After some great work on the immigration issue, The Australian’s Judith Sloan has unfortunately returned to her politically partisan ways spruiking the Trans-Pacific Partnership (TPP) and “free trade” agreements (FTAs) more generally, in part because members on the left oppose them:
Here’s one of my rules: whatever Greens senator Sarah Hanson-Young thinks, I think the opposite. If she is against the Trans-Pacific Partnership trade agreement, then I’m for the TPP…
Note also that GetUp! is another vocal opponent of the TPP. More irony…
Australia has its hands full trying to maximise the benefits of the recently finalised bilateral trade agreements with Japan, South Korea and China. One of the key features of these agreements is the greater access to markets in these countries for producers in several of our industries, particularly agriculture.
And don’t forget we have a trade agreement with the US…
There is still scope for the TPP to deliver benefits to the participating countries, but it will be some time in the future.
Supporting something because your opponents do not is hardly the basis of sound policy making.
Thankfully, the Productivity Commission (PC) – Sloan’s former employer – does not share the same enthusiasm towards the TPP or FTAs more generally.
The PC has previously claimed that Australia’s trade negotiations have been “characterised by a lack of transparent and robust analysis, a vacuum consequently filled at times by misleading claims”, and has called on the “final text of an agreement to be rigorously analysed before signing”.
The PC has also frequently derided the efficiency losses associated with preferential FTAs, as well as the hidden protections embedded in some deals (e.g. extending patents and copyright protection).
And the PC has explicitly requested that the government “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”.
Other studies have been similarly critical of Australia’s FTAs.
The Crawford School of Public Policy at the ANU conducted a study of the Australia-US FTA (AUSFTA) and found that a decade after signing, the agreement has diverted more trade than it has created.
The ANU’s Peter Drysdale has also estimated that “Australia alone has suffered trade losses [from AUSFTA] the annual equivalent of the current price of around 18 Japanese, German, Swedish or French submarines through this deal”.
There also seems to be a growing acceptance that the FTAs negotiated by successive Coalition governments have been over-hyped but under-delivered.
In addition to the concerns above regarding the AUSFTA, Peter Martin noted in July 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”.
Meanwhile, research by HSBC and the Australian Chamber of Commerce and Industry found that Australia’s FTAs have been drafted 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.
As another counter-point to Ms Sloan, senior academics have today posted an article arguing that so-called “free trade deals” have become less and less about opening markets and more about entrenching monopolies:
…improvements being made at the WTO level are sorely missing from most bilateral and regional trade deals, especially those being driven by the U.S. Many of these – from the Australia-U.S. Free Trade Agreement to the now defunct TPP – have sought to further extend the monopoly rights of IP-protected firms…
Obviously, the promotion of rent-seeking by entrenching monopoly rights has nothing to do with free trade. But the reality is that, for the United States at least, this has become a primary goal of its “free trade” agreements.
This is why the United States should abandon the TPP – and why Australia should support its abandonment. Abandoning the TPP, and requiring our governments to focus their efforts on trade deals that take a prudent approach to market access and a tough line on rent-seeking – would be beneficial for both our countries.
There is a role for FTAs in Australian trade policy, but only once rigorous process are put in place to ensure that Australia maximises the benefits from FTAs and minimises their costs.
At a minimum, the PC should be engaged to assess trade deals for their equity and efficiency impacts both before and after negotiations are completed.
