Former WTO director-general Pascal Lamy says tariffs are like dead stars. Photo: Michele Mossop
The stalled Trans-Pacific Partnership trade negotiations and Australia’s latest free trade agreements with Japan and Korea don’t much impress Pascal Lamy.
In Australia as a guest of the Centre for Policy Development, the former director-general of the World Trade Organisation dismissed such agreements as pacts of the past.
”Look at the US-Japan agreement,” he says. ”It’s about pork, beef and rice. They are not exactly 21st-century trade opening topics. The Trans-Pacific Partnership agreement Australia is negotiating with the US and 10 other countries, it’s a good old-fashioned agreement.
”It’s about goods, services, government procurement, a bit of intellectual property, but it’s the last of the big old-style agreements.”
His brutal message delivered to BusinessDay just after a meeting with the Australian Treasury is that trade is no longer much advanced by cutting tariffs.
”Tariffs are like dead stars. They are millions of kilometres away, they are dead, they don’t emit any light any more, but you still see the light of the star because it takes so long for the light to come to your eyes. They have been dead for thousands of years and you still see the light of the star. That’s what tariffs are like, tariffs are dead.”
The trade-weighted average tariff is now just 3 or 4 per cent, he says. What are left are for the most part nuisance tariffs. They don’t much impede trade and they are scarcely worth avoiding.
”Pursue the Trans-Pacific Partnership if you think there’s something in it for you,” he says. ”But it’s the last of the big old-style trade agreements.
”The new era begins with the Trans-Atlantic Trade and Investment Partnership.”
The trans-Atlantic agreement, known as TTIP is being negotiated between the European Union and the US. Instead of concentrating on what are by now minimal formal barriers to market access, it is concentrating on the regulations that actually make trade hard – items such as different safety standards for cars, the amount of pesticide residue allowed in cut flowers.
”Removing these would make an enormous difference to trade. Global corporations could truly take advantage of economies of scale.” It can’t happen in the TPP at present being negotiated by Australia with Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam because many have different ideas about standards.
It can happen between the US and Europe because views about consumer protection and safety are similar. If it does happen – and the negotiations only started last year – what TTIP agrees on will probably become the de facto standard for the world.
The other remaining barrier to trade was felled by Australia’s minister Andrew Robb and others at the WTO Bali meeting in December. It agreed to standardise and cut cross-border paperwork that restricts imports. ”The cost amounts to a tariff of 10 per cent,” Mr Lamy says. ”Eliminating just half of it would be the same as eliminating all remaining tariffs.
”I listen to businessmen, not trade negotiators,” the former French socialist who stepped down from the WTO last year confides. ”They know what’s useful. Most of the time they don’t even use free trade agreements. They make ambassadors feel good, but they are not worth the effort.”