Labor has announced that, if it were in government, it would require the Productivity Commission to assess 10 years after a preferential trade agreement (i.e. free trade agreement) was entered into by Australia whether that preferential trade agreement was actually economically beneficial to Australia. After all that is the rational for entering into such agreements, that is that they are in Australia’s interest.
While in itself this announcement is laudable, it does raise a number of issues of concern.
In most cases, but not all, before entering into a free trade agreement, which are actually “preferential trade agreements’” under WTO rules and certain conditions apply when they may be entered into, it is not uncommon for the government to commission an economic modelling study to set out the benefits to Australia in entering the free trade agreement in question. They tend to be overwhelming positive that entry into the free agreement in question will be of economic benefit to Australia.
The question is this been borne out by those free trade agreements Australia has entered into?
Australia entered its first free trade agreement in 2003 with Singapore, unless the Closer Economic Trade Relations Agreement, which came into effect in 1983, with New Zealand counts as a free trade agreement. Since then it has entered into free trade agreements with the USA, Chile, Korea, Japan, ASEAN, Malaysia and Thailand and others are in the process negotiation.
What economic benefits have these free trade agreements brought to Australia? It has been reported that the agreement with the USA has had the opposite effect and reduced trade between the two countries, at least from an Australian perspective.
Why does Australia believe that entering into free trade agreements with other countries will bring economic benefits to Australia when those same free trade partners are entering into free trade agreements with other countries? What effect does this have?
Importantly, as the Labor opposition acknowledges in its announcement, there have been no studies, independent or otherwise, as to whether any free trade agreement has had any economic benefit to Australia or to what extent, if any, they have actually been in the national interest. If it has, why and what were the results? If it has not, why not? Why are free trade agreements continuing to be negotiated when the government does not have this information?
It would seem that the focus is on announcing that Australia has entered into another free agreement and the undoubted economic benefits they will bring to Australia, although no one actually knows whether that a free trade agreement will bring to Australia any economic or other benefits. In other words, politics trumping economics and the national interest!
In relation to Labor’s announcement, which must be conceded is a policy in the right direction, it leaves a number of questions unanswered: -
• why will it take 10 years before a cost/benefit analysis can be undertaken in relation to a free trade agreement that Australia has entered into;
• does not the Labor opposition understand that the Australian economy will have changed/developed over that 10-year period and what was relevant when the free trade agreement was entered into may no longer be relevant;
• why can such cost/benefit analysis not be undertaken now in relation to those free trade agreements Australia already has entered into;
• if such cost/benefit analysis reveals that Australia obtained little in the way of benefits from entering into a particular trade agreement, what is proposed to do about it in the Australian public interest; and
• will there be, or should there be, a moratorium on Australia entering into free trade agreements while such a cost/benefit analysis is undertaken in relation to those free trade agreements Australia has entered into or will Australia continue to enter into free trade agreements without any knowledge of what economic benefits have conferred on the Australian economy?
Also, in relation to imports into Australia, with tariff rates between zero and 5% with tariff concessions available, what is it that Australia has to offer in relation to exports from other countries to Australia?
It would seem that governments of both persuasions have focused on the process of entering into a free trade agreement and announcing entry into free trade agreements for political reasons and not the economic outcomes of any such free trade agreement, of which they have no information or knowledge.
Unless there is a benefit to Australian industries and to the Australian economy in entering into a free trade agreement, everything else is irrelevant. What have been the economic benefits to Australia under the preferential trade agreements that Australia has entered into? What is the evidence of such benefits? Who knows?