Tuesday, July 21, 2015

Australia flying blind on trade deals says PC

On the eve of negotiations expected to finalise a giant trans-Pacific free trade agreement with 11 of Australia's neighbours, the Department of Foreign Affairs has revealed that none of Australia's existing agreements has been subjected to an independent analysis to work out whether the claims made for it have stacked up.

Australia signed its Closer Economic Relations agreement with New Zealand 32 years ago and its free trade agreement with the United States 11 years ago.

Giving evidence to a parliamentary inquiry on Tuesday, the department's first assistant secretary for trade agreements, Frances Lisson, said economic assessments were sometimes conducted before agreements were signed.

Asked whether any of that modelling had been subsequently checked against the actual outcomes, she replied: "Not that I am aware of."

"I am not aware of any economic modelling that's been, I guess, remodelled," she said. "But certainly the objectives and that are outlined in the feasibility study are very much part of the negotiated outcomes, so the free trade agreements are only entered into when they achieve the objectives that have been set out to begin with."

Labor MP Jim Chalmers expressed incredulity saying that the department was asking Australia to believe claims about future agreements with India and the Pacific bloc when it hadn't checked the claims it had made in the past.

Ahead of the US Australia Free Trade Agreement the department published modelling conducted by the Centre for International Economics that said it would boost Australia's gross domestic product by $5.7 billion. A study conducted a decade later by the Australian National University found it had boosted trade not at all.

The privately-owned centre was retained by the department again this year to examine the free trade agreements with Japan, Korea and China and found they would boost the economy by $24.4 billion by 2035.

Appearing before the inquiry the head of the Productivity Commission Peter Harris said such analysis needed to be genuinely independent of Australia's trade negotiators, otherwise the consensus in favour of trade reform would crumble.

The Commission itself was perfectly capable of doing it, although he said he wasn't using the inquiry "to solicit for work".

It should be conducted before negotiations begin and again in the four or so months after negotiations have concluded but before the deal is ratified.

"We should do better on transparency or we risk losing the consensus that has lasted for decades," Mr Harris said.

The analysis should first identify the problem that the trade agreement was designed to solve and then make clear the costs it would impose on business.

The recently-signed Korea Australia agreement included 5200 separate so-called rules of origin delineating which inputs included in an export in order to give it preferential treatment. An earlier agreement with Singapore had one.

"It's red tape, growing at a very healthy rate," he said.

"It adding to the compliance costs of businesses as well as the costs to governments."

So-called investor-state dispute settlement clauses included in the China and Korea agreements and planned for the Trans Pacific Partnership agreement would allow foreign but not domestic business to sue Australian governments in international tribunals.

"We would like to see analysis conducted that demonstrates the benefit," Mr Harris said. "We are not alone on this. Senior representatives of Australia's legal system have questioned why rights should be made available to foreign parties that are not available to domestic parties."

In The Age and Sydney Morning Herald