Protectionism

From The Australian

SEVEN of Australia’s biggest manufacturers will today demand a crackdown on the dumping of cheap Asian imports as part of a package of reforms to help the ailing manufacturing sector.

The Australian can reveal that chief executives from the seven companies will use a high-powered Manufacturing Australia summit in Sydney to ramp up their campaign to resurrect the sector by urging Labor and the Coalition to commit to an overhaul that targets four key areas of anti-dumping and industrial participation, industrial relations, access to energy and resources, and regulation.

This is going to be interesting – I’ve been invited to attend that very summit and am en route to Sydney. I hope there is more to it, otherwise I’ve wasted a day.

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45 Responses to Protectionism

  1. .

    Huh? Are cheap Asian imports illegal all of the sudden?

  2. johno

    Said it before and I’ll say it again. There are no justifications for industry welfare. These manufacturers are being unAustralian trying to deny their fellow Australians cheap imports that they themselves can’t deliver.

    Just disgusting. Boycott their products.

  3. .

    Let me guess

    Pacific Brands
    GM Holden
    Ford

    It will be interesting to see who turns up.

  4. daddy dave

    If they want Australian business to be competitive then we need to lower the cost of business. We need to make it easy for new entrants to get up and running and be successful.

    So what have these companies had to say about regulatory burden, labour flexibility and the cost of business in Australia?
    Nothing.
    Just “please give us money, you’ll get it back, we promise…”

  5. .

    I can’t believe we are jacking up the SCG without cutting or abolishing payroll tax.

  6. Rabz

    It’s been posted on the open thread, but the Nicholson cartoon on this topic is a cracker…

  7. Rococo Liberal

    Dot

    How do the Feds make the states drop payroll tax? The States’ revenue base is small enough as it is and will become smaller now stamp duties are being abolished on the sale of business assets and shares.

  8. .

    RL

    They have the Grate Negoshyater don’t they?

    I dunno, offer compensation indexed to PPI funded out of general revenue and make the SCG contingent on the removal of the State tax. Bastardry like that might work but I don’t really like it as it would complicate Federalism further. If they want the cash, stop welfare churn. That is a 90 bn pot. Personally I’d gut the NBN and Clean Energy Fund.

  9. papachango

    lets see them take this to its logical exension and try to ban all the gadgets that come from China and HK, such as iPhones, Wiis, flatscreen TVs.

    We’ll see how pouplar a ban on ‘cheap Asian imports’ is then.

  10. wreckage

    Australian big business: against imports, for higher barriers to entry! Nothing inconsistent about that, assuming “legislative capture” is considered as the motive.

  11. maurie

    After calling the German car “Australian” for so long
    & getting away with calling it a good product, I really think its about time a spade was called a spade. Keating did give Kodak $100m to set up here which they did for a little while… wonder what it would cost for GM to piss off. All Holden does is show the competitors how to get away with “A Really well planned obsolescence”. No one like a Labor Government can get disposable income & employment out of rural areas. A bit sad how youth unemployment & disillusionment seem to coincide with Labor terms!

  12. Cory Olsen

    German? I thought a large number of holdens were manufactured in Korea and Thailand?

  13. There are no justifications for industry welfare

    don’t agreee. when you have a hostile government destroying your industry, the claim of, but we get cheap prices doesn’t cut it.

  14. Cory Olsen

    Which hostile government would that be? GM = Government Motors?

  15. Peter Patton

    It’s the same with all this moaning about Coles and Woolies. Since when is $1 for a loaf of bread a bad thing?

  16. If you can’t see that for government to sit idly by while one hostile government sucks the lifeblood out of your manufacturing while another so called friendly government sucks the lifeblood out of your trade exposed sectors through currency debasement, then what you have is a religious argument with no basis in reality.

    Nero fiddles while rome burns

  17. .

    Irving let’s think about this.

    If you go to build a new factory, what tax rate will you face on construction?

    A $10 mn plant. How much of that was tax? So what is the tax rate on building a new plant?

    The is the radioactive woolly mammoth in the room no one talks about.

