The pandemic, the intensifying geopolitical collisions between the US and China, and the wars in Ukraine and the Middle East are reversing decades of globalisation as Western economies scramble to “onshore,” “re-shore” and “friend-shore” strategic activities.
Some industry policies can be justified if they support sectors which generate strong knowledge spillovers to the domestic economy or drives green innovation, but policies needed to avoid wasteful spending and protectionist measures that could further fragment global trade, the IMF paper said. More open economies – and Australia has a very open, very trade-exposed economy – were less able to complement research and development support with production or demand-side subsidies because they were more integrated in global markets and supply chains.
Despite the massive subsidies, we no longer have a local auto manufacturing sector – just as the tearing down of the tariff walls in the 1980s and 1990s gutted a broader swathe of far less advanced manufacturing industry players – because of the structural disadvantages local manufacturers face. Even the US, which has increased its production volumes thanks to Biden’s subsidies, has a global market share of only about 2 per cent.How are we supposed to compete? Where’s the comparative advantage? Instead of buying solar panels as cheaply as possible from China we’ll dump taxpayer funds into their production to make them appear competitive.