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Labor flirting with neo-protectionism in trade policy
IPA REVIEW ARTICLE
It is only early days, but the Rudd government's pro-growth reform credentials are already being put to the test. Since the 1980s, both major parties have favoured free trade. At the last federal election, then Shadow, now Minister for Trade, Simon Crean, committed a Rudd government to a trade policy overhaul that would promote Australia's economic interests.
In its election policy ‘A strong future for Australia's exports' the ALP complained that the Howard government had failed to make the most of an expanding world economy and resources boom. Now in government, Minister Crean is expected to start delivering on the detail of his policy.
Included in Labor's trade policy is a review of the effectiveness of Australia's ‘export policy and programs', including a flagged expansion of the Export Market Development Grants program. The EMDG is a boondoggle for small businesses who want a risk free opportunity to break into new markets through government subsidies-the sort of policy Australia opposes in the World Trade Organisation because they undermine free trade.
Another review includes the effectiveness of existing bilateral free trade agreements (FTAs). In its policy the ALP committed to ‘commission[ing] independent research to determine the effectiveness of existing FTAs and Regional Trade Agreements in delivering net benefits for Australia and to set benchmarks for future agreements'. Minister Crean is expected to announce the review shortly headed up by a senior Australian business person.
Considering Australia is one of the few countries internationally to negotiate truly comprehensive FTAs, it seems likely the review will achieve little.
In its election policy, the ALP actively questioned the deliverables of the US and Thai FTAs. With such scepticism-coupled with the influence on the Rudd government of the staunch multilateralist Professor Ross Garnaut-it is likely the review will recommend de-prioritising bilateral FTAs to focus on the constantly faltering Doha Round of negotiations in the WTO. Following their announcement, industry should scrutinise the terms of reference of the review closely.
Further, in the days following the recent announcement of the Mitsubishi plant closure in Adelaide and the subsequent Automotive Industry Review media reports suggest a likely outcome will be a tariff ‘freeze'. The outcomes of the trade policy, FTAs and automotive industry reviews will be a big test of Labor's economic reform credentials and commitment to free trade.