Malcolm Turnbull has announced a submarine building program that has an effective rate of protection of 300%. Yes 300%. That is the additional cost we will pay compared with buying at best price in the international market.
Yet Malcolm Turnbull is criticising Bill Shorten for ‘flirting with protectionism and questioning free trade’. Has he no shame or doesn’t he understand!
The 300% effective rate of protection for the submarine build is the highest rate of protection ever in Australia. And for that rate of protection, there will be less than 2,000 people employed. Even in the days of high protection with Tom Playford and Jack McEwen, we never saw a rate of protection like this.
When the Abbott Government pushed our automobile manufacturing industry out the door the effective rate of protection was 8%. Yes 8% and employing 200,000people.
Speaking with Donald Trump after his election, Malcolm Turnbull said that Trump was ‘very impressed with our naval ship-building plans … including twelve new regionally superior submarines.’ Trump could surely have only been impressed if he had been misled.
Apart from the massive level of protection and the $50b budgetary cost, Malcolm Turnbull has yet to adequately explain how our security will be improved by building these conventional submarines to operate against Chinese nuclear submarines in the South China Sea. Even the US has reservations about our inserting twelve conventional submarines in the South China Sea. Projecting ourselves into that area against China is likely to make us less secure.
Comparing the motor vehicle industry and the proposed new naval shipbuilding in SA, Jon Stanford in ‘JON STANFORD. Business welfare under the Coalition: two case studies (1)’ and ‘JON STANFORD. Business welfare under the Coalition: two case studies (2)’, said
‘Car manufacturing, the imminent loss of which may cost an estimated 200,000 jobs, has an effective rate of assistance (ERA) of less than 8%. The proposed submarine acquisition will require an ERA in excess of 300%. In return, according to the Defence Minister, the project will create “1,100 jobs in the shipbuilding process, potentially 750 jobs in the supply chain”. As a payoff for such a high ERA this is a very damp squib … The Australian Submarine Corporation in Adelaide has been consolidating three air warfare destroyers (AWDs) for the last ten years. They have been plagued with cost and delivery overruns. Finance Minister Mathias Cormann has noted that “these ships are costing $3 billion a ship when equivalent ships from other parts of the world would have cost us $1 billion a ship”. Not only is the cost of the ships unacceptable, but they are already years late in delivery, leading to significant additional costs for the RAN.’(in extending the life of the Collins class submarines)
But there is even more in Malcolm Turnbull’s highly protectionist stance. To hide the decision as much as possible in late December 2015 the Turnbull Government government quietly announced that it would not be removing the $12,000 excise duty on used car imports and the other restriction that imports be limited to a single second-hand vehicle. The Turnbull Government made this decision despite the fact that there was no automobile manufacturing in Australia that in future would need protection. As a result of the lobbying by the Federal Chamber of Automobile Industries, Australian consumers continue to pay thousands of dollars more on imports of second-hand vehicles. The restrictions are so severe that very few second-hand cars can be imported.
Malcolm Turnbull should be careful when he talks about free trade and free markets. The Productivity Commission has told us very clearly that the Free Trade Agreements that the government has negotiated with ROK, China and Japan have produced marginal benefits. Yet Malcolm Turnbull never stops telling us how wonderful these agreements are. The main result is trade diversion and prejudice to Australian jobs .
Neither the Business Council of Australia, the Australian Financial Review or News Corporation have raised a word of query or criticism of the 300% submarine protection. This is despite their persistent arguments about free markets and open competition. In fact, their arguments are invariably about protecting business and capital rather than getting the market to work effectively.
The 300% protection is so outrageous and scandalous it must surely be reviewed. It just cannot be sustained. It is a boondoggle that Malcolm Turnbull continues to boast about.