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Thursday, 11 June 1970

Dr J F Cairns (LALOR, VICTORIA) - This Bill can be divided into 4 main parts.I do so for convenience. There are a number of items on which tariff changes are being made. They are based on Tariff Board reports on gelatine and animal glues; floor and wall coverings; gloves and mittens; secateurs; electric circuit breakers and switch units; and lastly the very sinister sounding gang slitting machines. They are nol at all sinister. They are machines for cutting mild steel sheets. These changes arose out of Special Advisory Authority reports. This is also the case with cherries preserved by sugar - drained, glaced or crystallised. All these items were introduced into the last Parliament and validated by it. The Opposition did not oppose the items at the time and does not oppose them now.

The second part of the Bill is designed to implement changes which arise out of Tariff Board reports on time switches and movements and parts therefor, compressed gas cylinders, almonds, flexible metal tubing, piping and transmission shafts, taximeters, belts, belting and woven cotton fabrics, drawing, measuring and calculating instruments, syringes, injection or puncture needles, and chlorine and sodium hydroxide or caustic soda, and in addition Special Advisory Authority reports on metal working machine tools, vegetable oils, and curtain hooks of base metal.I do not want to summarise the changes in that section. They were at one stage presented to honourable members in Press releases from the Minister for Trade and Industry (Mr McEwen). Also, they are summarised at the back of the Minister's second reading speech. Therefore, I will not waste time in referring to the actual tariff changes that are proposed. Looking at the reports and at some of the changes in this section I cannot say that 1 am satisfied - this is not an unusual situation - that the changes ought to be made. The Tariff Board reports in a number of cases arc not adequate. But the changes are not of very great significance and the Opposition will not oppose what is recommended in rh's section.

The third part of the Bill, as 1 separate it, consists of changes that are being introduced as a result of an agreement reached by the Governments of Australia and New Zealand which arc to be added to Schedule A of the New Zealand-Australia Free Trade Agreement. The goods affected are mainly iron and steel. I include in this part of the Bill changes in tariffs on goods that are the products of cottage industries in a less developed country. These products appear in the Second Schedule. The Opposition does not oppose any of these tariff changes. What I would call the fourth part of the Bill is that which implements the tariff changes which follow from the Tariff Board report on man made fibres and yarn and tyre cord and tyre cord fabric. This report proposes significant reductions in tariff. The Government has accepted this recommendation and the legislation before us gives effect to that decision. The Opposition will not vote against the second reading of the Bill but will move in the Committee stage for the omission of the 13th Schedule of the Bill to indicate our opposition to these proposals and to separate that opposition from the fact that we do not oppose other parts of the Bill. If our amendment is not carried we will vote against the third reading of the Bill. So there will be 2 divisions in the next hour and a half.

Following the issuing of this report of the Tariff Board and the Government's acceptance of it, the Textile Council of Australia published a full page advertisement in Australian newspapers, lt is a long time since a Tariff Board report was received in this way. I want to quote from this newspaper advertisement certain very significant criticisms of the report on man made fibres and yarn, lyre cord and tyre cord fabrics. Firstly, the Textile Council of Australia is the organisation of all lextile manufacturers, it carries, and should carry, very considerable authority in the industry and with the Government. The Council in its advertisement first of all said:

The Board in ite Report again acknowledged the importance of the industry . .

But it says that the new rates of duty are unrealistic in their protective incidence compared to duty applying in other countries. I will give some details of that in a few minutes. Secondly, the Council states:

Much of the material and evidence on which the Board's report is based was prepared and submitted to the Board nearly 2 years ago.

The Council said that the report is out of date. Thirdly, the Council states in its advertisement:

The Report does not permit the Government to assess the soundness of the Board's recommendations.

I will refer to this matter also in a minute. 1 would like to say that this also is my own conclusion about the report and that it is a conclusion that I have frequently staled over several years about Tariff Board reports. Some evidence obtained by the Tariff Board in its inquiries is confidential and we in the Parliament and the Government do not know what that evidence is. But judging the Board by the evidence in the reports, this report in my opinion is quite inadequate for the Government to decide whether the Board's recommendation is a proper one or not. 1 agree with the Textile Council of Australia on that conclusion.

Fourthly, the Council says that the Tariff Board has made a number of serious errors of judgment in this report. 1 can identify and will mention some of them if I have time during the course of this debate. The fifth point made is that the Textile Council joins with practically every other industry organisation in Australia to say that the Board's report places considerable weight upon the so-called effective duty rate. The advertisement states:

The Council believes that this economic theory has no relation to everyday commercial practice, and that ils application to the manmade fibre textile industry is unsound.

