Australia should consider dumping all its remaining tariffs as the global trading system faces its biggest challenge in nearly a century, the Productivity Commission advises.
The government's independent economic researchers say the credibility of the world trading system is at risk, both from specific tensions between the US and its major trading partners and from a longer-standing and broader phenomenon.
The commission's annual trade and assistance review, released on Wednesday, warns that the use of tariffs and other protectionist measures around the world has lifted since the global financial crisis and there are clear risks this trend could accelerate.
"Australia cannot afford to take for granted that continued progress will be made given some of the deep-seated problems besetting the world trading system," the report says.
It recommends the government lower Australia's remaining trade barriers, boost efforts to explain how the community benefits from trade liberalisation, and regularly review the adequacy of foreign investment screening processes.
Commissioner Jonathan Coppel says Australia essentially only has "nuisance tariffs" remaining, with all imposts on goods coming into the country now lower than five per cent.
"It's within our capacity to simply say 'Well, they're very low, let's just do away with them altogether,'" he told AAP.
He points out the country has been in the position of taking this kind of unilateral action in the past, when it cut agricultural tariffs in the 1980s and 90s.
"In the current context where there are a number of short-term intense pressures ... (and) the negotiations within the WTO context are essentially going nowhere, why not look back at that past experience in Australia?" he says.
But he also cautions government must do a better job of talking to Australians about why free trade is so important.
Part of this is acknowledging while there will be winners, there may also be people who "incur the brunt of the adjustment".
"As a consequence of that more effort needs to be made in terms of explaining that there are positives and negatives but the judgment is that overall it will lead to an improvement to our economy and to the country as a whole," he said.
Overall within Australia, governments gave $14.4 billion worth of industry assistance in 2017/18.
The net worth after deducting the cost of penalty tariffs stood at $12.3 billion, about half a billion more than the previous year.
The commission reports about half of this, $7.3 billion, comes in the form of tax concessions.
Another $4.8 billion is in the form of budgetary outlays, primarily assistance to small business and research and development incentives.
