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Solomon

Protectionism

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Last night caught a little piece on the 7pm Project with Steve Price suggesting that to assist the ailing manufacturing sector, Governments should insist (legislate) that companies operating in Australia use Australian materials and goods, and hire Australian labour first.

That's got the faint smell of protectionism.

I wonder how many other countries are thinking the same thing.

Here's the link. (Sorry about the ads!! :censored: )

7pm Project

You need to fast forward to about 7:44 in the video.

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Last night caught a little piece on the 7pm Project with Steve Price suggesting that to assist the ailing manufacturing sector, Governments should insist (legislate) that companies operating in Australia use Australian materials and goods, and hire Australian labour first.

That's got the faint smell of protectionism.

I wonder how many other countries are thinking the same thing.

Here's the link. (Sorry about the ads!! :censored: )

7pm Project

You need to fast forward to about 7:44 in the video.

there's a very good possibility of protectionism taking hold. it'll start with the tea party and bogconomists. once it takes hold it will spread like wild fire. why wouldn't we protect our industries if others are doing the same?

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there's a very good possibility of protectionism taking hold. it'll start with the tea party and bogconomists. once it takes hold it will spread like wild fire. why wouldn't we protect our industries if others are doing the same?

Oh, I agree zaph.

I want work for our own people, and we should be buying more Australian made.

But what protectionism does is entrench depressionary conditions once they are in operation.

By protecting our own patch we stifle our exports and so our domestic demand has to fill the void.

This leads to wage decline, and so on.

It is now well documented that protectionist policies in Europe during the Great Depression forced a number of countries into hyper inflation as well, as companies tried to maintain profit levels, and the difficulty in obtaining offshore credit.

It also extended the depression well beyond the length it probably would have, if countries had not closed their borders to trade.

If governments start doing this, look for our resources sector to come under increasing pressure.

Its called tit for tat. (To the younger generation; - that is not meant to be a rude statement.)

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Protectionism is not beneficial in the long run, though anti-protectionism and open slather "globalism" are two different beasts.

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Oh, I agree zaph.

I want work for our own people, and we should be buying more Australian made.

But what protectionism does is entrench depressionary conditions once they are in operation.

By protecting our own patch we stifle our exports and so our domestic demand has to fill the void.

This leads to wage decline, and so on.

It is now well documented that protectionist policies in Europe during the Great Depression forced a number of countries into hyper inflation as well, as companies tried to maintain profit levels, and the difficulty in obtaining offshore credit.

It also extended the depression well beyond the length it probably would have, if countries had not closed their borders to trade.

If governments start doing this, look for our resources sector to come under increasing pressure.

Its called tit for tat. (To the younger generation; - that is not meant to be a rude statement.)

i wasn't advocating it, just saying there's a good chance it will happen and as you say the tit for tat will begin.

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i wasn't advocating it, just saying there's a good chance it will happen and as you say the tit for tat will begin.

Interesting to note that the last time that a significant rise in tax that was proposed on the very industry that is responsible for hollowing out the rest of the economy, there was an outcry from the community due to an ad campaign by the industry. BHP just made record profits of 22.5 billion. Increasing the rent on natural resources isn't protectionism. It's getting a better deal for the community. Partisan- Abbott wants to wind back the weakened version of the MRRT.

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BHP just made record profits of 22.5 billion. Increasing the rent on natural resources isn't protectionism. It's getting a better deal for the community.

The mining tax 'compromise' actually left the big miners in a better* forward position than before the tax was proposed. So... shhh. We don't want the gov't to disimprove the situation further.

* Depending on model/assumptions used.

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Protectionism is not beneficial in the long run, though anti-protectionism and open slather "globalism" are two different beasts.

+1. If Australia became protectionist, not only would the price paid for imports rise, but our trade partners would retaliate and our export income would disappear quickly. OTH, anti-dumping should be prohibited.

However, when we have the next lasting world recession, I have no doubt that under internal pressure, many governments will impose tariffs.

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Tony Abbott trips on industry protection

"The government should be investigating what can be done to ensure a genuinely level playing field with a fair go for Australian companies," he told the Committee for the Economic Development of Australia in Melbourne. "If there's a respectable case that can be made for maintaining a heavy manufacturing base on the grounds of national security, the inherent value of a diversified economy or the transitional costs of shutting down capital-intensive industries only to start them up again when market conditions change, there needs to be a forum where it can be addressed."

