U.S. Firms Likely to Gain as Australia Eases Barriers

U.S. aerospace firms and other manufacturers could reap huge benefits Down Under when dramatic reductions in Australia’s tariffs and quotas take effect.

The United States is already Australia’s largest foreign investor after the United Kingdom, and the South Pacific nation represents the 10th-largest market for U.S. goods and services--notably defense, aerospace and computer products.

But Australia’s latest lowering of protectionist walls, announced last week, should awaken a host of new firms to what one U.S. trade official called one of the best business opportunities in the Pacific.

“We don’t think U.S. companies are really aware of how important this market is,” said Michael Hand, commercial counselor at the U.S. Embassy in Canberra. “It’s an easy market to do business in, and it is very receptive to U.S. goods. So you should come on Down Under.”

Prime Minister Bob Hawke, in another step to boost Australia’s global competitiveness, announced last week that tariffs across a broad range of goods would be slashed to 5% by 1996 from the current levels of 10% to 15%. By the year 2000, tariffs are set to drop to 3%.

Hawke also announced reforms for two of Australia’s most protected markets. For passenger motor vehicles, tariffs will drop by 2.5 percentage points a year to 15% in 2000 from the current level of 35%. For textiles, clothing and footwear, they will drop to 25% by the year 2000 from current levels as high 55% and quotas will be eliminated in March, 1993, two years earlier than originally planned.

“Tariffs protected Australian industry by making foreign goods more expensive here. And the supposed virtues of this protection became deeply embedded in the psyche of the nation,” Hawke said in an address to the Parliament.

But the result, he said, was “inefficient industries that could not compete overseas and higher prices for consumers.”

Australia will also widen exemptions from the wholesale tax for manufacturers, miners and certain producers operating in the nation, as well as offer a more favorable depreciation system.

And, in a boon for aerospace firms, Australia agreed to dismantle what amounted to forced local assistance programs. Aerospace firms that won Australian government contracts of $1.9 million or more were required to offset 30% of the contract value by exporting domestic goods, investing in research and development or other forms of local assistance, Hand said.

“They eliminated that requirement and will move into a new form of cooperation that is much more flexible and negotiable,” Hand said.

The measures mark the latest steps to transform Australia from a sheltered enclave of farmers and miners to an industrial powerhouse able to withstand the harsh winds of global competition. Since the Hawke government took power, it has launched efforts to attract foreign manufacturing investments, reduce government protection of industry and control the nation’s notorious labor unrest.

The crusade appears to be paying off. Direct U.S. investment has doubled since 1973 and investment from Japan, Taiwan and Hong Kong is also increasing. Last year, Australia outgunned every other Pacific Rim nation in luring the greatest number of new U.S. manufacturing investments.

Colin Hook, senior trade commissioner with the Australian Trade Commission in Los Angeles, said the reforms should make Australia even more attractive.

“We would hope this stimulus in the economy and the improvement in our competitive position as a manufacturer might mean more American companies would boost their Australian operations and use it as a base for Southeast Asia,” Hook said.

Staff writer George White contributed to this story.