Australia’s $12,000 tariff on used cars came into my mind the other day when I read a Monocle story on Vladivostok, which highlighted that in 2008 Russia had brought in huge tariffs on cars to protect its domestic automotive industry. This unfortunately had a large adverse impact on Vladivostok’s economy, as reported in the February edition of Monocle (pp. 32-33):
For years, one of the city’s main economic drivers was the import of second-hand cars from Japan. It was big business for criminal gangs who controlled the shipping routes and customs offices, and also provided jobs for tens of thousands of locals who would drive the cars to other parts of Russia and sell them on. Then, in late 2008, in a move to stimulate the domestic car industry, Russia imposed huge import taxes on cars. Overnight, it seemed, the entire business would be killed. “Cars suddenly cost about $5,000 more, and it ruined a whole way of life,” says Kalachinsky [of the Vladivostok State University of Economics & Service].
Unfortunately, like Russia, Australia is also protecting its domestic car industry through tariffs. While the general automotive tariff rate has fallen to 5%, there remains a $12,000 tariff on second-hand cars, which effectively prevents the importation of cheap second-hand cars. There are only limited exemptions from the $12,000 tariff for specialist and enthusiast vehicles (e.g. a 1966 Ford Mustang).
Many people travelling to New Zealand would have noticed that used cars are significantly cheaper there in real terms – e.g. around $A9,000 for a 5-year old Corolla with 100,000 kilometres on the odometer compared with around $A12,000 in Australia (based on a quick look at Australian and NZ car sales websites).
The $12,000 used car tariff is bad policy with a regressive impact. Think of all the struggling students trying to scrape together the cash to buy a used car, and how much easier that would be if there were an influx of cheap second-hand Japanese cars.