This is a story about biggest economic achievement of the Liberal government since it came power in 2013, at least it is, according to the Liberal government.
More importantly, this is a story about why it matters to all of us.
And we’re going to break this thing down into 20 easily digestible points and sort the wheat from the ChAFTA (China Free Trade Agreement), so to speak.
NO DOZING OFF!!!
Let’s start at the absolute beginning.
1. A free trade agreement (FTA) is an agreement that removes trade barriers between countries. The most common type of barrier is a tariff, which is a tax on imported goods. Tariffs encourage people to consume local goods and services rather than imported ones, whose prices become artificially inflated due to tariffs.
2. But sometimes, it suits two or more countries to do away with tariffs and other barriers to free trade. That’s when FTAs are negotiated.
3. Australia currently is signatory to nine operational FTAs. You can see the list here. We have also signed a tenth, the China Australia Free Trade Agreement, with finer points being debated in parliament this week. It’s controversial in some ways, which we’ll get to in a moment.
4. When Tony Abbott made his final speech as PM on Tuesday, he opened with a few commendably humble remarks, then said the following:
“I’m proud of what we’ve achieved over the past two years. 300,000 more people are in jobs ... and we’ve signed Free Trade Agreements with our largest trading partners, with Japan, with Korea and with China.”
Jobs and FTAs. Those are the big economic achievements our 28th Prime Minister pins his legacy on.
Now, it just so happens that unemployment was running at 5.8 per cent when the Liberals came to power and that is now at 6.2 per cent, so the jobs boast smells like a case of creative accountancy. But the FTAs? Yep, Mr Abbott was absolutely right to claim them as an achievement.
5. Having said that, it’s worth noting the ChAFTA was first mooted by John Howard in 2005, while the Korea and Japan agreements were first floated by Kevin Rudd in 2007. But, yep, Tony Abbott’s government got them over the line.
6. So why do FTAs matter? Are they the economic equivalent of sunshine, lollipops, rainbows and unicorns that the government claims?
7. In its slick promotional video, the government says:
“This powerful trifecta of agreements opens up unprecedented trade and investment opportunities just waiting for Australian companies to seize them ... The agreements protect and strengthen our ability to compete against other countries, helping Australian businesses reach new heights.
“Australian companies now enjoy enhanced competitive advantages in sectors where in our goods and expertise are in demand. The agreements encourage two way investment and will attract vital new capital into Australia.”
8. By now you get the idea. FTAs, in principle, are good for business. And when you’re talking about three countries that together, accounting for 61 per cent of Australia’s total exports, that’s got to be good, right?
Right.
9. Well, mostly right. One man who sees both the good and the bad is Dr Jeffrey Wilson, a Fellow of the Asia Research Centre and Senior Lecturer in International Political Economy in the School of Management and Governance at Murdoch University. (We need a glass of water after writing all that.)
As Dr Wilson told us overnight in an email message we hope he doesn’t mind us repeating: “I have recently made a minor career out of explaining free trade agreements to media audiences that normally don’t know or care about them”, he said.
We love you already, Dr Wilson. So tell us, what’s the deal here?
10. “Basically, the main reason we want these agreements is for agriculture,” Dr Wilson explains. “We export lots of food, Asia has a growing middle class and we can feed them. The second thing we wanted were services. So if a lawyer or an architect want to open an office in China, now they can and their legal certificates and so on will be recognised.
“So we’ll export more agricultural products, more services and we’re basically giving up on manufacturing. That what this is about.”
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