The Turnbull Government will release its first foreign policy White Paper in 14 years, which will reportedly assert the need for Australia to aggressively pursue more ‘free trade agreements’ (FTAs) in order to spur job creation and economic growth. From The AFR:
Australia’s first foreign policy White Paper in 14 years will reject protectionist sentiment and reassert the need to continue to aggressively pursue new free trade deals as a central platform to drive the nation’s economic growth.
Trade Minister Steven Ciobo told The Australian Financial Review the White Paper, to be released on Thursday, will endorse the current policy to advocate for the liberalisation of trade and investment in bilateral and multilateral talks, build closer relationships with business and put “Australian commercial interests at the heart of foreign policy”…
“The White Paper makes clear that Australia’s national interest not only has been well-served by a liberal trade and investment regime but it is critical to our ongoing prosperity,” Mr Ciobo said.
“Australia will pursue all avenues to achieve pro-trade settings domestically, internationally, bilaterally and multilaterally because that has made Australians wealthier”…
Instead of pursuing further FTAs with vigour, the Turnbull Government should focus on getting the processes right. Because the FTAs that Australia has concluded this century have failed to deliver material benefits, and might even have generated net costs, for Australians.
Central to the concerns is that several of Australia’s FTAs have included ‘anti-liberalisation’ measures, like the strengthening of patent and copyright laws, as well as a controversial investor-state dispute settlement (ISDS) provision that permit foreign corporations to sue the government.
Several studies have delivered damning assessments 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”.
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”.
Earlier this year, 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”.
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.
Whereas back in 2010, the Productivity Commission (PC) “found little evidence that Australia’s recent bilateral agreements had provided substantial commercial benefits” and “concluded the benefits of these agreements have been oversold and the processes for developing them should be improved”. The PC also cautioned that anti-trade measures like ISDS mechanisms and intellectual property protections “potentially entail significant costs or risks”.
None of the above are an endorsement of FTAs, nor suggests that Australia should double down on more agreements without getting the processes right.
Indeed, the PC recently made a similar observation, noting 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 called for the “final text of an agreement to be rigorously analysed before signing”.
Forging ahead with FTAs in an ad hoc, evidence free, manner for political rather than economic reasons, and without due regard for longer-term consequences, is a recipe for failure. Instead, the Turnbull Government should seek the view of a genuine expert – the PC – and have it rigorously evaluate Australia’s existing FTAs, as well as advise on the mechanisms and processes that are needed to be put in place to ensure that future FTAs maximise benefits for Australians.
Because doing the same thing over and over again, and expecting a different result, is the definition of insanity.
