'Fair trade not free trade.'
'FTA will benefit low-employment agriculture and mining and destroy manufacturing jobs'
Why Australian Factories are on their knees.
Capral Aluminium
Snippets from
http://www.smh.com.au/good-weekend/why-australian-factories-are-on-their-knees-20150227-139w1v.html
Chinese aluminium producers rely on imported raw materials, including bauxite, alumina and coal from Australia. How do they manage to undercut Australian manufacturers in their own backyard?
The answer isn't just lower wages: cheap factory labour made China the workshop of the world, but aluminium is a capital-intensive business. "China is one of the highest-cost aluminium billet producers but their industry is massively subsidised at every stage of production," says John Heslop, a forensic accountant and anti-dumping specialist.
Heslop says billet production costs China about $3000 a tonne - one-third above the global average - but government subsidies bring that below $2000 a tonne. "It's scandalous that Australian industries are expected to surrender local markets and disappear under the impact of such unfair competition. I am absolutely distressed at the impact on our manufacturing industry."
The Capral plant - state of the art when built at a cost of $160 million - operates at less than 60 per cent capacity. The workforce is down to 300, a loss of 150 jobs in five years. Nationwide, almost 800 positions have gone. A decade ago, Capral made 60 per cent of all the extruded aluminium sold in Australia. It is still the biggest domestic producer but its market share has crashed to 30 per cent.
Every Australian maker of aluminium extrusions and finished products is struggling. All blame predatory competition from China, the world's biggest aluminium producer. They claim it is dumping product at below the cost of production, in breach of world trade rules, in order to drive Australian companies out of business and control the market.
"It is easy to dismiss us as inefficient manufacturers looking for an easy ride," says Capral director Phil Jobe. "But if mainstream Australia knew what long-term damage dumping is inflicting on Australia's industrial base, they would be outraged."
At Ullrich Aluminium, a Capral competitor, CEO Gilbert Ullrich estimates that Chinese imports have grabbed 55 per cent of the market for extruded aluminium, worth more than $1 billion annually. "You don't get that in just a few years by playing by the rules," he says. Ullrich fears that the jobs of his 325 Australian employees are "clearly at risk" from dumping. "I believe in free trade but also fair trade. Once the Chinese take over the sector, they will put their prices up.
Across a wide spectrum of industries, unrestrained imports are killing Australian manufacturing. The issue goes beyond dumping to include imports that fail Australian quality and safety standards and come with fraudulent labels and certificates. China is the main offender. "It's a nightmare and it's getting worse," says Tracey Gramlick, chair of the Building Products Innovation Council. "Many Australian manufacturers are closing down because they can't compete."
Occasional news reports hint at the scale of the problem: sheets of imported glass crack and fall off Canberra's new ASIO HQ; Chinese electrical cable is declared a fire risk, requiring up to 40,000 homes to be rewired; inspectors shut down a Sydney unit development over dangerous, imported formwork plywood; hundreds of tonnes of inferior gantry steel from China are sent for scrap at a Melbourne freeway project.
Capral apprentices John Shorter and Anthony Smith.
Photo: Glenn Hunt
Manufacturers supplying the building and construction industry are among the hardest hit; 45 per cent of them tell the Australian Industry Group (AIG), a major employer lobby, that "non-conforming" products are hammering their revenues, margins and employment levels. "This issue is affecting the very viability of legitimate businesses. Jobs are being lost now and we are seeing a downward spiral of product quality and conformity," warns the AIG.
Manufacturing's plight is the flip side to the excitement generated by Australia's deepening commercial engagement with China. The first Australia-China free trade agreement (FTA), signed in November, would "set Australia up for the decades ahead", declared Trade Minister Andrew Robb. While commentators gushed over concessions apparently granted to Australian service industries - banks, insurers, lawyers, architects and education providers - and some farm sectors, the agreement also kicked away the remnants of a tariff regime that nurtured Australian manufacturing.
"The FTA will benefit low-employment agriculture and mining while destroying jobs in high-employment manufacturing," warns Tom Skladzien, economic adviser to the Australian Manufacturing Workers' Union (AMWU). This concern is reinforced by employer sentiment: an AIG survey finds just over half of all local manufacturers expect to be hurt by the removal of tariffs. Only 11 per cent believe they will benefit from cheaper imported components and raw materials.
