WTO Trade Policy Review: Australia

PRESS RELEASE
PRESS/TPRB/202
25 September 2002
Australia: September 2002

The WTO report, along with the policy statement by the Government of Australia, will serve as a basis for the fourth Trade Policy Review (TPR) of Australia by the Trade Policy Review Body of the WTO on 23 and 25 of September 2002.

Sound macroeconomic policies and far-reaching structural reforms, behind Australia's impressive economic performance

Australia's impressive economic performance during the past decade or so is due in large part to sound macroeconomic policies in combination with some far-reaching structural reforms that have reinforced past unilateral trade liberalization, according to a WTO Secretariat report on the trade policies and practices of Australia.

Since its previous Review in 1998, Australia has successfully weathered the Asian financial crisis, despite the severe slowdown elsewhere in the region. Real GDP growth, generated largely by domestic demand and rising multi-factor productivity, remained strong until 2001, when a temporary decline in residential construction activity and the global economic slowdown adversely affected Australia’s short-run outlook for growth and employment. Nonetheless, unemployment has continued to fall and inflation has remained low.

The patterns of foreign trade and direct investment have hardly changed. Australia has remained largely dependent on commodity exports and manufactured imports. Most of its merchandise trade has continued to be conducted with Asia-Pacific Economic Cooperation (APEC) partners, with some reinforcement of trade with East Asia in the wake of the Asian crisis.

Since its previous Review, Australia has continued to implement trade reforms so as to strengthen competition in the domestic market and thus improve economic efficiency, according to the report. These reforms were undertaken partly in line with the scheduled implementation of Australia’s WTO commitments, but also unilaterally in accordance with domestic policy goals.

The customs tariff remains Australia’s main trade policy instrument, albeit a minor source of tax revenue (accounting for 2.3% of total tax revenues). Some 96.2% of tariff lines are bound, thereby imparting a high degree of predictability to the tariff. The average applied MFN tariff is currently 4.3%, down from 5.6% in 1997/98; further unilateral reductions in the rates applied to passenger motor vehicles and textiles, clothing and footwear are envisaged by 2005. Whereas the average applied MFN tariff for agricultural products is 1.2%, that for industrial products is of the order of 4.7%. The tariff rates applied to passenger motor vehicles, textiles, clothing, and footwear are two to three times higher than the average for industrial products. On the other hand, unilateral tariff reductions have brought about 86% of tariff rates within the zero to 5% range. The customs tariff has also been considerably simplified through the reduction in the number of rates. However, these changes have done little to reduce tariff escalation. Applied tariff rates currently fall short of bound rates by an average of 6.2 percentage points; while the consequent gap between bound and applied MFN rates provides considerable scope for the authorities to increase applied tariffs within bindings, this does not appear to have happened during the period under review. Indeed, the widening of this gap since 1997/98, despite the reduction in bound rates, is the result of even greater unilateral reductions in applied rates; applied rates have been increased in very few, if any, instances.

Perhaps the most important structural policy development during the period under review has been tax reform, notably implementation of The New Tax System, which has inter alia involved the rationalization and simplification of the indirect tax structure, thereby rendering it more neutral, especially with respect to international trade. The centrepiece of this reform involved the replacement of the Wholesale Sales Tax (WST) levied on manufactured goods by a broad-based Goods and Services Tax (GST). However, the special Luxury Car Tax, which seems to be biased against imports, remains in place.

The overall level of government assistance to agriculture, livestock, forestry and fisheries has remained low since 1998. Average nominal applied MFN tariff protection has remained negligible. Total support (TSE) to agriculture amounted to only 0.3% of GDP in 2001, the lowest percentage among all OECD countries, while Australia’s overall producer support estimate (PSE) was 4%, the second lowest. Around 96% of domestic support involves so-called “green” subsidies that have little, if any, distorting effect on production or trade; such support was predominantly general services (e.g., infrastructural, extension, advisory and R&D services and environmental programmes).

Australia’s SPS and quarantine requirements have been criticized by a number of its trading partners on the grounds that they are unduly stringent and therefore protectionist. But with Australia heavily dependent on agriculture and a major exporter of agricultural commodities and agri-food products, which receive relatively little government assistance and are sold at world market prices, these measures are believed to be necessary to ensure that Australia’s reputation as a reliable exporter of high quality agricultural products is not jeopardized by pests and diseases.

