Protectionism is back, and with it the traditional kind of facile justification for shooting ourselves in the foot. Or, in the case of one particular industry, firing a missile at it.
Shortly before the election, then defence minister Peter Dutton announced that Raytheon and Lockheed Martin would be “strategic partners” in a $1 billion sovereign missile manufacturing plan.
Australia couldn’t just buy missiles, we had to make them.
“Sovereign” is the new “strategic” — we used to justify protectionism by declaring certain industries “strategic”. For a while we began using the word “security”. Now it’s “sovereign”. They all mean the same thing: we don’t want foreigners making things for us, we have to make them ourselves, even if it costs a lot more. Which it always does. Just slap the word “sovereign” in front of something and people’s critical faculties and sense of guardianship of the public purse dissolve.
Illustrating the extent to which the election has made precisely zero difference in defence policy, last Friday Defence Industry Minister Pat Conroy confirmed that Lockheed and Raytheon would be “reporting back to us shortly on where the opportunities for us are to manufacture parts or entire missiles … I’m confident that at the end of this process we will have a much more sovereign capability to manufacture and upgrade missiles which are so important.”
What’s the bet the two defence giants tell the government that, yes indeed, there are opportunities to manufacture missiles — sorry, to have a sovereign capability. Because manufacturing defence projects locally comes with a 30% markup compared with buying off the shelf overseas. And that means even bigger profits for the likes of Raytheon and Lockheed and their US shareholders.
In the media coverage that followed Conroy’s remarks, a defence manufacturing firm in Adelaide was invited to opine about the need for a sovereign capability and — surprise! — declared it was absolutely necessary. In the event of a war, “We could be left with nothing if we solely rely on imports … What is the cost of not manufacturing our own missiles and not being able to use them when we need them?”
Well, about 30% of the total price, but it’s only taxpayers footing the bill, so who cares?
Coincidentally, at the weekend NSW Labor Leader Chris Minns, sniffing victory next March, revealed his plans to build trains in NSW. Nothing to do with the fact that the powerful Rail, Tram and Bus Industry Union hates foreign-manufactured trains because they don’t need as many crew to operate. Nothing like featherbedding to motivate unions.
The Australian Workers’ Union and the Australian Manufacturing Workers’ Union, the right- and left-wing powerhouses of the manufacturing sector, also hate foreign-manufactured trains. And what the big unions want from Labor, the big unions get. That’s why Prime Minister Anthony Albanese also backs manufacturing trains here.
Building trains locally will cost at least 25% more. But again, it’s just the hapless taxpayer getting mugged. A victimless crime, right? It’s worth it to have a sovereign train-building capacity.
And just to show protectionism isn’t necessarily at home only on the left, NSW Transport Minister David Elliott told News Corp yesterday he wants a sovereign ferry manufacturing capability. To his credit, NSW Treasurer Matt Kean is reluctant to cough up an extra 25% minimum for transport infrastructure.
But let’s pretend that money grows on trees and we can afford to have a sovereign missile capacity and a sovereign ferry capacity and a sovereign train capacity and like a total “sovereign manufacturing capability” to justify handouts to business anywhere.
There’s another impediment: where are the workers coming from? In the three months to August, manufacturing in Australia fell to its lowest level (again): just 834,000 workers. That’s about 6.2% of the workforce. Meantime unemployment is 3.5% and industries are constantly whingeing about labour shortages.
One of the biggest sectors suffering major worker shortages — health and social care services — this year rose above 2 million workers. Education, which Minns also promised to increase funding for, is now consistently above 1.1 million workers, but faces an “unprecedented teacher supply and retention challenge”.
For decades the media and politicians were trained to reflexively demand of any new policy “how will it be paid for?” Maybe we need a new rule that whenever a politician offers a new policy, we reflexively demand to know where the workers will come from. Which sectors does Minns want to take workers from to build trains? Which industry needs to be cut so Lockheed and Raytheon can build missiles here? Where are Elliott’s ferry builders coming from?
Maybe we can go further and have a charter-of-workforce-honesty law during election campaigns. It might stop politicians promising their union donors that they’ll pump money into a dying manufacturing industry without specifying where the workers will come from.
Or we can continue slapping “sovereign” on things and ignoring the problem?
Should we just buy off the shelf overseas, or should Aussies get the jobs, even if it costs more? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
Well you have certainly manufactured some nonsense here Bernard. Let’s have a look At the NSW transport system. Overseas sourcing has produced. Trams that crack and have to go out of service for months, Manly ferries that cannot stand the crossing of the harbour (the old ones could sail in open water when I was a kid), river ferries too big for the bridges, asbestos contamination, trains that do not fit the platforms etc etc. If this is the overseas outsourced version then it would be worth 20% to have the bloody things work in our setting and be repaired here by the maker. There was nothing wrong with the quality of the work done in NSW railways manufacturing, far from it.
