The Sydney Morning Herald’s recent editorial regarding the Trans-Pacific Partnership (TPP) misrepresents the quoted World Bank Study.
Contrary to the editorial, the World Bank findings support the view that the TPP is not only a game-changer for liberalising trade in the region, but will clearly benefit Australia to a significant degree. Yes, a 0.7 percent increase in GDP may look modest. But in Australia’s $1.6 trillion economy it is far from inconsequential, and equates to an increase of roughly $11 billion to Australia’s economy. What’s more, this is a permanent increase. At a time of uncertainty in the world economic outlook, it would be folly to turn down such gains.
These gains are even more significant considering they come on top of the benefits Australia has already locked in under existing trade agreements with eight of the TPP parties, including the US and Japan, the largest economies in the TPP, and build upon the clear benefits of our free trade agreements with China and Korea as well.
Economic models show varying benefits from free trade agreements for a range of reasons, including different states of development and openness. Characterising these outcomes as ‘wins’ betrays a basic misunderstanding of what is being modelled.
Comparing the outcomes for Australia and the United States – diverse, open and mature economies – with smaller emerging markets such as Malaysia and Vietnam, which have not undergone significant economic reforms like Australia and retain high trade barriers, is a poor way to assess the outcomes for Australia. The economic costs of not participating are also absent from your assessment.
The economic gains are, of course, only one part of the case for the TPP. As your editorial acknowledges there are also strategic benefits from the TPP in terms of increasing stability and prosperity in our region. The TPP is also an important expression of the US rebalance towards Asia which is very much in the region’s broader strategic interests. So in more ways than one, the TPP is a good deal for Australia.
Department of Foreign Affairs and Trade