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.
Bit harsh to compare protectionists to anti-vaxxers. As I understand it, protectionism makes the case that when you lower market barriers, the negatives of job losses by producers can outweigh the benefits of lower prices to consumers and the new jobs/markets created. Or that, even if there is a net benefit to the economy, the disproportionate impact on the losers is not justified. Sounds like an issue of value judgement to me, where two rational people could look at the same facts and figures and have two different opinions as to whether they approve or disapprove.
And that’s before you even get to the issue that “free trade agreements” these days are more about intellectual property and corporate power grabs than free trade vs. protectionism, but you alluded to that.
not only “harsh”, but stupid! as is your comment! Forced medical procedures are kinda NAZI-ish, dontcha think? (clearly not much)
Well said, Marcus. It always comes down to value judgements. It always has.
And the question for decades is what does the government value more, the welfare of the people or something else?
All the evidence points to something else, doesn’t it?
Evidence like the persistent ideology of a “competitive, free” market in a global economy where wages vary from under a dollar an hour to $17.70 an hour. Evidence like the myth that nations with fiat currency have to tax, privatise or borrow in order to spend.
Looked like a photo opportunity to me, bit like the Bishop/Netanyahu one with its big headline.
Some protectionism is ok for me, like the car industry. The fan is really going to be dirty soon with all these poor employees out of a job. Then we will see about the cost benefit of that Hockey decision, ie tax collecting jobs plus govt industry support versus cost of unemployment benefits, but hey they are busy reducing that.
This government loves what it calls “free trade agreements” (which are more correctly “preferential trade agreements)”
It’s a key point. These agreements are largely about propping up and protecting existing players, such as current IP holders and large multi-nationals that can afford to take governments to ISDS disputes. In other words, they are pretty much entrenching the opposite of free trade.
Equally, as others point out below, protectionism, like foreign investment, can be good or bad and is weighed up sometimes in non-financial terms, or at least are always addressed on financial terms only without factoring in the non-financial losses. Come on BK, while full on free trade would benefit us overall there would be substantial costs which would not be borne equally.
As for defence, we should be buying off the shelf from whoever has the best gear but USA won’t allow that, so if we are going to meddle completely it’s harder to argue that we shouldn’t be doing some protectionist policies to try to bring economic activity and possibly skills into the country.
Keep trying
Totally agree DB. I call them preferred trading partner agreements. The colonial son ,Mandy Turnbull, is salivating about a free trade deal with a country that created an empire by stealing land and killing people at the behest of the royal family. All this pathetic PM can do is jeopardise our jobs by doing deals to enrich himself and his pals, like the Star Mining debacle.
Perhaps he’s looking forward, after the Return of the Clown Prince, to being honoured as the Warden of the Cinque Ports?
Just in case the Caymans pall.
I still can’t see the value in by-products from unemployment as being equal too (let alone greater than) those from “propping up key unionised industries”? ….. Unless there’s gold in rust-belts?
If you think the UK is actually going to exit Europe then I have a bridge in Brooklyn to sell you. The Tories are already back-pedalling, raising all sorts of obstacles, and talking about the complexity of it all. Even the required formal start to the process is being put off until 2020, by which time “circumstances will have changed” necessitating a “fresh look” at the whole proposal.
There is a different point however that is more relevant to Australia. The whole geopolitical structure is undergoing massive change, and that change is being driven from Asia. The Parliamentary Library can write its scaremongering Briefing Book for parliamentary newbies about the New Silk Roads, but the truth is that we are witnessing Mackinder’s 1904 vision of a Eurasian “heartland” dominating the world economically and politically.
Turnbull cozying up to May and making faux assertions about foreign investment by China merely demonstrates that Australia is still locked into a mid-20th century mind set. The sooner that changes the better.
James…do you really think the Torys can just ignore the vote to leave?
Very brave if they do.