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Asian free-trade deals hurt Oz car-makers, says Bracks

Trade off: Former Victorian premier Steve Bracks says free-trade agreements with Thailand and Malaysia could harm local car-makers' chances of export.

Australian motor industry ‘disadvantaged by poor Thai, Malaysian trade deals’

General News logo29 May 2012

AUSTRALIAN automotive envoy Steve Bracks has criticised the federal government’s free-trade agreements (FTAs) with Thailand and Malaysia.

The former Victorian premier said Australia’s negotiators had failed to realise the importance of the automotive industry to Australia, resulting in lop-sided trade deals that disadvantaged Australian manufacturers.

“I want to see the automotive industry in lights when we are doing FTAs in future,” Mr Bracks said.

“We need to pursue FTAs, but we need to pursue them with our eyes open, knowing that automotive is one of our most significant manufacturing exports.

“We need to have that enshrined as one of the key opportunities for Australia in any FTAS in the future.”

Since the Thailand FTA was signed, vehicle imports from that country have soared from almost nothing to 158,469 units last year, second only to Japan and surpassing even Korea.

But almost as soon as the FTA was signed, Thailand introduced a punitive sales tax on vehicles with engines over three litres and, as a result, compromised several prospective vehicle export opportunities for Australia.

“We should never have signed that agreement without knowing what the Thais could do to prevent the export of our manufactured motor vehicles into that country,” Mr Bracks said.

Along with former Toyota Australia president John Conomos, Mr Bracks was appointed an auto industry ambassador by the federal government in 2009 under the Automotive Market Access Program, which forms part of the $6.2 billion New Car Plan for A Greener Future.

Mr Bracks was also responsible for a major review of the industry and the government’s assistance programs.

 center imageFrom top: Australian automotive envoy Steve Bracks Ford Territory.

Speaking in Melbourne this week after addressing participants in an imminent automotive trade mission to the United States, Mr Bracks said he was disappointed with the FTA with Thailand.

“Before the ink was dry on that, they brought in a volumetric (engine capacity) tax – which was legal under WTO (World Trade Organisation) rules – equivalent to something close to the total cost of the Ford Territory,” he said.

“That effectively locked out what was going to be one of the great export opportunities for the Ford Territory, to Thailand. Yes, I am very disappointed with that.”

The surprise Thai tax basically doubled the cost of the Territory and priced it out of the Thai market, although Ford has indicated it is toying with the idea of re-launching it now that it has a 2.7-litre diesel engine variant, which reduces the impost to 50 per cent.

Mr Bracks also criticised the recently announced FTA with Malaysia, because of its one-sided treatment of the automotive trade in favor of Malaysia.

The deal gives Malaysia an extra four years to reduce its tariffs, while Australia immediately goes to zero.

Malaysia also gets to impose a tariff of 15 per cent on any car under 1800cc and all SUVs next year, decreasing to zero by 2016. Australia drops its five per cent tariff on cars immediately.

“I would not accept that,” Mr Bracks said. “I think we should hold out on that because, again, Malaysia (FTA) is another good example of the Territory, a good vehicle, being denied access.

“A diesel Territory, very good car. Sure it’s good on import replacement in Australia – we like that – but the hope was we would get some export sales out of it.”

Despite his dismay at the continued failure of Australia’s negotiators to look out for the Australian automotive industry, Mr Bracks stopped short of calling for a tit-for-tat response from Australia.

“No, I don’t (support reciprocity),” he said. “I think we need to have our eyes open. We should never have signed that (Thailand) agreement without knowing what could have been done to prevent some of the exports of our manufactured motor vehicles into that country.”

Mr Bracks, who was appointed by former industry minister Kim Carr to hold an inquiry into the automotive industry and the federal Government’s assistance policies, said Australia’s FTA negotiators did not know the value of the Australian automotive industry.

“When I was doing the review of the automotive industry, Rick Wagoner (then chief of General Motors) told me that the biggest advantage Australia had in automotive was that it did have an automotive industry,” he said.

“Other countries want an automotive industry, for example, Saudi Arabia.

“I was there recently. They want to start one from afresh. That’s almost impossible.

“And, if you look at it the other way, if you gave it away, it would be almost impossible to get it back.

“The fact is that we are one of the 13 countries in the world that can go from research to a car on the factory floor. That’s a great advantage. The fact that we have a car industry is a great advantage.

“The fact that we even have an industry post the global financial crisis, when a lot of plants and subsidiaries were closed around the world, is a great advantage.

“We need to capitalise on that advantage, and not make any assumptions about the future.”

Mr Bracks said he was confident about the trade mission he will lead to the US soon.

He said the fact that it was barely a year after the last one was one of its strengths.

“Persistence is the key,” he said. “You have to be there. The first rule is being there. The second is following up and the third is being there again“This is quite essential. Our presence this time will be even better because we are following up on the mission we had last year.”

The trade mission will have meetings with General Motors, Ford, Chrysler and Toyota in Detroit and will then travel to San Francisco.

“I am very optimistic,” he said. “On the last occasion we went we were able to use the leverage of the mission to assist in new contracts for Futuris with Tesla and Fisker, and these were multi-million-dollar contractsFuturis now has a seat-making facility inside Tesla’s plant, which the trade mission will visit, about the same time Tesla releases its Model S sedan.

Mr Bracks said it was vital that Australian component makers forced their way into the global supply chains used by the multinational car-makers because any business overseas would help make Australian parts producers more competitive at home.

“Our component suppliers have to be integrated with supply chains at Ford, GM, Chrysler, Nissan and others around the world so they can be more competitive back here in Australia.

“That’s the aim in the Automotive Plan, the aim of the mission.

“We have to be there because the survival of the auto industry rests with being fully integrated with the global supply chain.”

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