RESTRICTED
WORLD TRADE G/SCM/Q2/AUS/10
23April 1997
ORGANIZATION(97-1753)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byKOREA1,CANADA2,THAILAND3,JAPAN4,
theEUROPEAN COMMUNITY5,NORWAY6,ARGENTINA7,andtheUNITED STATES8
Regarding theNewandFullNotification ofAUSTRALIA9
Thefollowing communication, dated 15April 1997, hasbeenreceived from thePermanent
Mission ofAustralia.
_______________
QUESTION FROM KOREA
Dairy products
Thenotification states thattheESPwasclassified asan"export subsidy" subject toreduction
commitments under theWTO Agricultural Agreement, butitwasterminated on30June1995andhas
beenreplaced byaclearly identifiable domestic market support scheme.
Could youexplain theobjective, thebeneficiaries andthecondition ofthereplaced scheme
andthereason whythiswasnotnotified?
Answer
Thenewscheme wasnotnotified totheCommittee onSubsidies andCountervailing Measures,
sinceitdoesnotprovide subsidies within themeaning oftheAgreement onSubsidies andCountervailing
Measures. Itdoesdeliver domestic support asdefined under theAgreement onAgriculture andso
isnotified totheCommittee onAgriculture.
Theobjective ofthenewscheme istoreplace thesupport provided todairy farmers under
theterminated scheme. Thebeneficiaries under thescheme aredairy farmers.
1G/SCM/Q2/AUS/1,2G/SCM/Q2/AUS/2,3G/SCM/Q2/AUS/3,4G/SCM/Q2/AUS/4 &Rev.1,
5G/SCM/Q2/AUS/5&G/SCM/Q2/AUS/9,6G/SCM/Q2/AUS/6,7G/SCM/Q2/AUS/7,
8G/SCM/Q2/AUS/8,9G/SCM/N/3/AUS.G/SCM/Q2/AUS/10
Page2
QUESTION FROM CANADA
Wenotethatthisnotification doesnotinclude anysub-federal subsidies. DoesAustralia intend
tonotify sub-federal subsidy programmes thatmeet thecriteria under Article 25oftheSubsidies
Agreement andArticle XVIoftheGATT 1994?
Answer
Australia willprovide what information itcantoquestions onspecific sub-national subsidy
programmes. More generally theAustralian Government isintheprocess ofconsulting withState
authorities onadditional information about whatsub-national programmes might benotifiable tothe
Committee.
QUESTIONS FROM THAILAND
Question 1
Please givedetails ofAustralia Trade Commission (AUSTRADE) anditsschemes toassist and
promote export.
Answer 1
TheAustralian Trade Commission (Austrade) istheAustralian Government 'sinternational
tradeandinbound-investment development agency. Itsprime functions aretohelpAustralian companies
establish andmarket theirproducts andservices onworld markets; toassist firms toinvest inproductive
operations overseas andtoattract direct, foreign investment toAustralia.
Austrade wasestablished bytheAustralian Trade Commission Actof1985andwasdesigned
tobuild onthe50years ofexperience already gained bytheformer Australian Trade Commissioner
Service. Austrade plays akeyroleintheAustralian Government 'sstrategy tointernationalize the
Australian economy. TheAustralian Trade Commission Actdescribes Austrade 'sfunctions as:
- representing thetrading andcommercial interests ofAustralia inforeign countries;
- assisting, directly orindirectly, Australian organisations intrade negotiations;
- promoting, coordinating orparticipating inprojects designed topromote Australian export
trade;
- obtaining andmaking available information about current andfuture opportunities forAustralian
exporters, including opportunities forinvolvement inoverseas development projects;
- supporting andfacilitating investment inforeign countries andforeign investment inAustralia
where thatinvestment islikely toenhance Australian export trade;
- carrying outorassisting withoverseas development projects incircumstances where thataction
willbenefit Australian enterprises;
- administering theExport Market Development Grants (EMDG) Actof1974 (asamended);
andG/SCM/Q2/AUS/10
Page3
- facilitating access toCommonwealth andStateDepartments andinstrumentalities where such
access islikely toenhance opportunities forAustralian export trade.
Inpartnership withtheDepartment ofIndustry, Science andTourism, Austrade works toattract
direct, foreign investment toAustralia through theInvestment Promotion andFacilitation Programme.
Theprogramme'sobjectiveistopromoteAustraliaasadestinationforforeign,non-portfolioinvestments.
Austrade has99offices andrepresentatives in67countries andanextensive domestic network
which together work withAustralian companies to:
- establish whether ornottheyareready toexport;
- helpthem understand andapply thetools ofsuccessful exporting;
- identify prospective overseas markets andcarry outresearch intothese markets, including the
identification andcapture ofbusiness opportunities;
- introduce them totherightcontacts inoverseas markets, including importers, distributors or
agents; and
- assist companies topresent competitive tender bids, negotiate commercial agreements such
aslicensing agreements orjointventures andmount displays attrade exhibitions.
Additionalinformationonprogrammesreferredtoabovehavebeengiveninresponsetoquestions
from theECandtheUnited States.
Question 2
Does Australia maintain anyexport incentive scheme during thenotification period onthe
following sectors:
- motor vehicles
- textiles, clothing andfootwear i.e.incentives forinternational competitiveness programmes
Ifyes,please givedetails according tothenotification format.
Answer 2
Export Facilitation Scheme Arrangements fortheAutomotive Sector
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheAustralian automotive market isaveryopenmarket. Halfthenewpassenger motor vehicles
soldinAustralia areimported. Almost allcommercial vehicles soldareimported.
TheExport Facilitation Scheme (EFS) isanindustry restructuring andrationalisation measure
designed toencourage greater efficiency andcompetitiveness intheAustralian automotive industry.
Thescheme isinplace asatemporary measure tofacilitate restructuring intheautomotive
sector which hasbeenstrongly affected byfalling tariffs. Thescheme ispartoftheprogrammedG/SCM/Q2/AUS/10
Page4
reduction intariff. Thescheme istrade liberalising asitforces restructuring byallowing forimports
toenter atbelow thebound andapplied tariff rates. Itisscheduled toexpire in2000.
EFSincreases thelevelofimports intoAustralia andthereby maintains anongoing pressure
onlocalsuppliers ofmotor vehicles andcomponents toincrease quality andcompetitiveness.
Theobjective oftheEFSistoassist theindustry rationalisation process by:encouraging
rationalisation oftheindustry byencouraging firms toconcentrate onmanufacturing andexporting
components andvehicles forwhich theyhaveacomparative advantage andsupplementing theirrange
byimporting those goods forwhich there isnocomparative advantage andtherefore contributing to
improved economies ofscale andindustry efficiency:
- increasing therange andquality ofvehicles available toconsumers byexpanding opportunities
tosupplement areduced range oflocalmodels withcompletely builtupimports; and
- assisting thelocalindustry become more integrated withtheworld automotive industry.
Textiles, Clothing &Footwear Import Credit Scheme
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheScheme ispartofthemajor restructuring mechanism ofthesector accelerating theeffect
oftariff reductions, thereby increasing exposure tointernational competition. Thisisreflected inan
increase inthenetdeficit oftrade intextiles, clothing andfootwear goods ofoverA$660 million or
21%since theScheme wasintroduced in1991/92. TheScheme isbeing progressively phased down
andwillterminate inJune2000.
Thescheme isequally available tobothAustralian owned andoverseas owned companies and
individuals and,byencouraging twowaytradefacilitation, assists bothimporters andexporters. The
scheme doesnotlinkimports toexports (i.e.evenifacompany doesnotexport, itcanstillimport
without anyrestriction). Itshould benoted thatAustralian textiles, clothing andfootwear market is
oneofthemostopenmarket intheworld (inthatAustralia doesnothaveanyquantitative restrictions).
Question 3
Does Australia maintain anyexport enhancement scheme atsub-federal level? Ifyes,please
givedetails according tothenotification format.
Answer 3
Australia willprovide what information itcantoquestions onspecific sub-national subsidy
programmes. More generally weareintheprocess ofconsulting withStateauthorities onadditional
information about whatsub-national programmes might benotifiable totheCommittee.
Question 4
PleasegivedetailsofR&Dassistanceatbothfederalandsub-federallevels.DoestheAustralian
Government setanycriteria toensure thattheassistance isqualified fornon-actionable treatment under
Article 8oftheSubsidies Agreement.G/SCM/Q2/AUS/10
Page5
Answer 4
TheTaxConcessions forR&Dscheme doesnotprovide specific subsidies.
