Time for progressive fair trade policies

25 January 2017

As US President Donald Trump rejects the Trans-Pacific Partnership, it's time to rethink trade policy and produce credible and inclusive fair trade, writes Dr Patricia Ranald in the Sydney Morning Herald.

US President Donald Trump

The US has withdrawn from the Trans-Pacific Partnership.

Donald Trump's rejection of the Trans-Pacific Partnership and review of other agreements has tapped into what is increasingly recognised as a reasonable resentment of fundamentalist free trade policies that have not delivered promised jobs and growth but have contributed to job losses, wages stagnation and growing national and global inequality.

Trump's simplistic response of high tariffs on Chinese imports will not magically restore lost jobs, but could provoke a trade war. Building walls and discriminatory migration policies based on fear are also a dead end. But we do need to rethink trade policy and produce credible and inclusive fair trade alternatives that benefit the majority, not just the top 1 per cent.

Fundamentalist free trade

The global financial crisis taught us that unregulated markets fail, and that governments must intervene to ensure responsible investment and protect consumers. Responding to climate change requires government action to encourage investment from high to low carbon industries and renewable energy. Exposure of global corporate tax evasion has shown that governments must act to ensure enough revenue to provide health, education and other essential services.

Fundamentalist free trade policy does not recognise these lessons. It aims to achieve not only zero tariffs but also zero "other barriers" to all trade and investment. Each country should specialise in its most narrowly defined "competitive" products or services, import everything else at the lowest possible prices, have no active industry policies and minimise other government regulation. Australia would be a farm and a quarry, with deregulated service industries like tourism and financial services.

This policy culminated in former treasurer Joe Hockey's admission that his government decided to end all assistance to the car industry to reach trade deals with Korea and Japan, a decision that has devastated regional economies in Victoria and South Australia. Such assistance is provided in all other competitive car industries, including in the US, Europe and Japan, because of both the strategic economic role of the car industry and the jobs it provides.

Deregulated global production chains have resulted in job losses in industrialised countries, and a race to the bottom as low income countries compete for investment in export processing zones with no effective workers' rights, health, safety or environmental regulation. The result is the 2013 Bangladesh clothing factory disaster, where workers with no rights were ordered back into a substandard building which then collapsed, killing 1300 mostly women and children. This factory was one of many supplying major Australian retailers.

With low or zero tariffs in Australia and many other countries, the TPP and other trade agreements now seek to restrict governments from regulating global corporations in the public interest. Most of the TPP's 30 chapters restricted government regulation in areas such as medicine prices, internet policy, financial regulation, government purchasing and temporary migrant workers. The TPP gave global companies the right to bypass national courts and sue governments for millions of dollars in unfair international tribunals. It extended monopolies on biological medicines for an extra three years, delaying cheaper versions of those medicines. This is not free trade but extension of monopoly rights.

Fair trade policies that put people and the environment first provide a positive alternative to both failed fundamentalist policies pursued by the Coalition government and the narrow, knee-jerk nationalism of Trump and One Nation.

A positive alternative

So what would fair trade policies look like? First, the purpose of trade policy as part of balanced economic policy is to contribute to employment and higher living standards in an environmentally sustainable economy. This should mean a range of jobs in manufacturing, services, agriculture and other sectors, supported by high quality education, health and other services.

Second, trade rules should be agreed through a multilateral system that includes all governments in an open, democratic process, not secretly made behind closed doors. Third, trade agreements should not prevent governments from regulating in the public interest. Fourth, trade agreements should not give additional legal rights to global corporations that already have enormous market power, and should not be used to extend monopolies. And finally, trade agreements should be based on internationally agreed and enforceable labour rights and environmental standards.

Fair trade policies that put people and the environment first provide a positive alternative to both failed fundamentalist policies pursued by the Coalition government and the narrow, knee-jerk nationalism of Trump and One Nation. Now is the time for the Labor opposition and other parties to develop them.

Dr Patricia Ranald is a research associate at the University of Sydney and the convener of the Australian Fair Trade and Investment Network. This article was originally published on The Sydney Morning Herald.

Luke O'Neill

Media and PR Adviser (Humanities and Social Sciences)

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