Labor finds its inner Donald Trump

Shorten adopts the talk of Trump.
Shorten adopts the talk of Trump. Nic Walker
by The Australian Financial Review

So anxious is Bill Shorten to distance Labor from the "barking mad" policies of Donald Trump that he has adopted the Republican President-elect's own wilder protectionist rhetoric. The Labor leader must figure that protectionism is the way to hold together his party's coalition of blue-collar unionists (who in the US were attracted to Mr Trump's dismissal of political correctness) and Labor's left-green progressives (who are at the vanguard of such cultural correctness). But both Labor's wings – along with the Greens and Pauline Hanson – can agree on erecting barriers to international trade in the name of protecting Aussie jobs. "My party will heed the lessons of Detroit, Michigan, of Ohio and Pennsylvania," Mr Shorten vows of the rust-belt states that swung to Mr Trump. "We will buy Australian, build Australian, make in Australia and employ Australians." And now he caps this off by demonising 457 work visas for undercutting Aussie wages and taking Aussie jobs, even though the number of such visas has fallen by one-third over the past few years.

It is blatant opportunism from the leader of a party that created Australia's modern prosperity by dismantling generations of industry protection – and by pioneering trade liberalisation in the Asia Pacific. It is why Australia's greatest Labor Treasurer, Paul Keating, repeats his complaint that his party has abandoned the aspirational class prosperity that it helped created from its reforms of the 1980s and 90s.

First, as Mr Shorten would know, protectionism does not work here, in the US, or anywhere. It temporarily shelters old jobs at the expense of new jobs. Building import tariff walls in the US will not revive declining industries. The tariff wall that Labor dismantled in the 1980s and '90s did not make our car industry competitive. Instead it pushed up the price of cars for other Australian workers. And it created the moral hazard of protecting trade unions that refused to bargain to save their members' jobs, such as at Toyota. Likewise limiting 457 visas in the name of protecting Australian workers would only stop companies from importing extra skills, and mostly professional skills, in order to compete for business.

Second, Australia is not the US. Unlike in the US, Australia has gotten immigration back under control by securing its borders. And much of the protectionist ire in the US is directed at Chinese manufacturing imports. But Australian workers have mostly benefited from China's economic rise because Australia supplies the raw materials for its blast furnaces. So, unusually among high-income economies, Australia runs a large trade surplus with the world's biggest manufacturing exporter. Australian wages did not stagnate under the weight of Chinese competition. Instead, the mining boom boosted household incomes across the country. As the mining investment boom is receding, it is being replaced by services. But Labor wants to adopt Trumpism just when there are such new opportunities to supply China's growing middle class consumers. It is a shame that Mr Trump will dump US support for Barack Obama's Trans Pacific Partnership free trade deal. But that will only intensify discussion on the China-led Regional Comprehensive Economic Partnership during the APEC summit at the end of this week.

Mr Shorten's protectionist rhetoric is more of the faux fairness campaign that has been politically effective but would be counter-productive in the real world. The Turnbull government must respond, not by following Labor's lead, but by sharpening the sort of economic growth agenda needed to generate the jobs and wages that Labor's Trump-lite policies could not deliver. That includes fixing Australia's high-cost energy policies that have produced Labor crocodile tears for workers in Victoria's LaTrobe Valley who will lose their jobs thanks in part to the state Labor government's fantasy renewable energy targets. And it would include pressing home the disadvantage that would face Australian companies – the ones that employ workers – if President Trump follows the UK in cutting America's corporate tax rate.