RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/178 
29 January 2007  
 
(07-0345) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
AUSTRALIA 
 
  
 
This report, prepared for the fifth 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 Australia on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Ms. Zheng Wang (tel:  022 739 5288). 
 
Document WT/TPR/G/178 contains the policy statement submitted by Australia. 
 
 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Australia. Australia WT/TPR/S/178 
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CONTENTS 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE POLICY REGIME :  FRAMEWORK AND OBJECTIVES  viii 
 (3) T RADE POLICIES AND PRACTICES  viii 
 (4) S ECTORAL POLICY DEVELOPMENTS  ix 
 (5) P ROSPECTS  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC PERFORMANCE  2 
 (3) M ACROECONOMIC POLICIES  6 
 (i) Monetary and exchange rate policies 6  (ii) Fiscal policy 6 
 (4) M
AIN STRUCTURAL REFORM ISSUES  7 
 (i) Tariff and tax reforms 7  (ii) Labour-market reforms 8 
 (iii) The National Competition Policy, government trading enterprises (GTEs), 
and deregulation 8 
 (5) D
EVELOPMENTS IN TRADE AND FOREIGN DIRECT INVESTMENT  9 
 (i) Merchandise trade 9  (ii) Trade in services 9 
 (iii) Foreign direct investment 12 
 (6) P
ROSPECTS  13 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  14 
 (1) O VERVIEW  14 
 (2) G ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK  14 
 (3) S TRUCTURE OF TRADE POLICY FORMULATION  15 
 (4) T RADE LAWS AND REGULATIONS  17 
 (5) T RADE POLICY OBJECTIVES  18 
 (6) T RADE AGREEMENTS AND ARRANGEMENTS  19 
 (i) WTO 19 
 (ii) Preferential and regional agreements 20 
 (7) F OREIGN INVESTMENT REGIME  24 
 (i) Overview 24 
 (ii) Changes in the policy framework 25  (iii) International investment agreements 27 
III. TRADE POLICIES AND PRACTICES BY MEASURE 29 
 (1) I
NTRODUCTION  29 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  30 
 (i) Registration and documentation requirements 30 
 WT/TPR/S/178 Trade Policy Review 
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  Page 
 
 (ii) Tariffs 31 
 (iii) Other charges affecting imports 37  (iv) Customs valuation and rules of origin 38 
 (v) Import prohibitions, restrictions, and licensing 39 
 (vi) Contingency measures 41  (vii) Standards and other technical requirements 43 
 (viii) Government procurement 50 
 (ix) Local-content requirements 52 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  53 
 (i) Registration and documentation 53 
 (ii) Export prohibitions, restrictions, and licensing 53  (iii) State trading 54 
 (iv) Export assistance 54 
 (v) Measures maintained by importing countries 57 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  58 
 (i) Taxation 58 
 (ii) Production assistance 62 
 (iii) Competition and consumer policy 63 
 (iv) Corporate governance 67  (v) Intellectual property rights 69 
IV. TRADE POLICIES BY SECTOR 73 
 (1) O
VERVIEW  73 
 (2) A GRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES  74 
 (i) Overview 74 
 (ii) Regulatory framework 74  (iii) Assistance 75 
 (iv) Border measures 77 
 (v) Reforms in selected sectors 77  (vi) Forestry 79 
 (vii) Fisheries 80 
 (3) M
INING , ELECTRICITY , AND WATER  81 
 (i) Mining 81 
 (ii) Electricity 81 
 (iii) Water 82 
 (4) M ANUFACTURING  83 
 (i) Textiles, clothing, and footwear 84 
 (ii) Automotive 86 
 (iii) Pharmaceuticals 88 
 5) S ERVICES  89 
 (i) Overview 89 
 (ii) Commitments under the General Agreement on Trade in Services 90 
 (iii) Regional agreements on services 90  (iv) Financial services 91 
 (v) Communications 94 
 (vi) Transport 96 
REFERENCES   101 
APPENDIX TABLES  107 Australia WT/TPR/S/178 
 Page v 
 
 
 
CHARTS 
  Page 
 
I. ECONOMIC ENVIRONMENT 
I.1 Product composition of merchandise trade, 2002 and 2005 10 
I.2 Direction of merchandise trade, 2002 and 2005 11 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Average applied MFN and bound tariff rates, by HS section, 2002 and 2006 33 
III.2 Tariff escalation by 2-digit ISIC industry, 2002 and 2006 34 
 