Nevertheless in the period under review, Government support to the services sector, through direct financial assistance, tax expenditures, and funding to public-sector institutions, has risen; the main recipients have been finance and insurance, cultural and recreational, transport and storage, property, and business and communication services. Several access restrictions have remained in force.

Note to Editors

Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments which may have an impact on the global trading system are also monitored. For each review, two documents are prepared: a policy statement by the government of the member under review, and a detailed report written independently by the WTO Secretariat. These two documents are then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of intellectual property rights have also been covered.

For this review, the WTO’s Secretariat report, together with a policy statement prepared by the Government of Australia, will be discussed by the Trade Policy Review Body on 23 and 25 September 2002. The Secretariat report covers the development of all aspects of Australia’s trade policies, including domestic laws and regulations, the institutional framework, trade policies and practices by measure, and developments in selected sectors.

Attached to this press release are the Summary Observations of the Secretariat report and parts of the government policy statement. The Secretariat and the government reports are available under the country name in the full list of trade policy reviews. These two documents and the minutes of the TPRB’s discussion and the Chairperson’s summing up, will be published in hardback in due course and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

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TRADE POLICY REVIEW BODY: AUSTRALIA
Report by the Secretariat — Summary Observations

Australia’s trade and trade-related policies as well as their formulation are, by and large, highly transparent. In the interests of public accountability, information on the nature, if not the effects, of various policies is usually available in published documents and from web sites operated by most public sector entities, many of which are referenced in this Report. Moreover, the Freedom of Information Act allows public access to non-confidential government documents. The transparency of policies, practices, and measures is further enhanced by organizations such as the Productivity Commission, the main independent review and advisory body, which reports on and conducts evaluations of the economic impact and/or effectiveness of protection, government assistance, and regulations. The Secretariat has drawn heavily on such publicly available documents in preparing its Report for this fourth Trade Policy Review of Australia.

Economic Environment

Since its previous Review in 1998, Australia has successfully weathered the Asian financial crisis, despite the severe slowdown elsewhere in the region. Real GDP growth, generated largely by domestic demand and rising multi-factor productivity, remained strong until 2001, when a temporary decline in residential construction activity and the global economic slowdown adversely affected Australia’s short-run outlook for growth and employment. Nonetheless, unemployment has continued to fall and inflation has remained low.

Australia’s impressive economic performance is due in large part to sound macroeconomic policies in combination with some far-reaching structural reforms that have reinforced past unilateral trade liberalization. Fiscal surpluses have dropped, however, as a result of outlays growing faster than tax revenues, the latter reflecting the budgetary cost of the major taxation reform package. Australia has proceeded with the corporatization and/or privatization of government-owned facilities in electricity, natural gas, and telecommunications. Other noteworthy structural reforms have been undertaken in competition policy, labour markets, and technology.

The steep fall in world commodity prices, which followed the weakening of global demand after the outbreak of the Asian crisis, put considerable downward pressure on the Australian dollar exchange rate, thus improving Australia’s international price competitiveness and benefiting import-competing sectors. The outcome was an export driven shift in the trade account from a deficit to a surplus. Concurrently, the current account deficit fell to its lowest annual level in 20 years, reflecting the recent narrowing of the saving-investment gap. Net foreign debt has continued to grow as a consequence of increased borrowing by the private sector.

The patterns of foreign trade and direct investment have hardly changed. Australia has remained largely dependent on commodity exports and manufactured imports. Most of its merchandise trade has continued to be conducted with Asia-Pacific Economic Cooperation (APEC) partners, with some reinforcement of trade with East Asia in the wake of the Asian crisis. Despite the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA), New Zealand’s share of Australia’s merchandise trade has dropped. As regards FDI, some effort has been made to ease remaining barriers in sensitive areas and to improve notification and examination requirements.

Trade Policy Framework

Since its previous Review, Australia has continued to implement trade reforms so as to strengthen competition in the domestic market and thus improve economic efficiency. These reforms were undertaken partly in line with the scheduled implementation of Australia’s WTO commitments, but also unilaterally in accordance with domestic policy goals.

