Three-part 1986 Bert Kelly series on the political process
(which is a nice extension to his 1980 feather bed series)
1. “The politics of protection”
2. “Bitter experience and learning economic laws”
3. “Same old song from the TCF”
Bert Kelly, “The politics of protection,”
The Australian, November 10, 1986, p. 17.
The textile, clothing and footwear industries (TCF) are mounting their usual campaign to frighten the Hawke Government from accepting the IAC (Industries Assistance Commission) report on their industries.
Listening to them you would think that their protection was about to be slashed to ribbons tomorrow, but I think the IAC treated them far too leniently.
It recommended the sections with very high rates of protection, 134 per cent and above, should gradually have their tariffs reduced, beginning in January 1989 and reducing to 50 per cent in 1996. So the really highly protected ones would have 10 years from now to learn to stand on their own feet, though they would have to cling to the rest of us even then, with a 50 per cent duty.
Those with low protection would not have to face any reduction in protection until after 1996. Yet they are now squealing like stuck pigs. Wouldn’t farmers love to get such kid glove treatment.
The TCF Council have learnt from experience that politicians usually run to water if the pressure groups squeal loudly enough. In 1980, when the TCF Council was then facing a reduction in protection, they mounted a campaign as strident and as badly based as now and they scared the daylights out of the Fraser government which ran to water. So high protection was continued and the inevitable changes that must be made one day were postponed. Now the council wants them postponed again.
Both parties in the Fraser government were eloquent in their belief in lowering trade barriers. Whenever the National Party talked to farmers they made powerful speeches about their determination to reduce farmers’ tariff burdens but they went to water when the TCF Council huffed at them. Mr Fraser, the Liberal leader, used to lecture to the world about the dangers of trade barriers when he was overseas and even spoke softly on the subject on his return. Yet he and his Liberal wimps ran to water with the National Party when the TCF Council beat its drum.
In 1980, when the TCF question was before the Fraser Cabinet and the TCF Council’s list of marginal seats containing TCF factories was read out, that was sufficient to frighten the government. So the Fraser government did what they knew was wrong in order to hang on to some marginal seats. But who owns these seats now? Almost all of them are in Labor hands in spite of the Fraser government’s surrender. And why did this happen? I think it was mainly because the electorate ceased to believe what the Fraser government told them, not only about tariffs but other matters also.
In an article written by Paul Malone in the Canberra Times on October 25, he spells out the seats the Hawke Government might lose if it does not give in to the present TCF council campaign: Bendigo, Ballarat, Calare and Hunter are non-metropolitan seats that are said to be likely to be lost. Well, I remind the Hawke Government that the Fraser government went down the road of giving in to TCF pressure to devastating results. The electorate simply ceased to believe what we said. This is not surprising because we didn’t either. We are still trying to recover our self-respect.
Although the TCF Council is behaving as they did in 1980 there are many individual manufacturers who do not agree with its attitude. I quote from a letter in the Financial Review on October 27, written by Mr Barry Williams, managing director of Williams the Shoemen, who make shoes in Carlton.
He says: “It was Malcolm Fraser who ducked any tough decisions on the TCF industries in that years (1980). Australia has paid dearly ever since. But this time we have a different team which has already demonstrated a wealth of political courage in the tough industry policy decisions — steel, cars and heavy engineering. And a highly responsible and conscientious minister rightly described as neither New Right or New Left but simply as the Federal Government’s brightest and best.”
As a Liberal, I should not pay such a tribute to Senator Button however much it is deserved. But I cannot help worrying about where Liberal MPs in State and Federal Parliament stand on the TCF question this time around. I know that the Federal Opposition parties have an industry policy that speaks quite firmly about the benefits that would follow a gradual but certain lowering of trade barriers. Indeed it is so good I sometimes think that Eccles might have had a hand in it. Yet as soon as the TFC Council begins campaigning to prevent such a gradual but certain reduction, we find Liberal wimps running to water just as they did in 1980.