That is a very significant and fundamental criticism. I have seen enough of the way that the Board has gone about its work to agree with that conclusion. The Council then compared the new rates of duty that will prevail if this legislation is carried. There will bc a 10% preferential rate applying to such countries as the United

Kingdom and Canada and a 20% general rate applying to the rest. Rates of 10% and 20% are very low rates of tariff. They are much below the rates that the Board has been expressing in the last couple of years as an indication of a fair level of protection. The comparable duties in the United Kingdom are 14% and 3d per lb. In Canada the preferential rate is 20% to 22i%. The general rate in that country is 35% plus 20c per lb. In the United States the rate is 45% plus 12.5c per lb, 50% plus 13.5c per lb and 65% plus 45c per lb. In Australia the duties are 10% and 20%. Those people who talk about comparative trade advantages and a highly protected Australian secondary industry should look to the United States for comparative purposes. We have an industry that will be protected by 10% and 20% while comparable rates for the United States are 35%, 45%, 50% and 65% plus additional amounts. In Japan, a country that is supposed to be highly competitive and to which normally the Tariff Board could be expected to pay some attention, the comparable rate is 17£%. It is about the same as that in Australia. I do not want later to hear arguments that the Australian rates are high.

Let us consider another point raised by the Textile Council of Australia. It appears to the Council that the Board's report has not taken sufficient account of the fact that the development of the textile industry, including fibre production, depends upon Australian manufacturers maintaining their share of the market. The developments that may come from this may make a serious difference to that situation. Finally, the matter for general concern, as the Textile Council calls it, is that other Australian manufacturing industries will be concerned with matters relating to this Tariff Board report. This may be an indication that the Textile Council is saying to other industrial groups: 'You had better have a look at what is happening'. I will say more about this in a few minutes.

The Textile Council asked for a withdrawal of this legislation until the matter can be reviewed. That is the position taken by the Textile Council and the day before yesterday I asked the Minister for Trade and Industry (Mr McEwen), who never takes part in these debates but who is said to be responsible for what happens and who is never in the House except at question time for the House to examine or to bear from him, his explanation as to why it occurs. Because of this extraordinary separation of responsibility for tariffs the Minister for Customs and Excise (Mr Chipp) handles the matter in the House but the Minister for Trade and Industry is responsible and we can never reach him. He is away somewhere in an office. He may come in for a division if he is not paired, but that is all we see of the responsible Minister. In answer to my question he said:

I am familiar with the grave doubts expressed by the Australian Textile Industry.

He said that he was aware of the grave doubts and he looked as though he were aware of them. He looked grave himself. He said that he was going to take no notice of what the industry said and if it so happened that any harm looked like being done to the industry it could make an immediate application and an inquiry by the Special Advisory Authority would be set under way and an emergency duty could be provided.

This is a new way of making tariffs. This is the experimental approach. I do not think that we have had an example of this so far. The Australian Labor Party will not accept the experimental approach in the making of tariffs. Irreparable damage may be done and I oppose this action for that reason. But I oppose it also mainly for the reason - and I will say much more about this presently - that I believe that the Tariff Board is not now equipped to know whether an industry is economic and efficient and is not able to report to the Government so that the Government itself can know from that report whether an industry is economic and efficient. That is the main reason why we are opposing this schedule.

An examination of this report shows that there is little evidence in it justifying any reduction in tariffs. The report reads something like the judgment of some judges on the bench. If we read through the reports of their judgments we see how they go carefully through the evidence but we cannot judge what side they are going to come down on until right at the end when they make their decisions. There is no indication in the judgments which way they are going until they give the reason.

If they gave the very opposite reason at the end and reached the opposite judgment it would still be equally as logical. This Tariff Board report discusses the condition of the industry and leaves one in doubt as to how it is going to come down until it finally gives the recommendation. If the recommendation had been just the opposite it would have fitted the report just as well and just as logically. Of course, 1 knew what the recommendation would be before 1 read the report so it rather spoiled the report. Most people like to keep a mystery until the end and when one reads a murder mystery one does not like to know who has done it until the end. I felt rather frustrated with this report because it was a mystery all the way through, but 1 knew the killer's name before I picked up the report. It was very disappointing for me. 1 should have liked the name of the murderer concealed until the end, but I knew it before I started the report. I could never have guessed from reading the report who was going to be held guilty until finally it emerged.

