Australia-US FTA still a drain on Australia’s economy
By Michael Cebon | February 10, 2009
Martin Feil kicks another goal in The Age today with an excellent article assessing the economic impact of the Australia-US Free Trade Agreement (AUSFTA) four years after it took affect on 1 January 2005.
As the Parliamentary Library noted in December, the AUSFTA has increased Australia’s merchandise imports from the US and reduced our exports, increasing the overall trade deficit with the US.
Feil builds on this analysis, noting that
The trade deficit numbers relate to trade in physical merchandise. They do not include income payments and payments for intangibles such as royalties, management fees, technical service fees and dividends. . .
Analysis of merchandise trade doesn’t take into account the potentially most devastating areas of one-way Australian market penetration created by the USAFTA.
The ABS economic indicator for 2007-08 shows Australia’s “income” deficit in the balance of payments has increased from $37 billion in 2005-06 to $45 billion in 2006-07 and $50 billion in 2007-08.
This is the statistical area where we simply don’t know what is going on, except that we are paying out much more than we are receiving. If we are supposed to become a service economy, the income flow needs to be the other way.
Global Trade Watch join’s Feil’s call for a full government review of this “free” trade agreement, especially in light of Kevin Rudd’s recent admission that the Global Financial Crisis has “called into question the prevailing neo-liberal economic orthodoxy of the past 30 years – the orthodoxy that has underpinned the national and global regulatory frameworks that have so spectacularly failed to prevent the economic mayhem which has now been visited upon us.”
If free trade is not a central neo-liberal economic orthodoxy, I don’t know what is.
Topics: Australian Trade Policy, Bilateral FTAs | Comments Off
Wrap-Up from the World Social Forum
By Michael Cebon | February 10, 2009
The World Social Forum finished up in Belem, Brazil last week. If you don’t know much about it, the WSF was started in January 2001 as a stark alternative and counterpoint to the World Economic Forum – an annual meeting of CEOs of the biggest corporations and the most powerful governments in the Swiss town of Davos.
The WSF brings together tens of thousands of activists, social movements and NGOs from around the world to discuss and debate the world’s problems and possible solutions, from the bottom up.
As usual, Inter Press Service has produced a fantastic series of articles and interviews from this years WSF, which are well worth a read.
There are interviews with activists, lots more interviews, calls for the WSF to Evolve, and even some criticism of the WSF.
Apparently, unlike previous Forums, the 2009 WSF also produced a host of resolutions – including the Declaration of the Assembly of Social Movements.
Topics: Global Justice Movement | 1 Comment »
Ideas for the G20′s agenda on the Global Economic Crisis
By Michael Cebon | February 1, 2009
In April, the leaders of the G20 group of countries will meet again in London to discuss responses to the global economic/financial crisis which is still unravelling. Dani Rodrik’s Blog links to an interesting new initiative: the Global Crisis Debate – a partnership between the VoxEU website and the UK government aimed at generating ideas for the April 2 summit of the G20.
The debate has 5 themes
- Development (Moderator: Dani Rodrik)
- Macro (Moderator: Philip Lane)
- Regulation (Moderator: Luigi Zingales)
- Institutional reform (Moderator: Francesco Giavazzi)
- Open markets (Moderator: Richard Baldwin)
While much of the commentary the so far is fairly conservative, Rodrik provides the lead commentary for the Development section, and it’s definitely worth a read. Rodrik uses the opportunity to put forward an ambitious agenda for global economic policy reform, including:
- Reform of the lending policies of the IMF & WB
- A crack-down on tax havens and tax evasions by corporations and the rich in the West
- A Tobin Tax on currency speculation which would raise billions of dollars which could be spent on development assistance, green technology promotion and fighting tropical diseases.
(Let’s hope somebody reads it and takes notice!)
Among other articles on the site that are worth a read is the response to Rodrik from Nancy Birsall from the Centre for Global Development which argues that before any serious economic policy changes (such as those Rodrik suggests) happen at the global level, there first needs to be reform at the IMF and World Bank – giving developing countries a real say for the first time. Birdsall says that this will only happen if developing countries collectively put their feet down and demand it.
