Australian Politics and Policy - Senior, 2019a

Australian Politics and Policy
Under protectionism, policy instruments were used to restrict the impact of
international competition. For example, secondary industries in Australia, such
as the textile, clothing and footwear and automotive manufacturing industries,
were protected by tariffs (government charges that increase the cost of cheaper,
imported goods) and quotas (government-imposed limits on the number of goods
imported). This approach to protecting domestic industries from international
competition is known as barrier protectionism. Protectionism was a major form of
industry policy in Australia and elsewhere from the end of the Second World War
until recently. However, beginning in the 1970s, and in the 1980s under the Hawke
government, Australia’s economy, following international trends, was increasingly
the subject of trade liberalisation and competition reform. 28 This meant that tariffs
and quotas were reduced or removed and domestic industries, particularly the
textile, clothing and footwear and automotive manufacturing industries, faced
increasing international competition. By the second decade of the 21st century,
cheaper labour costs overseas meant that Australian manufacturing declined and
continue to decline as a result of the end of protectionism. 29
One consequence of barrier protectionism for government–business relations
was the concentration of lobbying forces from both manufacturing companies and
the related trade unions. As these industries relied on government protection to
prosper, both capital and labour had an interest in the ongoing success of the
sector. The sunk costs of lobbying and compliance, in addition to higher wages
supported by inflated prices, provided little incentive for protected industries to
seek efficiencies. As international trends in trade liberalisation led to numerous
free trade agreements with other nations, other heavily subsidised sectors, such as
agriculture, were also subjected to competition. Debates over the benefits of free
trade versus protection continue as a result of the 2008–10 Global Financial Crisis
and, more recently, in the USA under the Trump administration. Nevertheless, there
is bipartisan agreement that Australia has prospered under trade liberalisation, with
the Department of Foreign Affairs under a Labor government admitting that:
The myth that lower tariffs destroy jobs has been debunked. Trade liberalisation
has made the economy more flexible. The number of people employed in Australia
in export-related activity in services such as finance, property and business
services is increasing. 30
Industry policy remains central to the government–business relationship,
although as Australia continues to enter into free trade agreements under the rulesbased
trading regime monitored by the World Trade Organization, the types of
policy instruments adopted have changed. Today, there are two major types of
28 Emmery 1999.
29 ABS 2018.
30 DFAT 2010, 34.
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