Australia WT/TPR/S/104
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II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
(1) OVERVIEW
1. During the period under review (1998-02), no major changes have been introduced to
Australia's highly transparent legal and institutional framework for trade and investment, apart from
those arising from a legislative review.  Action has been taken to reinforce the means available for
increasing public awareness (and interaction)1, and for taking advantage of the market-opening and
defence possibilities under the rules-based multilateral trading system.  More emphasis has been
placed on exploring prospects for broadening and deepening Australia's bilateral and regional trade
relations.  Involvement in dispute settlement has slightly increased.  Some effort has been made to
ease remaining barriers to foreign investors in sensitive areas.
(2) GENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK2
2. Australia's constitutional, executive, legislative and administrative framework has changed
little since its previous Review.
3. Executive power is vested in the Head of State, represented by the Governor-General.  The
Governor-General appoints the Prime Minister, who by convention is the leader of the majority party
of the largest of the parties in the House of Representatives.  On the advice of the Prime Minister, theGovernor-General appoints Ministers of State.  Th e Prime Minister and Ministers are accountable to
Parliament.
4. Legislative power lies with Parliament, which consists of the 150-member House of
Representatives (lower house) and th e 76-member Senate (upper house).
3  The Commonwealth
Parliament, inter alia , has exclusive power to impose and alter customs duties.  Elections to the House
of Representatives are held at least every three years while those of the Senate are held at six-year
intervals.  Federal elections for both Houses were held in November 2001 (lower and upper houseelections coincided).
5. The Commonwealth of Australia is a federation of six states
4;  each of the states has its own
constitution and government.  Three territories have self-government arrangements.5  The federal
government also administers certain islands as territories.6  The states and territories are responsible
for a number of trade-related policies such as standardization, government procurement, and state-trading.  Legislative state powers include agriculture, education, health, law enforcement, and
services.
7  States can also provide bounties or impose taxes on mining activities.  The Commonwealth
has exclusive power concerning all other bounties or support measures.  In the case of any
inconsistencies between Commonwealth and State legislation, the former prevails to ensure
uniformity throughout the Commonwealth.  The Council of Australian Governments (COAG) has
                                                     
1 Between the public and policymakers.
2 See WTO (1998) for further information on Australia's constitutional and institutional framework.
3 Commonwealth responsibilities, which are defined in the Constitution, include the right to levy
income tax, inter-state and foreign trade, external affairs, post and telecommunications, currency, banking andinsurance, copyright and patent laws, and quarantine provisions.
4 The six states are New South Wales, Queensland, Victoria, South Australia, Western Australia, and
Tasmania.
5 The three territories are the Northern Territory, the Australian Capital Territory and Norfolk Island.
6 The Jervis Bay Christmas Island, Cocos (Keeling) Island, the Ashmore and Cartier Islands, the
Territory of the Coral Sea Islands, the Territory of the McDonald and Heard Islands, and the AustralianAntarctic Territory.
7 With the exception of postal, telegraphic, telephonic, and other like services.WT/TPR/S/104 Trade Policy Review
Page 16
facilitated consultation, cooperation, and policy coordination between the Commonwealth, States and
Territories with a view to avoiding potential inconsistencies.  Recent COAG work has included the
elaboration of energy policy details and an Intergovernmental Agreement on Food Regulation.8  A
review of the Australian Mutual Recognition Agreement between the Commonwealth, States and
Territories (in force as of March 1993), which provides inter alia  that goods sold in one State or
Territory can be sold in other participating States or Territories, is scheduled for April 2003;  thefocus of this review may be the sale of goods rather than the use of goods.
(3) S
TRUCTURE OF TRADE POLICY FORMULATION
(i) Executive branches of government
6. The Minister for Trade and the Department of Foreign Affairs and Trade (DFAT) has
maintained prime responsibility for bilateral, regional and multilateral trade policy as well asadministrative responsibility for all treaties;  as from September 1999, a WTO Disputes Investigation
and Enforcement Mechanism, under the DFAT, has facilitated access of all exporters to government
assistance in taking advantage of Australia’s WTO rights in other markets.
9  Other agencies that have
an influence on international trade policy and international trade relations include the Department of
Agriculture Fisheries and Forestry – Australia, th e Department of Industry, Science and Resources,
the Department of Treasury, Environment Australia, the Attorney General's Department (Office of
International Trade Law), Department of Communi cation, Information Technology and the Arts, the
Department of Transport and Regional Services, and the Department of the Prime Minister and
Cabinet.
