Close to 100,00 Australians would be out of their jobs if the spread of Donald Trump-style protectionist trade policies continued, according to research from the Productivity Commission.
Such a scenario would leave an Australian household with the median weekly income worse off by nearly $1,500 per year.
“If a scenario akin to the experience of the 1930s were to be repeated — with trade barriers significantly higher around the world — the economic dislocation unleashed would have the capacity to cause a global recession and put the rules-based global trading system under much strain,” the report states.
President Trump withdrew the US from the Trans-Pacific Partnership and is preparing to raise tariffs on imported steel. He campaigned for the presidency on a platform of larger tariffs in trade with China and Mexico.
The report notes the trend towards protectionism predates President Trump, and has emerged steadily in the wake of the Global Financial Crisis.
Since 2009, the number of new protectionist measures recorded by the World Trade Organisation and Global Trade Alert has exceeded the number of measures designed to reduce barriers of trade.
A World Trade Organisation report from June notes trade restrictions in G20 economies have risen at a moderate rate similar to that of previous years.
Andrew Stoeckel, Visiting Fellow at the Australian National University at the Centre for Applied Macroeconomic Analysis, said the fallout described by the Productivity Commission could even be underestimated because it did not consider the loss of business investment created by increased tariff uncertainty.
He said the rise of protectionist sentiments were a product of the electorate not understanding that freer trade led to better outcomes overall. This view, he argued, was encouraged by the fixation by populist politicians like Donald Trump on the negative side of trade.
"All their trade remedy measures - anti-dumping, countervailing duties, national safeguards - they don’t do a balanced test, all they do is measure cost," he said to SBS World News.
"So how could you get a reading of the benefit-cost if you don’t measure benefit?
"This is where the whole system is screwed."
Trade Minister Steven Ciobo told SBS World News the government was "confronting protectionism" with its trade agenda.
"Recently I launched FTA negotiations with the Pacific Alliance, Hong Kong and Peru and I am working towards the launch of FTA negotiations with the European Union," he said.
"Meanwhile momentum continues to build for Australia to conclude an agreement with Indonesia after I re-launched negotiations in 2016."
Under a protectionist scenario modelled by the Productivity Commission, trade tariffs would increase 15 per cent globally.
Were tariffs to rise in such a manner, wealthier households would suffer more than the poorest households in Australia, according to the modelling.
One in five households, among them low income households dependent primarily on welfare and using fewer traded products, would avoid much of the financial pain.
The report models increased in tariffs, though others have noted non-tariff trade barriers like import quotas are also being used around the world.
The report recommends Australia should continue to work towards freer markets and educate people around their importance, but also pursue policies that strengthen the economy’s resilience and workers’ ability to adapt to emerging technologies.
"These companion policies can serve to lessen the disruptive impacts of change and create an environment that spreads the benefits of globalisation more widely,” it states.
The Productivity Commission is an advisory body that sits within the Treasury Department. The report was self-initiated.