Canberra Times, 14 December, 2015.
We shouldn’t believe everything we see on television.
Australian taxpayers are presently funding a government sponsored television campaign explaining what we gain from bilateral trade agreements. These are no longer called free trade agreements (FTAs). The TV advertisement describes them as “free trade export agreements”, creating the misleading impression that the gains available from these agreements all come from increased exports.
This name-change appears to be a response to criticism from the Committee for Economic Development of Australia (CEDA) and others that :
- trade negotiations are unnecessarily secretive,
- trade agreements should be about trade, not foreign policy; and
- our negotiators have ignored the larger gains (in domestic efficiency) available from all trade negotiations.
In fact, greater access to foreign markets has been the lesser of the two gains available from trade negotiations. The larger gains depend on how we structure the market-opening concessions we take to the negotiating table. It involves reducing the barriers protecting our less competitive activities, allowing labour and capital to move to more competitive industries. The resulting efficiency gains strengthen the economy not by enabling us to export more, but because we move from producing things we do less well to those we do better.
This does not mean that all the domestic liberalisation we need can be brought about through international negotiations, but simply that we are not so well endowed with other opportunities to enhance productivity that we can afford to ignore those available from trade negotiations.
The opportunity to improve the performance of the economy in this way was missed in all three FTAs concluded last year.
The two key issues currently fuelling public angst about FTAs are common to all trade agreements. They are the secrecy surrounding negotiations and the limited accountability for the outcomes.
For instance, the only information available to Parliament and the community during negotiations for the Trans Pacific Partnership agreement was leaked. Draft chapters, published by WikiLeaks, raised concerns that it put the interests of particular vested interests ahead of the public interest. Such concerns are inevitable, given the secrecy surrounding negotiations.
At present our negotiating agenda is simply a market-access wish list. Negotiations are conducted in secret ; the outcome for domestic efficiency is the accidental outcome of what market-access negotiators are able to agree about, rather than a central objective in deciding which barriers to reduce; and success is measured by whether the outcome improves access to external markets.
As a consequence of the secrecy surrounding negotiations, producers who feel threatened by liberalisation have been able to exert undue influence over negotiations. For instance, before negotiations leading to the Japan-Australia trade agreement began, the Japanese warned “negotiators should be mindful to avoid any adverse effects on agriculture, forestry and fishery products of Japan”. It was jointly agreed there were sensitivities on both sides and these needed to be handled appropriately. As a result, negotiations degenerated into a struggle to find an acceptable compromise on market access that ignored the major gains available from consciously structuring our own market-opening offers.
Most Australians have only a passing interest in arguments about trade policy. The present preoccupation with access to external markets enjoys acceptance because the idea of improving domestic efficiency through trade negotiations is counter intuitive. We find it easier to believe that opening international markets for our own world competitive industries depends on the performance of our negotiators in exchanging market “concessions”.
During a recent inquiry by the Joint House Committee on Trade, Investment and Growth DFAT confirmed that none of Australia’s existing agreements has been subjected to an independent analysis to establish whether the claims made for them at the outset of negotiations had subsequently been checked against the actual outcomes.
The confusing, and often misleading, information available has hindered rather than helped community understanding of what we have gained from FTAs. For instance,when industry groups represented by the National Farmers Federation expressed concern about negotiations leading to the bilateral agreement with the US, each was persuaded not to oppose the outcome unless its access to US markets would be less with the agreement than it had been without it. Like the rest of us, farm industries were persuaded to accept a view delivered by fiat, not by disinterested analysis, that linking ours to the largest economy in the world would bring huge economic benefits to Australia.
As the Tasman Transparency Group has argued, there is no conflict between the need for secrecy during negotiations and a process that provides transparency and introduces a public input to our negotiating agenda.
Both requirements can be met by governance arrangements in which the Productivity Commission conducts a public inquiry and report on Australia’s market opening offers before future negotiations get under way. Its report would be released only when negotiations are complete, but before future agreements are ratified.
This would preserve secrecy during negotiations while providing a public input to Australia’s market opening offers and a basis for parliamentary and public scrutiny of the outcome before ratification. These governance arrangements have been field-tested. They reflect the transparency arrangements that prepared the way for the reforms of the 1980s and 1990s.
While it would be wrong to leave the impression that DFAT is other than highly competent in dealing with issues intrinsic to foreign policy, it is clearly struggling with the productivity enhancing domestic dimension of trade policy.
In its response to CEDA’s call for a formal framework to guide future trade negotiations, the government must clarify whether future agreements will be limited in scope to “export agreements”, as conveyed in its TV campaign, or will also pursue the much needed productivity gains that are available from all trade negotiations.