'TPP: I have studied this dumb deal...'
I thank the committee and, in particular, the secretariat for the effort
they have put into summarising the background to the Trans Pacific Partnership
(TPP) agreement, outlining the key issues and examining the treaty-making
The committee has examined various aspect of the agreement and, coupled
with the circumstances that have arisen since the inauguration of US President
Donald Trump, has made two recommendations, both of which I support but they do
not go far enough.
The future of the TPP
In relation to the future of the TPP the committee has recommended 'the
Australian Government should defer undertaking binding treaty action until the
future of the Trans-Pacific Partnership Agreement is clarified through further
negotiations with Australia's major trading partners'.
One of the criticisms expressed of the TPP, including by the JSCOT, has
been the lack of sufficient analysis of the national benefit of entering into
such a deal. Shallow rhetorical statements cannot be used to make the case.
Analysis of agreements after their implementation invariably shows that the
claims made by Government and free trade spruikers just don't stack up.
The Productivity Commission has revealed predictions of growth and jobs
from Free Trade Agreements (FTAs) have rarely been delivered because the
economic models employed exaggerate the benefits, ignore many of the costs and
assume away unemployment effects.
The Australian National University's study of the outcomes of the
Australia-US FTA after 10 years showed the preferential agreement diverted
trade away from other countries. Australia and the United States have reduced
their trade by $US53 billion ($71 billion) with the rest of the world and are
worse off than they would have been without the agreement. That study concludes
that 'deals that are struck in haste for primarily political reasons carry risk
of substantial economic damage'.
Past Governments have claimed that Australia's FTAs with Japan, South
Korea and China would lead to tens of thousands of additional jobs. Yet
economic modelling, by the Canberra based Centre for International Economics,
estimates that by 2035 those three FTAs will have produced a total of only 5400
additional jobs. That's less than 300 jobs a year. The same study indicates
that the three North Asia FTAs – with Japan, Korea and China – taken together
will boost total Australian exports by only 0.5 per cent. They'll boost imports
by 2.5 per cent. These FTAs are more like 'import agreements' than export
I am not against the expansion of trade or negotiating free trade
agreements. Trade is the lifeblood of our economy. But we need to take a more
strategic approach to trade; indeed a much more hard-headed approach that
supports a diverse economy including our manufacturing industry.
Manufacturing is in crisis. Over 200,000 manufacturing jobs have
disappeared since 2008, and the rate of job loss has accelerated. Manufacturing
employment fell 6 per cent in 2015 alone. There was never anything
inevitable about this. What we have been witnessing has to a large extent been
driven by the policy decisions of successive governments. The decline in
Australian manufacturing output and employment is not typical of other
industrial countries. Australia is well behind our counterparts – and now has
the smallest share of manufacturing in total employment of any OECD country.
All successful manufacturing nations, the United States, Japan, Germany,
South Korea, and others have negotiated trade agreements that expand trade but
still enable them to use government procurement and other active government
policies to develop globally competitive manufacturing industries.
The government has negotiated poorly in the South Korea, Japan and China
FTAs, conceding far more than our trading partners. They have struck deals at
any cost, going for quantity, not quality.
The 'success' of this policy is evident in Australia's huge current
account deficits. In 2015, Australia exported just under $100 billion in total
value of manufactured products, but imported $246 billion. The deficit in
manufacturing is the biggest single contributor to Australia's ongoing current
account deficits which have driven rising international debt, now exceeding $1
In addition to an inadequate business case there are other significant
flaws in the agreement. One of these is the sovereignty sapping ISDS
provisions. The committee rightly quoted the powerful and attention demanding
extrajudicial statements of none less than the former Chief Justice of High
Court, Justice Robert French AC, which is worthy of repeating:
Arbitral tribunals set up under ISDS provisions are not
courts. Nor are they required to act like courts. Yet their decisions may include
awards which significantly impact on national economies and on regulatory
systems within nation states...The possible inclusion of an ISDS provision in the
TPP has become an issue of intense debate with some critics seeing it as a
Trojan horse for the enhancement of the power of international corporations at
the expense of national sovereignty and interests.
Other flaws in the agreement are well articulated in the committee's
The TPP is a dumb deal.
Even if a suitable replacement economy for the United States is found,
the TPP or a similarly styled agreement should not be accepted or ratified by
the Australian government.
Reform to the treaty-making process
The committee highlighted bipartisan agreement to reform the
treaty-making process and made a recommendation that 'the Australian Government
expedite widely supported reforms to the treaty-making process in order to
assist the completion of future trade agreements'.
The Senate committee joined JSCOT in endorsing 'the need to permit
security cleared representatives from business and civil society to see the
Australian Government positions being put as part of those negotiations' and
the need for independent modelling and analysis of a proposed trade agreement
to be undertaken by the Productivity Commission, or equivalent organisation.
I support these reforms but note that the committee's recommendation can
be strengthened by ensuring that the text of these agreements be subject to the
scrutiny of the Parliament prior to the agreement being signed.
That the Australian Government expedite widely supported reforms to the
treaty-making process in order to assist the completion of future trade
agreements and for that reform to include the need for the text of these
agreements to be subject to the scrutiny of the Parliament prior to the
agreement being signed.
Senator for South Australia
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