Australia has maintained its preferential trading arrangements with New Zealand and other countries in the South Pacific, Canada, and developing and least developed countries (under the Australian System of Tariff Preferences). The value of preferential tariffs has been eroded in recent years, however, as Australia’s applied MFN tariffs have been reduced. Recently, more emphasis has been placed on exploring the prospects of broadening and deepening Australia’s bilateral trade relations with Japan, Korea, Singapore, Thailand, and the United States, as well as regional relations through the Closer Economic Partnership linking ASEAN and CER economies, and the trans-Pacific regional agreement.

Australia’s highly transparent legal and institutional framework for trade and investment has been further improved through a legislative review undertaken to ensure that the regulatory framework (marketing of agricultural products, food labelling, finance and insurance, trades and professions, and gambling regulation, and local government planning processes) does not restrict competition. Action has also been taken to reinforce the means available for increasing public awareness (and interaction) and taking advantage of the market opening and defence possibilities available under the rules-based multilateral trading system. For this purpose, a WTO Disputes Investigation and Enforcement Mechanism under the Department of Foreign Affairs and Trade (DFAT) and a WTO Advisory Panel (comprising representatives from industry, community NGOs, academia, and the media) have been established. Australia has continued to participate actively in all aspects of WTO work, favouring the launching of a round focused on further liberalization of agriculture, manufacturing, and services. The Council of Australian Governments (COAG) has continued to facilitate consultation, cooperation, and policy coordination between the Commonwealth, States, and Territories with a view to avoiding potential inconsistencies. As of April 1998, the Productivity Commission has replaced the Industry Commission as the principal review and advisory body on structural policy and regulation.

Trade Policy Developments

The customs tariff remains Australia’s main trade policy instrument, albeit a minor source of tax revenue (accounting for 2.3% of total tax revenues). Some 96.2% of tariff lines are bound, thereby imparting a high degree of predictability to the tariff. The average applied MFN tariff is currently 4.3%, down from 5.6% in 1997/98; further unilateral reductions in the rates applied to passenger motor vehicles and textiles, clothing and footwear are envisaged by 2005. Whereas the average applied MFN tariff for agricultural products is 1.2%, that for industrial products is of the order of 4.7%. The tariff rates applied to passenger motor vehicles, textiles, clothing, and footwear are two to three times higher than the average for industrial products. On the other hand, unilateral tariff reductions have brought about 86% of tariff rates within the zero to 5% range. The customs tariff has also been considerably simplified through the reduction in the number of rates. However, these changes have done little to reduce tariff escalation. Applied tariff rates currently fall short of bound rates by an average of 6.2 percentage points; while the consequent gap between bound and applied MFN rates provides considerable scope for the authorities to increase applied tariffs within bindings, this does not appear to have happened during the period under review. Indeed, the widening of this gap since 1997/98, despite the reduction in bound rates, is the result of even greater unilateral reductions in applied rates; applied rates have been increased in very few, if any, instances.

WTO-related agricultural tariff quotas for five cheese items and non-manufactured tobacco have apparently been applied in a flexible/liberal manner. Recourse to non-tariff protection has been confined mainly to agricultural, livestock, and food products.

Documentation requirements have remained minimal, and computerized customs clearance has facilitated virtually all imports and exports. Self-assessment is allowed for import duty and export clearance. The transaction value has been mostly used for customs valuation purposes.

Import prohibitions and restrictions in the form of stringent quarantine or technical requirements have remained in place to preserve, inter alia, public health, safety or security. Efforts have been made to align certain compulsory standards to international standards (including for motor vehicles) as well as to improve international coordination and cooperation through WTO notification and mutual recognition agreements. Despite the Commonwealth/State Agreement on Mutual Recognition, it seems that there are residual areas where regulations power concerning standards certification (including State-based point of sale requirements, banning orders under consumer protection legislation) differs between the Commonwealth and States. Following institutional and procedural changes, recourse to anti-dumping and countervailing actions has dropped; no safeguard measures were adopted during the period under review.

