Of course, the reduction in tariffs was not the only reform of the 1980s and 1990s. The exchange rate was floated, capital markets were deregulated, labour markets were made more flexible, product markets were made more competitive, and state-owned enterprises were privatised or at least 'corporatised'.
Nevertheless, the Productivity Commission economist, Dean Parham, estimates opening the economy to the rest of the world, in which tariff reform played a major part, added about the 0.5 percentage points to annual productivity growth.
The economy’s strong response to the unilateral tariff reform of the 1980s and 1990s was further evidence of the point often made by economists: most of the benefits of tariff reform go to the economies that reduce their tariffs.
That is, the bulk of the economic benefits come mainly from the more efficient allocation of resources made possible by increased access to better and cheaper imports.
That of course is the direct opposite of what President Trump seems to believe.
Trump’s tariffs on steel and aluminium alone will not have much effect on US growth unless they spark a serious trade war. However, the President has signalled there are more tariff measures to come.
A danger he may not fully anticipate is the political and economic dynamic his policies may unleash within the US.
Trump's actions risk sending a destructive message to US business: that, instead of investing in increased efficiency and innovation, it can now look to the government to solve its competitiveness problems. That’s a world in which senior executives are selected as much for their lobbying skills as their business acumen.
Give one industry protection and the next day you’ll have a queue of industry leaders at your door with persuasive arguments as to why they are just as deserving of assistance.
No sooner had Trump announced his steel and aluminium tariffs, then Elon Musk, the founder of Tesla, was complaining loudly about China’s 25 per cent tariff on imported cars, which is 10 times the US tariff.
“I am against import duties in general but the current rules make things very difficult,” Musk said. “It’s like competing in an Olympic race wearing lead shoes.”
A sympathetic president responded by repeated his threat of tit-for-tat import taxes.
"We are going to be doing a reciprocal tax program at some point, so that if China is going to charge us 25 per cent or if India is going to charge us 75 per cent and we charge them nothing," Trump said. "We're going to be at those same numbers. It's called reciprocal, a mirror tax.”
Many of the people who queue for protection will have come with promises of investment and innovation, if only President Trump can 'level the playing field'. But most will not deliver on their promises.
As an old joke goes, governments don’t pick winners, losers pick governments.
Alan Mitchell is a former economics editor of the Australian Financial Review.