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Australian Productivity Commission Warns Against Protectionism

by Mary Swire, Tax-news.com, Hong Kong

20 July 2017


An upsurge in global protectionism could result in the loss of 100,000 Australian jobs and see the average Australian household worse off by nearly AUD1,500 (USD1,188) a year, according to a new report by the Productivity Commission.

The Productivity Commission has published "Rising protectionism: challenges, threats and opportunities for Australia," which models a set of scenarios based on new US trade policies and identifies their implications for Australia.

The report warned that if rising tariffs prompted a trade war and later global recession, "Over one percent of GDP every year and close to 100,000 jobs would be lost, and up to five percent of our capital stock would be mothballed. Living standards would fall across the income distribution. A household with the median weekly income would be worse off by nearly AUD1,500 a year."

There would however be an uneven distribution of impacts across households.

The report argued: "Rising protectionist sentiment and actions in some countries may lead some to suggest that a rethink of Australia's commitment to free trade is needed. They would be wrong."

"Protectionist policies would harm the Australian economy and risk reversing the community-wide gains that the lowering of barriers to trade globally have helped to deliver to us and would not deal with the insecurity concerns about jobs and incomes that globalization has come to encapsulate."

The report called for a three-pronged strategy to trade.

In the first instance, the Productivity Commission said that Australia should continue to work towards freer markets, by:

  • prioritizing regional agreements that allow, or work directly towards, most favored nation treatment;
  • promoting the greater use of plurilateral sector-specific agreements negotiated in the context of the WTO;
  • pursuing only those agreements where there is a strong net benefit to Australia;
  • broadening participation in negotiations to parties capable of offering critical assessment;
  • adopting better consultation processes in negotiating agreements; and
  • strengthening Australia's reputation as an attractive destination for international investors through predictable foreign investment approval processes.

In the second place, the Commission recommended that governments should pursue broader policies that strengthen the economy's resilience and the workforce's adaptability to changes taking place in the global economy. Finally, the Commission urged governments to better engage with Australians on the case for free trade.

TAGS: investment | free trade agreement (FTA) | export duty | tariffs | World Trade Organisation (WTO) | trade treaty | Australia | agreements | trade disputes | import duty | standards | trade

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