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Textiles, Clothing and Footwear Industries

Industry Commission inquiry report

This report was signed on 9 September 1997 and was released by the Commonwealth Government in two volumes, Volume 1: The Report and Volume 2: Appendices.

The report contains the findings of the inquiry into the textiles, clothing and footwear industries, including early stage processing of raw materials, topmaking and tanning and higher value-added manufacturing, including spinning, knitting, weaving, fabric and leather dying and finishing.

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Volume 1

Cover, Copyright, Signing Page, Table of Contents, Abbreviations, Terms of Reference, Commissioner's Views, Overview, Alternative anasysis: Mr P Brass - Overview, Recommendations


1   Toward an internationally competitive TCF Sector
1.1   A decade of change
1.2   The changing size and composition of the industries
      1.2.1   Adjustment so far
1.3   Australia’s international TCF trade performance
      1.3.1   Changing sources and destinations of trade
1.4   Taking advantage of Australia’s strengths
      1.4.1   Natural advantages
      1.4.2   Labour costs and productivity
      1.4.3   Investment
      1.4.4   Investing in technology
      1.4.5   Institutions and infrastructure
1.5   Questions of scale and scope
      1.5.1   Firm size
      1.5.2   Size of the domestic market
      1.5.3   Interdependencies along the supply chain
1.6   Business strategy
      1.6.1   Management
      1.6.2   Innovation
      1.6.3   Specialisation
      1.6.4   Quality and brands
      1.6.5   Alliances
      1.6.6   Quick response
      1.6.7   Flexibility
1.7   Conclusion

2   World trends in TCF production and trade
2.1   Changing global trade patterns
      2.1.1   Exports
      2.1.2   Imports
2.2   Adjustment by TCF industries in developed economies
      2.2.1   Changing trade shares
      2.2.2   Changes in employment
2.3   Adjustment responses in developed countries
2.4   Conclusion


3   Labour market issues
3.1   Introduction
3.2   Employment trends and characteristics of the workforce
      3.2.1   Changes in TCF manufacturing employment
      3.2.2   Distribution of TCF manufacturing employment
      3.2.3   Workforce characteristics
3.3   Industrial relations
      3.3.1   Awards
      3.3.2   Enterprise agreements
      3.3.3   Redundancy provisions
3.4   Training
      3.4.1   Skill gaps
      3.4.2   Government provision
      3.4.3   Coordination of training provision
      3.4.4   Industry participation in training
      3.4.5   Proposals for improvement
3.5   Homeworking in Australia’s TCF industries
      3.5.1   Structure of TCF homework
      3.5.2   Significance and extent of TCF homework
      3.5.3   Remuneration
      3.5.4   Occupational health and safety issues
      3.5.5   Supply issues6
      3.5.6   Responses to TCF homework

4   Adjustment Issues
4.1   Employment trends
      4.1.1   Projected employment trends in TCF manufacturing industries
      4.1.2   Economy-wide employment trends
4.2   Mobility issues for TCF workers
      4.2.1   General labour mobility in Australia
      4.2.2   Movement within and between TCF and other industries
      4.2.3   Movement out of TCF employment
4.3   Regional issues for TCF employment
      4.3.1   TCF employment in suburban locations
      4.3.2   TCF employment in regional locations
      4.3.3   Employment assistance in regional locations
4.4   Removing impediments to employment adjustment
      4.4.1   Labour market reform9
      4.4.2   Social welfare
      4.4.3   Enhancing labour mobility
4.5   Employment assistance programs and services
      4.5.1   Types of employment assistance programs
      4.5.2   Effectiveness of employment assistance programs
      4.5.3   TCF Labour Adjustment Package
      4.5.4   General labour market programs in Australia1
      4.5.5   The case for industry-specific employment assistance
      4.5.6   The role of the employer in the event of retrenchment
4.6   English language and literacy training
      4.6.1   English language and literacy training for employees
      4.6.2   English language and literacy training for jobseekers
      4.6.3   English language and literacy training for recently arrived migrants

