Free trade means free movement

Kevin Rudd’s proposal to implement an European Union-like organisation in the Asia-Pacific region is nothing short of insane. The conditions prevailing in Europe in the 1950s when integration was first proposed, or even now that it has been more fully achieved, and those in the Asia Pacific region are so different that even the suggestion that a similar integrative structure might work is simply ludicrous.

One of the basic structural processes operative in the EU is the free movement of people within the EU’s member countries. In this day and age, free movement of people is a necessary underpinning for “free trade” since - especially for countries like Australia - the trade in services which are delivered by people  are is more and more important than the trade in goods.

A European Union based model in the Asia Pacific region that allows free trade by allowing the free movement of people between member states would mean the end of Australia as we know it. It would be completely and utterly unworkable because it would see mass-migration of overseas workers into Australia at a level so completely unmanageable as to lead to the breakdown of the economy and the social infrastructure.

If this sounds a little extreme - that I am suggesting an “end of the world as we know it” scenario - it is because the scheme would lead to just that.

Using the example of exactly what happened in the EU after the entry of Eastern European States illustrates this point.

In April 2006 statistics from the UK Government's Worker Registration Scheme lists 345,000 eastern European workers, including 205,000 from Poland. Unofficial statistics indicated that the real figure was significantly higher. In August of the same year the BBC reported the following admission from the UK’s Home Office Minister:

“About 600,000 people have come to work in the UK from eight nations which joined the European Union in 2004,” says Home Office minister Tony McNulty. “New figures show that 447,000 people from Poland and the seven other new EU states have applied to work in the UK.” But Mr McNulty said the figure would be nearer 600,000 if self-employed workers - such as builders - were included.

The statistics indicated that about half of the workers were from Poland. Poland’s population in 2006 was about 38 million - and the migration to the UK in the two years 2004-2006 was thus equivalent to about 0.8 of 1 per cent of the Polish population (assuming the migration of the Home Secretary’s 300,000 Polish workers)

Polish worker influx into the UK makes an excellent comparison benchmark for what Australia might look forward to under Mr Rudd’s “EU” plan. Clearly, workers from a poorer country, like Poland, will migrate to a richer country, like the UK, given the opportunity. Admission of Poland into the EU, with its open border policy, was just such an opportunity.

In the year these migration statistics were announced, the UK had a income per capita of $40,180 whereas Poland had a income per capita of just $8,190 (or 20 per cent of the UK’s) (World Bank Development Indicators 2007). Clearly, the UK was a more desirable place to live than Poland and so poor, unemployed workers had an incentive to move - and did.

Logically, the same thing would happen in Australia were Australia to be a member of a “no-borders” EU style grouping of countries, where some of those countries were poorer than Australia.

In 2006 Australia’s income per capita was $35,990: China’s income per capita was $2,010; Indonesia’s income per capita was $1,420; and India’s income per capita was $820.

One would have to assume that migration from any of these countries to Australia is significantly more appealing than from Poland to the UK. Income levels in the UK were about five times higher than in Poland in 2006: Australian income levels were about 18 times more than in China, 25 times more than in Indonesia and almost 44 times more than in India.

China’s population in 2006 was 1,311 million, Indonesia’s was 225 million and India’s was 1,121 million - a total of 2.657 billion people. Using the very crude equivalent measure of Poles moving to the UK after its accession to the EU with these figures, an EU-type organisation that included Australia and these three Asian countries (leaving aside all the other proposed members) would see a migration to Australia of about 21.256 million people. Australia’s population in 2006 was only 20.6 million.

The EU worked because of a rough (even very rough) homogeneity of income levels, economic development, a lack or relative discrepancies in demographic distribution between rich and poor countries, and because it required a minimum level of political homogeneity.

The Asia-Pacific region has none of these things and it will take many more than 12 years to develop them.

There is no doubt that greater co-operation at an economic level, through the negotiation and implementation of sensible trade, labour and services agreements would benefit Australia as well as regional neighbours, but the implementation of an “EU-like” model (unless it wasn’t like the EU model at all!) would simply not benefit this country.

Perhaps Mr Rudd didn’t mean he thought an EU-like model was a good one for the Asia Pacific region. (In his speech to the Asia Society Australasia Centre in Sydney he said “The European Union of course does not represent an identikit model of what we would seek to develop in the Asia Pacific …”) But if that was the case - where free movement of goods services and people is the backbone of the EU system - what did he mean?

Perhaps the Prime Minister was speaking from a position of ignorance - he simply didn’t know how the “EU model” works. But if Mr Rudd did mean what he said, it is clearly of concern to us all.