Free Trade and Australian Manufacturing

[ryeman]

Ian Porter's article in today's GoAuto is a must read, but it will upset you!

[Cobra]

Link?

[ryeman]

Originally Posted by Cobra

Link?

Sorry it's worth subscribing , it's free.

[Road_Warrior]

http://www.goauto.com.au/mellor/mell...257B79000BAEC7

Comment: Time for decision on Australia’s future
28 May 2013

By IAN PORTER

THE federal government has been following the extreme free trade philosophies dictated by the big-money political lobbies in the US since the 1960s and 1970s, when it was in the interests of US manufacturers to force less developed countries to open their markets.

There was, of course, little reciprocation, with those less developed countries being prevented from selling the products they were good at making – mainly agricultural – because the US wanted to protect its own farmers.

Free trade has always been a chimera. It was designed by the powerful and dressed up to look egalitarian so as to suck, or pressure, other countries into a one-sided deal. How can anyone object to “free” trade?

That’s what happened when the US struck a free trade deal with Australia. Once more, exports of Australia’s primary produce remained restricted, even though that is one area where we can produce competitively.

There were many other exceptions, too. Why else would a free trade agreement need to stretch to 200 or 300 pages?

For instance, Australia was cowed into accepting a ban on the export of aluminium ferries and other ships to the US, even though Australia is a world leader in aluminium ships.

Our leadership should have ensured a vibrant ship-building industry in Perth but, no, because of the US ban in the so-called free trade agreement we have to drag ourselves over to the US and make the ships there, which means we miss out on the jobs our intellectual property should bring to Australia.

Unfortunately, Australia has swallowed the free trade pill holus bolus. We now have the lowest import tariffs in the world, a basic five per cent impost, while those all around us continue to protect what they prize.

So, in essence, we are granting unlimited market access to companies and exporters that are far bigger than our own companies.

It’s an unequal contest. There is no level playing field. Governments have to intervene to even up the contest.

The laughable tariff policy allows Australian politicians to strut across the world stage beating their chests telling every other country – including the US and Europe – that they should reduce their trade barriers, too, and stop subsidising their farmers.

Gosh, that makes the politicians feel proud. But the strutting might be about to end.

Canberra – politicians and bureaucrats alike – have been far too cavalier about this free trade business, and it is to be hoped that the Ford Australia decision to cease manufacturing in 2016 will start to wake up a few of our elected representatives.

The slavish reliance on free trade dogma – which no other first-world country adopts as fiercely as Australia – has thrown tens of thousands of Australians out of work in recent years.

Many industries have gone bust and no longer exist in Australia. We don’t make televisions or radios, bicycles, car tyres, clothing, toys, shoes, tools, gardening equipment: the list goes on.

The Australian manufacturing sector has been gutted, and there are no real jobs being created to fill the void. As manufacturing subsides, more and more jobs in the service sector are being converted to casual, part-time jobs. They don’t pay enough to raise a family and buy a house.

The politicians will argue that there are not many courses of action available, because we belong to the World Trade Organisation. But this is the very organisation – really a stalking horse – that is used by the free trade zealots to promote their bankrupt ideas.

We should not be afraid to throw off the WTO straitjacket.

There are policies we can adopt to preserve and promote Australian manufacturing, but we may have to break a few eggs because we have allowed ourselves to be closely penned-in by our trade rivals. The US free trade agreement is not the only one-sided deal we have signed.

Brazil is a shining example of what can be done to protect your own economy in difficult times. Quite apart from Mardi Gras, Brazil is strikingly similar to Australia. It derives around 25 per cent of its gross domestic product from industry but also possesses a big resources sector.

When the minerals boom took off and took the Brazilian currency, the Real, with it, the Brazilian government acted quickly. It declared that it would not allow a flood of cheap imports to deindustrialise Brazil.

To protect the car industry, Brazil imposed a second, floating tariff on imported cars. This tariff was tied to the Brazilian currency and increased the cost of imported vehicles, which otherwise would have fallen due to the strength of the Brazilian Real.

This maintained the price relationship between the imports and the domestic vehicles to prevent the market from being distorted.

What did Australia do? We stood by and watched as imports were given a massive free kick. The rise in the value of the Australian dollar produced an additional 33 per cent profit margin for vehicle importers. They were able to load up their cars with extra features, reduce selling prices and hammer the Australian-made products.

No industry can survive if its competitors are handed a 33 per cent price advantage overnight.

But the Australian government sat on its hands.

The federal opposition prattles on about why Australian car-makers don’t make cars Australians want to buy.

That’s irrelevant. Would you buy a Corolla that costs 33 per cent more than the identical imported car? Thought not.

So, what can be done, apart from – or as well as – a Brazilian-style floating tariff?

