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MARK Vaile's departure from the trade portfolio after seven years presents an opportunity to rethink what Australia wants to achieve in trade, what we need to do to get it, and what changes that will require. Any honest assessment has to conclude that Australia's trade is in terrible shape. Until 1980, our trade was more or less in balance, and on goods, in surplus. Since then, we have run trade deficits in 22 of the past 26 years, and in the past four years they have averaged more than $20 billion a year. Our share of global exports of goods has shrunk from 1.12 per cent in 1996 to 0.94 per cent in 2004. Of the 30 OECD members, only three have had worse export growth in that time. Surely it's time for honest debate about what has gone wrong, what could go right, and what has to change to get us there. But that requires an environment in which governments feel able to admit that something has gone wrong, and to change their policies and structures to put it right. We don't do things that way here. Suppose we did. Let's start by asking what we are trying to achieve in trade, and why it is not delivering the goods.

It is futile to blame Vaile for the deficits, although Labor's Kevin Rudd incessantly does so. The problem is that Vaile was really not Trade Minister, but Minister for Trade Negotiations. He is a good bloke, a hard worker and a straight talker, who threw himself into the job with gusto, and won global respect from his peers.

The problem was not the minister, but the job. Trade is now a branch of the Department of Foreign Affairs and Trade. It is now seen more as a vehicle for improving Australia's diplomatic relationships than its economic prosperity. Under Labor and Nationals, it

has focused on trade negotiations, not trade outcomes. Even if it wanted to get Australia's trade back in the black, it has few levers to achieve it.

Of all the trade negotiations we have engaged in, only the Doha round offers any relief for our chronic trade deficit. Even good free trade agreements, such as ours with New Zealand and with Thailand, work because they offer evenly balanced benefits to both sides. If you pursue trade deals with far bigger economies such as the US and China, you end up signing on their terms - as John Howard did in signing a deal that removed all our trade barriers to US exports while it retained dozens of barriers to ours.

The modelling on both sides agreed that it would worsen the Australia-US trade imbalance. And so it has.

What about Labor? Far from planning to liberate trade from its role as a branch of diplomacy, it has downgraded it even

more by making it a part-time add-on for shadow foreign minister Kevin Rudd.

Both sides need to recast trade where it should be: as an economic portfolio, linked to the bureaucracy responsible for other economic areas - and with a clear, stated goal of getting Australia's trade balance back in the black.

Step one is to move trade into a department where it fits: what is now the Department of Industry, Tourism and Resources. Manufacturing, commerce, mining, energy, tourism and services: they're all here, and they make up 80 per cent of our exports and almost 100 per cent of our imports.

(That leaves out agriculture. No problem: upgrade the Department of Agriculture's role and resources on trade to give it the clout of its foreign counterparts.)

Merely reshuffling the bureaucracy, however, would be useless without a change in policies and priorities. The Industry Department is seen these days as having little clout, little money and being frightened to put a foot out of line. Its minister, Ian Macfarlane, doesn't frighten easily, but his approach to industry is to go out and tell it what it's doing wrong, and don't come to government for help. Nice line, minister - if it works.

The figures suggest it hasn't. Output of goods other than buildings fell almost 4 per cent in the year to June. Macfarlane has now set up a taskforce to re-examine Australia's industry policy settings, focusing on "global integration". Read the background paper, and you realise why trade belongs in his department. The future for exposed sectors of manufacturing clearly lies in their integration with global markets.

We've been here before. The last industry policy review, under John Moore, set up a good policy structure, with "action agendas" supposed to identify and tackle the problems facing specific industry sectors. But then Moore moved on, and the action agendas became words with little action. There was no money to finance reform, and no commitment to make them work.

Now Macfarlane has a chance to make them, or some new model, work where policy since 1997 has plainly failed. The manufacturing malaise has to be tackled because most of the world's trade - most of Australia's merchandise trade - is in manufactures. Last year we ran a staggering $92 billion deficit in manufacturing trade alone. We need reforms to stop that getting worse. And unless we want to trust in praying that global prices for our minerals stay high and volumes grow, we must identify ways to significantly cut that deficit, and get back in the black.

Another 25 years of global warming might not create a disaster, but why take the risk? Another 25 years of big trade deficits might not create a disaster either - but why take the risk?

Tim Colebatch is economics editor.