Just when the postwar world trading system is under threat from a misguided American president, Labor has caved in to the worst anti-trade instincts of the trade union movement and the party's left. The price of reluctant union support for the updated Trans Pacific Partnership – the resuscitated TPP deal that has become a beacon of free trade against Trumpist protectionism – is a raft of promises unveiled by shadow trade minister Jason Clare that would make future Australian trade deals all but impossible.

Mr Clare's private member's bill would impose more restrictions on foreign workers, slap bans on provisions to settle disputes between governments and foreign investors, and bring intrusive union scrutiny of trade negotiations as they are underway. The plan would kill future ratification of the long sought economic partnership with Indonesia, to be signed as a highlight of next month's APEC summit. That deal with Indonesia involves much more than trade. It is part of the widening of Australia's diplomatic embrace of the south-east Asian region – along with other partners such as India and Japan – as a way of hedging and counter-balancing the rise of China. Now this essential element of Australia's future security is being outsourced to unrepresentative trade union supervision.

And a Labor government, bizarrely Trump-like, would want to reopen negotiations on deals already done with China and South Korea. As The Australian Financial Review's John Kehoe reported yesterday, the Trump administration has already further politicised world trade by demanding virtual veto rights over who else its partner nations can trade with. New clauses in the revised NAFTA will make Canada and Mexico disclose their trade dealings with China to the US. It could be part of a wider pattern of Washington strong-arming its trade partners into taking sides against China. Labor's new policy simply signals a retreat into a left-wing version of what Mr Trump is doing, retreating into a protectionist cocoon and using trade for political leverage. For a high-income commodity exporting country that has only benefited from free trade, this poses a risk to national prosperity and security.

Trumpism on trade has now come to the ALP. AP

After disgracefully xenophobic campaigns in the past by the CFMEU and the ACTU, the opposition to foreign labour is predictable. But investor-state dispute settlement provisions protect foreign companies here, and Australian companies overseas, from discrimination in favour of local investors by submitting complaints over expropriation, or free movement of their capital, to independent arbitration. The unions absurdly stretch these arbitrations into secret courts that threaten Australia's sovereignty. In reality, they cannot overturn local laws and regulations. When tobacco giant Philip Morris challenged Australia's plain packaging laws trying to defend its copyright, it lost. Indeed, such clauses are likely to be more value to Australia investors who have to put their money into countries where the rule of law is weaker to begin with.

Mr Clare has now reversed the Labor pragmatism, which saw it pass the landmark FTAs with China and South Korea. And Labor shadow trade ministers and the unions have never really articulated what is specifically wrong with investor protection. Foreign investment has been the lifeblood of the Australian economy since European settlement, and Labor and the union movement have now worryingly sided with the economic populists when they make an issue out of it. As the Financial Review noted yesterday, Australia under a populist-minded prime minister Bill Shorten should be relying on usually level-headed shadow ministers like Penny Wong in foreign affairs, Richard Marles in defence, and Mr Clare at trade to steer through the upheavals in regional geopolitics caused by Mr Trump. This hope quickly looks forlorn.

The ACTU is now crowing that Mr Clare has swung over to its troglodyte views on trade. In reality, Labor now looks weak and confused on a key plank in Australia's economic future in Asia. The party's stance should be poison in this weekend's byelection in Wentworth. Here is an affluent cosmopolitan fringe-CBD seat, a direct product of openness in immigration and trade. But such is the damaging power of the anti-market message these days that even Wentworth's liberal-minded voters could easily be mistakenly drawn to it. These are troubling times for those that treasure the liberalism of an open world economy.