RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/104
26 August 2002
(02-4500)
Trade Policy Review Body
TRADE POLICY REVIEW
AUSTRALIA
Report by the Secretariat
This report, prepared for the fourth Trade Policy Review of Australia, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Australia on its trade
policies and practices.
Any technical questions arising from this report may be addressed to
Mr. S. Stamnas (tel. 022-739 5382) or Mr. M. Daly (tel. 022-739 5077).
Document WT/TPR/G/104 contains the policy statement submitted by the
Government of Australia.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Australia.Australia WT/TPR/S/104
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS ix
(1) E CONOMIC ENVIRONMENT ix
(2) T RADE POLICY FRAMEWORK ix
(3) T RADE POLICY DEVELOPMENTS x
(4) S ECTORAL POLICY DEVELOPMENTS xii
(5) P ROSPECTS xiv
I. ECONOMIC ENVIRONMENT 1
(1) O VERVIEW 1
(2) R ECENT ECONOMIC DEVELOPMENTS 1
(i) Growth, productivity, incomes and employment 1(ii) Prices 5
(3) M
AIN MACROECONOMIC POLICY DEVELOPMENTS 5
(i) Monetary and exchange rate policy 5(ii) Fiscal policy 7
(4) M
AIN STRUCTURAL POLICY DEVELOPMENTS 7
(i) Tax reform 7
(ii) Corporatization and privatization 8(iii) Labour market reforms 8
(5) B
ALANCE -OF-PAYMENTS DEVELOPMENTS 9
(i) Current and trade accounts 9
(ii) External liabilities/debt 10
(6) D EVELOPMENTS IN MERCHANDISE TRADE 11
(7) T RENDS AND PATTERNS IN FOREIGN INVESTMENT 11
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 15
(1) O VERVIEW 15
(2) G ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK 15
(3) S TRUCTURE OF TRADE POLICY FORMULATION 16
(i) Executive branches of government 16(ii) Advisory bodies 16
(4) T
RADE POLICY OBJECTIVES 17
(i) General trade policy objectives 17
(ii) Sectoral trade policy objectives 17
(iii) The WTO Agenda 17
(5) T RADE LAWS AND REGULATIONS 19
(6) T RADE AGREEMENTS AND ARRANGEMENTS 20
(i) Multilateral agreements 20(ii) Preferential, regional and bilateral arrangements 20
(7) T
RADE DISPUTES AND CONSULTATIONS 23
(8) F OREIGN INVESTMENT REGIME 23WT/TPR/S/104 Trade Policy Review
Page iv
Page
III. TRADE POLICIES AND PRACTICES BY MEASURE 27
(1) I NTRODUCTION 27
(2) M EASURES DIRECTLY AFFECTING IMPORTS 28
(i) Registration and documentation requirements 28(ii) Tariffs 29
(iii) Customs valuation 39
(iv) Other levies and charges 39(v) Import prohibitions, restrictions, and licensing 39(vi) Government procurement 41(vii) Local-content requirements 44
(viii) Contingency measures 44
(ix) Standards and other technical requirements 46
(3) M
EASURES DIRECTLY AFFECTING EXPORTS 53
(i) Registration and documentation 53(ii) Export prohibitions, restrictions, and licensing 54(iii) State trading 55
(iv) Export assistance 60
(4) M
EASURES AFFECTING PRODUCTION AND TRADE 64
(i) Taxation 64
(ii) Production assistance 68(iii) Competition and consumer policy 74(iv) Intellectual property rights 76
(v) Other measures (environmental) 82
IV. TRADE POLICIES BY SECTOR 84
(1) O
VERVIEW 84
(2) A GRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES 85
(i) Features 85
(ii) Main policy issues 86
(iii) Selected agricultural and livestock items 93(iv) Forestry 95
(v) Fisheries 96
(3) M
INING AND ENERGY 97
(i) Mining 97
(ii) Energy 97
(4) M ANUFACTURING 99
(i) Textiles, clothing, and footwear 105(ii) Pharmaceuticals 105(iii) Automotive 106(iv) Shipbuilding 108
(v) Information technology 108
(vi) Printing and publishing 108
(5) S
ERVICES 109
(i) Features 109
(ii) Domestic support 109(iii) Overall commitments under the General Agreement on Trade in Services 113Australia WT/TPR/S/104
Page v
Page
(iv) Agreement with New Zealand 114
(v) Financial services 114(vi) Communications 117(vii) Transport 121
(viii) E-commerce 123
REFERENCES 125
APPENDIX TABLES 129WT/TPR/S/104 Trade Policy Review
Page vi
CHARTS
Page
I. ECONOMIC ENVIRONMENTI.1 Exchange rate developments, 1995-2001 6
I.2 Product composition of merchandise trade, 1998 and 2000 12
I.3 Direction of merchandise trade, 1998 and 2000 13I.4 Stock of foreign direct investment by sector, 1997-2000 14I.5 Stock of Australia's overseas investment by destination, 1997-2000 14
