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Trends in Trade Policies: What do they mean for Australia?

Commission Research Paper


International trade intensity has started to decline following decades of steady rises. Increased resort to protectionist policies is one probable cause. There is a particular risk that the United States will shift away from trade liberalisation. And it is possible to envisage ‘tit for tat’ responses escalating, with detrimental impacts on trade and hence economic performance extending well beyond the initial protagonists.

The impact of such a shift would be magnified if it results in reconsideration of foreign investment decisions across nations. As such, even apparently localised trade limiting measures could have a marked impact on global trade, and ultimately economic growth.

Recent Australian trade policy has emphasised bilateral and regional negotiation. Although the Trans Pacific Partnership is unlikely to be ratified by the United States, these possible international shifts have implications for Australia’s position on trade policy including for the new generation of trade agreements in the pipeline.

Australia has been a clear beneficiary of multilateral and unilateral trade liberalisation. But awareness of the benefits of such policies amongst the Australian population should not be presumed in an environment where global leaders propose to favour local supply regardless of risk or collateral damage.

Objective of the study

The objective of the project is to assess the impacts on Australia of possible international shifts in trade policy towards a more protectionist stance and implications this has for Australia’s trade policy. In that context, a reminder of how much we as a nation have benefited from trade liberalisation would be timely.

Key research questions include:

  • How might current trends in trade policy evolve? Would Australia’s trade with China, the United States and other countries be adversely affected? Would there be opportunities from international shifts in trade policy?
  • What are the likely impacts on foreign investment for a nation with a strong dependence on foreign capital such as Australia? Are impediments to outward investment by Australian firms likely to increase?
  • What would these shifts mean for how Australia should respond, frame and conduct its trade policy? Would a strategic rethink be required for the trade agreements currently under negotiation and for the role Australia might play as a global citizen promoting trade liberalisation?

In pursuing this objective, the research project will use a GTAP-type model to analyse the impact of different policy positions.

The study aims to make a timely contribution to Australian debates about trade policy — providing a reminder of how much we have historically gained from an environment supportive of liberalisation, as well as a consideration of our exposures in a new landscape of trade agreements.

Expected release

Mid‑July 2017


Lou Will 03 9653 2224