A few minutes later, Mr Abbott said: "The Coalition's instinct is always to defend and extend the role of markets. Protectionist sentiment can't be shouted down or asserted away -- it has to be argued against patiently, rationally and with a clear appreciation of what's best for people in the longer term."

Yet another example of Abbott attempting to walk both sides of the street. Bring back Turnbull.

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Tony Abbott trips on industry protection

Yet another example of Abbott attempting to walk both sides of the street. Bring back Turnbull.

+1. Turnbull is much better option to Abbot. For both economic & social reasons, I'd much rather have Turnbull. If nothing else, I doubt Turnbull would sell his arse as easily as Abbott! :)

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+1. Turnbull is much better option to Abbot. For both economic & social reasons, I'd much rather have Turnbull. If nothing else, I doubt Turnbull would sell his arse as easily as Abbott! :)

Well Abbotts approval rating is still at around 35% in spite of the party being at 57% two party preferred. If the government go the full term there could be a challenge to ensure victory. Turnbull may not be the leader unfortunately but I can't see Abbott being there.

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Australia isn't the only country with protectionist policies. Other countries are already protecting their industry using import duty as a mechanism.

Extract from a letter written by Calsonic Australia to the Australian Productivity Commission:

The major obstacle however is the high level of protection in these countries. Thailand for example is a major opportunity due to the major growth in vehicle production that will occur in the future. We recently quoted a condenser for the next generation Isuzu pick up truck and our ex factory price was competitive compared to their in house manufacturing cost however the import duty rate was 25 %. Ironically we can import the current model condenser from Thailand and the import duty rate in Australia is only 5 %. This is only one example and similar situations exist in Malaysia, Indonesia, China, etc. Such an imbalance in protection must be addressed if the Australian automotive industry is to reach its full potential. The Government needs to obtain firm commitments from the strategically important Asian countries to make significant reductions in import tariffs before it makes any further commitment to lower our duty rates beyond the 10 % rate legislated for 2005.

http://www.pc.gov.au/__data/assets/pdf_file/0007/25684/sub031.pdf

Edited by tux

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The mining tax 'compromise' actually left the big miners in a better* forward position than before the tax was proposed. So... shhh. We don't want the gov't to disimprove the situation further.

* Depending on model/assumptions used.

The big assumption is mineral price.

We are likely to be in a situation in a few years where the Federal government is left paying state royalties. The mining companies will be making little profit as they do between every upswing in the minerals cycle.

In reality they will not be paying the royalties they will just cancel the MRRT when this boom is finished. A tax which makes the government prone to the cycle in their revenues. It is OK to have this situation but only if the surplus is saved. We are relying on the minerals cycle in government revenues. This is my biggest issue with the tax.

They will remove "their skin from the game" the moment it is hurting.

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Extract from a letter written by Calsonic Australia to the Australian Productivity Commission:

I thought we had a free trade agreement with thailand?

http://www.dfat.gov.au/fta/tafta/

Maybe car parts are one of the things not being phased out till 2020?

Certainly removing trade barriers rapidly is also bad for the economy so these staggered trade agreements are probably best for all allowing the economy to adjust to the changes in local demand for local goods.

Also Thailand has ridiculous barriers with its other trading partners like China and Taiwan (some so bad it actually prevents them being competitive exporting value added goods!) so it actually gives Australia a bit of an opportunity to get in there without competition from China etc. (assumign our dollar ever returns from its stratospheric highs which it appears to now!!!)

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The big assumption is mineral price.

We are likely to be in a situation in a few years where the Federal government is left paying state royalties. The mining companies will be making little profit as they do between every upswing in the minerals cycle.

In reality they will not be paying the royalties they will just cancel the MRRT when this boom is finished. A tax which makes the government prone to the cycle in their revenues. It is OK to have this situation but only if the surplus is saved. We are relying on the minerals cycle in government revenues. This is my biggest issue with the tax.

They will remove "their skin from the game" the moment it is hurting.

imo the mrrt will not be cancelled but the royalty guarantee deal will end. within a short space of it being introduced it will resort to the rudd version.

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Looks like this thread is going to become busy. If Trump introduces the legislation, the pendulum is going to swing worldwide from offshoring to onshoring. I doubt other countries are not going to follow if the US starts doing it. Governments are under pressure to provide employment to those who are not capable (or want to) of obtaining tertiary qualifications. Bringing back home the unskilled jobs that have been exported (and that have not already been automated) will be a popular solution. It will most likely cause price inflation as well.

