Expect to hear more about trade in coming days, because Australia's just agreed to the broad terms of a new trade deal with the United Kingdom.
Why should you care?
Well, politicians and business groups love talking up trade deals, as though they're beneficial for everyone.
Speaking before the agreement was reached, Finance Minister Simon Birmingham — who oversaw initial negotiations as former trade minister — said it would be a big win for farmers and small businesses.
"It will only be done if it's a good deal for Australia," he said.
But what does the history of Australian trade deals show?
Their outcomes aren't always rosy.
Trade creation or trade diversion?
Through the 1970s, 1980s and 1990s, Australia went through a period of trade "liberalisation."
It saw us significantly reduce our tariffs and other trade barriers in a deliberate effort to open up to the world.
We did it without binding agreements with other countries, believing trade liberalisation was good for its own sake.
However, that era came to an end in the late 1990s, after many of the world's economies had removed many of their old trade barriers.
That's when a new era began.
The new era saw "preferential" trade agreements become more popular, where countries started signing more trade and investment deals with each other, or with particular regions, to the exclusion of others.
In many instances, the preferential nature of the agreements have led to trade "diversion" (where trade is diverted to the preferred country or countries) rather than trade "creation".
In this new era, Australia signed its first preferential agreement with Singapore in 2003, and its second with the United States in 2005.
The so-called Australia-United States Free Trade Agreement (AUSFTA)
The AUSFTA went far beyond tariff liberalisation.
According to Shiro Armstrong, from the Australian National University's Australia-Japan Research Centre, it led to the US getting preferential treatment in Australia's foreign investment screening regime after 2005.
"AUSFTA included more stringent protections for intellectual property (IP) right holders, most notably US pharmaceutical companies and copyright holders," Dr Armstrong wrote in 2015.
It also forced dramatic changes on Australia's Pharmaceutical Benefits Scheme (PBS).
The origins of the Pharmaceutical Benefits Scheme
The PBS was introduced in Australia in the 1940s.
It originated with the wartime Labor government of John Curtin.
Mr Curtin wanted to provide free medicine for citizens who presented a doctor's prescription to a pharmacist, with the government reimbursing the pharmacist.
It was part of his post-war reconstruction plan to provide "full employment" and free medicine for Australians after the war, to spread the benefits of economic growth more widely.
He also wanted to take advantage of the antibiotic revolution.
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)"It was a response to the need to provide access to a wave of antibiotic drugs — sulfonamides, streptomycin, penicillin — to the whole population, not only to the minority able to afford them," wrote Martyn Goddard, in the Medical Journal of Australia in 2014.
The scheme took more than a decade to be established and start working as imagined, thanks to ruthless political opposition.
"[It] was immediately and successfully opposed by doctors and the conservative opposition, which saw universal health care an underhand plan to nationalise medicine," Mr Goddard wrote.
But it proved popular with voters and it eventually became a cornerstone of Australia's healthcare system, with the Commonwealth government using its power to price critical medicines cheaply.
It remained intact through the trade liberalisation era of the 1970s, 1980s and 1990s.
PBS disrupted by AUSFTA
However, in the early 2000s, the coalition Howard government allowed American trade negotiators to haggle over the rules governing the PBS during negotiations for the Australia-United States trade deal.
A Senate inquiry into the trade deal wondered why this was allowed.
"By allowing the PBS to enter a trade negotiation in the first place, the government has opened the door to forces that it ultimately may not be able to control," the inquiry warned in 2004.
The Productivity Commission later agreed.
"Bringing domestically focused regulation aimed at public-good outcomes, such as the PBS, under the umbrella of trade agreements risks incurring substantial and unforeseen costs," it concluded in 2010.
In 2014, ANU's Thomas Faunce found the cost of Australian medicines was negatively impacted by that trade deal.
"Central to the processes of the PBS is the idea that drugs with identical or similar clinical outcomes should have similar prices, known as reference pricing," he wrote.
"Unfortunately, the PBS process of reference pricing was considerably disrupted by the Australia-US Free Trade Agreement (AUSFTA) — though this is not something the Australian government wishes to admit."
Australia-China trade deal
Sometimes trade deals can be delivered with great fanfare, but then be railroaded by disintegrating political relationships.
Take the Australia-China trade deal, which entered into force in late 2015.
In agriculture, the so-called "ChAFTA" eliminated China's remaining tariffs on imports of Australian barley and sorghum in December 2015, and it included a schedule of rapid tariff reduction on other agricultural exports.
As part of the agreement, Chinese tariffs on Australian wine of 14 to 20 per cent were eliminated by January 2019.
Tariffs on Australian dairy products of up to 20 per cent were set to be eliminated by January 2026, and beef tariffs of 12 to 25 per cent would be eliminated by January 2024.
In this era of preferential trading, Australia's government actively promoted the trade deal saying it gave Australia an advantage over its major agricultural competitors, including the United States, Canada and the European Union.
But now, with China waging a trade war on Australia, the promise of ChAFTA has been obliterated.
After wine tariffs of 14 to 20 per cent were eliminated, they have now been replaced by new tariffs of more than 200 per cent that will last five years.
China's imposed an 80 per cent tariff on imports of Australian barley for five years. It's also been putting severe restrictions on imports of Australian meat products.
New Australia-UK trade deal
Those are just a few problems with the trade deals that have been signed in the last two decades.
Prepare to hear more specifics about the latest trade deal — between Australia and the United Kingdom — in coming months.
The UK government has been eager to sign this deal.
In the aftermath of its decision to leave the European Union, it has had to renegotiate trade deals with a raft of countries.
What impact will it have on Australia in the long run?
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2021-06-15 19:08:46Z
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