Why trade is suddenly as popular as a snake in a sleeping bag – and what to do about it.


The TPP is dead.  Donald Trump delivered the last rites last week. 

The TPP only comes into effect if the US Congress votes for it.  And that’s not going to happen.  Not now.  The Obama Administration has given up trying to pass it before Trump takes over and Trump has made his view on the deal very clear.  There is more chance of Mexico paying for a wall than there is of the Congress voting for the TPP.

Suddenly free trade in the land of the free is about as popular as a snake in a sleeping bag.  And it’s not just America.  Fewer than three in ten Australians think trade has created more local jobs according to a recent Essential Poll.

That’s pretty scary and dangerous given how important trade is for Australia.

But the truth is trade has never been that popular.  The big tariff cuts that Whitlam, Hawke and Keating made weren’t popular.  They cost votes.  But they were very important.  They created new businesses and new jobs.  They increased wages and economic growth. 

What’s new is why people are so angry and suspicious about trade deals.  A lot of people in the US and Australia and right around the world feel like they are going backwards, like life is getting harder not easier. 

It’s not just a feeling it’s a fact.  In the 10 years before the GFC living standards went up in most developed countries around the world.  Since then they have been flat lining or falling.  A lot of Americans earn less today than they did when Lehmann Brother collapsed.  It’s the same in the UK. Here in Australia in the last two years national income per person has also gone backwards.

Part of this is a hangover from the GFC.  But it is also part of a bigger trend of growing inequality.  We don’t have the same gap between rich and poor that you see in the US.  But that gap is bigger now in Australia than it has been in 75 years.

Add to that the recent spikes in unemployment in WA and Queensland, massive jumps in house prices in places like Sydney and the threat that a robot is going to take your job one day and you get a really toxic mix. That’s why you don’t hear Malcolm Turnbull talk about how it’s the most exciting time to be alive any more.  Most people don’t believe it.

Trade deals aren’t the reason people are hurting, but they are a lightning rod for the anger and frustration people are feeling.  It’s not helped either when the government signs up to deals that don’t put Australian workers first. 

One of the problems with the TPP is the Turnbull Government agreed that companies could bring in workers from Canada, Peru, Mexico, Brunei, Malaysia and Vietnam without first checking to see if there are Australian workers who can do the job. 

These are the sort things that really make middle class and working class Australians angry.  Surely before a company brings in an electrician or a carpenter or a mechanic from overseas they should first have to go through the basic task of seeing if there is an Australian who can do the job. 

That’s what most Australians expect.  And fair enough.  457 visas are supposed to supplement the Australian workforce not replace it.  The government could also do a lot more to crack down on the dodgy companies and labour hire firms rorting the current system, bringing overseas workers to do jobs that unemployed Australians could do and often underpaying them.

Another problem with the TPP is it doesn’t include China.  Every week a senior Australian politician is asked if we have to choose between China and the United States.  It’s the wrong question.  It’s not Australia that has to choose, its China and the US.  Do they want a trade war or do they want to work together?

The key to the security and success of our region this century is this relationship between these two great powers.  Their governments working together, their militaries talking to each other and a trade agreement that helps to further enmesh their two economies together.

The TPP doesn’t do this.  Nor does the other big agreement currently being negotiated called RCEP.  It includes China but not America. 

This week Malcolm Turnbull heads to Peru for APEC.  The body Bob Hawke and Paul Keating helped forge.  It includes both China and the US and 19 other countries.  Over the last 30 years it has helped cut tariffs in half across the Asia Pacific.  Perhaps it can bring the US and China together and help drive a trade agreement that will create more jobs and economic growth here in Australia and throughout our region.  I hope so.

In the mean time if the government is smart it will start developing some policies that address the reasons why people are so angry and frustrated.  Policies that increase real wages, improve living standards, reduce under employment and reverse the rise in inequality.  If they don’t, no amount hollow rhetoric about jobs and growth will save them at the next election.  

This piece originally appeared in the Australian Financial Review on Wednesday 16 November 2016.