- The Strategist - https://www.aspistrategist.org.au -
The US’s antipathy towards free trade could leave Australia in the lurch
Posted By David Uren on July 6, 2023 @ 15:00
Trusting markets to allocate capital efficiently, we designed trade rules to liberalize as much as possible, under the theory that we were facilitating the creation of a free global marketplace. We thought a rising tide would lift all boats, believing that this approach could lead to a gradual improvement in labour standards and environmental protection as countries grew wealthier from increased trade flows.
We did not include guardrails to ensure that it would be the case. The system itself, then, created an incentive for countries to compete by maintaining lower standards, or by lowering their standards even further, as companies sought to minimize costs in pursuit of maximizing efficiency. This is the race to the bottom, where exploitation is rewarded and high standards are abandoned in order to compete and survive …
The traditional trade policy approach historically focused on providing benefits for our biggest companies, on the theory that those benefits would necessarily trickle down to our workers, small businesses and communities. But over time, what we have seen is that these benefits do not trickle very far down.
[W]e’re committed to free, fair and open trade, where the rules of the game are known and respected …
On balance, trade is a force for good. It is a key lever of the Australian economy. Its benefits flow to all aspects of everyday life. More trade means more well-paying jobs, more national income, and more opportunities for business and workers.
In an evolving and often challenging global environment, trade helps enable the economic strength and resilience that is central to our national power, alongside defence and diplomacy.
Much of the international economic policy of the last few decades had relied upon the premise that economic integration would make nations more responsible and open, and that the global order would be more peaceful and cooperative—that bringing countries into the rules-based order would incentivize them to adhere to its rules.
It didn’t turn out that way.
Our trade policy places workers at its centre to reflect the reality that the consumer who enjoys the low prices of imported goods is also a worker who must withstand the downward pressures that come from competing with workers in other parts of the world toiling under exploitative conditions.
Similarly, prioritizing and pursuing the consumer welfare standard in competition policy has led to consolidation and unchecked dominance in our domestic market, which has stifled competition and diminished economic liberty for our citizens and workers.
[I]f we look at what those agreements did, we see the ways in which they contributed to the very problems we are now trying to address.
The industrial supply chain rules in our traditional free trade agreements were based on that same premise of efficiency and low cost.
Because of it, they allow significant content to come from countries that are not even parties to the agreement—free riders, who have not signed up to any of the other obligations in the agreement, such as labour and environmental standards. That means these rules benefit the very countries that have used unfair competition to become production hubs.
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[1] US Trade Representative Katherine Tai argued: https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2023/june/ambassador-katherine-tais-remarks-national-press-club-supply-chain-resilience
[2] address to the National Press Club: https://www.trademinister.gov.au/minister/don-farrell/speech/national-press-club-address-canberra
[3] told the Sydney Morning Herald: https://www.smh.com.au/politics/federal/new-submarines-will-deter-blockades-that-cut-us-off-from-the-world-marles-20230316-p5css4.html
[4] speech on economic policy: https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/04/27/remarks-by-national-security-advisor-jake-sullivan-on-renewing-american-economic-leadership-at-the-brookings-institution/