News.com.au

China competition ’hurts manufacturers’

15 September 2006

AAP. Australia’s manufacturers are feeling the pinch from China, booking losses of close to $1 billion as they try to compete with the emerging economic giant, a new report said.

A study by the Australian Industry Group (Ai Group) shows the manufacturing sector is grappling with a market that presents huge opportunities for export growth, but is also hurting their bottom line.

Manufacturers accumulated more than $6.8 billion in benefits from China through increased exports and savings from using China’s global supply chains in 2005-06, the report found.

But the benefits fell well short of the losses in domestic and overseas markets caused by fierce competition from China - estimated at more than $7.6 billion.

Ai Group puts the net loss for Australia’s manufacturers at $880 million for the last financial year.

The group’s chief executive, Heather Ridout, said the study was a heads-up for Australian negotiators trying to seal a free trade agreement (FTA) with Beijing.

"While very large manufacturers and affiliates of foreign owned entities are starting to reap slight net financial gains, the majority of manufacturers are finding it tough to secure benefits," she said.

"Overall there remain considerable concerns about the non-tariff barriers in China, including the lack of intellectual property protection."

The report found businesses were particularly worried about the growing amount of counterfeit and pirated goods finding their way into the Australian market.

Ai Group’s survey of 700 businesses for the study showed manufacturers remained unconvinced of the benefits of an Australia-China FTA, although support had increased from 13 per cent in 2004 to 24 per cent in 2006.

Ms Ridout welcomed Industry Minister Ian Macfarlane’s recent assurance that tariffs protecting car makers and the textile, clothing and footwear sector were not negotiable in the FTA talks.

The Ai Group report comes amid concerns in the federal coalition - and in the Labor states - about Trade Minister Mark Vaile’s push for a comprehensive FTA that covers all products and sectors.

South Australian Premier Mike Rann, worried about an FTA’s impact on manufacturing, this week began a push for the proposed trade deal to be debated at the next premiers’ meeting in February.

The sixth round of negotiations for an FTA wrapped up in Beijing last week, but China failed to make any offer to open its markets for manufactured and farming goods.