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Thursday, 27 March 1969

Senator LILLICO (Tasmania) - Relative to the industry about which Senator Webster has spoken, the potato industry, let me say that not so long ago I read a report in the Press to the effect that processed potatoes from Canada and the United States of America were being dumped on the Australian market. 1 spoke to the director of a potato processing firm in Tasmania, who told me that the industry was under constant threat because of imports from the United States and Canada. There has been a lot of heartburning because of the adverse trade balance between Australia and New Zealand. I point out that our trade balances with Canada and the United States of America are just as adverse as New Zealand's is with us. I have always gone along with the idea that one cannot expect to trade all around . the world and break even wilh every country; there must be some adverse trade balances. In view of our adverse trade balances with Canada and the United States, if it is true that there are substantial importations of processed potatoes from those countries, surely the essence of the proposition is to have a speedy and prompt investigation by some tariff authority. It is disappointing to me to hear Senator Webster say that there has been such a long delay - several months - since the Minister for Trade and Industry (Mr McEwen) first referred the industry's problem to the Tariff Board. This is an important matter. In my view it should be dealt with promptly and finality reached.

Senator Websteralso said that it was necessary to have competition in the Australian market. I take it he means competition from overseas or at least the threat of competition. For that reason I believe that the Tariff Board has one of the most important and difficult functions of government to perform. It is a difficult proposition to ensure that industries are not protected to the extent that the efficiency that is so necessary to meet competition is not present.

Sitting suspended from 5.45 to 8 p.m.

Senator LILLICO - I will say no more about the potato question. 1 have here a publication entitled 'The Tariff Debate', which contains a number of articles by people who have had experience in these matters. The introduction slates:

The papers which are reprinted here, have made significant contributions to the tariff debate: a debate which has long since ceased to be about whether there ought to be protection-

I agree entirely with that, lt goes on: and which is now centred on the questions of what the .degree of protection ought to be, and how can it be applied efficiently and equitably.

I have pointed out previously that that seems to be the crux of the argument. That is what makes the Tariff Board's duty so important and difficult in striking a balance between efficiency and inefficiency. I call to mind an instance that occurred in 1960 to illustrate what can happen when an industry is over protected. An industry that operates not far from where I live was working under the benefits of import licensing, or the quota system, or whatever honourable senators may like to call it. Irrespective of what happened, it was sure of a considerable percentage of the Australian market. I do not think there is any doubt whatever that that brought about a condition of lethargy and a don't-care attitude. I believe that the efficiency of the product itself in some cases went very considerably downhill.

Senator Webster - What line of business is this?

Senator LILLICO - I am talking about the paper pulp industry. The abandonment of import licensing at about that time caused a considerable stocktaking and a great readjustment of production methods. I believe that went on all over Australia. 1 have heard very reliable reports of an industry on the mainland - as we say in Tasmania - which put off one-third of its staff and increased production as a result. I have given that only as an instance of what can happen when an industry is over protected.

The Tariff Board occupies a very important position in the Australian economy. Some honourable senators referred in this debate to primary production. It is true that the state of primary industry in Australia is not as good as it might be. Ii has been left behind. The Tariff Board, as it must, has adjudicated upon increases in cost of production largely brought about by decisions of the Commonwealth Conciliation and Arbitration Commission. It has been, perforce, compelled to grant increases in tariffs which, 1 suppose, have nol affected producers very much. Probably it has conferred a benefit on wage earners, but the process has eroded at least part of the income of primary producers.

The picture of primary production the world over is rather grim. I was surprised io read that Western Europe, one of the most densely populated areas in the world, because of excessive subsidisation under the auspices of the European Economic Community, has been compelled to destroy some of its products to get rid of them. In addition, Western Europe has been placing its surplus production on world markets at prices with which this country cannot hope lo compete. It is the old story of the primary producer being costed out of his export markets because of inflationary pressures.

There has been some talk of inflation in this chamber today. In the publication The Tariff Debate' there is a reference to the basic wage inquiry of 1949-50. lt states:

On one occasion, not so long ago, in the basic wage inquiry of 1949-50, one judge, in supporting an award which advocates had opposed as in its nature inflationary, took the opportunity of saying, 'I shall be concerned with the fact that an increase in the basic wage which will inevitably permeate the whole wage structure will increase prices and so add its modicum of inflationary pressure-

I remind honourable senators that these are the words of a judge of the Arbitration Commission - but inflation and ils control are matters for the Government.'

Now this last remark was quite wrong, lt is a common error to suppose that the Commonwealth Parliament has complete power-

And so on. The writer goes on to indicate that the Commonwealth Parliament can influence the position, but as to direct power of control, it has nothing of the sort. This afternoon I heard Senator O'Byrne and another honourable senator say that price control should have been imposed originally to rectify the position.

Senator O'Byrne - Every sensible country has it.

