Australia’s best hope of long-term trade liberalisation lies in signing a free trade agreement with the United States. Preferential liberalisation of trade may be the only way to break the present stalemate in worldwide trade reform. Author Wolfgang Kasper looks at the key options facing Australian trade policymakers, including the debate on whether to approach China or the USA for a free trade agreement.

As long as multilateral progress remains stalled, comprehensive liberalisation with the dynamic and free US economy promises by far the biggest and most sustained advantages for Australians. Betting on the ‘China card’ is politically risky. The ‘America option’ promises more growth but demands more honest reform efforts.’

Following the recent disintegration of multilateral trade negotiations, Professor Kasper says Australia has to explore the following trade options:

• A bilateral free trade agreement with the United States,
• Seeking acceptance into an open US-led free trade area to which countries with free economies are invited,
• A customs union with the United States and other countries in its orbit,
• Seeking another major long-range partner with which Australia can develop political and economic synergies, and
• ‘Integration from below’, namely through markets.

The abandonment of multilateralism in favour of preferential trade…is a definite second-best option. However, the case can now be made – reluctantly – that bilateral or plurilateral liberalisation agreements are, for the time being, the only feasible way forward.

Wolfgang Kasper is Emeritus Professor of Economics, University of New South Wales, and Senior Fellow at The Centre for Independent Studies.