCBS 2004: 8).

3 Appendix 19 of the Australian Guidelines for the Registration ofDrugs (AGRD). The AGRD became the Australian RegulatoryGuidelines for Prescription Medicines (ARGPM) in 2004 andnational self-sufficiency in blood products is protected in

Notes 273


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Appendix 9 of this document. The ARGPM, in accordance withthe side letter, no longer contains the clause regarding the need todemonstrate clinical advantage (see below) (ARGPM 2004).

4 Except where otherwise indicated, this section is based onARCBS (2004: 7), the Flood Report (2006: 193) and the StephenReport (2001: 86).

5 Most recently, CSL signed a five-year contract with the NationalBlood Authority, which began in January 2005 when its 11-yearcontract ran out (‘CSL seals five-year Australian plasma productssupply deal’, Paul Sonali, Reuters News, 23 December 2004). TheNational Blood Authority, created in 2003, now acts on behalf ofall nine Australian governments, contracting with the fraction-ator to purchase the plasma products and providing these tohospitals and clinics free of charge. The Therapeutic GoodsAdministration (TGA) is responsible for regulating standards forall plasma used in Australia.

6 Fact sheet: Plasma fractionation review (DHA 2006). 7 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 inthe domestic market by being registered under two separateprocesses. The first was under Appendix 19 of the AustralianGuidelines for the Registration of Drugs where registration wasrestricted to plasma products that demonstrated clinical superi-ority over the local product. Under the new Guidelines for theRegistration of Drugs, this requirement was discarded to pavethe way for a US supplier to take over CSL’s contract (see discus-sion of the side letter below); the ARCBS Submission to theFlood Review links this change to the government’s commit-ments given in the side letter (ARCBS 2006). The second isunder the Orphan Drug Program (introduced in 1998), whichallows the import of ‘orphan drugs’ (products used to treat,



prevent or diagnose rare diseases) that may not be commerciallyviable in Australia (Stephen Report 2001: 152).

8 See ARCBS (2004: 4); and Flood Report (2006).9 See Dr Brenton Wylie quoted in ‘Why infected donors’ blood

was given to patients’, Gerard Ryle, The Sydney Morning Herald,15 May 2003, available at <http://www.smh.com.au/articles/2003/05/14/1052885298025.html>.

10 Cited in ARCBS (2004: 8). 11 Article XXIII of the WTO’s Plurilateral Agreement on Govern-

ment Procurement sets out the principles for exclusions, spellingout the right of signatory nations to exempt from open tenderingthose strategic areas deemed necessary for national safety andsecurity: the safety and protection of human health, the safetyand protection of animal and plant health, and military security.

12 Use of IVIg in Australia is growing at an annual rate of 15 percent as a result of new applications, leading to greater recourseto higher-risk imports using plasma from paid donors. SeeS. Parnell, ‘Blood sell’, The Australian, 10 March 2007.

13 As the 2006 Flood Report on Australia’s Plasma Fractionationobserves, Baxter is one of only three foreign suppliers thatenjoys the benefits of restricted competition in our plasma pro-curement system. And benefit hugely it does by convincing thegovernment to buy its pricey synthetic (non-plasma) productsknown as recombinants. In fact, after CSL, Baxter is the govern-ment’s next most favoured supplier, accounting for some$68 million dollars of the Australian blood products bill. To putthis in perspective, Baxter’s slice of the pie is more than half ofCSL’s entire contract income for plasma fractionation.

14 Baxter International is one of the world’s largest producers ofrenal, intravenous therapy and blood products.

15 See ‘CSL faces fight on home turf ’, Brett Foley, AustralianFinancial Review, 29 July 2003, available at <www.factiva.com>.

16 Stephen Report (2001: 88).

Notes 275




http://www.factiva.com

17 ANAO (2003:18).18 Of course, value for money is reflected not simply in a one-off

contract price. It derives from a much larger calculation: thetaxes reinvested in the country, the investment and employmentcreation, the new tax revenue thereby generated, and the exportincome made possible by having a national fractionator likeCSL. Send these activities and assets offshore with a foreign frac-tionator and all of these losses are turned into ‘costs’ to thenational economy. So even if CSL’s prices were shown to behigher than average (which has not been shown), the benefitsassociated with local procurement would very likely still out-weigh the foreign alternative.

19 Note that these conditions apply only to US firms because theyare contained in the FTA with the United States.

20 ‘America Inc.’ is the term we use to convey the close collabora-tion between US government and US industry that takes place asa matter of routine in securing selected US interests in domesticand foreign markets.

