Trade talks
BY MARTON PETTENDY | 15th Apr 2008
Federal small business minister Craig Emerson used last Wednesday’s Federal Chamber of Automotive Industries (FCAI) annual general meeting to warn local car-makers and importers to prepare for lower import tariffs.
Speaking at a dinner the same day, which was also attended by deputy prime minister Julia Gillard, FCAI president John Conomos said the federal government needed to be more demanding than the previous Liberal government when it came to negotiating free trade agreements (FTAs).
Mr Conomos’ comments came as prime minister Kevin Rudd prepared to raise the possibility of signing an FTA with China, among other discussions with China’s premier Wen Jiabao the following day.
Mr Conomos said the former Howard government’s brokering of the FTA with Thailand in January 2005 had not delivered “genuine reciprocal sales access” to that nation, which continues to impose prohibitive sales taxes on imported large cars, preventing exports from Australian car-makers. Meantime, Toyota’s Thai-built HiLux was the third-biggest-selling vehicle in Australia (as well as the most popular vehicle in Queensland) last year, when the country’s most popular vehicle brand imported some 47,000 examples.
Toyota Motor Corporation, via executive vice-president Tokuichi Uranishi, made headlines last October when it said the future of vehicle manufacturing in Australia was at stake due to the strength of the Australian dollar and called for the government to hold the current import tariff at 10 per cent, instead of dropping it to five per cent as scheduled in 2010.
Australia's tariffs are the lowest of any car manufacturing country and, with 50 different brands in the market, is generally considered to be the most competitive.
Now Mr Conomos, who is also Toyota Australia’s chairman emeritus, has urged the Rudd government not to enter into new FTAs that result in “one-way traffic”.
“The chamber welcomes the initiative of the new federal government in investigating the development of further expansion opportunities along with the comprehensive review of the arrangements for the future of our domestic industry,” he said.
“The outcome is essential to the future of the industry. We welcome the Green Car initiative of the Rudd government and we look forward to hammering out the details of this milestone opportunity which has the potential to move Australia onto the front foot of global development of alternative energies.
“It is impossible to understate the potential positive impact this can deliver.
“In our submission to the review committee headed by Steve Bracks, we will be seeking to articulate a clear vision with long term horizons.
“In doing so the Chamber's objective is to achieve a shared vision between local manufacturers and importers.
“Within the FCAI we will seek a consensus on those critical issues which form the platform for the continued growth of the industry. Pursuit of sectional interests is not likely to achieve that goal.
“The Australian motor industry – once insulated and isolated – is staking its claim to being an integral part of the global manufacturing matrix. And it’s that global outlook which should be a focus of the review.
“The view sometimes expressed in the media that we are seeking to shore up the domestic industry is completely out of touch with contemporary requirement.
“We seek to create the ongoing means by which a healthy Australian industry can compete on equal terms with the rest of the world. It is a question of balance.
“A targeted investment program, the current ACIS program, will be pivotal in building on current levels of competitiveness.
“It creates the environment in which local manufacturers can further build on their IP (intellectual property) skills, and in which they continue to develop new and world leading technologies.
“But equally we believe this new government must be more demanding in its negotiation of free trade agreements.
“The attainment of genuine reciprocal sales access is paramount to our success in export markets.
“To consider further cutting tariffs without agreed reciprocity can only adversely affect our global market position.
“The pursuit of that goal desirably should extend also to non tariff trade barriers, not only in FTA negotiations but between other countries as well,” said Mr Conomos, who told ABC radio the following day (April 10) that “As a manufacturer of passenger cars in this country, we are currently not able to participate in any sort of volume sales within the Thai nation.” Speaking to Alison Caldwell on the same program, chief of the Australian vehicle Importers’ Group, Lindsay Smalley, who is also the senior director of Honda Australia, defended sales taxes in Thailand, where his parent company produces Jazz, Civic, Accord and CR-V models.
“At the end of last year, 80 per cent of new vehicles sales in Australia were actually imported. I think it is certainly creating a lot of challenges for the Australian car industry which they're stepping up to the plate.
“What we see in Thailand is a government strongly committed to the best possible environmental outcomes - certainly making it more difficult in the marketplace for people to own large, heavy fuel consumption vehicles.
“The types of cars that we manufacture in Australia don't generally fit into that marketplace,” said Mr Smalley.
However, Mr Conomos went on to say that it is likely global events beyond the Australian industry’s control will neutralise the tariff debate.
“As an industry we have to come to terms with the federal government’s determination to pursue an outcome from the Doha round of WTO (World Trade Organisation) talks.
“All indications are that it has become a key trade priority, and our industry needs to be realistic and be ready to adapt. If successful the Doha round will see further reductions in tariffs, and Australia will be bound by those reforms.
“The tariff issue is no obstacle to achieving an outcome to the industry review,” said.
The comments by Mr Conomos and Mr Smalley followed a warning from Dr Emerson to the automotive manufacturing industry to expect lower tariffs and to cease its reliance on government assistance.
“It's not for me to pre-empt the present review,” he said. “But I can tell you for sure that tariffs won't be going back up.
“And, surely, in doing your investment planning - your cash-flow analysis - you will need to factor in a scenario of them continuing to fall.” Senator Carr, who bypassed the Productivity Commission by establishing reviews for both the automotive and textile industries and creating the $500 Green Car fund, says that tariffs should continue to play a role. But Dr Emerson appeared to add weight to one faction within government, which includes treasurer Wayne Swan and finance minister Lindsay Tanner, who have resisted industry minister Kim Carr’s push for continued support for car-makers and say that tariffs are a burden on the economy.
“Now that tariff rates are down to 10 per cent, some parts of the industry are again arguing that they must be frozen. “Some are also arguing that the Automotive Competitiveness and Investment Scheme (ACIS) should be increased. What I would say to you in the strongest terms is this: there is a review under way. “We encourage your active participation. But we urge you to make your submissions on the basis of hard evidence.
“Components whose manufacture embodies high levels of innovation and skills, such as sophisticated electronics used in modern cars, are more likely to be candidates for competitive production in Australia than those relying on low-cost labour or on large-scale manufacturing processes,” he said.
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