Thescheme 'spremium rateofdeduction wasreduced to125% from 20August 1996. The
incentive allows claimants todeduct upto125% ofeligible expenditure incurred onR&D activities
when lodging theircorporate taxreturn. Thescheme isavailable toallmanufacturing andservice
companies. Inorder toclaim thefull125% rate,theclaimant musthavespent atleastA$20,000 a
yearinR&D activities unless thework iscontracted outtoanapproved Registered Research Agency,
suchastheCSIRO, oraCooperative Research Centre.
Could Thailand indicate which R&D programmes itwould likefurther details on.Some
additional information wasprovided intheanswer toJapan'squestion 6.Noprogramme hasbeen
designed withArticle 8.2(a) oftheAgreement onSubsidies andCountervailing Measures specifically
inmind.
QUESTIONS FROM JAPAN
Question 1
III. Citric acid
(1) Wasthisprogramme already terminated asmentioned inthenotification?
(2) Arethere anysimilar programmes inplace onthisproduct?
Answer 1
(1) Yes.
(2) No.
Additional information wasprovided inouranswer toECquestion I(c).
Question 2
IV. Computers
(1) Wasthisprogramme already terminated asmentioned inthenotification?
(2) Arethere anysimilar programmes inplace onthisproduct?
Answer 2
(1) No.G/SCM/N/16/AUS (i.e.theannual update for1996) notified thatadecision hadbeen
taken toextend thebounty until31December 2000. Subsequently theGovernment announced
inAugust 1996 thatitwould beterminated from 1July1997. Further detail wasprovided
inourresponse toECquestion I(d).
(2) No.G/SCM/Q2/AUS/10
Page6
Question 3
VI. Machine tools androbots
Paragraph 1(b)ofthenotification states thattheActprovides forpayment ofbounties onlocally
manufactured items. Inthisconnection, could Australia clarify whether theActconstitutes thesubsidies
contingent upon theuseofdomestic overimported goods?
Answer 3
Thebounty isnotcontingent upon theuseofdomestic overimported goods. Thereference
to"locally manufactured" simply means thatthebounty ispayable onproduction inAustralia.
Paragraph 1(d)ofthenotification noted thatthebounty ispaidasapercentage ofthevalue-added
component undertaken byacompany.
In1996theAustralian Government commissioned anIndustry Commission report intothetariff
andbounty arrangements pertaining tothemachine tools androbotics industries. Thereport
recommended themachine tools androbots bounty scheme lapse on30June1997. TheAustralian
Government hasaccepted therecommendation andconsequently stated itsintention inthe1996/97
budget tointroduce legislation intotheAustralian Parliament thatwould repeal theBounty (Machine
Tools andRobots) Act1985, which hadasunset of30June1997, andhence lapse thescheme before
thatdate. Thelegislation toabolish thebounty iscurrently before Parliament. Newapplications are
notbeing accepted.
Question 4
VII. Printed fabrics
(1) Wasthisprogramme already terminated asmentioned inthenotification?
(2) Arethere anysimilar programmes inplace onthisproduct?
Answer 4
(1) Yes,thisbounty wasterminated on30June1995.
(2) No.
Question 5
IX. Textile yarns
Paragraph 1(b)ofthenotification states thatthebounty waspayable uponproduction ofcertain
yarns, spunfromcertain textile fibres andusedtoproduce, inAustralia, yarns, othertextiles orproducts
made wholly orpartially therefrom. Inthisconnection, could Australia explain whether thisbounty
constitutes asubsidy contingent upon theuseofdomestic overimported goods?
Answer 5
Thebountydidnotdiscriminatebetweendomesticandimportedinputsusedtoproducebountiable
goods. Please notethatthisprogramme terminated on30June1995.G/SCM/Q2/AUS/10
Page7
Question 6
Others
Could Australia explain theoutlines ofthefollowing programmes andthereason whytheyhave
notbeennotified?
(1) Passenger Motor Vehicle Export Facilitation Scheme (PMV EFS)
(2) Textiles, Clothing andFootwear Import Credit Scheme (TCF ICS)
(3) Textiles, Clothing andFootwear: Bounties
(4) Textiles, Clothing andFootwear: Further Wool Processing
(5) 150percentTaxConcession forResearch andDevelopment
Additionally, please explain towhich industries andunder what criteria orconditions this
programme isapplied?
(6) Cooperative Research Centres Programme (CRC)
Additionally, please explain towhich industries andunder what criteria orconditions this
programme isapplied?
(7) National Space Programme (NSP)
Additionally,couldAustraliaexplaintheformofassistanceforenterprisesunderthisprogramme?
(8) Industrial Research andDevelopment: Queensland
Additionally,couldAustraliaexplaintheformofassistanceforenterprisesunderthisprogramme?
Answer 6
(1) Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheAustralian automotive market isaveryopenmarket. Halfthenewpassenger motor vehicles
soldinAustralia areimported. Almost allcommercial vehicles soldareimported.
TheExport Facilitation Scheme (EFS) isanindustry restructuring andrationalisation measure
designed toencourage greater efficiency andcompetitiveness intheAustralian automotive industry.
Thescheme isinplace asatemporary measure tofacilitate restructuring intheautomotive
sector which hasbeenstrongly affected byfalling tariffs. Thescheme ispartoftheprogrammed
reduction intariff. Thescheme istrade liberalising asitforces restructuring byallowing forimports
toenter atbelow thebound andapplied tariff rates. Itisscheduled toexpire in2000.
EFSincreases thelevelofimports intoAustralia andthereby maintains anongoing pressure
onlocalsuppliers ofmotor vehicles andcomponents toincrease quality andcompetitiveness.G/SCM/Q2/AUS/10
Page8
Theobjective oftheEFSistoassist theindustry rationalisation process by:encouraging
rationalisation oftheindustry byencouraging firms toconcentrate onmanufacturing andexporting
components andvehicles forwhich theyhaveacomparative advantage andsupplementing theirrange
byimporting those goods forwhich there isnocomparative advantage andtherefore contributing to
improved economies ofscale andindustry efficiency:
- increasing therange andquality ofvehicles available toconsumers byexpanding opportunities
tosupplement areduced range oflocalmodels withcompletely builtupimports; and
- assisting thelocalindustry become more integrated withtheworld automotive industry.
(2) Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheScheme ispartofthemajor restructuring mechanism ofthesector accelerating theeffect
oftariff reductions, thereby increasing exposure tointernational competition. Thisisreflected inan
increase inthenetdeficit oftrade intextiles, clothing andfootwear goods ofoverA$660 million or
21%since theScheme wasintroduced in1991/92. TheScheme isbeing progressively phased down
andwillterminate inJune2000.
Thescheme isequally available tobothAustralian owned andoverseas owned companies and
individuals and,byencouraging twowaytradefacilitation, assists bothimporters andexporters. The
scheme doesnotlinkimports toexports (i.e.evenifacompany doesnotexport, itcanstillimport
without anyrestriction). Itshould benoted thatAustralian textiles, clothing andfootwear market is
oneofthemostopenmarket intheworld (inthatAustralia doesnothaveanyquantitative restrictions).
(3) These bounties werenotified. Seeanswers toquestions 4and5above. They wereterminated
on30June1995.
(4) TheFurther Wool Processing Programme commenced on22June1992 andwasintroduced
toencourage asubstantial increase intheproportion ofAustralia 'swoolclipprocessed tothetopsstage
inAustralia. TheFurther Wool Processing Programme closed on22June1993.
(5) Thisscheme doesnotprovide specific subsidies.
Thescheme 'spremium rateofdeduction wasreduced to125% from 20August 1996. The
incentive allows claimants todeduct upto125% ofeligible expenditure incurred onR&D activities
when lodging theircorporate taxreturn. Thescheme isavailable toallmanufacturing andservice
companies. Inorder toclaim thefull125% rate,theclaimant musthavespent atleastA$20,000 a
yearinR&D activities unless thework iscontracted outtoanapproved Registered Research Agency,
suchastheCSIRO, oraCooperative Research Centre.
(6) Thisprogramme doesnotprovide specific subsidies. TheCooperative Research Centres
Programme funds basic orstrategic research inanyareaofscience andtechnology. Theprogramme
provides funding, onatleastmatching basis, toapproved centres which bring together researchers
fromuniversities, public andprivate research institutions andresearch users fromthepublic orprivate
sector.
(7) Theelement oftheNational Space Programme thatprovides assistance toenterprises isthe
Space Industry Development Centres (SIDC) programme.G/SCM/Q2/AUS/10
Page9
SIDCs arecentres ofresearch expertise within universities, working inpartnership withindustry
todevelop space products andservices.
TheSIDC scheme, which wasestablished in1990, receives A$1.6m ayear. Each Centre is
eligible foramaximum ofA$500,000 peryearforfunding aprogramme ofR&D projects andCentre
development activities. Allprojects funded under theSIDC scheme must havetheactive support of
anindustry collaborator, whoisrequired tomatch theGovernment 'scontribution onadollar fordollar
basis.