Australia has remained a non-signatory of the WTO Government Procurement Agreement (GPA). Commonwealth and state governments continue to use their procurement as a major instrument of economic policy with the aim of fostering industrial development (e.g., information and telecommunications technology) by means of preference margins (10% or 20% depending on the State) for local (and New Zealand) suppliers, compulsory sourcing from small and medium-sized enterprises (SMEs) and local-content requirements (which have also been attached to broadcasting).

Export controls or quantitative restrictions operated by public sector entities affect certain primary and therapeutic goods; they are intended, inter alia, to ensure adequate domestic supply and to enforce standards. Australia has maintained the export ban on merino ewes and embryos for breeding purposes except to New Zealand under ANZCERTA and for approved scientific purposes. State involvement in the economy has been maintained with a view to promoting and regulating trade in certain agricultural goods.

Export assistance, consisting of direct grants (through Export Market Development Grants, Supermarket to Asia Strategy) and tax concessions (Tradex, Passenger Motor Vehicle Export Facilitation Scheme), has been maintained and revised. Export finance is conditional upon local-content requirements as well as “national interest” and environmental protection criteria; export credit terms seem to be in line with OECD guidelines. Incentives in free-trade zones are tailor-made for each project and may, inter alia, include establishment or relocation subsidies.

Support for trade and production has been provided through tax and non-tax incentives with increased emphasis on export promotion and investment, especially in R&D. During the period under review, Australia’s schemes for the concessional entry of imports have become more generous. Non-tax assistance has been increased in certain broad areas (notably export promotion, investment, and R&D) and maintained for several specific activities. Low energy prices to producers have been ensured through state involvement in electricity and increased presence of private sector operators, as well as through tax exemptions and grants for several categories of diesel fuel users. Price controls have seemingly been reduced so that they now cover air navigation, airport, postal, and harbour towage services; certain pharmaceuticals have also been subsidized.

Perhaps the most important structural policy development during the period under review has been tax reform, notably implementation of The New Tax System, which has inter alia involved the rationalization and simplification of the indirect tax structure, thereby rendering it more neutral, especially with respect to international trade. The centrepiece of this reform involved the replacement of the Wholesale Sales Tax (WST) levied on manufactured goods by a broad-based Goods and Services Tax (GST). However, the special Luxury Car Tax, which seems to be biased against imports, remains in place. Personal and corporate income taxes have also undergone substantial reform as a consequence of The New Tax System. Their bases have been broadened and the rates of tax cut. As a consequence, the top personal tax rate has been reduced from 43% to 30%, while the corporate tax rate has been cut from 36% to 30%, thereby bringing it more into line with rates in several neighbouring countries. Insofar as high personal tax rates constitute a disincentive both to work and save, cuts in the top rates could lead to increased work effort and higher personal saving, thereby reducing the saving-investment gap. The combination of a broader corporate tax base and lower tax rates would tend to reduce the assistance delivered through the corporate tax system, thereby rendering it more neutral, and thus potentially less distorting, with regard to firms’ investment decisions. However, special deductions for companies involved in mineral exploration and development have been maintained.

Australia has sought to strengthen protection of intellectual property rights (IPRs) by expanding its international commitments and ensuring the enforcement of such protection at the border. At the same time, parallel imports have been further liberalized.

Australia’s competition policy framework has also been updated and put into effect so as to ensure, inter alia, that the regulatory framework does not restrict competition and that the majority of Government Business Enterprises adhere to the principle of “competitive neutrality”.

Sectoral Policy Developments

The overall level of government assistance to agriculture, livestock, forestry and fisheries has remained low since 1998. Average nominal applied MFN tariff protection has remained negligible. Total support (TSE) to agriculture amounted to only 0.3% of GDP in 2001, the lowest percentage among all OECD countries, while Australia’s overall producer support estimate (PSE) was 4%, the second lowest. Around 96% of domestic support involves so-called “green” subsidies that have little, if any, distorting effect on production or trade; such support was predominantly general services (e.g., infrastructural, extension, advisory and R&D services and environmental programmes).

