Current Event: Free trade agreements with Japan and South Korea

Why Consumers are Big Winners in Free Trade Agreements
Farmers 'disappointed' in Japan trade deal

The Prime Minister of Australia, Tony Abbott, recently signed two new Free Trade Agreements with Japan and South Korea.  He is also working on a similar deal with China.  These deals have met some controversy, in particular from rice farmers.  The deal with Japan, which removed or greatly reduced many tariffs on goods traded amongst the countries, retained a tariff on rice imported to Japan.  Farmers of other products were also dissatisfied with the outcome of the negotiations.

Free trade agreements reduce transaction fees for the market exchange of goods between the countries involved.  From a consumers point of view, the free trade agreements will result in shifting the supply curve to the right, resulting in higher quantity at a lower price.  Industries that rely heavily on exports to the countries involved will see a similar shift, but with the demand increasing, allowing them to produce a greater quantity and charge a higher price.  Rice farming is an industry that relies on exports, however they will not see that shift, at least not to as great a degree, because the transaction fees remain high.  Some industries will see increased competition, shifting their demand down, so they will have to lower their price and quantities to stay competitive.  More complex economic interactions could result from these actions, since increased exports will lead to increased jobs, and higher income.

The rice growers and other farmers are upset because they felt the agreements met did not benefit them as much as other industries.  Politically, a deal which they would find agreeable may not have been feasible.  The issue could be solved by further free trade negotiations to protect Australian agriculture.