WT/TPR/S/104 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) OVERVIEW
1. Australia has maintained its open trade regime since its last review.  At the same time, it has
continued to provide domestic support for specific sectors.  The fact that some sectors are protected or
otherwise assisted more than others constitutes a potential impediment to efficient resource allocation
in the economy as a whole.
2. Although the agriculture and livestock sector's share of Australia's GDP and total employment
is small (3% and 5%, respectively), it accounts for more than one quarter of total exports.  The sector's
overall level of support, as measured by differen t indicators, has remained low, however it has
continued to receive assistance from a wide range of government programmes, particularly through
statutory marketing and regulatory arrangements and to a much lesser extent tariffs, tax concessions,
and budgetary outlays.  The average level of applied MFN tariff protection for the sector is only 0.3%,
compared with 4.3% for manufacturing.  The sole important non-tariff barrier impeding market accessof agricultural (and food) products continues to be the strict quarantine and inspection regime, based
on rigorous science-based import-risk-analysis requirements.  Production and exports of agricultural
items are subject to levies earmarked for the funding of R&D and other sectoral activities.  Exports of
almost all wheat, barley (until 2001), rice, and sugar have remained under the exclusive control of
single-desk arrangements through either grower-owned public companies or State statutoryauthorities.  Dairy producers have been the recipients of a structural adjustment package to help adapt
to a fully deregulated milk market.  In forestry , despite structural reforms involving market-based
pricing and improvements in competitive neutrality, anti-competitive practices have persisted, with
inadequate reforms of monopoly arrangements in native forest logging.  Particular emphasis has been
placed on support for biotechnology.  Domestic support, aimed mainly at wheat (direct payments forshipping costs to Tasmania), pigmeat, and lamb meat, has remained far below its WTO reduction
commitments;  around 96% of domestic support involves so-called "green" subsidies that have little,
if any, distorting effect on  production or trade.
3. 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 and what little domesticsupport is provided has been declining.  A Petroleum Products Freight Subsidy Scheme, a Diesel Fuel
Rebate Scheme, and the 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 invo lvement;  legislation has been passed for the
mandatory purchase of increasing amounts of electricity generated from renewable energy sources.
4. Manufacturing accounts for nearly 11.6% of Australia's GDP and 12.4% of total employment
so that labour productivity in the sector is somewhat below the national average;  manufacturesconstitute nearly one quarter of merchandise exports.  Border protection has been reduced and further
tariff cuts are expected for 2005;  nonetheless, the average applied MFN tariff on imports of
manufactures, notably textiles, clothing and footwear as well as passenger motor vehicles, is
considerably higher than the overall average of 4.3%.  Government support in the form of direct
financial assistance (that is certain export incentives, input subsidies) and tax expenditures tomanufacturing has increased.  The main recipients of industry-specific assistance have been the
automotive and pharmaceuticals industries, although textiles, clothing and footwear, shipbuilding, and
printing and publishing have also continued to benefit from specific support.  Several industry-
specific support schemes have been revised or replaced with similar programmes.Australia WT/TPR/S/104
Page 85
5. Services continue to account for three quarters of Australia's GDP and an even larger
proportion of domestic employment, indicating that the sector's labour productivity is lower than the
national average.  Since the previous Review, Australia's comprehensive commitments in its
GATS Schedule have remained unchanged.  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 furtherprivatization 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
to the domestic advertisement and film producers b een 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, while the authorities have streamlined the seemingly opencabotage regime;  financial assistance to shippers of freight between Tasmania and the mainland has
been maintained.  Efforts have been made to reduce air transportation costs and improve the quality of
services by facilitating airline competition and the leasing of Commonwealth-owned airports.
E-commerce is being promoted through network funding and bilateral arrangements.
(2) A
GRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES
(i) Features
6. Agricultural production, the backbone of manufacturing activities, and trade remain of
fundamental interest to Australia.1  Despite the recent turmoil in several key markets, the agriculture
sector seems in a generally strong position as the sharp devaluation of the Australian dollar has helped
boost returns;  however, returns to farmers va ry with grain farmers and dairy farmers far
outperforming beef and sheep producers.2  Between 1997/98 and 2000/01 the sector (including
fisheries) accounted for a relatively stable 3% share of GDP (Table I.2) and provided work for around5% of the active population.  The sector's share in total exports was 25.8% in 2000 down from 29% in
1998.
3
7. Around 98% of total calorie and protein intake is met through domestic production.  Food
imports consist largely of processed food items.  There are a few agrifood categories in which
Australia is a net importer (i.e. processed fruit, nuts, vegetables, oil and fat, bread, cakes and pastry,biscuits, soft drink, cordial and syrup, and spirits).  Australian agriculture has remained export-
oriented with rural exports accounting for around 65% of production in the late 1990s:  about 78% of
wheat, 65% of barley, 71% of pulses, 88% of cotton, 80% of sugar and 62% of beef.  Since 1997-98,
there has been a slight shift towards grain (mainly wheat) and meat production at the expense of wool
production.  This shift reflected productivity improvements in grain production and relatively morefavourable beef and lamb prices.  During the same period, there have been increases both in dairy cow
numbers and milk yield per cow.
                                                     
1 Australian Department of Foreign Affairs and Trade (DFAT) online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/oecd_pub [23 March 2001].
2 U.S. Department of Commerce (1999).
3 UNSO Comtrade Database.WT/TPR/S/104 Trade Policy Review
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(ii) Main policy issues
Objectives
8. Australia, a Cairns Group member, considers that managed production and trade to the
detriment of relatively efficient producers is still a key feature of world agricultural markets.4  Its own
agricultural policies are targeted at building business and risk management skills, encouraging
innovation, developing leaders who can assist industr y to determine their own future, placing farmers,
processors, and other players in the supply chain in strategic alignment, and working in partnership
with regional and local communities to address natural resource management and wider rural issues.
Australia is seeking to achieve a fair and mark et-oriented global agricultural trading system by
reforming export subsidies, market access, and domestic support.  Government intervention is
intended to be strategic and to work with , rather than against, market signals.
Regulatory framework
9. During the period under review, regulatory changes were made to arrangements for statutory
authorities involved in trade and trade-related activities (e.g. production control, research, marketing)
for livestock, meat, horticulture, wool, and wheat (discussed below);  domestic market support for
dairying was ended.
Cooperation
10. Australia is a member of the International Sugar Agreement (ISA) and the International
Grains Agreement (IGA - comprising a Grains Trade Convention and a Food Aid Convention), and
the International Cotton Advisory Committee (ICAC);  it also participates in the FAO Consultative
Sub-Committee on Surplus Disposal (CSSD) with a view to minimizing the impact on commercial
trade of surplus disposal transactions that circumvent export subsidy regulations.5
11. Australia has continued its bilateral cooperation at the regional level in a wide range of
agricultural sub-sectors to, inter alia,  develop trading/investment relationships and to provide a forum
for the exchange of scientific information.6  Such arrangements include the Australia - China
Agricultural Cooperation Agreement, and Aust ralia - Indonesia Working Group on Agriculture &
Food Cooperation, as well as the Memoranda of Understanding on agriculture and agribusiness
cooperation with Thailand and Argentina.7  Technical assistance has also been provided by the
Australian Agency for International Development (AusAID) and the Australian Centre for
International Agricultural Research (ACIAR) to help regional economic development and growth as
well as to maintain trade flows and economic activity in economies affected by the Asian crisis;  this
activity is undertaken with a view to creating trade and investment opportunities for Australian
business.
                                                     
4 Australian Department of Foreign Affairs and Trade (DFAT) online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/oecd_pub [23 March 2001].
5 AFFA online information.  Available at:  http://www.affa.gov.au/outputs/
marketaccess.html [23 March 2001].
6 Projects included the horticulture, beef, dairy, wool, fisheries and forestry sub-sectors, the processing,
storage and transport of agricultural products, agricultural economics, and land and water management
technology (AFFA online information.  Available at:  http://www.affa.gov.au/outputs/marketaccess.html [23 March 2001]).
7 AFFA online information.  Available at:  http://www.affa.gov.au/outputs/
marketaccess.html [23 March 2001].Australia WT/TPR/S/104
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Institutional changes
12. No major institutional changes, other th an those affecting state-trading entities
(Chapter III(3)(iii)), have been undertaken since the previous Review of Australia.  Agriculture,
Forestries, and Fishery – Australia (AFFA) remains responsible for the development of the policies
and programmes to maintain and improve market access and trade opportunities for agricultural and
food exports.  It has provided leadership and direction in policy responses to international trade andinvestment related issues by seeking to improv e the global trading environment for Australian
agricultural and food exports.  It also takes an active role in building domestic and international
support for agricultural trade reform.  AFFA, throug h the Australian Bureau of Resource Economics
(ABARE), provides economic advice and undertakes analysis to assist participation in WTO
negotiations, and contributes to raising the level of awareness of key issues of importance in marketaccess and trade negotiations.
8
Appraisal and outlook
13. The agriculture sector has continued to receive assistance from a wide range of government
programmes.  Statutory marketing and regulatory arrangements form the major component of
assistance to agriculture (70% in 1999/00), with budgetary assistance (including R&D, adjustmentassistance and tax concessions) and tariffs on imports accounting for the remainder.
9  Economic
assistance has also been provided as a by-product of strict quarantine restrictions for many
agricultural products;  the seemingly unintended consequence of these restrictions has been reduced
competition from imports.  According to the Productivity Commission, the assistance associated with
these measures is partly offset by tariffs and other taxes on the inputs used in agriculture.
14. Judging from OECD estimates of various indicators of government support, assistance for
agriculture in Australia remained low in 2001.  For example, total support (TSE) to agricultureamounted to only 0.3% of GDP, the lowest percentage among all OECD countries.  The Nominal
Protection Coefficient (NPC) of 1.00 indicates that th e prices received by farmers were roughly the
same as those at the border.  Australia's overall producer support estimate (PSE) was 4%
10, the second
lowest among OECD countries and almost one eighth of the OECD average (Table AIV.1).11
(a) Border measures
Average nominal tariff protection
15. Since its previous Review, Australia's average level of applied tariff protection for the sector
has remained negligible at 0.3%12 (Chart IV.1).  While most products are duty free, some sensitive
items, such as cheese (which is subject to a specific duty) and certain vegetables, oilseeds, and fruit
(subject to a 5% rate), continue to receive tariff protection.
                                                     
8 AFFA online information.  Available at:  http://www.affa.gov.au/outputs/
marketaccess.html [23 March 2001].
9 Productivity Commission (2000d).
10 The %PSE is a measure of support to producers as a share of farm receipts.
11 See OECD (2002), Table 2.
12 This tariff average is lower than that indicated in Chapter III (2)(ii) owing to different product
classification (i.e. the average rate of 1.2% (Table III.1) is based on HS calculations).WT/TPR/S/104 Trade Policy Review
Page 88
Binding and tariff quota commitments
16. As discussed earlier (Chapter III(2)(ii)(e)), Australia has applied tariff rate quotas to certain
types of cheese, in line with its WTO market access commitments and preferential arrangements.
Non-tariff border protection
17. Imports of all agricultural (and food) products remain subject to restrictions under a strict
quarantine and inspection regime, which seemingly makes market access long, costly and uncertain;
as from 1998, a formal import risk analysis process has been in operation (Chapter III(2)(ix)(b)).13
Export taxes, assistance and promotion
18. Exports and production of several items are subject to levies (section (b) below,
Table AIV.2).  Some of these levies apply exclusiv ely to exports, such as those on wine, deer, buffalo,
sheep, goat, and woodchip and hardwood pulp logs.  Exports of almost all wheat, barley (until 2001),
rice, and sugar have remained subject to single-desk arrangements through either grower-owned
public companies or State statutory authorities;  the authorities decided not to proceed with
recommendations (of a Committee entrusted with a National Competition Policy review of the WheatMarketing Act 1989) to deregulate the exports of durum wheat.  Export support payment schemes and
                                                     
13 Productivity Commission (2001b).024681012141618Per centChart IV.1
Tariff averages by 2-digit ISIC category, 1997/98 and 2001/02
Source :WTO Secretariat calculations, based on data provided by the Australian authorities. MFN 1997/98
 MFN 2001/02
Average 2001/02
(4.3%)Average 1997/98
(5.6%)Australia WT/TPR/S/104
Page 89
internal support programmes for dairy producers have been terminated and a structural adjustment
package has been made available to dairy producers since June 2000 (section (iii)(b)).14
(b) Domestic support measures
19. Domestic support to agriculture, livestock, forestry and fisheries  has risen since 1998
(Table IV.1);  it has taken the form of direct financial assistance, funding to institutions, and tax
expenditures.  Domestic support has been aimed largely at adjustment and income support and R&D.
20. In recent years, product-specific AMS-related expenditure has been used for wheat (direct
payments to offset shipping costs to Tasmania) as well as pigmeat and lamb meat (grants)
(Chapter III(4)(ii)).15  Green-box type support accounts for 96% of total support (Table IV.2).  It is
mainly directed at general services and environmental programmes.
21. The 2000/01 Budget announced the delivery of $A 353 million in new or extended
programmes.  Since 1997, assistance has been pr ovided through the Agriculture – Advancing
Australia (AAA) package.16  Its major components are:  the FarmBis-Skilling Farmers for the Future
programme, for education and training;  the Property Management Planning schemes (as from
July 2001);  the Farm Innovation Programme, for innovation and diversification in farming;  the Farm
Help - Supporting Families Through Change, for assistance to farmers in severe financial difficulties;the Farm Growth Through Export Growth, for nego tiation of bilateral cooperation agreements with
major regional trading partners to overcome regulatory and other barriers;  the Farm Management
Deposits, setting aside pre-tax income in good years as cash reserves to meet costs in low income
years;  the Climate Variability in Agriculture Research and Development Programme, for managing
climate variability;  the Retirement Assistance for Farmers Scheme (until June 2001), for low-income
pension-aged farmers to transfer their farms to younger farmers and gain immediate access to the Age
Pension.
17
22. Under the AAA, States and Territories may apply for "exceptional circumstances" short term
targeted support to otherwise viable farm businesses to cope with the adverse impact of exceptional
and severe events;  new criteria for assessment of applications were established in March 1999.18
Assistance has been provided by way of interest rate subsidies and/or family welfare assistancethrough the Exceptional Circumstances Relief Payment (ECRP).  From 1998/99 to 2000/01,$A 95.4 million was disbursed though this facility.
23. In addition to the AAA package, the Rural Partnership Programme has funded 12 community
initiatives to address economic, social, and natural resource challenges in an integrated way.  Under a
programme called "Backing Australia's Ability" within the New Industries Development Programme
(NIDP), support has been provided to improve performance in the development andcommercialization of new innovative agribus iness products, services, and technologies.
19
                                                     
