CANBERRA: Australia must resist the rising tide of protectionism and continue fighting for free markets or risk dire consequences, the Productivity Commission has warned.
Donald Trump’s election on a protectionist agenda has emboldened parts of Europe, after some major economies began lurching towards restrictive trade measures following the global financial crisis.
The commission has urged Australia not to follow suit.
Households would be $1500 a year worse off and 100,000 Australian jobs would be lost if trade barriers were lifted significantly around the world, the commission has calculated.
Up to five per cent of the country’s capital stock could be mothballed, equivalent to nearly half of investment in the mining sector over the past 10 years.
Not all Australian households would be affected equally but most would be worse off.
The commission found 20 per cent of households, including those on low-income, would be least affected by a shift to closed-border trade.
But while this helps explain why broad support of open markets cannot be taken for granted, it shouldn’t trigger a rethink of Australia’s commitment to free trade.
“Protectionist policies would harm the Australian economy and risk reversing the community-wide gains that the lowering of barriers to trade globally have helped to deliver,” the commission said in a report released on Wednesday.
“(It) would not deal with the insecurity concerns about jobs and incomes that globalisation has come to encapsulate.”
The commission recommended Australia continue doing business with like-minded partners and pursue multi-country trade agreements.
At the same time, it found better understanding of concerns about free trade and improved engagement on the case for open markets were needed to build community acceptance.
Trade Minister Steve Ciobo said the country’s prosperity depended on trade and the government was committed to opening new export markets for Australian businesses.
“Australia’s economy has withstood global challenges and is in its 26 years of continuous growth because we’re open to the world,” he told AAP.
“The Turnbull government is confronting protectionism with our ambitious trade agenda that will create Australian jobs and drive economic growth.”