Projects areproposed bytheCentres orbytheirindustry partners, andbrought together as
thebasisofeachCentre 'sannual workprogramme. Funding oftheworkprogramme grants isapproved
annually bytheSpace Policy UnitoftheDepartment ofIndustry, Science andTourism. TheDepartment
currently supports SIDCs attheQueensland University ofTechnology andGriffith University.
Theprogramme wasnotnotified because Australia views itasresearch funding toUniversities.
(8) TheAustralian Government isintheprocess ofconsulting withtheQueensland Stateauthorities
about theprogramme andtheextent towhich itmight benotifiable totheCommittee. Wewilladvise
Japan oftheoutcome.
QUESTIONS FROM THE EUROPEAN COMMUNITY
Question
Australiasubmittedon7August1995itsnotificationofsubsidyprogrammestotheWTOpursuant
toArticle XVI:1 GATT 1994 andArticle 25oftheWTO Subsidies Agreement.
Inthisrespect, theCommunity would liketoobtain clarification onanumber ofissues onthe
notified schemes asdescribed below.
Moreover, theCommunity hasobtained information ondifferent subsidy schemes which were
notnotified totheWTO although theirnotification seems necessary pursuant toArticle 25.2ofthe
Subsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
Australia notified anumber ofprogrammes which arelisted below. After examination, the
Community hasserious concerns ontheextent andthepractical implications ofthenotified programmes.
Thepresent analysis constitutes theremarks oftheCommunity andarequest forclarification. The
Community would liketoobtain further information foreachprogramme onthespecific criteria which
havetobemetbefore thesubsidy isgranted, andinparticular ifexport performance isacriterion.
(a) Bed-Sheeting
- Australia claims thatthebounty wasnotpayable onexported bedsheeting. Inthis
respect, could Australia provide domestic andexport statistics inorder toevaluate this
statement?
- Could Australia provide theamount ofthebounty?G/SCM/Q2/AUS/10
Page10
Answer I(a)
Notethatthisbounty wasterminated on30June1995. Theobjective ofthequestion isunclear;
however thestatistics requested areasfollows.
Domestic production in1994/95 was3,233,000 square metres. 1,366,846 square metres of
thisproduct wasexported atavalue ofA$22,617,746.
Output datafor1995/96 arenotyetavailable. A$67,398 inbounties waspaidin1995/96 based
on8cents persquare metre produced.
(b) Books
- Australia states thattherateofthebounty wasfortheperiod 1987-1988 20percent
toreduce gradually to4.5percentin1997. However, thetotalamount ofthebounty
increased intheperiod 1994-1995 to$A25,400,000 compared to$A22,274,000 for
theperiod 1993-1994. Could Australia provide aclarification forthisincrease?
Answer I(b)
TheBounty (Books) Act1986 came intooperation on1January 1987 andprovides bounty
payments forapproved books manufactured inAustralia. Tobeeligible forbounty, books must, in
general, beatleast49pages andbeproduced inaminimum runof1,000 copies.
Thebounty isdesigned toassist theprinting ofbooks inAustralia byhelping offset tariffs on
inputs forbook production particularly onpaper andinks.
Therateofbounty fellfrom 13.5% in1993 to10.8% from 1January 1994 to9.0% from
1January 1995. Bounty payments arecalculated asapercentage ofthecostofproduction.
Thevolume ofbooks produced bytheAustralian industry increased significantly overtheperiod
inquestion. Thiscanprimarily beattributed tochanges made intheCopyright Actin1991 which
increased thedemand forAustralian printing aspublishers moved tohavebooks printed inAustralia
toguarantee theiravailability within the30dayperiod. Under therevised arrangements, fornewtitles,
theholder oftheAustralian copyright mustmake thetitleavailable inAustralia within 30daysoffirst
publishing thetitleoverseas, inorder toretain protection against parallel imports ofthetitle.
TheGovernment hasannounced itsintention toabolish thebounty payable onbookproduction
from 30June1997 andlegislation iscurrently before Parliament.
Thecostofthebounty was$A21.9m in1995/96 andisforecast tobeA$10.1m in1996/97.
(c) Citric Acid
- TheCommunity examined thebounty andfound thatthebounty waspaidtothesole
Australian citric acidproducer, Sirius Biotechnology. Since thereisonlyoneproducer
whobenefits fromthescheme, theCommunity would likemore information regarding
thesales structure (including exporting activity) ofthiscompany.G/SCM/Q2/AUS/10
Page11
Answer I(c)
Thebounty expired on30December 1995. Thesolerecipient, Sirius Biotechnology, closed
operations inMay1994. There arenoother programmes inthisarea.
(d) Computers
(i) Isthisprogramme available forsoftware?
(ii) Australia states thatthescheme willendin1995. TheCommunity understands thatthe
programme wasextended until2000atareduced rateof5percent. Could Australia confirm
this?
(iii) TheCommunity hasconcerns about theinterpretation ofthetrade effects ofthebounty for
computer equipment. Thestatement thatthebounty aimstogivelocalcompanies thepossibility
tobuyAustralianhardwareiscontradictedbythefindingsoftheAustralianIndustryCommission.
The94-95 Annual Report states thatpartofthecomputer bounty ispaidonproduction destined
forexport. Furthermore, theICReport continues: "Based ontheavailable data, exports
received about halfofthebounty payments oncomputers". Theamount ofsubsidy isquite
considerable e.g.$A35.6 mfor1995/1996. Inviewoftheinformation contained intheIC
Annual Report, theCommunity requests further clarification. TheCommunity would alsolike
information onwhether thebounty iscontingent upontheuseofdomestic overimported goods
andconsequently, itscompatibility withArticle 3.1(b) oftheSubsidies Agreement.
Answer I(d)
Theextension oftheprogramme wasnotified totheCommittee onSubsidies andCountervailing
Measures inG/SCM/N/16/AUS. On1December 1995, Parliament amended theBounty (Computers)
Act1984 extending thecomputer bounty until 31December 2000. Theamendments passed by
Parliament alsoexcluded research anddevelopment frombounty eligibility forallproduction completed
onorafter1January 1996 andreduced thebounty ratefrom8%to5%forallproduction completed
onorafter1January 1997.
TheGovernment hassubsequently announced itsintention toabolish thecomputer bounty with
effect from 1July1997 andlegislation iscurrently before Parliament.
Thecomputer bounty doesnotdiscriminate between production fordomestic saleorproduction
forexport. Thefigures quoted fromtheIndustry Commission arepresumably justasimple arithmetic
apportionment ofthebounty between thedomestic andexport markets.
Thebounty isnotcontingent upon theuseofdomestic overimported goods. Almost all
bountiable production usesimported goods asmany important components notably memory chips,
microprocessors, discdrives, monitors andmotherboards aregenerally notmade inAustralia. As
setoutinthenotification, thebounty rateisonin-house value added bythemanufacturer. Only
operating andsystems software associated withtheeligible hardware maybeclaimed forbounty.
Applications software andsoftware notassociated withtheeligible hardware arenotbountiable.
(e) Machine Tools andRobots
- Although Australia states thatthebounty isdesigned toencourage local production
ofmetal-workingmachinetoolsbyimprovingcompetitivenessagainstimports,theexport
dataontheproducts concerned arenotsufficiently desegregated todetermine exportG/SCM/Q2/AUS/10
Page12
levels. Theexport intensity ratios oftheBureau ofIndustry Economics indicate that
16percentofthetotalamount ofbounty wenttoexports. Towhatextent isexport
performance taken intoaccount when granting thesubsidy?
Answer I(e)
Theprogramme isabounty, i.e.itispaidonallproduction withnodistinction being made
between whether theproduct isdestined forthedomestic orexport market.
In1996theAustralian Government commissioned anIndustry Commission report intothetariff
andbounty arrangements pertaining tothemachine tools androbotics industries. Thereport
recommended themachine tools androbots bounty scheme lapse on30June1997. TheAustralian
Government hasaccepted therecommendation andconsequently stated itsintention inthe1996/97
budget tointroduce legislation intotheAustralian Parliament thatwould repeal theBounty (Machine
Tools andRobots) Act1985, which hadasunset of30June1997, andhence lapse thescheme before
thatdate. Thelegislation toabolish thebounty iscurrently before Parliament. Newapplications are
notbeing accepted.
