Support for free trade should never be unconditional

Just recently, another article pointed out that US tolerance towards China is waning after 16 Republican Senators approved the anti-Chinese currency manipulation bill during October. Further, the highly regarded free trader Robert Samuelson wrote in the Washington Post of a possible 25 per cent tariff on China that "the policy's only recommendation is that it might be slightly better than the alternative: condoning China's ongoing assault on our industry".

Another article acknowledges that the Chinese people are admirable competitors yet states "their hybrid Totalitarian-Capitalist government is not our friend" on the basis that we do not share philosophies on human rights, labour rights or geo-political issues. The article reminds Americans that "every time an American patriot buys a Made-in-China product at Walmart, he or she is investing in China's military expansion, which forces us to invest more in our military to counter the threat".

Contrary to the simplistic plea by Berg for Australia to support free trade, even unilaterally, much more astute commentary is emerging overseas to explain why concern is evident about the future of free trade.

According to Simon Tilford, chief economist at the Centre for European Reform, while the "country that moves first to erect trade barriers will no doubt take the blame for the resulting damage to the trading system", the "real villains will be the countries that skew their exchange policies, tax systems and industrial structures to gain export advantage".

With households and firms in deficit countries saving more, he notes that there has been no offsetting decline in private sector savings in the surplus countries. In other words, "deficit countries need more domestic savings and surplus countries more consumption".

While quantitative easing in the US has pushed up inflation in countries with currencies linked to the dollar, including China, Tilford argues that the US has little option but to continue pumping dollars into its financial system, in order to compensate for the drag on its economy from the trade balance.

In line with the evidence, it appears that Abbott's concerns about China are much more astute than Berg's given that much international commentary highlights the policy difficulties ahead and why a simplistic pursuit of free trade today is both wishful thinking and unlikely.

The West's future, and the viability of free trade, is in its own hands. They can accept their demise or do something about it.

Hard questions for Western societies are emerging. In Iceland, and despite its own immense financial difficulties, its Government recently rejected a bid by Huang Nubo, the billionaire chairman of China's Zhongkun Investment Group, who wanted to build a $200 million tourist resort in Iceland on the basis that Huang's interest was more in Iceland's energy potential rather than tourism.

Freer trade must reman a guiding light for humanity, but it will never be achieved through wishful thinking as if it is a concept that always delivers a win-win situation. The IPA needs to lift its game to indicate how the destructive potential of protectionism can be minimised rather than offering wishful thinking more in tune with a lucky country mentality.