Three reasons for an FTA

Here are three rea­sons for trad­ing busi­ness­es to take seri­ous­ly a free trade agree­ment between Aus­tralia and the USA. First: it will be big.  The World Bank mea­sures the GDP of Aus­tralia as larg­er than the com­bined GDP of all of the 10 aspi­rants to EU mem­ber­ship. The USA’s econ­o­my is almost as large as that of the cur­rent EU of 15 coun­tries. So the com­bined Australia/US region has a GDP, today, that is almost the same size as that of greater Europe. In fact, it’s eco­nom­ic impact is more wide­spread because an exist­ing frame­work of agree­ments with NAFTA coun­tries (Cana­da, Mex­i­co), with CER (New Zealand) and with ASEAN mem­bers (free-trade agree­ments with Sin­ga­pore and prob­a­bly with Thai­land) will trans­mit growth due to our trans-Pacif­ic link through­out the Asia-Pacif­ic region. Sec­ond: it will evolve rapid­ly. The growth prospects for the Australia/US ‘region’ are prob­a­bly not as great as the growth prospects for the enlarged EU. We have big­ger dis­tances to con­tend with and we’re not attempt­ing to achieve the degree of polit­i­cal and reg­u­la­to­ry inte­gra­tion that char­ac­ter­izes the EU or Australia’s agree­ment with New Zealand. But mar­kets are more flex­i­ble in Aus­tralia and the USA than in most of Europe and exter­nal bar­ri­ers to those coun­tries out­side the ‘region’ are low­er. So you can expect to see both Aus­tralia and the USA move quick­ly to extend the terms of their bilat­er­al agree­ment to oth­er region­al coun­tries who would like to facil­i­tate trade and eco­nom­ic exchanges with­out going down the ‘deep inte­gra­tion’ path to adopt­ing the same laws, admin­is­tra­tion or exter­nal rela­tions. Third: it will be inno­v­a­tive. For all the hand-wring­ing that has tak­en place in the aca­d­e­m­ic com­mu­ni­ty over the past half-cen­tu­ry about free-trade agree­ments, they have grown at bio­log­i­cal rates with­out debil­i­tat­ing the mul­ti­lat­er­al sys­tem. But the WTO is in dif­fi­cul­ty because it’s mem­ber­ship is too large and too diverse to con­tin­ue to devise ‘one-size-fits-all’ agree­ments that respond to every mem­bers’ needs. Sev­er­al of the WTO agree­ments are not imple­ment­ed by gov­ern­ments that have nei­ther the resources nor the nation­al pri­or­i­ties need­ed to do so. The writ­ing has been on the wall now for almost a decade: the mul­ti­lat­er­al sys­tem has to find a more sophis­ti­cat­ed way to han­dle diver­si­ty while main­tain­ing the essen­tial uni­for­mi­ty of rights and oblig­a­tions among its mem­bers.  Just as the Aus­tralia-New Zealand Clos­er Eco­nom­ic Rela­tions agree­ment in 1986 showed the way for­ward on mul­ti­lat­er­al agree­ments on ser­vices trade, the nego­tia­tors in the Aus­tralia-US agree­ment have an his­toric oppor­tu­ni­ty to show how region­al agree­ments can accel­er­ate the facil­i­ta­tion of trade and eco­nom­ic exchanges with­out harm­ing the glob­al trade enter­prise.

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