Free trade

[David]

We've all heard the arguments against the TPP deal, and certainly a lot of the aspects of this deal are alarming – ISDS provisions, medical patents and copyright laws to mention a few – but what are the arguments from the other side? What are the good aspects of free trade, generally speaking, and how do free trade deals tend to affect an economy in the long run?

[Tannin]

In theory, free trade increases efficiency and thus wealth. Let's work an example.

Suppose Queensland and Tasmania are different countries. They have trade barriers, including a 100% tariff on imported agricultural products. Queensland is very good at growing bananas; Tasmania is good at growing apples.

In Queensland, bananas cost $2. In Tasmania you pay $5 for a kilo of bananas - $2 is the raw cost, plus $1 freight, plus $2 tariff. The reverse applies with apples: they are $2 in Tasmania and $5 in Queensland.

Apples don't grow too well in Queensland. (We are going to suppose that some careless B-52 pilot dropped an atom bomb on Stanthorpe - http://www.aussieapples.com.au/growing-regions/queensland.aspx ) It costs way more than $2 to grow an apple in Queensland, they hate the climate. Queensland apple growers have to spend a heap of money on air-conditioned greenhouses to make it cold enough for apples to set fruit. Their fruit isn't great quality, and it costs $5 a kilo just to grow it. The apple growers whinge and moan about cheap imported apples and are always asking for tax relief, subsidies, and higher tariffs. You at home in Townsville wind up paying $4.80 for a not-very-good apple. And the Queensland banana growers have all these beautiful cheap bananas they can't sell 'coz of Tasmania's stupid tariffs.

Meanwhile, in Tasmania, the banana growers spend a fortune growing not-so-great bananas in heated greenhouses, and barely break even selling them at $4.80, while the apple growers can't find buyers for their superb quality cheap fruit.

So we end up with less of everything. There is lots of excellent banana growing land wasted on apples, and vice-versa in Tasmania. It takes way more effort to grow a banana in Tasmania, so we are wasting land, resources, effort and money to produce an inferior product.

The right answer, according to the economists, is to can the tariffs and let market forces go to work. Queensland ends up growing all the bananas, and Tasmania grows all the apples. Everything is cheaper, and we waste far less money and effort on dumb stuff like heated greenhouses.

The problem, of course, is that the "free trade" agreements this shonly government keeps bringing in are not, repeat not free trade agreements, they are completely bastardised secret "agreements" which mostly wind up doing more harm than good.

[Culprit]

As Tannin stated it's secret deals, if it's so good for everyone release the documents. When business are helping pump millions into an advertising campaign be very afraid.

[Mugwump]

Well enough explained above, really. In principle it's a good thing. In practice you need to look at the fine print. There is also some debate about whether nascent industries in the smaller market might warrant a little domestic subsidy while they get going. If it is truly done only when they are nascent (ie small) and it persists for a limited time in which they get bigger and can compete with large offshore incumbents who might engage in dumping, that sounds like a fairly sound idea, but I'm not aware of any definitive research on the matter.

The principle of free trade is fairly unarguable, I'd have thought. Tannin's example shows why the constitution of federal countries almost always prohibits barriers to trade between the constituent states, and the basic wealth-creating dynamic applies to trade between nations as well.

That said, I am not familiar with the terms of the TPP agreement in question, and it may have predatory or other pernicious provisions, I don't know. I rather doubt that Australian negotiators would sign up to things that are not in the national interest, but I know that is likely to be a contested view !

[David]

The secrecy scares me too, and it's hard to shake the feeling that we're getting screwed. But I don't want to just take a reactionary "all free trade is bad" approach, because a) it generally seems like good economics and b) there will necessarily be sacrifices. I want to weigh up the pros and cons before deciding whether it's, say, something to take to the streets over.

There's also the China free trade agreement to weigh up, too. Labor seem to be going harder on that one, at least.

Mugwump, sucking up to America has always been considered in the national interest here. I'm not sure why giving them the better deal in a trade pact would be so implausible, so long as the Liberal Party ideologues feel that we're getting something from it (and keep in mind that they're the ones negotiating, not the parliament as a whole or the populace). At the end of the day, they're the superpower and they hold the whip hand. It'd take an act of immense political courage to say no to the deal now it's been finalised.

[Mugwump]

[Tannin]

http://www.theage.com.au/comment/transpacific-partnership-were-selling-our-sovereignty-for-little-return-20151011-gk6fhw.html

[3.14159]

Why pay an Australian when a Chinese will do it for a 1/3rd of the cost?
Cheap labour has historically been China's strong suit so why are we opening doors that can only put Australian's out of work because they cannot compete with workers that fly-in work and send the money back over-seas.

According to this pact (or what little we know about it's contents) "if" future governments decide that unlimited 457's aren't the way to go Chinese companies will be able to sue Australia for the increased cost's of labour a change in policy would bring.

If this Pact is so wonderful why are we being kept in the dark about what it contains?

[stui magpie]

I think the free trade concept has been well explained, thank you all.

As far as the secrecy around the agreement, the biggest problem with that is it allows fertile imaginations to fill in the blanks and interest groups to make statements that can't be proven correct or otherwise.

The sooner the detail is made public so the detail can be discussed rather than the latest interest group sourced rumour, the better. Then we can judge it.

[3.14159]

(According to the CFTA) how many Chinese electricians does it take to change a light-bulb?

[stui magpie]

[3.14159]

(According to the CFTA) how many Chinese electricians does it take to change a light-bulb?

I honestly don't know!
I rang the office of trade and was told I was a racist and the information was covered by the Official Secrets Act.
My Metadata would from here on would checked daily and any further inquiries would see me brought before a Royal Commission and charged with Economic Terrorism.

[swoop42]

Free trade?

#Lethalsaysnotrade.

[Culprit]

Australia will soon be a Province of China as we are selling off the Country to them. No other Country allows non Citizens to buy up everything at will. We are truly suckers. No wonder the Chinese want an FTA. The Libs dealing with Communists is something I would not have thought would happen and in saying that Bob Menzies sold the iron to the Japs that helped kill our servicemen and women.

[Pies4shaw]

There are no "Communists" in any position of influence in China - whatever they might call themselves.