Economy

Apr 8, 2014

Sorry, but free trade agreements are duds, no matter how ‘nuanced’

Bilateral free trade agreements like the one negotiated with Japan deliver few benefits. The only worthwhile trade reform is unilateral tariff reductions. Don't hold your breath for that.

Bernard Keane — Politics editor

Bernard Keane

Politics editor

Remember the Australia-US free trade agreement? That FTA obsessed the political class in Canberra for much of 2004, with the Howard government and News Corporation outlets desperate to use it to wedge Labor leader Mark Latham, and considerable focus on how much benefit it delivered to Australian farmers.

Back in 2010, to the considerable dismay of the Department of Foreign Affairs and Trade, the Productivity Commission looked at the value of bilateral FTAs, including the AUSFTA (we’ll use the term “free trade agreement”, however much it’s a misnomer). Despite extensive work of its own, and consideration of the work of economists in Australia and internationally, the PC was unable to find anything beyond potential “small” benefits from FTAs, albeit offset by “material” negotiating costs to government. It concluded about trade in goods:

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18 comments

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18 thoughts on “Sorry, but free trade agreements are duds, no matter how ‘nuanced’

  1. klewso

    Like a bunch of feathers tied to a piece of string, for a cat, aren’t they? …. Or “Honours”?

  2. Chris Hartwell

    Sooo … I should have held off on my new mitsubishi for just a little longer? Bugger. #ThanksAbbott

  3. Migraine

    One positive aspect of AUSFTA was that it became easier for Australian researchers to go and work in the US. Unfortunately, this has also worked out to be more to the US’ advantage than Australia’s …

  4. MJPC

    BK, please don’t take away Citizen Abbott’s moment of glory, when he comes back there still Arthur up in NSW doing the rounds of ICAC trials and PUP Senators about the spoil his hoped for dream run in the Senate come July.
    I am excited to learn I will be able to buy a new Jap car for $1500 less, good for the economy and environment I am certain. Shame it will be as a result of the destruction of the Australian auto industry; the auto workers can extend their redundancies that much more now.

  5. The Pav

    The cargo cult mentality of the LNP led by dictator Abbott has resulted in a PUP,

    Calling this a free trade agreement is the same as calling Richmond a football team.

    Free Trade means Free Trade it isn’t that complicated but in this case a budget in alleged crisis takes a further hit just in case that maybe some time in the future the sons of sons of sons of cattle farmers may get to shift a feww extra steaks.

    Abbott sold the mine but kept the shaft just for party propaganda benefits

  6. Damien Cruickshank

    Economists support ANY movement towards tariff reductions. Yes, negotiated bilateral tariff reduction goes a small way for everyone, but as you say, unilateral tariff reductions help the most. Tariffs are the equivalent of shooting ourselves in the foot, just because Japan does. It’s stupid, and I can’t believe some politicians still support them.

  7. Bill Hilliger

    Don’t worry you’re in good hands with the negotiation skills of T rAbbott and co. Wait till they stitch up China as well. Riches to be had for all, especially the farmers. The farmers will now owe a great thanks to the ever diminishing National Party.

  8. Hunt Ian

    As Bernard says, it is not clear what the gains will be: all we can say is they will come in soon for Japan and long after for the limited range of products whose tariffs will be lowered. When Bernard talks of simulations, though, we must know the assumptions. The trouble with economists is that their theory does not tell us that unilateral removal of tariffs will improve things. We simply don’t know. We do not live in a perfectly competitive international market and tariff removal could be damaging to industries like the car industry, if Abbott had not so thoughtfully shoved it offshore.

  9. Scott

    It’s funny…when ever any one mentions that Productivity Commission report into bilateral trade, no one mentions the Dissenting Appendix A (which disagrees a lot with the findings and recommendations).
    The dissenting opinion was, after all, written for the international trade expert specifically hired for the study from the WTO, Andrew L Stoler.
    Maybe best to read the entire report, rather than just the findings page, hey BK?

  10. Iskandar

    Did I hear Abbott say cheaper electronic goods from Japan? I looked over the items on my desk and found: laptop (China), printer (Thailand), scanner (Indonesia), digital camera (Malaysia), desklamp and speakers (China, again). No FTA as far as I know with those countries. The trip sounds like another taxpayer-funded junket to allow Abbott and company to grand-stand. Even down to the obligatory lycra and pushbike.

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