TPP agreement displays free trade spirit as US fires starting gun on potential trade war

“The spirit of free trade seen in the signing of the TPP-11 agreement in Chile was a welcome development albeit under the shadow of the pending new US tariffs on steel and aluminium,” Australian Industry Group Chief Executive, Innes Willox said.

“It is disappointing that President Trump’s announcement did not specify an exemption for Australian steel and aluminium. However, we can take some comfort in the criteria for exclusion being a defence ally without a trade surplus with the USA, a criteria which Australia clearly meets.

“President Trump’s announcement of mirror taxes is also encouraging for Australian exporters of steel and aluminium as under the Australian US Free Trade Agreement, American steel and aluminium has been entering Australia tariff free since the FTA came into being.

“There would of course be winners and losers from these particular US tariffs including Australian manufacturers of products made from steel or aluminium. But as a country with a high reliance on trade, the risks of broader damage to the global economy from a trade war are great.

“Many Australian companies have a diverse global footprint that gives them proximity to customers and suppliers and for them unilateral trade action outside global rules is likely to have a very negative impact.

“While we hope that Australia will win exemptions from the latest steel and aluminium tariffs, this would be only a partial victory. This is both because any special treatment afforded to Australia would only apply to shipments coming out of Australia, not from Australian companies operating in third markets, and because of the broader threat to global trade.

“In regard to the TPP-11 signed, the Government’s negotiating team led by Trade Minister Steve Ciobo is to be congratulated for delivering this important trade deal.

“While Australian manufacturers already have extensive market access in most TPP-11 countries, iron and steel products and aluminium exported to Canada will be tariff free on entry into force of the TPP-11. Iron and steel products exported to Vietnam will be tariff free within 10 years of entry into force of the TPP-11.

“Importantly, for the first time in a trade agreement, TPP-11 countries will guarantee the free flow of data across borders for service suppliers and investors as part of their business activity. This ‘movement of information’ or ‘data flow’ is relevant to all kinds of Australian businesses – from a manufacturer with offshore sales offices and online order systems to a telecommunications company providing data management services to businesses across a number of TPP-11 markets.

“Worldwide data flows are the railways of the future and as such their value lies not in the country that holds the data but rather in how far that data can stretch across the globe. Countries that collaborate and share information and reject isolationism will be the ultimate winners.

“It is disappointing that the United States is not part of the final TPP, however this agreement is designed to be flexible and we hope that once the US sees the benefits delivered to the member countries they may sign up to the pact in the future,” Mr Willox said.

Source: Ai Group