Should Australia Increase Tariffs To Remove Trade Imbalances?

When I came to Australia in 1980, it was a high-tariff country. Also, at that time, Australia had homegrown industries: car manufacturing, white goods, and even televisions. However, these items were costly. I can remember the cost of something like a long-distance call being prohibitive.

Successive governments decided to lower tariffs and trade barriers. While Australia still has some tariffs with some countries, it also has free trade with many others. Trade barriers have been eroded. Of course, we’ve seen the effect, with the loss of manufacturing industries being the main result. We may bemoan the fact that Australia doesn’t make anything but sells resources to others, especially China. So, we need to look at some facts and the real story.

If I have something that you want, and another person has something I like, should I inhibit the exchange of goods by taxing those goods? Would that be more efficient or less efficient? If the individual can provide that item at a lower price, is that more efficient or less efficient? So, the people in the Trump administration promoting tariffs, even on countries with which America has a trade surplus, are not acting rationally.

Some people believe we can go back to the way things were before. I think back to the 1970s. We were using typewriters. There was no IT industry, computer programmers, software developers, etc. Making an international money transfer involved paperwork at the bank, which would take days for the transfer to occur. We also had less comfort, drove fewer safe cars, and had more inefficiencies that restrained growth and development. It’s so evident when we look at the growth in Australia’s economy over the decades.

In 1990, Australia’s GDP was $311 billion. In 2023, it was $1.72 trillion. The growth has been exponential.

Source: Macrotrends

Australia has also been running a trade surplus with the rest of the world for many years. This is because many nations demand Australian resources, especially developing countries like China and India, which have seen tremendous growth.

Meanwhile, Australians have been in demand for technological gadgets from many Asian countries that produce them at an affordable price. We also like to drive good-quality cars with bells and whistles; many components are manufactured in China. Australia, in fact, has a two-to-one trade surplus with China. Should China put tariffs on Australian goods?

Vietnam achieved a trade surplus with Australia for the first time in 2024. The country predominantly exports machinery with spare parts, mobile phones and their components, textiles and garments. Should Australia now put tariffs on Vietnamese goods, and to what end?

We can't tweak tariffs so that everyone has an exact trade balance, and when it goes out of balance, we can't tweak the tariffs again. All it does is create uncertainty in markets, leading to the masses suffering, not the wealthy.

Then there is the illusion that somehow, in the West, we can return to the manufacturing of the 1950s and 60s. China is a high-tech manufacturing powerhouse. Thanks to advanced robotics and AI, they've started building "dark factories," which can run day and night without humans. In fact, the lights don't even need to be on, hence the term dark. The number of robots that China has installed is more than the following four countries combined, including the USA.

Thinking that significant manufacturing will return to Australia or America is fanciful. China dominates and will continue to do so in the foreseeable future, and there are no factory jobs of the 1950s and 1960s available. Even if we could build major factories to employ people, the people would not be trained for the new AI future. China is at the top of the ladder in this area. 

In 10 days, I will be in Japan, where I will experience the Shinkansen, a bullet train that travels between Tokyo and Kyoto. 

This has been in operation since the 1960s, and Japan has many more as a regular feature of transportation. Several other countries, including China, France, and Spain, also have bullet trains. China's newest is the fastest globally, zooming along at 300mph. Meanwhile, America had to scrap the development of a bullet train in California. Then there is another major issue to consider–pollution.

I don't ascribe to artificial climate change hysteria. Still, I am concerned about land and air pollution. Those who obsess about carbon emissions and how a country like Australia needs to get to net zero take little account of countries like China or India, which are polluting unrestrained. We've seen images of people in Bejing wearing masks to protect themselves from particulate matter in air laden with many pollutants.

Those who want a re-industrialization would also say, "Not in my backyard." So we've merely exported pollution, for the most part, to Asia. That is certainly beneficial from a health standpoint for Americans or Australians but not for Asians. Cities heavily industrialized in the 50s, like Pittsburgh, Detroit, Toledo and Cleveland, are so much cleaner. Who can forget the Love Canal disaster of the 70s, which was a toxic dumping ground for chemicals that resulted in death and sickness?

While today, we may have regulations that some consider onerous, we are more aware of not allowing industries with toxic chemicals to proliferate in our communities. The toxic internal pollution committed by the pharmaceutical industry is another story. The cost of complying with regulations in countries like Australia and America makes establishing new industries much more difficult.

In the same way that each of us has had to adapt to the technological revolution with the use of computers, the internet, AI, and the ubiquitousness of smartphone technology, our country must look ahead, not backward. We can't go back. The Chinese and others in Southeast Asia's dynamism are looking ahead to overtake us. The myopic vision of ad hoc tariffs will not move us forward.