It is clear from the report that imports can reach Australia in large volumes and at lower prices than similar products can be produced in Australia. This is not disputed by me or by anyone else, but that fact is usually an argument for a tariff, not an argument against it, provided the Australian industry is economic and efficient. In this case the Board reports that there is no reason to doubt that the industries under review are, in general, technically efficient. The fact that there may be a large volume of imports coming to Australia at lower prices than we can produce them would normally be a reason to protect that efficient industry, but apparently in this case it is a reason to reduce the protection. Honourable members can understand from this example how difficult it is to arrive at what the recommendation is going to be until the recommendation is reached. In this case it is about the opposite to what would normally be expected. Not only do I think that this industry is efficient, but I would agree with the Board that it is apparent that industries in this field in Australia are as efficient as their parent companies overseas; and overseas their parent companies and their competitors are protected by a tariff as high as or higher than the Australian tariff.

There is much humbug about the attitude of some of the critics of Australian tariffs who assume, because they do not know, that countries like Japan and America are much less protected and that their world competition has such a powerful and beneficial effect. But 1 do not think there is another country in this field that is not more adequately protected than is Australia. Japan is one of the most adequately protected countries, not only by tariffs but by all sorts of other measures. This idea that the cost of a product reaching the port has some kind of validity as a measure of efficiency is the kind of rubbish that should have gone out with Little Red Riding Hood. The assumption that underlies the attitude of a lot of critics is the assumption of perfect competition. If we assume perfect competition, there is validity in this, but perfect competition never existed and anything close to it never existed. In the field of international trade it is more absent than it is in any other field. I will have a look at some of the special reasons for this in relation to this industry in a minute or two. Before I do so I point out that it is apparent also that this industry is as efficient as other sections of Australian industry. In the case of the largest of the producers in this industry the report shows that in 1967 the value of production per employee exceeded $10,000 per annum. I am quite sure that if all those wheat farms we have heard so much about in the past week or two were turning out $10,000 per annum per employee, and more, they would be in a much better position than they are in. I am sure also that the dairy farms which are in difficulties would not need so much assistance if they were turning out $10,000 per annum per employee. This figure is high for Australian industry in general. It would seem that the main base upon which the Tariff Board has arrived at its conclusion - and there is nobody here to defend the Tariff Board-

Mr Chipp - You must be joking.

Dr J F Cairns (LALOR, VICTORIA) - Well, is there? There is no one here to defend the Minister for Trade and Industry.

Mr Chipp - You said the Tariff Board.

Dr J F Cairns (LALOR, VICTORIA) - I said the Tariff Board. Is there anyone here to defend it?

Mr Kelly - Yes, indeed.

Dr J F Cairns (LALOR, VICTORIA) - All right. Is there anyone here to defend the right honourable the Minister for Trade and Industry?

Mr Kelly - Yes, indeed.

Dr J F Cairns (LALOR, VICTORIA) - The former Minister for the Navy is a Goliath indeed. He is at least back in his element. Those aircraft carriers and destroyers with which be was previously associated now have to look after themselves, but he is again back in his element. It would seem that the main bases on which the Tariff Board has arrived at this conclusion are referred to at pages 9, 10 and 11 of the report. Page 9 of the Tariff Board Report on Man-Made Fibres and Yarn, Tyre Cord and Tyre Cord Fabric, states:

Textile Organon' estimated that world capacity to produce non-cellulosics would rise by 29 per cent. ... by December 1970; it expected nylon capacity to increase by 21 per cent. . . . In the same period, the world capacity to produce cellulosics was expected to increase by 4 per cent. . . .

Courtaulds said that the world over capacity to produce cellulosics was between 10 and IS per cent of total capacity. .

There is great excess capacity in this industry in a number of countries, but not in Australia. The Tariff Board report sees a downward price movement and at page 10 it discusses this under the heading Overseas Price Movements':

While prices of cellulosics have remained fairly stable, prices of non-cellulosics have continued the downward trend which was evident at the previous inquiry.

The evidence suggested that prices of nylon staple fibre and major warp knitting yams in Britain and the United States of America fell by more than 40 per cent between 1960 and 1967, compared with a fall of about 30 per cent in prices of major bulking yarns.

The argument appears to be that there is great capacity in other parts of the world - excess capacity - which will lead to more fibres coming onto the world market and that consequently prices will fall; therefore the Australian industry has to be compared with this development and the Australian industry is therefore not inefficient and economic compared with this development. It is quite apparent that this over-capacity is the result of a lack of wisdom in the planning of industries overseas. It is clear, as the Tariff Board reports at page 10, quoting Fibremakers the largest company in this industry, that the cost reduction factor which is the essence of the situation arises from such factors as the adoption of new and improved technical developments and/or profit reductions stemming from chaotic or disruptive pricing conditions caused by vast excess capacity. The report chooses to quote from evidence submitted by Peerless Mills which opposed any increase in tariff. I do not think anyone asked for a reduction in the tariff. Some manufacturers in other parts of the industry opposed an increase, but I do not think anyone asked for a reduction. The Board referred to evidence presented by Peerless Mills which included a quotation from a paper given by F. H. Gruen, Professor of Agricultural Economics at Monash University. A summary of what the Professor said is set out in the report, and reads: technology for production of synthetic fibres was no longer difficult to obtain; « there was a growing number of world producers of synthetic fibres; costs of production would continue to fall;

