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Monday, 22 March 1999
Page: 3965

Mr McARTHUR (8:24 PM) —I have listened with some interest to the member for Sydney's remarks, and I thought her well-researched and thoughtful remarks worthy of comment. I just wonder what side of the fence she is coming down on—whether she is in favour of a competitive low tariff position in the TCF industry. I particularly noted her discussions about Professor Porter—`The Competition Advantage of Nations' I think was his work—and those activities in the northern part of Italy. I commend her for those thoughts on the development of a competitive situation in the textile industry—the Italian nation competing with Australia at world's best practice. It is interesting that a member of the Labor Party representing Sydney would express those views. Hopefully in the longer term all of us will express this type of attitude that the TCF industry can compete internationally with new technology, with a better work force.

I notice that the member for Sydney always reverted to the outworker argument—that they have been exploited. Obviously in the long run if we are to retain this industry their conditions will improve—if the industry becomes competitive, if the industry has a quality product. As her thesis demonstrated, in northern Italy as those smaller units competed one against another without the interference of tariff barriers, they were able to develop a world competitive industry. I thought they were interesting remarks coming from the opposition.

I remind the House that in the tariff debates over the last 10 years when the government members were in opposition we tended to support the Button plan because we knew that in the longer term it would be a good thing for Australia. The Textile, Clothing and Footwear Strategic Investment Program Bill 1999 and the Customs Tariff Amendment Bill (No. 1) 1999 , as other members have said, really end the TCF and automobile debate on tariffs. The government has put in position a set of arrangements to bring us closer to being globally and sustainably internationally competitive by the year 2004. It has bipartisan support, and I note the member for Sydney was clear that they would not vote against the bill. That is unlike some of the statements issued by the members of the opposition during the recent campaign—and, in particular, from the member for Hotham, who supported the Keating government on lowering the tariff regime and yet has reverted to his former trade union position of maintaining a high tariff barrier.

Australia's international action plan as submitted to APEC commits to universal tariff reductions through to the year 2000. The former Labor government were committed to the APEC general reduction of tariff regimes. Each APEC member has committed to reporting annually on the initiatives to achieve these goals, and Australia must play its part in this gradual reduction of the tariff wall. If we have a look at the 1997 TCF report of the Industry Commission, where this whole debate was looked at very carefully—industry people were interviewed; there were on-site discussions—we would see that yet again the argument about high tariffs, middle tariffs and low tariffs was debated by all the players.

By the mid-1980s assistance had peaked to some 250 per cent—and the member for Sydney would appreciate the significance of that in view of her philosophic statements in her speech to the House. This was a very high level of protection, and yet that was defended by some members on the other side of the parliament. Over many years people had said that that was the way to go. It was out of step with other countries around the world.

Why did we need the reform of the TCF industries? That debate has been on both sides of the parliament. Even though the TCF industry did get some restructuring under both governments, it still remained the most highly assisted sector. The farmers and the exporters—as you, Mr Deputy Speaker Causley, would understand—certainly paid the price for this very high protection regime and the wages and salaries that were paid to this sector. It was imperative to get the tariffs down in the longer term to ensure that the industry survived and continued to make a genuine economic contribution to the economy. This legislation helps to bring about a modernisation of the TCF sector and many of those factories that some of us have visited needed this injection of capital. The bill is part of this ongoing reform process that was initiated by former Senator Button in the 1980s and 1990s.

Basically, the world will be moving to a free trade environment by the year 2010. Most of those advocates of a restricted trade arrangement should be very aware of that. Australia must play its part in moving all its industries to a free trade environment. APEC's Bogor declaration of November 1994 commits APEC economies to `free and open trade investment' no later than 2020. Our near trading neighbours will be moving towards a better and freer trading arrangement, which is a benefit to both parties. I think we should make that clear at this stage of the debate.