Well, the car industry would get a big shot in the arm if companies – and holders of novated leases – were only given tax deductions on Australian-made cars. If you insist on driving an import because you are so important or your automotive tastes are so refined, pay the tax.

Similarly with whitegoods. Buy Australian and pay no goods and services tax.

Of course, if we go around granting tax rebates or holidays to all manner of goods (not that there are many goods still made in Australia), we would have to raise tax revenue elsewhere.

That could be done by raising import tariffs on goods that compete directly with Australian-made goods. Yes, it means prices would rise, but it would also mean more Australians would be in good-paying manufacturing jobs, paying income tax and generally boosting the economy by spending their income.

That’s far preferable to them being in part-time jobs or on the dole.

Australia has to decide what is important to its future and then go out and protect it, preserve it and promote it.

If we don’t respect ourselves and design the future we want, other people overseas will take control of our economy and force on us the future they want.

[b0son]

Originally Posted by Road_Warrior

Yes, it means prices would rise, but it would also mean more Australians would be in good-paying manufacturing jobs

The higher pay should come off the back off exports, not off us paying more. Otherwise, its just a giant work for the dole scheme.

[Road_Warrior]

So post the damn link and/or story instead of another useless one line contribution.

[ryeman]

Originally Posted by Road_Warrior

So post the damn link and/or story instead of another useless one line contribution.

And I take it your intellectual contributions are pure gold?

[Resurrection]

http://goautomedia.cdn.on.net/goauto...toNews_680.pdf

[BossBrand]

Bloody good article and real practical ideas.. Now all we need is some pollies with the guts to put in place

[robertjp]

Great article. What happens to Ford, if the government does make changes to tariffs?, Ever since Geoff was in charge senior management has let the Falcon image degrade to an extent that it is now virtually worthless. A huge crisis is looming in this country and I can see a similar situation developing as in Europe, Recessions and large scale unemployment. In such an environment who could afford a car.

Hang on to your hats, it's about to get bumpy.

[aussie muscle]

Originally Posted by robertjp

Great article. What happens to Ford, if the government does make changes to tariffs?

The primary reason for GM, Ford and Chrysler to set up manufacturing here in the first place was because it was cheaper than importing them. period.

[ryeman]

I support TRUE. FREE. TRADE. But that includes the US agricultural and manufacturing industries, THEY should DO what they PREACH.
Then there are the French....

[mik]

I have no doubt this is true, I spent many years carting imports off the wharf and in the back of thousands of containers unloading them , they were loaded with everthing imagineable,
scratching my head thinking why the hell are we buying this stuff from other countries when we could / should be easily make it here/grow it here, the only conclusion I could come up with is our own pollies have sold us down the river.

[ryeman]

I am old enough to remember the kiwis denying US nuclear powered ships in their ports, the yanks tipped their hats to them for not being pushed around.
We on the other hand are simply desperate to become the 51st state it seems and get no genuine respect, we never show any independence and as a result simply ask how high....

[Itsme]

Originally Posted by ryeman

I am old enough to remember the kiwis denying US nuclear powered ships in their ports, the yanks tipped their hats to them for not being pushed around.

Has not done their economy any good.

[ryeman]

Originally Posted by trublu

Has not done their economy any good.

They aren't blessed with our iron ore, that's our permanent 'free kick' we can't pat ourselves on the back.
They have a population equal to just one of our major cities and their best keep gravitating to Bondi

[Itsme]

Originally Posted by mik

I have no doubt this is true, I spent many years carting imports off the wharf and in the back of thousands of containers unloading them , they were loaded with everthing imagineable,
scratching my head thinking why the hell are we buying this stuff from other countries when we could / should be easily make it here/grow it here, the only conclusion I could come up with is our own pollies have sold us down the river.

Quite correct... the real problem in this country is the politicians have got no guts to make real decisions that will benefit us & future generations.

So much waste with our tax money it beggars beyond belief, we will see riots in this country in the near future like the ones we see overseas.

[pottery beige]

the place has been ran by dh incorporated..

world economy is ****

lets tax our people and industries about some wierd theoretical gas effect.. still lol about all the propaganda in smoko room at the time and all our new jobs on windfarms..

world economy is ****

lets tax the only industry that seems to be doing ok the big bad miners.. real clever make us un competitive on world stage and big boys will **** off quicksmart.. watch for big holes in africa....

lols @ efforts to kill off live cattle trade ffs....

tariffs or free trade.. needs someone in bs castle with half a brain and balls to match to sort out

[Franco Cozzo]

Originally Posted by pottery beige

needs someone in bs castle with half a brain and balls to match to sort out

Would be career suicide to that person.

[Agile]

Originally Posted by Big Damo

Would be career suicide to that person.

You got that right. You have to remember the terms of there lifetime super plan. Two terms of parliament and they are home free, with a life time, untill death, with their snouts in the trough.

