World trade faces biggest challenges since 1930’s

| June 17, 2019

The world trading system is under greater strain than at any time since the 1930s and can no longer be taken for granted, the Productivity Commission finds in its latest Trade and Assistance Review.

“Protectionist sentiment is once again on the rise around the world. Unfortunately, we are seeing the language of market gain give way to the language of strategic rivalry, resulting in unpredictable trade policy. This is bad for business and bad for jobs,” Productivity Commission Chair Michael Brennan said.

“The single most important step Australia can take in the face of mounting troubles in the world trading system is to keep our own borders open to trade and investment,” Mr Brennan said.

“The certainty of the rules-based trading system is of immense benefit to Australia and is a pillar of a strong global economy. It has helped to underpin 27 years of growth in Australia and to lift a billion people out of poverty around the world,” Commissioner Jonathan Coppel said.

The importance of strengthening in an even-handed manner the rules-based system governing international trade cannot be underestimated.

Australia should also continue to work with other countries to build consensus on how to resolve long-standing and escalating challenges facing the World Trade Organisation (WTO).

“We hurt the incomes of average Australians by imposing nuisance tariffs on the goods they buy, requiring complex ‘rules of origin’ in trade agreements, and running one of the world’s most active anti-dumping schemes. We only harm ourselves with these policies,” Mr Brennan said.

Australian industry received more than $14 billion in assistance from the Australian Government in 2017-18. Tax concessions made up $7.3 billion of this figure; budgetary assistance $4.8 billion; and tariffs $2.3 billion. The main developments in the past year were increases in drought assistance, the ongoing proliferation of government project finance vehicles, and the progressive ramping up of small business tax concessions.

The Commission’s figures for industry assistance are conservative as they don’t include the significant assistance provided by government through favourable finance, local purchasing preferences, and regulatory restrictions on competition.

The Trade and Assistant Review 2017-18 can be found at: www.pc.gov.au/research/ongoing/trade-assistance/2017-18

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