The ultimate goal is free trade

Complaints by our rice, sugar and dairy industries that they will not benefit from the free trade agreement with Japan are a little amusing. For starters they are wrong, because their cost of inputs from Japan (including electrical goods and vehicles) will fall.

And as anyone who tries to import sugar-derived ethanol from Brazil quickly discovers, the sugar industry is no fan of free trade. Its record of running to the government for protection and handouts is second to none.

Equally, the rice industry clings to a socialised marketing system that prevents entrepreneurial growers and third party marketers from seeking their own customers. It thinks the Australian government should convince the Japanese and Chinese to set aside their "cultural sensitivities" on rice, but doggedly clings to its own collectivist sensitivities.

As it happens, the Japanese government is in the process of winding back its support for small rice farmers. There are no signs the NSW government and rice farmers are likely to change their thinking.

For its party, the dairy industry has reinforced its lack of competitiveness against US producers by refusing to accept the productivity product Posilac out of fear the Japanese will discriminate against Australian cheese, despite its use in the US and that country's cheese being accepted in Japan. Some people are their own worst enemies.

But these complaints do highlight another of the deficiencies of bilateral free trade agreements – they only benefit those that are included. Trade in everything else is subject to the same old barriers. Indeed, there is considerable potential for these barriers to get worse because they are off the political agenda and vulnerable to special interest lobbying.

Furthermore, any competitive advantage afforded to exporters by bilateral free trade agreements only last until another country negotiates a similar agreement. Inevitably, other beef exporting countries will seek to negotiate the same tariff reductions as Australia, and Japan will recognise that there is no particular reason to favour Australia.

Similarly, the Australian government will ultimately realise that removing the tariffs on all cars, not just those made in Japan, is also in our best interests. Which reinforces the point I made earlier - we only hurt ourselves when we restrict free trade.

The best that can be said about these free trade agreements is that they are a step in the right direction. If the 12 nation Trans Pacific Partnership removes even more barriers to trade, it will be a bigger step. But it should never be forgotten that anything short of complete free trade means we miss out on some of the prosperity that comes from specialisation. It's not as if we haven't known for a long time.