Australia’s policy makers should make a strategic investment in leading edge science to grow future industries, according to a global trade expert, who warns it is difficult to compete with Chinese manufacturers in more established sectors.
Harvard Business School Professor Willy Shih is a renowned economist and trade expert who has spent the last 18 months mapping pandemic disruptions to supply chains and countries’ responses.
At a presentation to the Committee for Sydney urban policy thinktank, Professor Shih said Australia could build its resilience to global disruptions by developing emerging industries through more research and development, even if it took decades to pay off.
“You have to look at your capabilities and you have to invest in leading edge science and R&D. I like things that I’ve seen coming out of [Australia]… you have a lot of capabilities,” Professor Shih said.
It requires long-term planning, he said, comparing the opportunity to Taiwan’s bet on semi-conductors in the late 1980s, which ultimately paid off but took decades of work and times of uncertainty.
“It’s possible, but you need to do things that play to your strengths that maybe others aren’t as good at, or don’t have the energy to take on.”
Professor Shih said it will be nearly impossible for countries like Australia and the US to compete with manufacturing powerhouses like China in established sectors like steel and consumer electronics.
“One of the really tricky issues is: why is China so much less expensive? There’s a lot of subsidisation going on, which you have to battle.”
The subsidies from Chines municipal governments for even a single local manufacturer can be billions of dollars for large factories, according to the Harvard Business School Professor, but it keeps production onshore and the lower commodity prices attract global manufacturers from further down the value chain to China.
“It takes a very thoughtful strategy [to compete internationally]. I don’t think it’s without hope but there are some in the US who say ‘hey if China wants to subsidise it then we get to buy it at their expense. What’s wrong with that?”
“It’s a very complex issue,” Professor Shih said.
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It is interesting that, apparently, we need an overseas expert to tell us to support our sovereign technological capability. Cultural cringe at one remove, anyone?
Perhaps, one day, we will have the courage to take our OWN advice!