  18. Irony

    Rose Hancock. On a ABC media watch statement, stated that it was her wish to import cheap asian labor. It seems to be an irony that companies wish to quel the cheap asian imports but are happy to except cheap foriegn labor. Would it not be a good policy if these companies adopted Australian citizen first labor employment when they adopted a no cheap asian imports. Better minimum wages, and secure employment would be great as well.

  19. If you lose X% of your local jobs/business in order to get cheap goods from say china. The discount of the goods is less than the lost $ in jobs /business.

    So as a group, locally we have less buying power by some Y%.

    This results in downward pressure on wages and upward pressure on all other local prices, mostly the later. The former tend to fall off the bottom of the ladder to zero by hitting the minimum wages.

    The problem I have with this is that the libertarian answer to the plight of the little guy is bad luck. imo as long as that is the best freedom and liberty has to offer the little guy then the libertarian movement as a whole will always be relegated to the political sidelines.

    This is why socialists always gain traction in modern democracies, because even though they may be entirely wrong they have an answer that isn’t bad luck.

    It’s about time libertarians as a whole moved towards the center and have some better answer then bad luck little guy.

    The answer may not always be obvious, but in this case imo the answer is don’t let foreign governments trash your local economy to the benefit of theirs.

  20. .

    If you lose X% of your local jobs/business in order to get cheap goods from say china. The discount of the goods is less than the lost $ in jobs /business.

    So as a group, locally we have less buying power by some Y%.

    No.

    http://www.pc.gov.au/__data/assets/pdf_file/0011/25994/sub061.pdf

    Protectionism for cars basically screws over agriculture and services. Just read the intro and summary.

  21. and that especially applies to the US debasing its currency.

    imo the Australian government should defend its currency like Japan, Switzerland and other governments are doing against this artificial US dollar devaluation.

  22. Cory Olsen

    Even taking into consideration exchange rates there are just some things that Australia is not competitive at manufacturing- especially when compared to China (low cost of labour, low cost of energy, relatively well educated populace). Subsidising low quality mass production in Australia is not going to change things and will leave us all (including the little guy) worse off.

  23. Cory Olsen

    Not so long ago the luuviex were complaining that the Aussie dollar was too “weak”

  24. Most of these economic arguments lack proper systems thinking models. Most of the unintended consequences and flow through effects are not even well understood enough such that there isn’t even a consensus on the best economic policy.

    What is clear is that the effects of the artificial US dollar devaluation is *visible* and the effects of Chinese standard of living disparity and currency control has measurable effects on everyone else.

    Personally I don’t agree with big cash handouts to Holden or any other industry. On the other hand I don’t agree with currency manipulation to tip playing fields either.

    It’s one thing having business vs business it’s quite a different thing having business vs (business+government currency manipulation)

    However no one has ever addressed my point on the libertarian answer to bad luck little guy.

  25. .

    Most of the unintended consequences and flow through effects are not even well understood enough such that there isn’t even a consensus on the best economic policy.

    Really? What do you base that on? Trade is basically the one area of agreement amongst economists, theoretically and in terms of policy. It’s been done to death in theory and in practice with PE and GE models.

    However no one has ever addressed my point on the libertarian answer to bad luck little guy.

    That is not the answer, actually.

    The little guy ends up with a better chance of a getting a job in the first place and higher real wages.

    Who told you this stuff, Irving?

    imo the Australian government should defend its currency like Japan, Switzerland and other governments are doing against this artificial US dollar devaluation.

    …and what…inflate the shit out of our dollar?

    You would be putting many industries at a disadvantage to favour one. How does that help “the little guy”? You are putting many out of work to favour a few. Your argument makes no sense at all. It’s been proven wrong many times. Check out a trade economics text and look up a section explaining the costs of protectionism.

  26. Cory Olsen

    The little guy transitions to a profitable part of the economy or joins the public service/dole queue.

    If the government protects him from the realities of the market or scores like him the adjustment later will only be much worse.

  27. Unfortunately none of these answers have any appeal to the voting public.

    ldp: 0 seats.

    NZ ACT how many seats?

    Clearly the “you’re on your own” message is not a vote winner.

    and a persistence with the same old message of uncompromising individualism will result in zero seats at the next election.