Australia’s SPS and quarantine requirements have been criticized by a number of its trading partners on the grounds that they are unduly stringent and therefore protectionist. But with Australia heavily dependent on agriculture and a major exporter of agricultural commodities and agri-food products, which receive relatively little government assistance and are sold at world market prices, these measures are believed to be necessary to ensure that Australia’s reputation as a reliable exporter of high quality agricultural products is not jeopardized by pests and diseases. Changes have been introduced to SPS and quarantine requirements to cover, inter alia, animal diseases, genetically modified organisms and biotechnology; a stringent import-risk assessment requirement has also been introduced, further reducing access to the market for agricultural products.

Production and exports of certain items (meat, grain, horticulture, dairy, fishery, and forestry) are subject to levies earmarked for the funding of R&D and other sectoral activities. Trade distorting domestic support albeit with de minimis levels, for wheat (direct payments for shipping costs to Tasmania), pigmeat, and lamb meat, has varied but remained far below WTO reduction commitments. Particular emphasis has been placed on support for biotechnology. Exports of almost all wheat, barley (until 2001), rice, and sugar have remained under the exclusive control of statutory authorities or public firms operating under single-desk arrangements. By contrast, the dairy sector has been deregulated, and producers have received a structural adjustment package; they have apparently thrived as a consequence. In forestry, it would appear that reforms of the public forest agencies have improved competitive neutrality, although anti-competitive practices seem to persist.

Mining remains one of Australia’s most efficient and least assisted sectors as well as a major contributor to exports. The sector receives hardly any tariff protection (except for certain stones subject to 5% tariff) and the little domestic support it does receive has been declining. A Petroleum Products Freight Subsidy Scheme, a Diesel Fuel Rebate Scheme, and a Diesel and Alternative Fuels Grants Scheme have been operated in line with different policy objectives. A centralized wholesale electricity market is being put in place progressively, with increased private sector involvement; the mandatory purchase of increasing amounts of electricity generated from renewable energy sources has been in force since 2001.

Since 1998, border protection for the manufacturing sector has been reduced so that the average applied MFN tariff rate is only 4.6% (based on the ISIC) and further tariff cuts on sensitive items are envisaged. Nonetheless, the tariff rates applied to passenger motor vehicles (PMVs), textiles, clothing and footwear (TCF) are two to three times higher than this average for industrial products. Government support, in the form of direct financial assistance (certain export incentives, input subsidies) and tax expenditures, has been maintained and reinforced not just for PMVs and TCF, but also for other specific industries (such as printing pharmaceuticals, shipbuilding, and information and telecommunications technology), and for manufacturing activities in general. In several instances, namely PMVs, TCF, and pharmaceuticals, industry-specific support schemes have been revised or replaced with similar programmes. However, such assistance is expected to fall in line with announced tariff cuts and revised support plans.

In the period under review, Government support to the services sector, through direct financial assistance, tax expenditures, and funding to public-sector institutions, has risen; the main recipients have been finance and insurance, cultural and recreational, transport and storage, property, and business and communication services. Several access restrictions have remained in force. Financial services reforms (e.g. prudential rules, institutional) have been pursued in several areas in the light of recommendations made in 1997. Liberalization of telecommunications has led to further privatization of state-owned firms, increased entry of private sector operators, and lower tariffs; however, operational costs relating to the universal service obligation have been a concern. Support for domestic advertisement and film producers has been maintained through local-content requirements in television broadcasting as well as film production funding. As regards maritime services, state involvement seems to have been reduced; financial assistance to shippers of freight between Tasmania and the mainland has been maintained. Maritime road, and rail transport have also benefited from tax rebates on fuels. Efforts have been made to reduce air transportation costs and improve the quality of services through more operators and airport leasing. E-commerce is being promoted through network funding and bilateral arrangements.

Since its previous Review, Australia’s comprehensive commitments in its GATS Schedule have remained unchanged. The Schedule covers 90 activities within the financial, business, communication, construction, distribution, transportation (including maritime, road, air, and pipeline transport), tourism, recreational, health, educational, and environmental services sectors. Australia’s GATS Article II MFN exemption remains with respect to arrangements with Canada, France, Israel, New Zealand, and the United Kingdom for co-production of film and television programmes.

