Thursday, March 03, 2016

TPP: Would anybody mind if the deal fell over?

Hillary Clinton is misguided. Her opposition to the Trans-Pacific Partnership is based on "misinformation". Malcolm Turnbull's new trade minister says so.

Within hours of being sworn two weeks ago, Steven Ciobo eschewed the traditional approach of getting up to speed and consulting widely, and blundered into the US presidential race.

"I am not surprised that the trade union movement and, of course, the political arm of the Australian Labor Party is on a similar platform to, for example, Hillary Clinton," he told the Financial Review. "They both derive their key support from the union movement."

The woman most likely to be the next US president, the former secretary of state who ran America's missions abroad, the woman who criss-crossed the world pressing flesh about the Trans-Pacific Partnership, knows less about it than Steven Ciobo.

Asked directly whether he thought her opposition to the TPP was based on misinformation, he replied: "Absolutely".

And he was going to clear it up. "I will not take a backwards step in terms of putting forward the clear truthful situation in the face of an ongoing campaign of misinformation," he said.

So what is the clear truthful situation? What is it that Clinton (and also Trump) are failing to grasp? The awful truth is that Ciobo's department isn't particularly keen on finding out.

Back in 2010 the Productivity Commission found little evidence that Australia's trade agreements to that point had "provided substantial commercial benefits". It recommended the government first work out what it wanted to achieve, review its goals annually, and enter into trade negotiations only if they were likely to meet those goals and only after examining alternatives, including the alternative of "no further specific action".

The examination would be independent and made public. When the agreement was complete and about to be signed it would be examined again by an independent body which would produce a public assessment of the costs and benefits.

None of those things have happened with the Trans-Pacific Partnership, the biggest trade deal in Australia's history. Set to take in nearly 40 per cent of the world's economy including Australia, Canada, Singapore, Brunei, New Zealand, Chile, Mexico, the United States, Japan Malaysia, Peru and Vietnam, it will encourage us to buy and sell from each other rather than the rest of the world, and it will tie us to common (largely US-driven) standards.

Former trade minister Andrew Robb signed it in Auckland last month without commissioning any outside analysis. His department's so-called national interest analysis, required by law, ran to just 19 pages, most of which merely summarised the 6000 page agreement. New Zealand's national interest analysis ran to 277 pages.

Robb's department turned down an offer from the Productivity Commission to do the job properly, observing that modelling such an agreement was "very, very difficult to do"...

The modelling that's been done overseas finds the benefits for Australia close to non-existent. The World Bank finds that after 14 years the agreement will have boosted Australia's GDP by 0.7 per cent. Depending how you round it, that's a boost of either 0.0 or 0.1 per cent per year. A separate study by Tufts University in the US concurs, but says the growth will come at the expense of jobs, around 39,000 after 10 years. The agreement won't exactly "drive jobs and growth".

Willful blindness over the benefits wouldn't matter so much if there wasn't also wilful blindness to the costs. The Department of Foreign Affairs and Trade appears to have never examined any of Australia's 18 free trade agreements after the event, but the Australian National University has. Ten years after the US-Australia free trade agreement it found it had cut rather than boosted trade.

That's because free trade agreements help and hinder trade. By rewarding trade within a group they penalise trade outside the group, even the use of foreign-tainted inputs which can see entire classes of exports labelled non-compliant. Businesses find it easier not to import from outside, or not to use the agreement.

And they miss out on getting benefits they could have had years ago. The TPP promises tariff cuts worth $135 million over four years. But they could have been delivered without the TPP had the government not held them back, possibly in order to have tariffs to negotiate away.

Because we've comparatively few barriers to negotiate away we've been under pressure to agree to other things, like tighter copyright rules and extra-territorial tribunals to which foreign firms (but not our own firms) can take the Australian government after losing their case in Australian courts.

It may be that these concessions are worthwhile. It would be good to know, and it's not too late. The TPP may have been signed, but it won't come into force until at least half of its members have ratified it, including Japan and the United States. The parliament's treaties committee is examining it now and is accepting submissions until Friday March 11.

I'd feel better about the whole process if I didn't have a sneaking suspicion that leaders, including our prime minister, know full well that its not such a great deal and wouldn't much mind if the US kicked it over.

In The Age and Sydney Morning Herald