Senator LILLICO - I believe that Senator O'Byrne said this afternoon that had price control been introduced at the outset, the inflationary pressures which have worked upon this country for many years would have been curtailed and suppressed. Price control is as old as Diocletian, and that is about 2,000 years. Many experts have claimed that down through the centuries every time price control has operated it has aggravated the very thing it has set out to curb, ft is certain that price control operated by the Commonwealth Government, assuming that the Arbitration Commission and the Tariff Board would have behaved in much the same way as they have done, would only have served to invite increases in the prices of commodities, and nothing else.

Senator O'Byrne - Like the hospital and medical benefits s.heme.

Senator LILLICO - I am talking about the increased prices that everybody in this community must pay for bis requirements. Price control certainly could not have solved the problem, because when it is imposed it deals with an effect. It does not get down to the root cause of the trouble. The trouble can be remedied by keen competitive and efficient production. I was interested to read this statement about that firm which is anathema to a lot of honourable senators on the other side of the chamber, Broken Hill Pty Co. Ltd. It is looked upon by them as one of the arch examples of capitalism in this country. I read that at the commencement of the First World War the company's annual production was about 50,000 tons. By 1918 production had been built up to about 250,000 tons. Today it is 6.3 million tons. In addition to our own requirements, in 1966-67 we exported $117m worth of steel and associated products. It is claimed with much justification that our steel is the best in the world. That is an indication of what can be done by efficient production.

But what I rose to do, Mr President, more than anything else, was to point out that this Bill enlarges the range of commodities affected by the New ZealandAustralia Free Trade Agreement. I want to make my position plain in regard to that Agreement. I am one of those people who believe that for 50 years, because of the operation of this self-same tariff policy which perhaps compels the primary producers to pay more than they otherwise would for their requirements, primary industry has been the section of the community that has not enjoyed any direct benefit from the tariff policy. On the other hand, it has caused the primary producer to pay more for his requirements. Because it has had that effect it is beyond doubt that the Australian primary producer has subsidised the building up of the Australian local market. I have heard it said all my life that the justification for the imposition of the tariff policy in this Commonwealth ls that it has provided the primary producer with an excellent local market. Under no circumstances would I put part of that local market on the auction block and barter it away to anybody.

Tt is true, Mr President, that a lot of questions were asked in this place relative to the effect of the New Zealand-Australia Free Trade Agreement upon the canning pea and bean industry, and upon other industries in this country, but particularly upon the pea and bean industry in Tasmania. It is not flogging a dead horse to repeat that the position is dangerous. It is true that the effect of the Agreement has passed away for the time being because of seasonal conditions in New Zealand. I think we could say that the crops in New Zealand have been a failure because I have heard it said that New Zealand will not produce enough peas to meet its own requirements.

But that is only a passing phase. I say that after the 5-year period has elapsed and the tariff of these two commodities, and others, has been wiped out altogether, Austrafia will not have a chance in life of competing with the imported article from New Zealand. If we can take any notice of reports of addresses delivered by people in that country in a position to know, the potential is so considerable that the New Zealand producers could, if they chose, and in spite of the panel composed of Australian and New Zealand representatives which has been set up, make things extremely difficult for Australia.

I believe it is a fact that at the moment the freight charge from New Zealand to Sydney is about the same as that from Tasmania to Sydney. It is claimed that with the advent of the roll-on roll-off ferry service between New Zealand and Sydney the position will become more favourable to the New Zealand product. It is true in the case of blue peas that at this moment the New Zealand product can be bought on the Sydney market at $1 a bushel - which is a mighty lot; I have grown peas in my time at $1 a bushel - lower than the price of the Australian product at the moment. When the position reaches its culmination and when the tariff protection afforded to Australia has gone I believe that our situation will be grim.

There is no honourable senator in this chamber who has a kinder feeling towards the Dominion of New Zealand than I have. But I stand fast on this point: The Australian producer, provided that he can fulfil his requirements efficiently, is entitled to predominance on his local market. I do not think there should be any doubt about that. I. have been to New Zealand often and have heard the balance of trade spoken about. 1 have noted a lot of heartburning in New Zealand about the adverse balance of trade between Australia and New Zealand. But, goodness me, that goes on all over the world. I said this afternoon that Australia has just as great an adverse balance of trade with Canada and with the United States. Japan has an adverse balance of trade with Australia which is nearly as great. If the government of a country expects to balance its trade relations with every other country it is indulging in a pipe dream. The fact of the matter is that New

Zealand has purchased its manufactured products from Australia because it suited her to do so. If she had not purchased them here she would have got them from tha United States, from Japan, from the United Kingdom or from somewhere else.

Senator Devitt - And at a higher price.

Senator LILLICO - Yes, and probably would have paid a higher price for them. So the balance of trade between Australia and New Zealand is just a fact of life and nothing else. It has been brought about because we have a potential in Australia for the production of manufactured goods and that potential has been developed. 1 would like to point out that in that part of the country from which I come peas and beans represent just about the only profitable cash crops that are left. I would be very sorry, and so would a lot of other people engaged in the production of these crops, if anything untoward happened to those industries. However, Mr Acting Deputy President, because this Bill does not provide for any further inroads into the Australian primary producers' local market, so far as I can see, I will support it.

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