Sydney Morning Herald, Australia

Beware the limits of latest free trade deal

By Russell Marks

15 November 2011

Despite claims to the contrary by Prime Minister Julia Gillard, the nine-country Trans-Pacific Partnership announced this week is not good news for Australia.

Multilateral and bilateral free trade treaties form a major plank of what has variously been called neo-liberal economic policy or "economic rationalism". This is based on the theory that the regulation of the economy by governments almost always results in inefficiencies and productivity losses, which in turn lead to higher consumer prices and slower rates of economic growth. One major aim of free trade agreements is to compel governments to remove themselves from their role as regulators, and to allow "market forces" to determine what is produced and consumed where, by whom and at what price.

It’s a neat idea, in theory. And it must have something going for it, considering that it’s been ascendant in government policy circles for the better part of 30 years. The trouble is that over the course of those 30 years, there are numerous instances of the idea having failed when it’s been put into practice. Many of the fundamental tenets of neo-liberalism were discredited in 2008, when the consequences of the global deregulation of the financial sector became apparent.
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The discrediting of neo-liberal ideas has occurred not least in the arena of international trade. It has become increasingly apparent that what free trade agreements do best is restrict governments from regulating the economy for public interest policy reasons, such as public health and the protection of the environment and local industry.

Australia has recent experience of the detrimental consequences of signing a free trade deal with a much larger "partner". In 2004, neo-liberal ideologues in the Howard government engineered a bilateral free trade agreement with the US. Ostensibly, this was to allow Australian exporters greater access to American agricultural markets. However, the powerful agricultural lobby in the US was effective in preventing any real access. Famously, not one grain of Queensland sugar has seen entry into US markets. In the first three years of the operation of the AUSFTA, the Department of Foreign Affairs and Trade’s own figures show that Australia’s trade deficit with the US more than doubled.

Neo-liberal ideas are also referred to as "the Washington Consensus", given the location of many of the major institutions – the International Monetary Fund, the World Bank and the US Treasury – which prescribe rationalist solutions for crisis-ridden developing economies. "Washington Consensus" is an apt term. Historically, the US has used its relative economic and political power to secure "free trade" deals that benefit it at the expense of its trading "partners". This can most clearly be seen in America’s attempts to reclassify other governments’ public interest policies as forms of economic protectionism, which must be abandoned under the rules of "free trade" agreements.

In its negotiations over the AUSFTA during 2003-04, the office of the United States Trade Representative focused in particular on Australia’s Pharmaceutical Benefits Scheme (which provides heavily subsidised access for patients to listed medicines under patent), its process of blood procurement (which for health and security reasons is not open to international competition) and its laws mandating minimum levels of local broadcast content on television. The USTR sees these policies as "protectionist" and wants them abandoned, regardless of Australia’s arguments that they are in our national interest.

There has been very little media coverage of the Trans-Pacific Partnership negotiations. The TPP aims to build on a four-nation treaty originally signed by New Zealand, Singapore, Chile and Brunei. In September 2008, the new Obama administration announced that it would be seeking to join what was then called the P-4. Within two months, the governments of Vietnam, Peru and Australia announced that they would also join in negotiations, which formally started on March 15, 2010.

When the Rudd government committed Australia to the TPP negotiations (in the same year that he publicly declared that neo-liberalism was "little more than personal greed dressed up as an economic philosophy"), many outside DFAT scratched their heads. Yesterday morning, Gillard told ABC radio that "freer trade with our growing region means Australian jobs". But at what cost?

Why, exactly, is the Australian government pursuing a TPP deal? It already has bilateral agreements with four of the negotiating countries – New Zealand, Chile, Singapore and the US – and with the 10-country ASEAN bloc. Australia claims that the TPP will result in greater access to Pacific markets for exporters. But it is highly unlikely that the US, in a presidential election year, will allow much further access to its own domestic markets, especially given that it is still facing 9 per cent unemployment and is at risk of a double-dip recession. It is also likely that the US will make a further push for the deregulation of Australia’s PBS, local content requirements and blood procurement system.

The New Zealand-born former British Labour MP Bryan Gould, who has been warning New Zealand against signing up to any free trade deal involving the US, argues that "free trade areas" effectively become single economies.

Australians should be aware that any Pacific-wide free trade area would inevitably drive wages down as part of the need to compete with Asian and South American industries. With this in mind, the neo-liberal "jobs at any cost" rationalisation of our own Labor Prime Minister has a very hollow ring.

Dr Russell Marks is a lecturer in Australian politics at La Trobe University.