COVID vaccines offer the pharma industry a once-in-a-generation opportunity to reset its reputation. But it’s after decades of big profits and scandals


Elsa Olofsson/Unsplash

Ray Moynihan, Bond UniversityJust weeks before the first COVID-19 cases emerged, Gallup published its latest poll on America’s views about business. At the bottom of the list of 25 sectors was the pharmaceutical industry. Below advertising. Below oil and gas. Below the banks.

The pandemic and the new vaccines have of course turned that reputation around, but let’s not forget why the pharmaceutical industry’s credibility sank so low.

Or how the industry got so big. One company, Johnson & Johnson, is currently worth around US$450 billion. About the same as the economy of Norway.




Read more:
Big Pharma’s COVID-19 reputation boost may not last — here’s why


The birth of the behemoths

The idea of the miraculous potion or cure-all dates back at least as far as Greek mythology. The goddess Panacea even gets a mention in the Hippocratic Oath.

The rise of the modern pharmaceutical industry is more recent, coming through the 19th century. On the eve of the 20th century, the German company Bayer famously launched its early blockbusters, including “Aspirin” and “Heroin.”

Around this time, US drug-makers were arguing for patent protections, or exclusive rights to market a drug for a specific period of time. By the 1950s, they’d won those arguments, and the US soon became the world’s biggest market for medicines.




Read more:
The US drug industry used to oppose patents – what changed?


In addition to patents, the other special ingredient for success was the right to market pills directly to doctors, and in the US, directly to consumers via television commercials.

At the dawn of the 21st century, in those dark ages before Facebook and Big Tech, pharmaceuticals was among the most profitable industries on the planet.

Wonder drugs, miracle cures

Clearly many medicines extend lives and reduce suffering. And while we need caution with hyperbole, some discoveries are major breakthroughs.

Antibiotics revolutionised the treatment of deadly infections, and gave a boost to science at the same time.

In the 1940s, one of the first-published “randomised controlled trials” was a test of Streptomycin for the treatment of tuberculosis.

Streptomycin inventor Selman Waksman and two associates test the drug.
New Jersey Agriculture Experimental Station at Rutgers University/Wikimedia Commons

In the 1980s, another famous class of wonder drugs was developed, this time to tackle the HIV-AIDS epidemic. The mysterious new virus bringing many people a death sentence would soon become a manageable disease.

And while some cancers remain incurable, others are treated and even prevented with medicines that are simply miraculous.

Extortionate prices, evaded taxes

Yet, in each case, the golden drugs have a dark side. As the World Health Organization notes, overuse of antibiotics helped make antibiotic-resistance “one of the biggest threats to global health”.

Over-pricing and patent protections for HIV medicines put them out of reach of the world’s poorest, and prices only came down after massive global campaigns for greater access.

With cancer, companies have demanded huge prices for products offering sometimes minimal benefits.




Read more:
If we don’t talk about value, cancer drugs will become terminal for health systems


Extortionate prices were feeding drug company mega-profits, and at the same time driving down the industry’s reputation. In a notorious example, the cost of the life-saving Epipen skyrocketed more than 400%, helping make drug prices a big issue in the 2016 US presidential election.

Two epipens sit in front of their pack.
The price of Epipens rose by more than 400%.
Shutterstock

Industry argues high prices fund vital research. Critics say companies can spend more on marketing than research, and their profits sometimes derive from taxpayer-funded science.

To make matters worse, the big pharmaceutical companies are also among the big tax avoiders. A 2015 Senate hearing in Australia heard companies were paying rates as low as one cent in the dollar.

A global report from Oxfam in 2018 concluded the pharmaceutical industry was “cheating countries out of billions in tax revenues”.

Toxic marketing causes harm

The major problem with the drug giants is their unhealthy influence over medical science. The industry dominates research, and there’s strong evidence that company-sponsored studies tend to have a bias which favours the sponsor’s product.

Medical education is also heavily sponsored, with evidence suggesting an association between a doctor accepting just one meal at an “educational event”, and prescribing more of the sponsor’s drugs.




Read more:
Influential doctors aren’t disclosing their drug company ties


And the guidelines which can be so influential over a doctor’s prescribing decisions are too often written by medical experts with ties to drug companies.

Central to this marketing effort are these senior medical experts, sometimes called “key opinion leaders”, who claim to be independent yet accept fees for advice, consultancies or “educational” presentations to other doctors.

Male doctor types at his computer.
Just one meal at a sponsored educational event can result in a doctor prescribing more of that company’s drugs.
Shutterstock

A former top-selling drug company sales representative turned whistleblower put it plainly in a 2008 piece in The BMJ:

Key opinion leaders were salespeople for us, and we would routinely measure the return on our investment, by tracking prescriptions before and after their presentations.

If that speaker didn’t make the impact the company was looking for, then you wouldn’t invite them back.