In WWII we found very quickly that we could not rely on overseas supply. We made all manner of military stuff here from aero engines to machine guns. We had localised versions of the F86 Sabre that were better than the US one. You cnnot rely on imports of critical equipment, as we have found recently to our great cost.
Good examples, here in Perth we have a lovely pedestrian bridge over the river to the new stadium. Nearly two years mucking around with Malaysian contractors for pre-formed steel, dramas with sub-sub contractors, quality control failures, we just built it all here. Not the lowest quote, but I commute over it every day and it is beautiful.
All the mask and vaccine disasters were only a few years ago.
Finally, supply chain issues are not going away, with ongoing covid, war & climate change.
The US has realised it’s vulnerability in semiconductors and is spending $50B to re-build up their industry, not something we can do, but an example of the realisation of the risks of loss of industry.
There are literally hundreds of examples. And as for workforce, haven’t we read articles here about the disaster of Australia’s self destructivly short sighted approach of destroying local and industry training and becoming dependant on importing skilled workers.
Damn right!
Without skilled, creative workforce(s) our Nation beholden to whomever wants to exert pressure. Friendly or otherwise. That does not mean total independence, for alliances also have value.
Dirk Gently featured an electric monk who would believe things for those too lazy to do it themselves.
Or was that Dick’s “We Can Remember for You Wholesale“?
Either way, it’s a slippery slope to an uncomfortable landing.
What a load of neocon Thatcherite rubbish.
‘Cheap’ maybe initially on paper but the importance of the flow on effects from taxes paid HERE, workers employed HERE, skills maintained HERE, capability HERE are somehow conveniently ignored. Did we not just live through a pandemic where all of this; so many things not being able to be obtained through supply constraints due to an over reliance on imports was brought to the fore? Were you living under a rock? People employed locally spend locally. The article also says nothing of the costs to the environment and working conditions in [some of these] overseas sourced projects:
NSW trains built with Chinese Uyghur slave labour anyone? But, at least they were ‘cheap’.
Emissions to ship things half way around the world? Don’t worry, as long as it’s ‘cheap’.
TfNSW having to modify the entire Blue Mountains rail network because the imported trains didn’t fit through the tunnels? Don’t worry, they were ‘cheap’.
NSW Ferries not fit for purpose? Don’t worry they were ‘cheap’.
90% of Australia’s medicines are imported, and the current supply shortage issues because of global circumstances? Don’t worry, ‘they’re cheap’.
Tax payer money going to overseas companies (for their profit) AKA Chinese state owned enterprise and a likely future adversary? Don’t worry, as long as’ it’s cheap’
Care to compare the cost of a Toyota Camry from when they were made in Australia to now for the equivalent Japanese imported vehicle? It’s $10,000 more which I don’t know about journalist wages… that’s hardly ‘cheap’ in my books https://www.news.com.au/technology/innovation/motoring/new-toyota-camry-from-japan-is-up-to-10000-more-than-the-australianmade-model/news-story/752838cdc873d255c63c7b15e1c30ca6
That’s ok… it was ‘cheap’[er] to shut the industry down than pay a measly subsidy to maintain it here. Well done Joe Hockey.
Maybe Crikey could employ cheap(er) OS based authors or investigate the use of AI to write articles and Mr Keane could divert his newly found ‘cheap’ spare time working in aged care or assisting Scott Morrison & Co with their memoirs.
In the end ’cheap’ is an illusion, we all pay as a society.
Bernard, I enjoy your work but I am amazed that you would write such drivel.
The extra cost of manufacturing locally is surely more than recovered by the increased employment and local profits which return at least 30% in direct income and corporate taxes and GST, create further component and supply chain jobs and reduce profit payments to foreign shareholders. It also most importantly provides us with the capacity to defend ourselves should a conflict arise to threaten us. Ammunition, especially missiles re-supply being the first and most immediate priority.
Labour supply is a different issue with its own solutions both short and long term. There will be solutions but only if we address the parlous situation that economic rationalism and globalisation have brought us to and make the decisions and take action starting now. We must re-establish and sustain our manufacturing capabilities.
Relying on overseas supply for everything makes us vulnerable. A couple of examples: relying on most if not all of our aviation fuel, including for our air defence coming through the South China Sea from Korea and keeping a large part of our strategic fuel reserve in the USA in the American stockpile. There are of course many more examples and every one puts our nation at greater risk.
Well, I guess we should just off-shore everything then seeing as it is cheaper. After all, that’s what’s important.
Some louche lounge lizard of a Victorian boulevardier opined in his world weary nasal twang “As for living, our servants can do that for us.”
I don’t think that it was Oscar – more like Lord Alfred.
hard to believe that after the world’s recent experiences:-
Supply chain shambles and delays.
Covid caused delays.
Chinese dummy spit delays and bans.
Cargo shipping and airfreight ripoff price doubling.
Fuel price rises causing freight cost rises.
Shortly, climate change mitigation cost, price rises.
Everywhere else worker shortages.
Somebody still believes in Globalisation, voodoo magic