Wednesday, December 15, 2010



Is free trade worth it?

For the past few decades, since the NeoLiberal revolution, our government has aggressively pursued a policy of free trade. Since 2000 we have signed bilateral free trade agreements with Hong Kong, Singapore, Thailand, Brunei, Chile, Malaysia, and China, and we are currently negotiatign with the US, Japan, South Korea, the Gulf Cooperation Council, India, Peru, Vietnam, Russia, Kazhakstan and Belarus (yes, Europe's last dictatorship). We are told that these deals will deliver enormous economic benefits to New Zealand. But the evidence from Australia shows that that may not be true, and that these agreements may in fact cost us money:

A YEAR-long investigation of Australia's free trade agreements has found they are often nothing of the kind.

The Productivity Commission has told the government there is little evidence to suggest Australia's six free-trade agreements have produced "substantial commercial benefits".

Some may have actually reduced trade by introducing complex rules that make it difficult to sell goods made with products imported from countries not in the agreements. Advertisement: Story continues below

The extra cost imposed by these "rules of origin" could amount to 8 per cent of the value of each export shipment.

As an example, the US-Australia FTA meant a 25% increase in copyright royalties - effectively a "Hollywood tax" - and enshrined anti-competitive rules such as DVD regionalisation. And it means more expensive drugs due to restrictions on the Pharmaceutical Benefits Scheme (Australia's equivalent of Pharmac). These seem to outweigh the benefits of the deal, and result in a net loss for Australia.

The report also criticises the Australian government for assessing FTAs in secret, and "oversell[ing] the likely benefits". It suggests that future deals be subjected to an independent public assessment to avoid this problem. New Zealand could benefit from the same approach. But given how entrenched the dogma of free trade is in political and business circles, I don't see that happening anytime soon. No-one in power wants to find out if the emperor is in fact wearing clothes.

The full report is here.