21 See ‘Submission to the Joint Standing Committee on Treaties’,Baxter Healthcare Pty Ltd, 14 April 2004, available at <http://www.aph.gov.au/HOUSE/committee/jsct/usafta/subs/SUB14.pdf>.

22 Ibid.23 Ibid. 24 Indicated by the bold italicised font.25 See Davies (2004) on the health impacts of the AUSFTA.26 Ibid.27 To accommodate Paragraph 5 of the side letter, DFAT has stated

that ‘This paragraph acknowledges the right of governments tohave policies that blood plasma products are derived from bloodplasma collected in their own territory. This allows Australia topreserve its policy on using plasma collected from Australianblood donors’ (DFAT 2004b).



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28 According to a 2003 DHA submission, Australia aims for self-sufficiency in fresh blood products and plasma derived products,but not in alternatives to blood products (i.e. genetically engin-eered recombinants).

29 See Davies (2004).30 See DFAT (2004b).31 See Paragraph 3 of the side letter (Reservation to Government

Procurement Chapter). The Government Procurement Chapterof the Agreement applies to purchase of goods and services,except where specifically excluded, by listed government agencies.Procurement of Plasma Fractionation Services has been excludedfrom coverage of the Government Procurement Chapter (SeeAnnex 15-E Services).

32 Tony Abbott, ‘Minister for Health and Ageing Press Release-Plasma Fractionation Review’, 15 December 2006, emphasisadded. Available at <http://www.health.gov.au/internet/ministers/publishing.nsf/Content/C0FCD37A22EC8436CA25724500AE646/$File/abb161.pdf>.

33 See DFAT (2004b).34 From Article XXIII of the WTO’s Agreement on Government

Procurement: ‘. . . nothing in this Agreement shall be construedto prevent any Party from imposing or enforcing measures: neces-sary to protect public . . . safety, human, animal or plant life orhealth . . .’ (GPA 1994).

35 See Flood Report (2006: 27).36 See Hurt (2006).37 America’s strategic targeting of plasma products was no stab in

the dark; in the global market, plasma products constitute a 6 bil-lion dollar industry on an annual basis, and the most costly part(40 per cent) of the production process lies in the raw material,plasma, which now costs over US$100 a litre. Blood productmarkets are seen as a growth area, with rising demand for

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products like IVIg and new possibilities like artificial blood(recombinants).

38 For the evidence on the US approach to procurement of innova-tion from US firms in agriculture, health, defence, IT andbiotechnology more generally, see sources such as Hurt (2006);Weiss and Thurbon (2006); Ruttan (2006); and Connell (2004:7–9).

39 See USTR (2006: 31). 40 As a savvy marketer, Baxter promotes its products by sponsoring

and rewarding hospitals, medical and patient groups who buy itsproducts, including the Haemophilia Society which advocatesfor Advate. See for example The Hemophilia Bulletin, available at<http://www.carolkasper.com/11_5_05/BullAug2005.pdf>.

41 See ‘Baxter wins hemophilia drug OK’, Bruce Japsen, ChicagoTribune, 26 July 2003, available at <http://www.aegis.com/news/ct/2003/CT030708.html>.

42 See Flood Report (2006: 53).43 US Food and Drug Administration 2004: ‘Warning Letter to

Baxter Healthcare Corporation’, 25 May, see <http://www.fda.gov/foi/warning_letters/g4735d.htm>.

44 See ‘ACCC institutes against Baxter Healthcare Pty Ltd’, NewsRelease, 1 November 2002, Australian Competition andConsumer Commission, available at <http://www.accc.gov.au/content/index.phtml/itemId/88219>.

45 See ‘Healthy penalties in Caremark fraud case’, CrawfordGreenburg, Chicago Tribune, 17 June 1995, available at<http://www.aegis.com/news/ct/1995/CT950602.html>.

46 See ‘Corporate Profile: Baxter International’, Congress Watch,1998, available at <http://www.citizen.org/congress/civjus/prod_liability/biomaterials/profiles/articles.cfm?ID=5662>.

47 See ‘FDA notifies health care professionals of problem withBaxter Healthcare’s Meridian Haemodialysis Instrument’, US



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Food and Drug Administration, 16 December 2005, available at<http://www.fda.gov/bbs/topics/NEWS/2005/NEW01275.html>; and see the Class 1 Recall Notice at <http://www.fda.gov/cdrh/recalls/recall-092805.html>.