IV. TRADE POLICIES BY SECTOR 
IV.1 Major banks' domestic interest spread, 1996-05 93 
 
  
TABLES 
 
I. ECONOMIC ENVIRONMENT 
I.1 Selected macroeconomi c indicators, 2001-06 2 
I.2 Basic economic indicators, 2001-06 4 I.3 Foreign direct investment (FDI) in Australia by country and economic activity, 2001-05 12 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
II.1 Agencies and their trade-related responsibilities 15 
II.2 Foreign investment requirements and limitations 26 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
III.1 Structure of the MFN tariff, 2002-06 32 
III.2 Australia's MFN and preferential tariff regime, 2006 35 
III.3 Duty forgone through tariff concession arrangements, 2002-06 36 
III.4 Main import prohibitions, restrictions, and controls, 2006 40 III.5 State-trading enterprises for exports (Commonwealth, or states), 2006 54 
III.6 Structure of tax revenue, 2002-05 58 
III.7 Excise rates, 2004-06 59  
IV. TRADE POLICIES BY SECTOR 
IV.1 Budgetary assistance to agriculture, 2002-05 76 
IV.2 Budgetary assistance to manufacturing, 2002-05 84 
IV.3 Structure of the financial system assets, 2002-05 91 
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APPENDIX TABLES 
  Page 
 
I. ECONOMIC ENVIRONMENT 
AI.1 Merchandise exports by group of products, 2000-05 109 
AI.2 Merchandise imports by group of products, 2000-05 110 
AI.3 Merchandise exports by destination, 2000-05 111 AI.4 Merchandise imports by origin, 2000-05 112 
 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
AII.1 Principal notifications under WTO Agreements, 2002-06 113 
AII.2 Involvement in the WTO dispute settlement mechanism, 2002-06 115 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
AIII.1 Anti-dumping cases against Australian exports, 2002-05 117 
AIII.2 Tax reform measures, 2003-06 118 AIII.3 Subsidies notified under WTO provisions, 2001-06 119 
 
IV. TRADE POLICIES BY SECTOR 
AIV.1 Measures exempt from the reduction commitment – "Green Box", 2001-05 122 
AIV.2 Levies affecting agriculture, lives tock, forestry, and fisheries, 2006 123 
AIV.3 Developments in selected domestic support to services, 2002-05 127 
 
