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Tuesday, November 18, 2008

Focus: Global free trade within reach?

Surely not. A global free-trade agreement within 7 weeks after 7 years of failure. That's the task that world leaders including Kevin Rudd have set themselves, and in Washington after the G-20 meeting Mr Rudd seemed to think it actually could happen. in the remaining weeks of this year.

"This is a tough objective, but one which we have to rise to the occasion to meet," he told reporters.

"The decision to further open the global economy to more trade and therefore greater growth and jobs growth through trade now seems to be more urgent because of the pressures bearing down on the real economy off the back of a global financial crisis."

He is right about the benefits...

Australian more than most countries knows that trade is the key to making both the buyer and the seller rich. We saw it with Britain in our early years. Had the British not bought massive quantities of wool and wheat from us - at one stage 90% of our exports - we would have remained mostly poor convicts. We saw it with Japan which became rich after the war because it bought minerals and fuel from us just as we became rich as we sold it. And we have been seeing it with China. The Chinese may have been getting richer this last 5 years, but thanks to trade, we have been doing it with them.

The World Trade Organisation says says that if the deal up for negotiation at the stalled talks got through, the globe would benefit to the extent of $US130 billion a year - about 0.25% of global GDP - worth having at the moment.

But it's not that simple. And most of the world's leaders know it. Some countries would do very well out of free trade - mainly less-developed ones who would like to sell to the United States but can't because of huge US production subsidies. Some parts of the US and Europe would do very badly. Bloated US sugar producers who have grown rich on a diet of fat subsidies would find themselves unemployed.

Would the US wear such a thing? Right now? It's just about to pump heaven knows how much into the pockets of its moribund big three auto makers - just as we have. The proposed US rescue - if not ours - might be illegal under the draft agreement that made it to the most recent round of Doha talks - the one the leaders now say they want to sign by December.

What about the billions of US government dollars about to be shoveled into the vaults of US banks? Anti free trade? You bet, if the US bank was competing against an Indonesian one for a contract.

Our Prime Minister and other leaders would like to think that these are the best of times to reach the trade agreement that's eluded them and their predecessors for years. It's probably the worst of times. Neither Rudd nor Bush nor Obama nor any of them is likely to want to put a single one of their citizens out of work right now - even if the long-run it would work out well.