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Distribution of MFN tariff rates, 1997/98 and 2001/02 31
III.2 Average applied MFN and final bound tariff rates, by HS section, 1997/98 and 2001/02 34III.3 Share of customs duties collection in total impor t value and indirect taxes on international trade,
1995-02 35
III.4 Tariff escalation by 2-digit ISIC industry, 1997/98 and 2001/02 36III.5 Anti-dumping cases, 1 January 1998 – 31 October 2001 45
IV. TRADE POLICIES BY SECTOR
IV.1 Tariff averages by 2-digit ISIC category, 1997/98 and 2001/02 88
IV.2 Major banks' domestic interest spread, 1994-2001 116
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Economic developments, 1997-01 2
I.2 Structure of the economy, 1997-01 3I.3 Balance-of-payments, 1997-01 9I.4 Net foreign debt structure, 1997-01 10
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
II.1 Foreign direct investment (FDI) requirements and limitations, as of May 2002 25III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Tariff structure in Australia, 1997-02 30
III.2 Duty forgone by scheme, 1997-01 37III.3 Australian MFN and preferential regime, 1997-02 38III.4 Main import prohibitions, restricti ons and controls, as of May 2002 40
III.5 State (Commonwealth or territorial) and other forms of privileged involvement in the economy,
2002 55
III.6 Commonwealth assistance to exporters of goods and services, 1997-02 61III.7 Structure of tax revenue, 1996-01 64III.8 Excise rates 66
III.9 Overall budgetary assistance, 1997-02 69
III.10 Subsidies notified under WTO provisions, 1995-01 70Australia WT/TPR/S/104
Page vii
Page
IV. TRADE POLICIES BY SECTORIV.1 Developments in domestic support to agriculture, livestock, forestry, and fisheries,
1997/98-2001/02 90
IV.2 Usage of domestic support and export subsidies, 1995-00 92
IV.3 Developments in domestic support to mining, 1997-02 98IV.4 Developments in domestic support to manufacturing, 1997-02 100IV.5 Developments in domestic support to services, 1997-02 109IV.6 Structure of the assets of the financial system, June 1996-June 2001 115
APPENDIX TABLES
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
AII.1 Involvement in the WTO dispute settlement mechanism, 1998-02 (June) 131
IV. TRADE POLICIES BY SECTOR
AIV.1 OECD indicators of support to Australian agriculture, 1999-01 133
AIV.2 Levies affecting agriculture, livestock, forestry, and fisheries, 2002 134AIV.3 State-trading activities in agriculture, livestock, forestry, and fisheries, 1995-98 138
AIV.4 Tariffs and budgetary assistance net subsidy equivalents by manufacturing industry, 2000/01 140
AIV.5 Main support schemes to manufacturing, 2002 141Australia WT/TPR/S/104
Page ix
SUMMARY OBSERVATIONS
1. Australia's trade and trade-related
policies as well as their formulation are, by
and large, highly transparent.  In the interests
of public accountability, information on the
nature, if not the effects, of various policies isusually available in published documents and
from web sites operated by most public sector
entities, many of which are referenced in this
Report.  Moreover, the Freedom of
Information Act allows public access to non-confidential government documents.  The
transparency of policies, practices, and
measures is further enhanced by organizations
such as the Productivity Commission, the main
independent review and advisory body, whichreports on and conducts evaluations of the
economic impact and/or effectiveness of
protection, government assistance, and
regulations.  The Secretariat has drawn
heavily on such publicly available documents
in preparing its Report for this fourth Trade
Policy Review of Australia.
(1) E
CONOMIC ENVIRONMENT
2. Since its previous Review in 1998,
Australia has successfully weathered the Asian
financial crisis, despite the severe slowdown
elsewhere in the region.  Real GDP growth,generated largely by domestic demand and
rising multi-factor productivity, remained
strong until 2001, when a temporary decline in
residential construction activity and the global
economic slowdown adversely affectedAustralia's short-run outlook for growth and
employment.  Nonetheless, unemployment has
continued to fall and inflation has remained
low.
