Differences in the Industrial Policies between Australia and Japan - the Car Industry - Case Study Example

HOW GOVERNMENTS DEVELOP INDUSTRY POLICY FOR CAR MANUFACTURING INDUSTRIES? Name Grade Course Tutor’s Name Date Australian manufacturing industries are best known for the free trade policies. These policies have over the years led to gradual destruction and demise of the manufacturing industries. Many employees have lost their jobs as the country has plunged into to foreign debt problem. The fall of manufacturing industries has led to overdependence on import of foreign goods to satisfy local market demand (Hanson, 1998). The policies are unilateral in providing tariff reduction, deregulation of financial systems such as banks and offering free trade. However, Australia ought to protect the industries and the national sovereignties from deregulation and economic rationalisation just like its immediate competitor Japan. The industrial policy is best described by the ability of a government to support its industries (Kim Carr Press Release 2008). The main function of the industrial policy is to provide conditions to prosper and grow. It is also prudent for the government to intervene and come up with a more effective economy management and the market mechanism. This thesis will look into comparison and differences in the industrial policies between Australia and Japan, in the car industry (Hanson, 1998). The elements of industry policy making include; finance, research and development, intentional environment, infrastructure, labour market industrial relations, welfare and training of employees (Kim Carr Press Release 2008). If the industry is left in the mercies of the market, then it is bound to decline since key sectors such as exports and production will dwindle. The industry policy in Australia has taken two crucial approaches that are, free traders and interventionists who have the ability to provide superior economic outcomes (Hanson 1998). In a review to the Australia automotive industry, the government sought to initiate globally integrated and sustainable Australian manufacturing sector (Dunning & Pearce 1985, p. 27). These reforms have provided an opportunity to address challenges and crisis that faces the automotive industries (Department of Industry, Tourism and Resources 2007). For instance, the financial crises such as access to investment and funds as well as consumer demand are well catered for in the policy (Kim Carr Press Release 2008). The government has come up with a significant industrial program known as Automotive Transition Scheme (ATS) Program. This program provides up to $2.5billion to car manufacturing industries. This money is channelled for development, research, and designing most modern automotive for both local and exportation (Kim Carr Press Release 2008). The government also has bowed to pressure to the high demand of low carbon emitting vehicles (General Motors Holden 2008). The government has moved swiftly to establish Green Car Innovation Funds (GCIF) which provides assistance in research and attracting relevant investment in coming up with more fuel efficient and lower carbon intensive vehicles (Department of Industry, Tourism and Resources 2007). The GCIF contribution to the investment seeks to commercialise the technologies that reduce fuel consumption in green house gas emission, in manufactured vehicles (General Motors Holden 2008). In addition, Australian car manufactures will have to accommodate the impact of the proposed emission trading scheme (Invest Australia 2005). This is contrary to its trading partners such as Japan and Thailand who do not need to pay the carbon price during manufacturing. As a result, the competitiveness among the Australian trading partners continues to grow stiff (Beer & Thomas 2007, p. 249). The government needs to come up with an equivalent carbon cost that matches up to its trading partners. A clean method of offsetting this cost will be essential in maintaining the competition of car manufacture (Department of Industry, Tourism and Resources 2007). The policy makers in the government are influenced by the conventional economic activities in the international market (Invest Australia 2005). The Australian government is usually under pressure from the electoral prospects, and industrial crisis to come up with policies that are not biased. The policies formulated include Research and Development tax concession and Australian industry-run programs for business development (Beer & Thomas 2007, p. 256). The priorities, laws and regulations formulated govern and decide course action on the industrial sectors. The Australian motor vehicle industry produces close to 389,000 vehicles annually. One third of this production is exported (General Motors Holden 2008). The automotive manufacturers include; Ford, Holden, Mitsubishi, and Toyota. The production by these manufacturers is supported by design and manufacture of the numerous supply chain industries. Most vehicles produced are passenger vehicles (Invest Australia 2005). In addition to vehicle production, Australia has sophisticated production of motor vehicle spare parts such as exhausts engines braking, panels, suspensions, and vehicle electronics among others (Beeson 1997, p. 139). The Australian vehicle market is the largest manufacturing industries bringing in close to 5.7 per cent of revenue to the economy (Invest Australia 2005). Over the years, the vehicle market has grown steadily. The sales unit has increased up to 988,269 units. In comparison to the registered residence, the ratio is at 686 motors vehicles per 1000 residents. The high demand of motor vehicles is attributed to the affordability and efficiency of the vehicles being manufactured. With such statistics, the Australian government formulates policies that enhance long term sustainability and international competitiveness (Department of business and innovation 2011). The policies have seen significance tariff reforms in the vehicle manufacturing industries. Furthermore, the policies harmonise the business environment to provide a perfect platform for viable production. This entails easy access to raw materials, modern economy with direct investment, well developed infrastructure and availability of well educated skilled labour for the industries (Hanson 1998). The Japanese motor vehicle manufacturing industries are similar to those in Australia. However, Japan