CAUTION REQUIRED IN AUSTRALIAN TARIFF FIGHT

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The threat by automakers in Australia to stop producing vehicles in that country if tariff protection is reduced understandably has captured the attention of Australia's plastics industry.

Processors and suppliers, through their trade associations, say the threat needs to be viewed seriously by the government, which is to decide what action to take after receiving a report in June from Australia's Productivity Commission. A draft commission report recommended that the current import tariff on autos be reduced from 22.5 percent to 15 percent by the end of the decade, and to 5 percent by 2004.

The prospect of a diminution in protectionist fees on imports has prompted the four major automakers in Australia — Ford, General Motors, Toyota and Mitsubishi — angrily to warn that they will move their operations offshore or significantly downsize them if the lower tariffs are approved.

Australia's political leadership generally considers it in the national interest to reduce tariff barriers, a position that suggests the auto manufacturers are behaving in less than a politically prudent manner in threatening the government.

Vehicle production is particularly important to plastics suppliers in Australia. Exporting their product to Asian markets is difficult given the steep tariffs in those areas. That is precisely why Australia's government is interested in reducing fees. By making Australian products more internationally competitive, the government hopes to pressure other countries in the Pacific Rim to lower tariffs closer to Australia's level.

The automakers are free to make good on their threat, of course. Similarly, the government has the ability to adopt measures that punish corporate runaways.

Given the vested economic interest, it is easy to understand why the vehicle manufacturers' threat has roiled Australia's plastics industry.

Less understandable is the industry's presumption that the automakers are willing to abandon Australia and their investment in a fertile market if they don't get their way.

Domestic disputes can be dangerous.

The plastics industry in Australia would do well not to take the wrong side in this one.

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