Protectionism, Symbolism And Gillard’s Jobs Plan

Timing is everything. On Sunday, Prime Minister Julia Gillard announced her “plan for Australian jobs” at the Boeing factory in Melbourne: $1 billion “to make sure that we are a manufacturing nation”.

The next day, the nation’s largest manufacturing union assembled for its national conference on the Gold Coast. Australian Workers’ Union (AWU) chief Paul Howes announced he backed her leadership “110 per cent”.

This is as good a way to measure public policy success as any.

Gillard’s jobs plan (formally titled the Industry and Innovation Statement) is an obvious sop to the protectionist wing of the union movement.

You can read the plan yourself here. But it’s actually pretty uninspiring; a grab-bag of miscellaneous policies trying to form a cohesive whole.

Some of the policies are new. The 10 “Industry Innovation Precincts” are an attempt to cluster industries à la Silicon Valley. We’re throwing $238 million at this little idea.

Industry Innovation Precincts are no more likely to be successful than a similar Howard and Kennett joint venture: the Commonwealth Technology Port, sited in the Melbourne Docklands.
ComTechPort failed to attract digital entrepreneurs and was instead colonised by government departments. Now it’s been rebranded as an “inner urban community”. Let’s see what the Gillard precincts look like in a decade’s time.

Others policies in the jobs plan have already been announced. Legislation for the Anti-Dumping Authority is already squirrelling through parliament.

All up, the jobs plan is not really a new “$1 billion” package. It’s a $791 million one.

But the plan’s big ticket items are the worst of both worlds: they’re both administratively complex and completely unable to achieve their purported goals.

In other words, Julia Gillard’s jobs plan is protectionism as symbolism. It’s a “victory” that the old industrial unions can bring back to their members.

All large projects with a capital expenditure cost above $500 million will be required to submit Australian Industry Participation plans that detail how they intend to involve local firms in their project. Australian Industry Participation plans started back in the early 2000s but only applied to government-funded projects. The Gillard Government is extending them to independent private projects.

In practice, Australian Industry Participation plans end up being pointless red tape. Only the most reckless project manager would deliberately exclude cheaper local suppliers. The plans are mainly there to make local firms feel like they’re in with a chance.

Really large projects ($2 billion and above) that are receiving concessions to import goods tariff-free will have to “embed Australian Industry Opportunity officers within their procurement teams”. It’s not clear exactly what that means. It sounds like embedded public servants.

Now, embedding public servants in private enterprise sounds a bit creepy.

But plus a few increases to existing programs (the Government’s venture capital fund gets an extra $350 million) that’s all there is to the Government’s “jobs plan”. It’s a couple of tokenistic, bureaucratic measures presented as a great win for Aussie jobs and Labor values and the Asian Century.

The fact that union bosses have taken this thin gruel back to their members with such enthusiasm is revealing. They are as much in on the game as the politicians.

No doubt there are many in the AWU’s rank-and-file who want the Government to protect manufacturing and blue-collar jobs by major government intervention – protectionism and planning and government investment. If so, then they’ve been completely sold down the river by their union representatives.

Gillard’s Labor Party faces the same dilemma as many other labour parties around the world. The ALP has become entirely technocratic, as Tim Soutphommasane lamented in the Age recently. Managerialism has replaced ideology. Quite rightly, they’ve learned that open markets and free trade deliver higher living standards for the whole country. But this is hard on their old base. The winds of international competition have been tough on manufacturing unions.

So the protectionism we do get is tokenistic – little regulatory rules and futile programs. Nobody seriously believes these policies will have a substantial effect on the viability of manufacturing in Australia. If the Government really believed that the secret to national economic success was clustering firms geographically or forcing big projects to buy local, these policies would be 10 times as large.

In the case of anti-dumping law (which prohibits foreign manufacturers from selling products in Australia below their “normal” price) the Productivity Commission has explicitly said it exists for psychological reasons rather than economic ones.

We can see the same dynamic in the United States. The political scientist Dan Drezner noted the mercantilist theme running through Barack Obama’s recent State of the Union speech. Obama needs to signal to blue-collar manufacturing workers that he wants to protect them but at the same time the administration can’t abandon the free trade necessary for its long-term economic growth.

There was a great worry at the start of the global financial crisis that the world might take a turn towards protectionism. Politicians often respond to economic downturns by attacking trade.

But rather than demonstrating a lack of faith in free trade, symbolic protectionism does the opposite. Protectionism and state economic planning hasn’t just lost the intellectual debate. It’s completely lost the political one as well.