Free trade tied up in knots
We should welcome the fact that Australia will be the shower head capital of the world thanks to what happened in Honolulu a few days ago. Leaders of the 20 countries in the Asia-Pacific Economic Co-operation forum (APEC) decided to cut tariffs on "green goods" to 5 per cent by 2015.
Our Prime Minister celebrated and said this would open up markets for Australian-made products such as wind turbines, fuel cells and water-saving shower heads. Great. APEC is proof of just how distorted the priorities of developed countries have become.
APEC is more worried about shower heads than about the 200 million people in India who don't have access to drinking water. (Although since India is not a member of APEC, maybe this wasn't that much of a concern.)
None of the Australian journalists at the Honolulu meeting asked Julia Gillard whether she believed Australians could make wind turbines, fuel cells and shower heads better or more cheaply than the Chinese.
Maybe Australians could make these products better, but we can't make them more cheaply. At the same time as the PM talks about the wonderful potential for Australia to make shower heads, it is the official policy of her government to push up the price of one of the most significant costs in the manufacturing process - energy. All of this is happening while the chances of the United States adopting a "price on carbon" are practically zero. Which is what President Barack Obama admitted when he arrived in Australia this week.
But the APEC meeting wasn't a complete waste of time. Nine countries, including Australia, the US, Chile and Vietnam, committed to forming a free trade zone as soon as possible. This is good news. And it's good that Labor is behind it. At the moment, Labor's rhetoric on free trade is better than the Coalition's.
Tony Abbott's new anti-dumping policy is completely unnecessary. His threat to force importers to demonstrate that the goods they bring into Australia are not sold at less than the cost of production is a bureaucratic nightmare. Dumping is far from the biggest issue facing Australian manufacturing.
Increasingly, these non-tariff barriers appear at the behest of environmental non-government organisations (NGOs). The Illegal Logging Prohibition Bill, now in the Federal Parliament, aims to stop the importation of illegal logged timber.
Similar to Abbott's anti-dumping proposals, timber importers will be required to prove their timber is not illegally logged, a task that is expensive, time-consuming, and may prove impossible. As a study commissioned by the Department of Agriculture, Forestry and Fisheries revealed, the legislation is attempting to solve a problem that doesn't exist. Australia's timber imports are less than one-tenth of 1 per cent of global timber production.
This shows how environmental NGOs are successfully converting their anti-corporate campaigning into legislative trade barriers. Timber, coffee, sugar, cotton, palm oil and beef are some of the commodities the NGOs have set their sights on. As the Institute of Public Affairs' Tim Wilson identified in a recent report, Environmental NGOs imposing [in]voluntary regulations on consumers and business, there's a growing tendency for NGOs to boycott individual companies that don't comply with the NGO's self-imposed standards.
If a corporation attempted such action against another corporation as a result of a commercial dispute it would be illegal under the Competition and Consumer Act and the Australian Competition and Consumer Commission would intervene. But under an exemption in the act, if an NGO boycotts a company because of "environmental" concerns, it is legal.
Abbott has allowed Julia Gillard to capture the free-trade high ground. This is incredible given it was the Gillard government that unilaterally banned the live cattle trade to Indonesia.
Further, at the same time as the government talks about cutting tariffs, it's establishing a whole new series of non-tariff barriers on imports and exports. The latest, thanks to the government's tobacco plain packaging legislation, means that cigars imported into Australia will need to have the bands around them removed.
That's because those bands violate the rules on plain packaging. It's a worry that in communist Cuba you can smoke a cigar that has the manufacturer's band around it, but you can't in Australia. And it's a worry when the Cuban government threatens to take Australia to the World Trade Organisation.
The Labor government talks a good game on free trade. The problem is that the reality doesn't always match the rhetoric.