Australian Export Exposure to Foreign Trade Distortions: Evidence from the Global Trade Alert

Given Australia’s significant economic integration into the world trading system, foreign protectionism poses a genuine threat to Australian living standards. While the current US administration’s trade policy has put the spotlight on protectionism, in fact over the past decade there has been sustained resort to trade distortions by many governments.

According to Global Trade Alert (GTA) data, Australian exporters have faced a total of 2,192 new foreign trade distortions since November 2008, when GTA reporting began. In contrast, Australian exporters benefited from 926 foreign trade reforms. Very few of those foreign commercial policy interventions specifically target Australian exports; Australia’s trading interests are harmed frequently by its trading partners’ policy changes, implemented seemingly on a most-favoured-nation basis.

Matching detailed trade data to the foreign trade distortions faced by Australian farmers and manufacturers over the past decade reveals that, as of January 2019, 60% of Australian exports face one or more trade distortions that are still in effect. The scale of foreign protectionism affecting Australia has grown steadily over time. Over a third of Australian goods exports compete against a foreign rival that has received some type of state-provided incentive to export. A sixth of Australian goods exports compete in the home markets of firms that have received some type of government subsidy for their domestic operations.

Another sixth of Australian goods exports face continuing import tariff increases. Significant shares of Australian goods exports today face non-automatic import licences, import quotas, and foreign pricecontrol measures. These statistics lay bare the multilateral trading system’s deterioration over the past decade and its failure to shield Australian farmers and manufacturers from foreign protectionism. They also point to potential trade policy priorities for the Australian Government. Taking account of foreign measures harming Australian service providers, although not the focus here, would add to this unsettling picture.

Australia’s G20 partners differ markedly in their scale of protectionism erected against Australian exports. Over three-quarters of Australian goods exports to buyers in Argentina, China, India, and Indonesia do not compete on a level playing field. In contrast, less than 10% of Australian goods exports to Brazil, Japan, Mexico, South Africa and Turkey face locally imposed trade distortions that are still in effect. Given that so many Australian goods face multiple trade distortions when competing in foreign markets, the removal of all trade distortions imposed over the past decade by any one trading partner would have minimal impact, reducing the total share of Australian exports facing trade distortions by less than eight percentage points. Such findings should temper expectations as to what bilateral Australian trade policy can accomplish. First-order initiatives to reverse the protectionism facing Australian commercial interests must be focused on Geneva.

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The views expressed here are the author’s, and may not necessarily represent the views of the Institute for International Trade.

Tagged in World Trade System, Policy Brief

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