The Coalition-aligned Menzies Research Centre has urged the Turnbull Government to push-back on rising protectionism and redouble its efforts to bring about so-called ‘free trade’. From The AFR:
Australia needs to fight back against creeping protectionism and accelerate trade deals… commentator Andrew Bragg has argued in a major essay for the Menzies Research Centre.
With the Trans Pacific Partnership… unravelling… Mr Bragg has warned that Australia could find itself as badly isolated as it was in the 1960s when Britain joined the European common market.
The essay, which includes interviews with former Prime Ministers John Howard and Tony Abbott, as well as Malcolm Turnbull – who is scheduled to launch the book in Canberra on Wednesday – delivers a series of hard-hitting recommendations with the aim of ensuring trade deals are the nation’s best insurance against a global slide back into protectionism.
His suggestions include an attack on today’s business leaders for failing to take up the public battle in favour of free trade and open markets; a call on the government to ensure closer links between the Department of Foreign Affairs and Trade and dynamic emerging industries, particularly those in disruptive sectors; and, simplifying the language and shortening timetables used to negotiate agreements…
Mr Bragg, an accountant by training, is since last year director of policy and research at the Menzies Research Centre, and previously worked as head of policy for the Financial Services Council.
Instead of relying on the views of an accountant and former financial services lobbyist, how about the Turnbull Government instead seek the view of a genuine expert – the Productivity Commission (PC) – which has spent decades examining the whole free trade issue?
And while you are at it, how about rigorously evaluating those so-called “free trade agreements” (FTAs) already concluded and putting processes in place to avoid pitfalls in the future?
Because, the available evidence suggests that the FTAs negotiated by this and past Coalition Governments have been a failure.
Back in 2010, the PC comprehensively criticised Australia’s FTAs, noting:
The Commission concluded the benefits of these agreements have been oversold and the processes for developing them should be improved.
…the Commission found little evidence that Australia’s recent bilateral agreements had provided substantial commercial benefits. The main factors that influence decisions to do business in other countries are likely to lie outside the scope of such agreements. The study concluded that while preferential trade agreements could increase national income, the net effect is likely to be modest.
The study also found that some provisions included in Australia’s recent preferential trade agreements — including investor-state dispute settlement mechanisms, government procurement requirements, intellectual property protections and provisions affecting areas traditionally the province of domestic policy, such as culture — potentially entail significant costs or risks.
More recently, the PC lamented 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”.
Other studies have delivered even worse assessments.
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”.
Peter Martin noted in July 2016 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”.
Whereas just last month, The Australian reported that the China-Australia FTA was failing to deliver as promised, weighed down by “non-tariff measures made worse by slow bureaucratic processes [which] are imposing costs and delays”.
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.
Senior academics also recently warned that FTAs have become less and less about opening markets and more about entrenching monopolies.
None of the above are an endorsement of FTAs, nor suggest that Australia should double down on more agreements. Quite the opposite in fact.
My overall view is 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, these agreements have resulted in poor outcomes for the Australian people.
Rather than trying to sell us on the virtuous benefits of “free trade”, the Menzies Research Centre should focus its efforts on putting rigorous processes in place to ensure future FTAs actually deliver as promised for the Australian people.
Doing the same thing over and over again, and expecting a different result, is the definition of insanity.
