EDITORIAL: by Peter WestmoreNews Weekly
New South Wales puts Australian firms first
, June 27, 2009
Anytime that anyone dares to support a buy-Australia policy, a group of economic purists can be depended upon to condemn it.For the first time since the 1960s, an Australian government has announced a policy which gives preference to Australian industry.
The NSW state Treasurer, Eric Roosendaal, said his government's new purchasing policy, called Local Jobs First
, would give preferred treatment to local businesses which supply state government agencies and state-owned corporations (SOCs). Every year, they buy nearly $4 billion in goods and services from the private sector.
Under Local Jobs First
, government agencies and SOCs will now be required to give preferential treatment to local manufacturers under a price preference mechanism.
The price preference means locally-made content is discounted by 20 per cent when compared to overseas-sourced material in tender evaluations. Goods produced in rural and regional areas will attract a further 5 per cent discount.Protectionism?
Every time anyone in Australia supports a buy-Australia policy, free market purists in Treasury, various think-tanks and the political parties denounce it as "protectionism" and repeat the mantra that this is a repeat of the Smoot-Hawley Act, a notorious piece of American legislation in 1930 which imposed savage tariffs on a large range of imports, prompting retaliatory action from many European nations and bringing global trade to a virtual standstill.
In fact, the new policy announced in New South Wales is long overdue and sensible.
Preferential trade deals have been a feature of the policies of both the United States and the European Union for many decades. Even the Australia-US free trade agreement, which was supposed to open the door to free trade between the two countries, contained hundreds of exemptions - mainly for American industries.
US farmers have been the beneficiaries of multi-billion dollar subsidies for many decades, and the EU's Common Agricultural Policy was designed to subsidise small-scale farmers, both to protect the rural communities on which European societies have been built, and to equalise the economic opportunities between city and country.
Other nations have different measures to assist domestic manufacturers and businesses. Some, like China, have used their control over the local currency, cheap labour costs and a lack of occupational health and safety laws to keep exports cheap.
During the American Presidential election campaign last year, Barack Obama promised that he would abandon the free trade mantra of the Republican Party, and would support American industry and protect American jobs. It was one of the defining issues of the campaign.
Last December, Obama announced a $US787 billion economic stimulus package which contained provisions which will further promote American industry and protect American jobs - $US54 billion in small business concessions, tax relief for families, and massive expansion of both the housing and building industries. The package was adopted by Congress last February. (This was in addition to the $US700 billion previously committed by the Bush Administration to rescue the American economy in 2007 and 2008.)
The policies of the past two years, including the Republicans' bail-out of American banks and financial houses, and the Democrats' support for two of America's auto industry giants, are simply a continuation of long-standing policies adopted by successive US administrations over many years.
These measures have not attracted retaliatory action - for the simple reason that they are permitted under international trade rules. In any case, during the current economic emergency, the alternative policy of inaction would have led to an economic meltdown of unprecedented severity, whose main victims would be low-income families. Additionally, governments throughout the developed world have taken similar measures to protect their financial systems and manufacturing industries from collapse.
Australia - alone among the nations of the industrialised world - has abandoned both its manufacturing industries and agriculture in pursuit of free-market economic theory, which has crippled our primary and secondary industries.
This theory, most closely associated with what is known as the Chicago School, has dominated the teaching of economics since the 1960s, and populated the senior levels of Australian government, bureaucracy, the finance industry and think-tanks with people who seem to have learned nothing from what has happened in the world since the 1960s.
It was one of the 20th century's greatest economists, John Maynard Keynes, who during the Great Depression - which was triggered by a speculative bubble similar to that seen recently - observed that "practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist".
It was therefore not surprising that the modest actions announced by the New South Wales Treasurer last week should have aroused such strong and unwarranted condemnation.- Peter Westmore is national president of the National Civic Council.