Prime Minister Malcolm Turnbull and British Prime Minister Theresa May
The government’s enthusiasm for a free trade agreement with a Brexiting United Kingdom is wrong in all sorts of ways — but it illustrates a deep malaise both within this government and in the brand of politics it represents.
On the weekend, the UK Telegraph ran a report confirming what had been speculated for some time — the UK was keen to develop a free trade agreement with Australia after it departs the EU. And the Turnbull government is eager to help.
As many have already pointed out (James Chessell did it best), any agreement for this little trip back to the 1960s is a decade away or longer, given a series of major impediments — including that no one in the UK government has a clue how to negotiate such agreements. And it isn’t much to get excited about — the UK ranks eighth among our trading partners and you can bet that will fall when the UK leaves the EU. Let’s hope the Brits develop an appetite for iron ore and coal. And maybe they can sell us some sporting excellence.
[We trust our athletes to compete, so why not our businesses?]
The timing wasn’t particularly good, either: in the aftermath of the government’s staggering Ausgrid decision banning both a Hong Kong private company and a state-owned Chinese company from bidding for NSW power assets, here was the Turnbull government bending over backwards to talk about a free trade agreement with its one-time imperial power — with Turnbull couching the Ausgrid decision in a Howard-esque “we will determine who invests in Australia and the terms in which they invest” manner, according to Phillip Coorey.
Optics aside, though, the enthusiasm for a UKAFTA illustrates the policy problem of a government that both lacks a meaningful agenda and is facing surging opposition to the kind of market economics that it, and most of the Labor Party, support.
This government loves what it calls “free trade agreements” (which are more correctly preferential trade agreements) and they make up one of three parts of its economic strategy — the others being defence industry protectionism and massive tax cuts for large companies. As a consequence, it tends to hype preferential trade agreements as being astonishing step changes in the Australian economy.
The reality is, as the Productivity Commission has found, such agreements are of little net economic value, tend to be made without proper cost-benefit analysis, and in some areas, such as intellectual property and investor-state dispute resolution mechanisms, may harm Australia. And an interesting characteristic of such agreements under the current Coalition government is that they appear to require taxpayer investment after their conclusion in order to help business take advantage of them, further reducing the net benefits.
[The Nationals’ nonsense on agriculture exposed]
The PC also argues, in a point that should be appended to every article written on trade agreements, that much greater economic benefits could be gained by unilaterally ditching all of our remaining trade barriers; most of the benefits of bilateral trade agreements come from our removal of barriers, not greater access to markets from the removal of our agreement partner’s barriers.
Trade agreements are like a mutual agreement to stop hurting yourself — why wouldn’t you simply stop hurting yourself entirely? But the government won’t do this — because it is heavily politically invested in protectionism on defence (which the PC has also criticised). Nor do the Liberal party’s crony capitalist instincts help; it’s happy to maintain barriers that serve the interests of key constituencies such as farmers or, in the case of second-hand car imports, car retailers.
The Turnbull government is thus heavily conflicted when it comes to responding to the surge in protectionist sentiment both in Australia and round the world. As Trade Minister Steve Ciobo says, protectionism is an economic version of anti-vax sentiment, and needs to be refuted. But how can you refute such views while pandering to them in a key area like defence, or refute them while ostentatiously rejecting foreign investment? It’s like attacking anti-vaxxers while promoting homeopathy and the Paleo diet. And the government doesn’t even have Andrew Robb anymore — he at least had the guts to defend foreign investment in any forum, no matter how unpopular it was.
Worse, the government relies for its narrative on the benefits of free trade on its own politicised version of it — preferential trade agreements that are more about pretending the government has a serious agenda than actual benefits that might accrue by the time we’ve finished redirecting some exports, giving handouts to business and sending a few business delegations overseas. Labor is just as guilty, and more so, on this score, with its obsession with propping up key unionised industries like heavy manufacturing. But it isn’t politically reliant on an embarrassing obsession with preferential trade agreements of dubious value.
Perhaps, in Theresa May, Turnbull recognises another leader stuck with a party riven to the core by internal tensions, and wants to help her out. In truth, neither are effectively combating the resurgent forces of economic populism, but are pandering to them while preaching the benefits of free trade. It’s a dance with the devil that will end badly for all of us.