Australia: Nice Work If You Were Able To Get It

Australia, Business, China, Company Strategy, Economics, Philippines

By John Richardson

Roadsign1BACK in the late 1990s, the blog held a discussion with an Australian petrochemicals industry executive. He described his country’s approach to free trade, or rather the lack of it, as “to put it politely, naïve, and to put is less politely, plain stupid.”

He was referring to how Australia had aggressively cut back on import tariffs on the assumption that its neighbouring trading nations would play fair.

Instead, state subsidies for manufacturing continued to be the order of the day across Asia. Manufacturing sectors, from refining through to petrochemicals and finished goods were rapidly expanded, resulting in cost efficiencies that put Australia firmly in the shade.

Even such a sparsely populated, geographically isolated country such as Australia increasingly became the victim of low-cost surplus production from Asia. In the absence of any government that seemed able to fully grasp what was going on and, thus respond with a coordinated and sensible industrial policy, Australian industry’s fallback position became numerous anti-dumping and safeguard duty petitions.

Back then, though, the gradual erosion of Australian manufacturing didn’t, in terms of the whole economy, really matter that much as there were plenty of other jobs to go around.

And even those whose jobs were directly affected weren’t always unhappy. For example, people in the plastics processing industry whinged a lot, sure. But provided they had bought shares in resources companies, and invested at the right time in the property market bubble, they were ahead in the overall deal.

Not now, though. The resources boom is over and so a 16-year-old can no longer leave school without any qualifications and walk straight into a Aus$90,000 a year job driving a truck at a mine.

We heard a story the other week of a guy who worked on traffic control on one of the mining projects. All he had to do was stand at a road junction and operate a hand-held sign that said “Stop” on one side and “Go” on the other. He was paid Aus$100,000 a year.

Meanwhile, 25% of Filipinos earn less than US$1.25 a day. Here’s the link to the UNICEF appeal for Typhoon Haiyan.

Thus, as Asian economies seek a larger slice of a smaller overall global economic cake, trade protectionism is going to increase and regional trading blocs, supported quite possibly by heavy investment from China, will grow in importance.

First of all, though, we have to get used to the idea that we are, indeed, in a lower-growth world. Only then can we move forward.

In a series of blog posts over the next few days and weeks, we shall look at the risks ahead for countries such as Australia as protectionism increases and markets become less global and more regional.

And, of course, as always, we shall place this firmly into the context of the chemicals industry.

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