Andrew Robb urges Australia to not throw tariffs advantage out the window

Former trade and investment minister Andrew Robb says the foundations of the global trading system are facing their most significant challenge since 1945.

Former trade minister Andrew Robb has urged Australia to stand on principle over tariffs. Picture: Pema Tamang Pakhrin

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Former trade and investment minister Andrew Robb says America has led much of the West over the last decade into “closing up and regressing to massive subsidies, tariffs, and non-tariff barriers,” warning that Donald Trump would take America to an even higher level of protectionism.

Mr Robb – who successfully negotiated Australia’s free trade agreements with China, Korea and Japan – made the comments in a speech at Sydney University in which he urged Australia to stand on principle and resist “throwing the law of comparative advantage out the window.”

He said the emerging economies of India with 1.4 billion people and Southeast Asia with 700 million people stood to be the key drivers of global growth in coming decades if they continued to open up their economies.

With the US facing the threat of retaliatory tariffs, Mr Robb said the foundations of the global trading system were facing their most significant challenge since the post-World War Two era and that the efficient allocation of resources across the Western world faced the prospect of massive damage – something that would set back standards of living.

He said the three pillars underpinning the era of globalisation – a common set of trading and investment rules; acceptance of the law of comparative advantage and open borders involving the removal of protections – were now imperilled.

The warning came as Canada’s former finance minister and key contender to succeed Justin Trudeau as prime minister, Chrystia Freeland, made an appeal for other nations affected by Mr Trump’s proposed US steel and aluminium tariffs to “impose dollar-for-dollar retaliation against America” and “one hundred per cent tariffs on Teslas.”

She said the proposed “retaliation list should be published immediately to allow for maximum pressure on the administration from the American industries and workers we will target.”

Writing in the New York Times, Ms Freeland said the US tariffs were a “turning point for Canada and the world because they suggest the United States is making a historic change in its understanding of who its friends are and, indeed, of whether it is interested in having any friends at all.”

If America pursued its trade war, Ms Freeland said: “All of us will have no choice but to seek other friends, wherever we can find them.”

In his address to the RCEP (Regional Comprehensive Economic Partnership) Business Forum at the University of Sydney Business School on February 11, Mr Robb defended Australia’s free trade agreement with China, signed in 2015, as evidence that “that the opening up of an economy still works.”

“In that ChAFTA agreement 100 per cent of exports from China to Australia now face zero Australian tariffs, and 99 per cent of Australian exports to China face zero China tariffs. Notwithstanding the impact of Covid and the illegal sanctions placed by China on a number of Australian products for a period of time, the total value of trade between our two countries was $98bn in 2015 when ChAFTA was signed and today, 10 years later, the total value of trade is $330bn – from $98bn to $330bn in 10 years,” he said.

Mr Robb said the world was witnessing “much of the West closing up and regressing to massive subsidies, tariffs and non-tariff barriers – unbelievably largely led by the US.”

This trend was made clear when both the Republican and Democratic parties rejected the 2016 CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) free trade agreement despite the US having led and successfully concluded the negotiations.

“The Democrats subsequently introduced massive subsidies which are no different than a tariff in distorting trade and investment flows massively, with all the associated serious negative impacts on competitive opportunities, exchange rates, capital markets and endless supply chain disruption,” he said.

“Australia has been impacted along with the rest of the world, as billions of dollars have been sucked out of so many countries and into the US chasing the subsidies.”

Mr Robb said the outlook for the next four years was dire, declaring that this “massive protectionist move by the world’s biggest economy, and strongest advocate of the 3 pillars (of globalisation) for nearly 70 years, has been taken to yet a higher level of trade and investment distortion by President Trump who campaigned as the Tariff Man.”

“All the while the ASEAN countries, representing over 700 million people, and India with a population of 1.4 billion people, are dramatically opening up, and following the 3 pillar rules of recent trade agreements such as RCEP, CPTPP, Australian India Free Trade Agreement and many other bilateral such agreements,” he said. “And ironically, and very fortuitously, we are seeing these Asian economies, who now make up 60 per cent of the global population, opening up, and as a consequence they are delivering growth, jobs and prosperity far beyond what these economies have ever experienced.”

As a consequence, Mr Robb concluded that world growth over much of the next few decades would be driven by Asian economies and appealed for Australia to resist any retreat to protectionism.

“At a time when the unambiguous successes and gains of the last 70 years are under threat, it is time to stand up, and as Thomas Jefferson once so aptly said, and I quote: ‘In matters of style swim with the current, in matters of principle stand like a rock’.”