At the start of the new decade, Australia finds itself facing three crisis all at once: a global pandemic, an economic recession and a rapidly changing international dynamic. After 30 years of growth and free trade across international borders, our export oriented industries have faced a tough period which has pushed many firms to the brink of collapse. The affected industries include fish, wine, coal, and many more.
With international trade taking such a large hit over the course of the last 2 years, some might consider it time to change our economic policy and reduce our reliance on exports. However, this might not be the best way for the Australian economy to recover.
History of TPP
The TPP was a free trade agreement between the nations of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States which was signed in February 2016. It promised to eliminate trade barriers by cutting over 18,000 tariffs, strengthen environmental protections, protect intellectual property, and lift labour standards. While there were vocal critics of the agreement, chief among them former president Trump who withdrew the United States in 2017, the benefits were clear to Australia.
Benefits of the TPP for Australia
The economic benefits of the TPP were modest for Australia, as we are an advanced economy who already have trade agreements with many of the members of TPP. We also signed the CPTPP in 2018 which included many of the original TPP members. Projections in 2016 indicated we stood to gain about a 2% boost to GDP and a 5% boost to exports by 2030.
However, with our strained relationship with China, the TPP could serve as a useful method for opening our exports to new international markets. Our barley industry, which suffered Chinese tariffs of 80.5%, has begun looking into new markets as far as Saudi Arabia, but is also scouting Korea, Japan, Vietnam, etc. Many of these countries would have been TPP members, and thus eased the transition for our agriculture industries.
Additionally, the agreement would strengthen our allies economies and reduce their dependence on China. By increasing our relations with allies in Asia and the Pacific, Australia could create a more united front to combat China’s increasingly hostile actions. The TPP represents an opportunity to reaffirm security in the region by reintroducing the United States and other nations as members of the agreement.
Likelihood of Rebuilding the TPP
With President Trump no longer in office, this could be a key opportunity to bring back the TPP. This is bolstered by the fact that the UK has formally applied to join the CPTPP, and there is expressed interest from many more countries. Unfortunately, President Biden has shown reluctance in promoting free trade, and stated that he will prioritise domestic investment over trade agreements. If we do want to rebuild the TPP as it originally stood, there is a lot of work ahead of us.
By Omead Musa - 4th Year Bachelor of Commerce and Bachelor of Advanced Studies (majoring in Economics and Finance)
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