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Australian Auto Shutdown a Consequence of One-Way Trade Policy

More than two years after all three automakers in Australia announced they were closing down their manufacturing activities here, the shutdown of the entire industry is now at hand.  That last Australian-made Ford car rolled off the assembly line in Broadmeadows, Victoria last week.  Holden and Toyota factories will close next year.  Despite their long foreshadowing, the impending closures will exact a huge economic and social toll on autoworkers, their communities, and the national economy.

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One aspect of the industry’s demise that must be acknowledged (not least so that its lessons can be applied to other sectors) is the impact of Australia’s unilateral liberalisation in automotive trade on the industry’s footprint here.  As part of their general acceptance of the logic of globalisation, Australian policy-makers (both Labor and Coalition) oversaw a dramatic reduction of barriers to automotive imports beginning in the 1980s.  This consisted of large reductions in the most-favoured nation vehicle tariff (which fell from 57.5% in 1985 to just 5% by 2011, making it one of the lowest MFN tariffs of any country); the elimination of other restrictions on vehicle imports (like quotas or permitting); and the implementation of bilateral free trade agreements with several auto manufacturing countries (thus providing their vehicles tariff-free access to the Australian market).

Every chapter in this liberalisation – from the so-called “Button Plan” in 1984, to the “Bracks Plan” in 2008, to the negotiation of FTAs with the U.S., Thailand, Korea, Japan, and China – featured confident predictions that liberalisation would facilitate the export-oriented rationalisation of Australian auto production.  Instead of producing small runs of vehicles aimed largely at domestic consumers, free trade advocates predicted trade liberalisation would prod domestic producers to reorient production toward global markets, achieving economies of scale and higher total output.  Of course, another outcome was possible: with disincentives for imports mostly eliminated, global OEMs might simply choose to serve Australia’s lucrative vehicle market from offshore production, rather than producing anything in Australia at all.

Unfortunately, that is exactly what occurred. Read more from JIM STANFORD

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