Trade Minister Steve Ciobo has continued to push the case for more “free trade agreements” (FTAs), arguing that they are a key ingredient for continued economic growth and jobs. From The Guardian:
In an interview ahead of his departure on Monday for a new round of trade talks in Indonesia to progress a proposed bilateral economic partnership with Jakarta, Ciobo told Guardian Australia the policy orthodoxy on open markets and trade liberalisation was being questioned increasingly by voters both in Australia and other western democracies.
…”we’ve got to make sure we make that link between the policy orthodoxy to this point and the benefits that flow from it,” he said.
…with populist and protectionist forces gaining significant representation in the new Australian parliament, the Coalition will struggle to achieve broad-based political support for its trade liberalisation agenda, which is a key element of its economic policy approach…
“[We must] counter any misinformation with facts and really reinforce the point that 25 years of continuous economic growth in Australia is driven, not exclusively but partly, by our engagement with the world,” he said.
“Free trade and liberalised trade promotes economic prosperity,” he said.
Ciobo said populists highlighted the closure of factories but failed to mention that trade liberalisation delivered dispersed net benefits to economies like Australia. The dispersed net benefits included “multiple businesses employing more people – they’ve got increased market access”.
Ciobo’s spin around the benefits of the Coalition’s FTA agenda is not backed-up with evidence.
Peter Martin noted last month that a study commissioned by the Government “on the new Japan, Korea and China agreements found that taken together they will boost our exports 0.5 to 1.5 per cent, while boosting our imports 2.5 per cent, which means they will send our trade balance backwards”.
In a similar vein, the Crawford School of Public Policy at the ANU conducted a study of the Australia-US FTA, and found that a decade after signing, the agreement had diverted more trade than it has created.
Research by HSBC and the Australian Chamber of Commerce and Industry also found that Australia’s FTAs have been drafted so poorly, and are so complex, that they are next to useless in a commercial sense. As such, there has been a poor take-up rate by Australian businesses exporting to partner countries.
And just last week, the Productivity Commission (PC) delivered another damning assessment of Australia’s recent FTA negotiations, noting that the benefits arising from Australia’s FTAs have been “exaggerated”, while warning of risks associated with such agreements:
The benefits of increased merchandise trade emanating from bilateral trade agreements have been exaggerated.
Different and complex rules of origin in Australia’s preferential trade agreements are likely to impede competition and add to the costs of firms engaging in trade.
The nature and scope of negotiating remits should be assessed from a national structural reform perspective before entry into negotiations, rather than primarily for export opportunities. The text of proposed trade agreements should be made public and a rigorous analysis independent of the negotiating agency published with the final text.
The Australian Government should seek to avoid the inclusion of Investors-State Dispute Settlement (ISDS) provisions in bilateral and regional trade agreements that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors.
The history of Intellectual Property (IP) being addressed in preferential trade deals has resulted in more stringent arrangements than contained in the multilateral agreed Trade-Related Aspects of Intellectual Property (TRIPS). Australia’s participation in international negotiations in relation to IP laws should focus on plurilateral or multilateral settings. Support for any measures to alter the extent and enforcement of IP rights should be informed by a robust economic analysis of the resultant benefits and costs.
My overall view remains that FTA’s have the potential to offer modest trade benefits if executed well. However, this requires the Government to implement a proper process around negotiations, including engaging the PC to analyse trade deals for their equity and efficiency impacts both before and after negotiations are completed.
To date, the Coalition has shunned the PC altogether and instead forged ahead with FTAs in an ad hoc, evidence free, manner for political rather than economic reasons, and without due regard for longer-term consequences. Accordingly, they have so far resulted in poor outcomes for the Australian people.
Rather than trying to sell us on the virtuous benefits of “free trade”, Ciobo should instead focus on putting rigorous processes in place to ensure future FTAs actually deliver as promised for the Australian people.
