Volume 2 Comprises Supporting Appendices
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The Automotive Industry Volume II Appendices INDUSTRY COMMISSION Report No. 58 26 May 1997 © Commonwealth of Australia 1997 ISBN 0 642 27159 3 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial usage or sale requires prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Commonwealth Information Services, AGPS, GPO Box 84, Canberra ACT 2601. Enquiries Industry Commission 35 Collins Street Melbourne 3000 Locked Bag 2 Collins Street East Post Office Melbourne VIC 8003 Forming the Productivity Commission The Industry Commission, the former Bureau of Industry Economics and the Economic Planning Advisory Commission have amalgamated on an administrative basis to prepare for the formation of the Productivity Commission. Legislation formally establishing the new Commission is before Parliament. CONTENTS This report comprises two volumes. Volume 1 contains the Overview and the body of the report. Volume 2 comprises supporting appendices. Page Abbreviations IX Terms of Reference XVI APPENDICES A Conduct of the inquiry A1 A.1 Introduction A1 A.2 Submissions received A1 A.3 Visits A7 A.4 Round table participants A10 A.5 Public hearing participants A12 B The international automotive industry B1 B.1 Introduction B1 B.2 Worldwide vehicle production and sales B1 B.3 Automotive industry structure, trade and investment B6 B.4 Summary B14 C Australian automotive industry C1 C.1 Scope of the Australian automotive industry C1 C.2 Local PMV production C5 C.3 PMV exports C8 C.4 PMV imports C10 C.5 Automotive components in Australia C11 C.6 Australian automotive services industry C15 D The Australian vehicle market D1 D.1 The motor vehicle stock in Australia D1 D.2 Local PMV market D4 D.3 Commercial Vehicle market D9 III THE AUTOMOTIVE INDUSTRY E Labour productivity at the firm level E1 E.1 Introduction E1 E.2 Labour productivity of the individual PMV producers E1 E.3 Productivity of firms in the component sector E9 F Automotive technology, research and development F1 F.1 Introduction F1 F.2 Business expenditure on R&D F2 F.3 Strategic importance of R&D F5 F.4 Vehicle design and R&D F9 F.5 Australia as an R&D and design base for the Asia F10 Pacific region F.6 R&D infrastructure F13 G Occupational education and training in the automotive industry G1 G.1 Introduction G1 G.2 Government involvement in occupational education G2 and training G.3 Vocational educational and training in the automotive G7 industry G.4 Skills shortages G15 H The labour market H1 H.1 Employment in the motor vehicle industry H1 H.2 Industrial relations in the automotive manufacturing industry H5 H.3 Labour productivity H9 H.4 Where to from here? H15 I International trading environment for automotive products I1 I.1 Introduction I1 I.2 World trade in goods I1 I.3 International trade agreements 13 I.4 Australia’s obligations and commitments under 117 international trade agreements I.5 Implications of international trade agreements for 119 Australia’s automotive export opportunities I.6 Access to automotive export markets 121 J Environment and safety J1 J.1 Legislative framework J1 J.2 Vehicle emissions an d fuel consumption targets J1 J.3 Vehicle safety J8 IV K History of assistance K1 K.1 Overview K1 K.2 Comparable levels of assistance — 1900 to 1965 K1 K.3 High levels of assistance — 1965 to 1985 K3 K.4 Declining levels of assistance — 1985 to 2000 K5 L Export facilitation L1 L.1 Past arrangements L1 L.2 Current arrangements L5 L.3 Effects of the scheme L8 M Historical simulations M1 M.1 Introduction M1 M.2 Observed changes, 1986–87 to 1993–94 M2 M.3 The contribution of factors affecting the output of the M4 motor vehicle industry M.4 Summary M9 N The economy-wide effects of reducing the tariff N1 N.1 Introduction N1 N.2 Basecase N2 N.3 Scenarios N6 N.4 Results for scenarios A and B N11 N.5 Results for scenarios C and D N28 N.6 Summary N30 O The Monash model O1 O.1 Introduction O1 O.2 Why use MONASH? O2 O.3 MONASH modelling framework O3 O.4 Modelling tariff policy O6 O.5 Regional disaggregation of results O13 O.6 Theoretical developments O14 O.7 Conclusion O24 P Issues in evaluating changes in the t ariffs P1 P.1 Introduction P1 P.2 Criteria to evaluate changes in the tariff P2 P.3 Real consumption and capital stock P3 P.4 Real consumption and the government sector P4 P.5 Demand for exports and the terms of trade P5 P.6 Labour and capital markets P6 V THE AUTOMOTIVE INDUSTRY P.7 Import substitution P8 P.8 Aggregation and distortions P9 P.9 Economies of scale P13 P.10 Rent seeking P15 P.11 Dynamic efficiency P15 P.12 Adjustment over time P16 P.13 Regional