Monday, 17 November 2014

Trade diversion ain't great news

We had the announcement yesterday of the OZ/China free trade agreement which like every other bilateral agreement was not about free trade. how Orwellian.

The problem of bilateral agreements are they simply encourage trade diversion not greater trade.  This is taught in the earliest lectures if one studies international economics.

Multi-lateral trade agreements are far better than bi-lateral trade agreements For the reasons stated.

For those who have poor memories the advantages of the US/OZ 'free trade agreement were also overstated. Some of us thought so at the time. Others merely stated what their models came out with.

I blame Tim Fisher for this. He campaigned for bi-lateral trade agreements in opposition and then when he became a minister and found out they did not have any of the advantages he alleged still  kept on with them because he had to 'stick with his word.'