Tuesday , August 20 2019
Breaking News
Home / Latest News / Global trade is under greatest threat since WWII, Productivity Commission says

Global trade is under greatest threat since WWII, Productivity Commission says

Taking on Australia’s international partners, the Commission said the US and China had led the rise in protectionism as “the language of market gain gives way to the language of strategic rivalry,” threatening the “authority and credibility” of the rules-based order.

“The world trading system has been a foundation stone of Australia’s 27 years of uninterrupted economic growth. It helped deliver declining unemployment and steadily rising living standards. Sadly, that system — and the benefits it has generated — can no longer be taken for granted,” the Commission said.

Commissioner Jonathan Coppel said the system had been unable to deal with the growth and transition of developing countries – which can be subject to different trading rules – creating power imbalances in trade negotiations, particularly in the cases of India and China.

“There is no way in which a country that transitions from a developing to an advanced economy is agreed upon,” he said in an interview.

According to the Commission, no broad multilateral agreement has been concluded since 1994. The TPP11 was signed in 2018, but without the world’s largest economy after President Donald Trump pulled the US out of the deal.

Locally, tariffs have been slashed over the past three decades, but some industries continue to receive assistance three times above their economic contribution.

Manufacturing and primary production [farming] receive 28 per cent of assistance while contributing 9 per cent of value added to the Australian economy.

Saudi Finance Minister Mohammed al-Jadaan and US Treasury Secretary Steven Mnuchin shake hands after G20 finance ministers and central bank governors met in Japan.

Saudi Finance Minister Mohammed al-Jadaan and US Treasury Secretary Steven Mnuchin shake hands after G20 finance ministers and central bank governors met in Japan.Credit:AP

Mr Coppel described the 1 to 5 per cent tariffs on imported goods, worth up to $2 billion a year, as a “nuisance”.

“They are so low that what purpose do they really have?” he said.

He added that anti-dumping measures, designed to stop cheap foreign goods from out-pricing local suppliers, can have a negative impact on the international competitiveness of industries.

In 2016, the Anti-Dumping Commission found Italian tinned tomato exporters guilty of dumping – selling product for less than they sell for in their own country – and causing “material damage” to the local industry.

“Australia is one of the most prolific users of anti-dumping measures,” said Mr Coppel. “They should be avoided.”

The Commission also took aim at the government’s export credit agency, Efic, for the minimal public scrutiny of government assistance given to private sector projects.

“History has not been kind to previous efforts at government financing,” the Commission said.

“It will be critical to review the various newly-introduced financing measures early in their operation to ensure that they genuinely make Australians better off and not merely benefit project proponents.”

The Commission said taxpayer funding given to farmers during drought often undermined the incentives to manage their own risks and were ineffective in supporting sustainable farming practices. It said a new drought policy and a review of subsidies for farmers was necessary.

“When you are in an emergency that is not going to be the time for sane policy making,” Mr Coppel said.

Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.

Most Viewed in Business

Loading

About admin

Check Also

a2Milk toasts a net profit up 47 per cent to $272 million

On a key measure of infant formula market share in China, a2 now has a …