(f) Shipbuilding
- Information available totheCommunity indicates thatbounties arepayable on130per
centoftheproduction cost. Thebounties weretherefore equal to12percentofthe
actual production cost. TheAnnual Report oftheIndustry Community for1992/1993
shows that83percentofallshipbuilding bounties wereapplied forexport assistance
in1991/1992, 87percentin1992/1993 and86percentin1993/1994. Onthebasis
ofthese figures, theCommunity concludes thatthisscheme mayconstitute adefacto
export subsidy. Could Australia elaborate onthecriteria forgranting thesubsidy?
Furthermore, theCommunity would likeAustralia tocomment on(i)thefigures ofthe
Industry Commission; and(ii)thecompliance ofthescheme withArticle 3.1(a)of
theSubsidies Agreement.
Answer I(f)
TheBounty (Ships) Act1989 came intoeffect on1July1989 providing foraphase down of
bounties toshipbuilders. Itreplaced theBounty (Ships) Act1980following areview oftheshipbuilding
bounty scheme bytheIndustry Commission in1988. Amendments totheActin1993varied thebounty
phasedown schedule andextended theperiod ofoperation oftheActbytwoyears to30June1997.
TheGovernment hasannounced itsintention toextend thebounty assistance toshipbuilders to
31December 1997 andlegislation toimplement thisdecision iscurrently before Parliament.
Bounty in1996/97, asinprevious years, ispayable onabasis thatapproximates 100percent
oftheactual production costs, including anallowance foroverhead costs. Thebounty ratehasbeen
diminishing astheprogramme progressed towards termination. Thebounty rateis5%ofeligible costs
for1996/97 andthisratewillnowapply through theextended period of31December 1997.
Criteria forpayment ofthebounty arethat:
- theshipbuilder isregistered byauthority oftheMinister forIndustry, Science andTourism;
- thevessel isnotfortheAustralian Government orit'sagencies 'use,forexample, defence
vessels;
- thevessel isnotforexport toNewZealand; and
- thegross construction tonnage oftheshipisgreater than150andlessthan20,000.G/SCM/Q2/AUS/10
Page13
Withreference toArticle 3.1(a) oftheAgreement onSubsidies andCountervailing Measures,
theAustralian bounty isavailable toallvessels produced inAustralia thatmeetthecriteria, whether
forthedomestic orexport markets; itisnotinanywaybased onexport performance. Thefigures
quoted from theCommission arepresumably justasimple arithmetic apportionment ofthebounty
between thedomestic andexport markets.
(g) Textile Yarns
- Thefigures oftheTextiles, Clothing andFootwear Development Authority (Australian
Federal body) show thatthebounty scheme hasledtoastrong growth inexports of
textiles. In1988/1989 7percent(equal to$A236 m)ofallvalue-added textiles were
exported, compared toalevelof26percentin1994/1995 (equal to$A461 m).To
whatextent isexport performance taken intoaccount when granting thesubsidy?
Answer I(g)
Export performance wasnotconsidered inassessing bounty entitlements.
Thebounty wasterminated on30June1995.
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOWTO
Australia hasnotnotified alarge number ofprogrammes which appear tobenotifiable under
Article 25.TheCommunity finds thattheschemes described below provide afinancial contribution
which confers benefits tothelocalindustry. Inaddition theschemes areclearly specific (aspertaining
toaspecific sector orcontingent upon exports). Inaddition tothespecific questions asked, the
Community would likeclarification whytheseprogrammes werenotnotified toWTO andrequests that,
ifappropriate, Australia supplies anotification under Article 25,using thestandard format.
FEDERAL ORNATIONAL PROGRAMMES
(a) Pharmaceuticals -Factor FScheme
Thefactor Fscheme allows theGovernment togivehigher prices forpharmaceuticals itbuys.
Prior to1992 firms hadtomeetquantitative targets forR&D andexport activity. DuetoGATT
inconsistency, thecriteria changed toacommitment toincrease value-added inAustralia by50per
centinthree years and/or achievement ofR&D spending actual to3percentofannual turnover.
However where quantitative criteria cannot bemet,qualitative criteria arepossible suchas
newinvestment inproduction facility. Since thecommercial agreements onthisissueareconfidential,
itisnotpossible toascertain whether export policy isaqualitative criterion. Theprogramme isclearly
specific since thescheme subsidizes thepharmaceutical sector. TheCommunity alsoconsiders that
thisscheme mayconstitute aprohibited subsidy asprescribed inArticle 3(b)oftheSubsidies Agreement
since thescheme provides anincentive fortheuseofdomestic overimported goods intheformofthe
conditions ofincreasing domestic value-added.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthisscheme withtheSubsidies Agreement?G/SCM/Q2/AUS/10
Page14
Answer II(a)
TheFactor (f)Scheme isdesigned toredress theadverse effects ofpricesuppression fordrugs
supplied under theGovernment 'sPharmaceutical Benefits Scheme (PBS). Under theFactor (f)Scheme,
companies areabletoclaim notional price increases forPBSproducts.
TheFactor (f)Scheme doesnotinvolve thepayment ofasubsidy. Rather, itprovides a
mechanism tocompensate companies forPBSprices which fallbelow world andEuropean averages.
(b) Passenger Motor Vehicle Export Facilitation Scheme (PMVEFS)
ThePMVEFS aims toincrease Australian exports ofhighly processed, highvalue added
automotive products. Thescheme provides forexporter "bonus points" which aretradable against
thetariff costs ofimports.
Since 1991, thescheme wasextended inorder tocover automotive machine tools, automotive
toolinganddesign,developmentandproductionservices.TheAustralianIndustryCommissionestimates
thedutysaving fortheAustralian industry fortheperiod tobeworth $A763.3 m.Inaddition the94/95
Annual Report oftheIndustry Commission states: "Under thescheme itisprofitable forfirms toexport
ataprice which doesnotcover production costs, provided thatthelosssosustained islessthanthe
benefit fromtheduty-free entitlements earned through thatexport activity". TheCommunity concludes
withrespect tothecriteria thatthisprogramme constitutes anexport subsidy.
TheCommunity requests anotification under Article 25andrequests Australia toelaborate
onthisscheme, especially thecriteria andexport contingency.
Answer II(b)
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheAustralian automotive market isaveryopenmarket. Halfthenewpassenger motor vehicles
soldinAustralia areimported. Almost allcommercial vehicles soldareimported.
TheExport Facilitation Scheme (EFS) isanindustry restructuring andrationalisation measure
designed toencourage greater efficiency andcompetitiveness intheAustralian automotive industry.
Thescheme isinplace asatemporary measure tofacilitate restructuring intheautomotive
sector which hasbeenstrongly affected byfalling tariffs. Thescheme ispartoftheprogrammed
reduction intariff. Thescheme istrade liberalising asitforces restructuring byallowing forimports
toenter atbelow thebound andapplied tariff rates. Itisscheduled toexpire in2000.
EFSincreases thelevelofimports intoAustralia andthereby maintains anongoing pressure
onlocalsuppliers ofmotor vehicles andcomponents toincrease quality andcompetitiveness.
Theobjective oftheEFSistoassist theindustry rationalisation process by:encouraging
rationalisation oftheindustry byencouraging firms toconcentrate onmanufacturing andexporting
components andvehicles forwhich theyhaveacomparative advantage andsupplementing theirrange
byimporting those goods forwhich there isnocomparative advantage andtherefore contributing to
improved economies ofscale andindustry efficiency:G/SCM/Q2/AUS/10
Page15
- increasing therange andquality ofvehicles available toconsumers byexpanding opportunities
tosupplement areduced range oflocalmodels withcompletely builtupimports; and
- assisting thelocalindustry become more integrated withtheworld automotive industry.
(c) Textile Clothing andFootwear Import Credits Scheme (TCFICS)
TheTCFICS wasspecifically designed torestructure thetextile sector. Under thescheme,
forevery $A100 ofvalue added inTCFexports, amanufacturing company would receive $A30 credit
against thetariff ruling onimports.
TheIndustry Commission states thatthisbenefit subsidizes exports. In1994/1995 $A143 m
worth ofcredits were issued inresponse to$A850 mofexports. Thescheme provided anaverage
15.5percentrateofexport subsidy (1993-1995). Regarding thetrade effects, theIndustry Commission
claims thatsince theinception ofthescheme, exports oftextiles haveincreased significantly.
TheCommunity requests anotification under Article 25.Could Australia elaborate onthe
criteria forgranting thesubsidy?
Answer II(c)
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheScheme ispartofthemajor restructuring mechanism ofthesector accelerating theeffect
oftariff reductions, thereby increasing exposure tointernational competition. Thisisreflected inan
increase inthenetdeficit oftrade intextiles, clothing andfootwear goods ofoverA$660 million or
21%since theScheme wasintroduced in1991/92. TheScheme isbeing progressively phased down
andwillterminate inJune2000.
