With the election over we are turning our attention to the next great competition -- the Olympic Games, which kicked off on the weekend.
Australians know our athletes can hold their own against the world’s best, but we are less confident our manufacturers, miners and retailers can do the same. Rather than taking on international rivals head on, we try to stop them from taking the field in our own country. This approach makes no sense in the sporting arena and is foolhardy in the business world.
Trade grabbed headlines during the election campaign, when many people expressed anxieties about the impact of free trade. Those of us who support free trade need to understand people’s concerns and explain the benefits.
In its election platform the Coalition supported liberalised trade through more free-trade agreements. Labor backed free trade while recognising concerns from the business community about the complexity of existing deals. The Nick Xenophon Team claimed to support free trade but questioned the merits of particular agreements. Among the gaggle of other minor parties were more critical views, seeking overt protection and rejection of foreign investment.
In tapping into a vein of discontent these parties offered up policies that would stop us from competing with the world.
Free trade is not about transactions. Instead, free trade is a powerful part of competition policy. Free trade exposes an economy to international competition, driving efficiency and rewarding increased productivity. It forces businesses to give more choice to consumers. Downward pressure on costs allows more money to flow through the economy.
Some businesses will thrive, others will shut their doors; some new businesses will be created and others will be sold. This is the process of creative destruction.
The government is right to expose the Australian economy to global forces. But in doing so it should help Australian businesses to be more competitive through minimising the costs they face; otherwise Australian employers will carry lead in their saddlebags.
Free trade must be achieved alongside simplifying and making more efficient our tax and workplace relations systems, ensuring a competitively priced, reliable and secure energy supply, improving the efficiency of our logistics and infrastructure, and making government services more contestable.
The athletes who thrive in Rio will be those who have already been exposed to international competition and have the training and equipment to gain an edge. Otherwise, mediocrity awaits. The same is true for the economy.
So it is not just the Trade Minister who is responsible for free trade; it is also the Treasurer, the Industry Minister, the Energy Minister and the Small Business Minister, among others.
There is little value in waiting for other countries to reduce their own barriers. This is like waiting for the other team to put on its star players before you put on your own. In the competitive global economy, the first to open their doors to trade and investment gains an advantage.
Trade, Tourism and Investment Minister Steve Ciobo is right to defend free trade by pointing to economic growth due to earlier reforms. Much of our high standard of living is a product of the trade and investment liberalisation of the 1980s, which brought foreign capital and talent to us and helped Australian business to become more competitive.
But since then Australia has taken a mercantilist approach to free trade, seeking deals with only one or a few countries at a time.
The government views these deals as easier, but it means much slower progress. If we assume each bilateral trade deal takes two years to negotiate and Australia does them one at a time, it will take about 400 years to do deals with every country. And we would face a thicket of confusing rules and compliance regimes.
Ciobo and some businesspeople emphasise that these deals aim to support our exporters, but Australia’s trade figures show the deals have little impact on our export performance.
There are several alternatives to bilateral trade deals in achieving liberalisation, including unilateral reform (as we did in the 1980s) and multilateral reform (via the World Trade Organization).
Unilateral efforts allow Australia to secure strong outcomes without having to negotiate. We can control the terms of foreign investment, intellectual property, data flows and entry for tourists, students, businesspeople, ships, aircraft and imported goods. This won’t guarantee us market access for our exports but it will give our exporters lower costs.
No system is perfect, so questioning the merits of particular approaches is not “anti-trade”. We need a national conversation that starts by understanding how effective our past efforts have been. Just as our athletes analyse their performances to see how they can improve, our efforts on trade liberalisation deserve scrutiny.
Many studies, including a 2010 report from the Productivity Commission, show we can do better. The Australian Chamber’s National Trade Survey has found that companies cannot easily use the trade deals secured over the past decade. A good manager will set a goal and check it if has been reached. This should happen with our trade policy.
Free trade will make it easier for business to create jobs and drive growth, but some households and businesses may struggle to benefit. So there is a case for structural adjustment support where time is called on entire industries -- such as car manufacturing -- and ongoing investment in vocational education and training and developing entrepreneurial skills to equip workers to find new jobs.
As we cheer on our athletes in Rio, let’s find ways to do the same in our economy. In both cases, greater competition is the pathway to gold.