Comparing How Governments of Australia and France Make Industry Policies - Case Study Example

Business Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 08th September 2012 Introduction A vibrant manufacturing industry has been seen by many governments as a crucial part of a prosperous economy. Industry policy is any form of active, monetary or administrative support by the government to the industry. Additionally, it is also referred to as government instructions, laws and regulations. Industry policy is a standard that is meant to encourage or discourage economic investments within a given industry. The Australian government has had a supportive industry policy towards the manufacturing industry. The government has developed its industry policy by introduction of tax concessions and facilitated investments. Examples of the protectionist aspects of industry policy are trade barriers, tariffs and quotas. These policies increase costs and reduce the quantity of imported goods and services. On the other hand, post-protectionist policies improve success, competitiveness and market share. Industry policy has been changing due to the financial crisis facing the world. This has led to higher focus on industrial (horizontal) industry policies rather than the sector-based (vertical) industry policies. The vertical policy is also referred to as anticipatory model; its aim is to protect the industry from the effects of free trade policies. This paper aims at comparing how governments of Australia and France make industry policies. It also analyses the influence of interest groups in the red wine industries of both countries. France is among the most industrialized countries globally. That is why it is categorized under the G8 group of countries. In 1999, about 19.3 per cent of France’s GDP was contributed by the manufacturing industry (Gene & Gene 2012). Therefore, the French economy has transformed from rural economy in to a world economy. This has mainly been contributed by implementation of civil law in policy making (Hayden, 2010). Australia has also been developing although it still applies the customary law in its industrial sector. The transformation of the two countries has been attributed by industry policies that have been implemented by the government and other interest groups. Manufacturing is a major sector in the Australian economy because it forms 10 per cent of the country’s total employment. The manufacturing sector is stable although the employment levels fluctuate during and after recessions (Australian Government: Department of Innovation Industry, Science and Research 2010). Australian and France industry policies have several similarities. For example, Australian trade policies aim to open markets to trade, minimize trade barriers and facilitate easy access to Australian goods and services. This is similar to France’s trade policy which encourages innovation. This is achieved by improved government’s policies, rules and regulations to improve productivity and innovation. Therefore, both countries’ industry policies are motivating to the investors. However, industry policies in both countries can impose demotivating regulations or policies. Examples of motivating policies are export promotions, tax holidays, development of infrastructure, exemptions from tariffs and provision of health care. These policies are innovative in nature and as a result they create industry renovation, international competitiveness and support to the public sector (Henderson & Cockburn 1996). On the other hand, demotivating policies are increased interest rates, privatization and changes in institutions. Such policies discourage investment and competitiveness in the manufacturing industry. Australia and France also differ in the way that their governments develop industry policies in the manufacturing sector. In France, industrial policy means development plans that are instigated, financed and controlled by the government and public industry sectors. Some of the industry policies adopted by France are privatization, de-regulation and liberalization. The country has also implemented the Single European Market and Monetary Union which changed the economy to macroeconomic stability (Trouille & Uterwedde 2007). France’s market economy has a coordinated and relation-based industry model. Therefore, businesses in France are dominated with family firms, strong inter-firm relationships and many institutional shareholders. For example, insurance firms and banks. The corporate sector has more control over the business affairs as compared to external investors. Therefore, policies and management control are implemented by the controlling investor. As a result, the firms are able to guarantee the firms’ strategic commitments (Liu 2010). However, this leads to a firm’s dependency on financial markets due to lack of control by the main shareholders. This leads to the need for labour laws which enforce incentives and employment protection. The government of France as well as the European Union has also implemented social and environmental policies. As a result, there are philanthropic and CSR (Corporate Social Responsibility) requirements for businesses. This means that the government is highly involved in economic affairs and entrusts the public sector to provide basic commodities (Young & Marais 2011). On the other hand, Australia’s market is liberalized and operates within a government-established market. It is also based on principles set out by the Australian Stock Exchange (ASX). Australia develops industry policies within common law traditions. As a result, shareholder value maximization is constrained. The system is more centralized and protective of the employee rights; the labour laws are more