If you can’t build cars, how can you build submarines?

There’s a weird conversation going on in Australia about sovereignty. The word has been tossed around frequently over the years, not least in the title Operation Sovereign Borders, described on the government’s Home Affairs OSB landing page as “a military-led border security operation” delivering on its commitment to protect Australia’s borders, stop people smuggling and prevent people dying at sea - all politburo speak for not allowing asylum seekers to arrive on boats.

It must be a Liberal-National coalition government thing, because more recently, sovereignty has leapt to the fore in a new context - manufacturing. In something of a rinse-wash-repeat cycle, sovereignty has been applied to manufacturing in the context of national security.

First, our determination to achieve ‘sovereign’ production of COVID-19 vaccines propelled us into a commitment to Astrazeneca’s jab, manufactured by Australia’s high-achieving global colossus, CSL. Of relevance to this article, this was at least in part designed to ensure Australia had priority access to this vaccine as the virus exploded and drove demand higher in other parts of the world.

Unfortunately, it appears that this quest precluded any sensible negotiation and commitment to early orders of the mRNA vaccines from Pfizer and Moderna, for which we have since paid dearly through frequent and extended lockdowns and among the slowest ‘strollouts’ of COVID vaccines in the developed world.

The sovereign conversation has now drifted on into the frosty narrative and diplomacy surrounding submarine contracts. Former Liberal leader and prime ministerial aspirant, Dr John Hewson, tweeted to suggest the original decision to order diesel-electric powered subs from France with a percentage of their manufacture moored and docked firmly in Adelaide was no more than a pre-election primer for the Liberal-National coalition, delivering a windfall gain for South Australia, a state with an industrial sector and economy under significant stress.

Although Australia has famously canned the French submarine contract in favour of the AUKUS alliance with the UK and USA, it is still uncertain how much of the replacement nuclear-powered submarines will be built in Adelaide. In fact, we will limbo under the unknown threshold of our manufacturing contribution while we undertake post-announcement due diligence as to what submarine will be best to meet our needs and, as a consequence, whether any of it will be built in Australia at all. But that will all be decided post next year’s Federal election. We’ll see whether dangling an already chewed carrot will look appetising for South Australians in 2022.

Excuse my cynicism about this but, where’s the evidence we have the knowhow, skills or capacity to build sophisticated war machines, let along do so on time and on budget?

You see, the issue I have with this is that this is not the first time that a coalition government has gone nuclear on manufacturing.

In 2013, Australian Treasurer, Joe Hockey instructed the Productivity Commission to examine the viability of the Australian automotive industry, by far and away the largest, most sophisticated and capable manufacturing sector in the country, despite its struggle to remain competitive in a decreasingly protected marketplace.

Hockey’s Productivity Commission investigation did not include in its terms of reference consideration of the strategic value of retaining the automotive industry’s capability. Its terms of reference, as often is the case, were designed to produce a report certifying the government’s ideological antipathy towards the industry’s subsidisation.

The predicted economic costs of subsidies to the Australian auto industry ranged from $500 million (industry figure) to $621 million (Productivity Commission), and modelling of the future broader cost to the economy varied considerably, mostly constructed on worst case scenarios, and calculate as high as $21.5 billion (industry figure) over 15 years. None of this modelling addressed the subject of the broader strategic importance of the sector’s manufacturing capability.

Of course, economic dries will, with some justification, argue that the industry had been a commercial black hole for decades, unable to compete with the lower structural costs of manufacturing in emerging economies. Nonetheless, during the industry’s heyday through the 1980s, there was ample evidence of the flow-on intangible benefits that streamed into the Australian community.

The foundation of these was the training and opportunity it presented in areas of industrial design, science, engineering, electronics, robotics and logistics. At its peak, these opportunities were not confined to its Victorian heartland, but extended to New South Wales, Queensland and South Australia.

