The best way to protect jobs is through continuing to trade
About a decade ago I changed jobs. I left the Australian Council of Trade Unions (ACTU), where I had held the position of research officer (a position Bob Hawke held in the 1950s and 1960s) to join the Australian Trade Commission (Austrade) as Chief Economist. Source: Tim Harcourt.
When I told my boss, Bill Kelty, the legendary ACTU Secretary about the potential job offer from Austrade, he said to me the words I will never forget.
The study showed that exports help create jobs and around 1 in 7 Australian workers were involved in export activities and around 1 in 10 in import-related activities (we need imports to be able to export and 45 per cent of exporters also import). The reductions in protection, enabled export industries to flourish, and enabled Australia to pick up dynamic efficiencies and productivity gains across the economy that helped create jobs and reduce unemployment.
In short, raising tariffs would make everyone worse off, not better off, as it did during the Great Depression when countries engaged in tariff wars and ‘beggar-thy-neighbour’ exchange rate policies. In fact, in the Great Depression, here in Australia the economists of the day advised governments to do the three worst things you can do in a slump, that is, cut government spending, cut wages (the Arbitration Court cut the basic wage by 10 per cent) and raise tariffs.
Fortunately, we have learnt a lot since the 1930s and we now know that a fiscal stimulus, growing wages in line with productivity, and keeping an open economy with an accommodating monetary policy is the way to go to economic recovery. That is why Simon Crean is so vigorously prosecuting an activist trade agenda in the World Trade Organisation (WTO)’s Doha Round and through a series of free trade agreements (FTAs) across the globe. This will ensure that trade will help stimulate recovery and reverse the fall in living standards that the GFC has imposed – particularly on the world’s poor.
The study found that, exporters, on average, pay 60 per cent higher wages than non-exporters, but are also found to achieve higher standards of occupational health and safety, equal opportunity employment practices, better working conditions and more likely to be unionised and use collective bargaining agreements when compared to non-exporters. A similar result occurred when concentrating on just the manufacturing sector. As the industry moved up the value chain away from low-cost assembly to higher skill, research and development (R & D) and design, wages and conditions improved along with productivity in the export sector. The result of this Australian study is also consistent with overseas studies of exporters and the labour market in both mature and developing countries as diverse as Bulgaria, Chile, and Taiwan.
What about foreign direct investment (FDI)? A study by Access economics on the effect of FDI on jobs found that a majority of foreign owned firms in Australia accounted for 14 per cent of employment (equivalent to around 1.3 million jobs) and made significant contributions to output (value added), exports and R &D expenditure. These findings have been replicated in developing economies – particularly in China.
Have your say...
The approval of your comment is at the discretion of this article's publisher. Write your comment with the following in mind to ensure the highest likelihood of it being approved:
- No promotional undertones
- No use of profanity
- Good spelling, grammar and layout
- Check punctuation, language and missing words
- No use of aggression
- No unsubstantiated claims
We reserve the right to remove comments at our discretion.
Your name is used alongside Comments.