Unhealthy marketing means the latest most expensive pill is too often favoured over older cheaper options, or doing nothing at all, causing much harm and wasting precious resources.

Corporate crime

In 2009 came the biggest health-care fraud settlement in history. Pfizer was forced to fork out a US$2.3 billion fine for illegal promotion, false and misleading claims about drug safety, and paying kickbacks to doctors. That included a US$1.2 billion criminal fine, the largest ever in a US criminal prosecution.

One of the whistleblowers in that case happened to be a member of a special Pfizer sales team promoting Viagra. He revealed doctors were taken to breakfasts, lunches, dinners, Broadway shows, baseball games, golf courses, ski fields, casinos and strip clubs.

In 2013, Johnson & Johnson paid out US$2.2 billion in civil and criminal fines for putting “profit over patients’ health”. The company had illegally promoted powerful anti-psychotic drugs as behaviour control for the elderly and most vulnerable, overstating benefits and playing down dangerous side effects, including stroke.

Older man holds pill to his mouth in one hand and a glass of water in the other.
Drug companies have faced massive fines for putting profits over health.
Shutterstock

Other court documents around the same time exposed how the giant global company Merck used dirty tricks to try and defend its controversial anti-arthritis drug Vioxx. Merck created a fake medical journal and drew up secret lists of academic critics to “neutralise” and “discredit”.

In the end, Vioxx was taken off the market because it was causing heart attacks, with estimates in The Lancet suggesting it may have led to 140,000 cases of serious coronary heart disease.




Read more:
The most powerful companies you’ve never heard of: Merck


Investigation and reform

Scandals like Vioxx tarnished the industry’s image, and brought more intense scrutiny.

The US National Academy of Sciences produced a landmark report arguing the closeness between doctors and drug companies could jeopardise the integrity of science, the objectivity of education, the quality of care, and public trust in medicine.

A series of US congressional hearings on unhealthy marketing produced the Open Payments register, mandated by US law to publicly list every company payment to every doctor.

Many around the world are reforming further, moving from transparency to independence. Italy brought in a special tax on drug company promotion to fund public interest research. Norway doesn’t give doctors full credit anymore for industry-sponsored education.




Read more:
Guidelines governing Canadian doctors’ relationships with pharma companies under review


But there’s a long way to go. A study in 2020 found 80% of the medicos who run the world’s most powerful doctors organisations still take money from drug and device companies. For research, for consultancies, for hospitality.

Even some agencies which assess drugs, notably the US Food and Drug Administration (FDA), still rely on significant funding from industry, which pays to have its products assessed.

And the harmful marketing has continued. Just last month, a group of drug companies, including Johnson & Johnson, agreed to pay a total of US$26 billion for their roles in fuelling the opioid epidemic.

A prescription for trust

One drug company chief reportedly said last year the industry had a “once-in-a-generation opportunity to reset” its reputation.

Given the dark arts that drove pharma’s credibility to rock bottom, its fanciful to imagine the pandemic will magically end the misleading marketing and the price gouging.

Any post-pandemic recovery requires meaningful reform.


This article is part of a global Conversation series, The business of pharmaceuticals. You can read the other articles here.The Conversation

Ray Moynihan, Assistant Professor, Bond University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia is building a billion-dollar arms export industry. This is how weapons can fall in the wrong hands


Megan Price, The University of QueenslandSince 2018, Australia has been seeking to become a top ten global defence exporter.

Its main exports are products and components that fit into broader global supply chains for weapons and weapons systems. For example, the government boasts there isn’t a single F-35 fighter jet production operation that doesn’t feature Australian-made components.

The government sees further export potential for products and components to be used in armoured vehicles, advanced radar systems, and patrol boats, as well.

While Australia hasn’t made much headway on its export ranking, it has enjoyed some impressive sales success. In the 2017-18 financial year, the estimated value of approved export permits was A$1.5 billion. By 2019-20, it had grown to nearly $5.5 billion.

Australia’s export goals are connected to a broader effort to resuscitate domestic manufacturing.

Considerable government funding is involved in this effort, including $1 billion recently allocated to the Sovereign Guided Weapons Enterprise for building missiles.

Where do Australian arms go?

Australia doesn’t provide data on which countries it exports arms to. It only maps the regions, and unhelpfully, it lumps the Middle East and Asia together.

We do know successive defence ministers have courted markets in the UAE and Saudi Arabia.

Heavily redacted documents obtained by the Guardian under a Freedom of Information request also indicate that in 2018-19, Australia issued 45 arms export permits to the UAE and 23 to Saudi Arabia.

Another 14 permits were approved for the countries from 2019-20.

These developments are significant, not least because the UAE and Saudis have both been embroiled in the Yemeni civil war for years, at times conducting their own indiscriminate air strikes.

