Wednesday, November 19, 2014
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.