Cut and paste the link, stick it in an email to YOUR !!!!! local MP and give them an earful of how you feel. Or sit on your **** and do F all.

Very good artical. Bet he gets the DCM. Way too political for a car mag.

[FalconXV]

Originally Posted by pottery beige

the place has been ran by dh incorporated..

world economy is ****

lets tax our people and industries about some wierd theoretical gas effect.. still lol about all the propaganda in smoko room at the time and all our new jobs on windfarms..

world economy is ****

lets tax the only industry that seems to be doing ok the big bad miners.. real clever make us un competitive on world stage and big boys will **** off quicksmart.. watch for big holes in africa....

lols @ efforts to kill off live cattle trade ffs....

tariffs or free trade.. needs someone in bs castle with half a brain and balls to match to sort out

Don't blur the line between protectionism and a carbon/mining tax. It's about FTA/Tarrifs, and that's an bipartisan issue where neither of them can bend over quickly enough!

[GQ_Smooth]

I have to say, one of the most intelligent articles I have read on the subject, thank you reyman.

[GT-spec15]

Very good article and some excellent points made.

It's a shame we have let our industrial capability deteriorate as much as we have. Once the mining boom ends what will we fall back on?

Unfortunately for the Falcon, a range of issues have lead to its death, and the above issue is only one of them, so let's not use this as an excuse to simply 'blame the pollies' for the end of Ford production here.

[mik]

Originally Posted by GT-spec15

Very good article and some excellent points made.

It's a shame we have let our industrial capability deteriorate as much as we have. Once the mining boom ends what will we fall back on?

Unfortunately for the Falcon, a range of issues have lead to its death, and the above issue is only one of them, so let's not use this as an excuse to simply 'blame the pollies' for the end of Ford production here.

Agreed, but whatever the case, the sheer weight of massive import numbers means no way ............. not a chance in hell are local cars going to keep the big piece of the sales pie of years past.............. unless something changes that makes our cars much cheaper to manufacture , or they can export them by the thousands or both,
i`m not sure about toyota, they are very savvy and clever with their cars, they kit them out pretty good from the start then do very little to them for years except for cheaper incremental changes, and they are more often than not the cheaper to build front wheel drive, and probably have less local content?? so you would think they they would have a bit of extra margin to play with.

[GT-spec15]

Originally Posted by mik

Agreed, but whatever the case, the sheer weight of massive import numbers means no way ............. not a chance in hell are local cars going to keep the big piece of the sales pie of years past

The irony is that what is bad for Ford, is wonderful for the consumer.

We have far more choice in cars than we had in decades past, and foreign cars have become more affordable.

It really is a win for everyone except Falcon/Commodore faithful, who now represent a minority in the marketplace.

[ryeman]

I don't care about myself but I REALY feel for the assembly line members, it must be stressful in their families.

[mik]

Originally Posted by GT-spec15

The irony is that what is bad for Ford, is wonderful for the consumer.

We have far more choice in cars than we had in decades past, and foreign cars have become more affordable.

It really is a win for everyone except Falcon/Commodore faithful, who now represent a minority in the marketplace.

Perhaps , but even if circumstances change now for the better for our own cars i dont think that will really change as far as choice goes, if any thing it might just make our cars a bit more competitive in price, which certainly might be a win for local work force.

[GT-spec15]

Falcon does not have a price issue.

They are good value for money and look at something like the F6 - massive bang for buck compared to imported performance cars. The problem is not enough people want them anymore, and making them cheaper, or foreign cars a bit more expensive, won't change that.

[mik]

Originally Posted by GT-spec15

Falcon does not have a price issue.

They are good value for money and look at something like the F6 - massive bang for buck compared to imported performance cars. The problem is not enough people want them anymore, and making them cheaper, or foreign cars a bit more expensive, won't change that.

I don't know about that, i wouldn't be driving a 20 year old lexus and a 12 year old falcon if I could afford a new GT or an F6 .
In the lower wage bracket for a lot of people the F6 /GT would be way above means of many , and this where I reckon the poorer class of people are making the choice between even the cheapest of the full size cars like xts /omegas and buying a mazda or cheaper mid size car no matter how good the big cars are if people are cash strapped they will buy what they can afford, even if it is only a few thouand cheaper with interest it becomes more.

[Bearman]

We have signed away almost every trading advantage we had through these idiotic "free" trade agreements by successive governments. We cop it in the rear every time while those champions of the free world USA put punative tariffs on whatever the hell they like.

Early '90's a 20 odd percent tarrif was slapped on Aussie steel. Our gov't rolled over and now we have very few steel mills left. Just one example where we've just rolled over.

I also believe there's some trade agreements out there which places a legal obligation on us to buy citrus pulp from South America while our citrus growers plough in their orchards.

Something is very wrong indeed.