Decisions made by our elected representatives over many years have put the nation in an unenviable trade position.
Australia's shortsighted approach, rather than anything China has done, is the root cause of the supplicant two-way trade relationship we have blundered into.
China never asked us to destroy our strategic manufacturing sector, nor did it agree to always buy Australian resources and agricultural products.
China, like many other countries, will do what is in the best interest of its people and industries, and use its economic and political muscle to achieve that objective.
Sadly, that is the way emerging great powers have acted throughout history.
The demise of Australia’s strategic manufacturing sector, which has exposed the nation to increased security risks, is home grown.
For the past 25 years, Australian governments have blindly pursued a trade ideology devoid of any strategic oversight.
Consideration of supply chain disruptions caused by internal or external events never entered the minds of a political class wedded to the belief that economic globalisation was good and industry protection, of any kind, bad.
This doctrine forced our local manufacturers to compete against countries that turned a blind eye to intellectual property theft, provided massive subsidies and protection to their exporters, and had minimal safety or environmental standards.
Our political elite thought ‘a fair go’ meant Australian companies should compete against overseas manufacturers that used minors working in sweatshops.
There was little surprise when Australian manufacturers of machinery, white goods, medical equipment, motor vehicles, clothing, and footwear were effectively wiped out, leading to our current dependence on imports of strategic supplies.
The supply-chain disruptions resulting from COVID-19 have led Australia’s political class to express interest in revitalising the nation’s manufacturing sector.
Of course, that’s just political theatre to keep the electorate onside during this crisis.
In the real world, the Australian government led by Scott Morrison has no intention of cancelling the free trade agreements we have with our main trading partners.
It is also not going to unilaterally pull out of the World Trade Organization, which sets and arbitrates global trade. Nor is the government about to start raising tariff walls or provide massive subsidies to protect some locally produced goods that have been identified as critical to self-reliance.
The government could use the WTO’s national security exemptions to global trade rules to protect strategic manufacturing.
These provide WTO members some ability to take measures for the protection of their essential security interests.
Mandating the local manufacture of military hardware such as warships and munitions are examples of accepted exemptions to WTO rules.
Few WTO member countries have ever invoked national security exemptions for general industry, although the US used them to justify tariffs on imported steel and aluminium in 2018.
Unfortunately for the US, that is not working out too well, as the countries affected retaliated with their own tariffs on a range of US products.
The Australian government will be extremely hesitant to utilise WTO exemptions for products not related to defence without a very compelling security reason.
So, what is the Morrison government’s plan to build up strategic manufacturing in an environment where it continues to allow low-cost competing imports to flood into the country?
There isn’t one, and the recent talk about finding ways to lower energy costs to boost strategic manufacturing is just a strategy to use taxpayer money to subside gas and electricity costs for east coast voters.
Capital, labour, materials, government regulation, taxation, and access to markets are the key inputs that determine the competitiveness of elaborately transformed products, not energy.
Australia finds its industry ill-equipped for rising global disorder because our politicians failed to realise that some types of manufacturing provided social impact and strategic importance to the national economy.
Their recklessness in allowing all three Australian auto manufacturers to close between 2016 and 2017 was certainly the low point in terms of damaging the country’s strategic self-sufficiency.
They would have known, but did not care, that it was the auto industry’s ability to pivot its plant and workforce across to producing defence hardware that helped save Australia during WWII.
The loss of auto manufacturing, which directly employed 50,000 highly skilled workers, together with its advanced manufacturing techniques, technologies, and R&D, is incalculable to the nation’s security and represents the greatest breach of faith between our elected representatives and the people of Australia.
We would have to be gullible to now believe the people who kissed goodbye to our auto industry have seen the error of their ways and will implement policies that lead to a resurgence of Australia’s strategic manufacturing.
Instead, they will waste a couple of billion in taxpayers’ money over the next few years just so they appear to be supporting Australian manufacturing.
David Kobelke spent 15 years managing CCIWA’s Australian industry participation unit
