Export
Issue No. 9 - February/March 2003
Export Success
They said you'd never make it in Australian Manufacturing
by Tim Harcourt
Traditionally Australian manufacturers were not major exporters. Under ‘McEwenism’ manufacturers typically sold to the domestic market and only ventured overseas when the business cycle was slow in Australia. It was left to our primary producers and resource industries to earn the lion’s share of our export dollars. With economic reform over the past two decades, protection has been largely removed and manufacturers have been encouraged to be more international in their business outlook. Many commentators thought this would mean the end for Australian manufacturing. Furthermore, the idea that Australian manufacturers could become exporters, they said, was laughable. Surviving domestically was thought to be hard enough.
So what happened? Economic research from the Reserve Bank of Australia shows how the manufacturing sector has been internationalised over the past decade. Bank economists Jacqui Dwyer and Justin Fabo found that export orientation in Australian manufacturing in the 1990s increased at the same time that tariff protection has been reduced.
What were the main factors?
First, there were tariff and quota removals. Manufacturers had to become competitive to survive and in some cases, prosper.
Second, exchange rate falls helped manufacturers gain a ‘beach-head’ in new overseas markets. Basically, manufacturing businesses undergo various fixed costs to establish themselves in overseas markets. They stay in these markets (even if the exchange rate rises) in order to establish their brand and reputation. Once they have done so, they recover the costs sunk into establishing themselves and often make it possible for other Australian exporters to also enter the market. This establishes a permanent presence in the market and raises the 'natural rate of exporting' for Australian business.
Thirdly, globalisation increased intra-industry trade. So export orientation occurred as well as import penetration...
