Monday, June 15, 2009

Fair Shake Of The Sauce Bottle On Free Trade

It has been reported that tomorrow’s state budget will include a plan requiring government agencies and state owned corporations to give preference to buying goods and services from Australian companies. It is apparently to be called the “Local Jobs First Plan” and it reflects the view that part of the role of government is to support local business by offering them government contracts where possible. It has the support of unions, and is likely to be seen by the wider community as a positive plan to bolster Australian, and New South Wales jobs. The only problem is that it could also be seen as the beginning of a new era of protectionism which could have undesirable consequences.

As unpopular as free trade is among some quarters, the whole point of free trade is to not only allow Australians to buy foreign goods and services, but also for Australian producers to sell to overseas customers. Without free trade, many of the benefits of our mining and primary industries would be reduced. Without free trade it would be more difficult to sell Australian goods to other countries, and without free trade Australians would pay more for the goods they purchase, including the ones we produce here ourselves.

The downside of free trade, and the reason so many people see it as a threat, is that it can cause significant dislocation of jobs. It can cause downward pressure on pay and conditions as companies compete directly with offshore operations where wages are substantially lower. The idea of a level playing field is a fantasy so long as there are significant differences in living standards between different countries. That’s why the benefits of free trade come at a cost, and if we wish to preserve the Australian way of life it is necessary to find a balance.

While it would be a mistake to try to close the borders and attempt to become completely self sufficient, the idea of protecting Australian jobs by using Australian taxpayers money to buy Australian goods and services rather than imported ones, is a legitimate defence against the economic downturn. Of course, when taxpayers’ money is spent, it is right and proper to expect that it will be spent in a way which delivers value for money. The mistake that sometimes has been made is the assumption that lowest cost equals best value. Common sense should tell us that is not the case, as value depends upon much more than just cost alone.

When it comes to government expenditure, the spending of taxpayers’ money, there is an additional factor. That is the return to the community, in both economic and social terms. It might be cheaper to buy a consignment of firefighters’ uniforms from China, but it may not necessarily be better. Aside from the questions of quality and durability and utility of purpose, there is also the question of where the money goes, where the jobs are, and where the investment is. When you add those considerations into the equation, suddenly those cheap Chinese goods are not quite so cheap.

Despite all of the arguments in favour of free trade, the reality is that the United States is implementing a “buy American” policy to support its economy, and you can bet your bottom dollar that the Chinese government is buying its uniforms and office supplies and such from Chinese companies, so why should Australian governments not put Australian jobs first, and buy Australian goods. I’m sure even Kevin would have to admit that’s a “fair shake of the sauce bottle”.

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