  28. That is not the answer, actually.

    The little guy ends up with a better chance of a getting a job in the first place and higher real wages.

    well that’s not what the ldp policy list says, its first message is; you should be able to kill yourself and others should be able to help you.

    contrast with NZ ACT

    http://www.act.org.nz/policies

  29. the adjustment later will only be much worse

    Seriously doubt it, china is a stage managed dictatorship. What possible consequence are they facing “later”, that they are not going to simply ignore or force their way out of?

    Even if by some chance it does have a consequence “later”, what good is it to anyone anywhere now, if we are all long dead by the time it happens?

  30. .

    Irving we should have got two Senate seats last time but the Liberals and Fred Nile decided to play silly buggers and preference the Greens instead.

  31. .

    So what Irving? Civil liberties are important, just like free trade. We should just be the “Economics Nerds Party”?

  32. We should just be the “Economics Nerds Party”?

    You should be the party that has a voice in parliament not just a voice in the blogosphere.

    imo that means moving towards the center and compromising on certain key policies and being able to attract enough votes on your own merit.

  33. You would be putting many industries at a disadvantage to favour one. How does that help “the little guy”? You are putting many out of work to favour a few

    Hang on a sec. this is a false argument because the ground condition was no government intervention by either government. The first issue is the US debasing its currency to the benefit of its companies at the expense of ours.

    So for our government to match that devaluation would return the playing field to where it was.
    It’s not a case of benefiting one job over another locally; it’s a question of reversing an unfair distortion caused by a foreign government. If that distortion has benefited someone locally then it is not unfair to reverse that benefit, because it shouldn’t exist in the first place.

    So yes absolutely the government should sell aussie dollars till the rate returns back to a sensible position. Much the same as the Swiss do with euros and the printing the Japanese have just indicated they will do to combat the damage the artifically weak US is doing to the Japanese economy.

    Your answer is always the same, government should do nothing. How is this do nothing position even remotely centrist?

  34. Cory Olsen

    A stage managed dictatorship opened up to capitalism…

    Besides I am sure more than a few of their governments interventions will result in dire consequences later on. The one child policy and its effect on demography is one such example.

    Liberalism may not be a vote winner in a sense that voters always expect something for nothing (ignoring the true cost of a policy of handouts), doesn’t mean that the economic negative outcomes caused by ‘doing something” “think of the children” won’t prompt the little guy to vote for the other guys!

  35. Oh come on

    Irving: you’re making it up as you go along. I know you think it sounds logical but most of what you’re saying is patently incorrect.

    For a start, the USD is not artificially weak. If anything, it’s overvalued, because most export-oriented countries – mostly, but not exclusively in Asia – either peg their currencies at a cheap rate relative to the USD (eg China, Vietnam etc), or intervene through their central banks to mop up USD liquidity and push up demand, which boosts the value of the USD.

    Furthermore, quantitative easing is not undertaken with the aim of causing the relevant currency to depreciate, although that often happens. It’s generally done to encourage banks to lend more, or (in the case of Japan) to stave off deflation. And a cheaper currency is not an unmitigated Good Thing, as you appear to believe; there are winners and losers. Many companies and businesses are negatively affected by a weaker currency.

    Furthermore, if you don’t like the idea of QE, it’s not very smart to recommend that a country like Australia or Japan (particularly Japan, which has been carrying out QE for over a decade) engage in it in response to another country’s QE programme.

    And re: China, are you aware of the massive structural imbalances that are present in that economy? Let me give you a hint – last year, investment ran at something like 50% of GDP. We’re talking wild, wild misallocation of investment. Their banking sector is massively insolvent and is a ticking timebomb. The economic problems in China are so immense that it will be impossible for the government to just “ignore” or “force their way out of” them if (and when) they unravel. Which probably isn’t that far down the road.

    Regarding dumping – genuine dumping (that is, selling goods for less than the cost of production) benefits the buyer and screws the seller. In the case of China, if they really are dumping goods in Australia, then that’s a nice handout from the Chinese taxpayer (a private company isn’t going to sell goods for less than the cost of production for long) to the Australian consumer. Thanks very much for that. Most alleged cases of dumping are not actually dumping at all – it’s just a manifestation of the manufacturer’s competitive advantage.

