$13.7 trillion TPP pact to deliver boost in GDP

Australia stands to reap an ­economic dividend from the new TPP deal and an increase of up to 1 per cent of GDP.

Trade Minister Steven Ciobo. Picture: AFP

Australia stands to reap an ­economic dividend from the new Trans-Pacific Partnership deal and an increase of up to 1 per cent of GDP as part of the $13.7 trillion, ­11-nation trade group.

Independent international modelling of the deal has revealed that the decision by US President Donald Trump to pull out of the original 12-nation agreement could deliver a greater trade boost to Australia than if the US had stayed in, countering opposition arguments that it is a hollow deal.

Malcolm Turnbull yesterday hailed the agreement as a landmark deal for Australia and the region. The government is expected to move to ratify the agreement in parliament following the official signing by the 11 member nations in Chile in March.

The Prime Minister issued an immediate challenge to Bill Shorten not to stand in the way of the treaty, warning that any attempt to block it in the Senate would be a “threat to jobs”.

“This is a massive deal,” Mr Turnbull said. “So it’s a great outcome. It will mean billions of ­additional exports and thousands of additional jobs.”

The trade deal would ­reduce 98 per cent of all tariffs between the member countries of Japan, Australia, Canada, Mexico, Singapore, Malaysia, Vietnam, Chile, Peru, New Zealand and Brunei.

A senior government source said the Prime Minister would move “swiftly” to bring a ratifying vote to parliament.

The Opposition Leader yesterday refused to comment on an agreement he previously declared was “dead” without the US, but opposition trade spokesman Jason Clare ­appeared to leave the door open for Labor to change its position, claiming it would seek a Productivity Commission review of the agreement.

Strategic analysts said the TPP11 would have little strategic consequence without US involvement but offered a different ­economic model of liberal democracies in the region, compared with China’s “master-servant” ­approach.

The modelling report conducted by the Peterson Institute for International Economics, a US- based think tank, showed that Australia’s economy would grow between 0.5 per cent and more than 1 per cent by 2030 under TPP11, which has been rebadged as the Comprehensive Progressive Agreement on the Trans ­Pacific Partnership.

 

The three separate inter­national research groups behind the trade models argued that Australia would not suffer from a US withdrawal as it was not losing its preferential access to the American market under the new deal because of the existing bilateral free-trade agreement between the two countries.

Australia would also be spared from facing new competition in the US from TPP11 countries that did not have trade deals with the US, such as Japan, New Zealand, Malaysia and Vietnam.

Under a model that included a comprehensive deal where trade in services was also liberalised, TPP11 boosts Australia’s real GDP by 0.61 per cent, compared with 0.67 per cent under the original TPP that was signed by former US ­president Barack Obama before being torn up by the Trump ­administration. A second model shows Australia’s GDP growing up to 1.3 per cent under the new deal ­compared with less than 1 per cent under a US-included model.

Trade Minister Steven Ciobo, said the modelling of trade agreements was often largely “guess work” because they didn’t capture second-round benefits, often understating the broader positive outcomes.

The report suggested the deal would lift exports by $US23bn ($28.5bn) or 4 per cent by 2030 and lift national income 0.5 per cent. Without the US, the size of the deal has shrunk from 40 per cent of global trade to cover about 15 per cent of global economic ­activity. “The TPP11 … generates substantially lower global income benefits of $147bn, compared with $492 billion for the TPP12,” the study says. “(However) … some economies in North America and Oceania, including Australia, Canada, and Mexico, do reasonably well in the TPP11.”

“First, their gains in US markets were limited in the TPP12 since they already have FTAs with the United States; and second, the TPP11 would allow them to capture some benefits in third-country markets such as Japan, that might have gone to the United States under the TPP12.”

Mr Turnbull yesterday described the deal as a multi-billion-dollar win for Australian jobs and was designed to allow the US to come back into the group in the future without penalty.

“A quarter of our exports go to the countries of the TPP11, including Japan, Canada, Mexico, ­Malaysia, Singapore and others,” he said. “It is a big deal. A big trade deal at a time when many people said it couldn’t be done … I certainly would encourage President Trump and the United States to come back into the TPP, but I have to say I don’t think there’s any prospect of that.”

One of the significant beneficiaries would be Australian beef sales into Japan that would now become more competitive than US beef exports. The government said there would be new quotas for wheat and rice into Japan, sugar into Japan, Canada and Mexico and the elimination of all tariffs on sheep meat, cotton, wool, seafood, horticulture, wine and manufactured goods.

Minerals Council of Australia acting chief executive David Byers said the agreement was a major breakthrough that would boost exports and contribute to growth, jobs and investment.

The deal counters growing protectionist tendencies around the world, with Britain negotiating its exit from the EU, and the US this week imposing tariffs on solar panels and white goods ahead of a similar potential move on aluminium and steel products.

Australian Strategic Policy Institute executive director Peter Jennings said that, while the deal was not of great strategic consequence to the region and China’s economic power — given it was without the US — it was a significant economic statement.