Australia’s trade agreement with China — it’s not a free trade agreement (FTA), despite Coalition claims to the contrary — was borne of Tony Abbott’s desperation to appear to have an economic policy.
Having been elected on the basis of all the things he’d stop — boats, climate action, deficits — he turned to “free trade agreements” with a number of regional countries as a facade of a positive economic policy.
Such bilateral trade agreements produce little economic benefit, as the Productivity Commission (PC) has long pointed out — and certainly nothing like the absurd claims made for them by politicians.
The trade agreement with the United States concluded by the Howard government has actually been economically damaging to Australia, the PC found. And that’s before you get to the additional red tape burden required to try to access any benefits of such agreements — like labelling standards and country-of-origin rules.
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That didn’t stop Abbott from wanting to sign pretty much any draft trade agreement he could find, no matter what its state, so he could wave the resulting document and claim, as he did about the Chinese trade agreement (ChAFTA), that it would bring benefits “to hundreds of thousands of businesses right around our country”. For Abbott, the entire future of the country rested on his handiwork:
Almost nothing that this government has done will make as much difference to the long-term future of our country as the China-Australia Free Trade Agreement. Again, I congratulate the minister for trade and investment for his extraordinary work. This free trade agreement will be good for jobs, good for consumers and good for growth, and it sets up our country for the future.
The Department of Foreign Affairs (DFAT), however, was less enthusiastic.
Typically, it didn’t include much detail of exactly what benefits would flow from the deal — it relied on 10-year-old modelling to assess the impact, and when required to describe its benefits in the National Interest Analysis supposed to accompany the deal, could only conclude “ChAFTA will significantly boost Australia’s economic relationship with China, our largest trading partner, and elevate the standing of the bilateral relationship overall”.
But not merely did he laud the benefits of the deal with China, Abbott called those who opposed it — or objected to its labour market provisions allowing the importation of Chinese workers — racist.
“The CFMEU [is] going around trying to sabotage a deal that will set up this country for the future,” Abbott claimed in August 2015. “A campaign of xenophobic lies is being master-minded by the CFMEU and this leader of the opposition is silent in the face of racism.”
Next month he went further, describing Labor’s criticisms of the deal as “xenophobic at best, racist at worst, a campaign of lies being peddled, principally by the CFMEU, taken up by the ACTU more generally and being connived at by members opposite, being articulated by members opposite”.
It wasn’t just Abbott. Malcolm Turnbull told Sky News that Labor was being “aggressively anti-Chinese”.
And where the Liberals went, News Corp gleefully followed. The Australian declared Abbott “vindicated for standing firm against the misleading and xenophobic campaign run against ChAFTA”. The Oz’s foreign editor Greg Sheridan attacked Bill Shorten as “absolutely disgraceful” and said he had licensed “economic vandalism” and failed to speak out against “gross xenophobic paranoia from within the broader labour movement”.
And remember this was before the high farce of Turnbull’s effort to force through the long-dormant extradition treaty with China — which Abbott had promised the Chinese regime as quid pro quo for the trade deal.
The trade deal, of course, never posed the slightest hindrance to China’s campaign to intimidate Australia. And the idea that it led to any “elevation” of the bilateral relationship is farcical. Australia is now consciously trying to reduce its reliance on trade with China, not deepen it. And even Trade Minister Simon Birmingham has admitted that the FTA has been casually broken by China. There’s nothing to government can do about it.
And for that matter, many sections of the government, and News Corp, now can’t be anti-China enough — and Chinese accusations of racism are laughed off as propaganda.
But before this blew up, were FTAs actually delivering for Australia? Let’s turn to the people who should know — Australian business.
In 2018, the right-wing employer group Australian Chamber of Commerce and Industry surveyed businesses about, among other things, free trade agreements. Did the results confirm the laudatory claims of Abbott, and the less glowing but positive claims of DFAT, about trade deals? Here are some of the conclusions:
Understanding and utilisation of trade agreements continues to be problematic apart from the China Australia Free Trade Agreement (FTA). This is confirmed in the qualitative findings. Businesses were asked about their understanding and utilisation of a list of general FTAs. The results show that the majority of businesses stated that these FTAs are not relevant to them … A significantly large number of businesses do not understand or use FTAs…
But even the ChAFTA, which 40% of business claimed at least to understand and be aware of, wasn’t delivering, as one comment from an unidentified health business illustrated:
You know, Australia signed a free trade agreement with China a couple of years ago, you know Andrew Robb went off and did this amazing stuff, been sensation, but then China has reacted by making it harder and harder to do direct trade, so we can’t sell our [health care product] directly in a store in China…
The FTA was never worth the thousands of pages it was written on. And it didn’t take a crisis in the relationship with China to show it.
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Andrew Robb did OK
Yes he must have done so well they gave him a job. Would like to hear what he has to say now.
For whom? Apart from himself.
