The benefits of free trade to Australia

The benefits of free trade to Australia article image

ian-murray21History supports the benefits of free trade and investment for countries like Australia. Although there will always be those who support protectionism, Australia ultimately benefits from free trade which generates investment and drives sectors, writes Ian Murray. When things get tough, and while we are getting a lot of mixed messages on how tough it is, out pop the protectionists with their ‘let’s save jobs by putting up barriers’ rhetoric, which thank heavens fall on deaf ears by most forward thinking commentators and a Government which is driven by the free trade agenda. The other thing that tends to come to the surface when business slows is the ever-emotional issue of multinational participation in the manufacturing sector and we hear the cry to stop investment in old Aussie icons. Just to touch on the second issue first, I've written previously about the important role multinationals play in generating export earnings and the importance of foreign direct investment. In particular I made reference to not only overseas businesses like Mitsui, Marubeni and Mitsubishi from Japan and Ford and General Motors from the United States but Australia’s Rio Tinto and BHP Billiton. The article made the clear point that multinational companies accounted for more than 35 percent of our exports and played an undeniably huge role in employment, skills development and the creation of wealth across Australia. The article also pointed out that foreign direct investment contributes one quarter of all business capital in Australia and, depending on whose data you use, a massive amount of R&D investment. In other words, and remembering the important contribution export makes to employment, any suggestion of slowing the participation of multinational companies in our economy or dissuading direct foreign investment is clearly not in anybody’s best interest. Wikipedia describes protectionism as "economic policy of restraining trade between states, through methods such as tariffs on imported goods, restrictive quotas, and a variety of other restrictive regulations designed to discourage imports and prevent the foreign takeover of local markets or companies". Over the last six to eight months we have all heard from various quarters about the ‘Buy America’ clause and the often quoted 118 policies and measures worldwide that have restricted trade. We have also heard of the European Union’s plans to reintroduce dairy export subsidies which, as the Rudd Government pointed out, "could lead to other countries blocking free trade". Sadly we have heard similar things here in Australia and while one can appreciate the short-term emotional issue, the fact is our economy will suffer and more jobs will go if Australia adopts a protectionist stance. What is encouraging is the stand taken by the Australian Government, particularly Minister for Trade Simon Crean. When referring to The Centre for International Economics report which found that trade liberalisation over the past 20 years has boosted Australia’s GDP by between 2.5 and 3.5 percent, Crean was quoted by Christian Kerr in The Australian as saying: "This study shows the concrete benefit of trade liberalisation and is a strong reminder that Australia needs to remain engaged with the world, not retreat from it, in the face of the global recession." Crean has taken a strong stand, particularly on the jobs issue, saying at the ACTU Congress: "Protectionism would hurt Australian households and Australian jobs; that’s why the Australian Government has protested so strongly against the US’s ‘Buy American’ campaign and the reintroduction of dairy export subsidies by the EU. Engaging in this downward spiral of tit-for-tat protectionism will reduce Australian living standards and cost jobs. We are determined to fight protectionism at home and abroad." There will always be those who will promote the protectionist agenda and the agenda to restrict foreign investment in Australia and in Australian companies. History, though, supports the benefits of free trade and investment, not only for countries like Australia, which has small domestic market, but for emerging economies that without trade would contract and suffer a significant decline in their standard of living. There will probably never be a level playing field in trade, and there will always be tough competition, which nobody can argue against; it’s healthy. A free and open market is a must for Australia as it generates investment in R&D, drives sectors like IT where going global is mandatory and undoubtedly generates jobs. I support the government 100 percent on its stance to fight protectionism and any suggestion on restrictions to normal foreign investment. -Ian Murray is the executive director of the Australian Institute of Export


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