The UN secretary-general anticipates 16 million Yemenis will go hungry this year because of the conflict, while 50,000 Yemenis are already starving to death.

Earlier this year, the Biden administration announced a freeze on “offensive” arms sales to Saudi Arabia and the UAE, citing the toll on civilians in the Yemeni war. Italy followed suit. Germany, too, halted weapons exports to the Saudis after the murder of journalist Jamal Khashoggi in 2018.

Advocacy groups in Australia have attempted to seize on this glimmer of momentum by calling for Australia to do the same.

When weapons end up in the wrong hands

The Australian government still claims its arms export industry operates under strict regulations:

In keeping with Australia’s national interests and international obligations, Defence facilitates the responsible export of military and dual-use goods and technologies from Australia.

Such claims are hardly new. If anything, they’re part of a long-standing Western tradition.

In the 1960s, the UN Security Council debated the merits of an arms embargo on South Africa. At the time, the French and British maintained their weapons sales were for “defensive purposes” and not “internal use”. South Africa built a terrifying internal security apparatus, making a mockery of the distinction.

The historical record shows that arms exports often show up precisely where they shouldn’t, causing untold civilian suffering. At times, they are even wielded against the immediate interests of the countries in which they were produced.

Britain’s many mistakes

Here, the British experience is illustrative (although we just as easily tell this story about any purported liberal democracy in the arms export business).

When Tony Blair’s Labour government came to office in 1997, it promised an “ethical” foreign policy. As part of this, Labour would never allow the sale of arms to regimes that might use them for internal repression. Or so they said.

The previous government had approved export licenses for the sale of Hawk jets to Indonesia’s Suharto regime. While Labour could have cancelled these licences, it didn’t do so until it was too late. A series of unedifying spectacles followed.

Hawk jets in Indonesia.
Hawk fighter jets fly in formation during an Indonesian military celebration.
SUZANNE PLUNKETT/AP

In 1999, Britain confirmed Indonesia had flown Hawk jets over Timor-Leste to intimidate local residents before the region’s independence referendum. Hawk jets were then used in 2003 to bomb Aceh province during a particularly brutal internal military campaign. British Scorpion tanks were also used.

These were by no means isolated incidents. In 2009, Britain conceded it was possible its weapons had been used in the Sri Lankan civil war in a manner contravening their export licences.

That same year, the foreign secretary also confirmed Israel had used British-made equipment to bombard Gaza.

Like Australia, Britain is currently exporting weapons to Saudi Arabia, though a court challenge is being brought to try to stop it. From 2013-17, it was the country’s second-biggest supplier, after the US.

While Britain recently announced it will halve its aid budget to Yemen, it will not stop supplying the Saudis with arms.

Today’s friend is tomorrow’s enemy

Arming foreign governments does not just pose an immediate risk to civilians. In a phenomenon known as “blowback”, it can undermine the interests of exporters.

In 2004, for example, the European Union lifted arms sanctions on Libya. And from 2005–09, EU member states cemented arms deals with the oil giant.

Muammar Gaddafi’s regime stored its new purchases in warehouses. Then, in 2011, Libya erupted into civil war and NATO enacted a “no-fly zone”. Many of the warehouses were looted and the weapons spilled into the hands of both government and rebel forces. This effectively turbo-charged a conflict that NATO was responsible for controlling.

A 2013 UN report said looted weapons had been smuggled to as many as 12 other countries in the region. They’ve fallen into the hands of foreign governments, separatists, warlords, and Islamic extremists. This is how arms deals can come back to bite exporters.

The arms industry has an array of potential drawbacks. There are questions about the economic efficiency of investing in defence at the expense of other sectors, and arms procurement is highly susceptible to corruption.

Even if our intentions are good and we behave transparently, we still cannot predict the future. The British Parliamentary Committee on Export Controls articulated this problem over a decade ago when discussing the Sri Lankan war:

The issue of Sri Lanka illustrates the difficulties faced by the government, and by those who, like us, scrutinise the licensing decisions made by government, in assessing how exports of arms might be used by the destination country at a future date, particularly if [the] political situation in the country at the time of the exports appears stable.

That should give us pause for thought.The Conversation

Megan Price, Sessional Lecturer, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia’s plan for manufacturing missiles to be accelerated


Michelle Grattan, University of CanberraThe government is speeding up the establishment of its planned $1 billion Sovereign Guided Weapons Enterprise, which aims to boost Australia’s own defence production capabilities as it faces a deteriorating security outlook.

The defence department will now start the process of selecting a strategic industry partner to operate a sovereign guided weapons manufacturing capability to produce missiles and other weapons on the government’s behalf .

The new enterprise will specialise in guided missiles for use across the defence force.

The increasing assertiveness of China and Australia’s deteriorating relations with that country, as well as the lessons of COVID, have strengthened the push for greater sovereign capability.

