HOUSE OF REPRESENTATIVES, 11 JUNE 2020
Free trade is under fire. We've seen a massive increase in the number of protectionist measures around the world and significant pressure being placed on the global trading system. It's critical to realise the value that openness has played in building the modern Australian economy.
Australia's trade barriers were brought down largely by successive Labor governments: the 25 per cent tariff cut by Gough Whitlam in 1973, and the significant tariff cuts in 1988 and 1991 by the Hawke government. The process of trade liberalisation delivered significant competitiveness into the Australian economy and ensured that we created many more jobs. It improved the living standards for many Australian households.
As the ANU’s Adam Triggs has already pointed out, compared with a decade ago audio-visual and computing equipment is 72 per cent cheaper, cars are 12 per cent cheaper, toys and games are 18 per cent cheaper and clothes are 14 per cent cheaper. Trade has stretched household budgets further for low- and middle-income Australian households, but the rise in protectionist measures does threaten many of these gains. The Smoot-Hawley Tariff might not have caused the Great Depression, but it certainly acted to exacerbate the duration of the crisis. There is, again, a risk that rising protectionism around the world will do the same. We're already seeing significant trade tensions between the United States and China, but that's just one context in which trade conflicts are becoming worse in the current environment. Trade, along with immigration and foreign investment, has been critical to Australia's prosperity. Australia is a country that has chosen openness. It's been a deliberate policy choice, largely supported by both sides of this House, and one which has improved Australia's growth rate. But all of that could easily come to an end if we are to succumb to the siren song of protectionism and to close off trade. As Adam Triggs has pointed out, some have suggested that a national 'Buy Australian' campaign could fully compensate for our trade. He calls this a 'laughable' proposition, pointing out that more than 70 per cent of our agricultural production is exported. More than 25 per cent of our tourism industry relies on international tourists, to say nothing, as he points out, of universities and mining.
The same effect is seen in foreign investment. As we well know, Australia has traditionally had one of the highest current account deficits in the world—the fifth-largest current account deficit in the world recently—and still we receive significant amounts of foreign investment, although the increase in our existing superannuation pool means that we're now both an outbound foreign investor, in order to manage risks for Australian investors, whilst still accepting significant amounts of inbound foreign investment. Inbound foreign investment accounts for about one dollar in nine of total investment, so a complete shut-off of foreign investment would mean a one-ninth decrease of total investment in Australia. That would have massively adverse implications for investment in the manufacturing industry, in roads, bridges, ports. Light rail projects have been backed by foreign investment, and they have benefited Australians, raising living standards and increasing jobs.
There's also a national security benefit to this. When foreign investors, be they American, Chinese or Japanese, invest in our Australian economy, they have a stake in our success. They have a stronger interest in the Australian economy doing well when they're a part of it. As Adam Triggs pointed out in a piece in The Canberra Times recently, for many years Indonesia imposed restrictions on Australia's beef exports, but after Indonesian companies invested in Australia's beef industry the Indonesian government's incentive to restrict imports was significantly reduced. As he put it, suddenly, Indonesia had 'skin in the game'. Suddenly, they had an interest in the Australian beef export sector doing well.
We can understand the concerns over openness. This is, after all, a pandemic which came from overseas. But simply to take the view that when we're faced with a pandemic from overseas we should immediately roll up the drawbridges and shut off our engagement with the world would be to learn the wrong lessons. Past pandemics have shown that often the solutions will come from overseas. I agree with the previous speaker, who spoke about the importance of clinical trials. Labor took a policy on improving clinical trials to the last election. It is absolutely vital we do more of them. The major clinical trials now aren't occurring in a single country. The typical major clinical trial is an international trial. We have massive globalisation of this sector, and it's in our interests to be part of that globalisation.
Our universities are engaged with the rest of the world. Nobel laureate and now ANU Vice-Chancellor Brian Schmidt said that perhaps nowhere else could he have done his path-breaking research which earnt him a Nobel Prize, because his research group was so internationally connected. Temporary migration plays an important part in our universities, not just with students but also faculty. Flowing to and from our universities, that exchange of ideas makes our universities significantly more productive.
We're already seeing challenges to equity through both trade and technology, but too often the impact of technology is blamed on trade. As Tim Harcourt mentioned recently, artificial intelligence and robotics have already been changing the nature of work in manufacturing, and he points out that that effect is only likely to continue. But we need to be cautious of not blaming the impact on employment that occurs as a result of technological shifts on our openness to trade. Yes, trade has an impact, but technology is the larger factor.
How are we going to be affected in terms of our exports by the current crisis? We've seen a massive hit to tourism and a massive hit to the university sector. Rocks and crops have remained steady, and overseas steel production has held up, meaning that our iron ore has maintained. But there's certainly a risk in the future that we might see further protectionist measures that would adversely affect Australia.
Jeffrey Wilson from the Perth USAsia Centre has pointed out the importance of maintaining foreign investment in the current context. He's pointed out that a shutdown of foreign investment would particularly affect our resources, manufacturing and real estate sectors. He's highlighted the fact that in 2018 there was $3.5 trillion of accumulated foreign investment in Australia, and that Australian firms held $2.5 trillion of assets abroad. So foreign investment flows go both ways. We benefit as superannuation investors from foreign investment, but we can hardly expect that, if we turn off foreign investment for overseas investors, it will continue to be possible for Australian superannuation funds to get the benefit of diversification that comes through foreign investment.
Finally, it would be remiss of me to end a speech on trade without referring to the extraordinary export rorts revelations that have been reported by David Crowe in the Nine Fairfax papers today. We have seen fully 97 per cent of the money go to coalition electorates. That is, in round 1 of the program, some $4.3 million went to coalition electorates, compared to $140,000 to Labor electorates. Now what the government is saying is: 'Well, that's okay! Sure, we pork barrelled 97 per cent before the election, but after the election we ran another program, and that program was broadly 50-50, so it's okay.' This is a bit like saying, 'Well, you did an illegal tackle on the field, but after the final bell rang, you went and gave the bloke a hug.'
I mean, the fact is that this was a rort during the election campaign, and no second round after the election makes up for the malfeasance that occurred in this program. It deserves a thorough inquiry. Australians have a right to know why this export grants program was used for partisan pork barrelling.
Authorised by Paul Erickson, ALP, Canberra.