But the big question in response to this is: will the US government – which maintains a veto over the decisions of these institutions and has done so for 60 years since their inception – relax its hold and allow this to happen? Ultimately, the answer lies in President Obama’s hands….
Topics: G20, Global Economics, IMF & World Bank | 2 Comments »
Obama Picks Ron Kirk as Trade Representative
By Michael Cebon | December 23, 2008
The incoming Obama administration has annouced that Ron Kirk will be the new US Trade Representative. (We previously linked to reports that Xavier Becerra would be the new USTR, but apparently he said no.)
Kirk is a former mayor of Dallas, Texas, who doesn’t seem to have much of a background on trade issues.
But there is cause for some cautious optimism, with APF reporting that
The Democrat is strongly backed by trade unions and opposes free trade pacts with Colombia and South Korea that were signed under President George W Bush’s administration
In announcing Kirk, Obama also said some excitingly progressive things about his future trade policy, including that FTAs “must be written not just with the interest of big corporations in mind, but with the interests of our whole nation and our workers at heart.” He also said that Kirk has “seen the promise of trade, but also its pitfalls, and he knows there is nothing inconsistent about standing up for free trade and standing up for American workers.”
On the flip side Kirk has spent the last 5 years working as a corporate lobbyist for Energy Future Holdings Corporation, a group created by Kohlberg Kravis Roberts, TPG Capital and Goldman Sachs to acquire power utility TXU.
There’s some more background on Kirk here.
Topics: US Trade Policy | Comments Off
Asian Monetary Fund?
By Michael Cebon | December 18, 2008
Apparently the 10 countries of ASEAN are ready to set up an Asian Monetary Fund – an idea which has been floating around since the 1997-8 Asian Financial Crisis. AFP is reporting that an “AMF” worth $120 billion will be set up at a regional meeting in February. The idea for an AMF emerged after it became obvious that the policies imposed by the IMF on Asian borrowers were the main reason for the financial crisis. Civil society has been criticising the IMF & world bank’s so-called “conditionality” policies for a long time, so it’s exciting that this might be the beginning of the end of such destructive policies, at least in Asia.
But Reuters is reporting that Asian countries hit hard by the current financial crisis will have little choice but to continue to seek IMF loans. Reuters thinks that
one reason why more ambitious ideas such as a regional crisis fund to bail out banks or invest in equities proposed by the Philippines and Thailand have come to nothing is a reluctance of richer nations such as Japan to lend money without strong IMF-style safeguards.
I guess we’ll see who’s right come February.
Topics: Global Economics, IMF & World Bank | Comments Off
Out of (South) Africa
By Michael Cebon | December 12, 2008
Johanesburg’s The Times has a great article this week looking at the way that the IMF & World Bank have influenced the policies of post-aparteid South Africa. The article is an excerpt from ANC MP Ben Turok’s new book From the Freedom Charter to Polokwane: The Evolution of ANC Economic Policy.
And for an amazing insight into just how destructive these economic policies have been for ordinary South African’s there’s an extraordinary article in Harpers Magazing this month entitled Mandela’s Smile. (It’s not specifically on the issue of globalisation, but it gives a heartfelt perspectives on the ravages of free-market economic fundementalism, as practiced in South Africa.)
Topics: IMF & World Bank | Comments Off
Obama’s Pick for US Trade Rep?
By Michael Cebon | December 12, 2008
Apparently Obama is likely to choose Rep. Xavier Becerraas his new Trade Representative. You can read a bit about him here.
Topics: US Trade Policy | Comments Off
FTAs Badly Failing Australia
By Michael Cebon | December 11, 2008
The Australian Parliamentary Library has released a Background Note analysing Australia’s bilateral Free Trade Agreements (FTAs) which shows how clearly destructive they have been (although the analysis is only from an economic perspective). It starts by noting that FTAs aren’t really that much about trade anyway:
Research suggests that FTAs offer little in the way of trade liberalisation and a shift to more liberal trade policies, particularly in agricultural trade. Rather, FTAs are used more often to promote other non-economic, diplomatic and regional interests
The report notes that thanks to the:
- Thai-Australia FTA, Australia’s trade deficit with Thailand has risen from $711 million to $3.5 billion.
