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industry protection + innovation « Previous | |Next »
April 6, 2008

I'm not sure that it's a black and white issue of tariff and protection versus free trade any more now that the Australian economy has been integrated with the global one. Mitsubishi's closure in Australia showed that manufacturing needs to get smart and export to survive and ensure global competitiveness and innovative capacity.

There seemed little point in going back to protecting industries, behind tariff barriers to "save" Mitsubishi. As this shows protectionism may lead to short-term gains, it ultimately leads to longer term pain, reducing firm competitiveness, global outlook and innovative capacity. The reduction in tariffs under Paul Keating's prime ministership continues to one of Labor's approach to economic reform.

Yet the debate is still being framed in terms of protection versus free trade or open markets with the finger often pointed at neo-liberalism:

Economicrationalism.jpg Spooner

The common criticism is that neo-liberals see manufacturing as an industry in decline; or that Australian manufacturing is fundamentally uncompetitive with the vast manufacturing capacity and low cost structures of China, India and others. Thus Mitsubishi.

Australia has few distinct comparative advantages in the motor vehicle industry. Its domestic market is small, it is a long way from major markets and the fundamental industry structure remains based on assembly and distribution to the domestic market, notwithstanding some excellent performance, albeit on a minuscule scale by global standards, in export markets.

Does this overlooks the possibility of ‘new manufacturing’ within the global economic environment that is based on new forms of innovation, new opportunities for internationalisation and new ways of capturing the productivity advantages.

I presume that building globally-oriented businesses is an objective in the industry development policy of the Rudd government. An example is the $2 Billion Green Car Partnership, which involves investing $500 million in a “Green Car Innovation Fund” designed to generate $2 billion in investment to support innovation in vehicle technology which reduces emissions.

However, it is not clear that this technology-push initiative approach can stem the decline in the underlying comparative advantage of a motor vehicle industries in developed nations. Is it Is it subsidising "green" technology development for the motor industry?

| Posted by Gary Sauer-Thompson at 10:06 AM | | Comments (2)


the economic rationalists do deserve a serve as they can end up in a strange position.

Thus the Institute of Public Affairs estimates that policies designed to reduce energy use are already costing around $3 billion a year, including mandatory renewable energy targets ($840 million), the five-star housing energy efficiency measures, which add between $7000 and $14,000 to the cost of a house and a range of climate change related programs from the Environment Department costing $500 million.

So energy efficiency is bad because it costs more. Why isn't this cost balanced by the benefits of --reduced energy consumption.

Kim Carr is backing Toyota to produce a hybrid green car to be manufactured in Australia.