(ii) Advisory bodies
7. Australia has maintained its highly transparent policy formulation structure, ensuring
consultation and discussion at various stages of policymaking.  As from April 1998 the ProductivityCommission, which replaced the Industry Commi ssion, has been the Commonwealth Government’s
principal review and advisory body on micro-economic policy and regulation.
10  It undertakes
government-commissioned projects/public inquiries11, performance reporting (e.g., on the financial
performance of government trading enterprises and on government services) and other services to
government bodies, regulation review activities, and complaints concerning the lack of competitiveneutrality, as well as supporting research and statutory annual reporting.  Several other independent
bodies (e.g., Australian Bureau of Agricultur al and Resource Economics (ABARE), Bureau of
Resources and the Australian Geological Su rvey Organization, Bureau of Transport and
Communications Economics) continue to evaluate the impact and effectiveness of government policy
as well as to provide advice.  Transparency is also ensured through public access to non-confidentialgovernment documents.
                                                     
8 See Department of the Prime Minister and Cabinet online information.  Available at:
http://www.dpmc.gov.au.
9 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/index.html#oecd [23 April 2001].
10 Productivity Commission (2000a).
11 These projects have included rail reform, telecommunications regulation, the impact of competition
policy reforms on rural and regional Australia, international liner cargo shipping, Australia’s gamblingindustries and broadcasting, Australia’s general tariff arrangements, State and Territory legislation regulatingthe architectural profession, the Prices Surveillance Act and work arrangements on large capital city buildingprojects, work arrangements in container stevedoring, the black coal industry, and meat processing.Australia WT/TPR/S/104
Page 17
8. Wide consultations with business, non-governmental organizations (NGOs) and other
stakeholders in determining ways to advance Australia's international trading interests have been
carried out through a reinforced institutional structure.  As from April 2001, a WTO Advisory Group,
a new formal consultative body comprising representatives from industry and community NGOs,
academia, and the media, has provided advice on issues pertaining to Australia's WTO agenda.  The
Trade Policy Advisory Council (TPAC), a source  of advice from the business community on trade
and investment issues, has discussed WTO issues such as dispute settlement, opportunities for
Australia from accession of new WTO Members and a new round.12  In May 2001, the DFAT began
the first of a series of roundtables with community and industry NGOs.  Post-Doha, the DFAT has
undertaken a further round of community and industry consultations on the new round of trade
negotiations.
(4) TRADE POLICY OBJECTIVES
(i) General trade policy objectives
9. Australia regards trade policy as critical to advancing its economic interests.  Taking into
account the changing international environment, trade policy is based on the understanding that trade
openness and economic growth/performance and living standards (employment, welfare gains) arestrongly linked.
13  Thus, for example, in the context of structural reforms, unilateral tariff reductions
have been and are being undertaken to increase the economic efficiency of domestic producers (by
reducing input costs).
10. Australia pursues a combined multilateral, regional, and bilateral approach to trade policy.
Major departures from Australia's "open regionalism" objectives have included:  a stronger
commitment to bilateral trade policies;  a new emphasis on developing relations with emerging
economies;  and a willingness to look flexibly and pragmatically at options for regional free-tradeagreements where these advance Australia’s market access objectives.
(ii) Sectoral trade policy objectives
11. Despite increased trade openness and structural reform, trade and trade-related policy
instruments have been used to support/protect certain  activities, thus distorting resource allocation in
the economy.  A strict quarantine and inspection regime remains for agriculture where tariffprotection is minimal;  state-owned statutory authorities have controlled exports of certain sensitive
items.  Compared with agriculture, manufacturing benefited from much higher tariff protection
(though subject to cuts) and industry-specific support has been maintained for automotive,
pharmaceuticals, textiles, clothing, footwear, shipbuilding, and printing and publishing industries.
Market access limitations have been used in several services sectors.
(iii) The WTO Agenda
(a) The Doha Ministerial Conference and the new round
14
12. At the Doha Ministerial Conference, Australia, a member of the Cairns Group of Fair
Agricultural Traders, indicated that agriculture ha d to be fully integrated into the WTO framework by
ending all forms of export subsidies, substantially reducing trade-distorting domestic support and
                                                     
12 Australian Department of Foreign Affairs and Trade (undated a).
13 Australian Department of Foreign Affairs and Trade (undated b) and (2001).
14 More information and forward-looking commentary on Australia’s interests in a new round may be
found at DFAT (2001).WT/TPR/S/104 Trade Policy Review
Page 18
making substantial improvements in market access;  non-trade concerns (or multifunctionality) should
not block this reform.15  Disciplines preventing the misuse of trade measures in the name of
environmental protection, or the unilateral imposition of environmental standards needed to be
retained.  Concerns of developing countries (including access to medicines) had to be addressed in
preparation for a new round.
