This essay will discuss government industry policy and argue that Japan automotive industry is better than Australia. Through the academic research and cases comparison to investigate how governments develop industry policy in the automotive industry. Which country has the most powerful interest groups in this industry and why? This study takes a systems approach and analyses the government industry policies. The market support policies is analyzed and compared to the other country, Japan. This essay is using automotive industry as research target because it is one of the world's most important economic sectors by revenue.
What is industry policy?
Trade and industry policy must be considered together. Policy changes which affect trading and the effect are directed towards industry. Industry policy is the way for government to effect the trading. Government use to use the industry policy to assist the country to build up competitive advantages. Successful industry policy can assist the country development and reduce the unemployment rate (Forsyth, 1985, p.70). For example, industry protection is given by tariff, quotas or subsides. Governments launch incentives programs or direct purchases to local producer. By using industry policy, the government wants to promote technological innovation and gain competitive advantage (Kym, 1980, p.132).
What are the interest groups?
The interest groups are who the interested party is. In the automotive industry, government, supplier, local manufacturers, citizens and local consumers are the interest groups. Government guides the industry development in order to giving advantages to its own national competitive positions in “strategic” industries in order to protect domestic manufacturers. Normally, the interest groups is getting benefit when government implemented industry policies such as industry protection, subsidization, credit allocation, preferential taxation, relaxation of anti-trust laws and public procurement. During the processing, the own manufacturers can enjoy a better business environment as foreign competitors is not easy to entry the own market. Moreover, incentive programs may benefit to citizens, local consumers, and local manufacturers. The government is benefit by the tax revenue from tariffs and licensing fees (Masaru, 1994, p.401).
Australia Automotive Industry
Australia government was implemented a lot of industry polices from 1950s until today. In 1950s, Australia government was implemented two policies. The first one granting commercial loans through overdrafts and the second one is allowing import licenses (tariff) and duty-free parts imports to companies which is undertook the manufacture of automotive in Australia. They are aimed at encouraging manufacturing, protecting assemblers and component manufacturers (Fleischmann & Prentic, 2001, p.355). In 1960s, the only significant changes in policy were a tariff increase from a 35% to a 45% in order to deter imports. In 1970s, the competitive position of the Australia automotive industry was continued to decline in the global industry. However, the government further announced plans to increase duties on unassembled and tariffs increased quotas to restrict imports to 20% market. In 1978, the tariff was increased to 57.5%, and it remained at that level until April of 1988.
In 1980s, Australia introduced a new car manufacturing plan, the Button Plan, with the goals of making the industry more efficient, stabilizing the price of cars, providing job stability. Export facilitation expanded in order to encourages exports. In 1995, Australia entry the World Trade Organization (WTO), they starts to encourage foreign manufactures to invest in the domestic automotive industry (Truett & Truett, 1997, p.19). In 2000s, Australia government allocated $7 billion Automotive Competitiveness and Investment in Scheme (ACIS) to support the sustainable...