Prospects

Trade liberalization measures together with far-reaching internal structural reforms that were begun in the mid-1980s have undoubtedly contributed to Australia’s impressive economic performance during the past decade or so. As a consequence of both unilateral and multilateral trade liberalization, Australia is a relatively open economy. For example, its average applied MFN tariff is only 4.3% and most rates are between zero and 5%. This means that, except in the case of tariffs on passenger motor vehicles and textiles, clothing, and footwear, the economic benefits from further reductions are likely to be modest. During the last review period, the Government announced unilateral phased reductions in PMV and TCF tariffs, with a five-year pause in between 2000 and 2005; it remains to be seen whether the final 5% reductions of 7.5 percentage points (TCF).

TRADE POLICY REVIEW BODY: AUSTRALIA
Report by the Government — Part II

Australia’s trade policy objectives

Australia pursues a pragmatic and outcomes-focused trade policy integrating multilateral, regional and bilateral approaches to maximise market access opportunities for Australian exporters of goods and services. As an export-dependent country whose economy has benefited greatly from trade liberalisation and deregulation over the years, Australia has a major stake in maintaining a healthy and open world trading system. The successful launch of the Doha Development Round was Australia’s top trade policy priority in 2000 and 2001; bringing the negotiations to a timely and successful conclusion is central to Australia’s current trade policy agenda.

Australia welcomes the emphasis the Doha Declaration gives to market access and development issues, which hold the key to genuine trade liberalisation from which all WTO members stand to benefit. Australia’s overall objective for the negotiations is to achieve significant improvements in market access across the board in agriculture, industrial products and services; to that end, it is working constructively to help take the negotiating process forward as quickly and productively as possible. (Further information on Australia’s multilateral trade policy approaches is set out in Section III of this report, ‘Australia and the WTO’.)

Regional and Bilateral Approaches

Australia’s regional trade policy efforts complement and reinforce its bilateral and multilateral trade policy activities and objectives. An important component of this policy is Australia’s active involvement in the Asia Pacific Economic Cooperation forum (APEC). APEC’s wide-ranging agenda of trade and investment liberalisation, business facilitation, and economic and technical cooperation, is central to Australia’s efforts to promote sustainable regional economic growth and development. It is also an important element of Australia’ s wider bilateral and multilateral trade endeavours.

Australia is an active member of APEC and is committed to achieving the Forum’s Bogor Goals of free and open trade and investment by 2010 in developed APEC economies and 2020 in developing ones. To this end, Australia has been instrumental in developing a number of key APEC initiatives including the trade facilitation target of a 5% reduction in transaction costs over five years, and the pathfinder approach, which will enable those economies that are ready and willing to move faster in specific areas to do so collectively. Both these initiatives were key components of the APEC Leader’s 2001 Shanghai Accord, which sets forth APEC’s second decade agenda and aims to accelerate progress towards the Bogor Goals.

Australia has also played a leading role in APEC in building political commitment to take forward the WTO Doha Round negotiations. APEC aims to support the WTO negotiations through capacity-building initiatives to help developing economies participate in the new round and implement existing WTO agreements. Australia will continue to build support amongst APEC member economies for the timely and successful conclusion of the new WTO round negotiations.

In 1997 the Australian Government undertook a review of its policy on regional trading arrangements (RTAs) which concluded that consideration should be given to future RTA options in the context of Australia’s continuing strong support for the WTO and for regional trade and economic integration efforts in APEC. Since that time, Australia has pursued a range of activities to implement the outcomes of the review and foster stronger regional trade and economic linkages, including through exploring possibilities of developing closer bilateral trade and investment links with important trading partners and regional groups.

The ASEAN Free Trade Area (AFTA) — Australia-New Zealand Closer Economic Relations Trade Agreement (ANZCERTA also known as CER) linkage provides the focus for the coordinated development of trade and investment flows between the two regions. In 2000, ASEAN and CER Ministers tasked officials to work towards a Closer Economic Partnership (CEP), which in 2001 resulted in an agreement on a comprehensive Framework for the CEP and the establishment of an AFTA-CER business council. Australia also continues to engage regionally through its membership of the Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC).

