Abbott Lines Up With Left-Wing Union On Protectionism

The Coalition’s position on anti-dumping laws is part of a worrying trend.
Rarely does the federal opposition line up with the Australian Workers’ Union on economic policy but that’s where they are on free trade. Unfortunately, the nominally market-orientated Coalition is playing fast and loose with one of its core philosophies.
This matters because as the world faces a second round of financial crises, there’s been a surge in protectionism, and it’s a fair bet Tony Abbott will be the next prime minister.
In his ”forgotten families” speech in May, the Opposition Leader made tougher anti-dumping laws a centrepiece of his economic policy.
These laws purport to prevent foreign imports being ”dumped” so cheaply in domestic markets they threaten the existence of Australian companies. The theory suggests that the foreigners will jack up prices once local companies have gone out of business.
But it’s a theory that everybody from the Productivity Commission to Nobel-winning anti-free market economist Joseph Stiglitz thinks is nonsense. Pursuing that pricing strategy would be expensive and risky. It’s hard to find an example of any company ever having done so successfully.
Anti-dumping laws are pure protectionism. They benefit a few companies at the expense of consumers. No surprise that the AWU has been campaigning to beef up anti-dumping laws for months. But a big surprise that a Liberal leader has been as well.
The government made some changes to the anti-dumping regime in June. The AWU was satisfied. The Coalition was not. Labor, they said, had ”thumbed its nose” at manufacturers. That makes the federal opposition less supportive of free trade in this case than the union movement and the government. It could be dismissed as an anomaly if it wasn’t so clearly part of a trend.
And it isn’t an argument between free-market Liberals and agrarian socialists in the National Party. Last month Liberal industry spokeswoman Sophie Mirabella said departments should buy equipment and clothing from local companies.
Doing so she came up against the Victorian government – a Coalition government. Victorian Police Minister Peter Ryan was sourcing fabric for police uniforms from a company that uses Chinese labour. Protect local jobs, or try to get the best deal for taxpayers on the competitive, international market? The federal opposition went with the former. Ryan – who is a National – went with the latter. It’s the old battle between major benefits for a few or minor benefits for all.
It goes on. The opposition has concerns about foreign investment in Australia. The bogey-man here is Chinese and Middle Eastern companies ”buying up” Australian farms. That practice is also known as ”investing”.
And investment is something you’d think a growing, capital-hungry country like Australia might embrace. Nevertheless, the Coalition has a working group to scrutinise whether it is in Australia’s national interest.
The Coalition is not alone when it wavers on free trade. The past few years of downturn has seen a resurgence in anti-trade sentiment and protectionism around the world. According to the British-based Centre for Economic Policy Research, the 20 countries in the G20 have enacted 155 trade restrictions or tariffs since November 2010.
Austerity has left politicians with a restricted set of tools to please domestic rent seekers and trade unions. When governments cannot spend, they regulate.
Protectionism is easy to sell. Who wouldn’t want the government to protect domestic jobs and industries? By contrast, the benefits of trade – cheaper goods and services for everybody and an expanding economy fuelled by engagement with the rest of the world – are more diffuse.
Yet every one of the new restrictions on trade damages economic growth and punishes consumers. Australia has largely avoided joining the wave of protectionism. That’s what makes the Coalition’s growing antipathy to free trade so concerning.
Tony Abbott has been right to oppose many proposed tax increases. But tax is only one side of the economic coin. You can’t have a strong economy without free trade. If the Coalition cannot confront this principle in opposition, it will definitely have to confront it in government.