A Modest Farmer [Bert Kelly], “If we do tamper with tariffs, let’s do it well,”
The Australian Financial Review, March 28, 1980, p. 13.
Reprinted in Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 185-87, as “Government Intervention.”

Recently I spoke about tariff protection on the same platform as a secondary industry leader. I am often startled at the level of economic ignorance of many of the captains of industry but this chap wasn’t like that. He had a degree in economics and I am more modest than ever in the presence of such people. In the course of his argument justifying tariffs he spoke scathingly about (and I wrote it down to be sure) “the unreality of governments trying to tamper with industry development.”

When he said this there was a murmur of approbation because we all thought it was a splendid thing to say. There were some farmers in the audience and we always pride ourselves on our independence unless there is a super subsidy or similar handout kicking around. There were many secondary industry people there and these muttered scornfully at the suggestion that the government should “tamper with industry development”. “What could the government know about running a factory?” they asked querulously, “What a laughable idea!” Then we all had a little giggle together about it.

And if it had been a Liberal Party meeting we would have done more than giggle. As true Liberals, dedicated to the ideal of free enterprise, we would have almost certainly passed a motion condemning the very idea that the government should have the audacity, nay, the wickedness, to tamper with industrial development.

As most people now know, my mental processes are slow and I was half way home before I suddenly realised that the highly educated defender of the tariff system was talking through his hat when he criticised governments for tampering with industrial development, because indeed a tariff is such a tampering. By imposing a tariff to protect an industry from import competition, the government tampers with the market situation, it switches demand from imports to local products. Then during the rest of his speech, the speaker kept asking for even more tariff tampering. I wish I had been quick enough to point it out at the time.

Because we are not a free trade country, the government continually tampers with industry by awarding, or withdrawing, tariff protection. So if we have to tamper, we should try to do it well.

The final responsibility of how much tariff assistance an industry should receive rests with the government. Many years ago this was done by Ministers advised in private by their departments. But this was found to place too great a responsibility on a Minister who may have found it hard to resist a plea for more protection for a factory in his electorate, or, if he held a rural seat, the pressure from his farmers who resented having to pay the price for protecting factories in other electorates. So the Tariff Board system was instituted. The Board heard sworn public evidence and then gave its advice to the Minister in a public report and then the government made its decision. Then the Industries Assistance Commission (I.A.C.) took over from the Tariff Board and this is the system we have now to try to make the government tampering as wise as possible, if tampering there has to be.

Even the most rabid protectionists recognise that there are costs as well as benefits incurred in protecting an industry and it is the I.A.C.’s heavy responsibility to measure both. When the I.A.C. do this they are frequently denigrated by all kinds of people. You could expect this behaviour from people in the outer but when the men in the Members Stand do it also, we are in a mess. There is a bullying streak in many of the good and great these days. The Prime Minister has one and so has the Premier of Victoria and the Deputy Leader of the Opposition in Canberra. These people, when kicking with the wind of uninformed public opinion behind them, are inclined to beat the living daylights out of the I.A.C. if it doesn’t give its milk down and slosh protection around all over the place, doing damage to other industries in the process.

The next I.A.C. report on textiles looms close and may be out before this column is printed. When it does appear, bitter experience has taught me to expect the usual tirade of abuse for the I.A.C. when it spells out the costs as well as the benefits of protecting the industry.

The Roman emperors discouraged messengers telling them what they did not want to hear by cutting off their heads. This caused the emperors to make many silly mistakes. If the government has to continue to tamper with industry, it is important that they continue to be told what they may not want to hear. This is less likely if we go on as we are.