Protect or Perish – The Quandry for Government in a Free-Trade World

The recent announcement that steel producer Arrium was moving into voluntary administration threw up a number of comments that many of its problems arose from the alleged international “dumping” of steel products by Asian exporters.

There is no doubt that a glut of steel production in Asia has created issues for Arrium and for similar local steel producers in the EU and the USA.

However, at the same time that Arrium is experiencing difficulties, the other major Australian steel producer in BlueScope recorded excellent results, which would suggest that foreign competition is not the sole reason for Arrium’s problems.

Still, the media continues to carry regular stories regarding the evils of the foreign supply of goods, jobs and investment allegedly threatening Australian business, ownership and jobs.

This provides a quandry for all levels of government who welcome such foreign involvement and commit to it in free trade agreements (FTA).

It is especially an issue at the federal level in an election year – how to continue to promote the strong free trade agenda while still preserving some level of protection for legitimate local interests which may be “damaged” by that trade.

A brief summary of relevant considerations is set out below:

• No such thing as “total” free trade: There are many areas where regulation is permitted in the interests of ‘fair’ trade, such as the WTO agreements on anti-dumping and countervailing.
• Loophole closures: Our trade remedies regime has been subject to significant amendments in the last few years, much of which seems to have been aimed at “closing loopholes” or providing “further protection against unfair competition”.
• Australia’s Tariff Concession order regime: Put simply, the TCO is supposed to allow duty-free entry for goods for which there is no local production of ‘substitutable’ goods.
• Australian Quarantine measures: Our “quarantine” regime is also subject to international pressure. Government maintains that we have a robust and scientifically-based regime yet many of our trade partners see our regime as being unduly restrictive and a “non-tariff barrier” to trade.

In amongst this, there is the task for all Australian political parties to balance legitimate interests which can appear to be in direct competition.

Australian business wants open markets overseas for export of Australian goods and services as well as increased opportunities for outbound and inbound investment. It is hard to reconcile that to a
politically expedient desire to close off parts of our economy in a way not supported by sound policy. Perhaps the real test of policy in this area is to help those whose lives are affected in the pursuit of trade outcomes of benefit to us all.
A final thought – there is evidence in the US that manufacturing jobs are being reintroduced there, turning back from China and elsewhere in Asia where production has become more expensive and less convenient. Over time there may be a similar turn in the wheel for other economies.

This article has been edited and reproduced with permission of Andrew Hudsons, Parnter of Melbourne office of Gadens.For the full unedited article, please visit the Gaden website.