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22-October 2013

Free Trade Agreements and their questionable benefits

Opposition Trade spokesperson Richard Marles, discussing the TPP and a free trade agreement with China on ABC Lateline recently, dropped the following claim:

"I tell you, there are hundreds of thousands of future Australian jobs at stake."

Do you ever wonder where such claims come from and on what basis they are made?

Well, Lateline interviewer Tony Jones indicated that at least one of the sources politicians use is the Productivity Commission. But if we look, not even very carefully, at the Productivity Commission's 2010 report on Bilateral and Regional Trade Agreements (BRTAs), we see evidence of serious misgivings concerning the claimed benefits of trade agreements (p 292):

In brief, there are concerns that pre-agreement modelling is used to overstate the benefits likely to be reaped from BRTAs, and that the assumptions and other qualifications surrounding the modelling tend to be downplayed in public statements by those promoting BRTAs (box 15.1). In the Commission's assessment, this leads to unrealistic expectations about what will be obtained, and skews consideration of the merits of proceeding with negotiations.

In short, there are serious questions about many aspects of these models and their reliability.

Also, as the report suggests, politicians such as Richard Marles make public statements which completely ignore these questions.

Now, I am sorry to single out Richard in this criticism, as other politicians seem no better. Even well-prepared official party documents such as the Coalition's Trade policy document include statements that are unverifiable and unsourced.

For example, the claim that:

Over the last 20 years, multilateral trade liberalisation has boosted real family incomes by between $2,700 and $3,900 per year.

So, the Australian public is expected to just accept that such claims are not only uncontroversial but are a sufficient summary of complex issues?

Where did these figures come from? How can we check them?

The Productivity Commission report even seems to question the whole free-trade approach stating in relation to them that:

In the Commission's view, a more transparent and strategic approach is required to ensure that there is an appropriate focus on policies that are most in Australia's interests.

Even if we are to have free-trade agreements, the Productivity Commission's report also emphasises the need for trade agreements to be conducted transparently, noting that even prior to the TPP trade agreements were subject to (p 301) :

  • inadequate (public) assessmentof all available options;
  • agreements are not subject to meaningful, transparent assessmentbefore they are signed;
  • lack of transparency, coverage and pace of consultations (particularly once negotiations have begun);
  • and an inadequate role for Parliament in the process

Yet on the DFAT website, they insist that the TPP must be done in secret:

The countries in the TPP negotiations have agreed to keep the negotiating documents confidential, but we do provide regular public briefings on the status of the negotiations. This is normal practice in international negotiations.

In the case of the TPP, this confidentiality safeguards our negotiating positions and strategies, which cover sensitive national interests in relation to market access and Australia's trade and commerce more broadly.

The Productivity commission report on trade analyses some models for trade agreements, which it refers to as 'best practice'.

One of these best practice models was produced by Australia's own Rural Industry Research and Development Corporation (RIRDC). The RIRIDC model identified the following as a feature of a 'good' trade model:

Transparency is important at all stages to ensure that political motivations do not highjack FTA negotiations.

There are certainly some large, influential organisations that are happy for the agreement to be signed, even if in secret.

For example, in a recent media release, the beef industry has made it clear that it supports the TPP particularly if it provides 'unfettered trade'. Does this mean that under the TPP the Beef Industry, and perhaps many other industries, would no longer need to respond to concerns raised by everyday Australians? Would Australia (for example) be able to ban live beef exports if it was suspected that the exported animals were being mistreated as we did in 2011?

Certainly, the Coalition's trade policy identifies this as an issue, with the following criticism of the former Labor government:

Its decision to ban live cattle exports to Indonesia without warning not only significantly damaged Australia's valuable cattle export trade to Indonesia but our reputation as a trusted and reliable trade partner.

The decision to ban exports did indeed adversely effect beef farmers and there is no doubt that lessons can be learned on how to better help farmers in such situations (although note that smaller producers like this one and this one sell only to approved buyers), but do we really want a new TPP world in which the Australian government can be sued for making such decisions?

A world where large companies and organisations can put their own limited interests ahead of the wishes of many small Australians? Are trade and money now to be our highest values?

Is it not the purpose of Government to ensure that everyday Australians, the majority, can have some say in the running of Australia? Or are we to now accept that corporations in Australia can do as they please and are answerable to no-one but 'unfettered' markets?

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