14 United States Trade Representative (2001).
15 WTO document G/AG/N/AUS/36, 20 June 2001.
16 In the past, this type of support was provided mainly through the Rural Adjustment Scheme (RAS).
17 Centrelink online information.  Available at:  http://www.centrelink.gov.au/internet/internet.nsf/
programs/farm_help.htm [26 April 2001].
18 AFFA online fact sheet.  Available at:  http://www.affa.gov.au/corporate_docs/publications/html/
factsheets/exept.html [20 March 2001].
19 AFFA online fact sheet.  Available at:  http://www.affa.gov.au/docs/food/nidp/
overview.html [20 March 2001].WT/TPR/S/104 Trade Policy Review
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Table IV.1
Developments in domestic support to agriculture, livestock, forestry, and fisheries, 1997/98-2001/02
($A million)
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
A.  Industry-specific programmes
Horticulture, crops, etc.
Australian Plaque Locust Commission FI <1 1 - - -
Citrus industry market diversification subsidy DFA <1 1 2 <1 <1
Deduction of capital expenditure on
establishing horticultural plantationsT E 1455 5
Deduction of expenditures over four years on
acquiring and establishing grape vinesT E 4444 4
Sugar Industries Package FI - 3 5 30 34
Sugar Industry Programme FI 3112-
Forestry
Forest Industry Structural Adjustment DFA 6 24 4 3 5
Commonwealth-NSW Forest Industry FI - 3 <1 3 <1
N a t i o n a l  F o r e s t  P o l i c y  P r o g r a m m e F I 7952-
NSW Southeast Forests Package FI 4 - - - -
Livestock, poultry, etc.
A u s t r a l i a n  A n i m a l  H e a l t h  L a b o r a t o r y F I 6666 6
Exotic Disease Prepared Programme FI <1 5 16 4 1
Lamb Industry Development Programme DFA - - 9 2 4
Pigmeat Processing Grants Programme DFA - 2 4 3 1
Pork Producer Exit Programme DFA - - 5 - -
Pork Industry Development Group Grant FI 2 5 4 <1 -
T o t a l 3 66 86 96 5 6 1
Research and development c
General R&D measures
C o o p e r a t i v e  R e s e a r c h  C e n t r e s F I2 92 72 42 5 2 8
CSIRO plant and animal research FI 128 133 141 114 115
Farm innovation DFA - - - 4 11
New Industries Development Programme FI - - 1 1 6
R & D  S t a r t  &  r e l a t e d  p r o g r a m m e s D F A 2257 7
R & D  t a x  c o n c e s s i o n T E 6688 8
Rural R&D Corporations
Fishing industry research FI 11 12 13 13 13
Grains (wheat and other)d FI 34 34 32 34 32
Horticulture FI 11 15 16 16 16
Land and Water Resources R&D Corporation FI 11 11 11 11 12
Meat & livestock research FI 23 21 20 20 20
Other rural research eFI 33 36 33 33 33
Rural Industries R&D Corporation FI 11 11 4 4 4
W o o l F I71 09 98
Total 305 319 316 300 312
B.  Sectoral and adjustment programmes
Adjustment and income support
A g r i b u s i n e s s  p r o g r a m m e s F I< 1< 1< 1< 1 -
Farm Assistance Programme FI - - - 1 1
Farm Business Programmes FI 6 6 12 17 -
Farm Help DFA - - - 39 40
Farm Household Support Scheme DFA <1 <1 <1 - -
Table IV.1 (cont'd)Australia WT/TPR/S/104
Page 91
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
Farm Family Restart Programme
-   R e - e s t a b l i s h m e n t D F A 1 71 41 7 - -
-  Income support DFA 5 20 18 - -
Food and Fibre Supply Chain Programme FI - - 7 6 -
Rural Adjustment Scheme DFA - 43 29 18 8
Skilling farmers for the future FI 82 - - 9 26
Supermarket to Asia Strategy FI - - 4 - -
Other sectoral measures
Income Equalization Deposits Scheme TE 26 25 9 - -
Farms Management Deposits Scheme TE - - 23 40 30
Income tax averaging provisions TE 90 75 65 60 70
National Landcare Programme FI 54 56 37 37 38
Tax deduction for conveying water &
conservation measuresTE 30 20 20 20 20
Tax rebate for landcare expenditures TE - - 1 1 1
Tax allowance on drought-prepared assets TE 14 15 10 10 6
Total 324 271 251 258 241
General export measures
Austrade
-   E x p o r t  M a r k e t  D e v e l o p m e n t  G r a n t s  S c h e m e D F A 4454 4
-  Austrade export promotion fFI 30 32 36 40 40
-  Innovative Agricultural Marketing
ProgrammeD F A 3--- -
EFIC National Interest Business gD F A 1 81 71 72 0 1 6
T o t a l 5 55 35 86 3 5 9
Unallocated primary production
A g r i c u l t u r a l  D e v e l o p m e n t  P a r t n e r s h i p D F A ---- 3
B i o t e c h n o l o g y  I n n o v a t i o n  F u n d D F A ---- 2
R u r a l  F i n a n c i a l  C o u n s e l l i n g  S e r v i c e F I ---- 5
T a s m a n i a n  F r e i g h t  E q u a l i z a t i o n  S c h e m eD F A 2345 4
Total outlays 553 568 550 542 544
Total tax expenditures 171 146 147 148 144
Total budgetary assistance 724 714 697 690 689
-N i l .
ne Not estimated.
a DFA:  direct financial assistance;  FI:  funding to institutions;  TE:  tax expenditures.
b 2000/01 data are Budget estimates and 2001/02 data are Budget appropriations.
c Estimates are derived in part from the Science and Technology Budget Statement 2000-01.
d Other includes barley, grain, legumes, and oilseeds.e Other industries include dairy, chicken meat, pig-meat, eggs, cotton, dried vine fruits, grapes and wine, honey, sugar and tob acco.
f Data for 1999/00, 2000/01, and 2001/02 are based on the industry allocations for 1998/99, which is the only year for which
Austrade has assembled data on the industries benefiting from its export promotion activities.
g The estimates reported are net National Interest Business outlays.  These payments are insurance pay-outs.  Because any
difference between the National Interest Business scheme's borrowing and lending rates is underwritten by the Commonwealth,
the scheme may provide assistance to agricultural exporters.  However, net National Interest Business outlays provide only aweak indication of any assistance provided.
Note: Figures may not add to total due to rounding.
Source: Productivity Commission (2001), Trade & Assistance Review 2000-2001, Table 4.4 [Online], 11 December,
Annual Report Series 2000-2001, AusInfo.  Available at:  http://www.pc.gov.au [28 February 2002].WT/TPR/S/104 Trade Policy Review
Page 92
Table IV.2
Usage of domestic support and export subsidies, 1995-00
(US$ million)
1995 1996 1997 1998 1999 2000
Total domestic support 822.2 854.7 946.5 898.1 - -
Green Box 707.0 739.8 855.2 818.9 - -
De minimis 0 2.0 1.7 4.1 - -
Current total AMS 115.2 112.9 89.6 75.1 - -
Total export subsidies 000 1 . 3 2 . 4 -
- No notification received.
Source: WTO document G/AG/NG/S/12/Rev.1, 12 March 2001.
24. Levies and charges (Table AIV.2) have been maintained to fund activities such as:  research
and development by R&D corporations (RDCs);  marketing and promotion by statutory marketingauthorities (SMAs);  residue testing through the National Residue Survey programme;  and animal
health programmes.
20  A levy may be imposed by the authorities whenever they consider it is in the
public interest to do so, and in consultation with the relevant industry.  Currently, the meat, grain,
horticulture, dairy, fishery, and forestry industries have levies in place for marketing and/or R&D.  In
2000/01 rural RDCs spent around $A 378 million on R&D, $A 162 million of which came from
matching Commonwealth contributions, and $A 179 million from industry levies.
25. Public companies or statutory authorities have been involved in the marketing (internal and/or
export) of domestic production of dairy products, grain, wheat, barley, rice, horticultural products,
dried fruit, sugar, and wool (Table AIV.3).
26. Since 1999/00, emphasis has been placed on supporting biotechnology by considering a
$A 30 million National Biotechnology Strategy, increasing funding for research in this area, and a
Biotechnology Innovation Fund (as from May 2001) with contributions from industry and state
governments, as well as the setting up of a centre of excellence in biotechnology.21  On 3 July 2000, a
National  Biotechnology Strategy was launched with a view to promoting and fostering national
industry in this area.  A $A 30.5 million package of assistance for the assessment and development of
biotechnology was set aside in the 2000/01 Budget.  Biotechnology research incentives are also
provided under the R&D Start Programme (Table AIV.5).  Australian biotechnology firms are well
connected internationally and are largely export-oriented;  more than 40% of their revenue derives
from exports.  They focus on human health (34%) and agriculture (23%), as well as environmental
and resources sectors (11%), food processing (10%), genomics and informatics, and biochemicals.22
Biotechnology seems to have contributed to Australia's export competitiveness, particularly in exportof cotton.  Australia is interested in ensuring that access to agri-food markets is not adversely affectedby new domestic or international regulations affecting biotechnology.
23
                                                     
20 AFFA online information.  Available at:  http://www.affa.gov.au/corporate_docs/
levies.html [23 March 2001].
21 Productivity Commission (2000d).
22 Australian Department of Industry, Science and Resources and Austrade online information.
Available at:  http://www.investaustralia.gov.au/Industry_Sectors/ Biotechnology/biotechnology.html[25 April 2001].
23 Australian Department of Foreign Affairs and Trade (2001).Australia WT/TPR/S/104
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(iii) Selected agricultural and livestock items
(a) Crops
Sugar
27. Sugar has enjoyed domestic support owing to the industry's importance in sustaining many
rural and regional economies, as well as its position as a leading export commodity for Australia;
sugar exports accounted for around 75% of production (2000/01) but imports are insignificant.  Heavyexposure to fluctuations in world prices requires the sector to remain competitive.  While sugar
imports are duty free, duties of 4% or 5% are levied on certain types of sugar and/or sweeteners
(maple, glucose, fructose).  Government assistance to, inter alia,  offset reductions in domestic
support, has been provided in the form of funding of research projects (e.g. to increase the sugar
content of Australian cane) and $A 20 milli on under the Commonwealth component of the Sugar
Industry Infrastructure Programme (transport, irrigation, drainage).
24
28. In response to adverse climatic and farming conditions, a $A 83 million Sugar Industry (Cane
Growers) Assistance Package was introduced in September 2000.25  This temporary assistance
included:  income support to eligible farmers in Queensland, New South Wales, and Western
Australia (extended until 31 December 2001);  interest rate subsidies on new loans, up a maximumamount of $A 50,000, secured by growers for replanting purposes in the 2000 and 2001 planting
seasons;  and interest rate subsidies on new or existing loans up to a maximum of $100,000 for
eligible growers subject to an off-farm assets test for 2000/01 and 2001/02.  In addition, the
Queensland Government has allocated $A 10 million in concessional loans for the replanting and
establishment of sugar cane crops;  three-year loans of up to $A 10,000 have been available with an
initial interest rate of 6%.
Wheat29. Australia exports more than 80% of its output and is one of the top four grain exporters in the
world, with a 15%-20% share of the global wheat trade.
26  About 65% of these exports are destined
for Iran, Egypt, Indonesia, Iraq, Republic of Korea, Japan, Pakistan, and Malaysia.
30. Wheat exports have remained under monopolistic conditions.  Single-desk selling
arrangements for wheat exports have been maintained through the grower-owned company AWB(International) Ltd.  On 1 July 1999, the statutory Australian Wheat Board  ceased to operate and its
marketing and financing functions were transferred to a grower-owned and -controlled company
(AWB Ltd) without Government support.  A whol ly-owned subsidiary AWB (International) Ltd, is
responsible for pool marketing under the single-desk export arrangements.  The Wheat Export
Authority (WEA), a statutory authority, is responsible for monitoring and reporting on the benefits togrowers of the export performance of AWB (International) Ltd, and for issuing consents to other
persons applying to export wheat.  The wheat single desk was reviewed in 2000 in accordance with
national competition principles.  The single desk remains, but with improvements to the consent
system and AWB (International) Ltd monitoring arrangements.
                                                     