In late 2000, Australia and Singapore commenced negotiations toward an FTA covering liberalisation of trade in goods and services, which conforms to WTO rules and is comprehensive in scope. On 30 May 2002, Australia and Thailand announced that they would begin negotiations towards a bilateral free trade agreement, covering not only market access but also cooperation and trade facilitation activities in a range of areas. Australia is also pursuing discussions on launching a free trade agreement with the United States.

Consultations have started between Australia and Japan which will culminate in a report to Prime Ministers in mid-2003 on initiatives that would strengthen and revitalise the trade and economic relationship. Australia has also embarked on an intensive series of exchanges with China aimed at building closer bilateral trade and economic linkages and setting future directions for the economic relationship.

Trade Liberalisation: Australia’s tariff régime

More than 80 per cent of all tariff lines are now at a rate of 5 per cent or less, with around 45 per cent at a free rate of duty. The average applied tariff rate is just 4.4 per cent (3.9 per cent for developing countries and 1.72 per cent for Least Developed Countries). The average effective rate of assistance to manufacturing (a measure of net assistance taking into account the costs and benefits of government intervention on inputs, direct assistance to value-adding factors and output assistance) was estimated by the Australian Productivity Commission as 4.8 per cent in 2000-01. In contrast to most developed countries, Australia applies only one tariff rate quota, on cheese.

The following table outlines reductions in effective rates of assistance to the manufacturing industry since 1970-71.

Effective Rates of Assistance, 1970-71 to 2000-01 (per cent)

1970-71
1983-84
1990-91
1996-97
1998-99
2000-01

Manufacturing
34.9
22.7
15.6
5.6
5.2
4.8

Agriculture
28.0
12.0
13.0
10.2
7.7
6.0*

*1999/2000.

Passenger Motor Vehicles (PMV) and Textiles, Clothing and Footwear (TCF)

The two industry sectors for which Australia maintains higher tariffs are passenger motor vehicles and textiles, clothing and footwear. Australia is currently implementing a program of significant unilateral tariff reductions for these industries through to 2005, as outlined in the attached schedules.

On 21 December 2001 the Government announced a review into post-2005 assistance measures for the Automotive Industry. The review is being conducted by the Productivity Commission, and is due for completion in September 2002. It is anticipated that a similar review of post-2005 arrangements for textiles, clothing and footwear will take place in the near future.

Nuisance Tariffs

In July 1998, the Australian Department of Industry, Science and Tourism undertook a review of “nuisance” tariffs — i.e. items that attracted a duty of 5 per cent or less, raised less than $A100,000 in revenue a year (in 1996-97), and applied to items where there were no local producers. Following industry consultation, tariffs on 267 lines were reduced to zero in December 1999.

Anti-Dumping and Countervailing Measures

There has been a steady decrease in the number of anti-dumping and countervailing actions taken by Australia since the inception of the WTO. The number of anti-dumping and countervailing investigations in place has declined from 101 at the end of 1995 to 34 as of 30 June 2002.

Since the last review period, the Australian government made changes to its anti-dumping/countervail legislation which had the effect of reducing the investigation period, providing a simpler and more predictable process for all parties and introducing a new appeal mechanism.

Australia’s Quarantine Régime

As an island continent (with a climate which varies from tropical to sub-temperate conditions), Australia does not have many of the pests and diseases found in other countries. To safeguard Australia’s vulnerable indigenous flora and fauna, Australia takes a conservative approach to biosecurity consistent with the WTO SPS Agreement. Australia takes a “managed risk” approach to biosecurity based on scientifically justified measures that are the least trade restrictive possible.

Australia published an Import Risk Analysis Process Handbook in 1998, setting out the administrative and legal framework for implementing Australia’s quarantine policy. The import risk analysis process is open and transparent keeping stakeholders, including the foreign country requesting access, informed of developments with each import risk analysis. All IRAs can be accessed on the website at www.affa.gov.au.

Biosecurity Australia is reviewing Australia’s IRA process further, and plans to finalise and implement a new Framework in late 2002. The key elements of the new Framework include: earlier and more regular consultation with stakeholders; a technical issues paper for all IRAs and an independent scientific peer review.

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