MB has long derided Australia’s ‘free trade agreements’ (FTAs) for their complexity and deleterious efficiency impacts, their anti-competitive measures around intellectual property, as well as some FTAs containing clauses enabling trading partners to sue sovereign governments (called Investor-State Dispute Settlement or ISDS).
Over the weekend, Fairfax’s Ross Gittins joined the club attacking FTAs, claiming they were cover for dubious special deals for businesses:
When you look behind the spin doctors’ label you find “free trade” is covering up a lot of special deals that may or may not be good for the economy.
This is the conclusion I draw from the paper, What Do Trade Agreements Really Do? by a leading US expert on trade and globalisation, Professor Dani Rodrik, of Harvard, written for America’s National Bureau of Economic Research…
He says recent research suggests the deal [NAFTA] “produced minute net efficiency gains for the US economy while severely depressing wages of those groups and communities most directly affected by Mexican competition”.
So there’s a huge gap between what economic theory tells us about the benefits of free trade and the consequences of highly flawed, politically compromised deals between a few countries…
What many economists don’t realise is that the international battle to eliminate tariffs and import quotas has largely been won (though less so for the agricultural products of interest to our farmers).
This means so-called free-trade agreements are much more about issues that aren’t the focus of economists’ simple trade theory: “regulatory standards, health and safety rules, investment, banking and finance, intellectual property, labour, the environment and many other subjects besides”.
International agreements in such new areas produce economic consequences that are far more ambiguous than is the case of lowering traditional border barriers, Rodrik says, naming four components of agreements that are worrying.
First, intellectual property. Since the early 1990s, the US has been pushing for its laws protecting patents, copyrights and trademarks to be copied and policed by other governments (including ours)…
Second, restrictions on a country’s ability to manage cross-border capital flows…
Third, “investor-state dispute settlement procedures”…
Finally, harmonisation of regulations…
How, exactly, is this good for economic efficiency, jobs and growth?…
Rodrik concludes that “trade agreements are the result of rent-seeking, self-interested behaviour on the part of politically well-connected firms – international banks, pharmaceutical companies, multinational firms” (not to mention our farm lobby).
They may result in greater mutually beneficial trade, but they’re just as likely to redistribute income from the poor to the rich under the guise of “freer trade”.
Well said. I will also add that recent surveys show that FTAs have been next to useless in a commercial sense for Australian small-to-medium sized businesses, primarily because of their immense complexity, their lack of consistency between FTAs, and the high administration costs attached to satisfying FTA requirements.
So why is the federal government so gung ho about signing more FTAs? Presumably it is because it gives them something to spruik to voters – a ‘deliverable’ – as well as buys them good grace from certain members of the business community that may benefit from specific clauses.