  36. Oh come on

    the claim of, but we get cheap prices doesn’t cut it.

    No, you don’t get to make that decision for everyone else.

    And I’d love to see evidence for your claim that

    If you lose X% of your local jobs/business in order to get cheap goods from say china. The discount of the goods is less than the lost $ in jobs /business.

    If this were true, then it would make sense for us to re-erect all trade barriers and go back to the days when everything was Made In Australia, and usually badly. I wonder if AWA knows how to make LCD TVs?

    You seem to think we should engage in a little bit of protectionism. But that doesn’t make sense. If protecting our industries a bit makes us more money – as you claim above – then protecting them a lot will make us even more. But it is clear that the opposite is true. We are much richer now than in the days of tariffs and subsidies, and that’s not a coincidence.

  37. Oh come on

    Oh, and there’s a far, far more effective way for governments to stimulate business than by engaging in retaliatory (and self-defeating) trade wars, as you seem to want. They can hugely reduce the regulatory burden that businesses of all sizes are encumbered with at present. And they can cut taxes on the private sector, too. This will make the country a much more attractive place to do business, which will result in more investment, higher productivity and economic growth.

    You won’t get this through trade wars, however. Trade wars have quite the opposite effect.

  38. Furthermore, if you don’t like the idea of QE, it’s not very smart to recommend that a country like Australia or Japan (particularly Japan, which has been carrying out QE for over a decade) engage in it in response to another country’s QE programme.

    What, it’s just much smarter to just sit back and watch your economy turn to shit, because the theory tells us that can’t happen?

  39. And re: China, are you aware of the massive structural imbalances that are present in that economy? Let me give you a hint – last year, investment ran at something like 50% of GDP. We’re talking wild, wild misallocation of investment. Their banking sector is massively insolvent and is a ticking timebomb. The economic problems in China are so immense that it will be impossible for the government to just “ignore” or “force their way out of” them if (and when) they unravel. Which probably isn’t that far down the road.

    housing bubble? what housing bubble? there is no housing bubble:

    http://finance.yahoo.com/news/china-says-home-price-controls-041250904.html

    banks have a loan problem? er they are state owned. government has already printed more money to shore them up. problem? what problem?

    public opinion an issue? er no… not in china. everyone thinks china’s communists are the best thing since sticky rice

    http://www.theregister.co.uk/2012/03/13/china_weibo_censorship/

    consequences?? what consequences??

    do you think the totalitarians there are going to let a simple little thing like the “capitalism” or some little thing like “misallocation of money”, the supply of which they have grown at 30% a year release their grip on power?

  40. Cory Olsen

    And yet our economy is relatively strong, thanks in part to the liberalism of
    The Howard years.

  41. Oh come on

    Irving, you simply don’t know what you’re talking about. Sorry.

  42. Oh come on

    And your links prove nothing.

  43. Oh come on

    And seriously, Irving, just re-reading your last comment, it’s clear you really know nothing of what you speak.

    It’s all supposition.

  44. wreckage

    Trade protection is screwing the little guy. Example: multinational companies that manufacture farm chemicals in Oz get 5% tariff protection. The people they sell to, wheat farmers, get 0% tariff protection and represent more money, more jobs, more exports, more family businesses, and literally thousands more “little guys”. Protection of agricultural machinery manufacturers did exactly the same thing, and GUESS WHAT? The “protected” businesses ceased to exist anyway.

    Clearly – CLEARLY this protection is bullshit. End it all. End it now. It is nothing but the worst and most vicious “middle class welfare” ever devised; it’s not even for the middle class, it’s for the investor and political class.

    Wheat farmers were not permitted to keep our single desk (we wanted it, and it didn’t distort trade) we weren’t permitted to keep the AWB co. we’d put millions into (it was blocked from mergers, harassed by the parliament and finally sold off for less than its asset value), our wheat export quality control has gone to hell and is costing us markets, but big businesses that exist ONLY to supply us get 5% tariffs?

    The FUCK is going on here??

    Don’t give me some shit about saving jobs. Protectionism puts good people out of business to save us from dirty foreigners. The only possible justification is outright racism.

  45. Junko Potanovic

    So, there isn’t really much new after all!

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