Scott Morrison, who will announce the acceleration in Adelaide on Wednesday, said in a statement, “Creating our own sovereign capability on Australian soil is essential to keep Australians safe, while also providing thousands of local jobs in businesses right across the defence supply chain.

“As the COVID-19 pandemic has shown, having the ability for self-reliance, be it vaccine development or the defence of Australia, is vital to meeting our own requirements in a changing global environment.”

Peter Dutton, who was only sworn into the defence portfolio on Tuesday, said the announcement “builds on the agreement the Morrison government achieved at AUSMIN last year to pursue options to encourage bilateral defence trade and to advance initiative that diversify and harness our industry co-operation”.

Dutton said Australia would work closely with the United States “to ensure that we understand how our enterprise can best support both Australia’s needs and the growing needs of our most important military partner”.

The Australian Strategic Policy Institute, a defence think tank, estimates Australian will spend $100 billion in the next 20 years on buying missiles and guided weapons.

ASPI defence expert Michael Shoebridge wrote in June last year:

“The ADF gets its missiles from US, European and Israeli manufacturers, at the end of long global supply chains. And, when the home nations of these manufacturers need missiles urgently themselves, their needs can get in the way of meeting ours […]

“The deteriorating strategic environment in our region, combined with the heightened understanding of how vulnerable extended global supply chains are, means the current situation has become unacceptable.”

Companies that could be a potential partners include Raytheon Australia, Lockheed Martin Australia, Kongsberg, and BAE Systems Australia. The partner will need to be suitable to work with the US and have strong links with Australian supply chain businesses.

The new Minister for Industry, Science and Technology, Christian Porter released a National Manufacturing Defence Roadmap on Tuesday, for a 10 year plan for investment.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Morrison government to subsidise holidaymakers in $1.2 billion tourism and aviation package


Michelle Grattan, University of Canberra

Nearly 800,000 half-price air tickets for travel to and from holiday areas will be provided under a $1.2 billion program to support aviation and tourism, to be announced by the Morrison government on Thursday.

The measures are designed to assist these industries, still hard hit by the effects of the pandemic, after JobKeeper finishes late this month.

The cheap fares will run from April 1 to July 31.

The loan guarantee scheme that operates for small and medium sized businesses is also being expanded and extended for enterprises that leave JobKeeper in the March quarter.

While this is an economy-wide measure, the government says those eligible will be especially in the tourism sector.

Thirteen regions have been designated initially for the cheap flights – the Gold Coast, Cairns, the Whitsundays and Mackay region (Proserpine and Hamilton Island), the Sunshine Coast, Lasseter and Alice Springs, Launceston, Devonport and Burnie, Broome, Avalon, Merimbula, and Kangaroo Island.

The number of tickets will be demand driven, as will the places the flights depart from, but it is estimated there will be about 46,000 discounted fares a week over 17 weeks. A return ticket counts as two discounted fares, the government said.

Under the loan initiative, the maximum size of eligible loans will be increased from the present $1 million to $5 million. The maximum eligible turnover will also be expanded, from $50 million to $250 million.

Maximum loan terms will go from five years to 10 years, and lenders will be allowed to offer borrowers a repayment holiday of up to two years.

Eligible businesses will also be able to use the scheme to refinance their existing loans, so benefitting from the program’s more concessional interest rates.

The government says more than 350,000 businesses which are on JobKeeper are expected to be eligible under the expanded scheme, for which loans will be available from the start of next month and must be approved by the end of December.

For international aviation, there will be support from April until the end of October, when international flights are expected to resumer. The assistance across both airlines will help them maintain their core international capability, keeping 8600 people in work as well as planes flight-ready.

Among the assistance for aviation, several existing support measures are being extended until the end of September, including waivers for air services fees and security charges.

There are also extensions for the business events grants program, the assistance for zoos and aquariums, and the grants to help travel agents.

More than 600,000 people are employed by the tourism sector with domestic tourism worth $100 billion to the economy.

Tourism has suffered severely from the closed international border and from the state border closures and restrictions.

Scott Morrison described the package as “our ticket to recovery … to get Australians travelling and supporting tourism operators, businesses, travel agents and airlines who continue to do it tough through COVID-19, while our international borders remain closed.

“This package will take more tourists to our hotels and cafes, taking tours and exploring our backyard”.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Vital Signs: yes, we need to make things in Australia, but not like in the past



Shutterstock

Richard Holden, UNSW

Much of the focus of Opposition Leader Anthony Albanese’s budget reply speech was around Labor’s proposal to expand childcare subsidies – a policy with some flaws but which moves in the right direction.

Labor’s plan to modernise the electricity grid by setting up a “Rewiring the Nation Corporation” with A$20 billion in government support was also met with general approval.