48 See ‘Sealed in blood’, Pittsburgh Post-Gazette, 7 May 1997, avail-able at <www.factiva.com>.

49 See ‘Illinois court denies class certification in blood productscase’, Health Care Fraud Litigation Reporter, 10(10), 11 April 2005,available at <www.factiva.com> Pharmaceutical LitigationReporter, 2002. ‘Baxter Healthcare loses appeal of $18 milliondamages award’, 17(11), available at <www.factiva.com> and‘Japanese suits on HIV-tainted blood settled’, Andrew Pollack,The New York Times, 15 March 1996, available at <http://query.nytimes.com/gst/fullpage.html?sec=health&res=9E01E7DC1639F936A25750C0A960958260>.

50 See Business Wire 1994., available at <www.businesswire.com>;see also ‘The North Today’, 15 November 2003, available at<www.factiva.com>.

51 See US FDA Warning Letter, 25 May 2004, available at <http://www.fda.gov/foi/warning_letters/archive/g4735d.htm>.

52 Ibid. pp. 205–07.53 See Flood Report (2006: 205–07), emphasis added.54 See our discussion of Australia’s role in US strategy to take back

our beef markets in Japan by lowering our (‘BSE-free’) standardson mad cow, Weiss, Thurbon, and Mathews (2006); and foreffects on Australian industry more generally, see Weiss,Thurbon and Mathews (2004).

55 Sir Ninian Stephen was Governor-General of Australia from1982 until 1989.

56 Stephen Report (2001: 89).57 Under the Plasma Fractionation Agreement, the Common-

wealth had a unilateral option to extend the contract with CSLto June 2009, provided this was done by June 2002.

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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 Healthwith regard to its handling of the PFA extension option review’(2004: 22).

61 Barker (2007: 126–7).62 See ANAO (1999: 52), emphasis added.63 These comments were recorded in 2004 by the JCPAA (2004:

23).64 Ibid., p. 24, emphasis added.65 Ibid., emphasis added.66 See ‘Bad blood over FTA’, Sean Parnell, The Australian, 16 May

2006, available on Bilaterals website¸ <http://www.bilaterals.org/article.php3?id_article=4725>.

67 See Bambrick, Faunce and Johnston (2006).68 Ibid. 69 The ARCBS has long argued that any departure from self-

sufficiency in blood products would impact on Australia’s longstanding policy and risk management strategy. It has been vocalin its opposition to moves to process blood overseas, and its chiefexecutive has written to every donor voicing opposition to theproposal (ARCBS 2004).

70 See Weiss, Thurbon, and Mathews (2006).71 Accessed in 2006 before the release of the review, and subse-

quently removed from the website. 72 These conclusions are succinctly put in Bambrick, Faunce and

Johnston (2006). 73 Both the Red Cross (ARCBS 2004) and the Stephen and Flood

Reports (2001; 2006) see this as a high probability. 74 See ‘Plasma Deal Delivers CSL an R&D winner’, The Australian,

17 February 2007, p. 29; Sean Parnell, ‘Abbott may lift mad cowblood ban’, The Weekend Australian, 10–11 March, 2007, p. 2.



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7 POLITICAL STRATEGY AND POLITICAL CRINGE

1 ‘America Inc.’ is the term we use for the US government-businesspartnership and its institutionalised culture of cooperation,which drives US foreign defence and economic policy.

2 See Richard Ackland, ‘Another one sacrificed in the name of theAlliance’, The Sydney Morning Herald, 16 February 2007. p. 11.

3 Hence feeding to the media the ‘shocking’ story of CSL beingallocated 2 per cent of blood plasma collected for research anddevelopment purposes, painted as an ‘unfair subsidy’ to a privatefirm unreasonably shielded from international competition. See‘Plasma Deal Delivers CSL an R&D winner’, The Australian,17 February 2007, p. 29.

4 Josef Joffe, ‘Annan, an indecisive hero’, International HeraldTribune, 9 December 2006, p. 9.

5 Rostovtzeff (1928: 228–9).6 On the list of nicknames, mostly coined by his Liberal col-

leagues, ‘the rat’ would appear to be the least offensive. Themost offensive have been documented by Alan Ramsay in ‘Inmugsville, where payback beats politeness’, The Sydney MorningHerald, 25 October 2003; the coining of such nicknames byHoward’s own colleagues suggests a deficit of respect to say theleast. See, for example, M. McCallum, Run, Johnny, Run: The storyof the 2004 election (Duffy & Snellgrove 2004).

