Localized FTA proves better bet than sweeping TPP project

By Farooq Yousaf Source:Global Times Published: 2015-6-22 20:38:02

Illustration: Liu Rui/GT

After almost a decade of deliberation and negotiation, the Australian Trade and Investment Minister, Andrew Robb, finally signed the China-Australia Free Trade Agreement (ChAFTA) with his Chinese counterpart Gao Hucheng in Canberra last week. A mutual agreement was reached when Australian Prime Minister Tony Abbott met Chinese President Xi Jinping in Canberra late last year.

The deal allows more than 90 percent of Australian exports to China to be tariff-free, and the country's booming farming business is also tipped to get a lucrative entry into the enormous Chinese infant formula market.

China is already Australia's biggest trade partner, with the current ChAFTA promising to further propel the exchanges between both the partners.

Even with some criticisms from Abbott's adversaries, economic experts in Australia believe entry into the Chinese economy, poised to become the largest economy in the world in the coming years, could take the country's economy and relations with Beijing to the next level.

The current ChAFTA could easily be called a win-win scenario for both the signatories. Australian consumers can expect a decline in the price of important household items such as cars, garments and electronics, while private investors from China would get further investment and export opportunities in Australia.

The ChAFTA is also facing a regional competitor in the form of the Trans-Pacific Partnership (TPP). The TPP is a 12-member regional trade draft agreement, backed by the US, and includes major economies such as Canada, Japan, Malaysia and Singapore.

Even with Australia's opposition parties and its global partners, especially the US, preferring the TPP over ChAFTA, the economic prospects of the latter overpower the former. By 2025, the TPP, if fully functioning, could push Australian GDP up 0.5 percent, whereas the ChAFTA will produce a 0.7 percent push alone, according to the Centre for International Economics.

The TPP is also facing tough rounds of negotiations with many items of interest to Australia, such as beef, dairy, rice, wheat and sugar, taken off the table by the US and Japan.

Obama is adamant about accelerating the negotiation process of the TPP, whereas Japan, an important player in the deal, has its reservations. Japanese Prime Minister Shinzo Abe is reluctant to open up his market to inexpensive US rice and pork products, serving as a major hurdle in realization. Coupled with that, Obama is also facing domestic opposition within his own Democratic Party for fast tracking the TPP.

Obama's enthusiasm for pursuing the TPP is also an indicator of his pursuit of the Asian pivot and rebalance strategy. If the TPP fails to go through, Obama may leave behind a marred legacy of failure to rebalance power in Asia, especially the Pacific.

Obama is wary of the fact that Japan's conservative policies and unstable relations with important neighbors, especially China, could hurt his regional agenda. For that reason, the White House has recently urged Japan to pursue a policy of historical reconciliation rather than confrontation.

With political complications between the US and Japan visible, the Australian government has recently sounded pessimistic over the prospects of the TPP. Robb recently stated that without US backing, the TPP would face tough future prospects.

Professor James Laurenceson of the Australia-China Relations Institute believes that a FTA with China provides a good enough answer to the TPP. Major contributors to the TTP are forecasting a declining economy in the coming decade in the wake of growing Chinese and Indian economies, leaving very little for the TPP to play with.

The ChAFTA shows that a bilateral trade deal could reap more dividends compared to an over-ambitious multilateral deal based on a broader regional political agenda that prioritizes strategic political advances, rather than economic wellbeing.

The author is a Pakistani research analyst currently pursuing his PhD studies in politics in Australia. opinion@globaltimes.com.cn

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