13. At Doha, Australia favoured a three-year round focused on further agricultural, industrial, and
services liberalization:  an overly ambitious agenda  threatened to distract the WTO from its priority
objectives of trade liberalization16;  a limited, realistic degree of ambition was required in new areas
such as investment and competition.  Australia supports adherence to core labour standards, but sees
the International Labour Organization rather than the WTO as the appropriate international forum for
dealing with this matter.  Australia is already pursu ing trade reforms that benefit the environment, and
actively supports strengthening disciplines on fisheries subsidies in a new round of negotiations.
Australia does not accept that the WTO is the appropriate body to set standards for animal welfare,
and will resist attempts to use animal welfare to protect local industries by unjustifiably restricting
imports.17  With respect to limiting the use of place na mes, the exclusive use of generic terms with
geographical roots may rule out Australian use of such terms as Parmesan cheese, Pilsener andKalamata olives, in domestic and export markets.  The new WTO round seems essential in meeting
Australia’s political commitment to APEC’s Bogor goals of free trade and investment by 2010 for
developed economies and 2020 for developing economies.
18  A 1999 DFAT Global Trade Reform
study estimated a 50% cut in trade barriers globally would provide annual gains to Australia of around
$A 7.5 billion.19
(b) Developing and least-developed countries (LDCs)
14. Australia has maintained its commitment to adva ncing the interests of developing countries in
a broad range of trade and trade-related areas such as technical assistance, capacity building, market
access, food security, and governance issues.  It has, inter alia,  helped developing countries to
identify and manage the potential economic and social impacts of trade and investment liberalization,
identify new sources of revenue and market opportunities, and cope with the institutional and
regulatory requirements of the global trading system.  Multi-year trade-related development assistanceprojects worth over $A 140 million are under way;   over $A 27 million was spent in 2000/01.  In
conjunction with ongoing activities, Australia is to commit $A 460,000 to the Doha Development
Agenda Trust Fund to ensure that developing countries are fully engaged in the negotiations.
15. Australia has provided assistance to a number of LDCs for their accession to the WTO.  It has
also provided funding to assist LDC participation in WTO meetings (including the High-LevelMeeting on Integrated Initiatives for Least-Developed Countries’ Trade Development, the Ministerial
Conferences, and the High Level Symposiums on Trade and Development and Trade and
Environment).
20
                                                     
15 WTO document WT/MIN(01)/ST/19, 10 November 2001.
16 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/trade/trade_bytes/global_eco.html#bkg [20 April 2001].
17 Australian Department of Foreign Affairs and Trade (undated b).
18 Australian Department of Foreign Affairs and Trade (2001).
19 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/index.html#oecd [23 April 2001].
20 For more information on Australia's support, see WTO document WT/COMTD/W/66,
16 February 2000.Australia WT/TPR/S/104
Page 19
(c) Accessions
16. Since 1998, Australia has negotiated accession arrangements, bilaterally, with Albania, China,
Chinese Taipei, Croatia, Estonia, Georgia, Jordan, the Kyrgyz Republic, Latvia, Lithuania, Moldova
and Oman, thus securing significant improvements in market access;  China and Chinese Taipei
represent about 10% of Australian exports.  Participation in negotiations for the accession of the
Russian Federation, Saudi Arabia, and Viet Nam are a priority for Australia.21  WTO accession
negotiations are considered as a unique opportunity for Australia to address existing trading problems,
secure new market access, and achieve commitments that provide a substantial degree of transparency
and security in future trading conditions.22  It seeks to ensure that new Members are admitted to the
WTO on terms that, inter alia,  safeguard Australia's interests in the WTO, and provide a sound basis
for further improvements in market access in future multilateral negotiations.
(5) TRADE LAWS AND REGULATIONS
17. Australian laws essentially take the form of statutes and implementing regulations.23  Statutes
are printed separately while regulations are published in the Commonwealth Gazette .  Ministries,
Departments, and other agencies issue media releases and other forms of public notice.  Parliamentary
debate is published in Hansard .  Similar arrangements hold for State and Territory governments.
18. Since its previous Review, Australia has continued to review legislation that restricts
competition, to ensure that only restrictions that are in the public interest are retained.  The deadline
for the review and, if appropriate, reform was June 2002.  Each State and Territory government has
also identified legislation that restricts competition and has been undertaking this review process.24
Altogether, about 1,700 items of legislation were to be reviewed covering, inter alia,  marketing of
agricultural products, food labelling, the finance and insurance sector, trades and professions, and
gambling regulation, and local government planning processes.