Read more:
Albanese promises $20 billion plan to modernise electricity grid, and $6.2 billion for childcare


What got less attention was the third pillar of Labor’s budget strategy – a big push toward more local manufacturing jobs.

Albanese wasn’t shy about what he meant. He lamented the loss of Australia’s car-making industry:

Australians will never forget that it was this government that drove Holden, Ford and other car makers out of Australia, taking tens of thousands of jobs in auto manufacturing, servicing and the supply chain with them.

He then announced Labor would create a “National Rail Manufacturing Plan” to expand Australia’s boutique train-building industry:

We will provide leadership to the states and work with industry to identify and optimise the opportunities to build trains here in Australia – for freight and for public transport.

The economics of pillars 1 and 2 make sense. Pillar 3 involves trying to turn back the clock on the irrepressible, tectonic forces of globalisation and automation to pretend we should make things here we shouldn’t.

Understanding comparative advantage

Countries benefit from trade rather than seeking to produce everything they need locally. This is due to the idea of “comparative advantage”, originated by David Ricardo in his 1817 book On the Principles of Political Economy and Taxation.

One country (call it country A) might be more efficient than another (country B) in absolute terms at producing, for example, T-shirts and wine. It is tempting to think, then, that country A should produce both T-shirts and wine.

But what if country B is really inefficient at producing T-shirts but reasonable at producing wine? If country A specialises in producing T-shirts and country B specialises in producing wine, they can trade and both be better off.

Why? Because country A produces T-shirts much more efficiently than country B, and country B is only a little less efficient at producing wine. Overall, both economies get more efficient, raising living standards.

Making cars and trains in Australia

Does Australia have any comparative advantage at producing cars or trains?

With cars the evidence speaks for itself. Local manufacturing only survived for decades because of huge government subsidies. Without them Australian-made cars couldn’t compete.




Read more:
Holden’s dead end shows government policy should have taken a different road


Only part of that was to do with labour costs – and we should be rightly proud of our comparatively high wages and good working conditions. Germany – home of BMW, Mercedes Benz and Volkswagen – also has high wages and conditions.

What about trains? Some trains are made in Australia – by Downer EDI and Canadian multinational Bombardier. That’s good for a few thousand jobs. But the market is domestic, with the customers being state governments who buy with an eye on local jobs.

There’s not a lot to suggest it can become an export industry, competing for example with Japan, which has been making bullet trains since the early 1960s. Or France, whose train builders have sold hydrogen trains to Germany and high-speed freight trains to Italy.

With these competitors having such an edge, and the well-known phenomenon of “learning-by-doing”, are we really going to catch up?

There are many other sectors in which Australian producers are internationally competitive, such as agriculture, services and areas of high-tech manufacturing.
Building on and expanding comparative advantage in these areas makes a lot more sense.

The case for strategic manufacturing

That said, the COVID-19 pandemic has taught us how fragile certain parts of our economy are. The same logic of comparative advantage that has done so much to improve living standards has also made us vulnerable in some areas.

Having little or no manufacturing capacity in personal protective equipment or pharmaceuticals like insulin, EpiPens and antibiotics is potentially very dangerous. Importing more than 90% of our pharmaceuticals puts us in a vulnerable position if a state actor that controls important parts of the global supply chain decides to cut supply. This is what economists call the “hold-up problem”.




Read more:
Medical supply chains are fragile in the best of times and COVID-19 will test their strength


So it makes sense for Australia to have more presence in strategic manufacturing like pharmaceuticals and personal protective equipment, even if producing these goods locally is not as efficient as buying them from overseas.

From just-in-time to just-in-case

The pandemic has taught us that we have, as a nation, moved a little too far towards the efficiencies of “just-in-time” supply chains. We need to move back somewhat, but certainly not completely, in the direction of “just-in-case” – to a little less efficiency but a little more insurance.

That should involve a push for strategic manufacturing. We should at all times be looking to build on and expand our comparative advantage.

But trying to go “Back to the Future” and build an Australian De Lorean makes no sense.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Government extends assistance for first home buyers to stimulate building industry


Michelle Grattan, University of Canberra

In its latest stimulus measure, the Morrison government will extend its first home loan deposit scheme to an extra 10,000 home buyers.

But unlike existing arrangements, where people can purchase a new or existing home, these buyers will have to build a house or buy a newly-built property.

The condition is to direct maximum help to the residential building sector.

As with the existing program, the extended program allows people to buy with a deposit of as little as 5%, much less than the usual deposit of about 20%. The government guarantees the other 15% of the deposit.

The additional guarantee will run until June 30, 2021. The program has already assisted some 20,000 buyers since the start of the year.

Treasurer Josh Frydenberg said: “Helping another 10,000 first home buyers to buy a new home … will help to support all our tradies right through the supply chain including painters, builders, plumbers and electricians.

