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“APEC says No Local?”

23 July, 2009

Both NSW government and unions could be forgiven for calling hypocrisy. The NSW government has come under fire since it launched its Buy Local First policy in June – an effort to ‘help out’ smaller business during the economic downturn – while nations such as the US blatantly apply their own versions of ‘buy local’ policies.

But despite its non-binding nature, the decision (or more of a statement? a gesture?) reached at the APEC Ministerial Summit should be applauded, particularly given that nations such as Thailand have led the call for the larger nations such as the US and China to refrain from implementing protectionist measures that may impede their firms’ ability to export (See Forbes and Xinhua). Of course, many export-led economies in East Asia have been suffering primarily because of the massive drop in export demand from the US and Europe, and governments are right to fear that ‘buy local’ policies will make the situation worse.

The Rudd government should be credited with sticking to their guns in opposing ‘buy local’ schemes back in Australia, although the NSW government’s desire to push ahead with the scheme highlights the problems in coordinating trade policy where regional jurisdictions still control sizeable budgets. This is even more the case in China (see articles in the Financial Times and the [Asian] Wall Street Journal), where the decentralised political structure places considerable power in the hands of provincial governments. So while trade retaliation from China is less likely than Treasurer Swan suggests, the raising of trade barriers is certainly concerning, and the government should be emphasising the dangers that an increase in protectionism poses both to Australia and the global economy.

In Australia, the test may come down to whether the Federal goverment can convince the NSW unions that they are doing enough to provide “job stability” by helping local business.

UPDATE

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