One of the many controversial policies of United States President Donald Trump is the imposition of import tariffs. I’ve noticed the publicity around his radical move is prompting people to re-visit the tariff conversation here in Australia. It’s important to remember always, import tariffs are a tax on our own consumers. That is, when a tariff is placed on a good imported into Australia it is passed through to the end customer. They were first introduced when the British were governing our colonies. By 1970, the drum beat for their reduction and eventual removal was growing much louder. Today, they have all but disappeared. In the early decades of the Federation, tariffs were both a source of government revenue and a means of protecting our manufacturing sector from imports. That seemed okay for a while, particularly during the period when higher prices for goods in Australia were partly off-set by centrally set award pay rates in Australia.
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But as the global economy opened up – driven by transport innovation, the emergence of new economies, and tariff reform in Europe and the Americas – Australia’s economy was becoming increasingly uncompetitive. Our manufacturing industry had grown to be inefficient behind the protection of tariff walls. Manufacturing firms were paying tariffs on their imported inputs to production, and were facing new, large competitors in newly emerging Asian counties. The manufacturing industries we’ve lost would have met the same fate even if tariffs were retained. To use just two examples, we could not compete with the makers of t-shirts in counties where the cost of labour is a fraction of what it is here, even with a tariff (or it would have to be a very large tariff). Our car manufacturing industry was too small.
In the mid-1990s we attempted to correct that by using taxpayers’ money to heavily fund a plan to give the sector an export focus. In other words, to grow its markets and to create economies of scale. It worked for a while but eventually, the fast-modernising countries of Asia started to build huge, modern car plants where the overwhelming majority of the customers are.
Australia is a trading island nation with a small population. It is in our interest for the global economy to remain open for business, not closed. A trade war between the US and China – the world’s two largest economies – will hurt us badly. It will also hurt the US in three ways.
First it will force up manufacturing costs because many of the inputs they use in production are imported and will now cost more. In recent months, hundreds of thousands of US companies have made application to the US Department of Commerce for an exemption from the new tariffs. Few have met with success.
Second, China is beginning to take retaliatory action by imposing its own new tariffs on US imports. Third, the US is a big exporter and as the protectionist contagion spreads, its own exporting companies will be adversely affected.
Finally, successive Australian Governments have worked hard to convince other countries to remove their tariffs on our exports. We celebrate loudly whenever we are successful. We can’t have it both ways, we can’t expect others to act and then go back to self-defeating import tariffs ourselves.
Congratulatory messages
My office can arrange for a congratulatory message to be sent to people celebrating their 50th, 60th and subsequent milestone wedding anniversaries as well as for their 90th and subsequent milestone birthdays. Call in to the office at 3 Edward Street Cessnock, phone 49911022 or email joel.fitzgibbon.mp@aph.gov.