Thescheme isequally available tobothAustralian owned andoverseas owned companies and
individuals and,byencouraging twowaytradefacilitation, assists bothimporters andexporters. The
scheme doesnotlinkimports toexports (i.e.evenifacompany doesnotexport, itcanstillimport
without anyrestriction). Itshould benoted thatAustralian textiles, clothing andfootwear market is
oneofthemostopenmarket intheworld (inthatAustralia doesnothaveanyquantitative restrictions).
(d) Partnerships forDevelopment (PD) andFixed Terms Agreements (FTA)
ThePDandFTAschemes appear tobespecifically designed toforce foreign ITand
telecommunications firms toexport iftheywishtoparticipate ingovernment programmes. Aforeign
firm,whose government salesexceeds $A40 m,signsapartnership agreement bywhich thefirmcommits
itselftoexport anamount equal tohalfitsannual imports andanaverage 70percentlocalvalue added
across allexports.
ThefactthatPDandFTAhaveaneffect ontrade isshown bytheexport results ofthecompanies
involved intheschemes. According totheDepartment ofIndustry, theparticipating firms reported
exports of$A1.4 bn.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?G/SCM/Q2/AUS/10
Page16
Answer II(d)
These programmes donotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailingMeasures.AccordinglynotificationtotheCommitteeonSubsidiesandCountervailing
Measures isnotwarranted.
ThePartnerships Programmes encourage commercially oriented, longterm, strategic activity
intheInformation Industry. Companies volunteer activities intheformofaflexible agreement with
theCommonwealth (anonlegally binding Memorandum ofUnderstanding) implemented bybothparties
ona‘‘bestendeavours ''basis.
Companies pursue activities likeresearch anddevelopment, AsiaPacific regional headquarters,
technical support, centres ofexcellence, manufacturing, andusing Australia asagateway toAsiaand
other countries. None ofthese ismandatory, instead, companies havebuiltongenuine comparative
advantages inAustralia, through activities which make acommercial return tothecompany, andare
strategic tothem.
Partnerships Programmes areanelement oftheGovernment 'sapproach topre-qualification
forprocurement, however theyarenotdirectly linked withspecific Government purchases.
Theprogrammes donotdistinguish between foreign andlocalfirms, andanumber ofAustralian
companies havejoined.
UndertheProgrammesatpresent,therearenospecifiedgovernmentsalesthresholdsorspecified
levels ofcommitment. Some companies which joined theProgramme before 1994mayhaveproposed
agreements withformula targets, however thesetypesoftargets arenotnowsought (andarediscouraged
among pre-1994 Partners). Since 1994, companies havefocussed onlong-term planning topursue
strategic business opportunities andforecasts offuture activity naturally flows from thisplanning.
TheAustralian information industries areamong themostopenandcompetitive intheworld.
Australia 'sIT&T markets aredominated byinternational companies which generally import thebulk
oftheirproducts. According toonelocalassociation, in1996Australia willimport A$10 billion worth
ofIT&T equipment, while exports willbearound A$2.5 billion inthesame year.
While exports andimports willcontinue togrow, theseeffects arepredominantly aconsequence
ofAustralia'songoingprogrammeoftariffreductions,businessderegulationandmicroeconomicreforms,
which will continue toimprove thenation 'sbusiness climate andstimulate international
cost-competitiveness.
(e) Export Finance andInsurance Corporation
TheEFIC wascreated bytheFederal Government inorder toachieve anincrease ofexports
through theGovernment accepting ahigher levelandvariety ofrisk. EFIC'sgives financial support
totransactions insupportable under normal market terms. In1991-1992, thisfederal bodysupported
exports worth $A4.9 bn.In1993-1994, EFIC provided $A13.2 mofexport aid.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?G/SCM/Q2/AUS/10
Page17
Answer II(e)
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheExportFinanceandInsuranceCorporation(EFIC)isAustralia'sofficialexportcreditagency
(ECA), anorganization similar inoperation tobodies operated bymany governments around theworld.
Theoperations ofECAs arespecifically identified inAnnex IoftheAgreement onSubsidies and
Countervailing Measures (Items jandk),which, interalia,provides thattheoperations ofECAs must
involve premium rateswhich areadequate tocover long-term operating costsandlosses, andthatthe
operations ofECAs arenotprohibited solongastheyareinconformity withaninternational
understanding onofficial export credits.
InEFIC'scase, theCorporation operates profitably, enabling ittopayadividend tothe
Government andalsotobuild reserves. Inaddition, EFIC, through theAustralian Government, is
aparty totheOECD Arrangement onGuidelines forOfficially Supported Export Credits (the
Arrangement). TheArrangement establishes minimum lending ratesandmaximum repayment terms.
Assuch, EFIC'sinvolvement inexport financing isnotnotifiable under theWTO Subsidies Agreement.
(f) Export Market Development Grants Scheme (EMDG)
TheEMDG Scheme aimstosubsidize themarket opening costs ofSME'saiming toexport
goods, services, industrial property rights andknow-how. Thescheme provides forgrants tocover
partoftheinitial marketing expenses. Inorder tobeeligible, afirmmustgenerate lessthan$A25 m
inexports andhaveincurred atleast$A30,000 incosts inaclaim ayear.
TherateoftheEMDG expenditure hasincreased considerably overtheyears. Thetotalamount
ofEMDG subsidies rosefrom$A134 min1991-1992 to$A236.9 min1995-1996. Apparently, the
Australian authorities havenotreleased anydataregarding theimpact oftheEMDG scheme onnew
exports. However, there isnodoubt thatprogramme aimsspecifically toincrease export activity and
willhaveaconsiderable impact ofexports tothird countries.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?
Answer II(f)
TheExport Market Development Grants Scheme (EMDG) doesnotprovide specific subsidies
within themeaning oftheAgreement onSubsidies andCountervailing Measures.
Thepolicy objective ofEMDG istobuild anexport culture inAustralia through reimbursing
partoftheexport promotion expenditure ofeligible firms. Theintent istoencourage smaller firms
toenter export markets andacquire export skills andexperience.
EMDG wassetupbytheExport Market Development Grants Act1974. Funding isbyway
oftaxable grant. Under theAct,expenditure iscurrently eligible forpartial reimbursement until
30June1999.
Anytypeoffirmfromanyindustry mayapply foragrant, except forfirms thatprovide certain
services.G/SCM/Q2/AUS/10
Page18
Funding isnotrelated toexport performance butrather exporters arereimbursed 50%oftheir
expenditure onexport promotion, lessthefirstA$15,000.
(g) International Trade Enhancement Scheme (ITES)
TheITEscheme wasestablished in1992. Theprogramme isdesigned toprovide assistance
toAustralian firms intheformofconcessionary loans. Thefirmmustexpect toexport atleast$A20 m
overafive-year period. In1993-1994 thescheme wasextended tosmaller firms whowerenotable
tomeetthe$A20 mcriterion. Thefunds aresupposed toberefunded through capital repayments or
royalties onexport sales. TheITES payments rosefrom $A20.7 min1991-1992 to$A39.1 min
1994-1995.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?
Answer II(g)
Thepurpose oftheInternational Trade Enhancement Scheme (ITES) wastoenhance the
internationalbusinessprospectsoffirms,jointventures,consortiaandindustryassociations.Concessional
loanfunding wasprovided towards market expansion andmarket entry activities aswellasalimited
amount ofcapital equipment investment.
These loans were available tofirms from anyindustry. They were nottiedtoexport
performance.
TheITES hasbeenabolished, effective 1July1996.
(h) Innovative Agricultural Marketing Programme (IAMP)
TheIAMprogramme subsidizes ruralandrural-related export andimport replacement projects.
Theprogramme wassetupin1986 foraninitial period offiveyears butwasextended until1996.
Themaximum amount ofgrants is$A5mayear. Theexpenditure oftheprogramme liesbetween
$A3.8 mand$A5.0 ayearintheperiod 1991-1996.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?
Answer II(h)
TheInnovative Agricultural Marketing Programme (IAMP) aimed atencouraging andassisting
innovativepotentialexportersofAustralianagricultural,forestryandfisheryproductstodevelopmarkets
byproviding finance.
TheIAMPwasjointlyadministeredbytheAustralianTradeCommissionandtheCommonwealth
Department ofPrimary Industries andEnergy.
Funds wereprovided viaadvances, repayable intheformofroyalties andforcapital acquisitions
asinterest freeloans. Funds were notcontingent onexport performance.
Theloans weremade toproducers, processors, manufacturers andmarketers withinnovative
projects withsound commercial potential.G/SCM/Q2/AUS/10
Page19
TheIAMP hasbeenabolished effective 1July1996.