24 Minister for Agriculture, Fisheries, and Forestry online information.  Available at:
http://www.affa.gov.au/ministers/truss/ [24 April 2001].
25 Productivity Commission (2000d).
26 AFFA online information.  Available at:  http://www.affa.gov.au/corporate_docs/publications/
html/factsheets/wheat.html [20 March 2001];  and http://www.affa.gov.au/ministers/truss/ [24 April 2001].WT/TPR/S/104 Trade Policy Review
Page 94
(b) Livestock
Lamb
31. In response to the imposition by the United States of a tariff-rate quota on imports of lamb in
July 1999, an assistance package was implemented, consisting of 50% relief from the industry levy
payment (section (ii)(b)), and a $A 6 million two-year Lamb Industry Development Programme
(LIDP) providing 19 grants, ranging from $A 70,000 to $A 700,000, to assist lamb producers.  Levy
relief ceased on 15 November 2001 following the ruling by the WTO that the United States measure
was illegal and agreement to its removal.
Wool
32. Australia is the world's leading wool producer, accounting for about 70% of international
trade in high quality, apparel-type wools.27  Statutory reforms have been undertaken in the wool sector
since 1998, including the privatization of Wool In ternational in 1999, now designated a corporation
under company law, WoolStock Australia Limited.28  On 1 January 2001, the former Australian Wool
Research and Promotion Organization (AWRAP), which administered research and development,
marketing and promotion services was converted to a company, Australian Wool Services Ltd.  A 3%
interim wool tax was levied between 1 July 2000 and 30 June 2001 to cover the costs of institutionaltransition.  The wool levy rate was lowered to 2% on 1 July 2001 in accordance with a poll of all
woolgrowers.
Dairy
33. The dairy industry is a major regional employer owing to its processing activities;  with
farmgate production of around $A 3 billion, it is the third most important rural industry behind wheat
and beef.
29  As Australian milk output continues to expand at a faster rate than domestic consumption,
an increasing proportion is destined for export markets;  more than 50% of annual milk productionand more than 60% of manufactured milk products are exported .  Australia ranks third in terms of
world dairy trade (accounting for 15% of dairy product exports).
34. The dairy sector has been deregulated since the previous Review, in the context of a major
structural adjustment in the sector
30;  by 1 July 2000, all States had repealed legislation governing
pricing and sourcing of milk for drinking.  A fe deral Dairy Industry Adjustment Package (DIAP) was
introduced on 1 July 2000 consisting of three sub-programmes:  Dairy Structural Adjustment
Programme (DSAP), Dairy Exit Programme (DEP ), and Dairy Regional Assistance Programme
(DRAP).31  As from 8 July 2000, a Dairy Adjustment Le vy of 11 cents per litre on consumption of all
liquid milk products sold on the domestic market has been charged to fund the DIAP;  exported
products are exempt from the levy.  This levy funds DSAP payments to farmers, based on their milkproduction;  payments are being made quarterly over eight years to help farmers make the necessary
adjustments to a deregulated environment, with minimal social and economic disruption.  The DSAP
is to deliver a direct capital injection of $A 1.63 billion to dairy farmers in rural communities over
                                                     
27 AFFA online information.  Available at:  http://www.affa.gov.au/ministers/truss/ [24 April 2001].
28 AFFA online fact sheet.  Available at:  h ttp://www.affa.gov.au/corporate_docs/publications/
html/factsheets/wool.html [20 March 2001].
29 Australian Dairy Corporation (2000).
30 In the late 1990s, all Australian state and federal governments signed on to a National Competition
Policy (NCP) to subject government involvement in industries to scrutiny and eliminating regulatoryrestrictions.
31 Australian Dairy Corporation (2000);  and Productivity Commission (2000d).Australia WT/TPR/S/104
Page 95
eight years to help them adjust to the removal of regulated pricing arrangements i.e. lower liquid milk
prices at the farm-gate.32  DEP payments (until June 2002) may be up to $A 45,000 tax free per
exiting farmer.  The DRAP provides $A 45 million to assist dairy-dependent communities adjust to
deregulation by generating employment solutions and managing the impact of any social dislocation
that may be caused by these changes.  By February 2002, 185 projects had been funded, valued at
$A 34.46 million.  In May 2001, the Government provided an additional $A 159 million insupplementary assistance measures consisting of $A 119 million in Additional Market Milk Payments
(AMMP) to farmers who were heavily dependent on market milk production, $A 20 million in
discretionary payments to address difficult and unforeseen circumstances affecting farmers rights for
DSAP payments, and $A 20 million for DRAP.
35. It would appear that no element of the DIAP is linked to exports.  Farmer entitlements under
DSAP and AMMP are based on production in the y ear 1998/99.  The DRAP is seemingly not linked
to dairy production and most of the projects funded so far are not dairy related.  The authorities
indicated that, under the WTO Agreement on Agriculture, domestic support payments to dairy
producers are to be included in the calculation of Australia’s Aggregate Measurement of Support
(AMS), which is notified annually.  These payments to producers have been carefully designed toensure they are consistent with Australia’s WTO obligations and do not exceed Australia’s AMS
commitment.  The WTO consistency of the programme has not been raised in WTO fora.
36. The Australian Dairy Industry Council (ADIC) is the industry's policy body;  a federal
agency, the Dairy Adjustment Authority administers the DSAP.  The Australian Dairy Corporation
(ADC), an independent statutory authority, has, inter alia,  provided assistance (i.e. loans) promotional
and marketing assistance to the dairy industry and has controlled exports of some dairy produce to
certain markets with industry consent under statut ory direction.  At present, the ADC has industry
consent to act as the sole seller for exports under quota of natural cheddar cheese, and like varieties, to
the European Union (HTS item 0406 9021) and exports of bulk cheese, for processing and shredding,
to Japan (HTS item 0406 90).  The ADC's activities were to be reviewed by June 2002 in accordance
with the National Competition Policy.  On 1 March 2002, the ADC announced that single-desk selling
arrangements for cheese to Japan were to cease on 30 June 2002.
(iv) Forestry
37. Forestry policy has continued to be implemented through the 20-year Regional Forest
Agreements (RFAs) reached betw een the Commonwealth and State Governments in all major forest
regions.  RFAs are aimed at establishing world-class conservation reserves, providing certainty for
jobs and investment, and ensuring that native forests are managed in an ecologically sustainableway.
33  Forests are managed according to systems and processes accredited by independent panels of
scientific experts as meeting ecologically sustainable forest management requirements.  These
processes include the application of codes of forest practices that set out goals and guidelines for
timber harvesting, related roading, regeneration and reforestation, and are supported by legislation.
38. Since April 2000, exports of native forest hardwood woodchips have been prohibited unless
sourced from areas covered by RFAs.  Exports of unprocessed wood and woodchips from certain
native forests (non-RFA) remain subject to licencing.  These controls have been removed on
unprocessed wood and woodchips from native forests from ten regions (Tasmania;  the Central
Highlands, East Gippsland, Gippsl and, North East, and West regions of Victoria;  the South-West
                                                     
32 Dairy Adjustment Authority online information.  Available at:
http://www.daa.gov.au/ [17 April 2001].
33 AFFA online fact sheet.  Available at:  http://www.affa.gov.au/corporate_docs/
publications/html/factsheets/forests.html [20 March 2001].WT/TPR/S/104 Trade Policy Review
Page 96
forest region of Western Australia;  and Eden, North East, and Southern regions of New South Wales)
where RFAs have been finalized.
39. Two studies on the application of competitive neutrality principles to forestry were issued
in 2001.34  According to the Marsden Jacob report, State governments maintain anti-competitive
practices and inadequately reformed monopoly arrangements in native forest logging.  The
Productivity Commission found that while the implementation of competitive neutrality principlesvaries between jurisdictions and encompasses some differences in approach, some reforms have
involved inter alia , better management practices and pricing policies.  Despite claims that State forest
agency practices have discouraged plantation, establishment rates for first rotation plantations have
increased (see below).  Over 70% of these plantings were by the private sector, and around 95% were
hardwood, the sector claimed to be adversely affe cted by State Government native forest (hardwood)
operations.
40. Between 1995/96 and 2002/03, the Commonwealth allocated $A 101 million for a Forestry
Industry Structural Adjustment Programme to facilita te the long-term restructuring of the native forest
industry and to assist those adversely affected by the implementation of RFAs.
35  A Wood and Paper
Industry Strategy was intended to encourage plantation and farm forestry, accelerate research intohigher value-added products and assist with the development and implementation of criteria and
indicators for ecologically sustainable forest management.  Under the Prime Minister's Greenhouse
package, efforts have been undertaken to underpin development of plantation forestry as an increased
"sink" for greenhouse gas emissions.  Under The Plantations 2020 Vision, which was launched in
October 1997 with a target of trebling the area of Australia's plantation estate by 2020, the rate of
plantation establishment has increased from annual growth of 32,000 hectares over the period 1990 to
1995 to over 160,000 hectares of first rotation plantation forest planted in 2000.
(v) Fisheries
41. Fisheries is the fifth biggest primary industry and one of the fastest growing export industries;
it make an important contribution to regional infrastructure by providing opportunities for
downstream development and jobs in regional communities.  Australia seems to have some of the
best-managed fisheries in the world.  Issues f acing the industry include:  balancing the needs of
commercial, recreational, and indigenous fishing interests;  continuing to guarantee safety and quality;
ensuring that the industry remains sustainable and profitable;  protecting habitats and the
environment;  finding suitable sites for aquaculture enterprises;  reducing the high level of waste in
some fisheries;  arresting the growth of illegal,  unregulated, and unreported fishing;  and protecting
high seas and migratory species, such as tuna and orange roughy.
36  The Federal Government has
responsibility for managing Australia's fisheries resources from three nautical miles beyond the shore
to the edge of the 200 nautical miles Exclusive Economic Zone (EEZ), the world's third largest;  state
or territory governments are responsible for managing fisheries within the old three-mile limit.  This
general arrangement is subject to any specific arrangements States and the Commonwealth may make
on a species basis under the Off-Shore Constitutional Settlement Agreement.
                                                     
34 Productivity Commission/Commonwealth Competitive Neutrality Complaints Office (2001);
Marsden Jacob Associates (2001).
35 AFFA online fact sheet.  Available at:  h ttp://www.affa.gov.au/corporate_docs/publications/
html/factsheets/forests.html [20 March 2001].
36 AFFA online information.  Available at:  http://www.affa.gov.au/ministers/truss/ [24 April 2001].Australia WT/TPR/S/104
Page 97
(3) MINING AND ENERGY
(i) Mining
42. Despite its pre-eminent position as a mineral producer, Australia is under-explored.37
In 2000, mining contributed to around 4.6% of GDP (Table I.2);  at the same time it accounted for
more than 40% of total exports (including fuels).38  Although mineral and petroleum resources are
owned either by the Commonwealth or state/territory governments, commercial exploration anddevelopment are undertaken by the private sector.
39  Policies that have a significant impact on the
sector include:  native title legislation, which may affect land tenure and land access;  environmental
regulation;  and prescribed royalty levels, which vary between firms.  By contrast, tariffs and
budgetary assistance do not affect mining substantially.
43. The industry receives very little assistance fr om import tariffs;  chalk, slate, marble, granite,
sandstone, mica, steatite, and other monumental and building stones are subject to a 5% import tariff.
The mining industry's net subsidy equivalent (NSE) for 1998/99 was negative;  in the light of
forthcoming tariff reductions on inputs to the industry, it is estimated to become less negative (i.e.
gain to the mining industry) by 2005/06.40  The effective rate of assistance was marginally negative in
1998/99 and is expected to remain so up until 2005/06.
44. Budgetary assistance for the mining sector has declined and is provided mainly through the
development allowance and the R&D tax concessions (Table IV.3 and Chapter III(4)(i)(a)).41
(ii) Energy
45. Energy is one of the most important sectors of the Australian economy.  It provides services
to industry and households, employment, and investment opportunities, and generates considerable
export earnings.42  In the context of APEC, Australia has been working to foster a common
understanding on regional energy issues, improve trade and investment in the energy sector, reducethe environmental impact of energy production/use, and harmonize standards in this area.
43
(a) Hydrocarbons
46. In 2000/01, Australia produced around 84% of its liquid petroleum needs in net terms and all
of its gas needs.44  Despite continuing discoveries of off-shore oil and gas, the level of exploration
drilling is relatively low compared with other regions in the world;  more exploration is needed ifAustralia is to address a looming decline in liquid fuel self-sufficiency.  Australia has abundant
resources of natural gas and is a major supplier of liquefied natural gas, with more than 10% of the
global market.
                                                     
37 Australian Department of Industry, Science and Resources and Austrade online information.
Available at:  http://www.investaustralia.gov.au/Industry_Sectors/ Petroleum_and_Gas/petroleum_and_gas.html
[25 April 2001].
38 UNSO Comtrade Database.
39 Australian and New Zealand Minerals and Energy Council (undated).
40 This means that the overall effect of tariffs represented a tax on the industry, rather than a subsidy.
As a capital-intensive industry, tariffs on imported capital inputs have a negative effect on mining.  Productivity
Commission (2000d).
41 Productivity Commission (2000d).
42 U.S. Department of Commerce (1999).
43 Australian Department of Foreign Affairs and Trade (2001).
44 Department of Industry, Tourism and Resources (2002).WT/TPR/S/104 Trade Policy Review
Page 98
Table IV.3
Developments in domestic support to mining, 1997-02
($A million)
Type a1997/98 1998/99 1999/00 2000/01b2001/02b
Industry-specific measures
Exemption of income from sale, transfer or
assignment of rights to mine goldTE 38 18 5 - -
Regional Minerals Programme FI - - 1 1 1
General investment measures
Development allowance TE 138 92 88 121 110
General export measures
Austrade export promotion cF I 77899
E x p o r t  M a r k e t  D e v e l o p m e n t  G r a n t s  s c h e m e D F A 12222
General R&D measures
C o o p e r a t i v e  R e s e a r c h  C e n t r e s F I 8 1 0967
CSIRO minerals research FI 45 47 47 53 52
R&D Start and related programmes DFA 9 8 23 12 12
R&D tax concession TE 52 83 77 81 82
T o t a l  o u t l a y s 6 97 49 18 38 3
Total tax expenditures 228 192 170 202 192
Total budgetary assistance to mining 298 266 261 284 275
-N i l .
a DFA:  direct financial assistance;  FI:  funding to institutions;  TE:  tax expenditures.
b 2000/01 data are Budget estimates and 2001/02 data are Budget appropriations.
c Estimates for 1999/00, 2000/01, and 2001/02 are based on Austrade industry allocations for 1998/99.  Austrade has not
assembled data on the industries benefiting from its export promotion activities for subsequent years.
Note: Figures may not add to total due to rounding.
Source: Productivity Commission (2001),  Trade & Assistance Review 2000-2001, Table 4.7  [Online], 11 December,
Annual Report Series 2000-2001, AusInfo.  Available at:  http://www.pc.gov.au [28 February 2002].
47. Reportedly, reform of the entire gas industry is a vital component for the expansion and
integration of natural gas as a source of fuel for most users, from the smallest domestic consumer tothe largest industrial or power generation user.  Draft legislation has been drawn up for deregulating
the gas industry, including through opening up access to gas infrastructure, gas pipelines, and
distribution.
45
48. The Petroleum Products Freight Subsidy Scheme, which is not a retail price equalization
scheme, has been operated to subsidize the freight cost of delivering eligible petroleum products(automotive distillate, motor spirit, aviation gasoline, aviation turbine fuel) to remote Australian areas;
the subsidy margin, which is indexed to the CPI, was set at 15.3 cents per litre for the financial year
1999/00.
46  In addition to this scheme,  support for the use of certain types of fuels required in several
activities has been operated through the Diesel Fuel Rebate Scheme and the Diesel and Alternative
Fuels Grants Scheme (Chapter III(4)(ii)).  These arrangements were under examination (report due by
March 2002).
                                                     