David Trebeck, who was then working for the National Farmers Federation, once said sourly: “Everyone is in favour of tariff reductions so long as they do not actually happen.”
I wonder where today’s Liberals stand on this question, on the parapet fighting for their professional policy or in the water, shivering.
Bert Kelly, “Bitter experience and learning economic laws,”
The Australian, November 17, 1986, p. 9.
Eccles is a queer cuss. He is pigheaded and self-opinionated and I get awfully sick at him for nagging at me and everyone else, but he resolutely refuses to take the credit for the way the tariff wind has gone round.
“It is not me, Bert, and it is certainly not you. Neither of us have made people aware that tariffs do not create employment,” he says sourly.
“It is when people see that employment falls most in the heavily protected industries that they realise that they have been barking up the wrong tree. We have not changed people’s ideas, it is bitter experience.”
Eccles is not above saying I told you so when his prophesies are fulfilled, but he still gives the credit to economic laws, which he says always win in the end. That is why good economists are always unpopular. They tell us what we do not want to hear.
Eccles illustrated his argument by reminding me how in 1981, when the Fraser government was about to reduce the protection on cars, GM-H mounted a quite unfair campaign to stop it. The car maker placed a big advertisement claiming that 200,000 people would be flung out of work if protection were reduced. As there were only 79,000 employment in the car and component industries, this was clearly nonsense. However, it frightened the Fraser government which gave in, so GM-H won that battle and has been going downhill ever since because the company was not then forced to make the adjustments that bitter experience is now forcing it to make.
In 1980 the textile, clothing and footwear (TCF) industries mounted a powerful campaign to scare the Fraser government from reducing TCF protection. The Fraser government gave in without a struggle so the TCF group won that battle and has been going downhill ever since. There is a powerful economic law which says that if the price of a good goes up, the demand for it goes down.
Mavis could have told the Government that and she hasn’t got an economics degree, only an old sewing machine. Now the TCF people are at it again, trying to stop the Hawke Government giving them the medicine they one day will have to take to make them healthy so that they will not continue to need the $1 billion support we have to give them each year. To put it another way, we have to subsidise each person in the TCF group at a rate of $200 a week so that the industries will not have to face the trauma of change.
I am glad to find that there are some employers in the TCF group who do not believe the nonsense that their association puts out. Last week I quoted from a letter by Mr Barry Williams, a footwear manufacturer in Melbourne. I quote him again. He says: “About 50 footwear manufacturers make about 80 per cent of the total industry’s local production. Ten of them account for close to 60 per cent of its total employment. For the footwear industry at least, the increasingly shrill claims by an odd collection of bedfellows that ‘massive job losses’ will be the inevitable consequence of lower tariffs are just nonsense.”
An odd collection of bedfellows indeed: I would have been too nervous to say that.
Now let us hear from one of the best clothing manufacturers in the business. Mr David Jones, managing director of Fletcher Jones and Staff, which has an enviable reputation all round Australia, also seems a bit sceptical about the TCF’s claim that 60,000 jobs will be lost if the Government does what the Industries Assistance Commission recommends.
I quote him: “The scaremonger’s line of ‘60,000 jobs at risk’ is authorised primarily by a selfish and insular coalition of unimaginative managements wedded to the status quo and slick entrepreneurs who have made a new art form of rorting the present mish-mash of tariff and quota protection for the industry.”
If I had spoken so disrespectfully about unimaginative managements and slick entrepreneurs people would have said I was unkind, though Blind Freddy has known for years about the rackets that abound in the TCF area.
Then Jones faces the future that so terrifies the TCF Association. He says: “The IAC recommended that the TCF industries should have the same quota and tariff mix of protection for another six or seven years before proposed changes begin to bite. But why fiddle while Rome burns? Others aren’t waiting to make a judgment about this country’s future. Their valuation of our currency has already given manufacturers the bonus of an additional 30 to 40 per cent protection. Let’s not waste the extra windfall.”