There will be a new set of winners & losers to consider for deciding where to invest.

Trump vows 35% tax for US firms that move jobs overseas

 

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21 hours ago, cobran20 said:

Looks like this thread is going to become busy. If Trump introduces the legislation, the pendulum is going to swing worldwide from offshoring to onshoring. I doubt other countries are not going to follow if the US starts doing it. Governments are under pressure to provide employment to those who are not capable (or want to) of obtaining tertiary qualifications. Bringing back home the unskilled jobs that have been exported (and that have not already been automated) will be a popular solution. It will most likely cause price inflation as well.

There will be a new set of winners & losers to consider for deciding where to invest.

Trump vows 35% tax for US firms that move jobs overseas

 

 

What about all the firms that have already moved their manufacturing offshore?

It will not achieve what he hopes it will. The only was are tariffs and that will have other consequences. 

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2 hours ago, zaph said:

What about all the firms that have already moved their manufacturing offshore?

It will not achieve what he hopes it will. The only was are tariffs and that will have other consequences. 

If the standard company tax will be 15% and offshoring will raise it to 35%, I'd say that there will be changes to long term plans at corporate headquarters, especially if they expect Trump to be in power for 8 years.

The only question is whether Trump will withstand the blowback from other countries. Right now, he does not seem scared of giving the birdie to current arrangements.

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I can't see different tax rates working like this.

It will work for the little guy but not the big end of town who can employ expensive international tax lawyers.

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On 8/26/2011 at 5:50 AM, cobran20 said:

+1. If Australia became protectionist, not only would the price paid for imports rise, but our trade partners would retaliate and our export income would disappear quickly. OTH, anti-dumping should be prohibited.

However, when we have the next lasting world recession, I have no doubt that under internal pressure, many governments will impose tariffs.

I expect this thread is going to get busy...

Trump calls for 20% tax on Mexican imports to pay for border wall

 

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And then backflips almost as quickly saved by more moderate Republicans. His bluff failed. This is our first taste of the 'legendary' deal making ability of Trump. He fails to understand that countries aren't companies and the brinkmanship of imposing his will through monetary penalties alone don't account for other countries nationalism. Mexico (and other countries) will suffer to spite him. And their leaders will gain popularity because of their belligerence. They're not company shareholders and profitability is not their only concern. They're citizens. 

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12 minutes ago, staringclown said:

And then backflips almost as quickly saved by more moderate Republicans. His bluff failed. This is our first taste of the 'legendary' deal making ability of Trump. He fails to understand that countries aren't companies and the brinkmanship of imposing his will through monetary penalties alone don't account for other countries nationalism. Mexico (and other countries) will suffer to spite him. And their leaders will gain popularity because of their belligerence. They're not company shareholders and profitability is not their only concern. They're citizens. 

He can tax the billions that Mexicans send home. The Mexicans have more to lose than the US. Providing Trump has the support of his constituents, tariffs are going to be implemented by the US and I expect other developed countries as well. Globalisation has left many unskilled in western countries destitute as their jobs have been exported (and also by automation).  They will support anything and anybody that can provide them with meaningful jobs.

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16 minutes ago, cobran20 said:

He can tax the billions that Mexicans send home. The Mexicans have more to lose than the US. Providing Trump has the support of his constituents, tariffs are going to be implemented by the US and I expect other developed countries as well. Globalisation has left many unskilled in western countries destitute as their jobs have been exported (and also by automation).  They will support anything and anybody that can provide them with meaningful jobs.

 

Whatever he taxes the Mexicans can retaliate in kind. It may well cost Mexico more but that's my point. Look at Vietnam, Cuba or any numbers of other examples. He will decrease US influence and drive Mexico into the arms of others. 

You're right about the automation. That's where most of the jobs have gone. If anyone thinks that unskilled labour in the developed world can compete with wages in the developing world they are deluded. Tariffs or any other penalties will kill the US economy along with the Mexicans. 

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I heard comments that the visa waiver program may be changed.

I'd be extremely annoyed if the process changes much, it's enough of an annoyance having to register online.

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We have a group of students in the states, they are worried about this visa waiver thing changing. What sensei is going to want to go through that nonsense to come visit them? Certainly we have lost a lot of interest in going.

Last time we were there the immigration process was so stupid it made heathrows incompetence look good; the americans were deliberately sucking. I can't see the rumour of making their implementation of the visa waiver program even worse being any good for their tourism industry.

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