19. As indicated at its previous Review, Australia has amended and enacted legislation to ensure
compliance with its WTO obligations.25  The legislative provisions relating to Australia's WTO
obligations are covered by Commonwealth legislation.  All legislative changes required under WTO
commitments must be passed by Commonwealth an d/or State Parliaments, however, before they
become law in Australia.  While provisions of legislation implementing certain international treatieshave been addressed by Australian Courts, it is understood that, to date, those relating to the WTO
Agreement have not been an issue in domestic court proceedings.
20. Australia has participated in the work of the WTO Working Party on Domestic Regulation
where it indicated that while market access commitments should not be undermined by trade-
restrictive regulations, Members' capacities to regulate their economies appropriately had to bepreserved.  Its communications covered the types of regulation, their objectives and application,
necessity test, and  transparency.
26
                                                     
21 Australian Department of Foreign Affairs and Trade (undated b).
22 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/index.html#oecd [23 April 2001].
23 WTO document G/TRIMS/N/2/Rev.9, 28 September 2001.
24 National Competition Council (2001).
25 See WTO (1998).
26 WTO documents S/WPDR/W/1, 19 July 1999; S/WPDR/W/8, 15 September 2000.  The objective of
a necessity test on domestic regulation is to ensure that qualification requirements and procedures, technicalstandards and licensing requirements do not constitute unnecessary barriers to trade in services.WT/TPR/S/104 Trade Policy Review
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21. In the period under review, Australia has made numerous WTO notifications, including tariff
and trade data submissions to the Integrated Database (Chapter III(2)(ii)(a)).  Furthermore, Australia's
strong commitment to transparency has been reflecte d in the presence of internet websites at most
public sector entities, which greatly facilitated the preparation of this Review.
(6) TRADE AGREEMENTS AND ARRANGEMENTS
(i) Multilateral agreements
22. Australia is a founding Member of the WTO, and grants at least most-favoured-nation (MFN)
treatment to all its trading partners.  Although not a member of any of the plurilateral agreements, it
has been a participant in the Information Technolo gy Agreement (ITA).  The authorities consider that
the benefits of WTO membership have significantly outweighed the costs.27
(ii) Preferential, regional and bilateral arrangements
23. Australia has maintained its preferential trading arrangements with a number of countries.
The value of the preferential tariffs has been eroded in recent years, however, as a consequence of the
reduction in Australia’s MFN tariffs.28
(a) Preferential arrangements for developing countries and LDCs
The Australian System of Tariff Preferences24. Under the Australian System of Tariff Preferences (ASTP), a tariff preference of 5 percentage
points has been applied on a non-reciprocal basis to 48 countries identified by the United Nations as
least developed countries (LDCs) and a number of other small island developing countries and
territories.  This preference results in duty-free access for most products (about 85% of tariff lines).
29
The preferential tariffs are higher than zero for textiles, clothing and footwear, automotive-sectoritems, and cheese.  The value of trade covered by the Australian System of Tariff Preferences is
limited:  in 1998, for example, total imports from LDCs were valued at $A 112 million, 0.1% of totalimports;  however, since then, imports from LDCs appear to have doubled.
The South Pacific Regional Trade and Economic Cooperation Agreement (SPARTECA)
25. Australia’s (and New Zealand’s) trade and economic relations with the Forum Island
Countries (FICs), most of which are not LDCs, have been conducted under the aegis of SPARTECA.
Benefits from this framework are tied to a 50% local- or area-content rule;  FIC exporters are eligiblefor free access to the Australian (and New Zealand) markets for virtually all products.  Although the
overall decrease in MFN tariff rates in Australia has removed much of the preference margin, the
scheme is of value because of the preferential access it provides for textiles, clothing, and footwear
(which are of particular importance for Fiji).
30
                                                     
27 AFFA online information.  Available at:  http://www.affa.gov.au/outputs/
marketaccess.html [23 March 2001].
28 Productivity Commission (2000b).
29 Productivity Commission (2000b).
30 Productivity Commission (2000b).Australia WT/TPR/S/104
Page 21
The Pacific Agreement on Closer Economic Relations (PACER)
26. The PACER was endorsed by Forum Trade Ministers in June 2001 and 13 of the 16 Forum
members (including Australia) signed it on 18 August 2001;  four countries have ratified the PACER
to date and Australia is in the process of seeking parliamentary approval for ratification.  Its objective
is to establish a framework for the gradual trade and economic integration of the Forum members in a
way that is fully supportive of sustainable development of the Forum Island Countries and contributesto their gradual and progressive integration into the international economy.  It provides a negotiating
mechanism to ensure that Australian trade interests are not disadvantaged if and when FICs negotiate
a free-trade agreement with another developed country or a country with a GDP higher than the
lowest of a developed Forum member.  In the absence of such negotiations by the FICs, the PACER
will oblige them to commence FTA negotiations with Australia (and New Zealand) eight years afterthe entry into force of the Pacific Island Countries Trade Agreement (PICTA).
