International Trade Competitiveness Protection and Australian Manufactures

Australia’s weak trade performance in manufacturing is often seen to be a significant contributor to the nation’s balance of payments and external debt difficulties. The paper develops and applies a simple methodology for assessing trade competitiveness at a disaggregated industry level. The unique aspect of the approach is the attempt at incorporating existing levels, and changes in, trade performance and protection, and likely future growth in market demand. The findings provide some evidence which throws doubt on the assumption that reduced protection in manufacturing will be a substantial force in attaining the desired longer-term trade competitiveness objectives of Australian industry policy. The observed relationship between changes in protection and trade is weak and ambiguous at best. There has also been no sustained improvement in trade performance in manufacturing, total merchandise, or goods and services overall, since the early 1970s. Furthermore, the industry groups with high competitive advantage potential in the 1970s have not benefited from the structural readjustment accompanying reduced protection.