Bert Kelly, Speech on the second-readings of the Customs Tariffs Bill 1964, Australian House of Representatives, March 11, 1964

Mr KELLY (Wakefield). — Mr. Deputy Speaker, first, I protest strongly about the way in which these tariff measures have been brought before the House. In the dying hours of the last Parliament, several proposals, based on sixteen Tariff Board reports, were ratified until 30th June of this year. I cannot understand why legislation dealing with those proposals was not debated before the measures that we are now discussing. This situation, I think, is the result of either administrative incompetence or a cynical disregard of the rights of the Parliament. It is ridiculous to introduce legislative proposals based on the ten Tariff Board reports presented since the new Parliament met, and, for some reason, to suggest that it is impossible to legislate in respect of proposals that were the subject of reports that lay on the table during the last Parliament. This kind of treatment of the House is completetly wrong. I have often protested about having to deal with tariff proposals in large lumps. When the lumps are both large and stale, indigestion is the inevitable result. I think that these methods are completely wrong.

As this represents the first tariff debate in the new Parliament, I think it is right that, in a second-reading speech, I should lay down a few principles and make my position clear. On this question of protection, I regard myself as the opposition. I deeply regret that members of the Australian Labour Party do not take these tariff debates earnestly.

Mr Pollard — We do take them earnestly.

Mr KELLY — The honorable member gives no indication of it. Neither has the honorable member for Yarra (Dr. J. F. Cairns) given any indication of it in the speech that he has just made.

Mr Pollard — In every tariff debate, we take the proposals point by point.

Mr KELLY — Opposition members take part in tariff debates, but no one can say that they do so to great depth. I regret that members of the Labour Party fail to do their homework in these matters. We have heard from them nothing about what they believe in, except that they believe in protection. But so do we all. The question is: How much protection should be given and what form should it take? I find that in these matters as in so many others, Sir, members of the Labour Party just mouth their old parrot cries instead of doing the homework that should be done.

What is wrong with this Government’s protection policy? As I have said, I regard myself as the opposition in these matters.

I must admit immediately that I find myself in some difficulty, because I do not know for certain what the Government’s policy is. When I came into politics in 1958, this Government’s policy was based on the protection of economic and efficient industries, on the advice of an independent Tariff Board. We have since seen the impact of the emergency protection procedures and the two policy statements of 1962, one made by the present Minister for Trade and Industry (Mr. McEwen), who was then Minister for Trade, and the other made by the Prime Minister (Sir Robert Menzies). Even those two statements have not cleared my mind, and I doubt whether the Government really understands what its policy is.

Let us look at these two statements of policy in more detail. The present Minister for Trade and Industry, in his second-reading speech on the Tariff Board Bill (No. 2) 1962, made some observations that I have quoted before and shall quote again. He said:

The Tariff Board, for its part, has a vital and important role in advising the Government in this direction. Obviously the board in effectively carrying out its advisory duties must keep within its sights the objectives of Government policy — the objectives I have outlined in my remarks today and as given in Government statements from time to time.

In the debate that followed on that occasion, Sir, I expressed alarm at the fact that the old measuring stick of economy and efficiency was to be discarded, and at the fact that the board was to be expected to keep within its sights statements of policy made from time to time. I said that this must mean that the board was expected, and must be prepared, to depart from its previous policy of protecting only economic and efficient industries. If the Minister’s statement did not mean that, I do not know what it did mean. On 1st December, 1962, the Prime Minister, in his John Storey Memorial Lecture, dealt with the subject again. He discussed what he called national economic policy, the need for continuing migration, the development of old and new resources, the encouragement of capital investment from sources inside and outside Australia and the need for stability of costs so that export industries could compete on the world’s markets. Then he went on to say that surely the Tariff Board should properly keep these matters in mind when making its recommendations.

Apart from these two important policy statements, whatever they may mean, there has been also the impact of the emergency protective procedures. I admit that some such procedures were needed. What I find objectionable in the procedures adopted — I have often voiced this objection here — is the way in which they are frequently used to override the recommendations made in Tariff Board reports. The honorable member for Yarra, when discussing some of these things to-day, probably did not realize that the reports to which he was referring followed closely on reports made by special advisory authorities. There are many examples of this. I have given the House many of them before. Probably the worst of the lot is the way in which recommendations concerning the man-made fibre piece goods industry have been shuttled backwards and forwards. All this shuttling necessarily weakens the morale and the status of the Tariff Board when it sees that its recommendations, though only recently made, are altered by the Special Advisory Authority, even though the imports situation has not changed.