5   Taxation and regulation issues
5.1   Tax issues
      5.1.1   Payroll tax
      5.1.2   Wholesale sales tax
      5.1.3   Depreciation allowances
      5.1.4   Non-compliance
5.2   Regulation in the TCF industry
      5.2.1   Environmental regulation
      5.2.2   Other regulation issues
      5.2.3   Business inputs
5.3   Summary


6   Australia's TCF trade measures
6.1   Tariffs
      6.1.1   The level of assistance
      6.1.2   The TCF tariff structure
      6.1.3   Tariff duty paid
      6.1.4   Preferential tariffs
6.2   Concessional entry
      6.2.1   Policy by-laws
      6.2.2   Tariff Concession System
6.3   Effective assistance
      6.3.1   The effect of the policy by-law system
6.4   Overseas Assembly Provisions Program
      6.4.1   US and EU schemes
      6.4.2   TCF OAP Program
6.5   Summary

7   Trade barriers in other countries
7.1   Textile and Clothing Quotas
      7.1.1   The Multi-Fibre Arrangements
      7.1.2   Agreement to phase out quotas
      7.1.3   The special cases of China and Taiwan
      7.1.4   Economic effects of quotas
7.2   Effects on Australia
      7.2.1   Australian exports not restricted by quotas
      7.2.2   Effect of quotas on the flow of imports to Australia
      7.2.3   The effect on wool
      7.2.4   Continuing trade liberalisation
7.3   Tariffs as barriers to global trade in TCF
      7.3.1   Tariffs in developed countries
      7.3.2   Bound tariff reductions agreed for TCF
      7.3.3   Tariffs in developing countries
      7.3.4   Effect of tariffs on Australia’s exports
7.4   Other factors affecting Australia’s market access
      7.4.1   The Asia Pacific Economic Cooperation (APEC) forum
      7.4.2   Non-tariff barriers affecting trade
      7.4.3   Cotton
      7.4.4   Hides and leather
7.5   Summary

8   Government programs to improve competitiveness
8.1   Introduction
8.2   Objectives of the Industries Development Strategy
8.3   Capital grant schemes
      8.3.1   Effect on the industries
8.4   TCF infrastructure and management improvement assistance
      8.4.1   Effect on management and education
8.5   Effectiveness of TCF 2000 Development Strategy
8.6   Observations on the TCF Development Strategies
      8.6.1   Appropriateness of program goals
      8.6.2   Program effectiveness
      8.6.3   Efficiency of administration
8.7   General Commonwealth assistance
8.8   State and local government assistance

9   The Import Credit Scheme
9.1   Objectives of the Scheme
9.2   Operation of the Scheme
      9.2.1   Use
      9.2.2   Administrative arrangements
9.3   Effects of the Scheme
      9.3.1   Effects on TCF companies
      9.3.2   Evidence of the effects on TCF industries
      9.3.3   Economy-wide effects
9.4   The future of the ICS after 2000
      9.4.1   A cost-effective stimulus to exports?
      9.4.2   Is a replacement scheme possible?
      9.4.3   Would a replacement scheme be desirable?

10   The path of assistance reform
10.1   The path to 2010
10.2   Industry snapshot
10.3   The costs of protection
      10.3.1   The effects of past high levels of protection
      10.3.2   Economic effects of tariffs
      10.3.4   Tax effects
10.4   The assistance reform path
      10.4.1   The benefits of unilateral tariff reduction
      10.4.2   Tariff pause
10.5   Budgetary assistance
      10.5.1   Manufacturers’ concession
      10.5.2   Production bounty
      10.5.3   Innovation
      10.5.4   Redundancy allowances
10.6   Conclusion

