Free Trade Agreement threatens local whitebox market

Free Trade Agreement threatens local whitebox market

According to the Howard government, the recently passed US Australia Free Trade Agreement (FTA) will be beneficial to the Australian economy overall. However, it has been openly recognised that certain sectors of the economy will wither in the face of increased competition. When it comes to the local whitebox producers, the jury is still out but the doomsayers are gathering.

Newly appointed Federal Minister for IT, Senator Helen Coonan, is promoting the deal, saying it will provide local manufacturers and service providers with access to a potentially lucrative $US76 billion US Government procurement market.

"The Australia-United States Free Trade Agreement provides positive outcomes for Australia's ICT industry. These include enhanced access to the US Government procurement market for ICT goods and services; increased attractiveness of Australia as a destination for US ICT related investment; support for an open e-commerce environment; and potentially reduced supply and compliance costs," Coonan said.

"Australian companies will now be able to sell software, services and hardware directly to the US Federal Government and a significant number of State Government agencies and not be discriminated against through US legislation such as the Buy America Act."

However, others contend that the deal will further open the Australian market to IT products and services, but will not enable Australian IT companies to compete in the US market.

Breaking ranks with her Labor Party counterparts, Shadow Minister for IT, Senator Kate Lundy, has expressed concerns for Australia's IT sector, especially systems and components manufacturers.

"It will be devastating to the local industry," Lundy said. "Australia won't be able to create or implement policies which specify local content as criteria, and selling into government in Australia is an important stepping stone for many companies."

Lundy's concerns are not uniformly echoed across whitebox manufacturers, as most remain unsure as to how the deal will affect their business. Many have said it will lead to increased competition within the Australian market. However, few if any Australian whitebox manufacturers are keen to tackle the US market, even with a reduction in trade barriers.

Product marketing manager for whitebox manufacturer Protac, Patrick Cheng, said the FTA will make no difference to the company's suppliers or customer base.

"We distribute goods from Taiwan, and I think prices on US products will still remain higher, so there will be no point in buying them," Cheng said. "And we won't be exporting to the US, even with the free trade agreement in place."

However, product manager for computing hardware manufacturer Pioneer, Jeff Lee, points to supply price disparities between the major US-based vendors, and their smaller Australian counterparts, and calls for a strengthening of anti-dumping laws in order to shore-up the local industry.

"Dell is currently selling PCs in the US at under $US699, after the FTA they will be able to sell them here for $1000, and we just can't compete with those prices," Lee warned.

"It will be impossible for us to export to the US, there are no small or medium PC manufacturers there – there aren't even small retailers. It is all big business, and that is what will happen here."

Lee said that while the local whitebox industry already operates efficiently, it is unfair to force it to compete directly with US IT manufacturers who have access to massive economies of scale. His predictions are dire.

"There is no place for the local IT industry in this deal, we will not be able to compete for federal, state or even local government contracts," he said. "Hardware, software, services, it doesn't matter what your business is – it will be all gone."

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