So it is clear that there has been a change in the old policy that protection should be granted only to economic and efficient industries on the advice of a truly independent Tariff Board. The board’s independence is now imperilled by the impact of the emergency protection procedures and by the knowledge that it is expected to keep within its sights policy statements made from time to time. This can mean only that the old policy of protection for economic and efficient industries has been changed. What is the new policy? That is far from clear. I challenge the Government to give us a clear statement of its policy. The policy used to be protection for economic and efficient industries, but this kind of protection is not thought to be suitable for modern times. What kind of protection are we to have now? Should we have protection for industries that create employment or protection for industries that lead to development? Is the tariff to be used to promote decentralization, to encourage profitable investment or to strengthen industries that offer the hope of future exports? If the old measuring stick of economy and efficiency is to be abandoned, the purpose must be one of these that I have just mentioned.

Let us examine these possibilities in more detail. Let us look at the employment factor first. We are always told that we must generously protect secondary industry because only secondary industry can employ our people. But this is not so. Primary industry, because of mechanization and the need to cut costs to the bone, does not loom very large as an employer of labour, but indirectly it creates considerable employment further along the production line. But leaving primary industry aside, it is just not true to say that it is only secondary industry that can employ our increasing population. The most recent figures — I have cited them before, but I shall do so again — show that about 12 per cent, of our work force is employed in primary industry, 27 per cent, in secondary industry and 61 per cent, in the service industries. The proportion employed in the service industries, as indeed is the case in other countries with a rising standard of living, is increasing.

We recognize that the Government has the right to expect that any agency — the Tariff Board included — should not hinder a national policy such as full employment. But it is essential that the Tariff Board has full freedom in deciding how this objective is to be achieved. It is dangerously easy to point to increased employment in any particular industry, following high and, perhaps, prohibitive protection, but what about employment provided by dependent industry — the industries that use the goods produced by the heavily protected industries, and ultimately by the export industries that have to sell on the world market? If the position of these industries is jeopardized the employment position may very well become worse.

We all want full employment, but what we must guard against is the attempt to secure this by allowing costs to rise in any particular industry to the general detriment of our whole economy. This is where the independence and the competence of the Tariff Board are so essential. Let us grant that secondary industry is important to employment, even if not so important as some of the rabid protectionists would have us believe; yet, only about 60 per cent, of secondary industry depends in any way on the tariff; the rest of it can exist without tariff protection at all. These are industries like brickmaking and others that have a natural protection. In the final analysis the employment of only 15 per cent, of our work force depends on the tariff. It can be claimed that the tariff may decrease employment in a particular industry more than it increases it. For instance, in 1962 about 200,000 persons were employed in the motor car industry. Of these, 60,000 were employed in making cars and 140,000 in servicing cars. If cars were cheaper I guess there would be more people engaged in servicing them.

It is clear, therefore, that employment does not depend on higher tariffs. If it did, what a hopeless mess we would get into. It would mean that we would deliberately encourage industries which used a lot of labour — and this in a country where there is a great shortage of skilled people. Many of our secondary industries are economic and efficient just because they have learned to economize on labour. The steel industry is a shining example of this. What a strange philosophy it would be if, with this shining example before us, we were deliberately to encourage industries which use a lot of Jabour? ls the new policy, whatever it is, to be aimed at inducing growth and development? We are inclined to roll these words “growth and development” around our tongues these days. They are something in which we all believe. We say “Let us have a new policy to fit our new aspiration”. But is it a new aspiration? What about our past performances? Are they so shoddy? Was it not the determination to grow and develop that sent the Duracks shuttling across the continent? Was it not that determination that sent forth our forefathers to clear country with a stout heart and a sharp axe? Was it not this determination that pushed the Broken Hill Proprietary Company Limited along the path of sound development? One would think that development was a new idea that had just occurred to us, but in this field of protection for industry have we not grown and developed under the old policy? After all, is not a greater proportion of our work force employed in secondary industry than is the case in the United States of America.

