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Balancing Act: Domestic capability and free trade both critical for tech sector

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Since federation, both our national wealth and our modern economy relies heavily on open and global free trade, with exports contributing a record high of 24 per cent of Australian gross domestic product.

And it’s worth noting that telecommunications and information services exports are now worth more than wheat, financial services, wool, aluminium and copper, based on latest trade data.

As the Prime Minister Scott Morrison said when stating that one in five Australian jobs rely on international trade: “Our trade policy is all about supporting Australian jobs, boosting export opportunities and ensuring an open region with even stronger supply chains.”

Trade Minister Simon Birmingham, when announcing the Regional Comprehensive Economic Partnerships (RCEP) trade agreement, said: “Economic cooperation of this scale sends a strong signal that our region is committed to the principles of open trade for the post COVID-19 recovery, just as we advanced them during the previous years of strong economic growth.

Despite these comments and the importance of free trade to our economic future – globalisation is being replaced with what I call ‘strategic nationalism’.

AIIA head of policy and advocacy Simon Bush

We are starting to see governments around the world from Europe, the US, India and China – as well as Australia – creating sovereign-first policies that has the technology sector front of mind. COVID and geo-political events such as the China trade tensions that are impacting Australian supply chains have accelerated the political thinking that is driving this creep toward strategic nationalism.

We are seeing evidence of this in Australia in policies like the Modern Manufacturing Strategy, which talks about strategic resilience of our manufacturing capabilities, taskforces have been established inside government to look at critical industries and strategic resources, and new Defence alliances like AUKUS and the Quad have critical technologies like AI and quantum as core components.

The federal Labor Party announced plans for a Future Made in Australia Office, taking an Australia first procurement policy as a part of its upcoming election platform.

Cyber security policies are also driving regulatory and policy responses to ensure local capability with all federal government data now required to be hosted in Australia.

The AIIA supports this new focus by both businesses and governments wanting secure and stable tech supply chains and ensuring that as a country we have a domestic capability. We define this in the same way as Defence; as on-shore capabilities that can be relied upon during an externality and supported by Australian people (security cleared where appropriate), not by where the company HQ is located.

The AIIA has its own Domestic Capability Policy Advisory Network which developed its Made In Australia Office policy to support local domestic tech capability and uplift. We also support Australian governments having procurement policies that promote Australian SMEs and were involved in the NSW Government’s Sovereign Procurement Taskforce, which recommended SME procurement quotas.

However, we need to tread carefully when supporting local Australian procurement outcomes to ensure that we do not overstep into nationalist protectionism. This hurts the economy and more than 20 per cent of Australian jobs.

The AIIA also strongly believes that there needs to be unfettered free flow of data across borders in order for modern, secure and effective cloud platforms and solutions to be provided to the Australian and global economy.

It is the ability to transmit data openly across borders as well as not having restrictive foreign investment barriers in place, that has allowed home grown success stories like Canva and Atlassian to become global tech businesses.

Further, global firms bring world leading technology, jobs and investment into Australia – creating domestic business ecosystems and capability, which act as multipliers to the Australian economy.

It does worry me that good economic policy is falling on the sword of ‘strategic nationalism’ and the concern is, if Australian starts enacting Australia-only style laws, then other countries will follow and accelerate, making for a very slippery slope.

Given our economy is neither independent, self-sustainable or big enough, we must remain open in mind and execution of free trade agreements.

We need a measured, mature and robust discussion on these matters, as it is vital to our economy and national resilience. Technology R&D incentives and commercialisation policies are critical to ensure growth in local capability such as in AI and quantum.

But we can’t make Australia a hostile place for foreign companies to invest and employ tens of thousands of Australians.

And we can’t make it difficult for Australian start-ups and scale-ups to get access to foreign capital to grow and expand offshore. To do so would a disaster for our country.

Do you know more? Contact James Riley via Email.

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