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Wednesday, 1 May 1957

Mr WHEELER (Mitchell) .- In undertaking the trade negotiations with the United Kingdom, of which the agreement now under discussion is the outcome, the Minister for Trade (Mr. McEwen) probably took on one of the most difficult tasks with which the representative of an Australian Government can be confronted. He had to try to restore a balanced flow of traffic over the longest highway in the world - the trade route between Australia and the United Kingdom - the traffic on which is regulated by this trade agreement. Whatever may have been the position when the Ottawa Agreement was entered into, preferential trade between the two countries has now become grossly unfair to Australia. Our preference in the British market is practically useless to us except with respect to one or two commodities, and we are selling most goods at a loss - sometimes a very big one. Great Britain, on the other hand, has been given a preferential market in Australia, which is invaluable to her, and which covers the greater part of her exports to us. But it goes without saying that the Minister has laboured long, earnestly and energetically to rectify the position, and I think that the Parliament and the country are indebted to him, not only for his efforts, but also for his comprehensive statement of the difficulties involved in the negotiations.

However, the Minister had to face insuperable difficulties, and we must recognize that. Successive governments in the United Kingdom have made it clear that, whether we like it or not, they no longer want reciprocal trade agreements. Naturally, they are prepared to accept any concessions that we will make, but on the other hand, they will not make concessions in return in anything like corresponding measure. I have no doubt that they made that decision after careful consideration, and probably unwillingly. Whether or not that attitude is right does not matter now, because it is quite evident and we are unable to change it. The arrangement with the European Free Trade Area recently entered into by the United Kingdom is one significant pointer to its way of thinking. However much they may attempt to gloss over this arrangement, they cannot have the best of both worlds - the old and the new. No one can yet assess the effects of this arrangement on Australia. In spite of the reservations made by the United Kingdom when it decided to join the European bloc, the arrangement involves a turning back on the Empire and on the policy which, for the last 300 years, has made Britain the world's greatest commercial power. Britain has decided, in a trade sense, to become once more an island off the coast of Europe.

As I see it, the new trade agreement between the United Kingdom and Australia is a last gesture by Australia in an attempt to preserve the imperial trade policy that has always been the focus of our economic life. It is true that the United Kingdom has made some small concessions in the new agreement as compared with the old one. Some of these concessions are quite important, and I congratulate the Minister on getting as much as he did when it seemed, for a long time, that we should get nothing. But no one could pretend that the concessions made by the United Kingdom and by Australia are in any sense equal. Trade preferences will still be heavily loaded against us. However, the agreement does provide a breathing space for five years. In that time, we must see either a reversion by Britain to true imperial preference, or a change by Australia to a quid-pro-quo arrangement with any nation prepared to make a fair agreement with us. It would, of course, be a fine gesture on our part to Britain, in her undoubted difficulties, to say to her, " Never mind about giving us anything in return; we shall give you preference anyhow ". But that would not work.

I speak feelingly on this matter, because I have in my electorate one of the largest concentrations of poultry farmers in Australia. For several seasons now, I have watched their produce being sold on the British market at unbearable losses which have been absorbed only by charging higher prices to local consumers. Local prices are now so high that they are seriously damaging the local market. This situation will destroy the industry in time unless it is checked. Butter and several other important products are in the same category. If Britain will not buy these commodities from us at a fair price, we must sooner or later turn to some one who will, and in order to sell to that new customer, we must buy from him, whoever he may be. Our trade with Great Britain has not been very profitable in recent years, because she will take a large proportion of our export commodities only at prices that do not pay our producers. To secure that market, we have had to buy goods from Britain at prices higher than we should have had to pay elsewhere. The final result of low export prices and high import prices can only be disaster. If we are not to sit idly by and sigh for lost markets, we must meet the position by developing other markets and examining every prospect that may lead us to those markets.

In such a new approach to markets, we might well be guided by what has happened in the re-arrangement of our defence policy and strategy. Our remote geographical situation has played a part in this readjustment which has been necessary in order to meet the changing events of the world. There was a time when our thinking in defence was directed to participation in the affairs of Europe and in the shifting scenes of the Middle East. We must now contend with likely developments in the Pacific and South-East Asia. So it is with trade. Our traditional market has been the United Kingdom, and by custom and usage over the years we have developed an attitude that the whole future of this country depends on trade with the United Kingdom. We must realize that recent developments in the closing of the Suez Canal must force us to accept the fact that, with or without trade agreements, we can no longer rely on free use of the canal. The inescapable fact is that the Suez Canal will not be open to us at an economic scale of charges. This will load our exports with an additional burden of shipping freights. At the present time, although we are able to sell a large part of our primary products, the price is now a critical question, and any additional cost burden will squeeze us out of world markets, particularly the United Kingdom market.