What a hopeless philosophy it would be to discard the measuring stick of economy and efficiency in order to promote growth? What kind of growth do we want? Do we want uneconomic, inefficient, or hot-house growth? Is this the kind of development that we have in mind? Let us be clear on this: This is not the kind of development that has made this country what it is. This is the kind of growth that will surely inhibit sound development in the future. To load costs onto the back of the efficient sector of the economy — primary or secondary — in order to protect inefficient primary or secondary industry is just plain economic foolishness.

This is not just my idea. I suppose that politicians, as such, are suspicious of economists, as such, because economists are inclined to state their opinions in rather bald terms. There is some suspicion between us, I suppose, but on an economic question such as the height of the tariff wall in relation to development surely we should pay some heed to the economists. Have honorable members heard one reputable economist say that I am wrong in my insistence that to depart from the old standard of economy and efficiency would be disastrous? Indeed, in my whole campaign for a more realistic approach to protection I have not heard one word of criticism from an economist, but I have had a lot of quiet encouragement. If I am wrong all the economists are wrong, and if we are wrong some one ought to tell us why.

Just recently there was published by the Stanford Research Institute of the United States of America a report on the development of Australia. It was commissioned by the Australian Development Research Foundation. I have found the report a stimulating document, and certainly no one can say that it is dull or conservative. Its whole theme is how to develop Australia. I think honorable members will agree that I am engaged in a rather lonely exercise, and that therefore it is proper that I should draw on authorities from outside. I quote from the report:

If the social objectives of economic policy outlined above are accepted, as they must be, the case for re-examining the costs of indiscriminative tariff protection becomes very strong indeed. It is particularly strong on employment and wage grounds. In Australia, as elsewhere, the trend of employment is towards the tertiary industries and services. As technology improves, a smaller proportion of the work force is required to produce food and raw materials. The proportion of employment in the secondary manufacturing industries also tends to shrink. More and more employment must be sought in the provision of services, which in recent years have expanded at three times the rate of factory employment. To pay for such services, production in the basic primary and secondary industries must be efficient, and this cannot be achieved by spreading employment among a large number of small-scale, relatively less-efficient industries whose costs hamper the expansion of the large-scale, high-wage, capital-intensive enterprises.

I am in good company when I question the wisdom of discarding economy and efficiency as a stepping stone towards sound development.

Is the new policy expected to take particular account of decentralization of industry? For instance, are duties to be higher to protect those industries that are centred in a country town? This suggestion, of course, is attractive on the surface, but we should remember that, under the Constitution, a duty has to be the same all over Australia. Duties that are high enough to protect an industry in a country town may very well be too high for, and may over-protect, an industry in the city. There would be a natural pull for the industry to go to the city so that even greater profits could be made.

Or is the new policy, whatever it is, to encourage the export of products of secondary industry? There is much to be said for this because obviously primary industry cannot continue to shoulder the loads it has so manfully shouldered in the past. It seems a queer way to do it, if it is to be done by increasing protection and so sheltering industry from the chill wind of the competitive world which it is shortly to invade. One would have thought that a gradual process of acclimatization would have been better suited.

I have examined the various alternatives to the old “economic and efficient” policy of protection, and feel that, if adopted, they will do more harm than good. But maybe I have done the Government an injustice in this respect. It may have other policies in mind. My plea is that I be told what they are. I have a suspicion that the Government’s real policy is a determination to be loved by all; like Caesar’s wife, to be all things to all men. It is this desire to be loved that has led us into a shuttle system, with references and re-references fluttering to and from the Tariff Board and the Special Advisory Authority. It is probably this hunger for love and affection that has led to the change in the grounds for granting emergency protection. When this provision was introduced into the Parliament, we were told that the idea was to prevent imports flooding in and destroying local industry. But if one looks at the recent reference for emergency protection for woollen piece goods, one finds a difference. It was not the fact that imports were coming in that was of concern; it was the fear that they might come in and so force prices down to what, to some mills, seemed to be unprofitable levels. Evidently we are not only to guarantee the local mills a market; we must also guarantee them a profitable market. I want to know what manufacturers of woollen goods have that wool-growers have not.