As some members in this House would be aware, in the electorate of Corangamite in the Geelong region there was a great debate about the automobile industry and the level of tariff in that industry. Likewise, there were some TCF industries. The question is often asked: why would you eliminate tariffs? Tariff protection, as the late Bert Kelly, the modest former honourable member for Wakefield, said on numerous occasions—no relation to the Minister for Sport and Tourism at the table but of a similar quality—leads to lack of innovation and efficiency. The industries are protected from international competition and they tend to remain static. They do not improve. They do not grow. Eventually products—be they TCF products, be they automobiles, be they trucks—become so inferior or expensive that people, even in Australia, do not want to buy them to the extent that some of these industries can no longer survive. So if you have less production, inevitably you lose jobs.

The fundamental argument you hear in the pubs and around these protected industries is that we did not want to have unfair competition from low wage countries. All I can say is that in the longer run these countries will build up their wage levels. We need to maintain our technology and we need to maintain our quality so we can keep our industries here in Australia, be they the automobile industry or TCF industries. What the tariffs have done and what has been demonstrated quite clearly is that they entrench uncompetitive practices, lack of investment and lack of technical change. As the honourable member for Sydney indicated, you get these difficulties without proper work practices.

The Industry Commission report of 1997 was comprehensive, setting out the state of the industry and the types of activities that were being undertaken. The commissioners on that inquiry were John Cosgrove, an economist with the World Bank with treasury experience, Professor Richard Snape, who has an academic background, and Philip Brass, who was the industry representative. I want to put on the public record that in my assess ment these commissioners did an outstanding job. They talked to members of the industry. They understood it. They provided a total report. There were no dissenting statements, as was the case in the auto commission report. They made recommendations to government, backed up by the experience they had. I note that Philip Brass was an industry participant. He was in the textile industry in his own right, yet was prepared to understand the arguments and to put his name to the recommendations of that particular report.

They made it clear that there were inconsistent and often exceptionally high tariff levels across the board—some had high, some had low. For instance, in 1996 cotton fabric had 23 per cent tariff, men's pullovers had 37 per cent tariff, and leather footwear had 27 per cent tariff—more than double the European and US tariff levels on those items. What was the rationale for maintaining those tariffs? Why were they so varied? Their total report indicated the difficulties of maintaining these tariff walls in an international, globally competitive position.

If we look at this finale to the whole debate we see that the trend has been for tariff reduction since Senator Button, within the Hawke government, initiated some commendable changes. The Button car plan suggested that the tariff would be reduced within the range of 60 per cent to 15 per cent, which I think is running at this moment. The opposition at that time acted very responsibly in supporting this gradual reduction of the tariff regime both in the TCF and car industries. This legislation puts the final touch to it. We notice that members of the opposition are not going to vote against it. Again I reiterate my concern that the member for Hotham did revert to his high tariff regime attitude when most of his colleagues in government advocated quite strongly that tariffs needed to come down in the long term.

Senator Button, who remains a force for interesting thinking amongst the Labor Party and, as I say, should be given considerable credit for bringing about a change in attitude in a traditionally protectionist party, was recently on the public record saying that he hoped Labor would get out of its `quiescent mindlessness' that it found itself in in this whole debate. On the one hand, Labor wanted to revert to its protectionist stance. On the other hand, the more sensible members of the opposition know that the world has moved on, that tariffs can no longer protect jobs.

Even the member for Melbourne, who is close to the textile industry, has written a book indicating our globalisation. My philosophical friend on the other side of the parliament the member for Werriwa is clearly on the public record saying that tariffs have not protected jobs, that we need to make the changes and that we need to bring down the tariff barrier which does affect a lot of other industries because of the benchmark standards that have been set historically by the engineering component of the automobile industry and, in the case of the big number of textile workers who used to be employed, they set basic wage benchmarks that were unhelpful to those other export industries.

As former Senator Button said publicly, most of us realise that the Labor Party have lost the stomach for real economic reform. They proved that during the debate in the recent election. In 1985 they advocated tax reform and yet in the last election they were against the very proposals that former Treasurer Paul Keating put forward in reforming the tax system. The argument that we should not reduce tariffs because there is no level playing field is absolutely not true. We know the playing field is not level out there, but we know that Australia needs to compete in the best way it can. We are seeing some wonderful results with the car industry now being world competitive in quality, price and profitability.