It is apparent that vast excess capacity and disruptive pricing conditions are the main factor in the oversea situation. They may operate to reduce prices and costs but sooner or later excess capacities and disruptive pricing conditions will change. In the meantime the Australian industry can be seriously damaged by the existence of these things. As I have said, this situation is usually taken as an argument for protection and not as an argument for the reduction of protection.

Mr Chipp - Change in what way?

Dr J F Cairns (LALOR, VICTORIA) - I think that already there are signs in Japan of reduction in capacity. There are reports that the Japanese textile industry, particularly the man made fibres part of it, is now a most unprosperous industry and that there are cutbacks. It is apparent that they have gone into a far greater capacity than was reasonable or necessary and it is clear that capital will be taken out of the industry. This is usually given as an argument against the future of Australian wool exports, because the Japanese textile industry is not supposed to be in a condition to be able to pay any more for Australian wool than it is now paying. However, there has been plenty of evidence of excess capacity in Japan and there is evidence also of a cutback. If this occurs it may be only a temporary situation and it may change within a year or so. A position such as this is usually taken to be a reason for maintaining a tariff so that the problems caused by a perhaps temporary excess capacity might disappear and the industry in Australia will not be damaged while it is operating. I have examined this report and I am satisfied that there is not sufficient in it either to justify the recommendation the Tariff Board has made or to justify the Government accepting that recommendation. Consequently the Opposition will vote against the Thirteenth Schedule and finally against the third reading.

In conclusion I wish to make a few general remarks about tariff policy. Tariff policy in Australia has for a long time been the subject of controversy, but it has been a very sterile controversy. Over many years few changes have been made. Tariff making in Australia has. I think, shown few changes or innovations since the Tariff Board was established.' However, recently there has been a change. Until recently no one could doubt that the Board and the Government would stand behind any Australian industry that was economic and efficient and ensure its continuance as a source of income and employment for Australians. No section of industry and no section of the public could in the past have doubted that. However, the change I mentioned is that this is no longer the case. The Tariff Board has shown thai it wants to reduce tariffs, sometimes by considerable amounts, over a wide range of goods. When this became apparent last year the Minister for Trade and Industry came into this chamber one night in his very confident manner and dismissed the Board and the course that it intended to follow as shown in its report of the year before. There would be none of this, said the Minister. Neither he nor the Government would accept any of it; it would be the Government and not the Tariff Board that would make tariff policy. However, on the first occasion the matter has come into question it is the Board thai has won and the Minister who has submitted.

Recently this Government has been Government of retreat, lt has retreated from its stand in relation to tariffs, as I am indicating; it has retreated from its stand about introducing a civilian alternative to conscription; and it has retreated from its stand in regard to the off-shore oil and mineral legislation, lt is a Government of retreat. The Minister may have been outvoted in the Cabinet. From the way he answered the first question I asked him some weeks ago, I thought that he might have been indicating that he had been outvoted in the Cabinet on accepting and implementing the report on man-made fibres, because he answered the question in a way that made it possible so to interpret it. I have seen him doing that .sort of thing now for quite a number of years. In this case the Board has recommended a substantial reduction of tariffs for a significant Australian industry. The Minister admits that he is aware of grave doubts in the industry and of extensive public criticism of the report by the Board. Industry representatives have been to see the Minister and, although it may have been quite unusual, he saw them; but he did nothing to prevent the implementation of the Board's report. I believe that the Board has won and the Minister has lost. Where now is the Minister who proudly boasted in this House that he had no room for fancy theories and would never allow protection to be taken from an Australian industry that was economic and efficient and which provided employment and income for Australian workers? This is for the Minister to answer.

The Australian Labor Party stands for a number of principles in this matter. The first is that we will guarantee protection to Australian industries that are efficient and economic. The second is that we do not consider that protection can be solved by abstract theories of free trade or protection that often assume conditions of competition that do not and never have existed in real life. Next, we believe that a correct decision can bc made about protection only if we know the facts. We do not know the facts now, as the Tariff Board is not equipped to ascertain them. Recently the Prime Minister said:

To enable the Government to exercise its responsibility for tariff policy, it is clearly necessary that it should have available to it in the Board's reports the fullest possible knowledge of all the elements relevant to each particular case.