(i) Export Access Programme
Thisprogramme wasestablished toprovide indirect subsidy assistance tosmall andmedium
sized firms requiring training andpractical assistance inorder todevelop export expertise. The
programme isoperated bytheAustralian Chamber ofCommerce andIndustry, theMetal Trade Industry
Association andtheCouncil ofSmall Business Organizations.
Theexpenditure oftheprogramme liesbetween $A1.0 mand$A6.1 ayearintheperiod
1991-1996.
TheCommunity requests anotification under Article 25.Could Australia comment onthe
compatibility ofthissubsidy withArticle 3.1(a) oftheSubsidies Agreement?
Answer II(i)
TheprimaryobjectiveoftheExportAccessProgrammeistoassistsmallandmediumenterprises
tocommence exporting onasustainable basis byeducating them inthefundamentals ofexporting.
Export Access waslaunched in1991 asapilotprogramme. Itwillcease in1999.
TheAustralian Trade Commission provides funds tonational industry associations toenable
them toemploy export councillors toprovide hands onassistance tocompanies.
Wedonotregard thisasasubsidy within thescope oftheAgreement onSubsidies and
Countervailing Measures, and,evenifitwere, there would benospecificity involved.
REGIONAL ORSUB-FEDERAL PROGRAMMES
Thefollowing isa(non-exhaustive list)ofstateprogrammes which theCommunity believes
should havebeennotified andonwhich theCommunity requests further clarification. TheCommunity
requests Australia tonotify thebelow described programmes andsupply thefollowing information:
policy objective, budget, subsidy perunit,criteria foreligibility, number andnature ofbeneficiaries,
duration ofthesubsidy, statistical datapermitting anassessment ofthetrade effects ofthesubsidy
and,ifappropriate acomment onthecompatibility ofthescheme withArticle 3oftheSubsidies
Agreement (asadopted bytheWTO Subsidies Committee on21July1995 (document G/SCM/6 of
9August 1995).
(a) Victoria
- Electricity tariff subsidy foraluminium smelters
Alcoa Australia isinreceipt ofpreferential electricity ratesforitsPortland andPortHedland
smelters. Thecommercial benefit isworth $A200 mandgiven thatthemajor proportion ofoutput
isexported, seems tobeadefacto export subsidy.
TheCommunity requests more detailed andspecific information concerning these electricity
tariffsubsidies foraluminium smelters where amajority oftheproduction isexported. Could Australia
comment onthecompatibility ofthescheme withArticle 3.1(a) oftheSubsidies Agreement?G/SCM/Q2/AUS/10
Page20
- Market Entry Programme
TheVictoria 'sMarket Entry Programme provides subsidies forcompanies developing anexport
market strategy. TheGovernment alsoprovides foraidtonewexporters. Inapilotphase, 20firms
hiring anexport manager received a50percentsalary subsidy inyear1and20percentinyear2.
TheCommunity would likeafullnotification oftheaidschemes onstatelevelandtoknowwhich criteria
havetobemettoqualify forthesubsidies (foreachprogramme), anduptowhatlevelaidcanbegiven
byeachstate.
- Investment Attraction Programme
- Industry, Regional andTrade Support Programme
Answer (a)
TheAustralian Government isintheprocess ofconsulting withtheVictorian Stateauthorities
about thefactsastowhether there areanysubsidies involved and,ifso,whether theyarenotifiable
totheCommittee onSubsidies andCountervailing Measures. Wewilladvise theECoftheoutcome.
Asapreliminarycomment,wemightnotethattheissueofwhetherlongtermcontractsnegotiated
forbaseloadrequirements forelectricity power stations andallthevarious commercial aspects involved
should beconsidered toactually deliver asubsidy within themeaning oftheAgreement onSubsidies
andCountervailing Measures isoften amatter ofdifferent, irreconcilable views.
Subject tofurther clarification, weunderstand thattheMarket Entry Assistance scheme is
designed toprovide intelligence about offshore markets forgoods andservices forindividual firms
orconsortia. Thisisachieved bytheDepartment ofBusiness andEmployment either through itsown
internal sources ofintelligence orthrough thecommissioning ofspecific reports. Ifthisiscorrect,
thenitwould hardly bethesubject ofnotification totheCommittee. TheECappears tobereferring
toadifferent scheme andwewillenquire about itfrom theState authorities andrespond inwriting.
Wewillalsoinquire about theIndustry, Regional andTrade Support Programme andtheextent
towhich measures under itmight benotifiable tothisCommittee. Wearenotfamiliar withthe
"Investment Attraction Programme" referred tobytheEC.Possibly itisasub-programme. Again
wewillinquire about itandreply tothequestion.
(b) NewSouth Wales
- State Development andCountry Industries Assistance Act
ThisActestablished theDevelopment Corporation ofNSWandtheCountry Industries Assistance
Fund which provide alarge number ofincentives totheNSWindustry suchassubsidized utilities and
"competitive" taxregimes. TheNSW Authorities spent about $A608 million onassistance to
non-agricultural industry.
- Taxrebates forAsiaPacific regional headquarters
- Regional Business Development Scheme
- Regional Business Infrastructure ProgrammeG/SCM/Q2/AUS/10
Page21
Answer (b)
TheAustralian Government isintheprocess ofconsulting withtheNSW Stateauthorities about
thefactsastowhether there areanysubsidies involved and,ifso,whether theyarenotifiable tothe
Committee onSubsidies andCountervailing measures. Wewilladvise theECoftheoutcome.
Again itmight beuseful tomake somepreliminary comments, subject toanyfurther information
thatwereceive from State authorities.
There maybesome confusion overprogrammes. Ourunderstanding isthattheIndustries
Assistance Fund onlyhadsome A$14.9m allocated toitin1995/96. Thefigure ofA$608 mappears
tobeanallupfigure ofbudgetary outlays. Thisincludes items suchas:infrastructure andland
development; expenditure onthearts,onsportandrecreation, andonthe2000Olympic games; gaming
andracing; tourism; andsoon.Some ofitdoesgoonmanufacturing industry buttheextent towhich
itwould benotifiable isanopen question. Much ofitiseither arguably notspecific orinvolves
expenditure bygovernmental authorities inareas suchaspromotion andintelligence.
Onthefaceofit,themeasures provided inrespect ofAsiaPacific regional Headquarters would
hardly beconsidered toconstitute anotifiable subsidy under thisCommittee. Asweunderstand it,
thisisnotabout theproduction ofgoods. However wewillseektoclarify thesituation fortheEC.
(c) Queensland
- Major Projects Incentive Schemes
- Business Development Programme
- Industry andTechnology Programme
Answer (c)
TheAustralian Government isintheprocess ofconsulting withtheQueensland Stateauthorities
about thefactsastowhether there areanysubsidies involved and,ifso,whether theyarenotifiable
totheCommittee onSubsidies andCountervailing measures. Wewilladvise theECoftheoutcome.
Again itmight beuseful tomake some preliminary comments ontwooftheabove programmes,
subject toanyfurther information thatwereceive from State authorities.
Weunderstand thattheBusiness Development Programme seems tobefocused ontheprovision
ofbusiness-related information tofirms andprovides quality assurance training forfirms supplying
governments. These would notappear toustobeprogrammes thatarenotifiable totheCommittee.
TheIndustryandTechnologyProgrammeprovidesassistancetofirmstodeveloptheinformation
andtechnology sector. Itmaybethatlittleifanyofthiswould beconsidered tofallwithin thepurview
ofthisCommittee. However again wewillseektoclarify thesituation fortheEC.
(d) Western Australia
- Investment Promotion andFacilitation Programme
Thisprogramme provides subsidies toprojects selected bythestategovernment. Examples:
$A3.12 million interest ratesubsidy forErgLtd.and$A1.21 convertible loanforAustal ShipsG/SCM/Q2/AUS/10
Page22
- Industry Development Programme
- Investment Attraction
Answer (d)
There maybesome confusion hereabout thetitles ofcurrent programmes. However the
Australian Government isintheprocess ofconsulting withtheWestern Australian State authorities
about thefactsastowhether there areanysubsidies involved and,ifso,whether theyarenotifiable
totheCommittee onSubsidies andCountervailing measures. Wewillseektoclarify thesituation for
theEC.
(e) South Australia
- Economic Development Programme
Thisprogramme targets growth inexport earnings atarateof15percentperannum. This
general programme administered bytheEconomic Development Authority provides flexible assistance
packages toawiderange ofbusinesses.
Answer (e)
Itisunclear whattheEC'squestion is.There isaSouth Australian Economic Development
Authority andtheSouth Australian Government isreported tohaveanumber ofeconomic development
targets including notjustgrowth inexport earnings butalsotargets suchasgrowth inemployment.
