OPINION: by Robin SpeedNews Weekly
Economic policy should serve national interest
, April 26, 2008
Across a whole range of economic policies — from taxation to free-trade agreements — both Labor and Coalition governments have consistently failed to stand up for Australia's national interest, writes Sydney lawyer Robin Speed.It was Machiavelli who wrote in the 16th century that "... it has always been no less dangerous to discover new ways and methods, than to set off in search of new seas and unknown lands". So it is likely to be with the Prime Minister's Australia 2020 Summit.
The Machiavellian warning will hopefully not stifle discussion at the summit of "new ways and methods" on matters of substance, but encourage the realistic and robust advancement of ideas, no matter how entrenched the opposition.
Nowhere is this more necessary than in challenging entrenched policies on international trade. Free trade, free markets and deregulation are so enshrined as Australian government policies that it is regarded as almost blasphemy to suggest any limit to their extremes.Timely
It is timely for the summit to consider whether those policies are serving Australia, or whether Australia is in fact serving those policies. It is time to question whether the implementation of those policies in particular areas is in the best interests of Australia.
Even this benign questioning, however, is likely to be at first ignored by decision-makers, and then treated as heresy emanating from left-wing extremists.
There are, however, a number of areas where our international trade policies require immediate realistic and robust appraisal.
Australia has no meaningful restrictions on foreigners taking over Australian companies. This is in stark contrast to our restrictions on foreigners wishing to work in Australia. We regard foreign takeovers by multinationals or foreign countries, with the potential destruction or impairment of our livelihoods, as acceptable; but baulk at foreign individuals coming here and competing for our jobs.
By accepting foreign takeovers we wager our economy on decisions made in other countries, and by other governments, the subprime market crisis being the most recent disaster, with all of us anxious about our resultant higher interest rates. At the same time, we are reluctant to wager our jobs on the risk of a better foreign candidate. The irony is that the former is more likely to cost us our job (and to a greater degree) than the latter.
The proposed takeover of Qantas last year is illustrative of the then Howard Coalition Government's policy: no government interference with the marketplace. This was despite the fact that the Government had long undertaken intervention, by in effect giving Qantas a monopoly on the lucrative Australian-United States air route; and despite the fact that Qantas was to be saddled with a $10 billion debt which within 12 months would, with today's credit crisis, have put at risk the jobs of over 40,000 Australians. The Government of the day told us not to worry: Qantas would be backed by Allco. In hindsight, with Allco now in severe financial difficulty, that would have been cold comfort.
We have today the extraordinary situation in which international debt-funding has dried up, but foreign sovereign funds are out there in the marketplace pushing their billions of dollars to take up equity (frequently meaning control) in companies. Foreign sovereign funds are the front for foreign countries and give rise to such questions as whether China or Russia should be free to control, for example, BHP or the Commonwealth Bank.
We need to rethink our policies on foreigners controlling Australian companies. It is not a question of not welcoming foreign investment, but choosing what foreign investment we think is in the best interests of Australia. The Foreign Investment Review Board, currently charged with that duty, needs to be abolished and replaced with a professional, independent body, to give competent and transparent advice to the government of the day as to whether a particular foreign investment is in the best interests of Australia.
In Australia we do not differentiate at a policy level between Australian companies trading within Australia and those trading outside Australia, yet different considerations in fact apply to each.
At present, our policies on trade practices, taxation and corporations are not tailored to recognise the need for size and trade combinations, as well as special tax treatment, in order to establish, survive and compete when Australian companies trade overseas. Rather than giving our businesses a head start in the international marketplace, we are making it difficult, and at what cost to our community?
We urgently need a professional, independent body to work with industry to monitor how best to tailor policies to advance the interests of Australian companies in trading overseas.Foreign investment
We now have the absurd situation in which foreigners are in effect generally not taxed in Australia on capital gains they make from investing in Australia. Why? The same gain is subject to tax if made by an Australian; and if an Australian invests in a foreign country there is no reciprocal treatment — the Australian is subject to pay tax to that foreign country. Why?
The above is illustrative of the ad hoc approach to taxing foreign investment taken in our tax legislation and international tax agreements.
We need to adopt tax policies which integrate with our foreign investment policies, to ensure that concessions given to foreigners are the subject of a trade-off for reciprocal concessions so as to produce results which are in the best interests of Australia.
Australia has entered into a number of so-called free-trade agreements with other countries. By and large, Australia has negotiated these on the basis of free-trade ideology, despite the fact that the other country has negotiated on a basis of looking after its own interests.
The destruction and damage caused by the Australian approach is nowhere more evident than in our farming and manufacturing sectors. Colin Teese has already addressed some issues resulting from taking free-trade ideology to extremes ("Rudd Government to re-examine FTAs", News Weekly
, March 29, 2008).
The extremes here have resulted in a policy of providing apparently cheap imports for consumers, regardless of the overall costs to Australian industries and the community at large. The time has come to put a stop to these extremes and provide a better balance between short-term consumer-pricing and the long-term effect on the Australian community.