We are paying to protect an industry that no longer exists. We see it almost every day in the media; rent-seekers like the motor industries extracting benefits for themselves through political influence and lobbying at the expense of the broader community. It has very little to do with markets.
The Australian Motor Industry Federation and the Federal Chamber of Automotive Industries have successfully lobbied the Australian government to continue restrictions on the imports of second-hand vehicles.
The Turnbull government accepted many of the recommendations of the Harper Review into competition policy, but it decided to continue Australia’s archaic system where there is a $12,000 specific customs duty on second-hand vehicles. Retailers are further restricted because they can only import a single second-hand vehicles at a time.
The Productivity Commission recommended that Australia should progressively relax these ‘parallel import restrictions’ and scrap the $12,000 excise duty straight away. It pointed out that New Zealand abolished these sorts of restrictions on importation of second-hand cars 25 years ago.
A large number of quality used cars could be imported for example from Japan where the ‘Sharken’ system stipulates that when the registration of a new car expires after five years, it must be rigorously tested at that time and every three years thereafter. To support their car manufacturers, Japanese governments encourage Japanese consumers to buy new cars and sell their old cars. That is what Sharken is designed to do. As a result there are a large number of quality second-hand cars on the market in Japan. But it is very hard for Australian retailers and consumers to access this market.
Australia’s restrictions on used car imports might have been justified to some degree to support our motor vehicle production industry. But the closure of our car manufacturing industry makes a continued restriction on second-hand vehicles absurd.
The rent-seekers tell us that these import restrictions are necessary for safety and emission control reasons. But our own safety controls do address these issues. Furthermore, the emissions standards in many overseas vehicle manufacturing countries are more rigorous that ours.
In short, the actions of the Australian Motor Industry Federation and the Federal Chamber of Automotive Industries in opposing liberalization of second-hand vehicle imports is a clear example of the power of rent-seekers to extract wealth from consumers. And they are getting away with it. As a result, consumers will have to continue to pay a lot more for used cars and with much less choice.
It is about political favours for the powerful. No wonder that more and more people around the world are concluding that the economic and political system works for the influential and powerful insiders and not for the general community.
To read the other entries in the Lobbyland series please see below: