Why Did Most Australian Colonies Develop Protective Tariff Policies - Research Proposal Example

Australia and the Global Economy Protective Tariff Policies of the Australian Colonies Order No. 388232 Introduction Ever since World War II, most of the world’s leading economies were gradually heading towards a critical global recession during the period of 2008 – 2009 when many financial markets almost collapsed. Fearing a Great Depression, Governments, Policy makers, Central bankers and industrialists designed stimulating measures in order to increase the spending capacity by consumers and initiate industrial production. While most of the countries in the world suffered a setback, Australia proved to be resilient and resourceful in many ways. Its success relied on the extent of its globalization because not only did they engage themselves with it, but we’re also active players in the area of international affairs and world trade. (Dr. Bruno Mascitelli, et al., 2009) In this essay we would examine the extent of Australia’s involvement in the world markets and try to determine the salient points of its success with special reference to its protective Tariff Policies. Background of the Study The Depression of the 1890’s was a critical and long drawn out one which continued into the 1900’s. During this period, Australia understood fully well that in order to tide over this Depression, a federation was inevitable. They knew that such a federation would not only help them solve the puzzle of Depression but also would go a long way to help them solve and the social problems that were brought about due to Depression. Since the three colonies of Victoria, South Australia and Tasmania were the worst affected, they became the strongest proponents to bring about a federation, but colonies like WA and New Zealand were not much in favor of joining the federation since gold was found in their regions. However, When the British government brought about the Australian Constitution Act, WA decided to join forces with the Commonwealth. Aims of the Study The study aims at making an investigation of the Protective Tariffs Policies of the Australian colonies to help us better understand how these policies helped Australia to keep afloat during the Depression by bringing about crucial changes to their market economy and industry. The study also proposes to help us to assimilate the good points implemented by Australia and to make wise recommendations to build a healthy market economy in the future. Thesis Statement Many people were of the opinion that an Australian free trade zone was brought about due to the federation, but in reality this was not the case since many of the colonies joined the Commonwealth only after the Act was passed and on the basis that they were allowed to keep their Colonial tariff’s, since tariffs were a very important source of income for them. According to Meredith and Hyster ( ) the debate between ‘free trade ‘and ‘protectionism’ were one of the lengthiest debated issues at the Constitutional Convention. Outline of the Paper In the 1860’s, after the Land Acts were passed in Victoria and self government was granted, bankers and industrialists began to gain considerable power. On the rural front, NSW kept their tariffs low by keeping their political power in good restraint. Hence, rural tariffs gained interest and impetus due to low costs. Activities such as Agriculture and Pastoralism depended heavily on goods that were manufactured as well as imports of capital. Though Victorian tariff was considered to be the highest, it did not much favor protectionism. On the other hand, colonies such as Queensland, WA, SA and Tasmania had better protective tariffs. After a series of meetings and debates involving ‘ free trade’ and ‘ protection’, the Commonwealth Tariff was based on a compromise and before it could be enacted in October 1901, negotiable changes were made and the commonwealth Tariffs were amended. Some of the amendments to these tariffs are given below – 1) 1901 The Kingston Tariff, slightly protective; 2) 1908 The Lyne Tariff, almost twice the Kingston Tariff; 3) 1911 First Tudor Amendment, mild increase in protection; 4) 1914 Second Tudor Amendment, slight increase in protection; 5) 1921 The Greene Tariff, twice the Lyne Tariff of 1908. However, among the above tariffs, it was ‘The Greene Tariff’ of 1921 that made a significant breakthrough towards the forces of protection, but the major catch was that all amendments whether big or small, made to the Commonwealth Tariff, necessitated an Act of Parliament. This resulted in very few tariff revisions. However, once again the Green Tariff rose up to the occasion by breaking the nexus between the parliament and the tariff by establishing the Tariff Board in 1922, which gave added impetus towards protection. In 1930, another countermeasure was introduced by the then Prime Minister, Scullin which offered protection against the Depression. Even though there were changes in attitude towards Colonial Socialism during the 1890’s, yet there was always a constant partnership between the public and private sectors which was more indirect than direct. Therefore, the Constitution as well as the Constitutional Conventions had to make provisions for