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Tuesday, January 24, 2017

TPP was never that good for jobs, never that good for growth

If the Trans-Pacific Partnership was really as good for jobs and growth as Malcolm Turnbull says it was, he would be able to point to a study saying so.

He might have even commissioned one. Instead, despite the Productivity Commission practically begging for the role, his government has been resolute in its determination not to subject the 12-nation treaty that Donald Trump just dumped to independent analysis.

An earlier analysis of three landmark trade agreements that the government did commission found that, combined, the Japan, Korea and China agreements were set to create a total of 5434 extra jobs by 2035.

That's 5434 extra jobs after 20 years. According to the Bureau of Statistics, employment is growing at a trend rate of 8200 per month, meaning the extra jobs will amount to less than a month's worth, after 20 years.

The government-commissioned study found that, combined, the agreements would boost exports 0.5 to 1.5 per cent while boosting imports 2.5 per cent, which means they would send Australia's trade balance backwards.

In the absence of an Australian analysis of the agreement Turnbull insists would have produced jobs and growth, one by World Bank found that 15 years on, it would have bolstered Australia's economy just 0.7 per cent, which amounts to 0.05 per cent per year, somewhat less than measurement error.

It's easy to conclude Turnbull is talking up the TPP because he has not much else to talk up.

In any event, it's dead. Its rules say it can only come into force if it is ratified by members accounting for 85 per cent of its combined gross domestic product, which means it can only come into force if it is ratified by the United States, something President Trump has ruled out.

Part of the problem with it, and part of the problem with reviving something like it without the United States, is that it's so darn complicated. That's because in the assessment of James Pearson, head of the Australian Chamber of Commerce and Industry, "so-called free trade agreements never seek free trade".

Much of the TPP dealt with things such as copyright terms, patent protection for drugs, and so-called investor-state dispute settlement procedures that would have allowed foreign corporations to sue sovereign governments. It took a decade to negotiate.

Pearson says if free trade agreements genuinely sought free trade "they would be simple, stating that the parties agree there shall be no restrictions on trade, investment or movement of people between the two countries, full stop".

When even the potential beneficiaries are questioning the value of ever more complex trade agreements, it could be time to take stock.

In The Age and Sydney Morning Herald