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FTAs crash into Australian car makers

The Age, Melbourne

FTAs crash into Australian car makers

By Ian Porter

4 August 2008

The Bracks review of the car industry is expected to urge the Federal Government to take a stronger line in negotiating free trade agreements after the review’s hearings became a flashpoint for dissent over the Thai free trade agreement (FTA).

The local manufacturing industry is concerned about the burgeoning automotive trade deficit between Thailand and Australia, describing it as "one way" and "lopsided".

Thai exports have ballooned in recent years, but Australian exports remain negligible because the Thai Government blocks Australian exports with non-tariff barriers not covered in the FTA.

The anxiety was heightened in June when more Thai-built vehicles were sold in Australia than locally-made cars.

A total of 17,350 cars and trucks from Thailand were sold in June, while sales of locally made cars sagged to 17,039 units. Only Japan sells more cars in Australia, and it took 40 years to build that position.

For the six months to June, local vehicles only just stayed ahead of Thai vehicles (87,000 to 84,480). Sales of Thai vehicles have almost doubled in just 18 months.

While the Thai vehicles are mainly one-tonne trucks and small sedans and do not compete directly with the Commodore, Falcon and Aurion, the local manufacturers have virtually no chance of selling even a few six-cylinder cars in Thailand.

"The Thai free trade agreement was an early precedent but these agreements need to be done differently in future," said Andrew McKellar, chief executive of the Federal Chamber of Automotive Industries.

"There hasn’t been a full level of reciprocity coming out of that agreement," he said.

"From the industry’s standpoint, we would not agree to, and would not support, another FTA which came with those features or those arrangements.

"There needs to be something in it for the local manufacturers".

And it is not just the trade in vehicles that is causing concern within the Australian automotive sector. As with built-up vehicles, there is no tariff on imported parts from Thailand.

The chief executive of the Federation of Automotive Products Manufacturers, Anna Greco, is very sceptical about FTA benefits.

"The FTAs in place have led to trade distortions and components substitution away from Australia, thereby discouraging production in Australia," she said.

"For example, as there is no duty on imported components from Thailand, it is cheaper for (car makers) to import fully-built components and modules than it is to import components and assemble modules here."

"The Thai free trade agreement was presented here as a fantastic opportunity for the local industry.

"Well, we’re not exporting cars and our trade deficit with Thailand has ballooned out to $2 billion a year."