Yes, personally, as I suspect you imply.
Then there was all that discussion about the Trans-Pacific Partnership (TPP) and how that was going to save our trade. Another massive waste of time and paper. The PC is correct – such agreements produce almost zero benefits.
This seems to be the second article that you have written after a long lunch Bernie (over the last few days) Despite a tone of originally the trade deals by Howard and Abbott reservations existed at the time.
Just what is your point Bernie? Are you inferring that it is odds-on that Abbott will screw up in the UK (given the history) or is it that, in your assessment, no one should sign anything with the big boys; ie that we should confine our interests to the local(ised) Islands.
I think you will find that it is all about details. The problem that Australia has had for a number of decades is that there has been no shortage of personalities keen to make announcements but damn all with either the inclination or an eye for detail.
For my coin the place is entirely on target of fulfilling a former Asian PM’s prophecy of Australia becoming the ‘white trash zone of the Pacific’. Extensive and detailed trade (and diplomic) relationships with major players are required.
I am sure that the LNP are happy, after all many businesses got that Chinese labour almost for free.
I think Bernard’s point is the FTAs are worthless.
So do I.
If you mean “fair” such is hardly news. Students at decent universities have been writing essays for a subject known as ‘Developmental Economics’ since the 70s (in my experience).
Over the decades the tone has changed from neo-Classical to Marxist and onto Globalised neo-lib.
Indeed, there is a distinction between even first world players and even under the auspices of the WTO. Hat off to Mark (below)
Yeah I think this is just Keane grinding that axe. To be fair to him he has been consistent in saying that.
I think the argument over worthlessness of FTA’s is one about their worth over existing trading arrangements, which under “rules based order” was WTO (although this is under threat from US no longer wanting to “play by the rules” to borrow from Michael Pembroke)
It seems to me Keane’s article conflates ChAFTA with China Australia trade itself.
Big difference.
I’m with Geoff Raby, I believe the reality is that Australia does need China more than China needs Australia.
If there are other, substitute markets out there to diversify into in my view Australian exporters would already have been doing that.
It’s actually a good argument for supporting BRI as well.
Also seems pretty clear to me the provocation of China has been deliberate, the question almost no one seems to want to discuss is why
Free Trade Agreements are anything but free. All the pages are full of the qualifications, the no go areas and with theTPP outline how an overseas business can sue a sovereign country for acts of parliament they don’t like.
Ken, this is the big lie. A sovereign government can acquiesce to being sued by an overseas business, but at the end of the day it is sovereign risk that the government or parliament will comply. They ‘do’ ‘not’ ‘have to’ ‘comply’. China (& Australia) in ignoring some of the provisions of the agreements clearly demonstrate this. The real shame, is that our parliamentarians demonstrate by their acquiescence to these agreements executed by the Executive that the agreements are in effect like a constitutional constraint on parliamentary power, but without the referendum of the people that a Constitutional change requires. It shows our parliaments are full of lilly livered jellyfish without backbones — politicians, not parliamentarians!
Sovereign risk is the big lie, Mark. Short of a federal takeover of a company without compensation, which won’t happen here, the ‘sovereign risk’ gambit is just one of the many tools of business lobbyists to prevent govts from doing anything, anything at all.
It’s right up there with ‘business needs certainty’, the catchphrase of the neoliberal cons in the 21 st century, hoping to set in stone the mindless overreach of neoliberal economic policy. It’s basically just business saying we won the last round so let’s call off the fight. It’s all BS.
Ans ISDS provisions are embedded in most of the agreements.
I think you misunderstood me, or perhaps my sloppy wording. Sovereign risk is the lie,, as you said, and Ken complained of. Businesses should take into account the risk that a democracy real natural people…voters/citizens (not bodies corporate) that may regulate businesses. My whinge is that our politicians think they are constrained by these agreement when in fact they, are, not! The only constraint, and it is theoretical, is that if a parliament disregarded these agreements businesses may factor an increased risk in future investment decisions. But they already do this if they are prudent, so I doubt it makes a difference in practice.
Dead right Ken.
Bernard, the achievement or success of these ‘trade’ agreements is that they do deliver ‘announceables’ for the government, as you say. This is just like the ‘cashless welfare card’ and Robodebt etc, and even superannuation, in that they don’t achieve or deliver their stated objectives like better directing social security spending and budget savings or increase self-reliance post retirement respectively. But they do deliver in the real unstated objectives like making the well-off neo-liberals feel good because the government is being mean to social security recipients and for superannuation, it provides a massive regressive transfer from the poor to the rich.
However, the agreements also deliver benefits for big business in constraining State governments and parliaments in properly and effectively regulating various industries (comprising local and foreign corporations), as well as purporting to constrain the power of the federal parliament to also regulate these business activities. It’s not so much ‘free trade’, but an attempt to constrain democratic decisions that may negatively impact corporations. An objective that the government is unlikely to want to crow about.