The government’s insistence that Labor immediately endorse the Trans-Pacific Partnership minus the United States (TPP11), without knowing what’s in it, is an early reminder that politics will again dominate policy this year. Opposition leader Bill Shorten and shadow trade minister Jason Clare have suggested the pared-down agreement be subjected to Productivity Commission economic modelling. Treasurer Morrison has dismissed this idea as absurd. Yet he gleefully brandished BIS Shrapnel modelling he claimed was of the opposition’s negative gearing policy when, in fact, it had been conducted months before the policy’s release and on a different set of assumptions. In the treasurer’s world, consistency is the sign of a small mind.
Fortunately, the World Bank has released economic modelling of the original, gorilla-sized TPP that included the US economic powerhouse. The results are illuminating: the US-inclusive TPP could lift the collective GDP of the 12 member countries by a one-off 1.1 per cent by 2030. Vietnam and Malaysia would have been the biggest winners, but the US would have achieved only a 0.4 per cent lift in GDP in 2030. Australia would have been the second-smallest beneficiary, picking up only a 1 per cent gain at the end of the next decade.
With the US now out, independent modelling inevitably would show a negligible increase in Australia’s GDP from the TPP11. Perhaps that is why the Australia government is refusing to ask the Productivity Commission to model the agreement.
But this doesn’t mean the TPP is not worth having. It could form a building block to the Asia-Pacific Economic Cooperation (APEC) forum’s vision of a free trade area of the Asia-Pacific region. If the TPP truly is not a geo-political counter to China’s rise, it could over time be merged with the Regional Comprehensive Economic Partnership (RCEP) that includes China and Australia, which is under negotiation.
The US might join sometime in the future, President Trump signalling possible interest in a deal that was much more favourable to America. He is unlikely to move during this presidential term, having solemnly promised to withdraw from the TPP. So, too, did Hillary Clinton, making it most unlikely a future Democratic presidential candidate would reconsider US membership.
A definite negative in the TPP11 is the retention – reportedly with some modification – of the right of foreign corporations to sue member governments in front of specially constituted international panels for implementing policies that adversely affect their profit streams. Known as investor-state dispute settlement (ISDS), these provisions were driven by the US on behalf of its multinational corporations. The original TPP text provided safeguards against ISDS action, allowing member governments to regulate on a non-discriminatory basis in areas such as public health, safety and the environment. But it added the caveat “except in rare circumstances” to the same sentence.
Each corporation taking ISDS action would, of course, claim its circumstances were “rare”, potentially rendering the safeguard useless. As trade minister in the Gillard government, I told the US that Australia would not agree to ISDS provisions. The Americans reluctantly acquiesced, agreeing to carve Australia out of the ISDS chapter.
Labor’s position was informed by three considerations. First, all corporations should be entitled to national treatment: whether domestic or foreign, they are equal before Australian law but none has a superior right to legal remedies. Second, the Productivity Commission and Treasury had consistently advised against ISDS provisions. Third, in the US-Australia free-trade agreement, prime minister Howard refused US demands for ISDS provisions, agreeing instead to raise the screening threshold for foreign investment applications to $1 billion.
With the US now out of the TPP, it is curious that ISDS provisions have been retained. Why weren’t they suspended, along with other provisions that the US had demanded as pre-conditions for its entry?
These and other legitimate questions can be answered through a Productivity Commission review and modelling of the TPP11. Expecting independent scrutiny and analysis of a trade agreement is not anti-trade or anti-jobs, unless you believe the World Bank and the Productivity Commission are leftist organisations committed to the destruction of the global trading system.