It was an industry acutely aware of its precarious dependency on government support and, despite ill-informed criticism to the contrary made huge productivity gains through partnership in product development with a host of Australian supplier companies and, ultimately, by assisting key suppliers to build entire sub-assemblies in the areas where they had demonstrably superior knowledge and capacity.

Not only did it produce motor vehicles, but it had an enviable reputation for innovation dating back to the 1930s, when a Ford guy from Geelong called Lew Bandt invented the ute. It was reportedly in response to his wife’s request that they have a car suitable for going to church on Sunday and taking the pigs to market on Monday. A true demonstration that, given a length of wire, a nail and a length of timber, a resourceful Aussie will find a way to build a house.

You might ask how this relates to sovereignty and submarines. The Abbott government’s decision to cut the Australian car industry adrift has arguably compromised Australia’s knowledge and capacity to take on sophisticated ‘sovereign’ projects like nuclear submarines.

This graph from 2016 analysis by Swinburne University Professor of Economics, Abbas Valadkhani, shows the flow-on effects of the Australian car industry’s closure would most significant in the professional, scientific and technical sectors by a significant margin.

The government’s Department of Industry, Science, Energy and Resources website says a key component of the Morrison government’s JobMaker plan is to build an innovative and high-value manufacturing sector in Australia. It continues that this will “be underpinned by whole-of-economy reforms in areas such as tax, industrial relations, energy, trade, expansion and diversification, innovation and skills.”

It might not suggest subsidies, but that’s just a matter of semantics. It points inevitably to significant future investment in building, dare I suggest restoring, the nation’s manufacturing base. In fact, the government explicitly declares: “In Australia, we are moving out of heavily protected production to specialised production.”

This plan is unequivocal recognition that Australia must rebuild its manufacturing base. That’s not to say there is an argument for reinstatement of a major automotive manufacturing sector. That sub has sailed. However, you have to ask whether it was extreme shortsightedness nearly a decade ago to not consider the now acknowledged strategic importance of such a manufacturing base to our sovereignty.

Killing off Australia’s most significant manufacturing sector wiped out a pool of expertise, skills and capacity that could well serve our aspirations to manufacture sophisticated submarines and other high-end products. The Australian automotive sector and especially the people within it were highly regarded throughout the automotive world for innovation in design and engineering.

Luminaries in these fields were seconded to the US, Europe and Asia to direct and, indeed, rescue projects in overseas affiliates that led design thinking. This is the foundation stuff of any nation aspiring to ‘clever country’ status and transcends the boundaries dividing the subsets of a manufacturing sector.

We are fortunate to be debating these issues in a peacetime setting. It is now literally a lifetime since World War II and it is easy to forget how, in times of acute need, a sovereign manufacturing base can be converted to supporting a war effort.

CSL’s quick tooling up for vaccine production in the latter part of 2020 has been a case in point as we wage war on the battlefront of the pandemic. But let’s nmot forget that during the war years, Ford’s Geelong manufacturing facilities were producing landing barges and other military supplies to support Australian troops in far flung war zones. Holden’s plants turned out armoured vehicles and even aeroplanes. Who would be capable of stepping up to do this at short notice today?

In 2013, the Australian Strategic Policy Institute (ASPI), linked commentary on the demise of the Australian automotive industry and the announcement that submarines (the French version) would be partially built in Adelaide:

“With the prospect of a new generation of submarines to be built in Adelaide, Australia’s defence industry will continue to demand advanced manufacturing and design skills similar to those that the local automotive sector has gradually developed since WWII. ASPI’s Mark Thomson, who has been watching the defence business for a long time, notes that ‘the demise of the car industry will only make it more difficult to maintain the skills base and the sub-contractor base that underpin defence manufacturing in Australia’,” it wrote.

It concluded: “The challenge for the Abbott government will be to design a strategic plan to foster the skills base and innovative manufacturing technologies that will build on the long-term contribution of the car industry to Australia’s national well-being and help sustain those elements of manufacturing that defence relies on.”

According to the government’s own website, the baton has passed through several hands to the Morrison government and remains an aspiration rather than a realisation.