Australia’s economy could face a potential bill of $1 trillion (£5.6 billion) over the next 30 years to protect its farming industry from competitors.
The mind-blowing figure comes from a research paper released by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
A key finding was that an interconnected open global trading system with global supply chains is better for Australian agriculture, the broader Australian economy and the world in terms of real gross domestic product, compared to a more localised world despite the risks of global supply shocks.
Adopting localised policies as insurance against adverse shocks would come at a long-term cost to the Australian economy of around $1 trillion, it warned.
Localised or protectionist policies would include higher tariffs, higher subsidies to local industries and reduced substitution of domestic products for imports, the paper says.
Dr Jared Greenville, ABARES’ acting executive director, said domestic protections like trade barriers or subsidies might sound appealing “but they actually make economies weaker and create longer run costs for the economy.
“There is a cost to moving to a protected economy, and it also comes at the expense of growth,” he said.
“Not only does protectionism prohibit growth and cost the government money, we’ve found that it doesn’t really protect that much.
“For Australia, protectionist measures would only marginally reduce the impact on GDP in a pandemic-like event, but they have the potential to cost the economy $1 trillion over 30 years,” Dr Greenville said.
He said discussions regarding localising supply chains or ensuring local reserves of some products should be assessed on a case-by-case basis.
“Growing local supply chains and production should focus on enhancing competitiveness with protectionist trade and domestic support policies avoided,” he said.
“Interestingly, Australia’s agriculture sector experienced fewer disruptions than other sectors during the Covid-19 pandemic. People still need to eat.
“Australia’s agriculture sector is export-orientated and heavily exposed to international markets, exporting around 70 per cent of agricultural produce.”
Dr Greenville said for Australia’s producers, exposure to global value chains proved to be better for market resilience.