“In addition to the government’s HomeBuilder program, these measures will support residential construction activity and jobs across the industry at a time when the economy and the sector needs it most.

“At around 5% of GDP, our residential construction industry is vital to the economy and our recovery from the coronavirus crisis.”

The first home loan deposit scheme began in January, to provide up to 10,000 guarantees for the financial year to June 30, 2020. It saw strong demand in its first six months , with 9,984 out of a maximum of 10,000 guarantees offered.

Between March and June, the scheme supported one in eight of all first home buyers.

The government has announced new caps for the scheme, given newly built homes are usually more expensive than existing homes for first home buyers:The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

$400 million in government funding for Hollywood, but only scraps for Australian film



Marvel Studios

Jo Caust, University of Melbourne

On July 17, Prime Minister Scott Morrison announced an additional A$400 million to attract film and television productions to Australia until 2027.

In a press release, Morrison argued Australia is an attractive destination due to our relative success in managing COVID-19. The idea is that this financial expansion of the “location incentive” program will attract international filmmakers in production limbo to come to Australia.

What does the Australian film industry get out of this incentive? There is no doubt more film production here will ensure the employment of production staff, technical crews and support actors, many of whom have been badly economically affected by the stoppage in film making. As Morrison notes:

Behind these projects are thousands of workers that build and light the stages, that feed, house and cater for the huge cast and crew and that bring the productions to life. This is backing thousands of Australians who make their living working in front of the camera and behind the scenes in the creative economy.

The existing location offset provides a tax rebate of 16.5% of production expenses spent in Australia, while the location incentive – which this $400 million will go towards – provides grants of up to 13.5% of qualifying expenses.

This new input is predicted by the government to attract around $3 billion in foreign expenditure to Australia and up to 8,000 new jobs annually.

This is not a fund to make Australian films, but an incentive for foreign filmmakers to make films in Australia.




Read more:
Queensland has saved a Hollywood blockbuster, but the local film industry is still missing out


Global incentives

Many countries offer similar incentives.

The UK offers up to a 25% cash rebate of qualifying expenditure; Ireland offers 32% tax credit on eligible production, post-production and/or VFX expenses for local and international cast and crew, and goods and services.

Singapore is even more generous, offering up to 50% of qualifying expenses. But as a condition of receiving the money, the filmmakers must portray Singapore in a “positive light”.

There are usually caveats: a minimum spend of the film’s budget in the country providing the incentive; a minimum employment of local practitioners on the crew; and in some cases a “cultural test”.

In the UK, productions can earn points towards this cultural test by filming in English, contributing to local employment, and creating films “reflecting British creativity, heritage and diversity”.

Aquaman holds a gold staff.
Aquaman was filmed on the Gold Coast.
Warner Bros

Does Australia apply any similar conditions? The location tax offset requires the company to be operating with an Australian Business Number, and have a minimum qualifying spend in Australia of $15 million, while the location incentive is for “eligible international footloose productions”, that is international films being produced in Australia.

Delights, and concerns

The Australian and New Zealand Screen Association — whose members include Universal, Walt Disney, Sony, Netflix, Warner Brothers and Paramount — commissioned a research report on Australian location incentives in 2018.

The report argued other countries have been more generous in their provision of location offsetting, thereby resulting in a loss of international production in Australia. The association is delighted about this latest announcement.

But how do local filmmakers feel about this funding? Screen Producers Australia, whose members include local producers and production businesses, has said this funding may help to support around 20% of the local workforce, but is concerned about the lack of support for Australian filmmakers making Australian films.

Very rich people stand in a very posh room.
The Great Gatsby was filmed in Sydney.
Warner Bros

This new funding will certainly not help the production and development of locally made films and television. As Screen Producers Australia asserts, foreign made films and producers can now access more government funding in Australia than Australian made films and producers.

A sector in crisis

On June 24, the federal government announced new funding packages to support the “creative economy”. This included $50 million for a Temporary Interruption Fund to help film and television producers who are unable to access insurance due to COVID-19 to secure finance and restart production.




Read more:
The arts needed a champion – it got a package to prop up the major players 100 days later


This $50 million is the only support the government has specifically targeted towards the local film sector under coronavirus. Nearly a month on, no details have been released on how filmmakers will be able to access this support.

Since April 2020, free-to-air and subscription television services have been exempt from the need to adhere to the Australian content stipulations, significantly reducing the amount of Australian television content produced into the foreseeable future.




Read more:
Coronavirus TV ‘support’ package leaves screen writers and directors even less certain than before


This was further compounded by an announcement by the ABC in mid-June they would be reducing their commitment to local content production, given ongoing budget cuts.

The capacity of the Australian film and television sector to continue to make Australian stories that reflect our culture is seriously impacted.

While the government is showing support and generosity to foreign filmmakers and commercial television interests, it seems less inclined to demonstrate similar largesse to its own creators.

