Hockey told ABC radio that the Coalition would not have secured its recent free trade agreements if the government hadn’t presided over the demise of local car manufacturing. (He’s quite correct on that point, but I doubt Australian car workers currently in the process of being retrenched will appreciate the fact they have been sacrificed in order for Australia to lock down an FTA with China and Korea.) The treasurer was quite clear that there would have been no free trade agreements if we hadn’t made the hard decisions on industry assistance at the beginning of the year. WHY DOES THIS MATTER? Because the most important contribution of manufacturing, beyond the direct provision of jobs and incomes, is to the Australian science and technology base. The link has become even closer as innovation is now the key competitive strategy of manufacturing firms, and innovation is increasingly based on exploiting the scientific frontier. Without a solid manufacturing base Australia will lose scientific and engineering capacity that has taken generations to nurture. Manufacturing directly employs one in every five engineers and many more indirectly as consultants (Institution of Engineers Australia, 2011). Australian manufacturing businesses allocate $4.5 billion each year to research and development expenditure, which is approximately one quarter of total private sector expenditure. This R&D employs scientists, engineers and skilled technicians, directed mostly at developing and adapting technologies to particular local needs. Such research areas and industries include metallurgy, industrial chemistry, renewable energy products, aerospace, micro-electronics, advanced materials (such as carbon fibre), advanced casting, machining and robotics, nanotechnology and biotechnology. Even more is spent on ‘non-R&D’ innovation, such as new business models, systems integration and high performance work and management practices, all of which have diffusion, or ‘spillover’, effects on other industries. Accelerating de-industrialisation will result in the nation going backwards technologically, resulting in diminished capacity for innovation. The skills developed by manufacturing industries are also core skills upon which every modern economy depends. The manufacturing sector trains engineers, technicians, welders, maintenance fitters, CAD designers, and machinists with the skills necessary to install and maintain our telecommunications, power stations, water plants and transport systems. Manufacturing is a net supplier of these skills to other industries, especially in the resources sector. Without it skill shortages would become more intense. Retaining these jobs, and seeking areas for potential future growth plays an important role in offsetting the dominant trend towards greater income inequality in Australia. Losing more manufacturing jobs will result in yet more ‘hollowing out’ of the income distribution. If mining is allowed to continue crowding out manufacturing management of the national economy will be more uncertain and volatile. Mining investment and commodity prices are by nature highly cyclical, causing the economy to swing between boom and bust. With each future mining boom other trade-exposed sectors can be expected to be put under further pressure. Australia will be locked into a risky carbon-intensive export base, particularly exports of coal and liquid natural gas. These industries could face technological redundancy as alternative energy sources are developed. These fuel exports will be threatened as other nations implement policies to limit their carbon emissions. The case for ‘free markets’ and ‘free trade’ trade has frequently been made, but rarely has rarely proved convincing. In reality governments globally are engaged in increasingly sophisticated industry policies, designed to attract overseas investment, nurture hi-tech ‘strategic’ industries, capture foreign intellectual property by either legal or illegal means, secure long run access to resources, manipulate exchange rates in their country’s favour and use the quid pro quo of diplomacy to enter new markets. The importance of manufacturing to Australia’s future suggests that to continue to ignore these processes and opportunities would be at our collective peril. There is a public interest, not only private interests, at stake.
Posted on: Sun, 28 Dec 2014 03:22:33 +0000
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