3. Australia's impressive economic
performance is due in large part to sound
macroeconomic policies in combination with
some far-reaching structural reforms that have
reinforced past unilateral trade liberalization.
Fiscal surpluses have dropped, however, as a
result of outlays growing faster than tax
revenues, the latter reflecting the budgetarycost of the major taxation reform package.
Australia has proceeded with thecorporatization and/or privatization of
government-owned facilities in electricity,
natural gas, and telecommunications.  Other
noteworthy structural reforms have been
undertaken in competition policy, labour
markets, and technology.
4. The steep fall in world commodity
prices, which followed the weakening of global
demand after the outbreak of the Asian crisis,
put considerable downward pressure on the
Australian dollar exchange rate, thusimproving Australia’s international price
competitiveness and benefiting import-
competing sectors.  The outcome was an
export driven shift in the trade account from a
deficit to a surplus.  Concurrently, the currentaccount deficit fell to its lowest annual level in
20 years, reflecting the recent narrowing of
the saving-investment gap.  Net foreign debt
has continued to grow as a consequence of
increased borrowing by the private sector.
5. The patterns of foreign trade and
direct investment have hardly changed.Australia has remained largely dependent on
commodity exports and manufactured imports.
Most of its merchandise trade has continued to
be conducted with Asia-Pacific Economic
Cooperation (APEC) partners, with somereinforcement of trade with East Asia in the
wake of the Asian crisis. Despite the Australia
New Zealand Closer Economic Relations
Trade Agreement (ANZCERTA), New
Zealand's share of Australia's merchandisetrade has dropped.  As regards FDI, some
effort has been made to ease remaining
barriers in sensitive areas and to improve
notification and examination requirements.
(2) T
RADE POLICY FRAMEWORK
6. Since its previous Review, Australia
has continued to implement trade reforms so
as to strengthen competition in the domestic
market and thus improve economic efficiency.
These reforms were undertaken partly in line
with the scheduled implementation of
Australia's WTO commitments, but alsounilaterally in accordance with domestic
policy goals.WT/TPR/S/104 Trade Policy Review
Page x
7. Australia has maintained its
preferential trading arrangements with
New Zealand and other countries in the South
Pacific, Canada, and developing and least
developed countries (under the Australian
System of Tariff Preferences).  The value ofpreferential tariffs has been eroded in recent
years, however, as Australia’s applied MFN
tariffs have been reduced.  Recently, more
emphasis has been placed on exploring the
prospects of broadening and deepeningAustralia's bilateral trade relations with
Japan, Korea, Singapore, Thailand, and the
United States, as well as regional relations
through the Closer Economic Partnership
linking ASEAN and CER economies, and thetrans-Pacific regional agreement.
8. Australia's highly transparent legal
and institutional framework for trade and
investment has been further improved through
a legislative review undertaken to ensure that
the regulatory framework (marketing of
agricultural products, food labelling, financeand insurance, trades and professions, and
gambling regulation, and local government
planning processes) does not restrict
competition.  Action has also been taken to
reinforce the means available for increasingpublic awareness (and interaction) and taking
advantage of the market opening and defence
possibilities available under the rules-based
multilateral trading system.  For this purpose,
a WTO Disputes Investigation andEnforcement Mechanism under the
Department of Foreign Affairs and Trade
(DFAT) and a WTO Advisory Panel
(comprising representatives from industry,
community NGOs, academia, and the media)have been established.  Australia has
continued to participate actively in all aspects
of WTO work, favouring the launching of a
round focused on further liberalization of
agriculture, manufacturing, and services.  The
Council of Australian Governments (COAG)
has continued to facilitate consultation,cooperation, and policy coordination between
the Commonwealth, States, and Territories
with a view to avoiding potential
inconsistencies.  As of April 1998, the
Productivity Commission has replaced theIndustry Commission as the principal review
and advisory body on structural policy and
regulation.