7 Channel 9’s Helen Dalley puts it succinctly: ‘Written off politi-cally in the 1980s after a drubbing at the polls, snubbed by hisown party, sneered at in the media as Little Johnny, by the mid-1990s, the nowhere man was being hailed the comeback kid.’‘Howard’s Way’, Sunday (TV program on Channel 9), screenedon 10 October 2004.

8 As veteran columnist for The Australian, Paul Kelly, observes,‘Politics is everything to John Howard and he judges himself

Notes 281


very much by political outcomes’. Similarly, Helen Dalleyobserves that when asked in a 1999 interview celebrating hisquarter century as a taxpayer-funded MP ‘Personally, what doyou feel was your greatest achievement?’ Howard’s revealingresponse was: ‘Coming back. I was written off 10 years ago,almost to the day. I came back, I kept going and in the end I wassuccessful.’ As Dalley puts it, Howard ‘saw his greatest achieve-ment in political terms rather than anything he’d actually donefor the country thus far’. ‘Howard’s Way’, ibid.

9 Collins and Reed (2005); Wilkie (2007: 185). 10 Thus when Howard says ‘Australia is treated with greater respect

and taken more seriously on the world stage today than 10 yearsago’, almost certainly he is tacitly referring to the perception hehas of himself (as reported in the Sun Herald, 7 April 2006, p. 7).For many commentators, there is virtually no domain in whichAustralia has gained respect under Howard’s tenure; thoughmany believe the respect it has lost has been considerable.

11 Howard’s alliance exploitation game has cemented the allianceas the ‘Eleventh Commandment’, as former diplomat and DFATofficial Bruce Grant (2004) has noted.

12 Judith Brett offers an incisive analysis of Howard’s anti-Laborobsession, observing that he is driven to divide the world into‘us’ and ‘them’: ‘Critics putting arguments and reasoned differ-ences are treated as opponents and shoved into the Labor [read‘enemy’] camp.’ (Brett 2005: 42).

13 Brett (2005: 41–2; emphasis added).14 See this link ranking countries that vote most often with the US

at the UN <http://www.jewishvirtuallibrary.org/jsource/UN/UN_votes04.html. Australia did not appear in the rankingsprior to 2000; since then we have ranked in the top four>,behind Israel, Palau, and the Marshall Islands.



http://www.jewishvirtuallibrary.org/jsource/UN/UN_votes04.html.Australiadidnotappearintherankingspriorto2000



15 For example, Alcoa’s influence on the federal government’s 2004White Paper on Energy.

16 Wayne Errington and Peter Van Onselen, ‘You lucky, luckybastard!’ The extent of John Howard’s political genius’ paperpresented at the John Howard’s Decade Conference, ANU Canberra,March 2–3, 2006.

17 On the media, see Ester (2007), and on the culture of fearHoward has instilled in the public service, see Barker (2007), andMichael Costello, ‘Fear Has Muzzled Australia’s Senior FederalBureaucrats’, The Australian, 21 April 2006, p. 16.

18 ‘Howard’s Way’, ibid. 19 Louise Dodson, ‘At the centre of attention’, The Sydney Morning

Herald, 23 February 2006.20 For a long list of the plumb public service jobs awarded to

Howard supporters throughout his tenure see Louise Dodson,‘Plenty of Cheques, few balances for these plumb jobs’, TheSydney Morning Herald, 21 January 2006, p. 51, and PamelaWilliams, ‘Howard’s Legacy: An entrenched, hand picked elite’,Australian Financial Review, 16 July 2004, p. 1.

21 When coined by literary critic A. Phillips in the 1950s, the termmeant deference towards the cultural achievements of others.‘unthinking admiration for everything foreign (especiallyEnglish) which precluded respect for any excellence that mightbe found at home’ (1980: vii). Although criticised for overgener-alising (Hume 1993), the concept has broad resonance today:DEST’s website had this to say: ‘By cultural cringe we mean aknee-jerk, unthinking admiration for authorities overseas inplaces like England or, perhaps today, the USA.’ EnvironmentMinister Robert Hill (1996–2001) defined a related term ‘envi-ronmental cringe’ in a 2000 address to the Sydney Institute as‘Australia’s penchant for failing to assert its traditions and accom-plishments.’ (see <http://www.environment.gov.au/minister/

Notes 283


env/2000/sp10feb00.html>); even business leaders in the IT andcommunications sector see ‘the Australian government’s culturalcringe’ as one of the ‘biggest issues’ hampering the uptake ofexcellent local products, simply because they are local (LilliaGuan, ‘Supporting Australian business’, Crikey.com, 2006, avail-able at <http://www.crn.com.au>.

