IT'S GOOD HE BROKE HIS OWN PROMISES, BUT BAD HE BROKE GOOLSBEE'S:

Free trade brings heaps of benefits (Tim Wilson, 1/17/10, The Australian)

[A]n average $1.2 billion increase in our annual merchandise trade deficit between the 2005-06 and 2008-09 financial years is insignificant in comparison with the US investment windfall the FTA delivered.

A key provision of the agreement was the relaxation of the threshold requirements for US investors to seek Foreign Investment Review Board approval before investing in Australia.

The results are clear.

According to the latest Australian Bureau of Statistics data, total US investment in 2005 was just shy of $334bn and has increased by an average of $20bn a year, reaching $418bn by the end of 2008.

And attacking a marginal trade deficit increase ignores that free trade is not a zero-sum game and that imports deliver benefits as well.

To be internationally competitive, Australian businesses need technologies that help improve productivity, competitive inputs into domestically produced manufactures and service imports to support industry growth.

Necessary imports added with the significant size of US investment have helped Australian industries grow, create jobs and ride out the global economic crisis.

Increased US investment has also helped foster industries of the future.

According to a Department of Foreign Affairs and Trade analysis, US investment is "increasingly more diversified, particularly with increased activity in the services trade".

US investment is underwriting a boom for our services exports, with the ratio of Australia's goods to services exports to the US roughly two to one.

It would be easier to feel sorry for the UR had he simply been as pragmatic as he;'s supposed to be and followed the most basic advice of economists: push free trade and cut taxes instead of increasing spending.

Posted by Orrin Judd at January 17, 2010 11:38 AM