Only agility is backward steps to protectionist past

Judith Sloan
MARCH 29, 2016
THE AUSTRALIAN
The Prime Minister likes to tell us that he is in favour of open markets, although he did let it slip recently that he thinks small business needs to be protected. Similarly, the Treasurer declares that he supports greater competition — he is working on implementing some of the recommendations of the Harper report on competition policy — but many of his actions tell a different story.
Now some of this new-found affection for anti-competitive protection for select groups is foist on the government by the retrograde and self-serving attitudes of the Nationals. After all, one has to keep one’s Coalition partner on side and this can only be achieved by making a few concessions from time to time, particularly with Barnaby Joyce calling the shots for the Nats.
But what has happened under this federal government — Tony Abbott was no saint in these matters — is a creeping protectionism that is the very antithesis of a modern, forward looking administration focused on the 21st century.
Forget all that guff about innovation, agility and excitement, even forget the new trade agreements — there is a real reversion to old-style barriers to competition and favouritism for particular groups at the expense of the ­national interest.
Let me give you some examples. Most of these fly under the radar of the news cycle; they are important nonetheless. The Treasurer was asked to consider lifting the prohibitive tariffs on imported used vehicles, a recommendation of the Harper review. Given that we no longer have a domestic car industry, this sounds like a no-brainer.
But according to our Treasurer, we need to be fearful about the possible importation of radioactive cars from Japan and so he declined to alter the current arrangements. And the dealers were keen on the status quo — no kidding. The fact that New Zealand happily imports used vehicles without obvious damage, but to the benefit of consumers, did not sway our intrepid competition warrior, the Treasurer.
And if that is not bad enough, the federal government passed up the opportunity to overturn the current re-regulation of the sugar industry, an arrangement that was foist on a reluctant Palaszczuk government by the combined forces of the LNP and the Katter Party in that state. (Virtually all sugar is grown in Queensland.)
Cabinet could have referred the profoundly anti-competitive act to the National Competition Council, but the backward-looking Nats held sway. The clear impact is that there is a real threat, now and in the future, to foreign investment in sugar mills, but the Prime Minister didn’t have the guts to stand up to the Nats.
I’m just hoping the government now decides to levy all sugar growers for the full amount that was paid to them (close to $500 million) to compensate them for the deregulation of the industry, that is now being reversed. Mind you, I won’t be holding my breath.
And then there is the government’s attitude to the Anti-Dumping Commission, a body set up by the Gillard Labor government. If anything, this government is more enthusiastic about this protection-granting body than Labor. An across-the-board tariff has now been imposed on tinned tomatoes and the steel industry has a number of applications before the commission seeking to have the domestic industry protected against imports.
(Ironically, the Australian steel industry has been named as dumping steel products by the equivalent US body, which just goes to show you how ridiculous these types of arrangements are.)
Foreign investment is another area in which protection and xenophobia are alive and well, in equal measure. The Nats forced a change to the foreign investment rules in respect of agriculture and agribusinesses. Instead of the cut-off point for vetting being $252m (and higher for some countries, including the US), the new cut-off point would be $15m.
Under these new rules, the Foreign Investment Review Board must examine all proposals for foreign investment in agriculture above this cut-off point to establish whether or not the investment is contrary to the national interest. The only conclusion to draw is that the government’s attitude to foreign investment in now one of deep suspicion and discouragement.
For a country that relies on foreign investment, this is a most unfortunate (and populist) development. And it does not end with agriculture. There are new rules governing real estate and the Treasurer is keen to control any foreign investment in assets owned by state governments. Sadly, vetting foreign investment applications has become one of the main activities of the Treasury, a marked difference from the heyday of that organisation.
What the Prime Minister and Treasurer seem to have forgotten is that the core role of competition policy is to improve the lot for consumers. In all the muddle-headed discussion about the changes to Section 46 of the Competition and Consumer Act — the misuse of market power provisions — this point seems to have been lost.
In explaining the proposed changes, the Prime Minister was quite open in his intention to protect small businesses against big businesses. He completely overlooks the very real danger that the legal changes will actually deter innovation by big businesses that produces lower prices and better services for consumers. I guess he must think consumers love higher prices.
And then there is the reappointment of Rod Sims as chairman of the Australian Competition and Consumer Commission. A Labor appointee, he has revelled in the role of regulator as activist; has inappropriately aired his view in public on policy and legislative matters; has refrained from investigating anti-competitive behaviour of trade unions; and has failed in many of his battles with business. There was an audible, collective sigh of astonishment emanating from some very important business figures and investors when the news came through.
So just forget nimble, agile, forward looking; this government is heading to pre-Hawke days when there was nary a pressure on governments for more protection that was resisted. Be it sugar, tinned tomatoes, radioactive cars, steel, restrictions on foreign investment, favours to small business — the direction is one way and the costs are rising.
Is Labor any better on this stuff? Of course, their mollycoddling of their paymasters in the union movements knows no limit. But on a number of these issues, it’s hard to see a Labor government taking the same path.