Insight

Trade policies in the context of domestic manufacturing

Richard Nutt
By:
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With rising supply chain costs and disruptions on a global scale as a result of the pandemic, Australia has been a prime example of resilience with a renewed focus on manufacturing domestic products to minimise shortages and global reliance.

This has been demonstrated through commitment from the Australian Government into enhancing Australian manufacturing capabilities, including the Federal Government’s $1.3 billion Modern Manufacturing Initiative (MMI) to transform and diversify Australia’s economy and capture more economic value locally.

Although we’ve increased the supply of Australian products, some organisations still struggle to compete with global sellers. This is because domestically-manufactured products often remain more expensive due to the premium price of the ‘Australian made’ label, making it difficult to compete with cheaper alternatives available on the global marketplace. As supply chains slowly ease back into a pre-pandemic rhythm and import capabilities open back up to their full potential, Australian businesses will need to compete on a global scale more efficiently. This creates an opportunity to consider where trade policies via tariffs and quotas could be applied to even out the playing field.

An opportunity to enhance trade policies

Many countries have used this approach to influence market access and the competitiveness of local manufacturing. In turn, this has reduced reliance of inbound supply chains, encouraging more domestic trade and fair market access for goods.

Currently, all World Trade Organization members, including Australia, receive the Most Favoured Nation Duty rates. While these rates reduce the need to negotiate trade agreements and encourage trade on a global scale through preferential duty agreement schemes, countries reserve the right to revoke rates, apply tariff quotas, sanctions or additional measures should this approach support trade objectives at a domestic level.

Based on origin and nature of the goods, these trade policies may help provide a framework to enable key sectors to acquire imported products, drive demand towards locally manufactured products, build capabilities to encourage export, or a combination of these.

Considering the investment into the MMI and developing local capabilities – coupled with the upcoming election and a time where new policies are raised and debated – this could be an opportune time to consider which trade policies support or monopolise certain channels, what mechanisms can be implemented to protect the manufacturing sector and how to provide similar market access opportunities for companies who are looking to expand overseas into new or existing markets.

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