Most governments havesuchobjectives. However itisnotclear what measure theECisseeking
information about. However theAustralian Government isintheprocess ofchecking withtheSouth
Australian Stateauthorities about whether there exists aparticular programme oftheabove name and
wewillseektoclarify thesituation fortheEC.
(f) Tasmania
- Industrial Development Programme
Thisgeneral assistance programme aimstoliftexports ofTasmanian businesses to$A3.5 billion
perannum andattract additional investment.
Answer (f)
Again there would appear tobesome confusion overthereported development goals ofthe
Tasmanian Government, which includes factors other thanexport growth. Theimplication appears
tobeoftheECquestions thatifagovernment saysthatitwants tohaveeconomic growth, including
growth inexports, thenanyprogramme automatically becomes suspect asbeing anexport subsidy.
Ifthatisacorrect reading ofthequestions, thenitwould beacomplete distortion oftheAgreement.
Again wearenotaware ofanyspecific programme called the"Industrial Development
Programme" inTasmania butweareintheprocess ofconsulting withtheTasmanian Stateauthorities
about thefactsandwillseektoclarify thesituation fortheEC.G/SCM/Q2/AUS/10
Page23
FOLLOW-UP QUESTION FROM THE EUROPEAN COMMUNITY
Question
Under thePassenger Motor Vehicle Export Facilitation Scheme andtheTextile Clothing and
Footwear Import Credits Scheme, companies appear toobtain credits onthebasisoftheirexport volume.
Since thebenefits obtained arecontingent upon export performance, these subsidies seem to
beprohibited under Article 3.1(a). WillAustralia phase theschemes out?
Answer
Asweadvised inresponse totheEuropean Community 'squestions II(b) andII(c) in
G/SCM/Q2/AUS/5, these programmes donotprovide subsidies within themeaning oftheAgreement
onSubsidies andCountervailing Measures. Information ontheprogrammes wasprovided inresponse
toECquestions II(b)andII(c)inG/SCM/Q2/AUS/5. ThePassenger Motor Vehicle Export Facilitation
Scheme isscheduled toexpire in2000andtheTextile Clothing andFootwear Import Credits Scheme
isbeing progressively phased outandwillterminate inJune2000.
QUESTION FROM NORWAY
Yournotification seems toinclude onlysubsidies where theeligibility isexplicitly limited to
certain sectors. Could youplease explain thescope ofyournotification inrelation tothedefinitions
laiddown inArticle 2.1(b) intheSCM Agreement?
Answer
Thequestion isnotclear. However presumably theissue isthepotential differences inview
about which programmes arespecific andwhich arenot.Clearly thatisamatter forindividual members
when making notifications. Itisalways uptoother Members toaskabout programmes thattheytake
adifferent viewoverorwhich mayhavebeeninadvertently omitted.
QUESTIONS FROM ARGENTINA
Question 1
Australia hasnotified alistofproduction subsidy programmes forspecific products. Some
programmes havealready expired, andothers -asinthecaseofbooks, machine tools androbots,
andshipbuilding -aretobeextended untilJuneandDecember 1997:
1.1 Could Australia state whether itwillcomply withthetime-limit provided forin
Article 28.1oftheSubsidies Agreement forthephasing outofthese programmes?
1.2 DoesAustralia plantoextend thescope oftheseprogrammes orrenew themwhen they
come toanend(Article 28.2oftheSubsidies Agreement)?
Answer 1.1
Theprogrammes referred tohavenotbeennotified under Article 28.1oftheAgreement on
Subsidies andCountervailing Measures. They arefullyconsistent withtheAgreement onSubsidies
andCountervailing Measures.G/SCM/Q2/AUS/10
Page24
Answer 1.2
Article 28.2oftheAgreement onSubsidies andCountervailing Measures isnotrelevant for
these programmes.
ForArgentina 'sinformation thefollowing isthecurrent situation withthebounty programmes
referred to.
Machine Tools andRobots
In1996theAustralian Government commissioned anIndustry Commission report intothetariff
andbounty arrangements pertaining tothemachine tools androbotics industries. Thereport
recommended themachine tools androbots bounty scheme lapse on30June1997. TheAustralian
Government hasaccepted therecommendation andconsequently stated itsintention inthe1996/97
budget tointroduce legislation intotheAustralian Parliament thatwould repeal theBounty (Machine
Tools andRobots) Act1985, which hadasunset of30June1997, andhence lapse thescheme before
thatdate. Thelegislation toabolish thebounty iscurrently before Parliament. Newapplications are
notbeing accepted.
Shipbuilding
TheshipproductionbountywasintendedtoassisttheAustralianshipbuildingindustrytoimprove
itsperformance andinternational competitiveness.
TheBounty (Ships) Act1989 came intoeffect on1July1989 providing foraphase down of
bounties toshipbuilders. Itreplaced theBounty (Ships) Act1980following areview oftheshipbuilding
bounty scheme bytheIndustry Commission in1988. Amendments totheActin1993varied thebounty
phasedown schedule andextended theperiod ofoperation oftheActbytwoyears to30June1997.
TheGovernment hasannounced itsintention toextend thebounty assistance toshipbuilders to
31December 1997 andlegislation toimplement thisdecision iscurrently before Parliament.
Bounty in1996/97, asinprevious years, ispayable onabasisthatapproximates 100percent
oftheactual production costs, including anallowance foroverhead costs. Thebounty ratehasbeen
diminishing astheprogramme progressed towards termination. Thebounty rateis5%ofeligible costs
for1996/97 andthisratewillnowapply through theextended period of31December 1997.
Criteria forpayment ofthebounty arethat:
- theshipbuilder isregistered byauthority oftheMinister forIndustry, Science andTourism;
- thevessel isnotfortheAustralian Government orit'sagencies 'use,forexample, defence
vessels;
- thevessel isnotforexport toNewZealand; and
- thegross construction tonnage oftheshipisgreater than150andlessthan20,000.
Withreference toArticle 3.1(a) oftheAgreement onSubsidies andCountervailing Measures,
theAustralian bounty isavailable toallvessels produced inAustralia thatmeetthecriteria, whether
forthedomestic orexport markets; itisnotinanywaybased onexport performance.G/SCM/Q2/AUS/10
Page25
Books
TheBounty (Books) Act1986 came intooperation on1January 1987 andprovides bounty
payments forapproved books manufactured inAustralia. Tobeeligible forbounty, books must, in
general, beatleast49pages andbeproduced inaminimum runof1,000 copies.
Thebounty isdesigned toassist theprinting ofbooks inAustralia byhelping offset tariffs on
inputs forbook production particularly onpaper andinks.
Therateofbounty fellfrom 13.5% in1993 to10.8% from 1January 1994 to9.0% from
1January 1995. Bounty payments arecalculated asapercentage ofthecostofproduction.
Thevolume ofbooks produced bytheAustralian industry increased significantly overtheperiod
inquestion. Thiscanprimarily beattributed tochanges made intheCopyright Actin1991 which
increased thedemand forAustralian printing aspublishers moved tohavebooks printed inAustralia
toguarantee theiravailability within the30dayperiod. Under therevised arrangements, fornewtitles,
theholder oftheAustralian copyright mustmake thetitleavailable inAustralia within 30daysoffirst
publishing thetitleoverseas, inorder toretain protection against parallel imports ofthetitle.
TheGovernment hasannounced itsintention toabolish thebounty payable onbookproduction
from 30June1997 andlegislation iscurrently before Parliament.
Thecostofthebounty was$A21.9m in1995/96 andisforecast tobeA$10.1m in1996/97.
2. Dairy Products Programme
Howisthesystem after30June1995? Does itaffect exports? Could databesupplied so
astobeabletoknow itseffects?
Answer 2
Theprogramme doesnotdeliver subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures. Itdoesdeliver domestic support asdefined under theAgreement on
Agriculture andsoisnotified totheCommittee onAgriculture.
QUESTIONS FROM THE UNITED STATES
Please indicate whether thefollowing programmes have been reported aspartofanother
programme. Ifso,please indicate under which reported programme itfalls. Forthose programmes
listedbelowwhichwerenotnotified,pleaseprovidetheinformationrequestedintheapprovednotification
format andexplain thebasis onwhich Australia determined thatthesubsidy wasnotnotifiable.
1. Export Market Development Grants Scheme
Answer 1
TheExport Market Development Grants Scheme (EMDG) doesnotprovide specific subsidies
within themeaning oftheAgreement onSubsidies andCountervailing Measures.
