The future of trade policy in an uncertain world Address to the Lowy Institute Sydney Speech, check against delivery 10 December 2010 As the Lowy Institute points out in its selection of the topic of my address today, the global economy is experiencing a period of unusual uncertainty, with debt crises in Europe, further quantitative easing in the United States and overheating in China. In the aftermath of the deepest global recession since the Great Depression, global imbalances are especially large. A huge excess of spending over saving in the United States and Europe is mirrored by a big excess of savings over spending in China and other surplus countries. The sluggish post-recession growth in the United States and Europe and deep import penetration of Chinese manufactures into the US market hasn't led to the greatly feared outbreak of protectionist trade wars. But it has contributed to currency wars. My first message today is this: currency wars are no substitute for trade liberalisation. At best, currency wars can only redistribute income and jobs; in a global context they can create neither. Why play this zero sum game when the positive sum game of trade liberalisation is available -- where total global income and jobs are increased through the gains from trade made possible by specialisation? The Gillard government is vigorously pursuing trade liberalisation at home and abroad. Domestic economic reform is essential to lifting productivity growth and through it the international competitiveness of Australian businesses. But even if Australian businesses