Trade agreements and the myth of policy constraint in Australia

ABSTRACT

In this paper, I challenge the conventional view that trade agreements act as a major constraint on Australia’s industry policy options. Through a comparison with South Korea – a country with similar trade obligations to Australia – I find that the Australian government retains significant room to move in the industry policy sphere. However, Australian policy-makers appear far less willing than their foreign counterparts to use that space. To explain Australia’s comparative industry policy in-activism, I move beyond broad-brush explanations centred on ‘liberal ideology’ to explore the ideational, institutional and structural obstacles to the pursuit of a more proactive industry policy approach on the part of Australian policy-makers.

本文挑战了一种固定的观点，即贸易协议大大限制了澳大利亚产业政策的选择。比较一下对澳大利亚也承担同样贸易义务的南韩就会发现，澳大利亚政府在产业政策领域其实有着相当的活动空间。只是澳大利亚的决策者们不像外国的决策者那样愿意利用这个空间。关于澳大利亚消极的产业政策，笔者不想泛泛而论，而是聚焦‘自由主义思想’，探讨阻碍澳大利亚决策者追求主动的产业政策的思想、制度以及结构原因。

KEYWORDS:

• Developmental state
• industry policy
• South Korea
• strategic activism
• trade

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributor

Elizabeth Thurbon is an Associate Professor in the School of Social Sciences at the University of New South Wales, Australia.

Notes

1. Thurbon (2015) provides a detailed comparison of the international obligations of Australia and Korea in the public purchasing sphere, demonstrating that both countries retain a very similar degree of room to move in this particular arena.

2. See, for example, Wade (2003), DiCaprio and Gallagher (2006), Chang (2006) and Khan (2007).

3. In a similar spirit, Walter’s (2008) study of East Asia's engagement with global financial standards reveals that countries have retained significant discretion when it comes to the interpretation and implementation of their international financial obligations.

4. For an examination of such activism in the US case, see Weiss (2005), Weiss and Thurbon (2006), Block (2008) and Weiss (2014). For an examination of the Korean case, see Thurbon (2016a).

5. There exists an extensive literature on Australian innovation policy and its strengths and limitations. See Dodgson et al. (2011) as an example.

6. See Weiss (2014) for a detailed discussion of the US SBIR program.

7. The definition of small business depends on the agreement, but in Korea and Australia it is 300 and 200 full time equivalent employees respectively. Currently, SMEs employ approximately 70 per cent of the Australian workforce and 88 per cent of the Korean workforce.

8. For a detailed review of the ways in which a number of developed countries use their government purchasing systems to promote local innovation, see the edited volume by Lember et al. (2012). The chapter by Thurbon in that volume reviews the Australian case (Thurbon 2012a).

9. On the evolution of development banking in Korea from the 1960s to the present, see Thurbon (2016a). The data in this paragraph are drawn from this study.

10. On the origins and outcomes of Australia's IIF, see Cuming (2007). On the origins of Australian government efforts to support the local VC industry more broadly, see Ryan (1991).

11. The remainder of this paragraph draws on Thurbon (2016a: 134–38), which discusses the Hidden Champion program at length.

12. Defined by the government as a firm with annual exports exceeding US$300 million and a product ranked between 1 and 5 in the world. Alternatively, annual sales must exceed US$1 billion and exports comprise 50 per cent of sales.

13. Although this suggestion has been challenged by Weiss (2014), who argues that America's interventionism has been driven by the quest for military rather than commercial superiority. As such, the United States is best understood as a national security state rather than a developmental state.

14. On the ‘developmental mindset’ as the distinguishing ideational characteristic of East Asia's developmental states, see Thurbon (2014).

15. From 2008 onwards, many of Korea's techno-industrial policy measures came under the banner of its 'green growth' strategy. See Kim and Thurbon (2015) for details of this strategy, which centred on establishing Korea as a leader in technology-based industries associated with addressing climate change and energy security challenges.

16. There exists a rich literature on Australian industry policy – its evolution, strengths and weaknesses. Foundational studies include Capling and Galligan (1992), Bell (1993; 1997) and Stewart (1994). For an analysis of recent trends, see Conley and Van Acker (2011).

17. For a recent examination of this pattern of industry policy in Australia, see Conley and Van Acker (2011).

18. For an analysis of the extent to which neoliberal ideology might reasonably be said to have shaped policy industry policy choices in Australia from the Howard government, see Thurbon (2012b).

19. On the emergence and consolidation of a neoliberal consensus amongst key segments of Australia's economic bureaucracy, see Bell (1993; 1997).

20. On the significant shifts in trade and industry policy under the Rudd, Gillard, Abbott and Turnbull governments over the 2010–15 period, see Thurbon (2016b).