- Singapore-Australia FTA, Australia’s trade deficit with Singapore has more than doubled, rising from $3 billion in 2004 to $6.4 billion in 2007
- US-Australia FTA, “exports to the US fell while US imports increased. Manufactured exports fell across most categories in line with the decline in exports. Australian exports of motor vehicles fell by more than 200 per cent from their peak in 2004. Exports of vehicle parts also fell sharply from their peak of $286 million in 2003 to $131 million in 2007. . . Australia’s $13.6 billion trade deficit with the US in 2007 is the highest trade deficit Australia has recorded with any trading partner.”
The report ends with a scathing assessment of the impacts of Australia’s FTAs:
The FTAs were followed by higher Australian trade deficits and a much slower rate of reciprocal export growth, as well as trade diversion as products were sourced from countries with which Australia has zero tariffs.
The potential risks of the current FTA model adopted by Australia are clear: structural trade imbalances leading to higher trade deficits favouring the FTA partner country, long phase-in periods for free trade (in particular agricultural trade), and negative impacts on the Australian economy which are related to trade diversion.
The anticipated gains for Australian exporters have fallen well short of estimates. Given the growing importance of FTAs in the Asia-Pacific economy, policymakers need to evaluate FTA models and their importance relative to the region’s most significant multilateral project, APEC.
So Mr Rudd (& Mr Crean), why are we negotiating more of these agreements?
Topics: Australian Trade Policy, Global Economics | 3 Comments »
Globalisation & the Decline of the Welfare State
By Michael Cebon | December 4, 2008
Dani Rodrik points to some interesting economic research which “suggests that as technological progress and multilateral trade liberalisation have made borders less of a barrier to economic activity, the scope of redistribution policies has become smaller.”
Apparently there is a correlation between a more open economy and lower spending on social welfare programs. This makes sense, given the observed increase in economic inequality which has flowed from increased opening of markets around the world.
Interestingly, the authors conclude that the current fragility of financial markets “does not bode well for globalisation.”
The breakdown of private financial markets excites calls for stronger redistribution. If redistribution is national (as it has to be as long as politics are national), it will only be sustainable if national borders become less permeable to economic activity.
The Guardian today passes on a similar concern from the World Trade Organisation’s director-general Pascal Lamy:
He is concerned that economic distress in the US, Europe and Asia is already prompting countries to use protectionist weapons yet to be outlawed by the WTO – raising tariffs to the maximum permitted, and introducing anti-dumping regulations.
This seems to be aimed very much at the US, where members of Congress from both parties have written to President Bush to make sure that the US continues to be a big winner from any agreement of the Doha Round of trade talks:
“Developed and advanced developing countries must commit to provide meaningful new market access opportunities [for the US] if Congress is to support a deal.”
This leaves the so-called Doha “Development” round, which was supposed to be first and foremost about securing the interests of developing countries, not looking in very good shape. Which is probably good news, both for developing countries, but also for the poor in rich countries, which might see a bit more wealth flowing their way as “national borders become less permeable to economic activity.”
Topics: Global Economics, Global Inequality | Comments Off
Do tariffs matter any more?
By Michael Cebon | December 4, 2008
Martin Feil has an interesting article in The Age today criticising “free trade” as not particularly free. he argues that
The global industry protection policy development of the past 30 years has moved light years away from tariffs and has extended into the much broader arena of every other form of government assistance.
Our government is giving money to the car industry. It is guaranteeing the money markets. It is lowering interest rates to stimulate sales in the finance sector. It will tax us to pay for innovations in climate change. It will give individuals cash gifts to stimulate spending. It will spend the surplus to bring infrastructure forward to create jobs in the construction industry. It is picking winners and losers all over the place.
So does that mean that tariff levels are pretty irrelevant now? (In Australia at least…)
And a more important question: If successful economies are using government assistance in place of tariffs to protect and support their economies, where does that leave developing countries? Restricted in their use of tariffs by mulilateral or bilateral trade agreements, but unable to afford significant government assistance to industry in the ways listed above, how are developing countries supposed to develop?
Topics: Australian Trade Policy, Global Economics | Comments Off