Growing concerns about global exploitation of cheap labour have seen an increasing number of businesses and consumers marketing and calling for the widespread use of ‘ethical manufacturing’ – this growing social conscience presents an opportunity to shift the domestic policy dialogue for Australia’s own benefit.
Across the developed world, the social conscience of the public has been growing, from concerns about environmental sustainability and civil rights, one area that has been slow off the mark, at least until now is the issue of sweatshops and labour force exploitation in the developing world.
However, slowly, things appear to be changing, as the myriad celebrity-endorsed clothing, fashion and consumer electronics companies are revealed to be exploiting labour around the world. Further compounding this is recent revelations as to the extent of Beijing's own forced labour camps targeting ethnic minorities.
In response, there is a growing groundswell of the community developing in nations like Australia, the US and western Europe, calling for large multinationals to be more socially conscience, in line with their assortment of social issues campaigns, placing emphasis on what has become known as 'ethical manufacturing'.
Ironically, for all the bluster of these groups, which favour locally, sustainably sourced materials and labour markets, they have run almost headfirst into the growing waves of economic nationalism sweeping across much of the West in the aftermath of COVID-19 as many nations and people have realised their startling dependence upon vulnerable global supply chains.
For many nations, COVID-19 has served as a form of divine intervention, revealing foundations of sand and the frailty of over-dependence on the lowest cost proposition, ailing infrastructure and rapidly declining resilience – Australia is no exception, however it is in the midst of this adversity that we can truly chart our own path forward.
Across the globe, the post-Second World War economic, political and strategic order is coming under siege, driven by mounting waves of civil unrest and rising levels of the favourite boogeyman of much of the media, 'nationalism'.
Growing economic stagnation across the West, concerns about climate change and the increasing geo-strategic competition between the world's great powers are all undermining the global balance of power.
Adding further fuel to the fire is the global and more localised impacts of COVID-19, which range from recognising the impact of vulnerable, global supply chains upon national security as many leading nations, long advocates of "closer collaboration and economic integration", grasp at the lifeboats of the nation-state to secure their national interest.
So, what if the socially conscious concept of 'ethical manufacturing' was used as a catalyst to help support the national interest, and limit a nation's dependence upon vulnerable global supply chains?
Public dialogue is essential
Not since the socio-political upheaval of the 1960s has the Western World experienced such a politically engaged, socially conscious and internationally-minded populace, and while this has created a groundswell for an increasingly contested public policy debate, there is potential here.
Critically, concepts like 'ethical manufacturing' can be used by policy and political leaders concerned with national resilience and national security to contribute to the public policy debate, while also addressing the very real concerns raised by communities about labour exploitation around the world, but particularly in the Indo-Pacific.
Importantly, this concept fills a critical policy niche, one that despite the protestations and reassurances made by various Australian political leaders, the nation’s position as a “trading nation” does little to guarantee its economic, political and strategic security during a period of global recession and mounting geopolitical and strategic tension and competition between great powers.
Responding to these challenges has pushed the public policy status quo to the edge, as government grapples with how to stimulate the economy, lower unemployment and prepare the nation for the increasingly disrupted and challenging decades to come.
The concept of "reshoring" has emerged as a powerful policy mechanism for enhancing national security, limiting a nation's dependence on easily contested or constrained global supply chains.
Highlighting this, former US Defense Department official Jerry McGinn, who is now the executive director of the government contracting centre in the School of Business at George Mason University, in a piece for Defense News unpacks just how the model can be best used by the US and Australia to fast track economic growth, boost employment and secure national interests.
McGinn says, "US government officials have called for the 'reshoring' of domestic industrial capacity in several areas in recent weeks. Whether it is the production of pharmaceuticals and personal protective equipment, or the development of microelectronics, specialty chemicals and materials, calls for a significant increase in US manufacturing capabilities are coming through loud and clear. This makes complete sense, but how do we do this reshoring?
"The solution is not an autarkic 'Buy America'-only approach that would be counterproductive to our long-term economic health. Instead, we need to have a laser focus on getting out of the China business with respect to industrial capabilities critical to national security and, in many cases, doing that with a little help from our friends."
The Australian public is also looking to government to chart a course out of the nation's first recession in nearly three decades, with both sides of the political spectrum ramping up degrees of a 'local first' strategy to drive economic growth and head off potentially disastrous levels of unemployment and government debt.
As with all things, balance is essential
It is critical to recognise in forming any response that Australia is not alone in confronting this period of global and regional turmoil in isolation, however, its almost total dependence upon China's economic growth for its own growth has placed the nation in a precarious position.
This is particularly relevant as the war of words between the two nations continues to unfold and Beijing resorts to blatant economic coercion, now targeting Australia's wheat farmers to force compliance with its view of the COVID-19 pandemic and to more broadly legitimise its territorial claims in the region.
In responding to these challenges, it has now been firmly established that Australia needs to take greater responsibility for its own economic destiny, diversifying its trading relationships to better support and nurture economic competitiveness and growth over the long term.
