A small ado

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Predictably, some trades union leaders are trumpeting opposition to the Gillard-Emmerson trade policy statement: Trading our way to more jobs and prosperity.But their bluster is undeserved. The statement makes no concrete proposals for new (or even fewer) trade negotiations and identifies no specific economic reforms such as cutting Australia’s market access barriers for services, investment or manufacturing.

On first reading, the report appears to be a re-statement, with some refinements, of existing Australian trade policies distinguished by a sort of hand-on-heart, earnestness about basic micro-economic theory and good administrative practice that some will find refreshing and much-needed, but others rather naïve.

Dr Emerson acknowledges to, but does not attempt to cut through, some of the really difficult problems that trade policy poses for Australia. For example, the statement un-remarkably endorses our long-standing support for multilateral trade liberalization: a good-deal-if-you-can-get-it proposition for Australia, if ever there was one. He offers, however, no new ideas about how to restore momentum and credibility to the deadlocked and increasingly irrelevant embodiment of multilateralism in the WTO. Rather, the statement appears only to accept, briefly and with unspecified qualification, the recommendation of the Productivity Commission that the government consider options for plurilateral agreements in future.

The statement succinctly re-states, without over-stating, the deficiencies of discriminatory trade agreements such as FTAs—endorsing almost all of the recommendations in the recent Productivity Commission report—and assures us that Australia will never participate in “low quality” agreements (not comprehensive or “not truly trade liberalising”). But, as the statement confirms, the endless painful negotiations with Japan and China must, obviously, continue, although there is zero prospect of a comprehensive, preferential liberalisation deal with either of them.

The report also rehashes, with a rather foolish declaration, an old—and entirely pointless—piece of product-differentiation (Emmerson’s trade portfolio from Rudd’s foreign relations). “Australia will not allow foreign policy to dictate parties to and the content of trade deals” it proclaims. Really? What then of our joint agenda with China, Japan, the United States, New Zealand, the Pacific Islands…

On balance, Dr Emmerson’s report is a worthy testament to his belief in the practice of “neoclassical liberal economics” that has been so bitterly and inexpertly criticised in the past by his portfolio’s senior partner. This tone leads him to hint at some good intentions for the future (a more sceptical attention to quarantine protectionism, for example). He wisely dismisses simple-minded technocracy; rejecting the majority-recommendation in Productivity Commission’s report, for example, that trade modelling should determine our national interest in trade agreements. He gives little comfort to those who want to erect trade restrictions in the name of labour standards or environmental “sustainability”. But the lack of concrete innovation suggests no new insight into the most serious challenges facing our trade policy.

A Trade Minister’s job is difficult: the opportunities for “victory” in trade agreements are few and far-between;the task of restoring choice and resources to consumers is nearly thankless, and; the pressures for compromise and pragmatism are greater, no doubt, than Dr Emerson would like. The higher her or his principles soar, the more likely is a Trade Minister to trip-up on the pedestrian realities. For example, when pressed by business lobbies to defend this curious declaration: “[I]n negotiations with trading partners the Gillard Government will not seek exclusive or entrenched preferential access to other countries’ markets”, Dr Emerson may have to acknowledge that this not a policy but a fact. In reality, we have no alternative.

Dr Emerson suggests to us in this report that he intends to reconcile international relations pressures and political-economy pressures at home (e.g. parliamentary dread of the foreign integration of our securities markets) with the economic policies that we would choose if we really were the mythical “small country,” happily governed by a wise dictator with reliable foresight. I genuinely wish him good luck but I’m not encouraged by this report to lay short odds.

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