Communist Party of Australia

We acknowledge the Sovereignty of the First Nations’ Peoples.


Journal of the Communist Party of Australia

ISSUE 29May 1992

Tariffs, wages and unemployment

by Peter Symon

Once again the argument over protection and free trade is hotting up. The Wills by-election brought the matter right up front because about 18 per cent of workers are unemployed in that electorate. Lay-offs in the motor vehicle and textile industries have helped to create this chronic situation for the working people of Wills.

The government seems to have changed its position on tariffs while the Liberal-National Party Opposition remains wedded to its objective of eliminating protective tariffs almost entirely by the end of the century, presumably irrespective of the unemployment consequences or the position of other countries on this question.

Whether the apparent change of heart contained in election statements by Prime Minister Keating is a real policy change or has been brought about by the necessity for the Labor Party to win votes remains to be seen.

In his Economic Statement made in March last year, the then Prime Minister, Bob Hawke, announced that the Federal Government’s objective was to substantially reduce tariffs on imported goods by the end of this century. A general rate of five per cent by 1996 was declared to be the aim.

Tariffs are a duty levied on imports with the objective of making the price of such goods higher, thereby giving a better opportunity for locally produced goods to compete.

The Victorian State Government was the first to introduce tariffs in Australia in the 1860s. The aim was to protect the rising secondary industries which were only just beginning to be established.

The Victorian Government also provided for subsidies on agricultural products to enable farmers to sell at prices competitive with similar products grown in other countries. Other State governments soon followed the Victorian lead.

At this time, Federation had not taken place and there was no Federal government. The States were, for all practical purposes, direct colonies of Britain.

With Federation and the formation of the first Commonwealth Government in 1901, a tariff policy for the purpose of “protecting economic and efficient Australian industries and granting preferential treatment to certain imports from countries of the Commonwealth” was adopted.

The ALP was a supporter of tariff protection. Its 1915 platform, under the heading of “New Protection”, called for the “encouragement of local industry” by way of bounties, excise rebates, protective tariffs and the encouragement of home consumption.

Generally, those who were involved in manufacturing were in favour of protection, while those producing agricultural products, which had to be sold to markets overseas, were for “free trade”. Those dependent on agriculture were, however, not averse to demanding subsidies or bounties. One such bounty of direct assistance to farmers is that paid by the Federal Government on superphosphate.

One country after another put up “tariff walls” to protect “their” industries or paid government subsidies to farmers to keep down the export price of “their” primary products.

Every capitalist country has now adopted either tariffs or subsidies and often both. There were a number of other devices used to protect local industries or to secure some trade advantage.

But these imposts became a huge barrier to the flow of international trade which was increasingly strangled. In addition, the tariffs put up the price of imported goods and the cost of the agricultural subsidies became a heavy drain on government revenue.

As the economic and trade problems of all the countries increased, “export more and import less” became the slogan of every country and tariff barriers were seen as a serious obstacle.

Transnational corporations

We are now in the age of the transnational corporations and giant monopolies whose manufacturing and trading operations span many nations. They want to be able to move their products freely around the world, use the most profitable and convenient raw material and energy sources, employ the cheapest labour, and find the country with the most favourable taxation policies and the weakest laws governing employment, safety, health and environmental protection.

Tariffs are a barrier to the operation of the transnationals and they want them removed or broken down.

Most nations are members of the organisation called GAIT (the General Agreement on Trade and Tariffs) which attempts to regulate and get agreement among the nations on trade and tariff issues. For some years, the trading nations have been attempting to get international agreement to lower tariff barriers and the Australian Labor Government is one of those which has supported a general lowering of trade barriers. This is supposed to create a “level playing field” in the area of international trade.

But the conflicting interests and the serious economic and political difficulties facing the producers and the governments of many countries make agreement extremely hard to achieve. Despite innumerable conferences, no agreement has been reached. No-one wants to be the first to give way, and the governments and traders of the capitalist countries refuse to adopt a trade policy based on “mutual advantage”.