45 U.S. Department of Commerce (1999).
46 AusIndustry online information.  Available at:  http://www.ausindustry.gov.au/documents/
dir56/doc501156.html [25 April 2001].Australia WT/TPR/S/104
Page 99
(b) Electricity
49. The Australian Electricity Supply Industry (ESI), made up of six separate state and two
territory systems as well as the Snowy Mountains Hydro-electricity scheme, contributes around 2% to
GDP.47
50. The National Electricity Market (NEM),48 a centralized wholesale market, has operated across
five southern and eastern states since December 1998;  new interconnections will enable Tasmaniaand Queensland to join the NEM by 2002.  The NEM, which is structured around a common pool or
spot market for trading wholesale electricity, has been operated by the National Electricity Market
Management Company (NEMMCO);  a fully competitive market at retail and wholesale levels is
expected to be in place by 2003.  Reforms have resu lted in:  a complete restructuring of the industry
with vertical separation of competitive elements  (generation and retail) from the natural monopoly
elements (transmission and distribution);  corporatization of these separate elements;  introduction of
competition through non-discriminatory access to the transmission and distribution system;  and
enhancement of the interconnected system.  Private independent power producers are growing
rapidly, claiming 14% of the total electricity capacity installed in Australia.
49  Nevertheless, there is
significant state involvement in the sector (Chapter III(3)(iii)).  In 1999/00, the average cost recoveryfor government trading enterprises in the sector stood at 125.4% (ratio of revenues to the expense
from operations).
50
51. Legislation to support the implementation of a mandatory renewable energy target has been in
force as of 1 April 2001.51  Wholesale purchasers of electricity have been required to purchase
increasing amounts of electricity generated from renewable energy sources;  by 2010, an additional
9,500 GWh of new renewable energy must be generated in Australia.
52. Australia’s electricity prices are among the lowest in the developed world.  According to the
Productivity Commission, energy market reforms have realized falls in real prices for electricity of
some 24% on average for all end users since 1991/92.52
(4) MANUFACTURING
53. Australia's policy objective has been to convert its traditional commodity-based economy into
a dynamic export-oriented one, by transforming domestic raw materials into consumer products forthe global market.  Emphasis is being put on the expansion of value-added production in the minerals
and agriculture sectors as well as the manufacture of high-technology products.
53  Manufacturing
accounted for 11.6% of GDP and 12.4% of employment  in 2000/01 (Table I.2), as well as 23.8% of
total exports (about half of which machinery and transport equipment).54  Manufacturing activities
receive assistance from a wide range of policy instruments aimed at funding innovation and venturecapital as well as supporting certain industries (Table AIV.5).
                                                     
47 Department of Industry, Science and Resources online fact sheet.  Available at:
http://www.isr.gov.au/resources/electricity_reform/reform/aus_esi.pdf [26 April 2001].
48 More information on the NEM reforms may be found in Department of Industry, Science and
Resources (2000).
49 Department of Industry, Science and Resources online fact sheet.  Available at:
http://www.isr.gov.au/resources/electricity_reform/reform/aus_esi.pdf [26 April 2001].
50 Productivity Commission (2001), Table 1.8.
51 Australian Department of Foreign Affairs and Trade (2001).
52 Department of Industry, Science and Resources online fact sheet.  Available at:
http://www.isr.gov.au/resources/electricity_reform/reform/aus_esi.pdf [26 April 2001].
53 U.S. Department of Commerce (1999).
54 UNSO Comtrade Database.WT/TPR/S/104 Trade Policy Review
Page 100
54. Australia's average applied MFN tariff (on an ISIC basis) has declined from 6% at the time of
its last Review to 4.6%;  95.9% of its industrial tariff lines are bound.55  According to the Productivity
Commission, tariffs are the most significant form of assistance received by the sector;  tariffs (and
concessions) accounted for around three quarters, or $A 4.6 billion, of measured  effective assistance
for manufacturing (mainly food, beverages, tobacco, textiles and clothing, and automotive) in 2000/01
(Table AIV.4).56  Between 1998/99 and 2005/06, assistance to manufacturing is expected to fall, in
line with announced tariff changes, including reductions scheduled for 2005 under the textiles,
clothing, and footwear (TCF) and passenger motor vehicles (PMV) plans (sections (4)(i) and (4)(iii));
the net subsidy equivalent of tariff assistance is projected to fall to $A 4.1 billion (2000/01 prices).
Other industries to be affected by these tariff reductions are petroleum, coal, and chemical products,
fabricated metal products, and other machinery and equipment industries.57
55. Budgetary assistance in the form of direct financial assistance (certain export incentives, input
subsidies) and tax expenditures to manufacturing are estimated to have increased slightly
(Table IV.4).58  The manufacturing activities that accounted for the largest shares of total budgetary
assistance in 1999/00 were motor vehicles and parts (mainly through the PMV Export Facilitation
Scheme until end 2000) and the pharmaceutical industry (Factor f scheme and its successor, thePharmaceutical Industry Investment Programme).  Go vernment procurement has continued to be used
to attract foreign direct investment, promote R& D and enforce export performance and local-content
requirements, with particular emphasis on info rmation technology and telecommunications items
(Chapter III(2)(vi)).
Table IV.4
Developments in domestic support to manufacturing, 1997-02
($A million)
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
Food, beverages & tobacco
Industry-specific measures
Agri-Food Industry Programme FI 1 - - - -
Brandy excise preferential rate TE 5 5 5 3 3
General investment measures
Development allowance TE 26 6 6 2 2
General export measures
Export Market Development Grants Scheme DFA 7 8 8 9 9
General R&D measures
Cooperative Research Centres FI 8 8 6 8 9
CSIRO research FI 17 18 18 20 18
R&D Start and related programmes DFA 3 2 2 2 2
R&D tax concession TE 15 16 25 26 27
Other measures
Tasmanian Freight Equalization Scheme DFA 5 1 8 9 9
Total 87 65 79 79 79
Table IV.4 (Cont'd)
                                                     
55 U.S. Department of Commerce (1999).
56 The TCF and PMV industries accounted for around 45% of the estimated net subsidy equivalent to
the manufacturing sector in 1998/99.  Productivity Commission (2000d).
57 Productivity Commission (2000d).
58 Productivity Commission (2000d).Australia WT/TPR/S/104
Page 101
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
Textiles, clothing, footwear & leather
Industry-specific measures
Assistance to Howe Leather b
-  Grant DFA 13 - - - -
-  Loan DFA - - 14 - -
TCF Import Credit scheme TE 121 106 83 49 7
TCF Strategic Investment Programme and related
schemeDFA - - 4 12 145
Other TCF programmes 6 8 - - -
General export measures
Austrade export promotion cF I 1111 1
E x p o r t  M a r k e t  D e v e l o p m e n t  G r a n t s  S c h e m e D F A 6656 6
Tariff Export Concession (TEXCO) TE 12 9 9 - -
TRADEX TE - - - 10 10
General R&D measures
Cooperative Research Centres FI 2 3 3 - -
CSIRO research FI 15 15 11 31 31
R&D Start and related programmes DFA <1 <1 <1 <1 <1
R & D  t a x  c o n c e s s i o n T E 2111 1
Total 178 161 131 113 204
Wood & paper products
Industry-specific programmes
Investment incentives to Visy Industries DFA - - 3 3 3
General export measures
E x p o r t  M a r k e t  D e v e l o p m e n t  G r a n t s  S c h e m e D F A 1112 2
Tariff Export Concession (TEXCO) TE 3 2 2 - -
TRADEX TE - - - <1 <1
General R&D measures
Cooperative Research Centres FI 2 1 <1 <1 1
C S I R O  r e s e a r c h F I 4455 5
R&D Start and related programmes DFA <1 <1 <1 <1 <1
R & D  t a x  c o n c e s s i o n T E 2211 1
Other programmes
Tasmanian Freight Equalization Scheme DFA 12 10 18 16 15
T o t a l 2 42 13 12 7 2 8
Printing, publishing & recorded media
Industry-specific programmes
Book bounty DFA 7 <1 - - -
Printing Industry Competitiveness scheme DFA - - 6 4 4
Extended Printing Industry Competitiveness DFA - - - 14 12
General investment measures
Development allowance TE 1 <1 <1 <1 <1
General export measures
E x p o r t  M a r k e t  D e v e l o p m e n t  G r a n t s  S c h e m e D F A 3333 3
Table IV.4 (cont'd)WT/TPR/S/104 Trade Policy Review
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Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General R&D measures
R&D Start and related programmes DFA 1 2 2 1 1
R&D tax concession TE 2 1 1 1 1
Total 14 6 11 22 21
Petroleum, coal, chemical & associated products
Industry-specific programmes
Investment incentives to Syntroleum DFA - - 42 50 20
Factor f programme DFA 174 159 79 - -
Pharmaceutical Industry Development programme DFA - - 34 38 63
General investment measures
Development allowance TE 2 10 13 1 1
General export measures
Austrade export promotion cFI 2 2 3 3 3
Export Market Development Grants Scheme DFA 5 6 5 6 6
Tariff Export Concession (TEXCO) TE 2 2 2 - -
TRADEX TE - - - 2 2
General R&D measures
Biotechnology Innovation Fund DFA - - - - 6
Cooperative Research Centres FI 11 17 19 18 15
CSIRO research FI 38 39 40 41 41
R&D Start and related programmes DFA 6 8 12 9 9
Innovation Investment Fund DFA - 5 8 10 14
R&D tax concession TE 32 16 25 26 26
Total 273 267 281 203 205
Non-metallic mineral products
General investment measures
Development allowance TE 1 18 17 1 1
General export measures
Export Market Development Grants Scheme DFA 2 1 1 1 1
Tariff Export Concession (TEXCO) TE 1 1 1 - -
TRADEX TE - - - <1 <1
General R&D measures
Innovation Investment Fund DFA - - - 1 1
R&D Start and related programmes DFA 2 3 <1 7 7
R&D tax concession TE 11 8 5 5 6
Total 17 31 24 16 16
Metal product manufacturing
General investment measures
Development allowance TE 18 71 68 20 18
General export measures
Export Market Development Grants Scheme DFA 4 4 4 4 4
Tariff Export Concession (TEXCO) TE 6 4 5 - -
TRADEX TE - - - 2 2
Table IV.4 (cont'd)Australia WT/TPR/S/104
Page 103
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General R&D measures
Cooperative Research Centres FI 6 8 9 11 9
CSIRO research FI 25 27 28 28 28
R&D Start and related programmes DFA 5 3 6 5 5
R&D tax concession TE 41 44 24 25 25
Total 106 162 143 95 91
Motor vehicles & parts
Industry-specific measures
PMV Export Facilitation Scheme TE 251 288 348 363 -
Automotive Competitiveness & Investment Scheme TE - - - 148 560
Automotive Market Access & Development FI - 8 5 5 1
Investment incentive to Holden DFA - - - 5 4
General investment measures
Development allowance TE 3 25 24 16 15
General export measures
Austrade export promotion cFI 4 5 5 6 6
Export Market Development Grants scheme DFA - - - 2 2
Tariff Export Concession (TEXCO) TE - 13 14 - -
TRADEX TE - - - 62 62
General R&D measures
Innovation Investment Fund DFA - - - 2 3
R&D Start and related programmes DFA 1 1 <1 <1 <1
R&D tax concession TE 25 25 29 30 31
Total 284 365 424 640 684
Other transport equipment
Industry-specific measures
Shipbuilding bounty DFA 19 24 18 13 12
Shipbuilding Innovation Scheme DFA - - 6 9 10
General R&D measures
Cooperative Research Centres FI 2 2 1 - 1
R&D Start and related programmes DFA 1 3 4 5 5
R&D tax concession TE 10 6 23 24 24
Total 32 35 51 52 53
Other machinery & equipment
Industry-specific measures
Computer bounty DFA 49 59 - - -
Machine tools and robots bounty DFA 4 <1 - - -
General investment measures
Development allowance TE 1 1 1 <1 <1
General export measures
Export Market Development Grants Scheme DFA 19 18 17 15 15
Tariff Export Concession (TEXCO) TE 42 14 14 - -
TRADEX TE - - - 5 5
Table IV.4 (cont'd)WT/TPR/S/104 Trade Policy Review
Page 104
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General R&D measures
Cooperative Research Centres FI 21 21 20 24 21
CSIRO FI - 33 35 35 35
Innovation Investment Fund DFA 1 1 2 <1 <1
R&D Start and related programmes DFA 23 40 37 36 36
R&D tax concession TE 30 35 39 41 42
Total 191 222 164 155 153
Other manufacturing
General investment measures
Development allowance TE <1 2 1 <1 <1
General export measures
Export Market Development Grants Scheme DFA 5 4 5 9 9
Tariff Export Concession (TEXCO) TE 12 9 9 - -
TRADEX TE - - - 12 12
General R&D measures
R&D Start and related programmes DFA 7 11 11 14 14
R&D tax concession TE 4 6 7 8 8
Other programmes
Tasmanian Freight Equalization scheme DFA 3 5 2 3 3
Total 32 37 37 45 45
Unallocated manufacturing
General export measures
Duty drawback TE 79 95 87 50 70
International Trade Enhancement Scheme DFA 13 - - - -
General R&D measures
Technology Support Centres DFA 14 - - - -
CSIRO FI 34 - - - -
Technology Diffusion Programme DFA - 15 18 20 17
Other programmes
Enterprise Development Programme FI 28 14 6 1 1
Greenhouse voluntary gas reduction FI 1 - - -
Tasmanian Freight Equalization Scheme DFA 20 21 28 35 34
Total 189 145 139 106 122
Total outlays 665 673 627 617 739
Total tax expenditures 762 843 887 934 962
Total budgetary assistance 1,426 1,516 1,514 1,552 1,701
-N i l .
a DFA:  direct financial assistance;  FI:  funding to institutions;  TE:  tax expenditures.
b 2000/01 data are Budget estimates and 2001/02 data are Budget appropriations.
c Data for 1999/00, 2000/01, and 2001/02 are based on the industry allocations for 1998/99, the only year Austrade has resembled
data on the industries benefiting from its export promotion activities.
Note: Figures may not add to total due to rounding.
Source: Productivity Commission (2001), Trade & Assistance Review 2000-2001, Table 4.5  [Online], 11 December,
Annual Report Series 2000-2001, AusInfo.  Available at:  http://www.pc.gov.au [28 February 2002].Australia WT/TPR/S/104
Page 105
(i) Textiles, clothing, and footwear
56. The textiles, clothing, and footwear (TCF) industries are significant in terms of employment;
in the year 2000 textiles and clothing accounted for 0.8% of total exports and 4.6% of total imports.59
57. Since the previous Review of Australia, the average MFN tariff for TCF imports has declined
from 16.6% to 12%, but tariff protection remains the highest among all activities at three times the
overall average applied MFN rate (Chart IV.1);  effective rates of tariff protection are much higherowing to tariff escalation.  All TCF tariffs were reduced to rates of 25%, 15% or 10% in July 2000
(apart from those already at 5% or less).  TCF tariffs are to remain at these levels until
1 January 2005, when rates on apparel and certain finished textiles, footwear, and fabrics are to be
reduced immediately to 17.5%, 10%, and 7.5%, respectively.  Unlike other countries, Australia has no
import quotas.  The effective rate of assistance for the textiles industry is projected to drop from27.9% (1998/99) to 16.9% (2005/06), still more than three times the manufacturing average.
60
58. As from July 2000, the Textile, Clothing and Footwear (TCF) Strategic Investment
Programme (SIP), has been in force;  the previous support scheme, the Import Credit Scheme, ceased
in September 2000 (Table AIV.5).61  The SIP, provides funds (i.e. cash payments) for investment and
innovation over the period coincident with the pause in TCF tariff reductions (i.e. from 2000 to 2005).
(ii) Pharmaceuticals
59. Australia has maintained its Pharmaceutical Benefits Scheme (PBS), under which most
prescription pharmaceuticals are subsidized in order to be sold at an affordable price.  As from
1 February 1999, the Scheme has covered 559 drug substances (generic drugs) available in
1,354 forms and strengths (items) and marketed as 1,992 different drug products (brands).  The
amount of the subsidy varies depending on the price of the drug.  The Pharmaceutical Benefits Pricing
Authority considers a number of factors, including the drug’s cost effectiveness, in advising the
Government on a reasonable price to pay for each new PBS-listed drug, and reviews the prices of
products listed on the PBS.
60. The Pharmaceutical Industry Investment Programme (PIIP), which replaced the Factor f
scheme, has been in operation since July 1999.62  The PIIP is also aimed at compensating the
pharmaceutical industry for the impact of low drug prices set under the Pharmaceutical BenefitsScheme (PBS).  PIIP payments provide actual and/or notional price increases for pharmaceutical
products nominated by eligible companies in retu rn for their commitments regarding value-added
and/or R&D targets and "broad activities", such as investment in new plant and equipment, workplace
reform, or location of regional headquarters in Australia.  PIIP's funding is set at $A 292 million over
five years (to June 2004).  Under a competitive-based assessment process, nine companies (out of22 applicants) were selected to receive such assistance.
61. As indicated earlier (Chapter III(4)(iv)(a)), in 1998 the 20-year patent term was extended for
an additional five years, both  for existing and ne w pharmaceutical patents, in recognition of the time
taken to register a drug for sale.
63  New "springboarding" provisions also allow regulatory approval
for generic products still under patent.  In addition, under new data exclusivity arrangements,
                                                     
