Protection Vindicated

Sun (Auckland), Volume III, Issue 734, 6 August 1929, Page 8

Protection Vindicated

Experts Report on Tariff System

AFTER 18 months under the microscope of exhaustive and impartial research, the Australian tariff system has emerged with protection still uncondemned as an essential factor in the economic conduct of certain local industries. Capable and fearless minds have been focussed upon the effects of the Commonwealth tariff, and their report, which is a valuable contribution to political and economic progress, decides ultimately to leave the more intricate complexities of the question on the merits of a statement of their benefits and offsetting costs.

It was at the invitation of the Prime Minister of Australia, the Rt. Hon. Stanley Bruce, that a committee of five economic and industrial experts agreed to undertake a complete investigation of the economic effects of the Australian tariff. Giving their services free, the members of the committee worked strenuously for 18 months, and have now presented a report which is an example of impartiality and clarity, and which, although open to challenge from confirmed partisans in the economic field, is abundant in practical commonsense. Speaking in the widest generality in summarising a volume of 230 printed pages, the investigators say that, although some applications of protection have been wasteful and have cost more than the benefits gained, the evidence available did not support the contention that Australia could have maintained its present population at a higher standard of living under free trade. They go further and say that the adoption of a considerable, but not unlimited, amount of protection is justifiable on economic grounds in the circumstances of Australian industry, and that Australian resources in relation to population are sufficient at the present time to carry without distress any net burden there might be through the heavy costs of a tariff imposition. QUESTIONS OF PRICE The price of about £150,000,000 worth of Australian products is raised to some extent under the shelter of the tariff. About half of this is raised less than 10 per cent, in price and could not live without protection, the investigators say. The other half could not, without protection, be maintained at present efficiency. Alternative production, therefore, would have to be found for it, but owing to the quality of the uncultivated land and the effect of increased exports on the market, they were satisfied that the same average income for the same population could not have been obtained without protection. Moreover, in a primary producing country like Australia—and incidentally like New Zealand, for New Zealand is almost analogous in tariff questions—it is the conclusion of the committee that the diversion of production into protected industries has increased the opportunities for occupation and produced more stability in the national income than if it had been dependent on the seasons and the vagaries of overseas markets. Incidentally, of course, the tariff had increased the proportion of customs to total taxation beyond limits economically desirable, but when all

these factors had been considered the committee decided with the utmost clarity, and after a dispassionate sifting of the evidence, that the poliey of protection had not had very great net effects upon the prosperity of the community as a whole. It had not brought all the benefits expected, nor had its effect been disastrous. Careful examination of cost is urged by the committee before any extension of the protective system is undertaken, chiefly because of the inevitable tendency of costs to overtake the benefits as a tariff grows, and for this purpose it recommends that the Australian Tariff Board —which incidentally it describes as an integral and almost indispensable element in tariffmaking—should be equipped with the organisation necessary to investigate carefully the needs of individual industries and to report from time to time upon the operation generally of the protective system. BOUNTIES PREFERRED Bounties the committee considers are preferable to protective duties on all grounds except financial expediency. They should be adopted as the method of protection when the industry is iu an early and experimental stage. But when the industry is established, a tariff duty should be substituted and the amount more accurately determined. As a further objective it was recommended that all revenue derived from protection should be allocated to the protective purposes intended, and that it should be used for bounties and not for ordinary Government expenditure. The way in which natural development of an industry corrects any excess of tariff cost is dealt with extensively in the report, which adds that there is no reason why a well-managed protected industry should not enjoy unusually good profits and yet supply consumers with goods at reasonable prices. Provided the necessary safeguards for public interest are in operation—the simplest safeguard recommended is public knowledge and public criticism—there is no reason in the minds of the committee why the protection given should not be sufficiently high, not only to allow competition with importing comp'etitors, but to enable the industry to prevent imports and to secure the maximum market for an organised output, for under these conditions is protection likely to be most economically applied. Altogether the report is an illuminating document, and, as Mr. G. Finn, president of the Auckland Manufacturers’ Association, mentioned at the meeting yesterday must be considered an eloquent vindication of the system of protective duties as advocated by the New Zealand manufacturers.