For the Australian Government, the reality of mass unemployment has now forced it to think again about the course it has been following for a number of years. We have only to see what happened to some Australian industries as tariffs were reduced to understand the reasons for the recent change.

Those who wrote the Accord in 1983 had that in mind when it was agreed by the ALP and ACTU leaders in that document that “neither current economic conditions, expected future trends, nor balance of payments constraints justify reduction in protection in the foreseeable future”.

As with a number of other commitments made in the Accord, this one was not honoured. In Bob Hawke’s March statement already referred to, he said:

“Right from the start, this Government deliberately and determinedly set about pulling down the tariff walls. By 1992 our existing programs will have slashed the nominal rate of assistance to the manufacturing sector by over one-third ... “

The Prime Minister claimed that tariffs had led to inefficient industries which are not able to compete in international trade, and that Australian industries can be made “competitive” and “efficient” if they are subjected to the hot winds of overseas competition.

It was for this purpose that the government campaigned strongly to have tariffs scaled down and eventually scrapped altogether. Mr Hawke claimed that the reduction of tariffs so far carried through had had “dramatic” beneficial effects. It will be difficult to convince the unemployed workers of that.

“Competitiveness” and “efficiency”

It is as well to understand what “competitiveness” and “efficiency” mean in practice.

Speaking of the waterfront in the March statement, the then Prime Minister said:

“By year’s end, the national waterfront labour force will have been cut by over 1,500 – in anyone’s language, a major gain in efficiency”. Australian ships will have “smaller, more efficient crews”.

In Mr Hawke’s eyes, efficiency is directly related to fewer workers doing the same or more work. But he did not reckon with the electoral backlash this would create as he resigned from his Wills electorate and brought on a by-election.

So the reduction or elimination of tariffs is an attempt to force Australian industries to become competitive and efficient, and that means a reduction of the number of workers employed. But has the reduction of tariffs resulted in more trade?

The fact is that there is no significant increase in overseas exports. Other countries are attempting to protect their industries in the same way and are also out to make “their” industries competitive and efficient. All want to export more and import less and not every country can succeed in that objective.

While tariff cuts were the first and the major point in last year’s Economic Statement, other measures included the abolition of the wholesale sales tax and faster depreciation of plant and equipment to the point where a-company determines its own rate of depreciation.

The policy of wage restraint remains in the Keating Government’s program and this has been accepted by the ACTU leadership which has postponed any wage claim until later this year.

Measures which make it even easier for overseas investors and bankers to move in and take over existing Australian enterprises are continued in Keating’s “One Nation” statement.

Serious inroads

Serious inroads are also being made into all aspects of working conditions – hours of work, penalty rates, holiday loadings, safety and health. Enterprise agreements and individual work contracts will result in very serious losses in conditions unless strong trade union organisations act to defend the workers.

The idea is that by reducing wages and conditions of work, Australian manufacturers will be able to compete with low wage countries such as South Korea, Taiwan, the Philippines, Indonesia, Hong Kong and Japan. If that means reducing Australian wage rates to those of a banana republic, so be it – at least that is the outlook of employers.

What the politicians and business leaders never speak about are the consequences of these policies.

There are about seven million wage workers in Australia. If real wages are reduced by only $10 per week for each worker, the employers’ wage bill goes down by $70 million each week. They will be very pleased about that, but it also means that wage and salary earners have the same amount less to spend on their needs.

Over a period of a year, there will be $3.6 billion less in the pockets of these consumers.

If the goods being produced are not sold, over-production occurs, stocks accumulate and sackings take place. This aggravates the position even more because the unemployed get much less than a wage worker.

It does not take much imagination or mathematical skill to work out that the loss of wages and purchasing power rapidly becomes a huge figure. One million unemployed losing the difference between a full wage and unemployment benefit, say $200 (as a conservative estimate) for each person, amounts to $200 million per week or $10.4 billion in the course of a year.

These and a number of other consequences are happening right before our eyes. They are the direct and inevitable result of the insatiable drive for maximum profits and the attempt to solve the difficulties of the system, including trade problems, at the expense of the working people.

Tariff cuts and the reduction of real wages and working conditions are two parts of the same policy.

