With Trade Barriers Reappearing, G20 Leaders Must Get Serious

02 November 2011

The Age

By John Denton
Business Council of Australia Global Engagement Task Force

The meeting of G20 leaders in France this week comes at a critical time for international trade and investment. While the global economy – buffeted by concerns over sovereign debt in Europe – needs the benefit of trade liberalisation to boost business confidence, the World Trade Organization negotiations appear to be going backwards.

A new way to break the impasse was outlined last month by Trade Minister Craig Emerson. It received some helpful momentum at the Commonwealth Business Forum with the Prime Minister’s commitment to making freer trade a priority at the G20. The Australian approach calls for governments to focus on where there is common ground in areas such as services and trade facilitation. Where there is agreement, trade barriers could be lifted between these governments now, rather than waiting for countries holding up the process.

Such an approach has worked in past. In the late 1990s, governments wanting to remove barriers to information and communications technology services and financial services worked together on liberalisation in those particular sectors.

But such an approach will only work now if enough government leaders are prepared to back the efforts of their trade ministers.

As the principal international body for economic policy, the G20 has a particular responsibility to set an example. G20 leaders have to step up and stop treating Doha as business as usual.

Some G20 countries have actually raised tariff barriers, export taxes on raw materials and restrictions on public procurement, among other actions, to protect their national industries. Governments have claimed that these measures were designed only as temporary safeguards. Yet tariffs, non-tariff barriers and other restrictions have been maintained, preventing trade volumes from returning to their pre-2008 levels.

Recent analysis shows that a new generation of non-tariff barriers, more difficult to perceive and to tackle, has emerged, including discriminatory standards, industry-specific market-distorting subsidies, regulatory distortions and other restrictions that prevent or inhibit effective trade and investment flows.

If we don’t continue to actively reduce such barriers, we risk missing out on new opportunities that come from trade and investment between nations.

Pursuing more open trade and investment is hard, but in the end, the nations that make the hard decisions benefit from the results. The Australian community has gained far more than it has lost from opening up the economy to greater international trade and investment.

A study undertaken by the Centre for International Economics in 2009 found that Australia’s gross domestic product was between 2.5 per cent and 3.5 per cent higher than it would otherwise have been due to the benefits of trade liberalisation. As a result, the incomes of Australians are higher and the average family enjoys a real income that is up to $3900 a year higher than what it might otherwise have been.

Competitive disciplines keep participants on their toes. Local businesses are compelled to continually improve their performance, become more efficient and pursue best practice and innovation to meet international competition. Competitive markets give citizens greater choice of products at lower prices. Open markets also mean that overseas investors can have greater confidence in investing in Australia.

In turn, these benefits enable ongoing economic strength and the generation of new jobs.

The Business Council of Australia believes that the most effective and sustainable actions that governments can take to boost global economic growth involve removing or reducing barriers to international trade and investment. The G20 has a valuable role to play and must play it.



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