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February 10, 2004
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Free Trade for all...
Australia has now signed an historic free trade agreement with our new bestest friend, the US of A. I think the deal went a little like this (Vaile is the Aussie in charge, Zoellick the US guy): V: How about giving us access to your agricultural sector? So this is the price Australia pays for joining in on the was in Iraq. We get to export a few more cars in return for a vast amount of US goods getting imported here instead. No wonder Howard is losing ground daily, but his spin doctors are already hard at work calling this deal a win for Australia. Can anyone seriously see the US signing a free trade agreement that isn't better for them? posted by Paul on 02.10.04 at 09:07 AM in the
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"Can anyone seriously see the US signing a free trade agreement that isn't better for them?" Come on, economics isn't a zero-sum game. You should know better than to imply that one nation *must* gain at the expense of the other. posted by: Joe Grossberg on 02.10.04 at 11:03 AM [permalink]Never said that it was a zero sum game, or that Australia got nothing out of it. What I am saying is that the US have gained far more than they have given up. The manufacturing and services gain that Australia seems so proud of is largely meaningless as most of the large manufacturers are foreign owned anyway, many by American companies. Australia has traded away nearly unlimited free access to its markets in return for concessions in areas of the economy that we are not that strong in. Agriculture was always the key for Australia, already struggling against the high protectinonist policies of the EU and America, and those areas were largely untouched. In a bi-lateral trade agreement, both countries will probably increase exports to each other. But the US will be increasing their exports to Australia far more than Australia will to America. This continually worsens our trade deficit and weakens our economy, and as the US goods keep flooding in, it is the domestic markets that suffer. posted by: paul on 02.10.04 at 11:50 AM [permalink]But don't currency values and domestic conditions determine these numbers? I wonder if one should cast his eyes on more interesting numbers, like the dishing off of a budget deficit on Asian economies, than just making a trade deal that works for conditions suitably set out in both countries. posted by: boy on 02.10.04 at 11:54 AM [permalink]Australia can "allow" whatever amount they want into their country. If the US can produce it cheaper and/or better quality, it is a gain to Australia. If the US can't, Australians won't buy it. I can understand why Australia is upset about protectionism on the other side. However, it is the US people that should be more upset. After all, Australia gets potential access to cheaper and/or better products and Americans get...what? The Australian Financial Review printed a very good article today (can't be linked) that shows that the US doesn't have to be able to produce goods cheaper than a rival country (such as an Asian country) provided there is a sufficient tariff on the Asian country. In an ideal world, the kind that gives economists wet dreams, there would be free trade for all. But Australia suffers from little fish syndrome. we perpetually reduce our tariffs and quota restrictions far more than our trading partners. Invariably this means our imports increase far more than our exports, and thus a net outflow from the economy. This is not desireable for Australia. I don't see why the US would be upset by this deal. Their companies get access to another market that they an swamp through economies of scale. This means more production and more jobs in America. The inefficient American industries are still protected, so the country is better off by a long way, with net employment and trading gains. There will be some cheaper goods flowing into Australia from the US, and yes, that is good for the consumer in the short term. But as Australian industry further weakens when it can't compete with the bigger and more powerful American industries, what is to stop prices going up? And the terms of the FTA are such that when the world economy favours Australia (such as a cheap exchange rate or poor production seasons in America), quotas and tariffs will apply to prevent Australia increasing our supply to the US of cheaper goods. posted by: paul on 02.11.04 at 02:28 PM [permalink]I am one of those Americans that don't like the idea of protectionism in any country, and it's very accurate to say that the Bush administration's moves to put tariffs on things to help industries that need to be gutted, refined and made more productive is a death knell on the American economy. Or, close to a death knell. boy I agree with you completely. Tariffs by Bush are terrible for the US. A sign we just can not compete straight up. The irony is delightful. The US is pursuing a self-defeating policy and this post asks, HEY Destroy me Too! That this post sees getting real things you can use at a cheaper price in exchange for colored pieces of paper is BAD, and protectionism in Australia is GOOD, because there are jobs being created in Australia, is proof that clever talking points trumps reason. Free trade is good for all and those that have to fall back on protectionism are doomed to lose. Ask Smoot and Hawley and about 25% of the American working age population of 1933. The whole world fell back on protectionism and "competitive devaluations" of their currency and then subsequently suffered not only a depression, but the Great Depression. If I thought someone, anyone, would do anything differently than Bush on the economic issues and still protect my country I would be voting against GWB. posted by: kennycan on 02.12.04 at 10:52 AM [permalink] |
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