The Howard Government’s decision to freeze tariffs in the textile, clothing and footwear industries is the wrong decision made for the wrong reason. It is the wrong decision because if it protects any jobs, which is unlikely anyway, they will be poorly paid, unskilled jobs. It is the wrong reason because it panders to an ill-informed view of the tariff argument among ordinary voters that protection works.
The Productivity Commission had recommended that tariffs be cut to 5 per cent by 2008. Instead, the Government has decided to freeze tariffs at 25 per cent for clothing and finished textiles on July 1, 2000, when the round of reductions begun in 1992 ends. The freeze will continue until 2005 when the tariff will fall to 17.5 per cent. Slightly different regimes will apply to other parts of the TCF group. The Government will also provide various industry development incentives and funds.
One feature of the Government’s position has not had much attention. The regime announced in 1992 remains unchanged. Tariffs which were at 37 per cent last year and now at 34 per cent will continue to fall steadily in the next three years till they hit 25 per cent. In this regime several key manufacturers have moved off-shore. More will inevitably follow, irrespective of this week’s freeze. The fact is that Australia is uncompetitive internationally in this industry. The reason is that we do not pay people $30 a week to sew. Nor should we. We should be concentrating on things that we are better at, and things that will pay more.
In the face of such dismally low wages in parts of Asia, Australia would need huge tariffs and very low import quotas to enable the retail prices charged by domestic producers of clothes, textiles and footwear to compete with the price charge by overseas producers. Sure, it would mean a few semi-skilled workers would keep their jobs. But at what cost? The rest of population would be paying much more for their clothing. In effect a tax.
It would be better to spend that money developing industries that pay better and train more. Moreover, if Australians are paying much more for clothing, in order to prop up a few jobs here, they have less money to spend on other things. That money would go, in effect, to supporting other industry in Australia, most likely industry that pays its workers better for more fulfilling jobs than the textile and clothing industries provide.
At best the failure to cut textile tariffs shifts jobs from one industry to another. At worst it shifts jobs away from fulfilling highly paid ones to demeaning semi-skilled jobs in the textile, clothing and footwear industries.
Tariffs do not magically create jobs or magically preserve jobs. All they can do is shift jobs. That is why there may be some argument for a tariff regime in the automotive industry or better still some hi-tech industry employing highly educated and highly trained people. There is also a strong argument for providing money to seed and promote these industries. Then you would be shifting resources to more profitable parts of the economy.
But textiles? Why divert precious resources away from top-rank industries into low-rank ones?
Unless there is a vote in it, of course. It was the wrong decision for the wrong reason.