Agreement on Trade and Commercial Relations be tween the Government of Australia and the
Government of PNG (PATCRA II)
27. Under PATCRA II, most imports from Papua New Guinea that meet relevant rules of origin
(except those subject to excise duties in Australia) continue to enter Australia duty free.
(b) Regional agreements
28. While Australia’s trade policy emphasizes the primacy of the multilateral trading system,
since its previous Review it has become increasingly open to concluding regional trade agreements
(RTAs) that deliver substantial market access gains that cannot be achieved in a similar timeframe by
multilateral means.  Australia believes that RTAs can complement and help to build momentum for
multilateral liberalization by moving faster and covering a greater range of issues.  It considers it
important that RTAs comply strictly with the re levant WTO rules, including the requirements of
covering substantially all the trade between the parties and not raising barriers against non-parties.  It
believes that failure to do so risks fragmenting th e multilateral trading system by leading to trade
distortionary RTAs that damage the export interests of non-participating countries.  Australia is
particularly concerned by RTAs that seek to carve out entire sectors, as has been the case with
agriculture.
Asia Pacific Economic Cooperation (APEC)
29. Australia is a key member of the Asia Pacific Economic Cooperation (APEC) forum.  APEC
member economies accounted for 72.1% of Australia’s merchandise exports in 2001.  APEC, with its
commitment to open regionalism, is a key element in Australia’s regional trade policy.
31  Austr al ia
considers that APEC will strengthen the multilateral trading system and support non-discriminationby keeping member economies focussed on their own domestic liberalization policies
32;  it also
considers that existing and emerging regional trading arrangements involving APEC members ought
to be WTO-consistent and supportive of APEC’s goals and principles.  Under the 1994 Bogor
Declaration, the 21 member economies of APEC are committed to the attainment of free and open
trade and investment in the Asia-Pacific region no later than 2010 in the case of industrializedeconomies and 2020 in the case of developing countries.  This objective is to be attained through
unilateral, regional, and multilateral liberalization;  each year member economies present Individual
Action Plans (IAPs) that set out the measures they have taken or intend to take to achieve the
                                                     
31 Australian Department of Foreign Affairs and Trade (2001).
32 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/apec/contacts.html [20 April 2001].WT/TPR/S/104 Trade Policy Review
Page 22
2010/2020 goal.  IAPs are complimented by Collective Action Plans (CAPs) in APEC committees
and working groups.  In 2000, extensive work was done to streamline customs procedures and
harmonize standards.  In 2001, members committed to an APEC-wide moratorium on the imposition
of customs duties on electronic transmissions until the fifth WTO Ministerial Conference.
30. In October 2001, APEC leaders delivered a strong message of support for launching a new
round of WTO negotiations in 2001 and launched an initiative to build the capacity of developingAPEC members to implement their WTO commitments.
33
(c) Bilateral agreements
The Australia–New Zealand Closer Economic Relations Trade Agreement (CER, ANZCERTA)
31. Under the Australia–New Zealand Closer Economic Relations Trade Agreement, bilateral
trade in all products originating in the two countries has remained free of tariffs, quantitativerestrictions, anti-dumping measures, and production subsidies and like measures.  A 1988 protocol on
trade in services provides for market liberalization, national and MFN treatment, and access to
commercial presence (Chapter IV(5)(iv)).  Gains from preferential access are now modest as New
Zealand’s remaining applied tariffs are generally low (except for textiles, clothing, and footwear).
34  A
biennial report on the operation of this Agreement was submitted to the WTO in April 2002.35
The Canada–Australia Trade Agreement (CANATA)
32. Under CANATA, Australia provides tariff preferences ranging from 1% (certain fruits and
vegetables, lumber) to 15% (car batteries) over the MFN rate on over 400 tariff lines (tariff
preferences of 5% on 300 lines and 15% on 70 lines).  Its significance has declined since the items of
merchandise covered by preference were first agreed (1973), as a result of sweeping reductions in
tariff rates in both countries, and changes in patterns of trade.36  Margins of preference have remained
unchanged since 1960.
