Tariffs and 'free trade'
By Allen Myers
Several weeks ago, the federal government publicly retreated from its announced target of tariff reduction on cars. Car corporations and unions alike welcomed the move as likely to encourage investment in the industry and to preserve jobs. However, some — not all — economists and commentators in the establishment media objected that maintaining tariffs only preserves inefficiency and makes consumers pay higher prices.
The tariffs versus "free trade" debate is a complex one for socialists and the workers' movement generally. The complexity stems mostly from the fact that what appears to be the subject of debate is not the real subject.
Publicly, protectionists and free traders usually argue about whether high or low tariffs are more likely to preserve jobs — and which jobs those will be. But jobs are not their real concern. Jobs are only a pretext, an attempt to enlist public support for each side in the real debate: are high or low tariffs more likely to preserve/increase profits?
There is a debate about tariffs mainly because the answer to the real question is often different for different groups of capitalists. Protection of the Australian steel industry, for instance, is profitable for BHP but raises costs for companies, such as car manufacturers, which use steel as an input.
The partisans of tariff reduction argue that a tariff in effect taxes consumers and gives most or all the proceeds of the tax to the industry that is protected. That's accurate — if by "industry" we understand the owners of that industry.
The free traders then add that abolishing tariffs only creates "a level playing field". This too needs to be interpreted.
Whether the "playing field" is level or not depends on what you decide is part of the field. For an Australian capitalist whose international competitors pay higher wages than s/he does, the "playing field" won't be level until Australian wages come down. But if those same competitors pay a higher company tax, company taxes are not part of the "playing field".
To take another example, Australian farmers are well aware that both the United States and the European Union, equally partisans of "free trade", both subsidise agricultural exports — to "level the playing field", of course.
Where all the talk about "level playing fields" becomes most obviously hypocritical is in trade with the underdeveloped countries. After centuries of exploitation by imperialism, these countries have no chance of competing, even in their own internal markets, with the high productivity industries of the developed countries. In Third World countries, tariffs or other forms of protection are often the only means of having any significant local industry.
In short, it's not a "playing field", level or otherwise, because it's not a game. It's very serious business: profits above all.
In a developed country like Australia, protectionism and "free trade" are simply different — and not greatly different — ways of trying to protect and increase the profits of Australian capitalists at the expense of foreign capitalists and Australian working people.
But, even if saving jobs is not the aim, does either protectionism or "free trade" save jobs as an unintended by-product? Unfortunately, no. Under either system, the trend is for jobs to vanish.
Over time, the number of jobs for any given value of production declines, as a result of increased productivity, because the capitalists manage to take most or all the benefit of such increases. The only way to prevent this would be to enforce a shortening of the working week (with no loss in pay) equal to every increase in labour productivity.
All this means that it is a waste of effort, at best, for workers' organisations to line up with either the protectionists or the free traders. In either case, that is simply aiding employers who will "repay" such assistance by increasing the investments that put workers out of jobs.
Unions can usefully intervene in the tariffs debate only by clearly and firmly insisting that no changes (from high tariffs to low or vice versa) are acceptable unless they include provision to protect existing jobs or provide new and at least equal jobs for all the workers affected.