Bert Kelly, October 8, 1971. Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 117-19, as “Cheap Labour (2)”.
The other day I was grizzling away in parliament about the high duties on textiles and someone from the other side of the chamber interjected, “Don’t you believe in protecting us against imports from cheap labour countries?”
This rather floored me. I must admit that most interjections floor me. Often I think of some splendid answer: indeed I sometimes nearly kick the end out of the bath, laughing at my splendid replies. But this is usually about a month later, which rather spoils the effect.
This jibe about “cheap labour” was intended to hurt. A few years ago the word “black” would have been added to “cheap”. It is the justification used by many protectionists. What does it really imply?
We know that low money wages do not necessarily mean cheap real wages. But in many cases, real wages are often much higher in Australia than in Asian countries. The question is whether we should try to stop the importation of goods from these countries for this reason.
Let us take as an example the action of the government on shirts and knitted garments. The Minister made it clear that he thought the Tariff Board was right in principle to lower the duties, but to do this would mean exposing our industries to competition from Hong Kong, Taiwan, China and South Korea where labour costs are lower. So negotiations are to begin to limit imports from these countries.
Well, there are a few points that ought to be made. One is that Fred and his fellow farmers have to compete on equal terms in export markets with countries whose labour costs are less than ours. For instance, no one gives us more for our wool because our labour costs are higher than South Africa’s, or for our dried fruits when we sell in competition with Greece. It is evidently thought to be fair for Fred and his friends to compete on equal terms with cheap labour countries, but only if you have a farm and not a factory.
And, second point, if we limit imports from Asian countries, we limit their ability to buy from us. The greatest need of these countries is foreign exchange. An important reason they don’t buy more from us is that they just haven’t got the foreign exchange to do it.
In the case of these four countries, Hong Kong, Taiwan, China and South Korea, in 1970-71 we exported to them $203m worth of goods, yet we only bought from them $121m, leaving a balance in our favour of $82m. I wonder how much more they would have bought from us if we had bought more from them?
Thirdly, putting blocks in the channels of trade with Asian countries is always likely to unnecessarily irritate them even if they have the foreign exchange to buy our goods. I don’t think it would have been exactly helpful to the wool market to have the Australian manufacturers of woven man-made fibre cloth going to our best wool customer, Japan, earlier in the year, asking her to cut down on her supply of textiles to us; particularly when last year we sold to Japan $614m more goods than we bought from her. I hope Fred doesn’t get to hear about this.
Fourthly, everyone knows what industrialisation can do for a country. Again, look at Japan. A short while ago she was regarded as an undeveloped country, now she is our best customer. These other countries might one day become as good a customer as is Japan, if industrialisation is successful. We want it to be successful, but we don’t like buying the products of the process.
Fifthly, everyone knows that trade is indeed more important than aid, that aid alone destroys the morality and the economy of poor countries. So we urge self-help on them in eloquent speeches. But when they start to do it and to sell us something cheap, we say, “Oh, no, we didn’t mean that. Sell it to America or to the U.K., or to someone else. Not to us. We can’t allow our industries to meet the competition of cheap labour countries.”
So the next time that chap interjects across the chamber he will cop it between the eyes. All I need is time!
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