I submit that the Government docs not have, in the Tariff Board's reports, the fullest possible knowledge of all the elements relevant to each case. I suppose that in no report of the Board that I have seen has this standard ever existed or even been approached. Recently, the Minister for Trade and Industry said:

The advisory body has to assemble all the facts. Then it has to reach conclusions or judgments which will stand against the facts. Lastly, in reporting its conclusions, the advisory body must draw attention to all the relevant facts on which those conclusions were based and explain why, in the light of those facts, the conclusions were reached.

The Tariff Board does not do that, lt has never done it, and it has not done it in this case. The advisory body has never done this, either. Indeed, in reading some of its most significant reports, one can never be sure in which direction the facts one can find are pointing. Often the facts would fit conclusions directly opposite to those adopted by the Board. I believe that the report we are examining here is an example of that.

I submit that at least 2 important changes must be made soon, because several changes in the Australian industrial structure have to take place. It will be impossible to maintain the industrial structure in anything like its present form, as it will be impossible to maintain the structure of primary industry in anything like its present form. I believe that we must have properly equipped boards or commissions of inquiry in each field, both for primary and secondary industry, to examine, find the facts and make the recommendation. The Australian Country Party is not adequate as a board of inquiry into the condition of primary industry. It is not proper that the Country Party should make the recommendations for assistance to primary industry: It is proper that a properly equipped, objective board or commission should be operating for this purpose. These boards or commissions must be fully equipped to ascertain all the facts and to weigh and measure them accurately.

The Tariff Board must have more qualified staff and must be computerised. I am not criticising one member of the Tariff Board or of the staff of the Board for any lack of efficiency or for any personal deficiencies. It is merely that, first, the Board is not equipped to ascertain the facts. Secondly, the board or commission that makes the inquiry must extend its inquiries into the inter-relation of the industry in question with other industries. In particular, it must trace the product through wholesaling and retailing, for it is astonishing that hardly a significant manufactured product in Australia today does not come to a price, before it reaches the consumer, that is 3 or 4 times the price when it leaves the factory. It is ridiculous to talk about efficiency in production if one is looking only at the factory. It is time we looked at the wholesaling and retailing situation to ascertain why there is such a fantastic increase in the price by the time the goods reach the consumer. Thirdly, the inquiry must be continuous. There is little hope of ascertaining the facts when the Board makes a stab at them for a few days every few years.

In this case, the Board met, I think, once in Sydney and once in Melbourne for 2 to 4 days. It met twice in its public inquiries. It made private inquiries and obtained information from overseas. It sat around desks and talked to people. But that is just an amateurish way of trying to solve the problem. It is ridiculous to meet for 3 or 4 days in public in Melbourne and 3 or 4 days in public in Sydney, then make some private inquiries and produce a report about a significant Australian industry. That is a horse and buggy concept and it should have been thrown out when that age ended.

In the case of the greater part of Australian industry protected by tariff there has been no inquiry for years or no inquiry at all. I am sure the honourable member for Wakefield will agree with that statement. As the Tariff Board is at present equipped I suppose it would take about 25 years to cover the field. How can we talk about what is economic and efficient in such a situation? It is just humbug. It is an amateurish sort of situation.

The Australian Labor Party will not continue to support tariff making in those circumstances. As soon as Labor becomes the Government we will make all those changes necessary to equip those whose duty it is to obtain the fullest possible knowledge of the facts. We will equip them, whether in respect of secondary industry or primary industry, and we will help those who seek and deserve protection. We will not continue to work in the dark in that dismal twilight period between private enterprise and ill-informed government interference. The Government must exercise responsibility for tariff policy but it cannot do this yet because its advisory bodies are working in the dark. We must bring Australian economic activity into the light of day so that we know the facts. Only in this way can we reduce the effects of ignorance and sectional pressures which together have done so much to harm Australian economic growth.

That is the position that the Labor Party adopts. I have discussed this legislation in as much detail as I think the House would need or tolerate. I seriously ask the Government to pay attention to the man made fibres industry. I do not expect the Government to review it - 1 expect it to continue wilh this legislation - but the Minister has given an undertaking that the industry will be carefully watched and that if difficulties arise the matter will be referred to a special advisory authority. This is a very significant industry, lt is one of the most efficient in Australia, lt has considerable possibilities of development horizontally to the polymer raw materials that could be obtained under much better circumstances than they are being obtained now if a plan for the industry can be envisaged. This is greatly needed. It is a very serious matter. The Opposition is very disturbed at what is occurring and we will vote against the Thirteenth Schedule and against the third reading of this Bill.

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