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A comment on Trade & Assistance Review by the Productivity Commission

Comments on Productivity Commission "Trade and assistance review 2013-14", 30/06/2015

While I have not read the full report, I sense some of the statements in this short summary hard to understand or problematic. For example, the sixth paragraph states that a large proportion of the seemingly manufacturing exports consists of services:

The review highlights that services are more important than traditional trade statistics suggest. While trade statistics suggest that manufactures are about 36% of Australian exports, on a value added basis much of this is composed of services. Consequently, services are more like 42% of Australian trade; and manufactures fall to around 14%. Imposing a net burden on services through industry assistance measures in part designed to promote exports appears even less explicable.

If that is true, then trade assistance to the manufacturing exports may also be beneficial to services when they are inputs to those manufacturing exports, because the assistance would allow the manufacturing to pay a higher price to its inputs including those services used in the exported manufacturing. Although this may be second or third round effects, the summary does not seem to take that into account.

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