US-Australia FTA: Furniture makers fear they may take a big hit
The Age, Melbourne
6 August 2004
The US free trade agreement is getting a mixed response from manufacturers, writes Ian Porter.
The prospect of Australian manufacturing going toe to toe with the giant American industrial base might sound like an abject mismatch.
But Australian manufacturers appear less concerned about the looming contest than they do about their own Government’s willingness or ability to protect their interests and police the rules under the agreement.
Certainly, the country’s largest manufacturing industry, automotive, is not losing a lot of sleep over the prospect that another car-producing country will have tariffs as low as ours.
But smaller, Australian-owned manufacturers that are not controlled from Detroit are very worried about the prospect of unfair competition if the Federal Government adopts its usual lackadaisical style to policing dumping and other import illegalities.
Leading office furniture and fixtures maker Tony Schiavello is pessimistic.
"The problem we have is the American competitors produce parts in low labour cost countries such as China and Taiwan, frames and panels," he says.
"Then they send it to America, and from America they distribute it anywhere in the world. We are going to lose a lot of jobs."
Schiavello knows his way around the furniture industry, employing about 1000 people, most of them at a plant in Tullamarine.
He has no faith that the policing of the rules of origin, which underpin the free trade agreement, will give adequate protection.
"I don’t think the rules go far enough," he says. "They don’t stamp ’produced in China’ inside."
Schiavello says the logical outcome of the Government’s tariff policies and the FTA would be to force him to start making parts in China, which will cost jobs in Australia.
"I never believed in going to manufacture in China, but eventually we will have to change our policy."
Oddly enough, the local car industry - the world’s smallest and the least protected - is not that fussed about the US FTA.
This is partly because the biggest selling vehicles here - the Commodore and the Falcon - are made by US companies, which are not about to cut the throats of their local operations.
The parts industry has more to worry about but, even then, there is a level of protection in the fact that no US parts supplier is about to tool up to make unique parts for the Commodore and Falcon when total volumes are around the 100,000 mark a year.
"The US FTA will stimulate generic trade, but it won’t be a big plus for the automotive industry," says Bruce Griffiths, chief of parts supplier Air International.
Air International makes air-conditioning and heating systems for several local car makers, and also supplies interiors and seats.
Griffiths says suppliers of generic or commodity parts are already sourcing out of China. He says local suppliers with their own intellectual property should start identifying opportunities. "If they sit around waiting to be rolled over, they will be rolled over."
The biggest opportunity for parts makers in Australia is one they cannot directly take advantage of - the elimination of the 25 per cent tariff on sports utility vehicles, the biggest sellers in the US market.
"If Ford was to build its strategy around the Territory (and start exporting) it would be a great opportunity for the local parts industry," he says.
"Whether it happens in five minutes or five years, the fact is the chances of it happening have been enhanced."
Pacifica Group finance chief Tony Clarke agrees, up to a point. He sees Australian manufacturers being prevented from taking such opportunities, even if their parent companies are willing to import vehicles from Australia.
"In terms of the opportunity to export to the US market, particularly in the form of assembled cars, yes, certainly they will be more competitive in the American market," says Mr Clarke.
