Protecting is not protectionist

IT IS always disappointing when a vital discussion on the future of manufacturing descends into predictable knee-jerk name-calling of those who want to see the sector grow and continue to be a vibrant contributor to Australia's economy as "protectionists".

In the very early stages of what promises to be a long debate about the role of manufacturing in a balanced, diversified economy, we are already witnessing this name-calling as key opinion leaders including both the government and opposition wrestle with what is a complex problem.

We are living in a boom and gloom economy. Resource prices may be up, but for big employing sectors of our economy such as manufacturing, tourism, education and retail, the reality is shaped much more by the high dollar, constraining interest rates, and weak consumer confidence in the face of lower superannuation balances, falling real house prices, global economic volatility and domestic political uncertainties.

We have enormous policy challenges to address to boost our productivity in order to sustain the competitiveness of broad sections of the Australian economy. These include skills and training, innovation, infrastructure, industrial relations, trade policy including appropriate defences against dumping as well as procurement for major public and private sector projects.

Australian industry, whether located in Bendigo, Ipswich, Whyalla or Wollongong, understands it operates in a global environment and needs to be globally competitive. That it needs to be competitive not just with domestic counterparts but against global benchmarks should be no surprise as it was a key finding of two Australian Industry Group reports, Make or Break in 1997, and its follow-up, Manufacturing Futures, in 2006.

The tariff debate has been had and is over. However, the debate about whether Australian industry has the right to compete on fair terms with foreign competition is not over and certainly should not be. This issue has come to the fore in recent times in relation to the access Australian companies have to procurement for major public and private contracts.

Let's be clear. We are not proposing mandated levels of Australian content. We are not proposing to compel contractors to use Australian materials. We are not arguing for implicit quotas. Rather, we are advocating a principled approach which includes a number of sensible steps to ensure that Australian companies get a fair go.

In our view, five key principles should be embodied in Australia's procurement approach:

Long-term value for money, not just the short-term price on offer.

Procurement processes that are clear and transparent, as well as open to review to ensure ongoing improvement.

Full and fair access to supply opportunities for local suppliers (who should not be subject to disadvantages including in relation to unevenly applied standards conformity criteria).

The publication by purchasers of

the extent of participation by local suppliers.

The co-ordination and staging of major contracts to allow for economies of scale and aggregation by suppliers.

If locally based companies cannot compete on these grounds with overseas bidders, so be it. However, industry is seeing time after time examples of non-conforming goods and products being used on major projects in the interest of short-term savings and at the expense of Australian industries that are required to conform to more stringent and costly standards.

Doors on projects that don't fit. Electrical switches that don't conform. Pipes that crack. Road guards that do not comply with Australian standards. The list is a long one. To suggest doors should fit, switches should work, pipes shouldn't crack and road guards be built to appropriate standards is not protectionist. It is common sense.

We understand that this is not a one-sided argument. There will be cases where local companies won't be able to meet the vast scale of some projects, such as the example of immediately supplying hundreds of kilometres of pipe. Even so, if project managers had Australian suppliers at the forefront of their thinking they might develop solutions such as breaking tenders into smaller pieces.

Australia needs a real debate about how best to deal with both the opportunities and the challenges of the minerals boom. We need also to have a real debate about the sort of economy we want to see on the other side of the boom. Other countries such as Canada, Brazil, South Africa and the UK are having this debate, as should we.