Embracing the US-less version of the Trans-Pacific Partnership (TPP) will add less than 0.5% to GDP in a decade’s time, or around one and a half days’ worth of income, to the Australian economy, according to a study commissioned by spruikers of the trade deal.
The report, by two US economists and commissioned by business groups such as the Minerals Council, the Business Council, the Australian Food and Grocery Council, the Australian Industry Group and the Australian Chamber of Commerce and Industry (ACCI), is a humiliation for the business sector, which has long lobbied for adoption of the secretly negotiated trade deal that opens Australia up to litigation by multinationals to obtain compensation for government policy. When even your own specially-commissioned consultants can’t get the numbers to work for you, it’s an admission that the reality is like to be grim indeed. In fact, AIG, the AFGC and ACCI didn’t even issue a media release about the report.
The revised “Comprehensive and Progressive Trans-Pacific Partnership” will add US$12 billion per annum to Australia’s national income in 2030, or 0.46% of forecast income, an increase described by the report’s authors as “relatively modest”. It is also forecast to increase overall foreign investment into Australia by just US$6 billion. However, the Minerals Council decided to hype the report anyway, claiming “Australian workers, jobs and business will benefit significantly from the Trans-Pacific Partnership (TPP-11) trade agreement” and that it would “[lift] real wages with higher wage gains for lower-skilled workers.” The BCA — which has still not even acknowledged the change of prime minister — claimed the deal “can improve living standards, particularly at a time of weak wages growth”.
What does the report say about wages? The only mention is that “[r]eal factor prices — wages, profits — will tend to rise at rates similar to real income changes” with no further detail beyond that unskilled workers would do better than skilled workers. That presumably means that wages would, after a decade, grow by around 0.46%, or $7.60 a week* in current dollars for full-time adults, or about $10 a week in 2030. That won’t be very handy for manufacturing workers, though, since the report acknowledges durable manufacturing will shrink in Australia under the revised agreement by 2% — and even more if other countries join the agreement.
Both the BCA and the Minerals Council emphasised that the agreement would boost exports by US$30 billion, without saying that it would also boost imports by exactly the same amount. As the Productivity Commission’s outgoing chair Peter Harris noted last week about how the benefits of trade agreements are spun, no one ever mentions the additional imports that arise from them, despite the benefits of cheaper imported goods for Australian consumers and business.
*the original text contained a howler: we referred to $7.60 a year not a week. Thanks to the Minerals Council for picking this up.