59 UNSO Comtrade Database.
60 Productivity Commission (2000d).
61 Productivity Commission (2000d).
62 Productivity Commission (2000d).
63 Productivity Commission (2000d).WT/TPR/S/104 Trade Policy Review
Page 106
registration data submitted to the Therapeutic Goods Administration are afforded a five-year period of
protection from use by other companies.
(iii) Automotive
62. Vehicle manufacturing is believed to be a promising sector;  industry forecasts indicate a
$A 4 billion increase in new investments, 5,000 new jobs and $A 6 billion in annual exports by the
year 2005.  Australia's four car assemblers now concentrate on five models instead of the 13 modelsproduced in 1985.  Productivity has increased dramatically since 1990, contributing around 1% to
GDP (1998/99).  Low cost, high quality design and engineering, expertise in flexible, small-volume,
vehicle manufacturing, and global-scale component manufacturing reportedly led to an increase of
34.5% in vehicle exports and 7% in component s exports in 2001 over the previous year.
63. The authorities consider that to ensure its fu ture viability, the Australian automotive industry
must integrate with the global automotive industr y through regional trade links (APEC Automotive
Dialogue) and gradual exposure to further competition.
64  Nevertheless, the sector has continued
benefit from government support.  The tariff for passenger motor vehicles (PMVs) is to remain at
15% (as of January 2000) until 1 January 2005, when it is scheduled to fall to 10%, thus bringing the
effective rate of assistance to the PMV industry down from 16.4% (1998/99) to 10.2% (2 005/06), a
level still more than double the manufacturing sector average.65  Imports of second-hand passenger
cars are subject to an ad valorem  tariff rate of 15% (Chapter III(2)(ii)(d)), with an additional, arguably
prohibitive, flat rate of $A 12,000 charged per vehicle in the case of high volume imports (over
25 cars per licensee or compliance plate holder);  the authorities indicated that between 1992 and
2001 this duty was never collected as importers had obtained vehicle import approval under
concessional arrangements.66  Binding commitments, which are set at 20% and above, provide
considerable flexibility for raising applied tariffs.  Efforts have been made to increase alignment with
international automotive standards (Chapter III(2)(ix)(a)).
64. Australia has maintained its compliance plate approval (CPA) regime to ensure that (domestic
or foreign) vehicles comply with Australia’s safety and emission standards when they are first
supplied to the market.  The fitting of the compliance plate indicates to state and territory registering
authorities that the vehicle is eligible to be register ed for use in transport in Australia.  The Australian
vehicle certification system is a type approval system.67  A vehicle representing the design of that
make-model (the "type" of vehicle) is tested to demonstrate compliance with the safety and emissions
standards.  If the vehicle tested complies then all others of the same design (i.e. the same "type") will
also comply.  The manufacturer is responsible fo r ensuring compliance with the Australian Design
Rules (ADRs).  Under "full volume" procedures, the Australian certification process allows thevehicle manufacturer to conduct those tests wherever is convenient to the manufacturer providing the
tests are conducted properly.  In order to demonstrate compliance with all applicable ADRs, several
test vehicles are usually required, especially for passenger cars and light commercial vehicles.  "Low
volume" procedures apply where a manufacturer offers for sale in Australia fewer than a 100 or 25
eligible vehicles per year depending on the vehicle category.  Under "low volume" procedures,alternative and substantially easier means of demonstrating compliance with many of the ADRs are
acceptable and the rigorous testing of the "full volume" procedures is not always required.
                                                     
64 Australian Department of Foreign Affairs and Trade online information (undated b).
65 Productivity Commission (2000d).
66 Between 1996 and 2001, imports of used vehicles more than tripled, to 50,815 units.
67 Further information on vehicle imports and certification is available from the Department of
Transport and Regional Services online information.  Available at:  www.dotrs.gov.au/land/.Australia WT/TPR/S/104
Page 107
65. The fee for granting of authority to place a compliance plate (or an identification plate) on a
new vehicle produced domestically or overseas is $A 7.50 per vehicle;  these fees cover processing of
the application, conduct of laboratory inspections, conformity of production assessments and vehicle
safety research.68  The same fee is charged for imports of used vehicles.  However, an application fee
of $A 500 is charged for authority to place a compliance plate on a motor vehicle of a particular type
if not more than 100 vehicles or derivatives of that type are built or imported in a year.
66. As from 1 April 2002, used vehicles may only be imported and converted through Registered
Automotive Workshops (RAWs);  the scheme was introduced to halt fraudulent practices under the
low volume scheme and improve consumer protection.69  Vehicles not approved for supply to the
market by 1 April 2002 have to be fitted with a compliance plate by a RAW or by a CPA holder with
a valid approval.  The low volume procedures for used vehicles will be replaced by a new scheme forimporting and converting used vehicles to comply with Australian safety and emission requirements.
67. A $A 2.8 billion Automotive Competitiveness and Investment Scheme (ACIS), which was
introduced when the Export Facilitation Scheme for PMV was abolished, is in effect for the period
2001-05 (Table AIV.5).
70  The ACIS provides benefits to car manufacturers, component firms,
toolmakers, and design and engineering firms.  Under ACIS, motor vehicle producers may claim an
import duty credit equal to 25% of the value of production of motor vehicles, engines, and engine
components, multiplied by the relevant tariff rate, and 10% of the value of new investment in plant
and equipment.  Producers of automotive components and automotive machine tools, and providers of
automotive services may claim an import duty credit equal to 25% of the value of new investment in
plant and equipment, and 45% of the value of investment in R&D.  Other government support
includes customs duty and sales tax relief, export insurance and financial services, immigration
assistance, and a variety of R&D support schemes.   The Automotive Market Access and Development
Strategy continues to assist in opening and developing key export and investment markets for the
industry.
68. Direct financial support to the automotive industry remains a policy priority.  In April 2002
the Federal Government decided to give Mitsubishi Motors $A 35 million (in 2004/05), a further
$A 40 million plus $A 10 million over 10 years from the South Australian Government, whilesuspending its support for a small business innovation programme.
71  With this financial support the
company is to create 900 jobs at the plant, build a global R&D centre providing another 300 jobs,
replace the current model range with a new car from 2005, and build a long wheelbase model
for 2006.
69. In order to retain the special penalty on luxury cars (i.e. the old luxury tax of 45%)
(Chapter III(4)(i)(a)), as from July 2000, luxury cars have been subject to the 10% Goods and
Services Tax (GST) rate plus a special luxury tax of 25% on any surplus over a given GST-inclusive
threshold ($A 55,134 for 2000/01 and 2001/02).
                                                     
68 A complete list of fees is listed in the Schedule of Fees in the Motor Vehicle Standards Regulations
1989;  fees were amended upon implementation of the Registered Automotive Workshops (RAW) Scheme.
69 Regulations and amendments may be obtained from the Australian Attorney-General's Department
online information.  Available at:  http://scaleplus.law.gov.au.  Further details about the RAW Scheme areavailable from the Department of Transport and Regional Services online information.  Available at:www.dotrs.gov.au/media/anders/archive/2000/may00/8may2000.htm;  and www.dotrs.gov.au/land/Imports_
Certif/sevs.htm.
70 Online information by the Australian Department of Industry, Science and Resources and Austrade
at their jointly held website Invest Australia .  Available at:  http://www.isr.gov.au/invest/Industry_Sectors/
Automotive/automotive.html#Snapshot [25 April 2001].
71 The Sydney Morning Herald, 27-28 April 2002.WT/TPR/S/104 Trade Policy Review
Page 108
70. The Productivity Commission is currently undertaking a review of post-2005 assistance
measures for the automotive industry;  it was expected to report its findings and recommendations to
the Government in July 2002.
(iv) Shipbuilding
71. The Australian shipbuilding and repair industry is small and strongly concentrated in
domestic sales, and specialized (world leadership) in construction of small, fast passenger/ferry ships,under 4,000 grt, especially catamarans.  A production-oriented subsidy (bounty), which was
introduced in 1947 and phased out in December 2000, was has been granted to cover costs linked to
the construction or modification of certain types of vessels under certain conditions (Table AIV.5);  a
phasing out arrangement applies to vessels contracted for sale on or before 31 December 2000 and
delivered on or before 31 December 2003.  A $A 68.8 million Shipbuilding Innovation Scheme (SIS),which replaced the bounty scheme, has been in operation since July 1999.  Payments are made on
eligible R&D expenditure.
(v) Information technology
72. Information technology (IT) spending as a share of GDP in Australia is second only to
Sweden.
72  Knowledge-based industries already account for 48% of GDP.73  With 37% of businesses
online, Australia is well ahead of European, where the UK is leading with 25%.  Internet usage by
adults in Australia is 43%, behind only Norway, the United States, Iceland, and Sweden.  IT spending
as share of GDP, and per capita ownership of computers are both the second highest in the world.74
Australia's IT and communications market is larger than all ASEAN countries combined.  Australianexports of IT products grew rapidly in 2000;  exports were worth $A 3.0 billion, 27% more than the
previous year.
75
73. Australia has been a participant in the Info rmation Technology Agreement.  At the WTO
Committee of Participants on the Expansion of Trade in Information Technology Products, Australia
proposed, inter alia,  the addition to the ITA production coverage of items used as inputs to the
manufacture of printed circuit boards and printed wiring boards, as well as the identification of
non-tariff measures, which are significant impediments to trade in IT products.76
(vi) Printing and publishing
74. A four-year Book Industry Assistan ce Plan, which contains a number of
programmes/schemes, has been in operation since 2000/01 (Table AIV.5).77  A Printing Industry
Competitiveness Scheme (PICS), designed to reduce the effect of negative assistance on the industry,
is in effect (from 1 January 1999) until 30 June 2003.  An Educational Textbook Subsidy Scheme
(ETSS) was introduced to mitigate the increase in  the prices of educational textbooks resulting from
the introduction of the Goods and Services Tax (GST) on 1 July 2000.78
                                                     
