There was not one single solitary dollar sign in Anthony Albanese’s “A Future Made in Australia” speech delivered in Brisbane. There should have been. This was a speech about re-industrialising Australia, but there were no specifics.
It was 3,302 words of waffle—a melange of soundbites and non-sequiturs—aimed as much at the next Queensland state election as it was the Future Made in Australia Act which was supposed to be the real subject.
When Mr. Albanese was asked if there was any modelling underlying the speech and how many jobs it would create, the prime minister could only waffle saying there was an opportunity to “grow enormous” jobs.
So no modelling then. What was he promising? Well we got the general idea when he said:
“The so-called ‘Washington consensus’ has fractured—and Washington itself is pursuing a new direction.
“The United States has implemented the Inflation Reduction Act and CHIPS Acts and pursued what they call a ’small yard, high fence' approach to critical industries.
“The European Union has introduced its European Economic Security Strategy.
“Japan has the Economic Security Promotion Act.
“The Republic of Korea is re-framing its economic policy around a National Security Strategy.
“And Canada has brought in new rules to tighten foreign direct investment in their significant critical mineral reserves.”
So rather than the future being made here, it’s being made over there and we are just going to tag along.
But it’s not the future it’s protection under another guise, even though he also said:
“This is not old-fashioned protectionism or isolationism—it is the new competition.”
So a guilty conscience—it’s not what it looks like … protectionism? No, not here ... See what I mean by non-sequiturs?
So, absent any substance in the speech, let’s rehearse the reasons why protectionism is not a good idea anywhere, let alone in Australia.
Here’s Why
You might be good at making cars, and also good, but not as world-class, at growing corn. Another country may be good at both, but in the reverse order. You’ll both do best if the one who is best at cars does all the cars, and the one at corn, does all the corn.It’s much the same principle at work as when the medical specialist pays someone else to cut his lawn, but the pensioner cuts it themselves. Just because you can do it doesn’t mean you should.
Australia has done well when it’s observed this rule as an open economy.
What about when another country subsidises its producers, and exports their products to us at a cheaper price, aren’t we justified in raising tariff barriers?
No, not generally.
The government of the other country is subsidising your lifestyle—make the most of it, they won’t be able to afford to do it forever—and reinvest the surplus in something that will make your lifestyle even better.
There are exceptions to these rules. One is that as countries get larger the harms of protectionism can largely dissipate.
Competitive advantage works best when the whole world is trading with each other fairly, but the greatest advantage is to small countries because they get access to scale that is simply not going to be available to them domestically.
The larger countries are, the less scale counts, and the smaller the savings.
Australia, as a well-developed small country, will gain more from open trade than the United States as a well-developed large country, meaning that policies that might not be too damaging in the United States can be disastrous here.
Large countries can also afford trade wars better than small ones, and they can have more effect on the unfair trade practices of others because of the scale they offer to producers who export to them.
If a country can’t access the Australian market, big deal, but if it can’t sell to the United States, that is more of a problem.
U.S. Presidents Donald Trump or Joe Biden might (and I stress, might) be able to win a trade war, but they have the world’s largest economy, representing 13.3 percent of global GDP and a population of 333 million, while we have the 12th largest, 0.8 percent of global GDP and a population of only 26 million.
There Is One Exception
There is a case for selective protectionism in certain very narrow cases. One really. That is the case of China.That means we should be very careful dealing with them, and tariff and other non-tariff barriers can be justified to ensure that we are not put at a security disadvantage by relying on a strategic competitor for essential goods.
National security is one of the themes of Mr. Albanese’s speech, although he doesn’t name any particular strategic threat. But if he really wanted to do something about national security he wouldn’t start by altering trade policy.
The greatest threats to national security sit around his Cabinet table.
Mr. Albanese wants to build the industries of the future, but we have an economy that can’t even build enough houses for the people that live here.
The speech is in some of the grand traditions of Australian Labor.
It is insecure, looking abroad for leadership, and it thinks that the cosseted apparatchiks who make up the Cabinet, and have spent a lifetime playing politics and nothing else, know more about enterprise and risk than the people who actually invest.
For a while, as Australia raced up the global wealth charts, after the reforms of the 70s and 80s, it really did look like the future was being made in Australia. We weren’t looking to what others were doing, but blazing our own trail.
That future is now being cut down by a government that talks a good zinger and writes a good media release, but has outdated and ideological obsessions that it can’t even express coherently.
Australia has never been less secure in my lifetime.
