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Australia and UK urged to strike free-trade deal to counter Trump's protectionism

Exclusive: Agreement could rebuild trust in trade liberalisation, thinktanks argue

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Malcolm Turnbull and Theresa May



Malcolm Turnbull and Theresa May. Research says a free-trade deal between Australia and the UK should not include a controversial investor dispute settlement clause.
Photograph: Jack Taylor/Getty Images

Australia and the United Kingdom have been urged to negotiate a high-quality free-trade agreement to help rebuild public trust in trade liberalisation.

The agreement should include labour and environmental standards but not a controversial investor dispute settlement clause, says new research from two progressive thinktanks, the McKell Institute in Australia and Demos in the UK.

It backs the proposed trade agreement and argues the bilateral deal could be bigger than the sum of its parts, providing a constructive way forward at a time of rising protectionist sentiment.

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The study notes the prospective trade pact between Canberra and London “comes at a pivotal moment in the economic and political histories of both nations”.

“While the UK’s Brexit vote is the most obvious economic shift in that nation’s history for generations, Australia too is seeing a resurgence in populist political voices espousing more protectionist economic measures,” it says.

“These trends come at a time where internationally, a scepticism towards globalisation and free trade in particular is rising. This is perhaps most notable in the United States – a nation that leads a world economy defined by liberalised global trade but paradoxically has seen opposition towards that order reach fever pitch.”

It says that trade negotiators in Australia and the UK need to maintain their focus on securing good economic outcomes but they should also be aware that “a successfully delivered, highly beneficial and highly transparent FTA between the two nations could help arrest some of the growing scepticism in both states against vital economic institutions such as liberalised trading regimes”.

It notes that Donald Trump’s election in the US has formalised angst against a global economic system that a growing proportion of the community feels alienated from, and the way to push back against that sentiment is to produce trade deals that the public can get behind.

It says that, from the British perspective, as the May government takes back responsibility for trade policy outside the European Union, the bilateral deal with Australia “could be an important model FTA, which it could then use for building new trading relationships around the world”.

From the Australian perspective, the bilateral trade deal could serve as a model to pursue separate conversations with trade officials in Europe. Australia is also pursuing a free-trade agreement with the European Union.

The UK is not able to conclude FTAs while it is still a member of the EU but preparatory work is underway. A working group of officials is scoping out the terms of the bilateral agreement with a view to commencement in 2021. The UK leaves the EU in 2020.

The joint study from McKell and Demos recommends the proposed UK/Australia trade deal include labour provisions that further the rights and future prospects of workers in both states, and environmental safeguards referencing the countries joint commitment to reducing greenhouse gas emissions.

It recommends trade negotiators omit an investor state dispute settlement clause in the FTA “in order to maintain transparency and generate broader public support”.

ISDS clauses have been included in trade pacts to protect investors from unfavourable decisions by foreign governments but they have become increasingly controversial. There is concern that multinational corporations use the system to chip away at environmental or health and safety regulations enacted by sovereign governments.

The McKell/Demos study recommends the Australian and British governments conduct a transparent cost/benefit analysis of the deal and publicise the findings to build public buy-in and set a precedent for future negotiations.

It says the scope of the deal should be wide enough to ensure tangible economic benefits are delivered, covering off trade in goods and services and labour mobility between the jurisdictions. Australia has signalled it wants to use the negotiations to secure reciprocal enhanced visa arrangements.

“The Australia-UK FTA should be used as an opportunity for both states to ensure the standards of supply chains across all industries meet a minimum standard to help eradicate global transgressions of workers rights, and end modern slavery,” the report says.

Sam Crosby, the executive director of the McKell Institute, and now Labor candidate for the Sydney seat of Reid, told Guardian Australia that progressives’ supportive of open markets and trade liberalisation needed to understand the challenges of the current environment, and keep evolving.

“The conservatives have fallen into the trap of reciting the old stale script on FTAs and assuming working people will applaud, and [progressives] should not make the same mistake,” Crosby said.

“All over the developed world we can see how easily free trade can be demonised and scapegoated. But, unlike the conservatives, we should not be reflexively defensive or dismissive. We should be responsive.

“The relationship between Australia and the UK presents an outstanding opportunity to negotiate a new kind of FTA that delivers real economic benefit, while simultaneously earning a broad social license.

“Free trade, if done right, should bolster living standards and equality. It is up to progressives to make the case for how.”

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