72 Australian Department of Foreign Affairs and Trade (2001).
73 Australian Department of Foreign Affairs and Trade (undated b).
74 Australian Department of Foreign Affairs and Trade (2001).
75 Australian Department of Foreign Affairs and Trade (undated b).
76 WTO documents G/IT/SPEC/8/Rev.1, 23 February 1998 and G/IT/13, 10 July 2000.
77 Minister of Communications, Information Technology and the Arts online information.  Available at:
http://www.dcita.gov.au/ [24 April 2001].
78 Educational Textbook Subsidy Scheme online information.  Available at:
http://www.textbooksubsidy.gov.au/textbooksubsidy/default.htm [19 April 2001].Australia WT/TPR/S/104
Page 109
(5) SERVICES
(i) Features
75. Services make up the largest part and are the fastest growing component of the Australian
economy.  The share of services (including construction, energy and water supply) in GDP rose
slightly from 72% in 1997/98 to 73% in 2000/01 (Table I.2);  at the same time the sector's share in
total employment rose from 80.7% to 82%.  Property and business, wholesale and retail trade,ownership of dwellings, and transport, storage, and communications services have been by far the
leading service activities in Australia;  other important activities were finance and insurance, health
and community services, and construction.
76. Since its previous Review, Australia has maintained its position amongst the world's top
30 traders in services (2000).
79  In 2000/01, exports of commercial services represented 21.4% of total
exports of goods and non-factor services (Table I.3).  Between 1997/98 and 2000/01, exports (credits)
of non-factor services rose by 30% to $A 32.8 billion, equivalent to some 27.2% of merchandise
exports.  In 2000/01, imports (debits), largely consisting of transportation and travel, stood at about
$A 32 billion.
(ii) Domestic support
77. The estimated level of support provided to the services sector through direct financial
assistance, tax expenditures, and funding to public-sector institutions has been increasing
(Table IV.5);  budgetary outlays aimed at enco uraging investment, R&D, and exports have been
allocated mainly to finance and insurance, cultural and recreational, transport and storage, property,
and business and communication services.
Table IV.5
Developments in domestic support to services, 1997-02($A million)
Type
a1997/98 1998/99 1999/00 2000/01b2001/02b
Electricity, gas & water supply
Industry-specific measures
Renewable Energy Commercialization cD F A -237 1 2
Renewable Energy Equity Fund cDFA - - <1 3 3
General investment measures
Development allowance TE 14 2 2 4 4
I n f r a s t r u c t u r e  B o n d s T E 6 05 54 43 11 3
Infrastructure borrowing tax offset scheme TE 3 25 25 43 43
General export measures
Export Market Development Grants Scheme DFA <1 <1 <1 <1 <1
General R&D measures
Cooperative Research Centres FI 3 4 5 5 3
R&D Start and related programmes DFA 1 1 1 2 2
R&D tax concession TE 1 1 1 1 1
T o t a l 8 39 18 19 78 2
Table IV.5 (cont'd)
                                                     
79 WTO (2001), Table II.5.WT/TPR/S/104 Trade Policy Review
Page 110
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
Construction
General export measures
Austrade export promotion dFI 20 22 25 27 27
Export Market Development Grants Scheme DFA 2 2 2 2 2
TRADEX TE - - - 1 1
General R&D measures
Cooperative Research Centres FI - - - - 2
CSIRO research FI 24 25 25 22 22
Innovation Investment Fund DFA - - - 2 3
R&D Start and related programmes DFA 2 <1 <1 1 1
R&D tax concession TE 19 15 8 8 8
T o t a l 6 76 46 06 36 5
Wholesale trade
General investment measures
Development allowance <1 - - 12 11
General export measures
Export Market Development Grants Scheme DFA 15 15 12 13 13
TRADEX TE - - - 4 4
General R&D measures
R&D Start and related programmes DFA - <1 2 1 1
R&D tax concession TE 14 13 20 21 22
T o t a l 3 02 83 55 15 1
Retail trade
Industry-specific programmes
Pharmacy Restructuring grants DFA 7 11 13 10 -
General investment measures
Development allowance TE <1 <1 <1 <1 <1
General export measures
Australian Tourist Commission FI 18 21 21 21 21
Export Market Development Grants Scheme DFA 4 4 3 2 2
General R&D measures
R&D tax concession TE 2 3 5 5 5
T o t a l 3 23 84 13 92 9
Accommodation, cafes & restaurants
General investment measures
Development allowance TE 1 1 1 - -
General export measures
Export Market Development Grants Scheme DFA 4 5 5 9 9
Australian Tourist Commission FI 24 27 28 28 28
T o t a l 2 93 33 43 73 7
Finance & insurance
General investment measures
Development allowance TE 27 6 6 1 1
Offshore Banking Unit TE 17 30 35 35 30
Infrastructure borrowing tax offset scheme TE 3 19 19 19 19
Table IV.5 (cont'd)Australia WT/TPR/S/104
Page 111
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General export measures
Export Market Development Grants Scheme DFA <1 <1 <1 <1 <1
General R&D measures
R&D Start programme DFA 1 <1 <1 1 1
Innovation Investment Fund DFA - 5 5 <1 <1
R&D tax concession TE 54 26 18 19 20
Total 102 86 83 76 71
Communication services
Industry-specific measures
Investment incentive to IBM DFA - - - 2 1
Software Engineering Centres FI - 2 6 6 6
General investment measures
Development allowance TE - 18 - 33 30
General export measures
Export Market Development Grants Scheme DFA 1 1 1 2 2
Austrade export promotion dFI 17 18 20 22 22
Australian Tourist Commission FI 1 1 1 1 1
General R&D measures
Cooperative Research Centres FI 2 2 2 3 6
CSIRO research FI 22 21 21 21 21
Innovation Investment Fund DFA - 12 20 5 6
R&D Start programme DFA 7 10 12 14 14
R&D tax concession TE 16 7 30 31 32
Total 66 93 114 140 141
Transport & storage
Industry-specific measures
Investment incentive to Asia Pacific Space Centre DFA - - - - 6
General investment measures
Development allowance TE 33 <1 <1 6 5
I n f r a s t r u c t u r e  B o n d s T E 5 55 04 12 91 2
Infrastructure borrowing tax offset scheme TE 4 31 31 13 13
General export measures
Export Market Development Grants Scheme DFA 18 18 15 11 11
Australian Tourist Commission FI 30 34 34 35 35
TRADEX TE - - - 2 2
General R&D measures
R&D Start and related programmes DFA - 1 5 2 2
R&D tax concession TE 4 12 5 5 6
Total 144 147 132 102 91
Property & business services
General investment measures
Development allowance TE 1 - 18 2 2
General export measures
Export Market Development Grants Scheme DFA 22 23 22 24 24
Table IV.5 (cont'd)WT/TPR/S/104 Trade Policy Review
Page 112
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General R&D measures
Biotechnology Innovation Fund DFA - - - - 1
Cooperative Research Centres FI 7 4 3 4 5
R&D Start & related programmes DFA 6 14 22 28 28
Innovation Investment Fund DFA - 1 1 <1 <1
R&D tax concession TE 40 48 65 68 70
Total 76 89 131 126 129
Government administration & defence
General investment measures
Development allowance TE - 3 3 - -
General export measures
Austrade export promotion dF I 22233
General R&D measures
R&D Start & related programmes DFA <1 <1 <1 <1 <1
T o t a l 26633
Education
General investment measures
Development allowance TE - 1 1 <1 <1
General export measures
Australian Tourist Commission FI <1 1 1 1 1
Export Market Development Grants Scheme DFA 11 11 8 9 9
Austrade export promotion dFI 8 8 9 10 10
General R&D measures
R&D Start & related programmes DFA 5 5 7 4 4
R&D tax concession TE 2 1 3 3 3
T o t a l 2 72 62 92 72 7
Health & community services
General export measures
Export Market Development Grants Scheme DFA <1 <1 <1 <1 <1
General R&D measures
Cooperative Research Centres FI 12 12 13 13 13
R&D Start programme DFA 7 10 12 18 18
R&D tax concession TE 2 3 3 3 3
T o t a l 2 22 52 93 53 8
Cultural & recreational services
Industry-specific measures
Australian Film CommissionbD F A 3 01 61 71 71 7
Australian Film Finance Corporation & Film AustraliabD F A 4 84 84 84 84 8
Film industry division 10B & 10BA TE 20 21 21 21 19
General export measures
Australian Tourist Commission FI 3 4 4 4 4
Austrade export promotiondFI 16 17 19 21 21
Export Market Development Grants Scheme DFA 6 7 6 8 8
Table IV.5 (cont'd)Australia WT/TPR/S/104
Page 113
Typea1997/98 1998/99 1999/00 2000/01b2001/02b
General R&D measures
Biotechnology Innovation Fund DFA - - - - 1
Cooperative Research Centres FI 5 2 2 2 2
R&D Start & related programmes DFA - <1 <1 <1 <1
R&D tax concession TE 1 - 4 4 4
Total 129 115 122 127 126
Personal & other services
General export measures
Export Market Development Grants Scheme DFA 1 1 1 1 1
General R&D measures
R&D Start & related programmes DFA 2 2 2 4 4
R&D tax concession TE <1 <1 <1 <1 <1
Total 3 4 4 6 6
Unallocated services
General export measures
Austrade export promotiondFI 19 20 23 25 25
Australian Tourist Commission FI 1 1 1 1 1
General R&D measures
CSIRO research FI 9 9 9 10 10
R&D Start & related programmes DFA - <1 2 <1 <1
Other programmes
Building IT Strengths DFA - - 42 6 55
Total 29 31 75 42 91
Total outlays 445 484 563 544 605
Total tax expenditures 395 391 409 426 383
Total budgetary assistance 840 875 973 970 988
-N i l .
a DFA:  direct financial assistance;  FI:  funding to institutions;  TE:  tax expenditures.
b 2000-01 data are Budget estimates and 2001-02 data are Budget appropriations.
c The above industry allocations reflect the availability of recently supplied data.  In the Trade & Assistance Review 1999-2000,
these programmes were classified under the unallocated category due to a lack of information.  Consequently, the previousclassification is no longer appropriate.
d Estimates for 1999/00, 2000/01, and 2001/02 are based on Austrade industry allocations for 1998/99.  Austrade has not
assembled data on the industries benefiting from its export promotion activities for subsequent years.
Note: Figures may not add to total due to rounding.
Source: Productivity Commission (2001), Trade & Assistance Review 2000-2001, Table 4.6  [Online], 11 December,
Annual Report Series 2000-2001, AusInfo.  Available at:  http://www.pc.gov.au [28 February 2002].
(iii) Overall commitments under the General Agreement on Trade in Services
78. Australia has not changed its GATS commitments since its previous Review.80  its
comprehensive Schedule of Specific Commitments, which is subject to certain general (i.e.
horizontal) limitations (e.g. restriction of foreign investment subject to national interest
considerations), covers 90 activities within the financial (banking, insurance), business,
                                                     
80 More information on Australia's GATS commitments may be found, inter alia,  in WTO documents
GATS/SC/6, 15 April 1994, GATS/EL/6, 15 April 1994, and GATS/SC/6/Suppl.4, 26 February 1998;  andWTO (1998).WT/TPR/S/104 Trade Policy Review
Page 114
communication, construction, distribution, transportation (including maritime, road, air and pipeline
transport), tourism, recreational, health, educational, and environmental services sectors.  Commercial
presence in certain sectors (e.g. legal services, insu rance, transport services) is subject to certain
conditions, while the presence of natural persons in others (professional, telecommunications,
distribution, educational, health, tourism, recreational, environmental services) is unbound.  For
certain services (construction, environmental, health, tourism, transport), cross-border supply isunbound or subject to certain conditions (financial services).  Under Article II of the GATS, Australia
now maintains MFN exemption with respect to arrangements with Canada, France, Israel, New
Zealand, and the United Kingdom for co-production of film and television programmes.
79. Australia has supported negotiations across all 12 services sectors, as defined by the WTO, in
the new round of trade negotiations;  the authorities have indicated that this does not imply thatAustralia will make concessions in every area.
81  In addition to submissions on other services issues,
Australia has submitted to the WTO Council for Trade in Services negotiating proposals on high
priority areas such as legal, accountancy, architecture, construction and related engineering,
engineering, education, financial, and telecommunications services.82
(iv) Agreement with New Zealand
80. The negative "inscription list" of the Protocol on Trade in Services (part of the Australia New
Zealand Closer Economic Relations Agreement), aimed at ensuring national treatment, remains
unchanged since the last Review of Australia.83
(v) Financial services
81. The contribution of financial se rvices to GDP rose slightly from 5.8% in 1997/98 to 6.3% in
2000/01 (Table I.2).  Australia's financial services sector continues to be based on three main
institutional groups:  banks, non-bank financial in termediaries (NBFIs), a nd insurance companies and
management funds.  No major changes have taken place in the structure of assets of the financial
system;  the banking sector remains the largest holder of financial assets (Table IV.6).
82. As indicated at the time of the previous Review of Australia, financial reforms have been
undertaken since 1997 following recommendations made by the Wallis Report (Financial System
Inquiry (FSI) Final Report).  These reforms included changes to the prudential regulation regime, thecreation of the Payments System Board within the Reserve Bank of Australia, and the removal of
prohibitions on life insurance offices taking over banks.
84  To implement further recommendations of
the Wallis Report, there have been significant reforms since 1998 to the regulatory framework
governing financial markets (including stock and futures exchanges), clearing and settlement
facilities, general insurance, financial services providers, and financial product disclosure;  thesereforms became effective on 11 March 2002.
83. Since 1997, three institutions have shared supervision of the financial system:  the Reserve
Bank of Australia (RBA);  the Australian Prudential Regulation Authority (APRA) (deposit-taking
institutions, life and general insurance providers, and superannuation funds (i.e. pension funds));  and
the Australian Securities and Investments Commission (ASIC) (overall market integrity, consumerprotection and competition in financial services area).
                                                     