(d) Outlook
33. Australia is pursuing a number of regional trade initiatives with the objective of delivering
meaningful gains in market access and promoting regional economic integration.  These initiatives
include:  the work towards a Closer Economic Partnership linking ASEAN and CER economies (as
from October 2000)37;  and a free-trade agreement with Singapore.38  It is also carrying out studies
with Japan (mainly concerning services and investment) and the Republic of Korea with a view to
strengthening the economic partnership with each. It was also exploring U.S. interest in a bilateral
free-trade area.  It has participated in discussions on the possibility of a trans-Pacific regional
agreement (or P5), involving Australia, the United States, New Zealand, Singapore, and Chile.
Following the preparation of a joint scoping study on the feasibility of a bilateral free trade area
                                                     
33 Australian Department of Foreign Affairs and Trade (undated b).
34 Productivity Commission (2000b).
35 WTO document WT/REG111/R/B/2 – G/L/540, 13 May 2002.
36 Productivity Commission (2000b).
37 A Closer Economic Partnership would help Australia to build on its exports to ASEAN, which in
1999 accounted for $A 11.2 b illion or 13% of total exports (Australia n Department of Foreign Affairs and
Trade, 2001).
38 The agreement with Singapore is to cover goods and services;  it is expected to substantially increase
bilateral trade, which is worth around $A 9 billion annually, and increase Australia's attractiveness to
international investment.  Australia was aiming to conclude the negotiations by the end of 2001 (AustralianDepartment of Foreign Affairs and Trade, 2001).Australia WT/TPR/S/104
Page 23
(FTA) in May 2002, Thailand and Australia agreed to begin negotiations to establish an FTA to cover
market access, education, business regulations, and harmonization of standards;  it is envisaged that
this arrangement will boost Australia's GDP by US$6.6 billion over a 20-year period.
(7) TRADE DISPUTES AND CONSULTATIONS
34. Since its previous Review, Australia has become increasingly involved in the dispute
settlement mechanism under the WTO (Table AII.1).  The authorities indicated that involvement inWTO disputes has depended on the identification of economic or policy interests as well as the legal
strength of a case, and it has been the outcome of non-resolution or insufficient progress at the
bilateral level.  Australia has been a complainant in five cases involving measures taken by Hungary,
India, Korea, and the United States, affecting mainly meat and/or agricultural products;  mutually
agreed solutions were found in two cases.  Australia  reserved its third party rights in fourteen casesinvolving other partners' measures on:  aircraft (B razil, Canada), shrimp and shrimp products (United
States), milk and dairy products (Canada), pharmaceutical products (Canada), wheat gluten (United
States), swordfish (Chile), circular welded carb on quality line pipe (United States) and copyright
(United States), export restraints (United States ), agricultural products (Chile), tax treatment on
foreign sales corporation (United States), and telecommunication services (Mexico).  Australia'smeasures on salmon, and automotive leather have been subject to complaints by other
WTO Members, and panel and/or Appellate Body examination, and were resolved through acceptance
of its implementing measures;  a complaint against anti-dumping measures affecting coated woodfree
paper sheets was not taken further.
35. Efforts have been made to improve the institutional structure for defending Australia's rights
within the WTO.  Since 1999  a Disputes Investigation and Enforcement Mechanism within the DFAT
has assisted Australian business in identifying appropriate WTO legal processes to address tradeconcerns.
39  Further institutional strengthening was made through the establishment of a WTO Trade
Law Branch in the Trade Negotiations Division of the DFAT.  In 2000, the DFAT ran seminars to
raise awareness of the WTO Dispute Settlement mechanism.
(8) FOREIGN INVESTMENT REGIME
36. Australia encourages foreign investment consistent with its national interest, which includes
concerns about foreign ownership of Australian assets.40  Foreign investment is considered as a means
for achieving higher levels of economic activity and employment than could be financed from
domestic savings, as well as a means for gaining access to new technology, management skills, and
overseas markets.
37. Under the Foreign Acquisitions and Takeovers Act 1975, responsibility for foreign
investment policy and for making decisions on proposals rests with the Treasurer.  The Foreign
Investment Review Board (FIRB) , a non-statutory body, screens most investment proposals and
provides advice on foreign investment policy and its administration.41  Proposals are usually approved
unless they are judged "contrary to the national interest";  as a result, Australia’s commitments under
the WTO General Agreement on Trade in Services (GATS) are limited.  Following a review of
                                                     
39 Australian Department of Foreign Affairs and Trade (undated b).
40 Foreign Investment Review Board (2000).
41 The screening process provides a clear and si mple mechanism for reviewing the operations of
foreign investors in Australia whenever they seek to establish or acquire new business interests or purchaseadditional properties.  In this way the authorities may put pressure on foreign investors to operate in Australia as
good corporate citizens if they wish to extend th eir activities in Australia. Foreign Investment Review
Board (2000).WT/TPR/S/104 Trade Policy Review
Page 24
foreign investment policy in line with commitments under APEC's Bogor declaration, a number of
changes have been made to Australia’s notification and examination requirements since 1999,
including increases in:  the foreign investment business acquisition notification threshold;  the
voluntary notification threshold for the Australian assets of an offshore company to be acquired by
another offshore company;  and the limit for which certain business investment applications are
registered, but are generally not fully examined.42  Transparency was improved through dissemination
of information at the FIRB website.