Part D   Conclusions and recommendations

11   Future assistance arrangements
11.1   The new policy environment for Australia’s TCF sector
11.2   Towards a more predictable environment
11.3   Tariff reform options
      11.3.1   Option 1: Steady tariff reduction on all TCF products to 5 per cent by 2008; policy by-laws abolished in 2008.
      11.3.2   Option 2: Tariff reduction on clothing and footwear to 5 per cent by July 2008; zero tariff on intermediates from July 2001; textiles and yarn bounty from 1 July 2001 to 2008.
      11.3.3   Option 3: Top tariffs down to 15 per cent, then reducing to 5 per cent by 2008
      11.3.4   Preferred option
11.4   Overseas Assembly Provisions Scheme
11.5   Effects of tariff reductions on the economy
11.6   Adjusting to the new policy environment
      11.6.1   Adjustment assistance for employees
      11.6.2   Regiona adjustment issues
      11.6.3   Further adjustment assistance for companies
11.7   Other measures
      11.7.1   Training
      11.7.2   Research and development and information networking

Part E: Mr Brass' alternative analysis

12   Contenxt of my alternative analysis
12.1   My background in TCF: perspective on the IC’s inquiry
12.2   Agreement on the end point of TCF reform initiatives
12.3   The IC draft report and Monash model projected high benefit/low cost unilateral tariff reform
12.4   The IC draft report analysis and model called into question
12.5   The IC draft report strategy will ultimately be low benefit/high cost
12.6   The original bounty proviso in IC draft report not viable
12.7   Alternative analysis required given my revised views

13   Essence of my alternative view
13.1   My vision of TCF in 2010
13.2   Philosophy of my TCF policy
      13.2.1   Pace of tariff reduction
      13.2.2   Process of tariff reduction
13.3   Features of my TCF policy recommendation
      13.3.1   Importance of certainty
      13.3.2   Pause in reduction of tariffs pending international trade liberalisation
      13.3.3   Positive assistance
            Element 1: Funds for investment to facilitate smooth transition to viable sectors & niches
            Element 2: ICS replacement
            Positive assistance funded from tariff revenues
      13.3.4   Examination of trade liberalisation progress
      13.3.5   Extension of the OAP
      13.3.6   Other measures
            A   Anti-dumping protection
            B   Dedicated vocational education & training for TCF
            C   Global intelligence
            D   Microeconomic reform
            E   Retrenchment assistance
            F   Payroll and wholesale sales tax
      13.3.7   Responsibilities upon TCF industries
            A   Supply chain linkages
            B   TQM and WBP
            C   Industrial relations

14   The evidence and arguments underpinning my TCF policy recommendation
14.1   Overstated cost of TCF tariffs
      14.1.1   The relevance & accuracy of CTE cost to consumers
      14.1.2   Reduction in aggregate consumption
      14.1.3   Diminishing marginal benefit of tariff reduction
      14.1.4   Observations regarding the Monash model
14.2   Understated cost of unilateral tariff reductions
      14.2.1   Job losses
      14.2.2   Job creation in sectors outside TCF
      14.2.3   The importance of sentiment
      14.2.4   The importance of domestic markets for the export effort
      14.2.5   Hardship
14.3   General merit of measured reduction in tariffs and minimisation trauma to industry
      14.3.1   The capacity to add value is important for Australia
      14.3.2   Pause for adjustment will foster stronger businesses post-2000 — the importance of maintaining
                    critical mass
      14.3.3   Retaining a bargaining position
      14.3.4   The human element

Volume 1 References

Volume 2

Cover, Copyright, Table of Contents

A   Conduct of the Inquiry

B   The TCF industries: Definition, structure and performance

C   The TCF Workforce

D   Homeworkng in Australia

E   Demand measurement

F   The WTO textiles and clothing agreement and its effects

G   Australia's international trading commitments

H   Commonwealth funded adjustment assistance schemes

I   The history and structure of TCF barrier assistance in Australia

J   Concessional entry arrangements

K   The effect on household expenditure of reducing TCF tariffs

L   The role of general equilibrium models in assessing changes in industry assistance

M   The TCF Industries, 1986-87 to 1993-94

N   The economy-wide effects of reducing tariffs

O   The Monash Model

P   Issues in evaluating changes in industry assistance

Volume 2 References

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