Slamming the door on Australian industry

Adelaide, Australia – When the government announced last July it would offshore the work needed to build a new fleet of submarines for the Royal Australian Navy, it threw the future of thousands of jobs in the nation’s shipyards into doubt.

One of those belongs to Glen Dallimore, 42, a union delegate with the Australian Manufacturing Workers Union (AMWU) and a fitter and turner by trade.

“The current government is just completely not industry friendly,” Dallimore told Al Jazeera.

Dallimore works at the ASC shipyards, a government-owned Australian shipbuilding company that operates out of Techport, a multimillion dollar industrial hub developed by the South Australian state government in Adelaide’s west.

For the last two years, and two federal governments, Dallimore has been campaigning to ensure the work stays local.

Without it, he says, the consequences for the state could be severe.

“If there’s no building of submarines and ships, then we’re looking at well over 3,000 jobs directly connected,” said Dallimore.

Australia is the only country I've ever been in where the government seems to say that it doesn't want any industry domestically.

by Goran Roos, Swinborne University

“All up we’re looking at 25,000 related jobs – suppliers, engineers, people who have set up shop simply because we exist. This isn’t job creation. This isn’t ‘union jobs for the boys’, this is an industry in crisis.”

Declining defence

The first hint that change was coming came when the Australian Defence Force released a report in July 2014 that questioned the value in building defence projects in Australia.

The report cited delays and cost-overruns to the value of $300m on work currently being performed on three new Air Warfare Destroyers being built by ASC under an $8bn contract.

Despite criticism levelled specifically at the warships, the Australian government seized upon the report to announce it would no longer seek to build a new fleet of submarines locally, effectively breaking a pre-election promise by the ruling Liberal Party.

At the time, the country’s shipbuilders immediately shot back, arguing new projects always run over budget, as it is a learning process. But that argument largely fell on deaf ears and many of the country’s shipyards are predicting dark days ahead for the state if the industry is left to slide.

“It will be a skills drain. Completely,” said Dallimore. “Name another manufacturing industry in South Australia. The car industry is going. We have some industries around, but they’re on the edge.

“I’ve heard some examples around, and it is a very extreme comparison, but look what happened to Detroit.”

Building canoes?

Since then, the Australian government has worked to drum up overseas interest among German, South Korean and Japanese companies, but the effort has drawn unfavourable comparisons with the United States.

Unlike the US, Australia has no equivalent of the Merchant Marine Act of 1920, known as the Jones Act, which requires all vessels used for defence and domestic trade to be American-made and American-crewed.

The Jones Act is a key component of US maritime law, though it was nearly repealed last week by US Senator John McCain, who had tried to include its repeal as an amendment to the Keystone XL pipeline bill.

But the move failed following a fierce campaign from the shipbuilding industry that claimed any repeal could cost 400,000 US jobs during a time of economic uncertainty, while also threatening national security.

Australian unions have raised similar concerns in their own fight, but the federal government largely dismissed them, until recently.

Over the weekend, Prime Minister Tony Abbott found himself in hot water as a political challenge to his leadership threatened to make him one of the shortest serving Australian leaders in living memory.

Facing a vote over the future of his leadership, Abbott used the issue of defence procurement to shore up support by promising Senator Sean Edwards he would allow ASC to compete in competitive tender for the submarine contract.

Abbott survived the vote 61 to 39.

The move was a twist for Abbott, whose previous position had been antagonistic to industry and union calls for a rethink of the policy, with the prime minister repeatedly saying “defence decisions will not be made on the basis of industry logic”.

The view also seemed to be an entrenched view in Abbott’s cabinet, and played a role in the demise of former Defence Minister David Johnstone after he said last November he would not trust ASC, the government’s own shipbuilder, to “build a canoe”.

For the gaffe, Johnstone was dumped a month later during a cabinet reshuffle and replaced by Kevin Andrews.

When contacted by Al Jazeera, a spokesperson for Andrews directed questions about “defence procurement” to the Minister for Defence, but said the government was planning to release a new report in 2015 to provide “greater certainty” about the new direction.

Murky waters

These developments represent the latest twist in a larger story about the overall hollowing out of Australia’s manufacturing base, according to Goran Roos, a professor at Swinborne University in the UK and chair of the South Australian Advanced Manufacturing Council.

Currently, manufacturing is the fourth largest employer of Australians, and last year contributed more than $100bn in gross value-added to the country’s GDP.

But during 2014, the Australian government oversaw the first stages of the car industry’s withdrawal, and has now become involved in the process of offshoring defence manufacturing.

“Australia is the only country I’ve ever been in where the government seems to say that it doesn’t want any industry domestically,” Roos told Al Jazeera.

“In the last 18 months, we’ve had an industrial policy through the decisions with auto that has reduced our complexity dramatically, which has reduced our ability to generate a revenue base and that has increased our deficit even faster.”

What Roos and others within the manufacturing sector fear most is not just heavy job losses in a country with a population of about 23 million people, but the shedding of its skills base.

“It’s called deindustrialisation,” said Roos. “Once you start to lose skills, at some point it becomes very hard and very expensive to get it back.

“Unless you keep a use of an industry, you will not as a company be able to keep people employed, and when you need a skill, you will not be able to hang onto it. The only industry we’ve got left with any complexity and size, once automotive leaves, is defence.”

‘Valley of death’

Prior to its announced withdrawal, car manufacturing was the only complete industry in Australia, capable of taking raw steel and turning it into a finished car.

But with the industry’s end, the country’s southern states are expected to be hit hard as 2017 approaches.

For South Australia, the trajectory is particularly alarming, with the state’s policymakers now discussing how to avoid what they have called a “valley of death”.

Unlike the states of Western Australia and Queensland, South Australia largely missed out on boom-time profits in the mining sector, after BHP Billiton shelved a planned expansion of its Olympic Dam mine at Roxby Downs in the state’s far-north in 2012.

At that time, heavy investment in mining pushed the Australian dollar to parity with the US dollar, which contributed to the hollowing out of the country’s manufacturing base by making exports more expensive, and imports cheaper.

This partly contributed to the demise of the domestic car industry, announcing its 2017 deadline for withdrawal.

And South Australia has yet to feel the full impact of the closure. According to modelling by John Spoehr for the Australian Workplace Innovation and Social Research Centre, projected job losses from the end of the car industry in 2017 are 23,903 in South Australia, with about 98,500 jobs to go to the southeastern state of Victoria.

The future

Recently, the Australian dollar has fallen to new lows against the US, easing the pressure on the country’s manufacturers, even as the sector has continued to contract.

Meanwhile, the mining sector has also taken a hit as falling international ore prices means new and existing projects have lost their value, forcing them to be shelved and taking hundreds of jobs with them.

For many in the country’s manufacturing sector, all eyes now are on what the government plans to do next.

While the prime minister has given his assurances that ASC will be allowed to compete in an open tender, Abbott has a history of breaking promises and making “captain’s picks”, and there is no guarantee that ASC will ultimately get the contract.

None of which will be any comfort to workers and their families who will be waiting for something solid in 2015.