prevalent in Australia and employees are incorporated into governance structures. This is contrary to France, US and UK whereby employees do not form part of the policy making bodies. Additionally, in Australia, social and environmental disclosures are not part of the legal requirements (Dorries & Brennan 2007). However, this has been changing because the Australian Stock Exchange has put it as a requirement. This enables ASX to analyse the risky element of a given industry towards the environment and humans. Australia’s policies are principle-based. Therefore, firms that are listed on the Australian Stock Exchange must either adhere to the legal requirements or explain the reason for non-compliance. Additionally, ASX requires firms to comply with the needs of the shareholders, suppliers, consumers and society. Lack of strong regulations has made Australian industries to stop focusing on progressive reporting; rather, they emphasize on specific industry conditions (Young & Marais 2011). Interest groups are a major contributor to setting the government agenda, making decisions and implementing and directing the red wine industry. The major interest groups that affect government industry policies among red wine manufacturers in Australia are labour groups (Leigh 2002). These policies seek to improve the working conditions of the employees at the expense of the company’s profits. The labour unions and parties affect the salaries and working conditions of the employees in the beverage industry. They place salary and wage requirements upon the employer; in order to ensure continued employee welfare. The unions also enforce trade policies by ensuring that trading and working conditions are favourable. Additionally, they establish the rules and ethical requirements for traders. Failure to adhere to these rules is punishable before the court of law. Examples of the bodies that support and implement labour laws are the Tariff Board, the Industry Commission and the Productivity Commission. Additionally the Australian Stock Exchange (ASX) is an interest group that requires Australian industries to prepare and publish their business reports (Reed & Darryl 2002). The most powerful interest groups are in France and they are more powerful because the country is more liberalized and depends on civil law to make trade policies. Therefore, many interest groups are allowed to contribute to the policy implementation process. For example, in France there is the European Union as well as the public sector. There are also many calls for Community Social Responsibility. These policies have made France to concentrate on the economic framework and stability (Kingdon 2003, p. 10). Public action is also involved in reducing structural weaknesses in France. For example, the public have called or a change of the industrial policy in order to emphasize on education and university research. Labour groups in France also influence the red wine industry by establishing and implementing of employer obligations towards the employees. Therefore, they interfere with the standards and expectations set out by the government. Labour laws increase expenditure and reduce government revenue through corporate taxes. The international community on human rights is another interest group in the red wine industry in both Australia and France (Matthew 2005, p.10). It implements and controls the human factor by putting up rules against child labour and employee molestation. As a result, the beverage companies are required to employ persons that are of the legal working age. Additionally, beverage companies are required to advertise the negative effects of alcohol and the consumption age. Environment conservation groups also form part of this research. While the government establishes incentives to encourage more production, the environmentalists require the beverage companies to reduce environmental pollution. Therefore, these interest groups serve the public interests in order to reduce violation of human rights by the manufacturing industry. Conclusion France and Australia are among the developed world economies. Their success can be attributed to effective government policies and policies developed by other interest groups. Some of the similarities in industry policies are innovation and development. Both countries aim at establishing new and reliable beverage products. They also motivate their employees in order to boost production. Additionally, they regulate tariffs and trade barriers in order to improve investment, growth and development. Industry characteristics are seen to overcome national characteristics in both countries. There are also various differences between the industry policies in Australia and France. For example, while France depends on civil law for policy making, Australia uses the common law. Additionally, CSR reporting is more pronounced and supported in France as opposed to Australia. This could be contributed by the different governance systems in the two countries. Additionally, it could be as a result of regulation and reporting requirements by either the government or the capital markets. Australia involves the shareholders in policy making. Therefore, the governance system is able to analyse whether certain regulations are acceptable legal practices. Therefore, it is important for investors to consider industry and government requirements before investing. This is because it affects their profitability. The society should also be aware of their rights in order to reduce abuse by the industrialized community. Investors should also look beyond national characteristics of a country. They should compare the relationship systems among different countries. 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