Global Trade Watch

CSL's plasma fractionation plant takes the blood that about half a million Australians donate to the Red Cross each year and separates it into the products needed by modern medicine.

Cancer patients are the biggest recipients, but those suffering from heart disease, stomach and bowel problems and burns aren't far behind. It's a $138 million job that CSL - formerly government-owned but now a $13 billion listed company - has had to itself since 1953. But now foreign companies are seeking a slice of the action.

In May 2004, as part of the free-trade agreement struck with the US, then trade minister Mark Vaile wrote to American trade representative Robert Zoellick committing Australia to conduct a review of its blood fractionation services and pledging to recommend to the states that CSL's monopoly should be opened up to foreign tender. But the review, completed last year by former Department of Foreign Affairs and Trade secretary Philip Flood, put the kybosh on the idea.

His concern wasn't so much that the quality of Australia's blood supply could be at risk if plasma collected here were sent overseas, fractionated in a foreign plant then sent back. Rather, he warned the costs and time delays involved in such a process were prohibitive.

The so-called "vein to vein" lead time - the time that elapses between someone donating their blood and a final product making it to a patient - could double under such a scheme, he warned.

And given that CSL's Broadmeadows plant has the world's highest yield, generating more useable product for every litre of plasma it processes, offshore processing would make Australia more reliant on imports.

But despite Mr Flood's unequivocal conclusion, the federal government's hands were tied. In accordance with its obligations under the FTA, it recommended to the states - whose consent is needed before any policy changes can be made - that Australia should allow overseas processing.

A formal meeting between Health Minister Tony Abbott and his state counterparts isn't scheduled until the end of March.

But already it's clear the states aren't interested in change. In reality, the states' decision to back the status quo provides a handy escape clause for Canberra.

In an election year, no government would want to be convincing voters it's in their interests for the blood they donate to the Red Cross to be sent overseas for processing.

Still, the issue was included in the FTA for one reason: Washington wants its companies to have a shot at CSL's business.

The matter is likely to be on the agenda in June when the US and Australia discuss progress under the FTA, which came into force two years ago. But while the states' resistance might help Mr Abbott out of a hole, relations between the two levels of government are hardly strong. After state health ministers met in Melbourne on Friday to discuss hospital funding - the first such meeting to exclude the commonwealth - Mr Abbott accused them of a "Labor union conspiracy".