Opinion & Commentary
Bilateral trade pact the way to go
The government is actively seeking a bilateral free-trade agreement with the US. Foreign Minister Alexander Downer and Trade Minister Mark Vaile intend to travel to Washington to pursue this matter, possibly jointly with Singapore and Chile.
This marks a distinctive shift from Australia’s traditional commitment to multilateralism. It should not surprise. A turning point was reached anyway at the failed Seattle ministerial meeting of the World Trade Organisation in December 1999, not because of the antics of anti-globalisation lobbies, but because it demonstrated a complete lack of political commitment to further multilateral liberalisation among the key trading nations.
Despite countless pious declarations to the contrary and WTO boss Mike Moore’s pleas, one cannot but conclude that a stalemate has been reached. The arduous Uruguay Round and the aborted Multilateral Agreement on Investment had already shown how multilateral negotiations are being hijacked by recalcitrant foot-draggers.
The loss of momentum is dangerous. Since 1950, the GATT, now WTO, and OECD have instituted multilateral constraints on selfish governments, making it harder for them to pander to vested interests by obstructing foreigners and destroying growth opportunities. The progressive opening of borders to trade and investment became the major engine of unprecedented economic growth. Trade and investments far outpaced production and spread productive knowledge around the world. Growing
international competition has forced national parliaments to simplify domestic regulations, resist self-seeking lobby groups and enhance economic and political freedom.
'Vested national interests and politicians oppose the further opening of borders'
Despite these benefits, vested national interests and politicians oppose the further opening of borders. They now realise that this deprives them of much political clout. Hence, the concerted outcry against globalisation.
Since 1980, ordinary Australians have been major beneficiaries of liberalisation and the consequent lifting of self-inflicted regulation burdens. Economic growth would not have accelerated, lifting real incomes across all brackets.
Inflation could not have been controlled so easily. Sydney would not have become a booming world city. Of course, this came at the expense of structural adjustment. With millions of Asians learning to produce for world markets, low-skilled Australians cannot avoid competing with them. The solution to their plight is more investment and training, so that they can earn first-world
incomes in open markets. They could have met the challenge better had the Howard government not failed to reform labour markets properly.
If international liberalisation stalls again, Australia’s lobby-driven parliaments will not develop sufficient fortitude for overdue reforms. Ominously, the tide of interventionist populism is rising again in all political parties and the press.
'Ominously, the tide of interventionist populism is rising again'
With multilateral liberalisation no longer promising, bilateral deals are the second best way forward. Since ASEAN rebuffed Australian participation in East Asian free-trade arrangements at Malaysian insistence, the US and China are our most likely partners in bilateral liberalisation. Previous US administrations repeatedly broached the idea with Canberra, and Chinese
President Jiang Zemin offered Australia a free-trade pact in 1999.
The Australian debate has been complicated by recent party-political disagreements about whether to approach Beijing instead of Washington, Labor’s preferred option. However, the deals are not mutually exclusive. Why not demonstrate our sovereignty by establishing free-trade treaties with both?
In case of doubt, Australians have more to learn and gain from the US connection. Cultural affinities and defence interests will make a US tie more stable and trust-inspiring. In the longer term, membership in an elite US-led free-economy club and integration with wider Western political, economic and knowledge networks will make us more attractive and worthier of respect in Asia, even in China.
In any event, party-political tussles must not be allowed to distract from the priority of reviving the momentum of liberalisation.
About the Author:
Wolfgang Kasper is Senior Fellow of The Centre for Independent Studies and is Emeritus Professor of Economics at the University of New South Wales.
