How to lower living standards and perpetuate poverty

If the policies proposed in platforms of the Greens were implemented, living standards in Australia would fall and developing countries would be denied opportunities to raise living standards and reduce poverty.

The effect in Australia would be slower economic growth. The policies would divert investment into industries with unproven economic viability; reduce production of commercially viable products for export; and surrender rights for Australian producers to export without restriction into global markets. This would reduce output from manufacturing and resource industries and reduce exports.

The changes proposed for international trade would undermine the system of open global markets established after World War two on which the fastest increase in global prosperity in recorded history has been based. It would deny the one billion people still living in poverty the opportunity billions have already taken to raise living standards by trading into open global economy.

This policy will also lead to trade coercion and bullying of the developing countries for whom the policy professes support. The bill to ban illegal logging which the Gillard government introduced into the Senate in April 2011 and which the Greens support is a prime example.

The purported aim of the anti-logging bill is to prevent illegal logging in developing countries. Green groups have been lobbying for such a measure for several years. This measure will have virtually no impact on illegal logging outside Australia. It will impede imports of competitively priced timber and timber products from developing countries, thereby reducing opportunities for developing countries to build wealth on trade and reduce the competitiveness of the Australian timber industry.

The Greens policies on global economics are contradictory and lack coherence.

The policies require Australia to withdraw from existing Free trade Agreements (two of which give favourable access to Australia's markets – to Thailand and the nations of the South Pacific) as well as from negotiations to forge agreements with china, Malaysia, Indonesia and India, all of which would benefit Australian exporters.

The policies require Australia instead only to participate in multilateral trade agreements, yet requires that the only multilateral trade agreement which exists, via the World Trade Organisation (WTO), be radically reformed or abolished. The obligation to join only multilateral agreements is qualified, "unless a bilateral agreement is favourable to a developing country."

These policies demonstrate ignorance of the economics of international trade and of the purpose, intent and impact of international trade agreements. If implemented, they would leave an international impression that the Australian government did not understand how trade agreements work. They would reduce Australia's trade and that of its trading partners.

The policies set goals, which include, inter alia, securing a "decent standard of living for all" and "eradication of poverty." Realising these goals is impeded by the principle in the policy that "economic development must be compatible with, and subservient to, ecological sustainability."

The global consensus over the relationship between measures to increase economic growth and measures to protect the environment is laid down in the agreements reached at the UN RIO Earth Summit in 2002. They state that economic growth and environmental sustainability need to go hand in hand, with one not subordinating the other.

Subordinating economic development to ecological sustainability would retard both economic growth and improvement of environmental protection.

There is a widely accepted proposition that explains the logic of this. Before environmental standards rise, a certain level of prosperity needs to be established. This reflects common sense. It costs money to protect the environment. This explains why the greatest despoilment of the environment occurs in poor countries.

These countries need first to generate the economic growth to create the wealth required to ameliorate the environmental pollution, which fosters disease and reduces life spans. This is the impact of polluted water and air and the accretion of solid waste. In this case, clearly, economic growth needs to precede management of the environment.

Even after that stage of economic development is reached, developing countries still cannot afford policies that subordinate economic growth to the protection of the environment. They will not be able raise living standards or reduce poverty, professed goals of the Greens' policy itself.

The policies do not state the Greens are anti-free trade, but the effect of them would constrain competition and deny the benefits of free trade. This is also demonstrated by the effect of implementing the Greens' party manufacturing policy.

The policy criticises exports of minimally transformed goods and commodities from Victoria. It contends that buyers in other markets derive more employment, research and development by developing these basic products than Victorians. The implication is that government policy should promote value-adding industries to correct this.

The policy also calls for restructuring of the manufacturing and energy sectors and investment in, and commercialisation of, the technology to enable the transition to the low carbon economy. Implicit here is recognition that the desired technologies either do not yet exist or are not commercially viable.

The policy accordingly recommends development of a new raft of higher value-added products, with the emphasis on sustainable products, utilising these as yet unproven or non- existent technologies.

These policies show the Greens have not heeded the lessons of manufacturing and trade policy over the last three decades in Australia. The model proposed in the Greens' policy has been tried. High tariffs and subsidies were used by governments for several decades to implement measures to induce development of value-added industries and to foster development of enterprises, which were inherently commercially unviable.

These subsidies and tariffs had to be scrapped in the 1980s when it become clear they were supporting uncompetitive industries and sapping national wealth. After that Australia enjoyed a record period of high prosperity.

The manufacturing policy also stipulates that manufacturers should use only ecologically sustainable inputs, avoid toxic dyes, use reprocessed inputs, reduce climate change emissions and use power from renewable resources.

All these measures would increase the cost of manufactured products and reduce the export competitiveness of Australian industry. These policies would undermine comparative advantage in any economy.

When economies produce and trade what they produce best, everybody benefits. China gets cheaper coal from Australia, which Australia produces better than most and Australia in turn buys cheaper garments, which china produces best.

When capital is directed to competitive industries like those, it generates the optimal return. The point of open global markets is to spread this phenomenon as widely as possible. Everybody benefits. That is the theory and practice of free trade. The Greens' policy is not that. It slows, not increases growth.

Low growth policy does not generate sustainability; it reduces the capacity to achieve it. The policies of the Greens would cause a resurgence of protectionism. They would justify it as advancing sustainability, yet it would still protect uncompetitive industries and weaken the economy.

As well, it would turn Australian national trade policy into an instrument to pressure other countries to change national policies. "If you don't adopt our preferred environmental policy, we will restrict your imports," would be the diplomatic message. Green parties in all industrialised economies advocate such measures, particularly in Europe and the US.

There is a singular example now in the form of a Bill in the Australian Senate. This is to ban imports of illegal timber products. Research commissioned by the Rudd/Gillard governments revealed that the incidence of illegal timber products entering Australia is small, so small, that the cost of the controls proposed would damage the Australian economy.

The Greens contend illegal logging is a bigger problem than it is and that it is destroying biodiversity in developing countries.

The damage would occur in two ways. First the cost of all imported timber products would rise. Second, in order to try to obviate WTO rules that imports may not be subject to selective import controls, the government bill plans to require that all Australian timber product put on the market must be shown formally to be produced legally, despite the fact there is no illegal timber of any significance produced in Australia. The systems to demonstrate that will just push up the price of Australian-produced timber to consumers.

This would suit the policy of the Greens to restrict commercial forestry, both in Australia and neighbouring countries. Environmental groups have coaxed, cajoled or greenmailed retailers not to stock timber products from Indonesia or other countries unless they follow the sustainability standards developed by the WWF which curtail expansion of forestry.

The policy of the Greens claims to support developing countries, but it will harm developing countries. The strategy of the policy is to pressure the governments of wealthy countries to use the threat of restricting imports unless developing countries change their environmental policies. This is bullying.

The General Agreement on tariffs and trade was specifically created to prevent large nations using their economic strength to bully smaller economies. It grants those smaller economies an enforceable right in international law to enjoy the benefits of their comparative advantage. Removing that right is what environmental groups seek.

The policy does not state how it wants the WTO reformed, but the WWF and Greenpeace have. They want its capacity to rule against use of trade measures to enforce environmental standards, removed.

There is a more civilised way to behave. That is to respect the sovereign right of each nation to determine its national policies and to develop international laws in the form of international agreements where parties concur in common principles then commit to enact those principles in national law.

The core problem here is that most developing countries do not want environmental policies that subordinate economic development to second place, as the Greens propose. Instead of seeking common ground, the policy of the Greens is to resort to bullying.