(3) T
RADE POLICY DEVELOPMENTS
9. The customs tariff remains Australia's
main trade policy instrument, albeit a minorsource of tax revenue (accounting for 2.3% of
total tax revenues).  Some 96.2% of tariff lines
are bound, thereby imparting a high degree of
predictability to the tariff.  The average
applied MFN tariff is currently 4.3%, downfrom 5.6% in 1997/98;  further unilateral
reductions in the rates applied to passenger
motor vehicles and textiles, clothing and
footwear are envisaged by 2005.  Whereas the
average applied MFN tariff for agriculturalproducts is 1.2%, that for industrial products
is of the order of 4.7%.  The tariff rates
applied to passenger motor vehicles, textiles,
clothing, and footwear are two to three times
higher than the average for industrial
products.  On the other hand, unilateral tariff
reductions have brought about 86% of tariffrates within the zero to 5% range.  The
customs tariff has also been considerably
simplified through the reduction in the number
of rates.  However, these changes have done
little to reduce tariff escalation.  Applied tariffrates currently fall short of bound rates by an
average of 6.2 percentage points;  while the
consequent gap between bound and applied
MFN rates provides considerable scope for
the authorities to increase applied tariffswithin bindings, this does not appear to have
happened during the period under review.
Indeed, the widening of this gap since
1997/98, despite the reduction in bound rates,
is the result of even greater unilateralreductions in applied rates;  applied rates
have been increased in very few, if any,
instances.
10. WTO-related agricultural tariff quotas
for five cheese items and non-manufactured
tobacco have apparently been applied in a
flexible/liberal manner.  Recourse to non-tariffprotection has been confined mainly to
agricultural, livestock, and food products.Australia WT/TPR/S/104
Page xi
11. Documentation requirements have
remained minimal, and computerized customs
clearance has facilitated virtually all imports
and exports.  Self-assessment is allowed for
import duty and export clearance.  The
transaction value has been mostly used forcustoms valuation purposes.
12. Import prohibitions and restrictions in
the form of stringent quarantine or technical
requirements have remained in place to
preserve, inter alia, public health, safety orsecurity.  Efforts have been made to align
certain compulsory standards to international
standards (including for motor vehicles) as
well as to improve international coordination
and cooperation through WTO notificationand mutual recognition agreements.  Despite
the Commonwealth/State Agreement on
Mutual Recognition, it seems that there are
residual areas where regulations power
concerning standards certification (including
State-based point of sale requirements,
banning orders under consumer protectionlegislation) differs between the
Commonwealth and States.  Following
institutional and procedural changes, recourse
to anti-dumping and countervailing actions
has dropped;  no safeguard measures wereadopted during the period under review.
13. Australia has remained a non-
signatory of the WTO Government
Procurement Agreement (GPA).
Commonwealth and state governmentscontinue to use their procurement as a major
instrument of economic policy with the aim of
fostering industrial development (e.g.,
information and telecommunications
technology) by means of preference margins(10% or 20% depending on the State) for local
(and New Zealand) suppliers, compulsory
sourcing from small and medium-sized
enterprises (SMEs) and local-content
requirements (which have also been attached
to broadcasting).
14. Export controls or quantitative
restrictions operated by public sector entities
affect certain primary and therapeutic goods;
they are intended, inter alia, to ensureadequate domestic supply and to enforce
standards.  Australia has maintained the
export ban on merino ewes and embryos for
breeding purposes except to New Zealand
under ANZCERTA and for approved scientific
purposes.  State involvement in the economyhas been maintained with a view to promoting
and regulating trade in certain agricultural
goods.
15. Export assistance, consisting of direct
grants (through Export Market DevelopmentGrants, Supermarket to Asia Strategy) and tax
concessions (Tradex, Passenger Motor Vehicle
Export Facilitation Scheme), has been
maintained and revised.  Export finance is
conditional upon local-content requirementsas well as "national interest" and
environmental protection criteria;  export
credit terms seem to be in line with OECD
guidelines.  Incentives in free-trade zones are
tailor-made for each project and may, inter
alia, include establishment or relocation
subsidies.
16. Support for trade and production has
been provided through tax and non-tax
incentives with increased emphasis on export
promotion and investment, especially in R&D.
During the period under review, Australia'sschemes for the concessional entry of imports
have become more generous.  Non-tax
assistance has been increased in certain broad
areas (notably export promotion, investment,
and R&D) and maintained for several specificactivities.  Low energy prices to producers
have been ensured through state involvement
in electricity and increased presence of private
sector operators, as well as through tax
exemptions and grants for several categoriesof diesel fuel users.  Price controls have
seemingly been reduced so that they now cover
air navigation, airport, postal, and harbour
towage services;  certain pharmaceuticals
have also been subsidized.
