Problems with protection   Is the CAD a problem? Goal of external stability   The exchange rate   International investment position   Free trade v protection

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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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The nature of free trade and protection

Historically, Australia provided substantial support for many industries, in particular the manufacturing industry.  It did this with a view to protecting Australian jobs and incomes, as well as protecting Australia from any erosion of local culture and identity.  In particular, persuasive arguments were used to back support for local 'infant industries' that needed time to adjust to rigours of international competition.  In addition, industries were keen to avoid foreign goods that were 'dumped' onto Australian markets (meaning they were sold below cost, often in an effort to eliminate domestic competition) and to retaliate against protection that was afforded to competing producers abroad.  

The most common forms of protection sought by Australian firms including the following:

Over time, Australian policy makers became more committed to embracing a trade policy that promoted 'freer trade' and a progressive dismantling of those forms of protection that were clearly not in the national best interest.  It became evident that a continuation of protection for local industries prevented Australia from enjoying the significant longer term benefits that free trade provided.  Whilst protection still exists in some industries, such as film and television, the grounds for continuing support will often be based on non-economic factors.  In the case of film and television, the argument for protection is one based on a need to preserve Australia's culture and identity, rather than a need to protect production and jobs.

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