a whole new range of institutions to cater to this partnership. The changes in the goals of the government were clearly reflected in the development and progress of the protective tariff. The primary goal of the Protective Tariff Policy was to act as a stimulant for economic growth and the development of the manufacturing sector. The strategy that was used is termed as ‘Import Substitution Industrialization (ISI) which aimed at creating a tariff protective wall. This involved placing a heavy tax on imported goods and discouraging local producers who were inefficient but who were trying to make huge profits for themselves. The strategy also helped the local firms to establish themselves well and to expand their businesses. It also encouraged foreign firms to make investments within the host country by jumping over the tariff wall. This resulted in the establishment of new factories through direct foreign investments. A good example of such an investment during the 1920’s was the Chrysler, who wished to sell its motor vehicles in Australia and who joined hands with a local producer to do so. According to (Bordo et al., p.11) the increasing prominence of goods and services by the same company to different markets is another sign of global integration. In sharp contrast to the ISI was the Export Oriented Industrialization (EOI) according to the strategy of the ISI, when established firms progressed and got bigger, they would automatically move towards international markets and exported goods, but such a scenario hardly takes place. On the other hand, an alternative strategy is used by the EOI which does not involve the initial phase of ISI and therefore are internationally competitive. Generally, the EOI strategy is made use of by Governments to get into partnership with other multinational or transnational companies where they operate within free trade zones. Discussion The Australian economy was greatly impacted by both WWI and WWII and hence we find great changes in the tariffs that have been brought about during the 1960’s. After the war since there was a huge population displacement, migration in the form of workers, travelers, businessmen, refugees and students who migrated to find asylum here. (Castles and Miller (1998) Towards the end of the 1960’s we find that Australia had gradually transformed itself from an economy based on agriculture to an economy based on industry. However, during the 1970’s when the Whitlam Government was in power, there was a 25% decrease in the tariff as Australia gradually de- industrialized itself. The economic policy of the EOI went a long way in speeding up the process of industrialization and making the markets more competitive. However, governments tried to protect certain industries so that they may be used and exploited for their advantage. Between the 1960’s and 1980’s some of the East- Asian countries had barriers on imports, but by reducing the barriers on tariff and engaging in floating exchange rate, the government supported the export of goods. Therefore, in the postwar period we find that the EOI was greatly responsible for the economic development that took place in relation to the economies of Singapore, Hong Kong, Taiwan and South Korea. The EOI was fully supported by the Government through finance as well as the freedom to bring about innovative tariff policies that helped in the progress of the Australian economy. Australia began to de-industrialize after the ISI phase, but more importantly the key factor that brought about major changes in the economy was the Hawke/Keating Labor Government that rose to power in 1983. They fully understood that the manufacturing sector of Australia was internationally uncompetitive and there was a dire need to restructure the system and encourage innovative ideas for higher efficiency and modernization. They brought about distinctive crucial changes to their macroeconomic policy over the next five years and paved the way widening the Australian economy to higher international standards. Some of the revolutionary policy changes brought about were – 1) The floating of the dollar. 2) The deregulation of the financial and banking sectors. 3) Reforms in the area of micro economy. 4) The de-regulation of the labor markets and 5) The decreasing of tariffs. Conclusion These crucial policy changes changed the nature of protection. No more was the tariff considered as a suitable means of protecting the manufacture of goods, since the protection for manufacture was provided by the industry plans in the form of incentives. Presently, Australia’s economic growth is greatly dependent on a smaller range of ‘staple’ primary products to the various industrial powerhouses of the world and has so far been quite successful in its mission. References Bordo et al., (1999) Multinational Companies in ‘Australia in the Global Economy. Annual Report. (1999 – 2000) Pg. 11 www.pc.gov.au/__data/assets/pdf_file/0004/9067/chapter01.pdf Castles and Miller (1998) Migration in Australia in the Global Economy. Annual Report. (1999 – 2000) Pg. 103 www.pc.gov.au/__data/assets/pdf_file/0004/9067/chapter01.pdf Dr. Bruno Masciteelli, Tony Ciro and Siva Muthaly (2009) Australia and the Global Economy. Connor Court Publishing. Pgs. 278 Read More