81 Australian Department of Foreign Affairs and Trade (2001).
82 Australian Department of Foreign Affairs and Trade (undated a).
83 WTO (1998).
84 More information on these reforms may be found in WTO (1998).Australia WT/TPR/S/104
Page 115
Table IV.6
Structure of the assets of the financial system, June 1996-June 2001
(Per cent and $A billion)
June 1996 June 1997 June 1998 June 1999 June 2000 June 2001
Total ($A billion) 1,047.7 1,209.6 1,343.1 1,494.1 1,688.9 1,869.1
(Per cent of total)
Banking sector
Reserve Bank (RBA) 3.4 4.0 3.6 3.3 3.2 3.3
Other banks 46.4 45.3 43.7 43.4 43.3 43.2
Other authorized deposit-taking institutions
Permanent building societies 1.3 0.9 0.9 0.9 0.8 0.7
Credit cooperatives 1.5 1.4 1.4 1.3 1.3 1.3
Financial Corporations Act institutions
Money market corporations 5.7 5.5 5.0 4.1 3.8 4.3
Finance companies 3.3 3.0 3.3 3.2 2.6 2.6
General financiers 1.1 1.2 1.2 1.2 1.2 1.3
Pastoral finance companies 0.3 0.3 0.3 0.3 0.3 0.5
Life offices and superannuation funds
Life insurance offices 11.5 11.1 11.0 10.9 10.3 9.4
Superannuation funds 13.6 14.3 14.8 15.3 16.5 16.0
Other managed fund
Cash management trusts 0.8 1.0 1.4 1.4 1.5 1.5
Common funds 0.5 0.5 0.5 0.5 0.4 0.4
Friendly societies 0.8 0.6 0.5 0.4 0.3 0.3
Public unit trusts 4.3 4.9 5.5 6.3 6.5 6.7
Other financial institutions
General insurance offices 4.4 4.3 4.5 4.4 4.2 4.0
Securitization vehicles 1.3 1.7 2.5 3.0 3.8 4.5
Source: Reserve Bank of Australia (undated), Bulletin Statistical Tables, Table B.1 [Online].  Available at
http://www.rba.gov.au/statistics/bulletin/ index.html/ (23 October 2001).
(a) Banking and finance
84. The Australian market is dominated by four major nation-wide full service banks (accounting
for about three-quarters of total banking assets) with numerous regional banks, foreign owned banks
and other non-bank financial institutions.  At present, there are 49 authorized banking groups, 37 of
which are foreign-owned (12 incorporated locally, 25 are branch operations).
85. The Reserve Bank of Australia (RBA), Australia's central bank, is mainly responsible for
monetary policy, the stability of the financial system and the safety and efficiency of the paymentssystem;  the RBA undertakes its tasks with full independence from the Government.
85
86. Australia has a liberal financial services sector, although some restrictions remain on trade in
banking and insurance services.  Foreign banks are able to operate both branches and subsidiaries,
although they must keep their operations separate.  Australian banking requirements include
compliance with international prudential standards.   Foreign bank subsidiaries must be locally
incorporated and are restricted by the size of their Australian balance sheets.  Foreign banks operating
as branches are limited by the constraints of their world-wide balance sheets and can only accept
                                                     
85 Office of Asset Sales and Information Technology Outsourcing (2000).WT/TPR/S/104 Trade Policy Review
Page 116
deposits exceeding $A 250,000.  The authorities clarified that these measures protect retail depositors,
as foreign bank branch operations are subject to more liberal regulatory requirements.  These
requirements reflect prudential policy considerations and are not intended to restrict competition.
87. Foreign ownership in this and most other sectors is subject to the general provisions of the
Foreign Acquisitions and Takeovers Act 1975.  Investment proposals that exceed specified limits
must seek prior approval from the Foreign In vestment Review Board.  Proposals above the
notification thresholds are dealt with on a case-by-case basis and are approved unless judged contrary
to the national interest.  In addition to this requirement, any person (foreign or domestic) wishing to
control or hold a stake greater than 15% in a financial sector company (including banks, general
insurers and life insurers) must obtain the approval of the Treasurer, who takes into consideration the
national interest under the Financial Sector (Shareholdings) Act 1998.  Consistent with the findings ofthe Financial System Inquiry, the Australian Government stated that any large-scale transfer of the
ownership of the financial system to foreign hands would be contrary to the national interest.
88. In 1998, the Government launched the Centre for Global Financial Services initiative, to
enhance Australia's position as a global financial services centre in the Asia Pacific time zone.
86  In
August 1999, Axiss Australia, a comprehensive one-stop shop was established for Australian andoverseas financial services organizations either operating in Australia or wishing to move or extend
their operations to Australia.
89. Between 1994 and 2001, increased competition and deregulation caused Australia's major
banks' interest rate spread (difference between interest  rate received and interest rate paid) to fall from
3.97 percentage points to 2.7 percentage points (Chart IV.2).
                                                     
86 Australian Department of Foreign Affairs and Trade (undated b).2.02.53.03.54.0
1994 1995 1996 1997 1998 1999 2000 2001Chart IV.2         
Major banks' domestic interest spreada, 1994-2001
Percentage points
Average interest rate received less average interest rate paid.
Information provided by the Australian authorities.a
Source : Australia WT/TPR/S/104
Page 117
(b) Insurance
90. In 2000/01 there were 156 private and 15 public general insurers, with assets worth
$A74.8 billion (4% of total financial sector assets).  There were 42 private life insurers with assets
worth $A175.8 billion (9.4% of total financial sector assets).  Australia has no public life insurers.  At
the time of the previous Review, both life and general insurance industries were relatively
concentrated.  In general insurance, ten groups held around 72% of premium revenue in 1996/97;  tengroups accounted for 57% in 1999/00.  The three largest life insurance groups accounted for almost
50% of the industry's Australian assets in 1996/97 (ten groups account for 77% of industry assets);
this rose to 60% in 2000/01 (ten firms accounting for 90%);   21 foreign-owned life insurance groups
accounted for 28% of the total.  Public general insurers accounted for around 26% of the sectors'
premium revenue.
91. Foreign insurance companies face limitations, such as the prohibition on establishment of new
foreign branches of life insurers and on placing life insurance business with foreign insurers.  Any
person (foreign or domestic) wishing to gain influence over a registered insurance company would
require the Treasurer's approval under the Insurance Acquisitions and Takeovers Act 1991.  The
Treasurer can approve an application if it is in the "public interest".  When determining if anapplication is in the "public interest", the Treasu rer examines the concentration of economic power in
the insurance industry, the national interest and whether persons influencing the company are fit and
proper.  Under the Insurance Act 1973 and the Life Insurance Act 1995, the Australian Prudential
Regulatory Agency (APRA), an independent regulatory body, approves domestic or foreign person as
actuaries of life or general insurance companies, provided that the person has suitable actuarial
qualifications and experience to perform the functions of an actuary.
92. Under the Insurance Act 1973, both Australian-incorporated general insurers, and general
insurance branches of foreign insurance companies must receive the FIRB's authorization subject to
normal threshold exemptions in order to conduct business in Australia.
87  As from 11 March 2002,
agents of unauthorized foreign insurers can operate in Australia as long as they are licensed under the
Corporations Act 2001.  Disclosure requirements that came into effect on 11 March 2002 eliminated
any distinction between Australian and foreign insu rance companies:  authorized foreign insurance
companies have the same disclosure requirements as  Australian insurers.  Clients that are provided or
recommended policies with unauthorized foreign insure rs must be informed that the insurer is not
subject to the usual regulation for insurers in Austra lia, and that consideration should be given to the
need for further information about the insurer's c ountry of incorporation and the legal framework for
dispute resolution.
(vi) Communications
(a) Telecommunications
93. Following the 1997 deregulation, Australia's telecommunications sector has developed from a
largely centralized, publicly controlled monopoly structure to an open and competitive market regime
placing emphasis on industry self-regulation.88  There is a greater choice of suppliers of
telecommunication services and a broader range of new and innovative services and products.  The
auctions of radiocommunications spectrum in the 800MHz and 1.8GHz bands in 1988 and 2000
facilitated the entry into the market of several new mobile phone carriers.89  As at March 2002, more
than 80 carriers were licensed by the Australian Communications Authority (ACA) and some
                                                     
87 WTO (1998).
88 Department of Communications, Information Technology and the Arts (2000).
89 Department of Communications, Information Technology and the Arts (2000).WT/TPR/S/104 Trade Policy Review
Page 118
1,000 carriage service providers were registered  with the Telecommunications Industry Ombudsman
(see below).  The new carriers are often former service providers and are generally reliant upon
leasing network capacity from Telstra Corporation Ltd (Telstra), although some are developing their
own switching and network capability. 90
94. Telstra Corporation Ltd (Telstra), the former monopoly carrier, still dominates the
telecommunications sector (about 70% of the total market) and operates Australia's land-basedtelephony service
91;  state ownership in Telstra has been reduced to 51.1% (via two public floats,
November 1997, October 1999) and the intention is to sell the remaining equity at some future point.92
Foreign ownership in Telstra is restricted to 35% of the 49.9% available for trade on the stockexchange (i.e. some 17.5% of the total company shar e base);  any individual ownership is limited to
5% of the 49.9%.
95. During the period under review, a number of amendments have been made to the regulatory
framework to enhance its effectiveness.  The Telecommunications Act 1997 and the
Telecommunications (Consumer Protection & Servi ces Standards) Act 1999 strengthened existing
obligations and introduced new ones with regard to consumers and the general community.
93  These
obligations include the universal service obligation (USO), retail price controls on various Telstraservices, and customer service guarantee (CSG) performance standards.  No restrictions are imposed
on network suppliers (except that no carrier may install or operate an analogue AMPS network).
94
The analogue network was closed on 31 December 1999 in the metropolitan areas of all capitals(except Darwin and Hobart) and on  31 December 2000 in remaining areas, with Telstra replacing its
analogue mobile phone network with Code Division Multiple Access (CDMA) technology.
96. Foreign ownership in the sector, except in Telstra, is subject to the general provisions of the
Foreign Acquisitions and Takeovers Act 1975.
95  Investment proposals that exceed specified limits are
subject to the prior approval of the Foreign Investme nt Review Board.  Prior approval is also required
for foreign involvement in the establishment of new entrants to the telecommunications sector or
investment in existing businesses in the telecommunications sector.  Proposals above the notification
thresholds are dealt with on a case-by-case basis and are approved unless judged contrary to the
national interest.  There have been no proposals rejected in this industry in recent years;  this, togetherwith the approval of the Singtel acquisition of Optus in 2001, is evidence of Australia’s liberal
approach to foreign investment in the sector.
97. In addition to the improvement in the quality of telecommunication services, lower prices
have been achieved for telephone calls, particularly long-distance calls.  As indicated earlier, the 1999
Telecommunications (Consumer Protection & Services  Standards) Act provides for price control
arrangements for certain services supplied by Telstra, thus retaining the system of price caps for
Telstra.  The controls are administered by th e Australian Competition and Consumers Commission.
96
The arrangements for the period from 1 July 1999 to 30 June 2001 included a requirement for Telstra
to reduce average prices for a basket of services by at least 5.5% in real terms each year.  Between
                                                     
90 Department of Communications, Information Technology and the Arts (2000).
91 Telstra's principal activities include providing telephone exchange lines, local and long distance
phone services, international services, mobile telecommun ication services, and a range of data, internet and on-
line services.
92 Department of Communications, Information Technology and the Arts (2000).
93 Department of Communications, Information Technology and the Arts (2000).
94 Department of Communications, Information Technology and the Arts (2000).
95 Foreign Investment Review Board (2000).
96 Department of Communications, Information Technology and the Arts (2000).Australia WT/TPR/S/104
Page 119
1998 and 2000, Australia's average international call charge per minute at peak rate dropped by 68%
to US$0.40, or 76% of the OECD average level.97
98. During the period under review, the universal service obligation (USO) subsidy levels have
been an issue and the subject of comprehensive reform.  Telstra's USO requires that standard
telephone services, including services for the disabled, public payphones, digital data services and
prescribed carriage services, are reasonably accessible to all people in Australia on an equitable basisat affordable prices, wherever they reside or carry on business.  As a matter of course, Telstra's
$A 1.8 billion USO claim (lodged on 28 September 19 98) was subject to scrutiny by the independent
regulator, the Australian Communications Authority (ACA), which finally estimated Telstra's cost for
1997/98 at $A 548 million.  Given the unprecedented size of the claim, however, and its potential to
cause industry instability and deter investment, the authorities decided the setting of a subsidy would
be set by agreement between the carriers, or capped at the historical level of $A 253.2 million.  The
subsidies for 1998/99 and 1999/00 varied in line with ACA advice, at around $A 280 million in each
year.  Following the 1997/98 claim, an extensiv e review of Australia's USO arrangements was
undertaken and, in 2000, new arrangements were enacted.  Amongst other things, the Minister was
empowered to set USO subsidies for up to three years in advance, based on the advice of the ACA.This approach enables a range of factors to be c onsidered in setting subsidies.  According to the
authorities, the setting of subsidies in advance pr ovides industry with certainty, helping it to plan.
Subsidies of $A 240 million, $A 234.1 million, and $A 231.7 million have been set for 2001/02,
2002/03, 2003/04.
99. The 2000 amendments also provided for competition in the supply of services under the USO.
Within this framework, a competitive tender in relatio n to the supply of USO services in the remotest
80% of Australia was conducted in 2000/01.  Telstra was the successful tenderer, and two pilots of amulti-provider USO contestability model commenced on 1 July 2001.  These arrangements seek to
provide all telecommunications service providers with the opportunity to compete for USO subsidies,
consistent with Australia's openness in the telecommunications market.
100. The institutional setting for the sector has remained unchanged.  The Australian
Communications Authority, is, inter alia,  responsible for administering a range of technical and
consumer issues relating to telecommunications, as well as for managing the radiofrequency
spectrum, licensing telecommunications carriers, and reporting to the Minister for Communications,
Information Technology and the Arts on the performance of carriers and service providers.
98  T h e
Australian Communications I ndustry Forum (ACIF) deals, inter alia,  with the development of
industry codes of practice for registration and the timely production of technical standards,specifications, plans, and guidelines that the industry and community need.  The Telecommunications
Industry Ombudsman (TIO) provides a free, independent investigation service for residential and
small business customers of telecommunications services.
                                                     