Some film workers are now likely to be employed, but the sector overall will not be assisted. If our own stories are not being made for our audiences, the on-going loss to the nation will be significant.The Conversation

Jo Caust, Associate Professor and Principal Fellow (Hon), School of Culture and Communication, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Matt Canavan says Australia doesn’t subsidise the fossil fuel industry, an expert says it does


Jeremy Moss, UNSW

Queensland Nationals Senator Matt Canavan on Monday night denied suggestions the government subsidises Australia’s fossil fuel industry. The comments prompted a swift response from some social media users, who cited evidence to the contrary.

Canavan was responding to a viewer question on ABC’s Q&A program. The questioner cited an International Monetary Fund (IMF) working paper from May last year that said Australia spends US$29 billion (A$47 billion) a year to prop up fossil fuel extraction and energy production.

The questioner also referred to media reports last year that Australia subsidised renewable energy to the tune of A$2.8 billion. He questioned the equity of the subsidy system.

Canavan disputed the figures and said there was “no subsidisation of Australia’s fossil fuel industries”. You can listen here:

Senator Matt Canavan on ABC Q&A.
ABC Q&A1.59 MB (download)

So let’s take a look at what the Australian government contributes to the fossil fuel industry, and whether this makes financial sense.

Do fossil fuels need government support more than renewable sources of energy?
Justin McKinney/Shutterstock

What does Australia contribute to the fossil fuel industry?

Canavan said the figures cited by the questioner didn’t accord with the view of the Productivity Commission.

The commission’s latest Trade and Assistance Review doesn’t specifically mention federal subsidies. But it describes “combined assistance” for petroleum, coal and chemicals in mining of about A$385 million for 2018-19.

Subsidies to fossil fuel companies and other products can be difficult to categorise. Often there is disagreement as to what counts and what doesn’t.

For example, the IMF paper includes subsidising the costs of fuels used to extract resources, accelerated depreciation for assets and funding for fossil fuel export projects.




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Estimates by other organisations of the annual federal subsidies for the fossil fuel industry range from A$5 billion to A$12 billion a year.

So despite the disparities, it’s clear the fossil fuel industry receives substantial federal government subsidies. Earlier this month a leaked draft report by a taskforce advising the government’s own COVID-19 commission recommends support to a gas industry expansion.

Importantly, these subsidies benefit the fossil fuel industry relative to its competitors in the renewable sector.

Do these payments make sense?

The subsidies are also aimed at a sinking industry.

As Tim Buckley, of the Institute for Energy Economics and Financial Analysis, notes, COVID-19 and the falling cost of renewables are delivering a hit to the export fossil fuel industry in Australia from which it may never recover.

Fossil fuel companies such as Santos are also under extreme pressure from some super funds to adopt strict emissions targets.

Moreover, these subsidies produce very few direct jobs in fossil fuel extraction.

According to the Australian Bureau of Statistics, coal, oil and gas extraction create just 64,300 direct jobs. Only around 10% of coal industry employees are women.

If we divide the IMF subsidy figure by the number of direct jobs, the governments of Australia spend A$730,000 each year for every direct job in the coal, oil and gas industry. That equates to A$1,832 for every Australian.

Where are the profits?

Setting aside the madness of this support for fossil fuels given the climate crisis, the subsidies make no financial sense.

With so much government support, you’d think the industry would be full of profitable companies filling the government’s coffers with taxes. But this is not the case.

Australian Taxation Office data for 2016-17 show eight of the ten largest fossil fuel producers in Australia paid no tax. That’s despite nine of these companies having revenue of about A$45 billion for that period.

Not all of these benefits go to these big producers, but many of them do.

If Prime Minister Scott Morrison really wants to lessen the impact of the coronavirus on Australians and save jobs, then this gross level of subsidies must be phased out.

Given the scale of the climate crisis, the Morrison government’s fossil fuel subsidies don’t make sense.
AAP

Money needed elsewhere

Subsidies paid each year to the fossil fuel industry could be used far better elsewhere.

It could help retrain or provide generous redundancy packages for the relatively small number of workers in fossil fuel industries and their communities.




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The subsidies are unconscionable when you consider the resources so desperately needed now for health and the broader economy. The coronavirus must force us as a country to re-evaluate how we distribute taxpayer funds.

As International Energy Agency head Fatih Birol notes, we now have an “historic opportunity” to use stimulus to transition to clean energy.

Directing funds to companies that have had 30 years to prepare for their demise is simply throwing away public money. It could be put to so much better use.The Conversation

Jeremy Moss, Professor of Political Philosophy, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

What COVID-19 means for the people making your clothes



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Sarah Kaine, University of Technology Sydney; Alice Payne, Queensland University of Technology, and Justine Coneybeer, Queensland University of Technology

Workers everywhere are feeling the impact of COVID-19 and the restrictions necessitated by COVID-19.