We are seeing wonderful results in all of those key indicators so that, in the longer run, those industries will remain in Australia; likewise the TCF industry. There are those industries which remain and which made the investment because they saw that with new technology they could compete in some areas with other nations around the world. The other key feature of the tariff reduction means that those industries which have invested capital become export focused. They start to concentrate on those markets overseas where they can make a dollar.

If we look at this legislation and the rationale behind it, we see that it gives time for the TCF industries to adjust. That has always been the catchcry. The government did make that concession with the downward movement of the tariff regime. This bill allows the minister to formulate a TCF Strategic Investment Program to enable it to design and manufacture grants that would help in a number of areas. These areas include new plant and building, research and development, which is a key area, value adding, second-hand plant and assistance with industry reconfiguration. The bill also allows the minister to make supplementation to the Regional Assistance Program for strategic investment where there is a clear need for employee assistance in regional areas and where productivity and efficiency gains can be made. The government is giving the minister a chance to make some of these investments in the R&D area in regional Australia where those companies have shown some initiative, have brought in new programs and are showing the potential to export and be profitable.

By the year 2000 there will be a 25 per cent tariff on clothing and a 15 per cent tariff on footwear and many intermediate textiles. Those levels will be frozen until the year 2004. The investment program will assist the levels of protection by giving the participants in the industry time to adjust so that they can develop some of these exports. By 2004 the exchange rate will be the key determinant of the protection level of some of these industries rather than the tariff itself. I know that members of this House would be aware of that argument, but that will be the key determinant. The pause until 2005 will allow another reappraisal by the government of the day to further examine the tariff position, but it will be at a lower base. The argument will not have the heat it has had on this particular occasion.

Restructuring will hopefully take place during the implementation of this bill. The government is spending $700 million to help with the plants and buildings and, as I say, the R&D. There are a number of technical details of where and how the money is being spent, as set out in the bill. There is a cap on the TCF value adding grants which ensures that no particular company gets more than it should and that the minister has the discretion. There is a requirement in the bill that strategic business plans must be prepared. The companies need to have that onward export outlook so that they can participate in the assistance from the government in the rearrangement of the way in which the TCF industries are run.

Importantly, this bill requires the industries involved to put up a case to show that they are sustainable and that they need some assistance from the government. I am quite confident that the process will work out because Minister Minchin understands these arguments very clearly. He will be there to assist the industries to make good rather than continue to prop up those that are there for historical purposes. Between 1988-89 and 1995-96 TCF exports grew by 44 per cent. That is an interesting figure. As the tariff reduction reduced, the TCF industries exported more. That is quite a surprising result. I have no doubt that some of my friends on the other side would argue with that, but there are the facts. These industries have developed some niche markets and have done a pretty good job.

This legislation will help to make the TCF industries more viable. It will help some of those factories, which a number of us have visited over the years, to put in new machinery and to bring about some new practices. They know that they are in a world competitive market, that they have to get a good product, that they have to sell and that they have to meet the standards of the Australian market, which is not easy because Australians can now import some of these quality products from overseas. This bill, in a philosophical sense, is a very important milestone in that we have moved this tariff protected industry into the global market.

The member for Sydney is really conceding that point. The TCF and motor car industries are moving away from their base in the industrial suburbs of Melbourne. I notice that the next speaker for the opposition comes from that part of the world and has been involved in those debates. I can fully understand the political pressures put on members of parliament on both sides to maintain the jobs of those large work forces under one roof, come hell or high water. That has all changed. The attitude of mind in Australia from the policy makers and both sides of this parliament is that these industries need to be internationally competitive. With a bit of assistance from the government, I am sure they can complete the task and bring about this dramatic sea change so that all industries in Australia will meet the world market on a competitive price basis and on a quality basis and return money to their shareholders.