February 24th 2001

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Articles from this issue:

THE ECONOMY: Manufacturing key to economic health

EDITORIAL: A time bomb under the Howard Government

CANBERRA OBSERVED: WA result shows Coalition's dilemma

WESTERN AUSTRALIA: ALP rides One Nation to victory

NATIONAL AFFAIRS: Behind the push to become part of Asia

AGRICULTURE: ABARE report underestimates dairy backlash

Straws in the Wind



Indonesian wrath causes exodus of Papuans

CORPORATIONS: Does shareholder value makes everything acceptable?

COMMENT: Media's North Korea blindspot

FAMILY: Marriage is good for you


FILM: "Hannibal" raises issue of film violence

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Behind the push to become part of Asia

by Colin Teese

News Weekly, February 24, 2001
Colin Teese explains why - despite the emergence of trade blocs - our attempts to "become part of Asia" have been rebuffed.

Readers of News Weekly won't need to be told of the harm done to Australia's economy - to manufacturing industry and, more recently, to agriculture - by the impact of free trade, globalism, and its fellow traveller, competition policy.

Also well-known is the impact of all this on our international trade. Imports of manufactures, let off the leash through a policy of free trade, have eaten away at the trade surplus, which was part of the lifeblood of our traditional economic prosperity. The effect of free trade has been to push the current account into what appears to be permanent and irreversible deficit.

Successive governments of different political complexions have preferred to ignore this reality and distance themselves from its consequences. Under hands-off policies, control over trade policy has been surrendered not merely to the uncertain frailties of market forces but, ultimately, into the hands of international big business.

Prime Minister Whitlam started it all back in 1973. Acting unilaterally - though on the advice of a clutch of free trade leaning academic advisers - he decided to cut industrial tariffs by 25 per cent.

In a trade policy sense, that single act cast Australia adrift: except for a brief period under the Fraser Administration, our policies on trade have been drifting ever since.

The Whitlam decision was made on the eve of the beginning of the Tokyo Round of multilateral trade negotiations. As a result, Australia's negotiators were left high and dry - deprived of whatever negotiating levers they had accumulated when it came time to try to negotiate away some of the barriers to our trade in agricultural products.

Incidentally, Hawke and Keating - much more ambitiously committed to tariff cutting than Whitlam - also chose to slash tariffs in advance of the Uruguay Round of multilateral trade negotiations.

Thus, in successive trade rounds, Australia's negotiators were sent to the table stripped of all possible bargaining chips.

The Howard Government seems determined to follow suit. While arguing for a new round of trade negotiations in the World Trade Organisation to deal particularly with agricultural trade protection (devised by Labor) and the relaxation of plant and animal health protection, which, separately or together, will have the effect of opening up our domestic market for agriculture to unrestrained import competition. Once more our negotiators will be asked to bargain without whatever negotiating power they might otherwise have had.

It doesn't take much foresight to imagine that the consequences of this ill-considered policy for Australia. After all, manufacturing industry provides us with a case study of what happens when the forces of free trade are unleashed on a small unprotected economy.

As domestic industries disappear, more and more of what we consume will be imported. In the 20 years since 1980, the contribution of manufacturing to our Gross Domestic product has halved. And, compared with the previous 20 years (from 1960-1980) GDP growth per person has slowed.

Cutting tariffs has made us worse off. Expect more of the same if we cut agricultural protection. Less of what we consume in farm products and foods manufactured from them will be grown or made in Australia.

Small farmers will first feel the effects, but over time, those with larger holdings will not escape the impact.

Australian farmers will be dispossessed of employment, land and wealth. And Australia's current account problems will intensify.

In all probability, when Whitlam started all this he never made the connection with trade policy. No doubt he was influenced by the views of Labor advisers who were fond of proclaiming publicly that "the best trade policy was none". And those same influences managed to take hold of the successor Labor governments.

If Hawke and Keating had no use for trade policy, they certainly had an international economic agenda. It was sometimes described as "Labor's strategy for getting us into Asia". Some strategy! Those of unkind disposition might remember Mr Keating as some government minister who earlier has described Asia as "the place you fly over on the way to Europe". Certainly Asians do.

The so-called Labor strategy - to the extent Labor could claim credit for it - was actually Hawke's or, rather, his academic advisers.

Subsequently, it was attributed to Keating, as Prime Minister. Indeed, Robert Manne once identified the plan as a pillar of Keating's time as leader. Manne also saw it as a credible and practical means of advancing ties with our Asian neighbours which, lamentably, was among those Labor initiatives abandoned by the successor Coalition Government.

Others have chosen to characterise this particular Hawke/Keating initiative as unhelpful in the development of our relationship with Asia - economic and otherwise. They see it as a first step by a self-righteous Australia attempting to lead the world towards the path of free trade.

Asia is the test case. The instrument was to be the Asia Pacific Economic Commission. Remember APEC? And, under its impetus, and the driving force of free trade, Asia would become the dominating economic region.

Well, Asia didn't buy the idea - nor Australia as its driving force. And we all know what happened to Asian economic growth in 1997, and subsequently.

Nobody takes issue with the idea that a closer relationship with Asia is a serious and important matter. And it is possible that Hawke and Keating genuinely believed it to be so, though, with the advice available to them, they were never going to be able to advance that objective, because Asian countries have never accepted Australia as part of Asia.

It is also true that the Howard Coalition appears to have backed away from the idea. Perhaps because, in terms of its other economic objectives - which are not so different from Hawke's and Keating's - the Coalition is not clear as to how the idea may be advanced.

Not that Labor or its advisers ever had a mortgage on the idea. The writer himself was involved in canvassing the idea towards the end of the Fraser Government's term of office. Especially so, following the collapse of the GATT Ministerial meeting at the end of 1982. It was then clear that any serious progress on agricultural trade liberalisation was likely to be permanently blocked by the efforts of the European Community, together with the USA and Japan.

At the same time, it was already possible to envisage a world dividing into trading blocs. The then European Community was already formally such a bloc of nine European states. And it was obvious that the USA and Canada could easily become a bloc. Such a bloc, given time, could embrace Latin America.

Where would these developments leave us? More than ever dependent upon Asia. But there were, then and now, serious political and economic problems to be overcome before we could consider moving closer to Asia.

These were under examination at the time the Fraser Government lost office.

To be continued in the next issue

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