Policies which will work

If these policies don’t-work – and they don’t – what will?

Tariffs should be kept at a level sufficient to maintain jobs and industries. It is senseless to reduce tariffs if it results in the devastation of an industry. Yet that is what is happening. Tariff reductions should not be implemented unless there are reciprocal reductions by our major trading partners.

There are also other means of controlling and regulating trade. These include import quotas, control of prices, preferred nation treatment and regulation by way of government to government trade agreements and contracts.

It is claimed that tariffs have resulted in inefficient industries. If there are inefficiencies, they can be overcome by new technology, by education in the realities of the economy and greater involvement of workers in production and management. Generally, Australian industries, including publicly owned ones, are not inefficient. Qantas, Australian Airlines, Telecom, the ABC, the Commonwealth Bank, Australia Post and GIOs are all examples of efficient public enterprises. Private enterprises are also relatively efficient if a comparison is made with many other countries.

Australian agriculture is held up to be one of the most efficient in the world. Its efficiency is not related to the existence or non-existence of protection. Its efficiency, however, has not saved it from today’s acute farm crisis.

To put all the blame for inefficiencies on tariffs and “work practices” is a false argument and has the aim of persuading workers to accept reductions in pay and conditions.

Tariffs were introduced by governments in Australia at a time when manufacturing was starting to grow. The new developing industries were on a small scale and had to compete with already established industries in Britain. They did protect home industry and gave it a chance to get on its feet. Tariff protection at a level sufficient to keep industry on its feet must be maintained.

Protecting agriculture

Our agriculture must also be protected. Today, our efficient agriculture faces a crisis at least as severe as that of the 1930 Great Depression.

Organised marketing schemes for major commodities should be maintained. At the moment, organised marketing is being thrown out but farmers will come to rue the day. It was introduced to overcome the anarchy in the market which had existed and which will return with farmers never being sure what they will get for their produce from year to year or even from one month to the next. It is the individual farmers who will suffer, while the “big-boy” middle-men, processors and marketers will increasingly dictate prices.

Tariffs do hinder international trade, there is no doubt about that. However, the unilateral abolition of tariffs by Australia will not help Australian industries, but will make it easy for the transnationals to snuff them out. Nissan did not hesitate to close down its operations in Australia when its head office in Japan decided that it was no longer profitable for them.

Arguments about tariffs and free trade are not new in Australia or other countries. They were raging in the days of Marx and Engels who wrote on this question in the middle of the last century. They raise another point which should not be forgotten.

Engels said at the time that those “who advocate the protective system never fall to push the well-being of the working class ... The intelligent among (the workers) know very well that this is all vain delusion whether protective tariffs or free trade or a mixture of both, the worker will receive no bigger wage for his labour than will just suffice for his scantiest maintenance.

“Not until only one class – the bourgeoisie – is seen to exploit and oppress – only then will the last decisive battle break out, the battle between the propertied and the propertyless, between the bourgeoisie and the proletariat”.1

Karl Marx took up the issue sharply and said: “Do not imagine that in criticising freedom of commerce we have the least intention of defending protectionism. The protective system is nothing but a means of establishing manufacture upon a large scale in any given country ... we see that in countries where the bourgeoisie is beginning to make itself felt as a class ... it makes great efforts to obtain protective duties.

“But generally speaking, the protective system is conservative, while the free trade system works destructively. It breaks up old nationalities and carries antagonism of proletariat and bourgeoisie to the uttermost point. In this revolutionary sense alone, I am in favour of Free Trade.”2

Arguments about higher or lower tariffs, free trade or protection will never be resolved while capitalism lasts. Tariffs, subsidies and other devices are typical capitalist measures to control and regulate trade in the interests of one or another group of producers or trades, or one or another country.

Sooner or later, the working class will have to take the more far-reaching step of ending the system and introducing new principles which include economic planning and running the economy and trade conducted for the benefit of the working people. That is the road to the basic solution of the problems which have overtaken the people of Australia today.

  1. Marx-Engels, Collected Works, Vol 6, p 94.
  2. Ibid, p465.
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