Pearls and Irritations

The geopolitical danger in which Australia finds itself after the election of Donald Trump reinforces an argument made by Paul Barrett. His was to re-establish a free-standing Department of Trade and mine is to combine trade and resources as they were between 1977 and 1983.

The 2024 US election raises the prospect of an intensified trade war between the United States and China that may see Australia being caught in no man’s land as the world divides into rival economic blocs.

In these circumstances, the Australian Public Service might be better configured with trade separated from foreign affairs, as it now is in the Department of Foreign Affairs and Trade (DFAT) and restored to the position it was in between 1956 and 1987.

For thirty years since its creation in 1956, the Department of Trade was one of the powerhouses of the Australian Public Service. In 1957, under the leadership of Sir John Crawford and its Minister John McEwen, the department championed the negotiation of the Commerce Agreement with Japan. This was little more than a decade after the end of the Pacific War and in the face of lingering resentment of Japan and fears that manufacturing industry would be swamped by cheap Japanese imports. One of Australia’s most important twentieth century trade agreements, it laid the foundation for Australia’s post-war economic engagement with Japan and Asia.

In 1960, the Department of Trade joined forces with the Department of Primary Industry and the Australian Wheat Board to support the export of wheat to the People’s Republic of China. This trade was discouraged by the Department of External Affairs, which showed greater deference to the US policy of economic containment of Communist China. Following Chinese intervention in the Korean War, the United States maintained a complete embargo on trade with Communist China and encouraged its allies to follow suit.

After the opening of the wheat trade, Australia became the largest foreign supplier of wheat to China in the first half of the 1960s. The current flourishing of trade between Australia and China has its origins under the government of Robert Menzies, who was supported by a free-standing Department of Trade under a powerful minister.

Later, during the Cultural Revolution, which in 1967 was spilling over into the British Crown Colony of Hong Kong, the British Government encouraged Australia to use wheat negotiations with China to restrain Chinese influence in Hong Kong. The Department of Trade and Industry, as it now was, resisted the Prime Minister’s Department’s effort to institute what would have been tantamount to an embargo of wheat exports to China in support of British policy.

In 1972, Gough Whitlam separated the Tariff Board and the industry wing of the Department of Trade and Industry from the Department of Trade, which became the Department of Overseas Trade between 1973 and 1977. Whitlam also set up a powerful Department of Minerals and Energy which exercised trade functions (via export controls) on exports of Australia’s mineral resources.

The Fraser Government saw the logic of combining the Department of Minerals and Energy (renamed National Resources) with the Department of Overseas Trade to form the Department of Trade and Resources in 1977. By this time, resources exports, particularly iron ore, coal and alumina, had outpaced rural exports to constitute Australia’s most important exporting sector. Trade and Resources oversaw the North-West Shelf gas projects, the opening up of uranium trade and regulation of mineral exports in the national interest.

When Labor returned to office in 1983, its leading ministers were skeptical of the trade department and its trade commissioner service, which they regarded as bastions of the Country (later National) Party and its rural interests.

Prime Minister Bob Hawke moved swiftly to separate resources from trade. Three years later, he hived off the trade commissioner service, still operating under its own act, from the Department of Trade and placed it in a new statutory authority, the Australian Trade Commission (Austrade). In the following year, the rump of the Department of Trade was combined with the Department of Foreign Affairs to form the Department of Foreign Affairs and Trade (DFAT).

The merger had some advantages, such as providing stronger support and a larger diplomatic network for initiatives like the Australian-led Cairns Group of Agricultural Free Traders, which became a powerful force in pressing for freer international trade in agriculture during the Uruguay Round of Multilateral Trade Negotiations (1986 to 1993).

The disadvantage was that trade took second place to foreign affairs in the mega department so that trade officials could often be overridden by foreign policy/security interests over matters such as the US Free Trade Agreement in 2003 or trade in critical minerals currently. Officers in the current DFAT who might seek to advocate such 1980s trade policies as the ‘China Action Plan’ would have to run the gauntlet of the senior echelon of DFAT, many of them wedded to the anti-China policies of the Department of Defence.

A solution would be to separate the trade specialists from DFAT into a free-standing department and to reunite them with the trade commissioners from Austrade to better align trade policy (the negotiation of access agreements) and marketing priorities. This department could be augmented by adding resources as and a network of regional offices as was the case between 1977 and 1983.

One of the other arguments for combining resources with trade is that ‘resources’, as part of the Department of Industry, Science and Resources, has been at the centre of one of the biggest failures in public policy of the last twenty-five years. This was the failure of Commonwealth and States to establish a gas reservation policy in in Eastern Australia.

One of the central problems of Australian national policy or ‘grand strategy’, as identified by former DFAT Secretary Peter Varghese, is the unresolved tension in our strategic policy. On the one hand, our foreign policy embraces a multilateral future in which no country dominates. On the other hand, our defence policy ‘quietly conflates US leadership and US primacy and is increasingly fixed around doing what it can to ensure the retention of US strategic primacy’.

Reestablishing the Department of Trade and Resources would give trade officials more autonomy to advise a more powerful Trade Minister to help resolve such tensions in our international policy around the Cabinet table rather than in the bureaucracy.

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