Great Britain, in order to survive, must live cheaply, and no one can blame her in the least if she buys in the best and cheapest market. This places the ball back in our own court, and we must find compensating markets. The solution must be a reassessment of our trade position. We must make greater efforts to trade with other countries in our immediate vicinity. We have not very far to look for new markets, because there is a wide field for trade promotion with our neighbours in South-East Asia. We must ask ourselves whether we have made sufficient effort already to develop these opportunities. I believe that, though we have done a great deal in this direction, we have ample scope for greater effort in the future.

At present, our national economy is dangerously dependent on wool, and we are at the mercy of wool prices. Providence has given us a climate and conditions suitable for wool production, but we must be tempting Providence too far when we permit these chancy conditions to continue There is a tendency, however, to devote too much time and legislation to primary production to the neglect of our secondary industries. I admit quite readily that our export income from secondary industries is not high, but the alarming reality is that our exports of true manufactured goods have fallen during the past few years. The last war brought about an expansion of local secondary industries, and we reached a stage at which our industries could compete with outside manufactures, both on the home market and abroad. In recent years, however, our manufacturing industries, with machinery and equipment which is outmoded and incapable of high economical output, have been forced to maintain competitive output. This is not the fault of management, nor is it the fault of the workers at the bench. The causes which have contributed to it are an inadequate depreciation allowance on machinery and buildings and the imposition of harsh import controls, which have prevented the replacement of old, worn-out machinery with modern equipment. If a manufacturing concern is to produce efficiently and economically, its plant must be renewed from time to time. That would prevent machinery maintenance costs from becoming a direct component in production costs.

Time does not permit me to develop this argument, but I recommend to the House and the Government that the time is now opportune to consider carefully the recommendations made in what is known familiarly as the Hulme report, or, more properly, the report of the Commonwealth Committee on Rates of Depreciation, of which the honorable member for Petrie (Mr. Hulme) was chairman. Two budgets have been presented since that report was submitted to the Government and no action has been taken along the lines it recommended. With the 1957 budget in the offing, some thought should be given to that matter.

If we mean business in exports of manufactured products, the time is also ripe for thought to be given to the injustice of the continuance of the pay-roll tax. This is a cost tax and is added to the cost of production. It is a tax vicious in character and inflationary in practice, which also makes a serious inroad into government revenue. Everything the Government buys for its armed services or for civilian requirements has a pay-roll tax content. The Government consequently pays out substantial sums each year, contributing to its own tax, but the net benefit to the Treasury is small by comparison. If the tax is to remain, it would be more reasonable, if we are searching for export markets for manufactured goods, to have it applied as a finished product tax. As it stands, the payroil tax must be considered as a cost item, and that prevents a manufacturer from shaving quotations in order to compete in overseas trade. If the pay-roll tax were an end product tax, I anticipate that exports would be assisted, as the manufacturer would not be required to meet the tax, as is the situation with sales tax.

The final point 1 wish to make at this stage on assistance to our secondary industries, if they are to take part in an export campaign, is that in its pre-budget considerations I trust the Government will give some thought to the reduction of company tax as an incentive to production. In its "little budget" of March, 1956, the Government contented itself with imposing restrictions and tax on free enterprise, but did not call on its governmental activities to contribute. That is a perfect example of the inconsistency of Government policy which so frequently hobbles free enterprise while allowing public spending free rein. I trust that this situation will be remedied in the next budget.

When I said earlier that we live dangerously in our economy, relying so much on our wool exports, we have only to realize how vulnerable we are when a shot fired in Korea or a rabble-rousing adventurer in Egypt can alter the whole direction of our national welfare overnight. We are dependent on a war-threat economy, as these two instances alone were responsible for a sharp increase in wool prices. This has had a most disturbing effect on our national trading; policy has to be continually changed in accordance with fluctuations in the price of wool. A rise in that price produces greater export income, naturally enough, with consequent higher import demand bringing in its train, as it has, the painful spasms of imports control. As a consequence, we have become an unpredictable trader and as such, from time to time, we must have involved the United Kingdom in losses because manufacturers in that country would be unable to determine our requirements as a fair business risk.

From the beginning of Australian history, wool has been king and we have become indolent and complacent about other markets. We have become indolent because the market was easy and we could buy everything we wanted out of the wool cheque. We have become complacent because we grow the best wool in the world and have no threat of competition. I say that we are living dangerously on our wool exports because wide research has been directed to finding a substitute for wool. One company alone in the United States of America the Du Pont organization, is spending £10,000,000 a year in the search for a wool substitute. The Commonwealth Scientific and Industrial Research Organization has estimated that the United States of America, the United Kingdom, Italy and Western Germany together are spending approximately £20,000,000 a year in their efforts to find a substitute for wool. By comparison, our own wool research expenditure of £1,750,000, covered in worthy legislation introduced by the Minister for Primary Industry (Mr. McMahon), does not give scope for complacency. All this leads to one conclusion: If we are to have an economy with any stability, we cannot rely on one product but must develop other exports.

I refer finally to the Minister's presentation of his trade report. I say again that the task of trade bargaining is not an easy one, and the Minister has done well to secure the concessions that have been gained under this agreement.

Question resolved in the affirmative.

Sitting suspended from 5.40 to 8 p.m.

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