No. 190

FREE TRADE AGREEMENTS – SOME GOOD NEWS

Stone the crows! There we were thinking free trade had gone the way of zombies, with ministers at meetings just walking into walls and eating officials’ brains. But it seems the trade triplets bilateral, plurilateral and multilateral agreements are not not-dead, in fact they are looking surprisingly sprightly.

Problem is, activists who think free trade is terrible are also alive and argumentative.

Just as there were in 2004, when they wanted to bury the free trade treaty with the United States, warning it would “kill the country”.[i]

But we are still here – and so it seems is free trade – with deals imminent and agreed all over the joint.

For a start, we have an agreement with South Korea ready for parliament – the Korean-Australian Free Trade Agreement (KAFTA). This is catch-up commerce. The US, EU and ASEAN already have KAFTAs of their own and, without our own, Australian agricultural exports will be down 29 per cent by the time the US and EU arrangements are fully phased in. In contrast, a KAFTA to call our own will increase exports there by 25 per cent in 2030.[ii]

The Trans-Pacific Partnership Agreement is, potentially, a bigger deal. This is an expansive arrangement between us, the US and Canada, Malaysia, Mexico plus Peru, Japan and Vietnam which, while a long way short of a common market, would supplement existing FTAs and end barriers on investments and financial services.[iii] There is a way to go on the Trans Pacific Partnership (TPP); a Singapore meeting broke up last week with only an agreement for ministers to meet again next month. However, they have an incentive to reach an agreement by then – campaigning for the US mid-term elections means trade will shortly be trapped by politics.[iv]

But the trade negotiations most easily mistaken for a zombie, the Doha Round of the World Trade Organisation, is also lithe and lucid. This is especially surprising; countries, including Australia, started down the bi and plurilateral tracks when it looked like a global free trade deal was doomed by the collapse of the Doha round in 2008.[v] However, at the start of this month, all members of the WTO agreed to reduce de facto tariffs, customs delays, obscure import rules and the like.[vi] Open borders this is not, “although the trade-facilitation agreement should help to boost world trade, the deal is unlikely to convince sceptics that the multilateral process can produce ambitious reforms,” The Economist has ambivalently argued.[vii]

Understandably so. Orthodox free traders argue that bilateral agreements and regional arrangements distort world trade, creating “a spaghetti bowl problem, a complex set of overlapping and inconsistent rules that erode the integrity of the global trade system.”[viii] This is undoubtedly true, but trade politics is about deals in the best of all possible worlds and the apparent demise of Doha meant there was not much hope of a global arrangement. This is a good deal for people who will benefit from free trade in goods and services all over the world – and that is everybody.

But most opponents of trade reform do not object to bi and pluri agreements because they are in the way of the revived Doha round. Rather, they think free trade is a capitalist conspiracy imposed by the evil Americans.

Australian protectionism is as old as federation but the modern version really got going when Labor kicked up against the US FTA a decade back. Latham-led Labor argued it was a plot to destroy Australian film and television and to allow American drug companies charge the Pharmaceutical Benefits Scheme what they liked. The Howard Government, in response, overstated the benefits of the deal and, in the end, it was all rather fraught. As John Quiggin, no special friend of free market economics, concludes:

The AUSFTA has delivered few, if any, of the benefits promised by its advocates. On the other hand, its consequences have been more limited than many critics predicted. The PBS remains intact, although the agreement has strengthened the push to raise returns to pharmaceutical companies. Attempts to advance a strong intellectual property agenda on the basis of the agreement have generally been unsuccessful, and there has been some liberalisation of intellectual property rules in relation to fair use and other exemptions. [ix]

Despite the USFTA not killing the country, there are similar arguments now that the TPP is another American plot, and that another conservative government is sacrificing Australian interests on everything to please the Yanks. There are claims Australia is bowing to US demands for corporations to be able to sue governments over legislation business does not like, in national and international courts. This is seen as Washington helping tobacco companies to overturn plain packaging laws.[x] Critics also argue that strengthened intellectual property rights in particular will push up drug prices in developing nations.[xi]

In essence, the complaints come down to alarm that copyright owners will be able to protect their investments:

Intellectual property experts are critical of the draft treaty, which they say would help the multinational movie and music industries, software companies and pharmaceutical manufacturers to maintain and increase prices by reinforcing the rights of copyright and patent owners, clamping down on online piracy, and raising obstacles to the introduction of generic drugs and medicines.[xii][xiii] As for the claim that the government will accept increased PBS costs, all the Crows can caw is “pull the other wing, for verily it hath bells upon it”. As John Howard didn’t in 2004, neither will Tony Abbott now – no prime minister who likes the job will willingly increase the consumer costs of the PBS.

As with the USFTA, the TPP is simply not as sinister as its opponents argue. In the end, opposition to it is driven by two things – distrust of the US and suspicion of market economics. Which puzzles the Crows – if there is one thing the left loves it is subordinating government to international agreements. But not when the result is less regulation and more capitalism.

It’s enough to depress the undead.

 

The Crows are off their perch for a few weeks and will be back in January.

Need a speech written an argument assembled? Call me; stephen4@hotkey.net.au, 0417469093

 

ENDNOTES


[i] Linda Weiss, Elizabeth Thurbon and John Mathews, How to kill a country: Australia’s devastating trade deal with the United States (Allen and Unwin, 2004)

[ii] Department of Foreign Affairs and Trade, “Korean-Australian Free Trade Agreement” @ http://goo.gl/LD25RJ recovered on December 14

[iii] Department of Foreign Affairs and Trade, “Trans-Pacific Partnership Agreement negotiations,” @ http://goo.gl/MDHJrd recovered in December 14

[iv] John Kerin and John Kehoe, “Robb says public will see TPP deal before it’s signed,” Australian Financial Review, December 11

[v] Dennis Shanahan and Patricia Karvelas, “Labor to pursue bilateral FTAs,” The Australian, August 13 2008

[vi] Alan Kohler, “WTO deal in Bali keeps Doha round alive,” The Australian, December 10

[vii] “The World Trade Organisation: Unaccustomed victory,” The Economist, December 14

[viii] Jeffrey Wilson “Multilateral, regional, bilateral: which agreement is best? The Conversation, November 15 @ http://goo.gl/fxaiFl recovered on December 14

[ix] John Quiggin, “Lessons from the Australia-US Free Trade Agreement,” Inside Story, November 22 2010, @ http://goo.gl/qrgkKH recovered on December 14

[x] Peter Martin, “Australia ‘fails’ anti-tobacco bid,” Sydney Morning Herald, December 12

[xi] Brigitte Tenni, “US concessions don’t give trans-Pacific partners access to drugs,” The Conversation, December 6 @ http://goo.gl/slcEpY recovered on December 14

[xii] Philip Dorling, “Australians may pay the price in Trans-Pacific Partnership free trade agreement,” Sydney Morning Herald, November 14

[xiii] Greg Earl, “Trade deal battle producers results,” Australian Financial Review, December 11

'2012