17. Perhaps the most important structural
policy development during the period underreview has been tax reform, notably
implementation of The New Tax System, which
has inter alia  involved the rationalization andWT/TPR/S/104 Trade Policy Review
Page xii
simplification of the indirect tax structure,
thereby rendering it more neutral, especially
with respect to international trade. The
centrepiece of this reform involved the
replacement of the Wholesale Sales Tax (WST)
levied on manufactured goods by a broad-based Goods and Services Tax (GST).
However, the special Luxury Car Tax, which
seems to be biased against imports, remains in
place.  Personal and corporate income taxes
have also undergone substantial reform as aconsequence of The New Tax System.  Their
bases have been broadened and the rates of
tax cut.  As a consequence, the top personal
tax rate has been reduced from 43% to 30%,
while the corporate tax rate has been cut from36% to 30%, thereby bringing it more into line
with rates in several neighbouring countries.
Insofar as high personal tax rates constitute a
disincentive both to work and save, cuts in the
top rates could lead to increased work effort
and higher personal saving, thereby reducing
the saving-investment gap.  The combinationof a broader corporate tax base and lower tax
rates would tend to reduce the assistance
delivered through the corporate tax system,
thereby rendering it more neutral, and thus
potentially less distorting, with regard tofirms' investment decisions.  However, special
deductions for companies involved in mineral
exploration and development have been
maintained.
18. Australia has sought to strengthen
protection of intellectual property rights
(IPRs) by expanding its international
commitments and ensuring the enforcement of
such protection at the border.  At the same
time, parallel imports have been furtherliberalized.
19. Australia's competition policy
framework has also been updated and put into
effect so as to ensure, inter alia, that the
regulatory framework does not restrict
competition and that the majority of
Government Business Enterprises adhere tothe principle of "competitive neutrality".(4) S
ECTORAL POLICY DEVELOPMENTS
20. The overall level of government
assistance to agriculture, livestock, forestry
and fisheries has remained low since 1998.
Average nominal applied MFN tariff
protection has remained negligible. Totalsupport (TSE) to agriculture amounted to only
0.3% of GDP in 2001, the lowest percentage
among all OECD countries, while Australia's
overall producer support estimate (PSE) was
4%, the second lowest.  Around 96% ofdomestic support involves so-called "green"
subsidies that have little, if any, distorting
effect on production or trade;  such support
was predominantly general services (e.g.,
infrastructural, extension, advisory and R&Dservices and environmental programmes).
21. Australia's SPS and quarantine
requirements have been criticized by a number
of its trading partners on the grounds that they
are unduly stringent and therefore
protectionist.  But with Australia heavily
dependent on agriculture and a majorexporter of agricultural commodities and agri-
food products, which receive relatively little
government assistance and are sold at world
market prices, these measures are believed to
be necessary to ensure that Australia'sreputation as a reliable exporter of high
quality agricultural products is not
jeopardized by pests and diseases.  Changes
have been introduced to SPS and quarantine
requirements to cover, inter alia, animaldiseases, genetically modified organisms and
biotechnology;  a stringent import-risk
assessment requirement has also been
introduced, further reducing access to the
market for agricultural products.
22. Production and exports of certain
items (meat, grain, horticulture, dairy, fishery,
and forestry) are subject to levies earmarked
for the funding of R&D and other sectoral
activities. Trade distorting domestic support
albeit with de minimis levels, for wheat (direct
payments for shipping costs to Tasmania),pigmeat, and lamb meat, has varied but
remained far below WTO reduction
commitments.  Particular emphasis has beenAustralia WT/TPR/S/104
Page xiii
placed on support for biotechnology.  Exports
of almost all wheat, barley (until 2001), rice,
and sugar have remained under the exclusive
control of statutory authorities or public firms
operating under single-desk arrangements.  By
contrast, the dairy sector has beenderegulated, and producers have received a
structural adjustment package;  they have
apparently thrived as a consequence.  In
forestry, it would appear that reforms of the
public forest agencies have improvedcompetitive neutrality, although anti-
competitive practices seem to persist.
23. Mining remains one of Australia's
most efficient and least assisted sectors as well
as a major contributor to exports.  The sectorreceives hardly any tariff protection (except
for certain stones subject to 5% tariff) and the
little domestic support it does receive has been
declining.  A Petroleum Products Freight
Subsidy Scheme, a Diesel Fuel Rebate
Scheme, and a Diesel and Alternative Fuels
Grants Scheme have been operated in linewith different policy objectives.  A centralized
wholesale electricity market is being put in
place progressively, with increased private
sector involvement;  the mandatory purchase
of increasing amounts of electricity generatedfrom renewable energy sources has been in
force since 2001.
