Column in The Australian - Labor Must Resist Economic Populism

 Published in The Weekend Australian on 26.10.13

As Labor begins the task of charting a course back to government it now has, as it did following the election defeat of 1996, a choice of two roads. The high road of developing responsible policies in the national interest always looks steep and arduous, especially when the low road of political populism beckons, littered with the cheap allure of support by interest groups opposed to reform.

Labor has proved itself in government to be the party of competition, but in opposition it has succumbed to the enticements of vested interests seeking protection from competition from imports and from business rivals here in Australia.

It was the Whitlam government that reduced tariffs across the board, the first post-war Australian government to do so. And it was that same Labor government that enacted Australia’s first competition laws, the Trade Practices Act 1974.

Further reductions in protection had to await the election of the Hawke government in 1983, which fashioned Australia’s open, competitive economy, abandoning inward-looking protectionism in favour of reaching out to Asia. To intensify competition within Australia, Prime Minister Keating implemented national competition policy with the states and territories.

But by 1996, after 13 years of Labor rule, the Australian people were said to be suffering reform fatigue. Incoming Prime Minister John Howard promised to make them feel relaxed and comfortable.

Labor in opposition, informed by the same polling as the Howard government, abruptly repudiated the Hawke-Keating open, competitive model, pressuring the new government to freeze tariff reductions that Labor had legislated. Howard buckled under the pressure. Not content with its populist victory, the Labor opposition then railed against Keating’s national competition policy.

Of the four Labor opposition leaders between 1996 and 2007, only Mark Latham was strongly committed to the Hawke-Keating pro-competitive reforms.

It took 15 years from the 1996 election defeat for a Labor Prime Minister to stand in the parliament and unreservedly advocate free and open trade. At the despatch box, Prime Minister Gillard praised the political courage and reforming zeal of the Hawke and Keating who, in the teeth of the 1991 recession, not only pressed ahead with tariff reductions, they accelerated them.

These were not mere words of praise. The Gillard government took the lead internationally on further global trade liberalisation. Through the G20, APEC and the East Asia Summit, Gillard successfully championed new ways to kick-start stalled global trade negotiations, culminating in acceptance of her proposal by the World Trade Organization in late-2011. Under this so-called new pathways approach, which I developed on a long, frustrating flight to Geneva, the various agenda items in the global trade talks would be pursued separately rather than all together, each being brought to conclusion as they were ready instead of as a single (but elusive) undertaking.

There is a reasonable chance that the biennial ministerial meeting of the World Trade Organization in Bali in December will agree on a large down payment on the Gillard initiative.

At the World Trade Organization, Australia and the United States are co-chairing a group of 50 countries representing 70 per cent of the global economy that are negotiating an agreement on trade in services. In a major, positive turn of events, China has now asked to join the negotiations.

On Australia’s behalf I was able to broker a landmark deal at APEC to limit tariffs to 5 per cent on 54 goods used to protect the environment, such as wind turbines and photovoltaic cells.

Add the free-trade agreement with the ASEAN countries and New Zealand and the Malaysia-Australia free-trade agreement, and it’s clear Labor has a strong record in government of promoting competition through trade liberalisation. Negotiations for trade deals with Japan, Korea and China are at an advanced stage.

Back in Australia it was the Labor government that replaced the out-dated Trade Practices Act with a modern Australian Competition and Consumer Act, implementing policies to protect competition from business while rejecting populist proposals to protect business from competition.

Having re-connected with the Hawke-Keating open, competitive economy, Labor needs to stay connected and resist demands to return to Fortress Australia.

That means saying no to those farming groups that want new restrictions on food imports. It means saying no to the Coalition government’s policy of reversing the onus of proof in anti-dumping cases in clear violation of world trading rules to which Australia has agreed. And it means saying no to business groups, small and large, that demand protection from competition under the ruse of fair competition.

Australia has benefited enormously from pro-competitive reforms, now enjoying its 22nd year of recession-free economic growth. This is no time for turning, no matter how enticing the offers of political support might be from vested interests seeking a more comfortable existence.