COMMENTARY--Australia has a $14 billion trade deficit in ICT products and services, but is it something we need to worry about?
If the Federal Government is to be believed, Australia doesn´t need to worry about the fact that we recorded a trade deficit of $14.4 billion in 2001-02 in ICT goods and services.
Apparently it´s enough that we´re a good user of technology—the economic benefits to be gained from ICT-enabled productivity improvements will ensure our future prosperity.
Personally, I find the fact that ICT accounted for 65 percent of Australia´s total current account deficit last year more than a little alarming, and I believe we should actively seek to address the imbalance as soon as possible.
I am concerned by the size of the deficit and its average growth rate of 8.34 percent per annum, not, as Senator Alston suggests, because I simplistically believe that all exports are good and all imports are bad, but because I believe Australia cannot afford such a large deficit in ICT and should be doing something about it.
The best way to maintain or extend our competitive advantage is to actively create technologies for both domestic and global markets that enable us to do things in new and different ways or do them more efficiently to reduce costs.
But unless we actively support and nurture our local manufacturing sector, we will ultimately lose our capabilities in this area as developers and entrepreneurs are inevitably attracted overseas to achieve their dreams.
Those of you who saw the initial coverage of the ACS-sponsored 2002 ICT Trade Update will also have seen Senator Alston´s scathing response, in which he accused us of being highly misleading, alarmist and “peddling discredited 19th century mercantilist dogma’.
His media release pointed out that other OECD countries like the US, Germany, and the UK also have large ICT equipment trade deficits—very true. However, it´s important to recognise that their deficits are largely driven by the offshore manufacturing efforts of their own multinationals.
Several prominent US hardware firms operate manufacturing facilities in Mexico which account for a substantial proportion of America´s ICT imports and re-exports. In fact, US investment abroad in computer and office machine manufacturing alone reached almost US$18 billion in 1998, but the profits of these ventures returned to America.
By comparison, Australia has no multinationals manufacturing offshore and the profits made from our ICT equipment imports remain in their countries of origin, so there is no benefit to Australia.
According to the OECD Information Technology Outlook 2002, the 2000 ICT equipment deficit as a share of GDP was 1.50 percent for Australia, 0.43 percent for Germany, 0.40 percent for the UK and just 0.36 percent for the US. So, relative to the size of the economy, Australia´s ICT equipment deficit is around four times larger.
Returning to the productivity debate, it´s helpful to also consider the impact of the ICT-producing industries. OECD data reveals that countries with the largest ICT producing sectors enjoyed the highest productivity growth during the 1990s (ie, Ireland, Finland, and Korea). These were also the countries with the highest ICT trade surplus.
The US Department of Commerce recently reported that between 1995 and 1999, the IT-producing sector accounted for an average seven percent of US GDP, but was responsible for 28 percent of overall real economic growth. Australia is missing this growth opportunity.
One of the most important lessons from the ICT Trade Update is not the deficit itself, but the reversal of the growth trends earlier in the mid-1990s. Surely there is more we could be doing in terms of industry policy and development initiatives.
It´s all very well to debate these issues in the public arena and it´s important to promote open and objective discussion, but the time for action is now well overdue. Australia´s ICT sector deserves the support of all stakeholders and we welcome any opportunity to contribute to initiatives aimed at delivering tangible benefits, for this sector and for Australia as a whole.
Richard Hogg is National president of the Australian Computer Society (ACS). The ACS is the recognised association for Information Technology (IT) professionals, attracting a membership (over 16,000) from all levels of the IT industry and providing a wide range of services. A member of the Australian Council of Professions, the ACS is the guardian of professional ethics and standards in the IT industry, with a commitment to the wider community to ensure the beneficial use of IT.
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