22 As historian Mark McKenna notes, ‘Wherever there is a cup oftea to be had with the military, John Howard is there.’ (cited inBrett 2005: 38).

23 See for example Jason Koutsoukis, ‘Ladies and Gentlemen,President Howard’, Sunday Age, 26 November 2006, p. 15.

24 Judith Brett conveys this understanding of Howard with rareinsight (2005: 32–40).

25 Howard has emphasised that he is a ‘nationalist’ from one end ofhis tenure to the other. See his address to the Liberal PartyTasmanian State Council dinner in 1997: ‘I am not a centralist; Iam a nationalist’ and in 2007 his press conference at the mouth ofthe Murray River: ‘I am a passionate Australian nationalist’. Forthe 1997 speech, see <http://www.pm.gov.au/news/speeches/1997/taslib.html>; for the 2007 press conference, see <http://www.pm.gov.au/news/Interviews/Interview2351.html>.

26 In a seminal essay on ‘Centre and Periphery’, anthropologistEdward Shils (1975) underscores the role of a central valuesystem in creating social cohesion. Howard’s instinctive under-standing of this point (expressed in efforts to invoke or exploitshared experiences and collective memories), too often dis-counted by his multicultural opponents, is expertly analysed byJudith Brett (2005: 40). She notes that ‘Because whenever he hasevoked a national “us” he has been accused of really demonisinga non-national “them”, Howard’s critics have been unable todevelop any effective or plausible counter-strategies for talkingto their fellow Australians. If you regard any talk of “us” as



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illegitimate, it is not clear to me whom you are going to talk to.Nations are not simply formed and defined by their oppositionto or difference from some Other; they are also formed anddefined by shared experiences and collective memories. Theyhave centres as well as borders . . . Howard speaks persuasivelyfrom that centre.’

27 In reality, Howard has not ‘failed’ since, as we have shown, ithas never been his project. On the contrary, judged by the US-centric political strategy that he has pursued, Howard hassucceeded.

28 Brett (2005: 43).29 Writing in the Australian Financial Review, Geoff Barker observes

that ‘. . . under John Howard . . . Australia seems to be emulat-ing aspects of countries like China, Singapore and Malaysia. . . countries where dictatorial or dominant governments have asecurity of tenure that allows them to implement long-termsocial, political and economic plans without the fear of beingturned out of office.’ See ‘PM marginalises dissenters’,Australian Financial Review, 17 October 2005.

30 See the comprehensive analysis by Clive Hamilton and others inthe collection Silencing Dissent (2007).

31 Former Army lieutenant colonel and senior intelligence analystAndrew Wilkie describes his experience in Wilkie (2007: 191).Ridicule, on the other hand was reserved for the 43 eminentformer Australian military and intelligence chiefs and seniordiplomats who in a letter called for a return to ‘truth in govern-ment’—publicly lambasted by the PM’s minders as ‘dodderingdaiquiri diplomats’ and ‘disgruntled old men’. Distinguished warrecords it seems were no grounds for respect. See Grant (2004:132–3).

32 See remarks by Al Gore on NBC’s Today Show, with Matt Lauer,6 December 2006, available at <http://thinkprogress.org/2006/12/06/gore-iraq-bush/>.

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http://thinkprogress.org/2006/12/06/gore-iraq-bush

33 Rudd (2006: 30). 34 Owen Harries, SBS Dateline, 27 July 2005. Harries, a radical con-

servative who commands respect on both sides of the Pacific,puts it candidly: ‘A reputation for being dumb but loyal and eageris not one to be sought.’ On the contrary, he argues, what thealliance needs is discrimination and balance plus a degree ofscepticism: ‘Australia must learn to be as good an ally as itcan be, while maintaining its freedom of choice.’ See ‘End ofsimplicity’, The Australian, 1 December 2006, p. 12). Similarpoints are made by former Liberal PM Malcolm Fraser, ‘Theend of our independence?’ The Age, 14 July 2003, available at<http://www.theage.com.au/articles/2003/07/13/1058034872660.html>.





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