"The escalating Trade War between the USA and China is already hurting Australian companies through restrictions in availability of key components, higher landed costs for Australian exports out of China and the USA, damage to business confidence, and delayed investment decisions," Ai Group Chief Executive, Innes Willox, said today.
"The complexity of international supply chains means that the impact of either US or Chinese tariffs will be felt by all kinds of businesses and as expected Australia is becoming collateral damage. Trying to stay ahead of any changes will be a bit like playing whack-a-mole, but agile companies with good relationships with customers and suppliers are best placed to survive this trade conflict."
Ten years on from the Global Financial Crisis, it seems that protectionist-leaning governments are determined to snatch recession from the jaws of prosperity.
"More than 700 trade-restrictive measures have been introduced in G20 countries since October 2008; 39 alone from October 2017 to May 2018."
As stated in the World Bank's Global Economic Prospects Report, an escalation of tariffs up to legally-allowed bound rates could translate into a decline in global trade flows amounting to 9 percent. This is similar to the drop seen during the global financial crisis in 2008-09. Even the threat of substantial shifts in trade policies in major economies could have negative consequences for the global economy, according to the World Bank.
"Trade has lifted billions of people out of poverty worldwide. Trade growth in 2017 was the strongest since 2011, playing its part in supporting the global economic recovery."
The multilateral trading order, which for decades has been the pillar of our global economic success, is under stress. For years, WTO members have not shown the necessary willingness to advance market access and the rules of the multilateral trading system in order to make the organisation fit for 21st century trade patterns.
"Although the Trade Facilitation Agreement and the ban on agricultural export subsidies were important achievements, the WTO is not sufficiently equipped to deal with trade distortions caused by non-market economies including subsidisation; the overwhelming role of State Owned Enterprises (SOEs); local content requirements; forced technology transfer; and the theft of intellectual property.
"In addition, the WTO's critical dispute settlement mechanism is under threat as nominations to fill the vacant posts of the appellate body are being blocked, and WTO members cannot agree on a positive reform agenda.
"We are deeply worried about the stability of the rules-based global trading system. To generate prosperity, business needs reliable modern international rules, predictability and stability as well as strong and impartial referees. Quick fixes or simple fine-tuning will not do. International cooperation is essential. We need a positive agenda that enhances the strengths in the global trading system while addressing its shortcomings in an effective way.
"Go-it-alone and unilateralist beggar-thy-neighbour policies are not the solution," Mr Willox said.