At last, something to be positive about. Of all the Abbott government's
efforts to improve our economic prospects over the year and a bit since
its election, none compares with the benefits likely to flow from its
remarkable trade agreement with China.
I'm not expecting to see any
noticeable gains from the G20 leaders' pledge to increase economic
growth by 2 per cent over the four or five years to 2018 - not directly
as a result of our government's promised measures, nor indirectly as a
result of the other governments' promises.
Those pledged actions
don't seem to amount to much. And with Turkey taking over leadership of
the G20 next year, it's possible this is the last we'll hear of them.
But
the free trade agreement with China is of great substance, with phased
reductions in China's tariffs (import duties) against many of our
exports and, equally beneficial, in our tariffs against imports of
certain manufactures from China.
It's likely to add significantly
to our trade with China, increasing our ability to benefit from its
growing middle class with ever more Western tastes, and giving us freer
access to its ever more sophisticated manufactures. A coup for our
tireless Trade Minister, Andrew Robb.
To be truthful, I've never
been a great enthusiast for bilateral free trade agreements. They're
greatly inferior to multilateral agreements, mainly because they're
preferential agreements - you and I favour our mutual trade over trade
with other people - contrary to what the term "free trade" implies.
This
means they're capable of diverting and distorting trade, as well as
generating red tape as rules are established to determine how much of an
item that claims to be from China actually is.
But with efforts to
achieve another round of multilateral trade improvements having been
stalled since 2000, it seems we must accept that a spaghetti bowl of
bilateral agreements is the best we're likely to get.
Australia
has now negotiated quite a few of these deals, including John Howard's
agreement with the United States in 2004 and Robb's agreements with
South Korea and Japan earlier this year, but they amount to little
compared with the China deal.
That's partly because China is fast
becoming the world's biggest economy, partly because China is our
largest trading partner - first on imports as well as exports - and
partly because our economies are so complementary, but mainly because
China is a still-developing country that joined the World Trade
Organisation only in 2001 and so has many trade barriers still able to
be reduced.
But it's a pity the government's ability to pull off
such a good deal with the Chinese is not matched by a willingness to
acknowledge the global good news embodied in last week's agreement
between the US and China on measures to reduce greenhouse gas emissions
after 2020.
This meeting of minds of the two most influential players in
the world's efforts to contain global warming has boosted confidence
that we may yet be able to limit the industrial-age increase in average
temperatures to 2 degrees Celsius and that major progress is possible at
the next meeting of countries in Paris next year.
To hear our
leaders seeking to avoid short-term embarrassment by denigrating the
agreement and misrepresenting China's efforts to limit its own emissions
is terribly disappointing. Joe Hockey let himself down with his claim
that China will continue increasing its emissions until 2030.
This
suggests he's as well briefed on the subject as a radio shock-jock.
Should he care to raise his understanding to the level we expect of a
federal treasurer, he could read a speech that Professor Ross Garnaut, a
noted expert on the topic, gave as long ago as August.
As such a
vocal advocate of economic growth, you'd expect Hockey to understand
that China is committed to raising its people's material standard of
living to a greater fraction of that Australians and people in other
rich countries have long enjoyed.
This has inevitably involved
much increased use of fossil fuel, with China's rapid economic growth
during the noughties meaning it has become the largest contributor to
annual growth in the world's greenhouse gas emissions.
But at the
meeting in Copenhagen in 2009, China committed itself to reducing the
emissions intensity of its economic growth by 40 to 45 per
cent between 2005 and 2020. That is, each extra yuan worth of production
would involve the emission of less greenhouse gas.
Garnaut points
out that, relative to what would otherwise have happened, this
represented a larger reduction than any other nation promised. And his
calculations imply that the Chinese will achieve their commitment.
They
have moved to a new economic strategy in which less of their growth
comes from investment in factories and infrastructure and more from
consumer spending, especially on services. This should involve less use of energy, particularly from fossil fuels, and so fewer emissions.
Garnaut's
projections of China's electricity generation to 2020 - which accounts
for most but by no means all of its emissions - suggest that its burning
of steaming coal will actually fall a fraction between 2013 and 2020.
So,
far from China still increasing its emissions in 2030, Garnaut believes
they are likely to have peaked by 2020. You should have known that,
Joe.
