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Queensland needs to talk about protectionism

Queensland needs to better educate the community on the perils of protectionism and conversely the considerable advantages that free trade brings to us on a daily basis.  Protectionism does nothing to solve concerns over jobs and incomes in Queensland it only plays to the politics of populism.

Support for protectionist trade policies typically flare up during periods of below trend economic and income growth. Now is one of those periods and unsurprisingly we are seeing calls for protectionist policies rise globally and in our own Queensland back yard. Recent examples include:

"We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs."  U.S. President Donald Trump

"We are going our own way. We will ignore restrictions that go against our interests. Cabinet has agreed the State Government would no longer be constrained or bound by free trade agreements that have seen jobs go off-shore or interstate.​"  Premier Annastacia Palaszczuk, Announcement of the Buy Queensland Policy 31 July 2017

"One Nation opposes globalization and will withdraw from international treaties that harm Australian manufacturing. One Nation is strongly opposed to the 'free trade' economic policies which, over the years, have led to the gradual destruction of the Australian manufacturing industry." One Nation Manufacturing Policy

Only recently the Australian Productivity Commission examined how Australia would be affected by a new swing towards protectionism.  The key takeaway was that significantly higher trade barriers around the world would cause a global recession and Australia would not escape unscathed.

Indeed over one per cent of Australian GDP and close to 100,000 Aussie jobs would be lost, living standards would fall and an average household would be worse off by nearly $1,500 a year.

Rising protectionist sentiment and associated actions in some countries may lead some to suggest that Australia needs to mirror this rethink on free trade or lose out. However the Productivity Commission concluded they would be wrong, and very wrong at that. Protectionist policies would harm the Australian economy and risk reversing the community-wide gains that lowering barriers to trade globally have helped deliver to us.   

The Productivity Commission concluded that resisting protectionism, continuing to work towards freer markets and ensuring the benefits are widely shared, is the best path for Australia.  Key conclusions by the Productivity Commission included: 

  • Protection has increased in G20 countries since the Global Financial Crisis and there are clear risks and signs that the trend towards more protectionist policies could accelerate.
  • International trade and investment are vitally important to the Australian economy. Barriers to trade and investment pose a risk to economic growth and living standards.
  • Significant worldwide increases in protection would cause a global recession. Modelling estimates that for every $1.00 increase in Australian tariff revenue, economic activity in Australia would fall by $0.64. In total, GDP would be lower by over one per cent each year. This would equate to a loss of close to 100 000 jobs, and the average household would face an income cut of nearly $1500 a year.
  • In the event of a global rise in protection, Australia is likely to face intense political pressure to follow suit and lift its own barriers to trade and foreign investment.
  • There is a strong need to better understand and respond to the insecurity concerns of citizens about jobs and incomes that, for many, globalisation has come to encapsulate.
  • The best response to rising protection and other trade developments would be to continue to work towards freer markets.  Even in a world of much higher protection globally, Australia would be better off to persist with lowering barriers to trade. Co-operating with a coalition of like-minded countries could significantly amplify the positive economic effects for Australia of avoiding increases in protection.

I have always believed that regardless of being right or wrong individual views have to be addressed as they are either right or are perceived and in any case have to be responded to.

Accordingly there needs to better understanding of community concerns about free trade.  Queensland needs improved engagement with the community around the case for open markets and clearer communication about the policies in place to manage the costs of adjustment.  

In short the Sunshine State is calling out for a fierce and tireless proponent of free trade, outside of politics, to build and champion community understanding and acceptance of open markets.

 

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