The Guardian July 5, 2000


Productivity Commission:
Move to scrap tariffs "sooner rather than later"

by Kerry Ans

Both Labor and Liberal governments have pursued the "free" trade mantra and 
"competition policy". This has resulted in the substantial lowering of 
tariffs which, in turn, has led to the dismantling of many of Australia's 
former manufacturing industries. It is this which Mr Doug Cameron, the 
National Secretary of the AMWU complained of at the recent ACTU Congress  
300,000 jobs gone in manufacturing industries.

However, the recently released Productivity Commission's draft report 
states that most general tariffs are now fairly low and that there would 
still be some benefits to the Australian community from their complete 
removal. 

The main tariffs the report refers to are in the manufacturing sector, 
which are currently set around 5 percent. The higher tariff levels still in 
place in the passenger motor vehicle and textiles, clothing and footwear 
sectors were not part of this report.

The main arguments used for the conclusion that manufacturing tariffs 
should be removed next year are that even low tariffs add to the prices 
paid by consumers for manufactured goods and they reduce the international 
competitiveness of Australian firms. 

The claimed benefits from the complete elimination of remaining tariffs are 
improved purchasing power for households, removal of an area of complex and 
unwanted legislation on firms, and a strengthened international trade 
negotiating position for Australia.

In the international negotiations at the Uruguay round of the General 
Agreement on Trade and Tariffs (GATT) and then in the World Trade 
Organisation (WTO) which grew out of GATT, many governments (including 
Australia's Keating administration which  signed the final agreements) were 
convinced by the ideology of the "free" market, the so-called "level 
playing field" and "competition". 

Unfortunately, for the ordinary people these free market notions hide the 
reality of the powerful capitalist interests that lie behind the 
agreements. The agreements are used to dismantle and deregulate many 
institutional forms and enterprises which have been constructed over time 
to meet the particular economic, social and cultural needs of countries.

Whether or not "free trade" will suit a country depends on the 
circumstances of that country. Australia, for example, has a large land 
mass, most of which is marginally productive except for some coastal 
fringes and has huge communication and transport distances to overcome. 
These challenges were, to a great extent, overcome by particular 
institutional (including public sector) arrangements. 

Many of these arrangements were designed to deal with inequalities between 
people and regions, following successful campaigns by unions, small 
farmers, and progressive political parties and organisations. They gave our 
country a degree of economic independence in times of war and economic 
crises in other parts of the world and built Australia's economy to a high 
level.

The so-called "level playing field" of "free trade" is basically about 
dismantling and deregulating these arrangements with disastrous 
consequences for the manufacturing and clothing, textiles and footwear 
sectors of Australian industry.

Job losses

Between 1974 and 1999 there was a reduction in employment numbers in 
textiles, clothing and footwear by 53 percent, in transport equipment and 
machinery by 39 percent, and in metallic products by 29 percent  an 
overall reduction in employment in the manufacturing sector of just over 22 
percent. 

Whereas just under 24 percent of the workforce were employed in 
manufacturing in 1974, the figure was down to 12 percent in 1999. This is 
not because of a decline in productivity in the manufacturing sector. 
Productivity levels have increased as have the profits in the sector but 
this has not been shared with the wage earners in the manufacturing 
industries. Eighty two percent of Australia's workforce is now engaged in 
the service sector.

The social and economic dislocation caused by the decline of manufacturing 
employment has not been accounted for in the Productivity Commission's 
statement of costs faced by the sector. 

The report claims the main costs relate to "labour market adjustments" 
which will "peak" at $90m (don't you love the doublespeak!). The 
unemployment costs of which the report speaks, mainly includes the direct 
cost of unemployment benefits (for a minimum period of time) and re-
training. 

Full costs

The full costs in terms of social dislocation, loss of consumer demand in 
urban and rural areas with higher than average unemployment rates, the long 
term effects on people's health, the stress of losing one's job and facing 
a very difficult over-50s labour market, and the loss of manufacturing 
capacity, are ignored in the report. 

Consequence

The decline in the country's manufacturing base, results in a reliance on 
imports, which not only means loss of economic independence, but also means 
an escalating current account deficit as we import goods formerly made in 
Australia. This problem worsens when the exchange rate of the Australian 
dollar slides, as it has of late. It means we have to pay out more 
Australian dollars to purchase the same volume of imports. 

The decline in the manufacturing sector is a big contributing factor to the 
current crisis in the countryside. Enterprises that formerly provided 
employment in country towns have closed. Local people and local Councils 
have attempted to compensate by building up the service industries, 
particularly tourism and hospitality. These industries, however, are very 
reliant on good economic conditions in the region and in the rest of the 
world. 

Overall, country towns have suffered badly and as manufacturing enterprises 
contract, banks, telecommunications, Medicare centres, hospitals, etc also 
close.

Major reason

The major reason for the elimination of tariffs are made clear from an 
analysis of the Productivity Commission's claims  to enable finance 
capital a freer hand in restructuring those historically developed 
institutional arrangements in a way which better suits their purpose. The 
Productivity Commission's task is to legitimise the process as it carries 
out the work of the WTO and global capital.

A more socially conscious industry policy would rebuild those components of 
the manufacturing sector which are necessary to Australia's economic 
independence, keeping in mind the ecological effects and keeping these to a 
socially-agreed minimum. 

Such an industry policy would need to develop strong ties with democratic 
groups in other countries, notably in the Third World. This would recognise 
the right of industries and countries to trade protection where they have 
recognised the rights of labour to organise and raise living standards.

Back to index page