This is something championed by Lowy Institute non-resident fellow Professor Alan Dupont, who recently issued a challenge for Prime Minister Scott Morrison, calling for him to "balance" the nation's relationships between the two antagonistic superpowers, with a focus on building Australia's economic resilience and security.
For Professor Dupont, this is an essential part of the nation's response to the global turmoil, explaining, "Adjusting our foreign policy, trade and security settings will be crucial to determining our place in an emerging world order that will be far less favourable than the last. Disruption to global supply chains is intensifying.
"Most countries want to lessen dependence on China-centric value chains, especially for strategically important goods and commodities deemed essential for national resilience. Trade protectionism and strategic tensions are on the rise. A recrudescent nationalism is leaving 'anywhere' internationalists and the Davos crowd lamenting lost power and influence."
This is part of a broader paradigm shift influencing the global economic, strategic and political balance of power Australia has been dependent upon for the best part of a century and for Professor Dupont spells only one thing: increased great power tensions, competition and animosity.
Prince Ghosh, writing for Forbes, has penned a piece titled 'The Exodus of Chinese Manufacturing: Shutting Down The World's Factory', which states: "It’s not breaking news that manufacturing is leaving China."
COVID-19 has served as a major catalyst for many nations, including Australia, who have recognised the national security, economic and increasingly, political ramifications of diminishing value-add manufacturing capabilities, particularly as many nations continue to protect their interests, not those of the globalised economy and citizens.
This is the culmination of decades of policy shifts and deregulation that saw China leverage the shifting sands of Western policymaking to leverage its natural advantages in population and low-cost labour, while also using elements of central planning and capitalist doctrines to maximise the economic shift.
"Cheap labour rates and proximal access to quickly growing consumer populations in south-east Asia made China one of the most lucrative business hubs in the world. It quickly overtook the United States in 2011 to become the world’s largest manufacturer driving growth in the nation’s GDP by 40 per cent," Ghosh explained.
"Over the course of these 40 years, the world around China also underwent an enormous digital transformation. Consumer electronics proliferated homes and workplaces with paper and pens replaced by phones, tablets, and computers for nearly every knowledge worker."
Now, you might be asking, where are these companies shifting their manufacturing operations to? The short answer is south-east Asia, with nations like Vietnam, Thailand, Indonesia and India all net winners, while central and South American nations Mexico and Brazil are also winners. So, what opportunity is there for Australia?
Interestingly, these markets seem to markets of relative convenience for global supply chains, with nations like Australia, the US and many western European nations apparently suffering from labour force skills and wage costs.
However, contradicting these apparent weaknesses, Ghosh, citing a Deloitte-commissioned report titled Footprint 2020: Expansion and optimization approaches for US manufacturers, establishes the key catalysts global brand executives look for when deciding where to expand manufacturing bases, including:
- New market opportunities;
- Proximity to existing accounts;
- Talent availability, educational infrastructure;
- Business disruption risk; and
- State technology advances.
It would seem on that basis, Australia is a stand out opportunity, particularly when combined with the nation's wealth of traditional and 'next-generation' raw resources, like rare earth elements essential to modern, value-add manufacturing capabilities.
In order to capitalise upon this shift in manufacturing hubs, it is clear that Australia must begin to plan for the next 15 to 20 years, not the next term of state, territory or federal government, providing policy consistency and, above all, long-term stability and vision for the public and surety in a period of global and regional turmoil.
At the core of this is an unlikely ally, the socially conscious concept of 'ethical manufacturing' which can be used to help secure Australia's national interests, secure local employment and economic growth, significantly reduce global labour exploitation and satisfy the conscience of the public.
Australia is defined by its economic, political and strategic relationships with the Indo-Pacific and the access to the growing economies and to strategic sea lines of communication supporting over 90 per cent of global trade, a result of the cost-effective and reliable nature of sea transport.
Indo-Pacific Asia is at the epicentre of the 21st century’s era of great power competition and global maritime trade, with about US$5 trillion worth of trade flowing through the South China Sea and the strategic waterways and chokepoints of south-east Asia annually.
Enhancing Australia’s capacity to act as an independent power, incorporating great power-style strategic economic, diplomatic and military capability serves as a powerful symbol of Australia’s sovereignty and evolving responsibilities in supporting and enhancing the security and prosperity of Indo-Pacific Asia.
Rear Admiral Kevin Scarce also issued a challenge for Australia's political and strategic policy leaders, saying:
"If we observe that the level of debate among our leaders is characterised by mud-slinging, obfuscation and the deliberate misrepresentation of the views of others, why would the community behave differently ... Our failure to do so will leave a very damaging legacy for future generations."
Further complicating the nation’s calculations is the declining diversity of the national economy, the ever-present challenge of climate change impacting droughts, bushfires and floods, Australia’s energy security and the infrastructure needed to ensure national resilience.
Australia is consistently told that as a nation we are torn between our economic relationship with China and the longstanding strategic partnership with the US, placing the country at the epicentre of a great power rivalry – but what if it didn’t have to be that way?
Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific and what you would like to see from Australia’s political leaders in terms of shaking up the nation’s economic, political and strategic approach to our regional partners.