Global Production Sharing in the Australian Automotive Trade

This paper contributes to the literature on global production sharing by investigating the experience of the Australian automotive industry, which has experienced significant structural change following trade liberalisation. Our analysis indicates that the globalisation of the world economy, together with developments in transport and communication, has significantly increased the importance of the global production network in the Australian automotive industry, leading to a substantial rise in value-added share of foreign inputs in its exports, which had reached about 80% by 2011. While foreign technology embodied in imported inputs may have made the industry more competitive, lacklustre production and exports performance, especially during the decade to 2010, suggests that the flow-on effects are weaker. Nonetheless, some welfare gains through improvements in the motor vehicle affordability index were observed. These findings raise important policy questions for ongoing industry assistance, including research and development support.