Australia’s Economic Autonomy
[dropcap]On[/dropcap] October 5, the United States, Australia, and ten other Pacific Rim countries finished negotiation the Trans-Pacific Partnership (TPP), a deal almost ten years in the making. The free trade agreement eliminates 98% of tariffs for Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam. While Australia has other trade agreements with China, the TPP opens up markets to a wider extent than ever before as member countries account for almost 40% of global GDP. However, these new opportunities come at cost: some Australians wonder if their country has given away too much of its economic sovereignty.
Australia has had previous experience with American-led free trade. In 2004, the two countries liberalized trade with the AUSFTA. Although touted as a measure integral to the country’s economic future, the agreement increased Australia’s trade deficit and reduced the exports to the U.S. Since then, U.S. trade in the Asia-Pacific region has decreased by 43%, leading some to question the potential trade opportunities from a U.S. economic hegemony. The failure of the AUSFTA has led critics to conclude that free trade under U.S. leadership has and will continue to hurt the Australian economy.
A major concern about the TPP revolves around Investor-State Dispute Settlements (ISDS), which would bind Australia to an American-style court, where foreign companies can sue Australia in offshore tribunals. The fear is that these companies could override a country’s laws if local regulations hurt business, effectively undercutting that country’s judicial sovereignty. Australian National University professor of law Thomas Faunce sees this provision as potentially damaging because American corporations invoke ISDS lawsuits the most in Australia. On the flip side, others do not see the harm in adopting American regulations, because most of the laws, such as outlawing child slavery, accord with Australian statues. Moreover, Australia maintains twenty-eight ISDS agreements with other trade partners, and has not faced any serious challenges.
More broadly, the United Nations has instituted several agreements on international trade law, which established the rules for ISDS. Today, these provisions occur in over 2,700 agreements worldwide. In this sense, the TPP represents globalization changing the dynamics of trade agreements, which may place greater emphasis on harmonizing laws than on individual sovereignty.
For the most part, both the public and heads of industry seem ready to accept the call of a new age. Senior executives of BHP Billiton, a mining company crucial to the Australian economy, argue that free trade will only bolster the economy: “Domestic reforms that help address the national productivity challenge … that reduce trade barriers and stimulate economic growth, are critical for Australia.” Declining productivity poses a serious threat to Australia’s economy, so access to a greater pool of qualified workers looks particularly attractive. The TPP makes it easier for members to bid for job offers in other countries, an attribute Prime Minister Malcolm Turnbull finds “truly transformational.”
Even though Australia looks poised to accept free trade, regardless of past failures or potential drawbacks, the impact of the TPP remains unclear. The full text of the agreement has not yet been released, so some analysts have reserved their judgment. Politicians also look skeptically at how American presidential hopefuls have demonized the TPP, but believe that it will eventually be approved . However, even with the TPP’s uncertain potential, Australia seems poised to embrace the risks and benefits of free trade.