38. As a general rule, foreign firms establishing in Australia are accorded national treatment (e.g.,
may take advantage of the tax incentives available to domestic firms) unless they are tax exempt or
their proposed activity is subject to notification/review requirements (certain assets/businesses,
existing business/real estate) (Table II.1).  In most industry sectors, smaller proposals are exempt fromnotification and larger proposals are approved unless judged contrary to the national interest.  The
Government appears to have some discretion in determining what is "contrary to the national
interest";  in this context, specific restrictions on foreign investment have been based on the relevant
industry legislation and have remained in force in more sensitive sectors, such as the media and
residential real estate.  It would appear that natural resources may also be a sensitive sector as, inApril 2001, the Government cited "national interest" concerns in blocking a hostile $A 10 billion
takeover offer by the Royal Dutch/Shell Group for Woodside Petroleum Ltd, one of Australia's largest
natural resource companies.
43
39. In 2000/01, 98.6% of the foreign investment proposals received were approved (97.6% in
1999/00).44  Total approved proposed investment in Australia was $A 106.3 billion in 2000/01 and
$A 78 billion in 1999/00.  By far the largest number of foreign investment proposals involves the
purchase of real estate.45  The policy consists of ensuring that foreign investment in residential real
estate increases the supply of residences and is not speculative in nature.  Therefore, foreign
investment in the housing sector is channelled into activity that directly increases the supply of new
housing and brings benefits to the local building industry and suppliers.
                                                     
42 APEC (2000).
43 "Australia Thwarts Shell's Bid to gain Hold of Woodside" Wall Street Journal Europe ,
24 April 2001.
44 Foreign Investment Review Board (2001).
45 In 1999/00, out of the 4,003 proposals involving proposed investment of $A 78 billion,  3,907 were
approved (2,737 with conditions, mainly in the real estate sector) and the remainder were rejected.  In 1998/99there were 4,754 approvals (2,918 with conditions) and 112 rejections.  Foreign Investment ReviewBoard (2000).Australia WT/TPR/S/104
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Table II.1
Foreign direct investment (FDI) requirements and limitations, as of May 2002
A. Prior approval requirement/notification
All activities:
Acquisitions of substantial interests in existing Australian businesses with total assets over $A 50 million or where the propo sal values
the business at over $50 million;
Proposals to establish new businesses involving a total investment of $A 10 million or more;
Portfolio investments in the media  of 5% or more and all non-portfolio investments irrespective of size;
Takeovers of offshore companies whose Australian subsidiaries or assets are valued at $A 50 million or more, or account for mor e than
50% of the target company's global assets;
Direct investments by foreign governments or their agencies irrespective of size;Acquisitions of interests in urban land  (including interests that arise via leases, financing and profit sharing arrangements and the
acquisition of interests in urban land corporations and trusts) that involve the:
- acquisition of developed non-residential commercial real estate, where the property is subject to heritage listing, valued at 
$A 5 million or more;
- acquisition of developed non-residential commercial real estate, where the property is not subject to heritage listing, valued  at
$A 50 million or more;
- acquisition of accommodation facilities irrespective of value;
- acquisition of vacant urban real estate irrespective of value;- acquisition of residential real estate irrespective of value;  orProposals where any doubt exists as to whether they are notifiable.
B. Limitations/requirements
Information technology
(including telecommunications equipment)Foreign information technology companies with annual sales to the Australian
government from $A 10 million to $A 40 million must enter into fixed-term
arrangements (FTAs, local industrial development activities worth 15% of projected
amount of government sales over a four-year period), and those with sales greater than$A 40 million) to enter into Partnerships for Development (PFDs, to invest 5% of
annual local turnover on R&D in Australia;  to export goods and services worth 50% of
imports (for hardware companies) or 20% of turnover (for software companies); and to
achieve 70% local content across all exports within seven-years).
Telecommunications Foreign investment is limited to 35% of Telstra (main telecommunications company).
