2 weeks Ago By Bernard Keane
While the prime minister’s response to Donald Trump’s global trade war wisely eschewed any reciprocating tariffs, he is still proposing to take Australia further down the road of protectionism at a point when the global trade system is being demolished. This is an historic day, no doubt — not any sort of liberation day, but a day which saw the overthrow of the global trade order. That order, if hardly “free”, has underpinned Western prosperity — and helped hundreds of millions of people escape poverty across Asia — over the past four decades and helped prevent any major power conflict since World War II.
The direct consequences for Australia are limited. A 10% tariff on goods to the US will, as Anthony Albanese pointed out, affect less than 5% of our exports. One of Australia’s most valuable exports to the US, pharmaceuticals, is exempt , softening the impact.
The larger consequences are the economic pain Trump is inflicting on the United States via a spike in the already rising level of US inflation, and the harm to the global economy that will result as other major economic powers like China (34% tariff) and the European Union (20%) hit back. In particular, every reduction in Chinese economic growth will flow through directly into the prices for Australian commodities and revenue for Australian governments. What’s notable about Trump’s declaration of war is that there is no longer any point in being a US ally — you’ll still be attacked.
We got 10%, as did the UK. Japan got 24%, South Korea 25%, Singapore and New Zealand 10%. Even the Israelis copped 17%, with all rates calculated not on any existing tariff levels (some countries with high tariffs against the US got the same 10% as us) but on a bodgy calculation based on the US bilateral trade deficit in goods, and goods alone, not services, where the US is a trade powerhouse in areas like IP and software.
Trump treats allies as economic enemies, even as he treats America’s enemy in the Kremlin as a valued friend to be duchessed to the negotiating table. Albanese’s response was part election pitch, part doubling down on his tactic of not provoking Trump. Yes, he rejected any tariffs on US goods, correctly — why should we make those goods more expensive for Australians by taxing them? But his response was a celebration of softer kinds of protectionism that stop short of tariffs but still inflict real damage on the economy.
In particular, he promised to strengthen our anti-dumping regime. Why do we need a stronger anti-dumping regime targeting imports when the US is targeting our exports? The argument is that other countries affected by US tariffs might attempt to flood Australia with cheaper products forced out of US markets. Except, what is the specific problem with other countries offering us cheaper products, especially given we’ve just come through a serious bout of inflation and interest rates have yet to come back down? Don’t we want some disinflation? But now, the bureaucrats of the Anti-Dumping Commission — the most economically toxic institution in the country — will be on guard to stop Australian consumers and businesses from getting lower prices and lower interest rates.
And funnily enough, one of the biggest abusers of the anti-dumping regime, BlueScope, is one of the biggest domestic beneficiaries of Trump’s madness, via its multiple US steel facilities. The soft protectionism didn’t stop there: Albanese announced another $50 million for sectors most affected by the latest tariffs — agriculture, mainly. Small beer in the scheme of things, sure.
But then he said he’d be expanding one of Labor’s innumerable funds — the National Reconstruction Fund — for a new “Economic Resilience Program” for companies “to capitalise on new export opportunities.” Plus, still more “Buy Australian” via government procurement, an unspecified measure meaning “Australian businesses will be front of the queue for government procurement and contracts”. Taxpayers will get to lose out to protectionism by paying more for less competitive Australian products.
Sorry, but now isn’t the time to Buying Australian. Now is the time to be trying to maximise productivity and efficiency and minimising inflation. Maybe it’s the time to be buying European, or Canadian, or Chinese, or Vietnamese, or Thai, or Indian, if they produce the best products for the price we want to pay.
After all, we expect them to give us the same opportunity. How would we feel if Australian firms were told not to bother seeking government contracts in Europe, or South-East Asia, or Japan, because they’d decided it was time to buy local, too? How would we feel if Australian companies, having wisely diversified their exports into other markets, found themselves charged with dumping? No, none of this is anywhere near as disastrous as tariffs. But apart from the economic damage it does to us, such soft protectionism sends the wrong signal to the world at exactly the moment we’re on a tipping point of the worst trade war since the 1930s.
Contra Trump’s idiotic comments this morning, that prolonged the Depression and helped give us World War II. Our prosperity is now in real peril thanks to the madman in the White House and the Americans who voted him in. A bit of voluntary autarky isn’t going to save us.
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