Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

‘Competitiveness’

In the 1980s it was clear that exposure of the traded goods sector to international competition entailed domestic producers dealing with import competition and exporters winning new markets. Many of the economic and industrial relations policies of the Hawke Government aimed to facilitate this strategy, particularly those associated with industry policy.¹³⁰ However, as the 1990s unfolded it became clear that competition was as much about capital flows as it was about traded goods or services. With the dominance of financialisation over the last 30 years, traditional assumptions about trade and competition are increasingly obsolete.¹³¹

Thomas Palley, for example, refers to the new global economic architecture, which is not a global marketplace but a global production zone for multi-national corporations. In the case of Australia, for example, what does it mean to talk about James Hardie being internationally competitive? The company is headquartered in Ireland (having moved from the Netherlands) and its major markets and production sites are now in North America. One has to ask where does a nation’s ‘comparative advantage’ fit within this framework.¹³² Companies may now outsource their assembly work to China, their administration to India, and may locate their head office in an overseas tax haven. Where does the notion of nations trading with each other fit into this? In such an economy, production, capital allocation and employment decisions are not determined by decentralised markets but by bureaucracies responding to market and non-market factors. The old assumptions underpinning notions of global competition no longer need apply.

The complexity of modern international trade, particularly in advanced manufacturing, is evident in products like the iPhone. The design and intellectual property resides in California, key components come from Japan, Korea and Germany. Final assembly happens in China, but their share of the manufacturing revenue for this product is extremely small.¹³³ Yet most consumers think that their iPhones are made in China and that this illustrates how China is on the way to becoming the economic powerhouse of the 21st century.¹³⁴

In this global context where the mobility of capital is unrestricted, industrial relations are largely irrelevant. Multinational corporations have increasingly outsourced their production to locations with the cheapest labour—China initially, then Vietnam or Bangladesh as Chinese labour became more expensive—and then imported the output into their own country for sale through their existing distribution networks. Many of the brand names Australians grew up with are still on the shelves in stores, but no longer carry the ‘Made in Australia’ sticker. There is little that innovations in Australian workplaces can do to accommodate this kind of competition. Taken to its extreme, the race to the bottom is virtually a death spiral, something exemplified in Gina Rinehart’s speech to the Sydney Mining Club in 2012:

The evidence is inarguable that Australia is becoming too expensive and too uncompetitive to do export-oriented business. Africans want to work, and its workers are willing to work for less than $2 per day. Such statistics make me worry for this country’s future.¹³⁵
Where do traditional IR concepts of ‘high performance’ workplaces, ‘best practice’, and so forth belong within the global economy of the 21st century? It is clear that the last 10 years has been illuminating in this respect. The competitive position of Australian manufacturing was seriously eroded by the high dollar, itself largely a result of the commodities boom. As Roy Green observed: ‘the large scale job losses in manufacturing over the last five years are attributable more to import competition than the labour-displacing technological change which has characterised manufacturing historically’.¹³⁶ The recent drop in the dollar has assisted some manufacturers (such as BlueScope Steel) but the exchange rate of the dollar remains unpredictable and the devaluation against our trade weighted index is far smaller than against the benchmark USD: its fortunes hinge less on the ‘fundamentals’ of the Australian economy and more on international developments (such as US Federal Reserve policy). ¹³⁷ Thus while further changes in industrial relations might bring minor improvements in productivity, these kinds of incremental advances in international competitiveness are dwarfed by the currency equation, and by other factors such as taxation policy, development and deployment of new technologies and head-office investment strategies. The historical problems of Australia’s status as a branch-plant economy for multinational capital were not resolved by the reforms of the 1980s, merely postponed, a sentiment reinforced by the impending departure of the automotive giants.

Where the Australian economy does maintain an edge that is largely immune to these developments is in advanced products and services. In the case of manufacturing, new innovations (such as 3D printing an advanced materials) and new fields for investment (such as renewable energy), hold out promise. But these opportunities need supportive policy to be realised, whether renewable energy incentives like the RET or innovation support such as a well resourced CSIRO and agencies like Commercialisation Australia. It is with grave disappointment that we see the current Government move backwards in these areas, which will underpin our manufacturing competitiveness in future, while attempting to reform our IR system, which will have little impact on competitiveness but will severely impact workers’ wellbeing.

In the case of services, the future also lies in highly specialised niche markets for advanced knowledge. The history of the relocation of call centres in Australia—first to low wage regional areas like Tasmania, and then increasingly to much lower wage countries like the Philippines and India—highlights the vulnerability of service employment which is not based on advanced knowledge.

Within this framework what kinds of industrial relations arrangements are most suitable? In exploring the concept of ‘industrial citizenship’ Ron McCallum explored the work of Hugh Collins, whose writings encompassed three key themes: social inclusion, citizenship and competitiveness. In the case of the latter, Collins argued that this could be achieved through ‘systems of management and flexible and highly trained employees’. However, ‘for the flexibility to operate successfully … industrial citizen employees require guarantees of fair treatment’, embodied in appropriate labour law.¹³⁸ The implications of this are obvious: ‘high performance’ workplaces and the integrity and fairness of the industrial relations system go hand-in-hand in achieving international competitiveness. The current weaknesses in confronting globalisation lie not on the flexibility side of the ledger, but on the fair treatment side. The ‘high performance with fairness’ prescription is the polar opposite of the Rinehart prescription.

6	Measuring the Economic Impacts of Industrial Relations Regulation: (B) Compliance Costs