Thepolicy objective ofEMDG istobuild anexport culture inAustralia through reimbursing
partoftheexport promotion expenditure ofeligible firms. Theintent istoencourage smaller firms
toenter export markets andacquire export skills andexperience.G/SCM/Q2/AUS/10
Page26
EMDG wassetupbytheExport Market Development Grants Act1974. Funding isbyway
oftaxable grant. Under theAct,expenditure iscurrently eligible forpartial reimbursement until
30June1999.
Anytypeoffirmfromanyindustry mayapply foragrant, except forfirms thatprovide certain
services.
Funding isnotrelated toexport performance butrather exporters arereimbursed 50%oftheir
expenditure onexport promotion, lessthefirstA$15,000.
2. Customs Bounty Schemes
Answer 2
Information onAustralian bounty schemes wereincluded inAustralia 's1995notification and
1996update (G/SCM/N/3/AUS andG/SCM/N/16/AUS, respectively). They included: bedsheeting;
printed fabrics; textile yarns; books; computers; machine tools androbots andshipbuilding.
3. Victorian Payroll TaxRebates
Answer 3
TheAustralian Government isintheprocess ofconsulting withtheVictorian Stateauthorities
about anysuchrebates andwewilladvise theUnited States oftheoutcome.
4. Wages Subsidies
Answer 4
These arenotsubsidies within themeaning oftheAgreement onSubsidies andCountervailing
Measures. Theintent oftheschemes isnottodeliver benefits tocompanies buttodealwithproblems
involving unemployment. Theprogrammes involved would notbespecific within themeaning of
Article 2oftheAgreement onSubsidies andCountervailing Measures, eveniftheywereconsidered
todeliver some benefit toindividual companies.
TheCommonwealth Department ofEmployment, Education, Training andYouth Affairs
administers anumber ofwage subsidy programmes. Themainwage subsidy programme isJobStart.
Theimportant point about thewage subsidy programmes isthatwhile theprogrammes arespecifically
targetedtowardsassistingdisadvantagedjobseekers,theyarenottargetedtowardsanyspecificemployer
orindustry group.
JOBSTART
Objective
JobStart (introduced in1985) aims toassist those people who aredemonstrably most
disadvantaged intheworkplace togainaccess topermanent employment. Akeyindication ofthis
disadvantage isalengthy period ofunsuccessful jobsearch. Inaddition, theprogramme aims to
encourage employers totakeonjobseekers theymaynotnormally consider andisdesigned toassist
these jobseekers inmaintaining andimproving theirjobrelated skills, motivation andconfidence.G/SCM/Q2/AUS/10
Page27
Description
JobStart isamainstream wage subsidy programme thatprovides access toemployment for
jobseekers whohavebeenunemployed for6months ormore orfaceother disadvantages inobtaining
work, including jobseekers withadisability. Under theprogramme, mostdomestically established
employers intheprivate, community andpublic sectors mayreceive subsidy payments forsetperiods
ofupto20weeks asanincentive toemploy disadvantaged jobseekers. Thelevelofwage subsidy
paidranges fromA$150 perweekfor13weeks toA$325 perweekfor20weeks (total subsidy: A$1,950
toA$6,500) anddepends onthejobseekers 'unemployment duration andtheirlevelofdisadvantage
inthelabour market. Subsidies areconsidered tobebusiness income andassuchassubject tothe
applicable company taxrate.
Employers
While theprogramme istargeted towards assisting disadvantaged jobseekers theprogramme
isnottargeted towards anyspecific group ofemployers orindustry sector. Inanyoneyearupto80,000
employers usetheprogramme.
Forthepurposes ofJobStart thedefinition ofaneligible employer is:
- anyemployerintheprivate,publicandcommunitysectorwhooffersemploymentunder
anormal employer/employee relationship.
Some employers, including those whohaverecently retrenched existing workers, areunder
investigation foralleged/suspected breaches ofAgreements orhavehadtheiraccess towage subsidy
programmes withdrawn forsubstantiated abuse oftheprogramme, areexcluded fromtheprogramme.
Limits tothenumber ofsubsidized employees anemployer canhaveatanyonetimeapply.
Jobs
Most jobsoffered byemployers (including apprenticeships andtraineeships offering accredited
training) canbeapproved under JobStart provided theyareunder anormal employer/employee
relationship subject totheapplicable industrial arrangement. JobStart wage subsidy canbepaidfor
fulltimeandsome parttimejobs. Employers areexpected tousetheirbestendeavours toprovide
continuing employment foratleast3months afterthesubsidy period ends.
5. Export Facilitation Scheme Arrangements fortheAutomotive Sector
Answer 5
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheAustralian automotive market isaveryopenmarket. Halfthenewpassenger motor vehicles
soldinAustralia areimported. Almost allcommercial vehicles soldareimported.
TheExport Facilitation Scheme (EFS) isanindustry restructuring andrationalisation measure
designed toencourage greater efficiency andcompetitiveness intheAustralian automotive industry.
Thescheme isinplace asatemporary measure tofacilitate restructuring intheautomotive
sector which hasbeenstrongly affected byfalling tariffs. Thescheme ispartoftheprogrammedG/SCM/Q2/AUS/10
Page28
reduction intariff. Thescheme istrade liberalising asitforces restructuring byallowing forimports
toenter atbelow thebound andapplied tariff rates. Itisscheduled toexpire in2000.
EFSincreases thelevelofimports intoAustralia andthereby maintains anongoing pressure
onlocalsuppliers ofmotor vehicles andcomponents toincrease quality andcompetitiveness.
Theobjective oftheEFSistoassist theindustry rationalisation process by:encouraging
rationalisation oftheindustry byencouraging firms toconcentrate onmanufacturing andexporting
components andvehicles forwhich theyhaveacomparative advantage andsupplementing theirrange
byimporting those goods forwhich there isnocomparative advantage andtherefore contributing to
improved economies ofscale andindustry efficiency:
- increasing therange andquality ofvehicles available toconsumers byexpanding opportunities
tosupplement areduced range oflocalmodels withcompletely builtupimports; and
- assisting thelocalindustry become more integrated withtheworld automotive industry.
6. Textiles, Clothing &Footwear Import Credit Scheme
Answer 6
Thisprogramme doesnotprovide subsidies within themeaning oftheAgreement onSubsidies
andCountervailing Measures.
TheScheme ispartofthemajor restructuring mechanism ofthesector accelerating theeffect
oftariff reductions, thereby increasing exposure tointernational competition. Thisisreflected inan
increase inthenetdeficit oftrade intextiles, clothing andfootwear goods ofoverA$660 million or
21%since theScheme wasintroduced in1991/92. TheScheme isbeing progressively phased down
andwillterminate inJune2000.
Thescheme isequally available tobothAustralian owned andoverseas owned companies and
individuals and,byencouraging twowaytradefacilitation, assists bothimporters andexporters. The
scheme doesnotlinkimports toexports (i.e.evenifacompany doesnotexport, itcanstillimport
without anyrestriction). Itshould benoted thatAustralian textiles, clothing andfootwear market is
oneofthemostopenmarket intheworld (inthatAustralia doesnothaveanyquantitative restrictions).
7. International Trade Enhancement Scheme
Answer 7
Thepurpose oftheInternational Trade Enhancement Scheme (ITES) wastoenhance the
internationalbusinessprospectsoffirms,jointventures,consortiaandindustryassociations.Concessional
loanfunding wasprovided towards market expansion andmarket entry activities aswellasalimited
amount ofcapital equipment investment.
These loans were available tofirms from anyindustry. They were nottiedtoexport
performance.
TheITES hasbeenabolished, effective 1July1996.G/SCM/Q2/AUS/10
Page29
8. Export Access Programme
Answer 8
TheprimaryobjectiveoftheExportAccessProgrammeistoassistsmallandmediumenterprises
tocommence exporting onasustainable basis byeducating them inthefundamentals ofexporting.
Export Access waslaunched in1991 asapilotprogramme. Itwillcease in1999.
TheAustralian Trade Commission provides funds tonational industry associations toenable
them toemploy export councillors toprovide hands onassistance tocompanies.
Wedonotregard thisasasubsidy within thescope oftheAgreement onSubsidies and
Countervailing Measures, and,evenifitwere, there would benospecificity involved.
9. 150percentTaxConcession forR&D
Answer 9
Thisscheme doesnotprovide specific subsidies.
Thescheme 'spremium rateofdeduction wasreduced to125% from 20August 1996. The
incentive allows claimants todeduct upto125% ofeligible expenditure incurred onR&D activities
when lodging theircorporate taxreturn. Thescheme isavailable toallmanufacturing andservice
companies. Inorder toclaim thefull125% rate,theclaimant musthavespent atleastA$20,000 a
yearinR&D activities unless thework iscontracted outtoanapproved Registered Research Agency,
suchastheCSIRO, oraCooperative Research Centre.