Individual foreign holdings in this one third can be no more than 5%.  Foreigninvestment in the other two carriers, Optus and Vodafone, is subject to the terms of the
Foreign Acquisitions and Takeovers Act, 1975.  Licensing of new foreign carriers is
dealt with on a case-by-case basis and subject to national interest considerations.
Foreign person may not exercise control of a television licence, or have company
interests in such a licence exceeding 15%;  and two or more foreign persons may not
have company interests in such a licence exceeding 20% in the aggregate. Foreign
investors are limited to a 20% share individually and a 35% share in the aggregate, of
any subscription TV broadcaster.Broadcasting and media
Foreign investment in mass circulation newspapers  is limited.  A single foreigner
may hold a minor share of 25% and unrelated foreign interests may hold an additional
5%.
Shipping A ship may only be registered in Australia if more than half the shares are owned by
Australian nationals or if it is on demise (bare boat) charter to an Australian-based
operator.
Civil aviation Foreign investors (including foreign airlines) may acquire up to 49% of the equity in an
Australian international airline.  In the case of Qantas, ownership restrictions limit totalforeign ownership to 49%, ownership by foreign airlines in aggregate to 35%, and
ownership by an individual (including a foreign carrier) to 25%.
Source: Foreign Investment Review Board (2001), Annual Report 2000-2001  [Online].  Available at:
http://www.firb.gov.au/policy_pubs/publications/AnnualReports/2000-2001/index.htm [16 May 2001].
40. In general, foreign participation in privatization schemes is regulated in accordance with
overall foreign investment policy.  In May 2000, the authorities raised the limit on investment by
foreign persons (including foreign airlines) in Australian international carriers to 49% (Table II.1,
Chapter IV(5)(vii)(b));  as from November 1999, foreign persons (including foreign airlines) may
expect to get approval to acquire up to 100% of the equity in an Australian domestic airline, unlessWT/TPR/S/104 Trade Policy Review
Page 26
this is contrary to the national interest.46  In June 1999, the Telstra (Further Dilution of Public
Ownership) Act authorized the sale by the Government of a further 16.6% of the company's equity;
the proportion of Telstra Corporation’s equity that may be acquired by foreign investors has
effectively increased (Chapter IV(5)(vi)(a)).47  Privatization of government assets in the gas
distribution, electricity generation, electricity dist ribution, shipping, and broadcasting transmission
sectors also provided increased opportunities  to foreign investors (Chapters III(3)(iii)
and IV(5)(vi)(b)).48
41. Property and contractual rights are enforced through the Australian court system.  As far as
the authorities are aware, there have been no in vestment disputes involving foreign companies in
recent years.  Australia subscribes to the 1976 OE CD declaration concerning international investment
and multinational enterprises as well as OECD codes of liberalization of capital movements andinvisible transactions;  it has been a member of the International Center for the Settlement of
Investment Disputes (ICSID) since 1975 (entry in force of convention on 1 June 1991).  Australia is
bound by the Nara Treaty not to discrimina te against Japan concerning investment.
42. Australia has bilateral investment promotion and protection (IPPA) treaties in place with
several developing or formerly centrally planned economies where nationalization of foreigninvestment has been a concern.
49  It is currently negotiating more IPPAs, thus adding further emphasis
to its bilateral relationships.
43. Since 1998, in the context of the WTO Working Group on the Relationship between Trade
and Investment, Australia has expressed its views on the definition of investment, treatment of
performance requirements under the WTO Agreement on Trade-Related Investment Measures,
differences between investment agreements and WTO instruments, and own benefits from FDI.50
While Australia may accept limited work on investment as part of a balanced new WTO round
agenda, it is not a proponent of full-fledged investment negotiations because of the three-year
timeframe for a market-access-focussed round, and the limited capacity of developing countries to
implement new measures.51
                                                     
46 APEC (2000).
47 APEC (2000).
48 APEC (2000).
49 These countries are:  Argentina;  Chile;  China;   the Czech Republic;  Egypt;  Hong Kong, China;
Hungary;  India;  Indonesia;  Laos;  Lithuania;  Pakistan;  Papua New Guinea;  Peru;  the Philippines;  Poland;
Romania;  Uruguay;  and Viet Nam.  Australian Department of Foreign Affairs and Trade (2001).
50 WTO documents WT/WGTI/W/23, 9 January 1998;  WT/WGTI/W/80, 16 June 1999;  and
WT/WGTI/M/10, 14 October 1999.
51 Australian Department of Foreign Affairs and Trade online information.  Available at:
http://www.dfat.gov.au/trade/negotiations/index.html#oecd [23 April 2001].