So clearly there are some TCF people who are prepared to face the trauma of change. I warn the rest of them, the chicken-hearted ones, that they too will have to do this eventually. Economic laws always win in the end. If in doubt, ask GM-H.
Bert Kelly, “Same old song from the TCF,”
The Australian, November 24, 1986, p. 7.
Before we had bulk handlers for our grain, the worst job on our farm was sewing the wheat bags.
City people probably think this would be an easy task, just a matter of climbing along the top of a heap of bags and quickly stitching them closed.
But it was not like that at all. Each bag had to be shaken down and then rammed full. You were really working to sew 200 bags in a day and the heat, the flies and the boredom were soul-destroying. I remember our relief when a portable radio allowed us to listen to the cricket. Fred says that he once even listened to Parliament.
Now we have bulk handling the memory of my unhappiness is fading and I have difficulty in holding the attention of my grandchildren when I tell them how hard I used to work.
They do not know how lucky they are because I feel sure that if our farmer organisations had had an attitude like that of the textile, clothing and footwear (TCF) industries, my grandsons would still be sewing bags and, in these days of affirmative action, my granddaughter might be also.
You can imagine the case which our organisation could have mounted if they had followed the pattern set by the car makers or the TCF people. “Look at the 200,000 bag sewers who will be flung out of work,” they would have sobbed, copying the GM-H advertisement. Or, using the TCF model, they would have pleaded pathetically for things to remain the same.
I suppose they would have tried to classify bag sewers as outworkers so we could then be kept under union control.
Lest you think this is just a nightmare, consider this statement by former prime minister Malcolm Fraser in February 1977. He said: “Because of rising labour costs, employers were tending to use machines rather than people in the production process. If tariff protection for Australian industry was reduced, this trend would worsen. The Government has worked to ensure that the push for lower tariff levels would not continue.”
I do not think that Mr Fraser was prepared to go quite as far as the Luddites in England in 1811: he did not advocate smashing up the power looms so that virtuous women could continue to weave contentedly in their cottages, but at least he was prepared to do what he could to discourage TCF manufacturers using more machinery in the effort to become more competitive.
So you can see that I am not imagining things when I say that my grandchildren do not know how lucky they are not to be condemned to sew bags forever.
Of course, we would have had problems in competing with farmers in other countries who had been encouraged to change with the times, but I suppose we could have confidently expected to get the same generous subsidy treatment as the TCF people get, that is, $1 billion every year.
The main plank in the TCF’s attack on the Industry Assistance Commission’s (IAC) recommendations is the effect on unemployment. There are about 110,000 people engaged in those industries and the IAC says that if the recommendations were adopted, employment would fall by about 20,000 by 1996. The TCF people are said to be broadly in agreement with these figures but they also contend that a further 30,000 people will be lost during this period through productivity changes.
I am uncertain whether or not they want these productivity changes stopped. Mr Fraser is not here to advise them now.
Using the IAC’s figures for jobs lost between now and 1996 — and these are more likely to be right than the TCF figures — (remember the GM-H advertisement) employment in the TCF group would fall at the rate of 3000 a year for seven years. Yet about 30,000 people leave the TCF industries each year now.
However, we would still be losing employment at the rate of 3000 a year.
“What are you going to do about these poor people, you hard-hearted monster?” the TCF people snarl.
I have to admit not knowing exactly where each of these displaced 3000 will be employed but I do know that, over the past eight years, while employment in the TCF industries fell by 16,000, employment in Australia rose by 800,000, so I guess some of the 3000 displaced people would fit in somewhere there.
Remember what Williams the shoemaker said: “For the footwear industry, at least, the increasingly shrill claims by an odd collection of bedfellows that massive job losses will be the inevitable consequence of lower tariffs are just nonsense.”
If the Hawke government gives in to this TCF pressure, it will be judged as being as gutless as the Fraser government — and that is not a nice thing to say.
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