Assessing the impact of Free Trade Agreements - how does one deal with it?!

The Australia-India FTA was ratified by the Australian Parliament. News of it is here and here.

If wants to get a thorough understanding of the scale, impact and nuances of the FTA, this Joint Standing Committee  on Treaties Report of the Australian Parliament is a must read. It outlines the liberalisation in goods and services as well as what has not been done in this early harvest.

What I found interesting in this report is the debate about modelling the benefits of FTAs. The Report goes into the differing views on whether it is possible to assess the impacts of a free trade agreement - the gains, losses and overall economic benefit it has brought to the country. Is there data that can be attributed to the free trade agreement? Can we assess the benefits to a sector/business/people as a result of liberalisation? Is modelling possible at all?

One view expressed was one of doubt, as explained in the report:

By the time the Committee began considering the Trans-Pacific Partnership Agreement (TPP) in 2016, however, the Australian Government had stopped economic modelling of trade agreements, arguing: 

"We would note that modelling is one tool among many when you are assessing a free trade agreement of this sort of character and dimensions ... We also note in these models that there are some methodological limitations. Models do not provide every fix in the world. This is broadly recognised by economists. When we are modelling a dynamic, 12 party deal, there are some real challenges. Modelling the impact of liberalising preferential supply chains is very, very difficult to do. Modelling the value that traders and investors place on certainty is very difficult to do."

However, the Report counters it with a different view:

However, in the absence of an independent and thorough impact assessment, that identifies the expected benefits, the direct and indirect impacts, and the trade-offs inherent in any trade agreement, one is left to merely accept the proposition that liberalised trade is beneficial without being able to properly examine the detail of what are complex and carefully designed agreements that make numerous changes, including with respect to areas that are not always strictly concerned with trade and investment (for example, the movement of natural persons, the treatment of intellectual property, the capacity to regulate in the public interest). 

How does one do an impact assessment? What data points can one rely on? How easy is it in the services sector? Building a robust data base to analyse pre and post trade agreement scenarios is critical. Do all countries have that capacity? How does one assess in areas like intellectual property? Building trade capacity is not only about negotiating capacity - it also involves assessing the impact, benefits and pitfalls of what one has committed to!