For more than half a century, open trade has helped make Australia more prosperous, dynamic and resilient. Yet around the world, support for openness is fraying. Big economies are turning inward. Tariffs are creeping back. Multilateral institutions are struggling.
At times like this, it's worth reminding ourselves why Australia has done well by keeping our doors open, and why tariffs are rarely the answer.
The case for openness starts with the idea of comparative advantage. Just as most of us don't cut our own hair or fix our own shoes, countries do better when they specialise in what they're relatively good at, and trade for the rest. That's why Australian miners export lithium to Korea, our farmers sell beef to Vietnam, and our universities teach students from across the Indo‑Pacific.
We're a small share of the global economy - just 0.3 per cent of the world's population - so trading with others is essential. Trade supports nearly a third of our economic activity and one in 4 Australian jobs. It keeps prices lower for consumers, encourages innovation, and helps businesses grow to a scale that wouldn't be possible on the domestic market alone.
It wasn't always this way. In the late 1800s, most colonies slapped hefty tariffs on goods such as furniture, musical instruments and carriages. Federation removed internal tariffs, but high external tariffs persisted for decades. Only after World War II did we begin serious cuts, first through global trade agreements, and then on our own.
From Whitlam's across‑the‑board 25 per cent tariff cut in 1973, to the Hawke government's phased reductions in the late 1980s and early 1990s, Australia chose to lower barriers regardless of what others did. The results were clear: more competitive industries, better jobs and stronger links to the region.
Today, we have 18 free trade agreements covering 30 economies, with more on the way. But the case for openness still needs defending. Tariffs may sound like a quick fix, but they come with real costs.
Here are 5 reasons why they're the wrong choice.
First, high tariffs cause disproportionate harm. Just as wind resistance rises with the square of speed, the economic drag rises with the square of the tariff rate. Large tariffs can severely distort investment and production decisions.
Second, tariffs reduce choice. Even small ones create paperwork that can deter importers from offering new products. When the Albanese government scrapped around 500 'nuisance tariffs' on items from walking sticks to crocheted fabrics, we removed red tape without hurting local producers.
Third, retaliating with tariffs only makes things worse. Australia didn't respond in kind when China restricted $20 billion worth of our exports, and we're not doing so in response to new US tariffs. As economist Joan Robinson is said to have put it, just because your trading partner throws rocks in their harbour doesn't mean you should throw rocks in yours.
Fourth, trade is good for workers. Jobs linked to exports pay nearly 9 per cent more on average. Virtually all jobs rely on imported parts and materials. In a modern economy, trade is woven into supply chains. Encouraging trade protects livelihoods.
Fifth, tariffs hit low‑income households hardest. They raise the cost of essentials, shrink markets for our farmers and manufacturers and can ultimately cost jobs. Isolation doesn't protect opportunity; it erodes it.
Openness isn't just about economics. Trade builds trust and cooperation with other nations: relationships we need to tackle global challenges from climate change to tax avoidance.
Australia's prosperity has never come from turning inward. We've thrived by connecting, with markets, with ideas and with people. Trade has made us more competitive. Immigration has made us more dynamic. International cooperation has made us more secure.
Resilience isn't built by walling ourselves off, but by strengthening the networks that help us adapt and recover when shocks come.
The world will keep debating the merits of openness. But for Australia, the verdict is in: trade expands opportunity. Closing ourselves off would shrink it.
