Turnbull sets out for more pretend free trade deals

Turnbull delivering his speech at the Policy Exchange think tank
Contributed by Joe Montero

The Australian prime minister’s trip to Europe focused on working trade agreements for with Europe and the United Kingdom.

He is reported to have told the conservative think tank Policy Exchange in London:

“The more doors to more markets I can open for Australian business to enter the better. That’s my goal. Free trade and open markets are a big part, a huge part of our 26 years of uninterrupted economic growth”.

Opening more markets for Australia’s exports is a good thing. However, Turnbull turns this on its head and his statement contains two matters that need further comment.

The use of the term free trade agreement, is both misleading and wrong. Australia, as Turnbull implies, has already signed a few. The most important is the one with the United States. It might be a trade agreement, but it is not a free trade agreement. To be this, it would have to involve equal rights and obligations on both sides.

This is not the case here. The United States does not have open borders,   is heavily protectionist especially when it comes to primary produce, which happens to be one of Australia’s primary exports. American farmers are highly protected. Australia also faces on the export of manufactured goods.

At the same time, there is an open door for the United States to export to Australia.

This is possible, because the United states mainly exports banking and investment.

It happens that the main exports commodities of the of this country are banking and investment capital. In the current economic climate, this has primarily been used to take over existing companies in Australia, fund speculative bubbles, create debt and export the wealth of the country back to the United States – often via tax free havens. As a small player in the financial market, Australia is unable to compete.

Whatever the writing of the trade deal document, this one-sided arrangement can be imposed, because the United States is a powerful economy and Washington has the political clout to get its way.

It is also one sided because Australia’s politicians Have been too busy genuflecting to bother too much about making sure that the interests of the bulk of the Australian population are secured.

This agreement has also been an important contributor to locking Australia onto a more extensive withdrawal of Australian government from the provision across a range of traditional services. On the false argument that government provision is a barrier to competition.

Rather than referring to this as a free trade deal, it would be more accurate to call it an unequal trade treaty. To make matters worse, the US Australia free Trade Agreement is the model for other so-called free trade agreements that have bee entered into.

The other matter that calls for comment is Turnbull’s assertion that Australia has experienced uninterrupted growth for 26 years. It sounds impressive. The trouble with it is that it is not true.

It is true that Australia can put together the numbers that suggest Australia has not gone into negative growth over the period, even though from time to time and especially lately, it has been close to the wire and sometimes tipped into the negative. But these numbers do not tell the true story.

The real economy, and by that is meant that which involves real activity, apart from shuffling money around, has been shrinking. The best evidence of this has been the rapid decline of manufacturing. Another piece of evidence is that investment into that part of the economy that is not the buying of government bonds, futures markets, the real state bubble and funding credit has been going downhill.

The only exception has been mineral deposits, oil and gas. But the shine is starting to wear of even these.

Needless to say, free trade agreements have not been Australia’s path to success. They are a part of the problem.

In any case, being in its own right a major powerhouse, Europe is not going to open its borders to Australian exports. The European Union is a trading block that gives its members advantages over others. This condition is at the heart of its existence and its protectionism, along with that of the United States, is the  most important factor creating tension between the two. Each seeks to gain the advantage and neither sees the future in terms of opening their borders to unrestricted imports.

Australia is in no position to shift this and lacks the bargaining power to extract special concessions. and why should they when we are already reputed to be the most open financial market in the developed world and one of the most open in terms of overall trade? There is very little left to bargain with.

Similarly, with the United Kingdom. The existing £14 billion trade relationship is very much weighted in the United Kingdom’s favour. Australia exports mainly primary produce (British farmers are also heavily protected) and imports banking and investment, on the same lines as is the case with the United States.

The Confederation of British Industries, the UK’s leading business organisation, has made clear its wish to prioritise relationships with Europe after Brexit.

Carolyn Fairbairn, the organisation’s director has said:

“Instead of a cliff edge, the UK needs a bridge to the new EU deal…”.

For Malcolm Turnbull, the visit had a lot more to do about marking his territory as leader of the Liberal Party and the prime minister of Australia. Being on shaky ground, he needed something that at least looks like an achievement and these have been in short supply. Acting the international statesman provided a chance to pick his moment. His speech at the Policy Exchange was made in the context of his being awarded the year’s Disraeli Prize, something with which he can hit Tony Abbott and his other enemies over the head.

It is no mere coincidence that his swipe against his opponents, invoking the memory of Menzies and his definition of the true nature of the party came out of London.

 

 

 

 

 

 

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