Pitfalls of a Fortress Australia

By Maria Livanos Cattaui

Prosperity for Australia, as for most people on this earth, depends on cooperative arrangements with other countries, not only to develop markets for exports but also to attract foreign investment and the jobs and additional business that come with it. Trade and investment are two sides of the same coin.

On trade, the record is clear. Besides seeking greater market access for its products, Canberra makes common cause with the developing countries. Australia joins them in demanding an end to farm protectionism, so that they too can sell their products in the affluent markets of the industrial world.

Only last month, Prime Minister John Howard put his money where his mouth is by announcing that Australia plans to eliminate all trade tariffs on imports from 50 poor countries.

Even though Australia is an island continent, it is not self-contained, and this provides the rationale for its free trade stance. The Australian government is a commendably high-profile member of the Cairns Group of countries heavily dependent on agricultural exports.

Canberra’s opposition to increased agricultural subsidies in the United States and the European Union’s trade-distorting Common Agricultural Policy commands widespread support from international business. Liberalization of trade in farm products is a make-or-break issue for the World Trade Organization’s Doha development round, whose end-2004 deadline is already agonizingly close.

The WTO reckons that if the Doha round succeeds in halving trade barriers in agriculture and textiles alone, developing countries would gain more than $US 200 billion a year in additional income by 2015.

A hospitable policy towards foreign investors is a natural corollary to your support for freer trade. Yet like many countries, Australia seems to be somewhat schizophrenic in wanting foreign investment but fearing foreign ownership of assets on Australian soil – a recent example being the decision to retain the foreign ownership cap on Qantas.

Accepting foreign ownership of Australian icons can look to some like pawning the family silver, but this reaction is misguided since countries that block foreign investment are the losers in terms of jobs, technology, management skills and the creation of business opportunities.

There is an opportunity for progress right now on improving the investment climate in Australia. Reviews of government policies on compe tition and taxation are in full swing. International business hopes these reviews will solve important problems such as excessively restrictive rules on mergers and takeovers and a tax regime that is unwelcoming towards foreign multinationals.

Government decisions based on these reviews should aim to make Australia a more attractive place for outside investors. Foreign-owned companies should be encouraged to make their views known on what sort of reforms will make a real difference.

Australia’s international stance is especially important at the present time. After the Bali outrage and its toll of innocent young lives, it would be a natural reflex for Australians to allow terrorism to push them into isolationism, to develop a ‘fortress Australia” mentality. Other countries that have been the victims of terror attacks have had the same understandable reaction.

But these reflexes must be resisted for Australia’s own sake. Terrorists are enemies of globalization, of peaceful exchanges among nations. They want to instill suspicion, fear and confrontation in place of trust and international cooperation.

Contrary to the claims of the anti-WTO protesters in Sydney, globalization – the progressive intermeshing of national economies through trade and investment – is a positive fact of 21st century life.

Globalization is a force for peace and stability. Australia, like the rest of us, needs more of it.

Maria Livanos Cattaui is Secretary General of the International Chamber of Commerce. She is in Australia this week for consultations with Australian government and business leaders and will address the National Press Club in Canberra today (Wednesday, 27 November).