boasts of having more car manufacturing companies than Australia. These industries include; Toyota motor corporation, Mitsubishi motor corporation, General Motor s Corporation, Nissan motors, Hyundai Honda Suzuki and ford Motor Corporation (Bayari 2008, p. 88). The Japanese automotive companies have invested well in the Australian markets. Most of these motor vehicle manufacturing industries have supply chains in Australia. Over the years, most of these chain supply manufacturing industries have closed their companies in Australia (Edgington 1990, p. 49). Toyota Motor Corporation is the only Japanese vehicle manufacturing company that operates in Australia. Manufacturing industries in the Japanese economy bring out close to 90% of total revenue collected from exports. On the contrary, Japan has not utilised the advantage of the growth in market opportunities around the world (Department of business and innovation 2011). This explains the reason for the closure of its chain manufacturing industries in Australia. Japan industrial infrastructure is becoming more advance due to the international division of labour (Kim Carr Press Release 2008). Similar top their Australian counterparts, the Japanese car manufacturing companies, are facing challenges such as severe competition and decrease in manufacturing jobs. However, their utmost challenge is not oriented towards finances. The challenge is leakage of technologies to its market competitors. This has harmed Japan’s economic growth in terms of employment and technological clusters. Japan has also embraced Green car vehicle (Newsweek Magazine 2008). The green car they manufacture is environmental friendly vehicles which have less harmful effects to the environment. They reduce air pollution and also greenhouse gas emissions. Japan’s automotive industries have taken the vehicle market by storm as they have been recognised as the best country to produce eco-cars. The policies set up by the government have propelled automakers in Japan to be ahead in producing cars that cancel out noise (Newsweek Magazine 2008). These automobiles are known as hydrogen fuel cell cars. It is regarded to be the most advanced vehicles in the world. The automakers in Japan are now targeting mass market of green cars. This differs from the Australian car manufacturers that have not yet prospected to mass production of the green cars (Bayari, 2008 p. 104). The challenge of accessing energy pushed the government further into coming up with efficient energy for the automobiles. The success of the car industries in Japan is attributed to the high technology and relying much on cheap market. Availability of highly skilled personnel, as well as, cheap labour has also propelled these industries in the international market (Kim Carr Press Release 2008). The popularity in green car made automotive industries to increase production. Toyota alone produced up to 450,000 units in the year 2009 with Mazda targeting to produce up to 2.5 million units by the year 2015 (Newsweek Magazine 2008). The Japanese government has formulated policies to see to it that Japan becomes the main car manufacturing base (Bayari, 2008 p. 99). The policy enhances domestic market maturation, and at the same time accelerates overseas operations just like Australian motor industries. The government is striving to establish a strong industrial base for Japan’s automotive manufacturing industries. This is achieved through upgrading and development of intense production systems aimed at the emerging markets. The manufacturing industries ought to maintain a position in the domestic market (Newsweek Magazine 2008). Efforts to upgrade the domestic competitive environment are initiated by the policies. The formulated policies, further reviews taxes charged to industries on international trading and appropriate response to global warming by manufacturing green cars (Newsweek Magazine 2008). This is similar to Australia’s green car manufacturing policy. The government has also put up measures to increase profitability through improvement of vehicle corporations such as Nissan Motor Corporation. Manufacturing industries are also taking extra caution in technology leaks and property rights (Bayari, 2008 p. 110). In conclusion, the Australian government assistance to trading policies to manufacturing industries especially car manufacturing is by creating barriers to trade so as to protect domestic industries (Beeson 1997, p. 141). The government also reviewed the tariff by increasing cost of imports and limit the quantity of imported commodity. Both countries are overdependence in car manufacturing industries for significant revenue generation in the international market (Hanson, P 1998). It is prudent for both governments to formulate policies that will enhance profitability (Kim Carr Press Release 2008). References Bayari, C 2008, ‘Japanese auto manufacturers in the Australian market and the government industry assistance spending’, The Otemon Journal of Australian Studies, vol. 34, pp. 87−107. Beer, A & Thomas, H 2007, ‘The Politics and Policy of Economic Restructuring in Australia: Understanding Government Responses to the Closure of an Automotive Plant’, Space and Polity, vol. 11 no.3, pp. 243 − 261. Beeson, M 1997, ‘Bilateral Economic Relations in a Global Political Economy: Australia and Japan’, Competition and Change, vol.2 pp. 137 − 173. Department of business and innovation 2011, A more competitive manufacturing industry New directions for industry policy and manufacturing, viewed 5 September 2012 Department of Industry, Tourism and Resources 2007, ‘Automotive Industry Policy’, pp. 1-23, viewed 5 September 2012 Dunning, J H & Pearce, R D 1985, The World’s Largest Industrial Enterprises, 1962−1983 St. Martin’s Press, New York. Edgington, D W 1990, Japanese Business Down Under: Patterns of Japanese Investment in Australia, Routledge, London. General Motors Holden 2008, Submission to the Review of Australian Automotive Industry ‘Making Australia an Attractive Place for Global Investment’. Hanson, P 1998, Manufacturing Industry Policy, viewed 5 September 2012, Invest Australia 2005, Australian Automotive Industry. Canberra: Commonwealth of Australia. Kim Carr Press Release 2008, ‘Government announces review of automotive industry’, 14 February, viewed 5 September 2012 Newsweek Magazine 2008, ‘Get Your Green Motor Running’ , 5 September p. 1-4, viewed 5 September 2012, Read More