With slowing growth in the BRICS and the underwhelming recovery in the U.S., many nations around the world are looking to free trade. Australia, among others, has been negotiating agreements with Asia, forming the Trans-Pacific Partnership.
Paul Krugman wrote a famous paper in the 1990s outlining the myths surrounding the Asian miracle of the 20th century. Rather than it being a ‘miracle’, he presented a less dazzling critique of Asia’s economic success. He proposed that it was a combination of stringent government policy and the further adoption of free trade that was key to sustaining economic growth in East Asia. Most of this growth occurred in eight economies, collectively referred to as the High Performing Asian Economies (HPAEs) – Japan, Hong Kong, the Republic of Korea, Singapore, Taiwan, and the newly industrializing Indonesia, Malaysia, and Thailand . The relationship between public policy and economic growth is now more important than ever, and in light of the continuing economic crisis in Europe, there are a number of lessons to be learnt from the success of the HPAEs.
Welcome to the third and final installment of my series on the history of protectionist policies in Australia! My first article sketched out the political economy theories that can be used to analyse the rationales of protectionist policies, whilst the second outlined the key events in trade protection over the 20th century. This article takes us back to the first principles of economics as we explore the economic arguments for protectionism that were presented during that era. We also consider the primary causes of tariff reform in the 1980s and the potential reasons for their lasting impact.
The Federal government announced recently that they will continue to support the Australian car industry through ‘co-investment’ – i.e. through tax-payer funded direct subsidies to industry. This is funneling money to multinational co-operations so they can maintain production of Holdens and Fords in Australia. All this is for one reason – to protect Australian car manufacturing jobs.
The government argues that this investment is important to maintain a car manufacturing industry in Australia, and if there no support, they would cease producing locally-made cars. For example, the government granted $34 million in subsidies to the Ford Plant in Melbourne to keep it running until 2016. Decisions such as this have been branded as important to Australia’s ‘national interest’, a clever political line to justify protectionist policy initiatives.
I was watching an episode of one of my favourite political TV shows, The Drum (Mon-Fri, ABC News 24 at 6pm) when Dick Smith was introduced as the program guest. I watched with bewilderment as Smith began ranting and raving – it went something like this:
“(without the GST revenue from electronic retail sales) we won’t have the money to pay decent wages to our nurses…our police, you won’t be able fund the ABC in a decent way, this money is gone forever.”