With slowing growth in the BRICS and the underwhelming recovery in the U.S., many nations around the world are looking to free trade. Australia, among others, has been negotiating agreements with Asia, forming the Trans-Pacific Partnership.
The Trans-Pacific Partnership has been praised as a breakthrough in international free trade efforts. It has also been heavily criticised, seen as merely a smokescreen for increasing American influence in the Asia-Pacific region and the reach of its corporations. However, it is also a fascinating example of how political and economic rivalries can overlap.
The general consensus amongst economists is that opening one’s doors to foreigners will stimulate a country’s economic growth. Governments can do so either by introducing foreign direct investment or easing their immigration laws. By opening up their economy to foreigners and global corporations, countries can increase their population size, standards of living and output per capita. Additionally, they can also benefit from the creation of jobs, as well as the exchange of technology and expertise.
However, while economic growth is seen as favourable, a rapid development can present adverse consequences and backfire on the government’s goals.
It is expected that Japanese Prime Minister Shinzo Abe will announce Japan’s entry into Trans-Pacific Partnership (TPP) free trade talks in the next few days. The TPP economies already account for 30 per cent of global output and 20 per cent of the world’s exports of goods and services. The addition of Japan would make that 40 per cent of global output and add significant heft to the agreement.
In my next series of articles, I’ll be examining the evolution of protectionist policies in Australia throughout the 20th century. This first article presents a snapshot of the key features of import protection during that period, and explores some political economy theories that we can use to analyse the reasoning behind such policies.
The Federal government announced recently that they will continue to support the Australian car industry through ‘co-investment’ – i.e. through tax-payer funded direct subsidies to industry. This is funneling money to multinational co-operations so they can maintain production of Holdens and Fords in Australia. All this is for one reason – to protect Australian car manufacturing jobs.
The government argues that this investment is important to maintain a car manufacturing industry in Australia, and if there no support, they would cease producing locally-made cars. For example, the government granted $34 million in subsidies to the Ford Plant in Melbourne to keep it running until 2016. Decisions such as this have been branded as important to Australia’s ‘national interest’, a clever political line to justify protectionist policy initiatives.