Trans-Pacific Partnership promises cheaper prices for consumers

That 12 wildly different countries, including Australia, the US and Japan, representing 40 per cent of the world’s output and 800 million people, were able to agree on a liberalisation of trade and investment barriers is a remarkable and welcome achievement.
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While the US congress may yet thwart the Trans-Pacific Partnership, Andrew Robb and the Coalition government deserve much credit for helping draw the delicate negotiations, which only a month ago appeared destined for the stuffed bottom drawer of global discourse, to a consensus.
It should be obvious that freer trade and investment, and the specialisation and innovation they nurture, have fuelled the dramatic growth in world living standards, especially in countries like Australia which couldn’t hope to maintain its high living standards without importing goods and expertise from abroad.
In our highly interdependent economies, where most of us couldn’t even get dressed let alone get to work without directly or indirectly relying on foreign goods or services, even a little shift back in the direction of autarchy is farcical.
That’s why opponents of the recently negotiated TPP — which now, reportedly, include US presidential contender Hillary Clinton — do not follow their arguments to a logical conclusion and advocate re-erecting barriers.
Economists disagree on a lot but they almost universally back removing trade and investment barriers. British economist David Ricardo explained in 1817 that even if Portugal was better at producing wine and clothes than England was, it would still benefit the two countries to trade. Portugal would specialise in whatever it was relatively best at compared to England, say wine, while England would focus its efforts on clothes, leading to much more output for everyone than if each country tried to provide for itself.
But vested interests — always producers, be they sugar farmers in the US or carmakers in Japan — have deep pockets and well organised campaigns that influence politicians.
In fact, if Australia had simply unilaterally removed tariffs on imported goods and impediments to the use of foreign services, we would have been off.
“Countries get most of the gains from trade from reducing their own barriers; we didn’t actually have to give anything ‘away’ in these negotiations,” says Andrew Stoeckel, a trade specialist at the Crawford School of Public Policy.
“The whole point of the economic system is consumption, not production, so the more we can help consumers, the better off we are,” he adds, suggesting the world was suffering from too little consumption.
It is ominous that global trade growth has steadily fallen to 3.6 per cent in 2014, the slowest pace since 2009. The average annual rate of global trade growth rose from 3.8 per cent between 1850 and 1913, according to the World Trade Organisation, to 6.2 per cent from 1950 to 2007, which underpinned an increase in average annual per capita growth in income from 1.3 per cent to 2 per cent.
In a significant boon for Australia’s relatively efficient farmers, the TPP will see 98 per cent of tariffs eradicated among these 12 countries, across beef, dairy, wine, sugar, rice, horticulture and seafood. The TPP has even managed to prise open the highly protected US sugar market.
But the biggest win in the long-term will come from reduced barriers to trade in services — financial services, telecommunications, education and health services, tourism, government procurement and professional services, for example. Trade in agriculture and manufactured goods has been subjected to the blowtorch of global competition at least since the signing of the general agreement on tariffs and trade in the 1940s. But services haven’t — they are the new low-hanging fruit for improved productivity.
This will be particularly important for Australia as commodity prices, both mineral and agricultural, continue their long-term decline. Services will inevitably grow as a share of Australia’s trade as they have already grown as a share of its economy (services make up about 80 per cent of economic output in advanced countries).
More broadly, the TPP will help Australia by helping Japan. The world’s third-largest economy has been highly protected from foreign competition — which perhaps helped Japan develop novel and competitive manufacturing industries in the 1960s and 1970s, but has since engendered economic sclerosis. Two of Prime Minister Abe’s reform “arrows” have been fired — fiscal stimulus and quantitative easing — without much success. The third, micro-economic reform, might occur organically if the TPP injects sufficient competition into Japanese industry. The TPP might also revive the stalled trade negotiations between the European Union and the US, and the EU and Japan. In turn, less developed countries such as Indonesia and China, whose markets aren’t yet sophisticated enough to join the TPP, will be encouraged to accelerate their own reforms.
The concerns about the TPP — that Australia’s public health system could be undermined by the extension of US intellectual property — have been cauterised by Robb. TPP won’t require any change to Australia’s copyright or patent regimes.
As for investment, Australia will lift the automatic screening threshold for firms from all TPP countries from the $252 million to $1.1 billion. This is hardly a concession since the Foreign Investment Review Board approves virtually every application anyway, and Australia will continue to rely on foreign investors to plug the gap between our imports and exports.
 
Source: DairyAustralian
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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