OECD boss slams China and Trump for ‘lost trust’ in open markets and rules-based trade
OECD boss Mathias Cormann has slammed China and taken a veiled swipe at Donald Trump for ‘lost trust’ in global trade, saying Australia must invest in critical minerals and AI.
The Australian boss of the OECD has slammed China and taken a veiled swipe at Donald Trump for “lost trust” in global trade, saying Australia has to respond by investing in critical minerals and AI and reforming its tax system to strengthen business investment.
Mathias Cormann – the former Australian finance minister turned secretary-general of the Paris-based international economics body – said the challenge for all economies worldwide was to “rebuild trust in open markets and rules-based trade”.
In a rebuke of American tariffs and China’s government-backed manipulation in key markets such as critical mineral and semiconductors, Mr Cormann said such moves were “causing increases in costs” and countries had to “tackle unfair trade practices” to boost “economic security and supply chain resilience”.
“There has been a loss of faith in the ability of our global trading system to discipline or prevent the increased incidence over recent decades of non-market trade distortions. China is the largest and most pervasive provider of industrial subsidies in the world,” Mr Cormann told the Australian Chamber of Commerce and Industry in Melbourne on Monday.
“Steel firms in China, on average, receive 10 times the level of support provided to OECD competitors. These subsidies have enabled Chinese firms to make significant gains in global market share at the expense of OECD-based firms, especially in solar photovoltaic cells, semiconductors, shipbuilding and steel,” he said. “The impacts of this loss of market share have been felt around the world, including in Australia.”
In response, it was “even more important” that Australia, as a trade-exposed economy, took action to respond to this market manipulation, he said. Tax reform and critical minerals investment were high priorities.
“Export restrictions on critical raw materials are on the rise, having increased more than fivefold since 2009,” Mr Cormann said.
“Global demand for these minerals is set to quadruple over the next two decades.
“Australia will play an important role in meeting this demand, and there is a range of new opportunities to be seized, including further developing midstream refining and processing capacity, which is relatively concentrated in global supply chains.
“Australia and like-minded economies around the world need to seize the opportunities.”
Mr Cormann indicated his support for Australian departmental reports that suggest key requirements include “unlocking new infrastructure investment to better connect production hubs to domestic and global markets”.
One key area that could help boost this investment is tax change. “There also are other policy measures that could improve economic dynamism, including encouraging increased investment through a more growth-friendly and internationally competitive tax system,” he said.
“We need to continue to advance global tax co-operation.”
Mr Cormann also suggested the Albanese government pursue policy reforms to boost “workforce participation”, especially among “older workers”, in what may have been a hint at increasing the retirement age or shaping tax rates.
Artificial intelligence was another area Australia should be careful not to hinder, he said.
“Australia needs to further boost adoption by encouraging competitive AI ecosystems that offer quality services at affordable prices,” Mr Cormann added. “No economy can afford to ignore the fact that productivity growth is set to be shaped by new advances in AI.”
During a question and answer session with ACCI chief executive Andrew Mckellar, Mr Cormann said there were “genuine and legitimate concerns about how the global rules-based trading system has been operating, or not been operating, in more recent times”.
“The key point here is not to throw the baby out with the bathwater, to find ways to make international trade arrangements fairer and function better, to find ways to improve economic security and supply chain resilience, and tackle unfair trade practices in a way that preserves the economic benefits of open markets and rules-based trade, not go into ultimately a set of policy arrangements that will lead to lower growth, higher costs and lower incomes,” he said.
“We will continue to prosecute the argument in favour of open markets and rules-based trade. We will also seek to support governments engaged in ways to achieve that. In the end, if we can’t find the right solutions, public support for open markets and global trade..will continue to reduce.”
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