Let us look at the broader canvas. This is important at this stage. Let us look at our own international trade negotiations. No one denies that the Minister for Trade and Industry (Mr. McEwen) is a most competent negotiator. But sometimes there does not seem to be much logic in the procedure. It is very fitting to castigate European countries for putting barriers in the way of our exports to them, but it must be confusing to them to be told in ringing tones that because Australia is a developing country we must reserve the right to put barriers in the way of their exports to us. The next week we are told that some other spokesman has implored European countries to cease regarding us as a land of sheep and kangaroos and to remember that we have a greater proportion of our work force engaged in secondary industry than has the United States of America.

In a speech last week in the House, the Minister for Trade and Industry dealt with this kind of question and pointed out the difficulties that the developing countries have with this matter of a fluctuating demand for exports. He went on to say that it was most important that developing countries should not have barriers put in the way of their trade. Perhaps he had in mind the barriers that we have put in the way of imports of cotton piece goods from India. In any case, can we properly be bracketed with India as an undeveloped country? As I said, we have a greater percentage of our work force engaged in secondary industry than has the United States. It takes a bit of nerve also to describe the capital cities of Australia as undeveloped. They always seem to me to be a bit over-developed.

I am aware that there is much development yet to be done in Australia, but it is this very policy of protection that has aided lopsided development, helped to make the cities bigger and increased the problems of developing the undeveloped areas. It seems a queer kind of philosophy to increase the dosages of the very ingredient that has led to the trouble. Is it really proper for Australia to bracket herself with India in the class of undeveloped countries? Have we the same problems? Have we people sleeping in our streets? Is democracy here being tried in the fires of ignorance, prejudice and poverty? We all know that we have one of the highest standards of living in the world. To try to attract world sympathy for ourselves because of our poverty is, I think, hardly fitting for a country that is so eloquent in claiming credit for its achievements.

The dilemma of how we are to regard ourselves in the future will be more important with the Kennedy Round of tariff negotiations coming up. We have been welcoming this prospect for years. If we can only get access to markets in Europe and America for goods for which we have natural advantages, then the really economic sectors of our industry will take a big step forward. We all know this, and no one knows it better than does the Minister for Trade and Industry, who has battled with great energy to this end for years. But surely the chances of success in this will be jeopardized if, at the same time, we say that we are not prepared to allow competition to threaten some of our uneconomic industries. If the Government tries to court the love and affection of all groups in Australia in relation to these negotiations, then we might as well stop home and turn our backs on all our hopes and aspirations for a really sound economy.

I shall not look any further for examples of the determination of the Government to be loved by all, if that is indeed its policy. But if this is its policy, I want to add a grim word of warning. We have all heard of the awful fate — worse than death, I understand — of the girl who could not say “No”. The same thing can happen to our economy if we do not draw the line somewhere, if we do not say, “No” to some one. There must be some principles to work to, some guide lines to be laid down. The Government has discarded the old guide line that industry must be economic and efficient. That was the policy which operated when I came into the Parliament. It is the policy that is written into the platforms of the Liberal Party and the Australian Country Party. That is the policy in which I believe. But this policy has been changed, and the Tariff Board is now expected to keep its ear to the ground and, at the same time, keep within its sights other policies as announced from time to time. This rather cramped posture does not make for clear thinking. Perhaps I have done the Government an injustice on this. All I want to know is: What is the Government’s policy?

I have one thought in conclusion. In the committee stage of the consideration of the bills, I shall debate some of the items — not many, you will be glad to know, Mr. Speaker — in some detail. I could speak on more, but I do not think that if I were to do so, it would be fair to the House or to myself. Because I speak only on the most glaring instances, the idea has got around that I am a free trader. I have denied this often and I shall do so again. I believe in a soundly-based protective system with the assistance of a truly independent tariff board. It is the fear that this independence is being lost and our successful previous policy is being changed that alarms me. Above all, I am sick of being accused of being a little Australian, one who does not believe in the development of our great country. Just because I am a fanatical believer in development, I want to make sure that development is soundly based.

I am well aware that development in the primary or secondary field is not an easy exercise; it is easier to talk about than to achieve. I know that difficult and expensive decisions have to be made by private industries and governments. Those decisions have to be made by some one. I know that as well as do other honorable members. But difficulties are made to be overcome by governments as well as by individuals. The difficulties do not become less by being ignored or by the Government’s acting in the expectation, or the hope, of being loved by all.