Opening up — not shuttering — markets will drive Australia’s post-COVID 19 recovery. Despite this, many still doubt the merits of globalisation.
Globalisation sceptics have been emboldened by the pandemic. They claim it has exposed the overreliance of the Australian economy on foreign markets, and instead demand adopting a ‘Fortress Australia’ mindset.
Trade scepticism is historically and economically ignorant. Australia is a trade-dependent economy that has been enriched by open markets with our neighbours. Withdrawing from globalisation will impoverish us.
We’ve been here before. There’s some parallel between today’s vaccine nationalism — and stockpiling of medical supplies — and World War II’s onshoring production of a suite of necessities.
There may be a justification for some onshoring on the grounds of national security. However, a limited case on the basis of national security is one thing: a more general retreat from the world and market forces is another thing entirely.
We must resist such urges. A more open economy is a more productive one, delivering further gains to our living standards.
In Failure to Converge? The Australia-US Productivity Gap in Long-Run Perspective, Dr Stephen Kirchner argues that the relative openness of the Australian economy over time is an important determinant of productivity —allowing it to import productivity trends from the global frontier represented by the United States.
This is contrary to arguments by anti-globalisation advocates that argue for retreating from global and market forces. Domestic policy can help us improve reap the benefits of globalisation by increasing our levels of productivity. This can be done through red tape and tax reform.
We can emerge from the pandemic with a more free and open economy if we improve our productivity levels. Fortress Australia is no recipe for a prosperous Australia.
Joanne Tran is a contributor to the Centre for Independent Studies.
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