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Protectionism will hinder Australia's economic transition

Economy2016-09-07

As Australia is attempting one of its most significant economic transitions with its ambitious free trade plans, a wave of protectionism in domestic politics however is threatening the agenda.Protectionist attitudes are not just against free trade, but the free flow of capital needed to boost underutilized sectors of Australia's economy, such as agriculture which is on the cusp of a upswing to service Asia's rising middle class.Battling those attitudes, Australia on Wednesday released findings showing foreign investors hold just 13.6 percent of all agricultural land, principally held by the United Kingdom, to help combat the protectionist attitudes."It helps us to make the case because around the world today - and there are elements of this here in Australia - there is a longing to perhaps...to pull the head under the (blanket)," Australian Treasurer Scott Morrison told local broadcaster Sky News."With more than three trillion (Australian dollars) worth of foreign investment in Australia today, we cannot afford to risk our economic future by engaging in protectionism."Foreign investors, generally speaking, are the biggest advocates for free trade as they still have to pay the import tariff in their home market. EXPORT WARThis is leading to an export war with emerging markets. High global production is pressuring farm-gate prices. When coupled with depressed freight rates, Australia is beginning to loose its natural advantage to service the Asian region for its clean, quality produce.A report commissioned by the Australia-China Relations Institute (ACRI) showed Australia's beef exports to China had surged 13-fold between 2011 and 2014 to be its fourth largest export market, however in fiscal 2015, exports to China fell by 28 percent.The drop in Chinese imports is largely due to changing appetites and Australian beef producers restocking following a high slaughter rate due to a prolonged drought, but the dip is allowing new entrant Brazil to challenge Australia's dominance.The export war however is throughout Asia as more markets capitalize on the effects of a more globalized world.Global movements of all agricultural products have increased as the trend toward more free trade continues, increasing competition and forcing producers to become more efficient in a bid to improve the cost to yield ratio.Australia however will always remain a high cost produce due to domestic environmental laws ensuring its clean, green image."We're at the height of what we can feasibly produce with current technologies," Mecardo analyst Andrew Whitelaw, using grains as an example, told Xinhua.Eurasian, South American and African agriculture producers are highly undeveloped to the standards of Australia. Should they receive the right technology, investment and management, they too will further add to global production, weighing prices, and outcompete Australia on cost, Whitelaw said. AUSTRALIA SHOULD FOCUS ON SKILLED WORKFORCEAustralia's relevant strength however relies on its skilled expertise in innovative science and technology, and then selling that to the world's biggest markets.But should the protectionist forces continue, the country would not leverage its preferential access for its high value technical exports.Companies won't reinvest or innovate to come up with the next technological revolution unless there is an incentive, such as an open economy where those who invest in research can reap the benefits."The simple fact is we cannot allow a situation to arise where protectionism erodes our future standard of living and our future prosperity," Australia's Trade Minister Steven Ciobo said after meeting with U.K. officials to further FTA talks, after describing pro-protectionists as the equivalent of those against vaccinations.   (APD)

As Australia is attempting one of its most significant economic transitions with its ambitious free trade plans, a wave of protectionism in domestic politics however is threatening the agenda.

Protectionist attitudes are not just against free trade, but the free flow of capital needed to boost underutilized sectors of Australia's economy, such as agriculture which is on the cusp of a upswing to service Asia's rising middle class.

Battling those attitudes, Australia on Wednesday released findings showing foreign investors hold just 13.6 percent of all agricultural land, principally held by the United Kingdom, to help combat the protectionist attitudes.

"It helps us to make the case because around the world today - and there are elements of this here in Australia - there is a longing to perhaps...to pull the head under the (blanket)," Australian Treasurer Scott Morrison told local broadcaster Sky News.

"With more than three trillion (Australian dollars) worth of foreign investment in Australia today, we cannot afford to risk our economic future by engaging in protectionism."

Foreign investors, generally speaking, are the biggest advocates for free trade as they still have to pay the import tariff in their home market. 

EXPORT WAR

This is leading to an export war with emerging markets. High global production is pressuring farm-gate prices. When coupled with depressed freight rates, Australia is beginning to loose its natural advantage to service the Asian region for its clean, quality produce.

A report commissioned by the Australia-China Relations Institute (ACRI) showed Australia's beef exports to China had surged 13-fold between 2011 and 2014 to be its fourth largest export market, however in fiscal 2015, exports to China fell by 28 percent.

The drop in Chinese imports is largely due to changing appetites and Australian beef producers restocking following a high slaughter rate due to a prolonged drought, but the dip is allowing new entrant Brazil to challenge Australia's dominance.

The export war however is throughout Asia as more markets capitalize on the effects of a more globalized world.

Global movements of all agricultural products have increased as the trend toward more free trade continues, increasing competition and forcing producers to become more efficient in a bid to improve the cost to yield ratio.

Australia however will always remain a high cost produce due to domestic environmental laws ensuring its clean, green image.

"We're at the height of what we can feasibly produce with current technologies," Mecardo analyst Andrew Whitelaw, using grains as an example, told Xinhua.

Eurasian, South American and African agriculture producers are highly undeveloped to the standards of Australia. Should they receive the right technology, investment and management, they too will further add to global production, weighing prices, and outcompete Australia on cost, Whitelaw said. 

AUSTRALIA SHOULD FOCUS ON SKILLED WORKFORCE

Australia's relevant strength however relies on its skilled expertise in innovative science and technology, and then selling that to the world's biggest markets.

But should the protectionist forces continue, the country would not leverage its preferential access for its high value technical exports.

Companies won't reinvest or innovate to come up with the next technological revolution unless there is an incentive, such as an open economy where those who invest in research can reap the benefits.

"The simple fact is we cannot allow a situation to arise where protectionism erodes our future standard of living and our future prosperity," Australia's Trade Minister Steven Ciobo said after meeting with U.K. officials to further FTA talks, after describing pro-protectionists as the equivalent of those against vaccinations.   

(APD)

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