In Australia, retail and hospitality workers have been particularly hard hit. In other countries, it’s manufacturing workers, hit by disruptions to value and supply chains.

A value chain is the process by which businesses start with raw materials and add value to them through manufacturing and other processes to create a finished product.

A supply chain is the steps taken to get a product to a consumer.

Most of the time we don’t think about them at all.

Cotton is complex

Our research project with the Cotton Research Development Corporation is investigating strategies for improving labour conditions in the value chain for Australian cotton.

This is the chain in which our cotton is spun into yarn, woven or knitted into fabric, and turned into garments and other items which are sold to consumers.

When we began our project in mid-2019 the world was a very different place.

The changes brought by COVID-19 have had a significant impact on those working throughout the chain – particularly in garment production, but with flow on effects to other tiers.




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The tiers in the diagram are numbered backwards.

The first is Tier 4, where Australian cotton is grown and harvested. The next is Tier 3 where it is turned into yarn, usually overseas.

Tier 2 is the production of fabric, Tier 1 is the production of garments and other products, and Tier 0 is retailing and selling to retailers.


Alice Payne

Tier 0 (brands and retailers) has been hit by delays in shipments due to factory closures at Tiers 1 and 2.

However this has been matched by a decline in demand as social distancing and lock-down arrangements discourage or prevent consumers from shopping in person.

In Australia retailers such as Country Road, Cotton On and RM William temporarily closed, taking short-term retail job losses to 50,000 or more.

Globally, many multinationals have closed their doors.

Shocks along the chain…

Nike is expecting sales to drop by US$3.5 billion. While seemingly immune from some of the social distancing provisions, online retail is also likely to take a hit due to a drop in demand.

Tier 1 (garment manufacturing) has been hit by falling demand as retailers cancel orders or ask for delays in payment. It has also faced disruptions in the supply of fabric, especially from China.




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Fabric producers in Tier 2 and cotton spinners in Tier 3 have had to contend with a decreased supply of raw materials and demands to retool to produce medical equipment.

For cotton growers in Tier 4, the fall in demand has pushed prices down from US 70 cents at the start of the year to US 50 cents, the lowest price in a decade, before a partial recovery to US 58 cents.

…with human costs

Reports of losses of tens of thousands of jobs in Myanmar and Cambodia paint a bleak picture.

In Bangladesh estimates have 1.92 million workers at risk of losing their jobs as factories receive notice of US$2.58 billion worth of export orders cancelled or on-hold.

Making things worse, many workers in Tiers 1-3 were receiving less than a living wage defined as the minimum needed to provide adequate shelter, food and necessities. This has made it hard for them to plan or save for emergencies.

Many are migrant workers without funds to return home.

Even the workers who manage to hang on to their jobs aren’t in the clear. Programs set up to improve their working conditions have been disrupted.




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The Accord on Fire and Building Safety in Bangladesh is a legally-binding agreement between brands and unions set up in the wake of the collapse of the the Rana Plaza factory in 2013 which killed 1,133 people and critically injuring thousands more.

Inspections under the program have been suspended, as have audits due to the closure of borders.

The problems are cumulative – delays in orders due to interruptions in supplies will need to be addressed when factories scale back up, creating demands from buyers that might result in pressure for workers to work unpaid and involuntary overtime, or even worse, subcontract to the informal market where there is a high risk of human rights violations.

Shoots of hope

Amid the havoc are some shoots of hope.

Companies along the value chain have been asked to produce and supply medical equipment such as surgical gowns, face masks and materials and elastics.

Dozens of brands and retailers have donated funds and activated their logistics networks to support the effort.

As orders slowly start returning, cotton and textile associations have joined forces in calling for greater collaboration throughout the value chain. Governments have announced aid packages for their workers, and the European Union has provided an emergency fund to support the most vulnerable garment workers in Myanmar.

Longer term, the supply risks highlighted by the disruption might cause companies along the value chain to diversify their suppliers and even produce locally.




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The crisis has demonstrated forcefully the importance for manufacturers and retailers to be agile. Yet this can best be done when workers have been well trained and have access to the best technology and equipment.

For now, we watch and see. Cotton is as good an indicator as any other of the brittleness of supply chains and the ways in which what we produce and consume affects the livelihoods of those further down the chain.

In the short-term, a best-case scenario would see a revaluing of garment work as “essential” in order to produce protective/medical equipment that we need in a way that benefits the people who help make them.The Conversation

Sarah Kaine, Associate Professor UTS Centre for Business and Social Innovation, University of Technology Sydney; Alice Payne, Associate Professor in Fashion, Queensland University of Technology, Queensland University of Technology, and Justine Coneybeer, Research Assistant – Supply Chain, Queensland University of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.