A return to growth involves nurturing free trade
This week, the director-general of the World Trade Organisation, Pascal Lamy, is in Australia warning against the threat of protectionism. When Australians are taking lessons on free trade from a Frenchman, it is a sign of how sick the campaign for free trade is.
The global financial crisis is fanning the flames of economic nationalism and Australians are not immune. Prime Minister Kevin Rudd likes to parade as a free trader, but in reality he sends mixed signals. Free trade remains a key pillar in the neo-liberal ideology he has recently sought to condemn.
Rudd has also stirred economic nationalism by calling for the pink insulation batts bought from his stimulus package to be Australian made, commenting he has a "low tolerance threshold for importation".
Around the world, winding back free trade reforms justified by economic nationalism is all the rage. French President Nicolas Sarkozy hinted that bailed-out car companies must keep production in France. British unionists are protesting under the banners of "British jobs for British workers".
The justification for economic nationalism is to "protect" or "save" local jobs, but it actually does the reverse.
In 1930, the US Congress passed the Smoot-Hawley Tariff. It raised tariffs on goods into the US and, in response, countries around the world responded in-kind. Global trade suffered and the measures played a significant role in turning a recession into the Great Depression.
Economic nationalism raises the cost of production for local manufacturers, reduces access to technology and makes Australian products less competitive. Ultimately, economic nationalism slows economic growth and job creation.
If the Federal Government legitimises trade barriers under the banner of economic nationalism, we should expect the same treatment for our exports and the cost will be dire. One in five Australian jobs is directly related to exports.
And when governments stir economic nationalism, vested union and industry interests are not far behind.
The Australian Steel Institute has released a proposal to "promote Australian jobs first" by requiring projects funded by the Federal Government's stimulus package to use Australian goods and services.
Meanwhile, the national secretary of the metal workers' union, Dave Oliver, has called for local content requirements in manufacturing, arguing a stimulus package should have "less emphasis on the economics and more emphasis on the social benefits".
But Oliver has got it wrong. The best "social benefit" the Government can deliver is promoting free trade that grows the economy and creates jobs.
In the second half of the 19th century, organised labour argued against Chinese workers coming to Australia through the establishment of the White Australia Policy. In his essay on Race and organised labour in Australia, 1850-1901, Professor Raymond Markey argued that the racism of the time correlated with "economic rescissions, when fear of unemployment lent credence to the notion that the Chinese were an economic threat".
The more things change, the more they stay the same. The national secretary of the Construction, Forestry, Mining and Energy Union, Dave Noonan, has called for an end to the Federal Government's 457 immigrant worker visas because they are displacing Australian workers.
Noonan may not be invoking the spirit of racism akin to the White Australia Policy, but the anti-competitive spirit of his policy is.
Stopping immigration isn't going to help Australian industries grow when there is still a need for skilled workers.
Rudd's leadership in opposing economic nationalism has been left wanting, but he has the opportunity to reassert this, and in the process, Australia's credibility as a free trade nation.
In late 2001, the global community united to start the Doha Round of World Trade Organisation negotiations. They did so to send a signal of confidence to the international marketplace following the September 11 terrorist attacks.
If it took a crisis to start them, a global financial crisis provides the same impetus to finish them.
Concluding the Doha Round would not just help kick-start the global economy, it would also be a lance in the heart of economic nationalism.
But to conclude the round, leadership is needed. Trade Minister Simon Crean has been providing it even before the global financial crisis hit. But by toying with economic nationalism, Rudd is undermining his efforts.