by Ken AldredNews Weekly
Economics - Industry policy where to now?
, June 30, 2001
Former Liberal MHR Ken Aldred, while conceding the excessive tariffs of Australia's past, advocates dramatic policy changes concerning foreign investment and local manufacturing in the future.
Heartening though it is that Australia has avoided a recession, as formally defined, debate remains focussed on short-term issues.
Growth is moving again; that's good. However, our dollar is still worth little more than half the greenback. Ludicrous explanations are offered for this, ranging from it all being the fault of the GST to the devious manipulations of New York speculators.
Net foreign debt, which is now overwhelmingly corporate-based, is $317 billion and continues to climb inexorably. Unemployment is starting to move back to the seven per cent mark.
None of these problems is the product of recent events. The basis for nearly all of them goes back nearly two decades.
In 1984 the Hawke-Keating Government, urged on by the economic rationalists in the Federal Treasury, commenced a tariff reduction program that has resulted in the average tariff today being only 3.9 per cent.
Certainly Australian tariff levels in the 1960s and early 1970s, in some cases 60 per cent or more, were excessive. However, the drastic unilateral approach taken here was replicated only in New Zealand, which froze tariffs in April 2000.
Those countries in South-East Asia with which Australia trades made partial tariff cuts, but tariffs in the region still generally remain much higher than they are here. On some products tariffs are 100 per cent or more.
The European Union and the United States did initiate more substantial tariff cuts than South-East Asia. These cuts, though, were astutely replaced by a complex web of administrative barriers, voluntary restraints, severe anti-dumping regulations, quotas, standards controls and other non-tariff barriers.
Meanwhile, dumping - the selling of a product in an export market below its domestic price - has accelerated in Australia over recent years. The Anti-Dumping Authority was abolished and our anti-dumping regime weakened, so that everything from Taiwanese furniture castors through Brazilian orange juice to Canadian pork and even Chinese cement has been dumped in Australia.
A compliant Foreign Investment Review Board, located within the Federal Treasury, has allowed one industry sector after another to fall into foreign hands. Foreign investment has played a vital role over the last 150 years in developing new industries, such as the motor vehicle industry. Nevertheless, there is a major difference between that approach and condoning the overseas takeover of well-managed and profitable Australian companies.
Food processing, once firmly under Australian ownership, is now at the corporate end believed to be over 90 per cent foreign-controlled and foreign-owned.
Our dramatically shrunken industrial base has cut manufacturing from 26 per cent of Gross Domestic Product in 1975 to around 11 per cent by 2000. This has more than halved manufacturing's contribution to the final value of goods and services produced within Australia in a year.
As a result hundreds of companies have closed or gone offshore. Approximately 500,000 jobs have been lost. We can no longer fully supply our domestic market with manufactured goods, and this fact is leading to a ballooning of our import bill.
Little wonder, then, that as a nation we have been trading at a loss for over 15 years. This is reflected in our ongoing Current Account Deficit, which over recent years has reached over five per cent of GDP. It is expected this financial year to fall back to three per cent, as it has in past downturns, and then increase again to four per cent in 2001-02. Therein lies the real explanation for our weak dollar.
We can pull ourselves out of the present malaise by several decisive and immediate measures.
Firstly, Australia should restrain unfair practices by substantially strengthening our anti-dumping regime, tightening standards for imported foodstuffs and more carefully scrutinising imports produced by child labour or slave labour. With dumping, the onus of proof should be on the importer to prove he is not dumping, as already happens in the US.
Secondly, given that 10 per cent of total purchases in the Australian economy are made by Federal, State and Local Governments, we should start reversing the trend to favour imports in official purchasing, by buying Australian. This should be combined with a vigorous "Made in Australia" campaign that has teeth.
Thirdly, as there is little doubt that our Current Account Deficit problem will continue, we need to impose a revenue duty on imported goods that we can produce. Providing that this is a temporary measure, that the rate is below 12 per cent and that the duty is used to redress a continuing trade deficit problem, this measure is allowable under current World Trade Organisation rules.
Finally, we need to compel the Foreign Investment Review Board to take a harder line on proposed foreign takeovers, if necessary by invoking national interest considerations, especially where strategic resources or companies are involved.