Trade Policy

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Trade Policy

• Trade and the Australian economy
• Trade policy and the role of Treasury
• Australias trade policy priorities
• Role of economic analysis
• Questions for discussion

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1. Trade and the Australian economy

• Why trade matters
• Evolution/dispersion of protection
• Federation to 1973 protection all round
• 1983-1991 - unilateral trade liberalisation
• Trade liberalisation important in Australias
  economic performance since the 1990-91 recession
• Since 2000?

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Theories of protection

• Public interest theories
• Private interest theories
• Strategic trade theory
• Defensive protection
• Rise in contingent protection
• IT outsourcing backlash
• Chinas exchange rate

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2. Trade policy and Treasury

• Role of the Tariff Board/Industries Assistance
  Commission/PC
• Role of Treasury (IED)
• Co-ordinate Treasury input into WTO processes and
  negotiations for bilateral FTA/CER, with focus on
  ensuring that the two processes produce net
  benefits to Australia
• International role support multilateral process
  in international fora IFIs/OECD/G20/APEC

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3. Australias trade priorities WTO

• Rounds have progressively become more
  comprehensive
• Role of Cairns Group
• Rise of non-trade concerns
• Doha Development Round
• Changing face of the WTO
• accession of China
• G20

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APEC

• Founded in 1989 evolved under the principle of
  open regionalism ie non-discrimination
• Bogor Goals (1994) will they be met?
• Comprehensive agenda
• Trade and investment liberalisation
• Trade and investment facilitation
• Economic and technical co-operation
• Challenges
• Osaka Action Plan changed the dynamics
• Security agenda now dominates
• APEC now too unwieldy
• Finance Ministers Meeting

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FTAs

• Post-crisis rise in East Asia regionalism
• Drivers have been multi-faceted
• Initially driven by Korea and Japan increasingly
  by Japan/China rivalry
• Concerns about Chinas competitiveness
• Concerns about being left behind
• Proliferation of announced FTAs but few signed

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FTAs

• Negatives
• Uncoordinated approach to FTAs given rise to
  spaghetti bowl affect, multiple ROOs, raising
  transaction costs for business and lowering
  overall welfare
• Political and security motives mean outcomes may
  not be welfare enhancing
• Impacts on third parties
• Draws on scarce resources
• Weakens support for domestic trade
  liberalisation?
• Weakens the multilateral system?

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FTAs

• Positives
• Move further/faster beyond the WTO in services
  and investment
• Provide momentum to the WTO/APEC?
• Deepen economic integration

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4. Role of economic analysis

• Empirical evidence of the gains from FTAs is not
  conclusive
• PC study, Scolley study on East Asian FTAs, USFTA
  studies
• Comprehensiveness of FTAs is evolving faster than
  economic analysis mostly only the static
  gains can be measured
• But non-preferential arrangements still yield
  higher gains
• Key question potential for three trading
  blocks implications for global welfare?

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Questions for Discussion

• Where should Australias trade policy focus lie?
• What are the costs/benefits of a multi-pronged
  focus on multilateralism/regionalism and
  bilateralism
• What role should Treasury play in trade policy?
• What are the implications for the international
  trading system of the changing dynamics between
  the developed/developing world?