Recent Trends in the Wool Industry and Some Long-Term Policy Issues

Summary

This paper outlines the broad framework of marketing, political and institutional factors affecting the allocation of resources to research and development (R & D) in the wool industry. Long-term trends in wool production, demand and prices provide a framework for an overview of the present financing of wool marketing policies. Some policy issues facing the wool industry are noted. Greater variability of wool prices to overseas users due to exchange rate volatility is a particular problem. Expansion of the real level of international wool promotion in the past and some future plans are briefly outlined.

Relatively high inflation rates in Australia and some aspects of domestic economic management by governments are discussed. The high levels of assistance to such industry sectors as textiles, clothing and footwear are seen as distortions to resource allocation in conflict with the best interests of Australia and the wool industry in terms of comparative advantage. Recently publicised government policies of ‘positive assistance’ with R&D and of encouraging the setting up of value adding industries run the risk of further increasing distortions to efficient resource allocation.

Changes to administrative arrangements for wool R & D are briefly reviewed. In the future, more attention to appraisal of broad R&D priorities will occur through the Wool R&D Council. It is argued that priorities need to be more influenced by market requirements and more closely integrated with marketing and promotion strategies implemented by the Wool Corporation and the International Wool Secretariat. Recent suggestions for more R & D on manufacturing and sun-rise industries is questioned as these sectors are generally ones in which Australia does not have an international comparative advantage.