disaggregation P17 P.14 Summary P18 Q Labour market programs Q1 Q.1 Introduction Q1 Q.2 Types of labour market programs Q1 Q.3 Australia’s past and current labour market programs Q3 Q.4 Effects of labour market programs Q11 Q.5 Effectiveness of labour market programs Q13 REFERENCES LIST OF BOXES F.1 Product and process R&D F2 F.2 Export of R&D services F8 F.3 Robert Bosch (Australia) Pty Ltd (RBAU) F12 G.1 Targets for training and education in Australia G4 H.1 Labour relations at Toyota H7 H.2 Industrial relations and labour productivity at Denso H12 I.1 How does APEC work? I11 N.1 The motor vehicle tariff N8 O.1 Documentation on the MONASH model O5 O.2 Using the Monash model over the period 1997–98 to 2009–10 O6 O.3 Calculating preference and supply change O8 O.4 Policy analysis using the MONASH model O12 Q.1 Effects of labour market policies Q12 Q.2 Highlights of PMV LAP evaluation study Q18 Q.3 Main findings of the Working Nation Evaluation Report Q20 VI LIST OF TABLES B.1 International passenger motor vehicle production B3 by country, 1985 and 1991 to 1996 B.2 International passenger motor vehicle registrations B5 by country, 1985 and 1991 to 1996 B.3 Exports of finished products, OECD regions, 1980 and 1992 B9 C.1 Relative employment in automotive industry sectors, November C1 1996 labour force survey C.2 Summary of operations 1989–90 to 1994–95 C2 C.3 Summary of operations, Victoria and South Australia, 1994-95 C5 C.4 Production of PMVs, 1988 to 1996 C6 C.5 International plant capacity comparisons C7 C.6 CBU PMV exports and their real value FOB, 1985 to 1996 C9 C.7 Exported CBU PMVs by destination, 1993 to 1996 C9 C.8 CBU PMV imports and their real value FOB, 1985 to 1996 C10 C.9 Imported CBU PMVs by source country, 1993 to 1996 C11 C.10 Total real automotive exports, 1985 to 1996 C12 C.11 Total real automotive imports, 1988 to 1996 C14 D.1 Characteristics of the vehicle stock in selected countries D1 D.2 Local PMV sales, by purchaser, 1995 and 1996 D9 D.3 Registrations of light commercial vehicles, 1985 to 1995 D10 F.1 Selected ‘motor vehicle and part manufacturing’ comp anies F5 expenditure on R&D, 1994-95 F.2 Location of R&D Expenditures by Business Enterprises, F6 1994–95 G.1 Average training expenditure, Australia, July to September, G8 1989 and 1993 G.2 Automotive VET planned activity (enrolments), Australia, 1996 G11 G.3 University courses in which Ford employees are enrolled G13 I.1 Share of each region in world merchandise trade I2 I.2 Inter-regional merchandise trade, 1972 and 1992 I2 I.3 Size of passenger motor vehicle markets in selected Asian I23 countries, import penetration and Australia’s share of passenger motor vehicle imports, 1995 I.4 Tariff rates on automotive products, selected Asian countries, 1997 124 I.5 Tariff barriers applied to automotive products and tariff I26 commitments at 2000, the Americas I.6 Tariff barriers applied to automotive products and tariff I28 commitments at 2000, Europe and other selected countries VII THE AUTOMOTIVE INDUSTRY I.7 Simple average applied tariff in the APEC region, 1988, 1993 I29 and 1996 J.1 Relative contribution to atmospheric pollut ion in major J2 Australian cities by source J.2 Summary of emission standards for new PMVs in Australia, J4 1972-1999 J.3 National Average Fuel Consumption, Australia 1978 to 1995 J8 K1.1 Assistance to the automotive industry, 1960 to 2000 K9 K1.2 Tariff rates and estimated rates of assistance for plan K14 automotive production, 1960 to 2000 K1.3 Effective and nominal rates of assistance for motor vehicle K16 and part industries, 1968–69 to 2000–01 L.1 Changes to export facilitation provisions, 1985 to 1996 L3 L.2 Duty forgone under the export facilitation scheme and L9 automotive exports and imports, 1991 to 1996 M.1 Changes in the automotive industry, trade and macroeconomic M2 variables, 1986–87 to 1993–94 M.2 Contribution of factors to changes in the output of the automotive M6 industry, 1986–87 to 1993–94 N.1 Macroeconomic and motor vehicle variables in recent history N3 and in the basecase N.2 Shares of total domestic sales of automotive productions, N5 various years N.3 Rate of growth of broad sectors in the basecase, 1997–98 N6 to 2009–10 N.4 Combinations of tariff changes and automotive industry structure N6 in scenarios modelled N.5 Tariff schedules assumed for motor vehicle imports, 1997 to 2010 N7 N.6 Shares of sectoral employment in State employment, 1997–98 N25 N.7 Comparison of gains under all scenarios N31 N.8 Index of automotive output and employment, basecase and N31 all scenarios, 2009–10 N.9 Employment increases by state, by scenario, 1997–98 to 2009–10 N31 P.1 Illustrative disag gregation of