April 7th 2018


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Articles from this issue:

COVER STORY Free trade agreements leave us even more dependent on China

EDITORIAL Why Russia re-elected Vladimir Putin

CANBERRA OBSERVED Empty seat last vestige of minor parties' party

NATIONAL AFFAIRS Liberals take power but plan for none for SA

INTERNATIONAL AFFAIRS Sexual exploitation at Oxfam symptom of culture of death

RELIGIOUS FREEDOM General protection gives a false sense of security

PHILOSOPHY AND CULTURE On celestial politics

GENDER POLITICS Trans ideology awash with big money from big biomed and big pharma

REGIONAL AFFAIRS Taiwan stands up to Beijing's bullyboy tactics

CINEMA Outstanding film follows St Paul to his death in Rome

HUMOUR An Appetite for Diamonds: Porphyry Volpone investigates

MUSIC Power playing: Technique v musicality

CINEMA Peter Rabbit: More Bugs than Beatrix, but lots of fun

BOOK REVIEW We're doomed; but we're not alone

BOOK REVIEW Subcontinent set for Asian century

LETTERS

NATIONAL AFFAIRS The deeper causes of Australia's social malaise

GENDER POLITICS Queensland proposes transgender birth certificates

Books promotion page

COVER STORY Free trade agreements leave us even more dependent on China

by Patrick J. Byrne

News Weekly, April 7, 2018

Trade is in the headlines with Donald Trump’s tariffs on Chinese imports and on imported steel, a reaction to decades of trade deficits and the loss of American industry and jobs.

More on the U.S. tariffs and what they mean for the world trading system will appear in the next issue of News Weekly.

Meanwhile, the Trump Administration moves raise the question: how have Australia’s exports fared with the nine countries with which it has signed free trade agreements (FTAs) since 2003?

For two decades, Australian governments of both persuasions have promised significant expansion of the Australian economy from FTAs.[1] Such improvement is measured by how much our balance of trade improves.

The Singapore FTA came into force in mid-2003. Australia had been running a $1-2 billion annual trade surplus with Singapore for a decade, which turned into a $6-8 billion annual deficit between 2007 and 2013. The trade deficit in 2016–17 has come down to about $2 billion.

At the time of the 2005 Australia-United States FTA, Australia was running a $14 billion deficit with the U.S. The deficit with the U.S. had been growing since at least the mid-1980s. By 2016–17, Australia’s trade deficit with the U.S. had blown out to almost $25 billion. Over that time, Australian exports increased about $6.6 billion, while imports rose about $18 billion.

When the FTA with Thailand came into effect in early 2005, trade between the two nations had been in balance for about 20 years. By 2016–17 the trade deficit with Thailand was $11.6 billion. Over those 11 years, export from Australia rose by $0.6 billion, while imports from Thailand blew out by $11.6 billion.

Australia’s trade with Chile is relatively small, measured in the millions of dollars. At the time of the 2009 FTA between the two countries, Australia had a $300 million trade deficit, which fell to $77 million in 2016–17.

Up until the early 2000s, Australia had been running a trade surplus with ASEAN and New Zealand. However, by the time the ASEAN-Australia-New Zealand FTA came into effect in early 2010, Australia was running a $23 billion trade deficit across this region. Today the deficit has come down to around $15 billion. Australian exports have grown by $14 billion, while imports have increased by $7 billion. ASEAN is made up of Indonesia, Thailand, Vietnam, Singapore, Malaysia, Philippines, Myanmar (Burma), Cambodia, Laos and Brunei.

Similarly, Australia had been running a trade surplus with Malaysia until the late 1990s. By the time of Australia’s 2013 FTA with Malaysia, Australia had a $3.5 billion trade deficit with Malaysia. Since then,the deficit has marginally improved to about $3 billion. In the four years since the FTA, Australian exports grew $1.3 billion, while imports increased by $1 billion.

The Australia-Korea FTA came into force in late 2014. Australia had a growing trade surplus with Korea over previous decades, peaking in 2011 at about $16.5 billion, after which it went into a sharp decline. It fell to $6 billion at the time of the FTA. In the following three years, Australia’s trade surplus with Korea has marginally improved to $6.7 billion.

The Australia-Japan FTA in early 2015 came after steady growth in Australia’s trade surplus with Japan over many decades, peaking around 2009 at $35 billion. At the time of the FTA the trade surplus was around $25 billion. By 2016–17 it had fallen to $21 billion. While import levels from Japan are fairly steady, export values fluctuate with volatile commodity prices.

Australia’s most recent FTA was the 2015 agreement with China. Between 2008 and 2013–14, Australia went from a balance on trade with China to a massive $48 billion trade surplus. In 2016–17, the trade surplus was around $46 billion. It is too early to know how the FTA with China will pan out for Australia.

On balance, Australia’s trade deficit with these countries has marginally deteriorated since the signing of these FTAs. Australia has done poorly with the U.S. FTA. Australia’s trade deficit has blown out and continues to worsen.

Up until the turn of the century Australia had favourable balances with most Asian countries, but this was eroded after 2000. Excluding China, the overall trade balance with Asia further deteriorated after FTAs were signed. The same was true of Australia’s trade with Japan, which may be due to fluctuations in commodity exports and export prices.

Since 2007, the difference has been made up largely by a massive increase in exports of iron ore and coal to China. Thus far, China has rescued us from the worst effects of FTAs that have not worked to Australia’s advantage.

We don’t know how the future with China will play out but, if our commodity exports fall, our current account will suffer.

In other words, Australia relies on China to prevent us drifting into unsustainable current account deficits.

Frequently, economic modelling had predicted that Australia would see a significant rise in gross domestic product from these FTAs. This has not eventuated.

Patrick J. Byrne is national president of the National Civic Council.

Reference

[1] Direction of goods and services trade, financial years. Historical figures, Australian Bureau of Statistics, Last updated: December 2017 using ABS catalogues 5368.0 and 5368.0.55.003 (Sep 2017 data).




























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