Academic journal article History of Economics Review

The Path of Protection in Australia since Federation

Academic journal article History of Economics Review

The Path of Protection in Australia since Federation

Article excerpt

Abstract: This paper traces the path of protection in Australia from the time of federation. It outlines the main facts of the history of industry assistance through tariff assistance and through non-tariff measures. It then examines three developments relating to the measurement of levels of assistance and their economic effects--the development of the concepts of effective protection, computable general equilibrium modelling and the Trade Restrictiveness Index. With these concepts, it re-examines trends in industry assistance in the last 40 years and offers some concluding remarks.

1 Introduction

From the time of federation, protection of Australian industries has been a contentious issue. And it still is. The reason is that assistance given to one industry or product group affects the real incomes of downstream and upstream industries and consumers as well as those receiving income from the industry. (1) And it lowers the average income in real terms. Collectively, we are worse off.

In this paper I shall focus on two aspects of this debate. First, I shall outline the main facts of the path of industry assistance from the time of federation. This history will apply to tariffs, in Section 2, and then to non-tariff measures, in Section 3. Second, in Section 4, I examine the measurement of the levels of tariffs and non-tariff measures. This section traces the development of the three concepts which have changed our measurement and thinking about levels of industry assistance--effective protection, computable general equilibrium modelling and the theory of the Trade Restrictiveness Index. Section 5 re-examines trends in industry assistance in the last 40 years, using these more recent measures. Section 6 makes some concluding observations. However, I shall comment only briefly on the economic theory arguments for or against industry assistance and I shall not examine the political economy of industry assistance.

2 Long-term Series of Tariff Rates

On 8 October 1901 a uniform tariff replaced previous non-uniform State tariffs, and trade between the Australian States became free. (2) Initially statistics of the value of duty collected were compiled by the NSW Government Statistician under instruction from the Commonwealth Minister of Trade and Customs. The first two years--1903 and 1904--were done by Timothy (later Sir Timothy) Coghlan. He reported duty collected on both total and dutiable imports. Coghlan was the producer of the first New South Wales Yearbook and then the producer of A Statistical Account of the Seven Colonies of Australasia (various years). He was an important pioneer of national income accounting (see Haig 2006). In the present context, he is the first hero in the history of measurement of industry assistance levels. (Sorry, ladies, there are no heroines.)

The Commonwealth of Australia Yearbook 1908, which was the first Commonwealth Yearbook, contained the first official Commonwealth calculations of the average rate of import duty. This publication reported the average rate of duty on all merchandise imports, both dutiable and free for the year 1906. This was calculated as the total duty collected divided by the total value of all imports. The duties included specific and ad valorem rates of duty. This statistic can be shown, by simple manipulation, to be the import-weighted arithmetic mean. It is a Paasche index number, using current period weights. For the year ended 1906, the rate was 17.5 per cent.

The Commonwealth Statistician also calculated in the same manner the average rate on all 'dutiable imports' only, excluding imports that entered duty-free. This second statistic recognised a problem in the all-imports measure of the average in that it included imports of goods which are non-competitive inputs and exempt from duty. The Customs Tariff 1902 introduced 'special exemptions' from duty which are the ancestors of the later by-law system and the present-day concessional import system. …

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