INDUSTRY PROTECTION AND ADJUSTMENT: THE AUSTRALIAN EXPERIENCE.

Australian industrial policy is primarily concerned with protecting the manufacturing sector by the use of tariffs and quotas. Over the last decade and a half successive governments have announced an intention to move towards lower tariffs. The result has been lower tariffs on average, but the introduction ofimport quotas in response to the 1974–75 recession has resulted in large increases in protection for the textile, clothing, footwear and motor vehicle industries. These sectors are covered by Industry Plans. There is a stated intention to liberalize trade, but for a decade the market share of imports has been fixed. On the basis of past experience, there is a low probability that significant trade liberalization will occur. Australian industrial policy has failed to create a more efficient manufacturing sector. It is reactive and has slowed the rate of structural change. It is a good example of the way in which initiatives to restrict trade flows by ‘temporary’ quotas — intended to provide a breathing space so an industry can reorganise and compete more effectively against imports — can result in import quotas becoming a near permanent feature of the economic environment. The Australian economy has also been subject to largeexchange rate appreciations. Our experience is that unusual appreciations bring to the forefront of structural change those industries which have already set out upon a path of long run decline. Once the appreciations have passed, these troubled industries are not placed back in their original position relative to imports. [ABSTRACT FROM PUBLISHER]