Turnbull’s Australia: Tanking while world trade is booming

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Prime Minister Turnbull and Minister for Trade, Tourism and Investment Ciobo

Thanks to the Coalition's policies and foreign trade agreements, Australia’s trade is failing while global trade is booming, writes Alan Austin.

JUST TWO YEARS AGO, Australia had a vibrant export industry in power-generating equipment.

Annual sales abroad for the decade to 2015 averaged close to a billion dollars.

In just the last two years, that has declined by almost a quarter. Turnbull has terrible troubles with trade.

Australia has just been marked down further on its trade performance by the influential conservative U.S.-based research organisation Heritage Foundation. Australia’s ranking on trade freedom fell again in 2018 to 51st place in the world. That’s down from 48th place last year and 39th in 2013.

This negative assessment is consistent with other indicators, showing trade performance now lags the rest of the world disturbingly.

Australia’s trade is failing while global trade is booming. The Baltic Dry index – based on global shipping data – reached the highest level last month since January 2014.

More than 40 countries now enjoy record or near-record export volumes. These include Canada, China, France, Germany, Hong Kong, Italy, Malaysia, Mexico, the Netherlands, Singapore, South Africa, Spain, Sweden, Switzerland and the USA.

A recent major report by the International Monetary Fund confirmed that in 2017: 

' ... the global pickup in activity that started in the second half of 2016 gained further momentum.'

It projected further trade expansion in 2018:

' ... supported by … a benign global financial environment and a recovery in advanced economies.'

So these are boom times for trade. But not for Australia. The latest numbers from the Australian Bureau of Statistics (ABS) show Australia’s trade balance has declined eight times month-on-month in the last eleven months. The balance moved into deficit in October after an impressive streak of ten trade surpluses in the 11 months from November 2016 to September 2017.

Australia has now gone from a strong trade surplus of $4.28 billion in December 2016 to a deficit of $302 million last October. The deficit deepened in November to $628 million.

Okay, that is not a deep slump in historic terms, but it contrasts starkly with experience elsewhere. Only three economies in the world have gone from steady trade surplus to a significant run of deficits in the last year — Argentina, Venezuela and Australia.

So the Heritage Foundation’s downgrading of Australia’s trade freedom confirms other assessments.

Early Heritage reports, from the late 1990s onwards, rated Australia poorly on protectionism.

The 2006 report claimed that Australia’s non-tariff barriers included

' ... extremely stringent … sanitary and phytosanitary measures, resulting in restrictions and prohibitions on imports of many agricultural products.'

In 2007, under a new scoring system, Australia ranked 45th in the world.

That year’s report noted: 

' ... the government implements a number of non-tariff barriers that impede and raise the cost of trade. These include … support programs for agriculture and manufacturing products, and commodity boards.'

By 2010, Australia’s global rank had lifted marginally to 44th. The report identified continuing import restrictions and tough quarantine and other trade barriers. But it noted approvingly that exports of bulk wheat had been liberalised.

In 2012, Australia ranked equal 38th in the world, the highest level attained. Not great. But better than 45th. That year’s report affirmed that 'Australia strongly backs the dismantlement of trade restrictions. Foreign and domestic investors receive equal treatment, but foreign investments above a certain threshold may be screened'.

The rank slipped one place to 39th in 2013, but with an unchanged score, as other countries rose and fell.

In 2014, Australia slipped to 40th in the world, then down to 43rd in 2015, but back up to 40th in 2016. No specific reasons were identified in the reports, so these may just be the outcomes of other countries moving up and down.

In 2017, Australia plummeted to equal 48th in the world, and a lowly 29th out of the 35 developed countries comprising the Organisation for Economic Cooperation and Development. Last year’s analysis noted that Australia’s tariffs were still high and 'regulations impede agricultural trade'.

Why Australia tumbled in 2018 to ranking equal 51st in the world we may soon discover. That analysis will appear in the full Heritage report on economic freedom due out later this month.

This dramatic tumble in the ranking – from 39th in 2013 to 51st now – together with the data from the ABS and elsewhere, vindicate concerns expressed since the Coalition came to office, that the trade treaties negotiated by former Trade Minister Andrew Robb were excessively favourable to other countries at Australia’s expense.

These concerns were exacerbated when Robb accepted a job with the Government of China five minutes after resigning as trade minister. It has since emerged that Robb’s position with China might not, in fact, be a real job after all.

Looking at the trajectories of the trade balance since Steven Ciobo replaced Robb, in February 2016, there is no evidence he is performing any better.

This is not only disastrous for Australia’s power-generating machinery industry. This is bad for all Australians.

You can follow Alan Austin on Twitter @AlanAustin001.

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