Donald Trump has torn up the Trans-Pacific Partnership on his first day in office, making good on his campaign pledge to end the deal.
The move has deeply disappointed the Australian government, which was as one of its foremost champions.
“We are a trading nation. Trade is one and a half times as big a share of our economy as it is of the United States. What that means is that there is a bigger proportion of Australians who are dependent on exports than there are Americans,” said Prime Minister Malcolm Turnbull.
“Other leaders and other countries can make whatever judgments they wish but Australian trade policy is written in Canberra in the interest of Australian jobs. We will stand up for Australian workers.”
The final comment was as a not-even-veiled jab at Mr Trump’s boast that his killing the TPP was “a great thing for the American worker”.
Following Trump’s election, the Turnbull government held out hope that the businessman in chief, known for his bluster and erratic behaviour, might volte-face once in office.
Having delivered on his promise, the Australian government is in a state of limbo about what comes next. One option being tabled is to simply salvage the agreement—the “TPP 12 minus one”—despite America’s absence. But whether such an option would fly without US participation is unlikely; Japan has already expressed doubts.
Australian big business — it is no secret — was highly supportive of the TPP, particularly those businesses most exposed to the Asian market. It will come as no surprise that the big four banks, which have large investments in Asia, were among the TPP’s loudest cheerleaders and among the saddest to witness its departure.
“We have entered new, and uncharted Trumpland that in its worst case might come to resemble the chaos that prevailed in early twentieth century Europe. This heralded the first of two Great Wars,” claimed an ANZ bulletin, commenting on the TPP’s demise. ANZ is perhaps the most highly exposed of the big four banks to Asia.
While large established finance companies may mourn the TPP, there is good reason to think that fintech won’t be much affected.
There are two reasons for this. The first reason is that while free trade agreements may, like rock bands, have committed and adoring fans, for most businesses they are irrelevant. According to a 2014 survey by HSBC, only 19 per cent of Australian firms use FTAs where available and many business owners do not even know what they are. The irrelevance of FTAs is particularly true for small businesses, such as fintechs, whose market is overwhelmingly domestic.
The second reason is that the benefits to the Australian economy as a whole – if the rising tide is to lift all boats – were estimated to be slim to none. The World Bank is better placed than most to guess what exactly the gains from the TPP would have been. According to its 2016 study, the boost to the Australian economy would be 0.7 per cent of GDP by 2030, almost negligible.
While Mr Turnbull and his Trade Minister have trumpeted the importance of the TPP, his government has failed to produce any evidence that the deal would deliver benefits. The government went so far as turning down an offer by the Productivity Commission, the heavyweight advisory body, to study the deal’s likely effects.
26 October 2020
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