24. Since 1998, border protection for the
manufacturing sector has been reduced so that
the average applied MFN tariff rate is only4.6% (based on the ISIC) and further tariff
cuts on sensitive items are envisaged.
Nonetheless, the tariff rates applied to
passenger motor vehicles (PMVs), textiles,
clothing and footwear (TCF) are two to threetimes higher than this average for industrial
products.  Government support, in the form of
direct financial assistance (certain export
incentives, input subsidies) and tax
expenditures, has been maintained and
reinforced not just for PMVs and TCF, but
also for other specific industries (such asprinting pharmaceuticals, shipbuilding, and
information and telecommunications
technology), and for manufacturing activities
in general.  In several instances, namelyPMVs, TCF, and pharmaceuticals, industry-
specific support schemes have been revised or
replaced with similar programmes.  However,
such assistance is expected to fall in line with
announced tariff cuts and revised support
plans.
25. In the period under review,
Government support to the services sector,
through direct financial assistance, tax
expenditures, and funding to public-sector
institutions, has risen;  the main recipientshave been finance and insurance, cultural and
recreational, transport and storage, property,
and business and communication services.
Several access restrictions have remained in
force.  Financial services reforms (e.g.prudential rules, institutional) have been
pursued in several areas in the light of
recommendations made in 1997.
Liberalization of telecommunications has led
to further privatization of state-owned firms,
increased entry of private sector operators,
and lower tariffs;  however, operational costsrelating to the universal service obligation
have been a concern.  Support for domestic
advertisement and film producers has been
maintained through local-content
requirements in television broadcasting aswell as film production funding.  As regards
maritime services, state involvement seems to
have been reduced;  financial assistance to
shippers of freight between Tasmania and the
mainland has been maintained.  Maritimeroad, and rail transport have also benefited
from tax rebates on fuels.  Efforts have been
made to reduce air transportation costs and
improve the quality of services through more
operators and airport leasing.  E-commerce isbeing promoted through network funding and
bilateral arrangements.
26. Since its previous Review, Australia's
comprehensive commitments in its
GATS Schedule have remained unchanged.
The Schedule covers 90 activities within the
financial, business, communication,construction, distribution, transportation
(including maritime, road, air, and pipeline
transport), tourism, recreational, health,
educational, and environmental servicesWT/TPR/S/104 Trade Policy Review
Page xiv
sectors.  Australia's GATS Article II MFN
exemption remains with respect to
arrangements with Canada, France, Israel,
New Zealand, and the United Kingdom for co-
production of film and television programmes.
(5) PROSPECTS
27. Trade liberalization measures
together with far-reaching internal structural
reforms that were begun in the mid-1980s
have undoubtedly contributed to Australia's
impressive economic performance during thepast decade or so.  As a consequence of both
unilateral and multilateral trade
liberalization, Australia is a relatively open
economy.  For example, its average applied
MFN tariff is only 4.3% and most rates arebetween zero and 5%.  This means that, except
in the case of tariffs on passenger motor
vehicles and textiles, clothing, and footwear,
the economic benefits from further reductions
are likely to be modest.  During the last review
period, the Government announced unilateral
phased reductions in PMV and TCF tariffs,with a five-year pause in between 2000 and
2005;  it remains to be seen whether the final
5% reductions of  7.5 percentage points (TCF)and 5 percentage points (PMV) are
implemented on schedule on 1 January 2005.
Non-tariff border measures are also few and
far between;  in particular, total support for
agriculture is the lowest among OECD
countries.  Moreover, Australia is, by andlarge, open to foreign investment.  Hence, the
benefits from the further liberalization of non-
tariff distortion to trade and the removal of
remaining barriers to foreign investment might
be rather modest too.
28. Internal policies, however also have a
bearing on trade and foreign investment.  With
the tax reform largely complete, the
Government's attention has turned to
additional reforms including furthercorporatization, if not privatization, of state-
owned enterprises, efforts to complete reform
of competition policies, continued gradual
deregulation of the labour market (together
with an overhaul of the welfare system) and
measures to encourage technological
excellence/innovation.  Such reforms shouldhelp to provide the basis for the sustained
growth of the Australian economy in the
future.