97 OECD document DSTI/ICCP/TISP(2000)10/CHAP2, Table 7.15, 1 December 2000.
98 Department of Communications, Information Technology and the Arts (2000).WT/TPR/S/104 Trade Policy Review
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(b) Broadcasting and audiovisual
Broadcasting
101. Under the Broadcasting Services Amendment Act (No 1) 1999, an "anti-hoarding" or "must
offer" regime for free-to-air broadcasters was introduced in December 1999;  the amendment places a
licensing condition on commercial television broadcasters, to maximize opportunities for full and live
free-to-air coverage of major events, particularly sporting events.99  The national broadcasters (ABC
and SBS) are bound, through obligations established in their respective legislation, to televise live
designated events that they have accepted, or to offer, before the expiry of the offer time, those rights
(either in whole or in part) to the other national broadcaster for a nominal charge.  The minimum offer
time is 30 days before the start of the event or series.  The rules require commercial television
broadcasters that have live rights to designated events or series of events, and who do not intend totelevise the whole or a part of the event, to offer the unused rights for a nominal charge to the national
broadcasters.
102. As from March 1999, a new 1999 Australian-content standard for all commercial television
services has applied to promote the role of Australian television in reflecting a sense of Australian
identity, character, and cultural diversity.
100  The standard contains two main mechanisms:  a
transmission quota that sets an annual overall minimum level of Australian programming between
6 a.m. and midnight, and a set of sub-quotas for first-run Australian programmes requiring the
broadcast of minimum amounts of drama, children’s programmes (including children's C drama), and
documentary programmes.  Each licensee must meet the following requirements:  an Australian
programming transmission quota of 55% (previously 50%)101;  an Australian drama score of
225 points;  an Australian children's drama requirement of 32 hours of first release and 8 hours repeat
drama;  and an Australian first release documentary requirement of 20 hours.  Regulations governingAustralia's pay-TV industry require that drama channels must devote 10% of programme expenditure
to new Australian-produced content.  In accordance with Australia’s obligations under the Closer
Economic Relations Agreement (CER) with New Zealand, New Zealand programmes are counted
towards the broadcaster’s Australian content obligation.  All commercial television networks met
these requirements in 1999 and 2000.
103. In May 2002, the authorities considered changes to the 1998 high definition television
(HDTV) digital broadcasting policy.  In 1998, it was agreed to provide the three commercial networks
with additional spectrum to allow them to introduce digital broadcasting;  mandatory broadcasting of
at least 20 hours each week is in force but the use of multi-channelling services is blocked.
102  An
HDTV quota requiring the networks to provide home-grown programming comes into effect in
January 2003.
104. Foreign interests in commercial television broadcasting services continue to be limited to a
15% company interest for individuals and a 20% company interest in aggregate.103  A foreign person
cannot be in a position to exercise control of a commercial television broadcasting licence.  No more
                                                     
99 Australian Broadcasting Authority (ABA) online information.  Available at:
http://www.aba.gov.au/what/programme/oztv.htm#compliance with standard – 1997;  or http://www.aba.gov.au/what/programme/ozpay.htm;  or http://www.aba.gov.au/what/programme/ozadvert.htm [4 April 2001].
100 Australian Broadcasting Authority (ABA) online information.  Available at:
http://www.aba.gov.au/what/programme/oztv.htm#compliance with standard – 1997;  or http://www.aba.gov.au/
what/programme/ozpay.htm;  or http://www.aba.gov.au/what/programme/ozadvert.htm [4 April 2001].
101 U.S. Department of State (2000).
102 The Australian Financial Review,  3 May 2002.
103 Foreign Investment Review Board (2000).Australia WT/TPR/S/104
Page 121
than 20% of directors may be foreign. For all subscription television broadcasting services licences,
foreign interests are limited to a 20% company inte rest for an individual and a 35% company interest
in aggregate.  There are no foreign ownership or control limits on commercial radio.
105. Under a Regional Equalisation Plan (REP), as from 2000/01, assistance of up to
$A 260 million is to be provided over 13 years to ensure that regional and remote Australia shares in
the benefits offered by digital television and datacasting services.104  This assistance represents 50%
of the estimated costs for digital conversion of the regional broadcasters.  Commercial television
broadcasters in regional licence areas are to commence digital transmission progressively between
1 January 2001 and 1 January 2004.
Advertising
106. The Australian-content in advertising standard ha s ensured that the majority of advertisements
on television are Australian-made;  at least 80% of advertising time broadcast each year by
commercial television licensees between the hours of 6 a.m. and midnight must use Australian
produced advertisements.105  New Zealand commercials have fully qualified as Australian since 1981.
The amount of foreign advertising broadcast by all network stations was well below the amount
allowed under the standard.
Film production
107. The Australian film production industry receives government support in several ways.  The
Australian Film Commission provides screen, cu ltural, and industry support through a range of
measures including project development through script and other pre-production assistance,
post-production grants and low-budget production funding, and grants in support of a vigorous and
diverse screen culture.106  The Australian Film Finance Corporation (FFC), the principal government
agency for funding the production of Australian film and television programmes, has annual publicfunding of $A 50 million for the period from 2001/02 to 2003/04.
107
(vii) Transport
(a) Shipping
108. Since the previous Review of Australia, the state appears to have disinvested in maritime
services.  In late 1998, the Commonwealth sold the Australian National Line (ANL) shipping businessand the Western Australian Shipping Commission sold "Stateships";  the authorities indicated that at
present, no States operate cargo ships any longer.
                                                     
104 Minister of Communications, Information Technology and the Arts online information.  Available
at:  http://www.dcita.gov.au/ [24 April 2001].
105 Australian Broadcasting Authority (ABA) online information.  Available at:
http://www.aba.gov.au/what/programme/oztv.htm#compliance with standard – 1997;  or http://www.aba.gov.au/what/programme/ozpay.htm;  or http://www.aba.gov.au/what/programme/ozadvert.htm [4 April 2001].
106 Australian Film Commission online information.  Available at:  http://www.afc.gov.au/about/
whowe/index.html [17 April 2001].
107 Minister of Communications, Information Technology and the Arts online information.  Available
at:  http://www.dcita.gov.au/ [24 April 2001];  and Australian Film Finance Corporation online information.Available at:  http://www.ffc.gov.au/intro.html [17 April 2001].WT/TPR/S/104 Trade Policy Review
Page 122
109. Australia's cabotage regime remains unchanged.  Coastal operations are carried out through a
system of licences and permits available to both Australian and international operators.108  Australian
wage standards must be observed.  The licence/permit system was streamlined and costs reduced.  All
but a couple of licensed ships are Australian registered.  By contrast, permits are held almost
exclusively by foreign flags.  In 2001 about 675 single voyage permits (SVPs) and 115 continuous
voyage permits (CVPs) were issued.  About 85% of the coasting trade is undertaken by licensedvessels.  The remainder is carried out by vessels holding a permit.
110. Financial assistance to shippers of freigh t between Tasmania and the mainland under the
Tasmanian Freight Equalisation Scheme (TFES) was modified and put in effect as of 1 July 1999.
The modified TFES provides a more transparent and appropriate basis for assistance to shippers and
defines more clearly the transport cost disadvantage (the difference between a shipper’s wharf gate towharf gate cost and the notional road freight cost for an equivalent freight task).  All commodities are
being compensated on an identical basis, that is, on a per twenty-foot container (TEU) basis.  The
TFES assists in alleviating the comparative interstate freight cost disadvantage incurred by the
shippers of eligible non-bulk goods.  Eligible items include goods produced in Tasmania for use or
sale on the mainland as well as equipment and raw materials of Australian origin used as inputs bymining, manufacturing, agricultural, fishing, and forestry industries in Tasmania.  Cargoes intended
for export, bulk cargoes, and goods manufactured overseas are ineligible.  Some 1,450 shippers
benefit from the scheme.
(b) Air transportation
111. An open market in the airline industry has reduced the cost of air travel and improved
passenger service.  Since 1998, real airfares on r outes between Australia and North America, Europe
and North East Asia have continued their downward trend, while fares between Australia and SouthEast Asia and some Pacific countries have remained relatively stable.  From 1998 to 2000, the
Herfindahl-Hirschman Index (HI), measuring competition on Australia’s major international routes,
declined from 0.19 to 0.16, indicating the availability of a greater number of services and more
opportunities for travel.  In November 2000, Australia and New Zealand endorsed their first open
skies agreement to allow international airlines from both countries to operate without restrictionacross the Tasman and within and beyond each other's territory.
109  Australia intends to negotiate other
open skies arrangements when this is in the national interest;  discussions are being held with
Singapore, the United Kingdom, and the United States.
112. Air transport is used extensively for lighter cargo, small high-value items, and for urgent
needs.110  Three major airline operators, Qantas, Ansett, and Virgin Blue provide air services on
domestic trunk routes, with a large number of regional commuter operators providing regular air
                                                     
108 Under Part IV of the Navigation Act 1912, the movement of interstate cargo may be legally
undertaken by either a licensed ship or a ship operating under a coasting trade permit (either single voyagepermit (SVP) or continuous voyage permit (CVP)).  Licen ses are not restricted to Australian registered, owned,
or crewed vessels and may be issued to a ship of any fl ag, regardless of crew nationality or ownership.  The Act
stipulates a number of requirements the licence holder n eeds to meet, including that the crew on a licensed ship
is paid Australian seafarer wage rates for the period during which the ship is engaged in the coasting trade.  Alicence is an alternative to a single or multiple voyage permit (SVP or CVP), which an unlicensed ship mayapply for.  A permit will be issued only where no licensed ship is available, or the service by a licensed ship is
considered to be inadequate to the needs of the ports, and it is considered desirable in the public interest that a
permit be issued to an unlicensed ship.  SVPs are issued for a single voyage between designated ports for a
specified cargo.  A CVP may be issued in circumstances where a long-term contract exists for the movement ofcargo and the freight task will be undertaken primarily by one or two vessels.
109 Australian Department of Foreign Affairs and Trade (undated b).
110 U.S. Department of Commerce (1999).Australia WT/TPR/S/104
Page 123
transport services to around 240 airports.  Foreign persons (including foreign airlines) may acquire up
to 100% of the equity in a domestic airline, unless this is contrary to the national interest.111  They
may acquire only up to 49% of the equity in an Aust ralian international carrier (other than Qantas),
provided this is not contrary to the national interest ;  total foreign ownership of Qantas is restricted to
a maximum of 49% in aggregate, with individual holdings limited to 25% and aggregate ownership
by foreign airlines limited to 35%.  In addition, a number of national interest criteria must be satisfied,relating to the nationality of Board members and operational location of the enterprise.
113. Most of Australia’s 250 licensed airports are owned and operated by local government
organizations.  However, 22 of the major international, regional, and general aviation airports, which
account for just under 90% of scheduled international and domestic passengers, remain
Commonwealth owned.  Starting in 1997, the Austra lian Government began a comprehensive airport
privatization programme for these airports and by September 2001 all, except those in Sydney, had
been leased to commercially operated private-sect or companies.  Australian airport legislation
stipulates a 49% foreign ownership limit for leased Commonwealth-owned airports, and a 5% airline
ownership limit and cross-ownershi p limits between Sydney airport (together with Sydney West) and
Melbourne, Brisbane, and Perth airports.
(viii) E-commerce
114. Australia considers that e-commerce is likely to give further impetus to the process of
globalization.  Internet technology has been used to expand into new foreign markets;  so far the
greatest beneficiaries among Australian firms have been mining companies, which have streamlined
internal procedures, collaborated with rivals to jointly procure, and are now moving their minerals
marketing to Internet-based spot markets.  The Commonwealth and state governments have a range of
programmes and other measures to promote the uptake of e-commerce in regional Australia.
112  The
largest programme "Networking the Nation", provides fu nding of $A 250 million over five years.  For
example, the Tasmanian Electronic Commerce Centre has assisted a number of local firms to integrate
the Internet into their operations to create internal efficiencies and streamline their international export
relationships.  These include firms in the dairy, forestry, wool, pyrethrum, apple, and pear industries,
as well as larger manufacturers of footwear and engineering products.
115. Since 1997, Australia has entered bilateral arrangements to encourage international
cooperation in e-commerce, information technology, telecommunications, and other online issues and
projects.113  It is party to joint statements and memoranda of understanding (MOUs) with several
countries including Canada;  China;  Hong Kong, Ch ina;  India;  Indonesia;  Israel;  Japan;  the
Republic of Korea;  Singapore;  the United Kingdom;  and the United States.
116. Australia believes that the WTO must give full consideration to the complex trade-related
issues arising from the emergence of e-commerce.114  It considers that multilateral trade rules must
encourage e-commerce development, while discouraging burdensome, trade-restrictive regulation and
anti-competitive practices.
                                                     
111 Foreign Investment Review Board (2000).
112 Australian Department of Foreign Affairs and Trade (2001).
113 National Office for the Information Economy online information.  Available at:
http://www.noie.gov.au.
114 WTO documents WT/GC/W/86, 22 April 1998, and WT/GC/25, 5 July 1999.Australia WT/TPR/S/104
Page 125
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