  Australia WT/TPR/S/178 
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SUMMARY OBSERVATIONS 
 (1) E
CONOMIC ENVIRONMENT  
1. The high degree of transparency in the 
formulation and evaluation of Australia's 
economic policies in relation to their rationale, nature, and economic effects, enhances government accountability and public debate over the merits of these policies.  
Hence, transparency has contributed greatly 
to the continued process of reform, which began in the 1980s, and in which trade liberalization, much of it unilateral, has played an integral part.  The extent of structural reform in Australia is exemplified 
by the drop in the effective rate of assistance 
(ERA) for manufacturing during the past two decades, from 25% to 4.5% in 2003/04, the last year for which the indicator is available. Structural reforms were accompanied by 
macroeconomic reforms:  for example, the 
floating of the exchange rate in the early 1980s facilitated subsequent adjustment to tariff reductions.  Structural reforms have been aimed at reducing, if not removing, distortions to competition in order to improve 
the functioning and therefore flexibility of 
markets for goods, services, labour, and capital, thereby accomplishing a more efficient use of domestic resources.  The resulting rise in productivity and improved 
competitiveness of Australia's goods and 
services in world markets has enabled real GDP to grow at an average annual rate of about 3.5% during the past 15 years, which has raised per capita income to eighth place 
among OECD countries.  Reform has also 
made the economy more flexible and resilient to external shocks, like the Asian financial crisis in the late 1990s and, more recently, the drought in 2006. 
2. Against the backdrop of continued 
wide-ranging structural reforms as well as 
sound macroeconomic policies, Australia's economic performance has been impressive during the review period (2002-06), with annual average GDP growth of 3.2%.  Growth 
has been led by a global boom in demand for 
mineral products, of which Australia is a major exporter. Australia's prudent 
macroeconomic policies have helped to strengthen the economy's resilience to shocks, and thereby to sustain economic growth.  As a 
result of increased inflationary pressure, the 
Reserve Bank of Australia has been tightening monetary policy. Consequently, inflation has, by and large, remained within the Central Bank's targeted range.  Both the 
Commonwealth and state governments have 
achieved fiscal surpluses, and net  government 
debt has been eliminated.  In addition, unemployment declined to its lowest level since the 1970s, in great part due to reforms that have rendered the labour market more 
flexible.   
3. Rapid growth in the resource sector 
and the accompanying rise in private investment, including inward foreign direct investment, have contributed to a widened 
current account deficit.  The strength of the 
Australian dollar has put pressure on other sectors, particularly manufacturing.  The increased demand for resource-based products has also revealed infrastructure constraints.  Unfinished business in this 
regard includes reform of maritime and land 
transportation, and electricity and water services. 
4. Corresponding to the global boom in 
demand for mineral products, the share of 
mining in total merchandise exports increased 
from 40% in 2002, to 48.4% in 2005.  On the other hand, manufacturing accounted for around 80% of total merchandise imports.  Australia's trade with Asia continues to grow.  
The proportion of trade with Singapore and 
Thailand has increased, possibly due to the trade creating effects of regional trade agreements.  By contrast, the proportion of trade with the United States fell.   
5. Australia's stock of FDI peaked in 
2004.  It seems that Australia's recent RTAs 
(with Singapore, Thailand, and the United States), which include investment-specific provisions, have not increased investment from its partner countries.  The authorities WT/TPR/S/178 Trade Policy Review 
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consider it is too early to assess the impact of 
these RTAs on foreign investment flows. 
(2) TRADE POLICY REGIME :  
FRAMEWORK AND OBJECTIVES  
6. Australia has a highly transparent 
trade policy formulation and evaluation framework.  Transparency has greatly facilitated the advancement of the economic reform agenda, much of it involving unilateral 
trade liberalization.   
7. While the Doha multilateral trade 
negotiations remain Australia's top priority, increased importance is being attached to the negotiation of RTAs.  In addition to the Australia-New Zealand Closer Economic 
Relations Trade Agreement, Australia has 
signed RTAs with Singapore, Thailand, and the United States.  The authorities state that Australia's commitments in its RTAs go beyond the current WTO Agreements in a 
number of areas, including services and 
investment.  The Government is thus making efforts to multilateralize, through WTO  
negotiations, some of the progress achieved in regional trade liberalization.    
8. Australia's foreign investment regime 
is generally transparent and liberal, although 
foreign equity restrictions in certain "sensitive" sectors remain, and a screening process continues to be applied to ensure that foreign investment is not contrary to the 
"national interest".  Si nce Australia's previous 
Review, changes in the foreign investment policy have been primarily the result of the Australia-United States Free Trade Agreement (AUSFTA), which provides preferential 
treatment to U.S. investors vis-à-vis other 
trading partners.  
(3) T
RADE POLICIES AND PRACTICES  
9. Trade liberalization has been an 
integral part of the structural reforms that have contributed to Australia's impressive 
economic performance.  Liberalization has 
continued during the review period. 10. The tariff remains one of the main 
instruments of Australia's trade policy.  As a result of unilateral reductions (in 2005) in tariffs applied to textiles, clothing, and 
footwear (TCF) as well as to passenger motor 
vehicles (PMVs), the overall simple average applied MFN tariff rate fell from 4.5% in 2002 to 3.8% in 2006.  While 96.7% of Australia's tariffs are bound, more than 40% of its bound 
rates currently exceed applied MFN rates by 
at least five percentage points.  Although this potentially imparts a degree of unpredictability to the tariff, there has not been any increase in applied tariff rates during the period under review.   
11. Nonetheless, some tariff and non-tariff 
barriers to trade remain.  Despite the cuts in tariffs applied to TCF and PMV products, their rates are still considerably higher than the average applied MFN rate.  In addition, 
non-ad valorem rates, applying to a few tariff 
lines, tend to conceal relatively high tariffs.  In particular, judging from its high average ad valorem equivalent (AVE), the compound duty on second-hand vehicles is potentially prohibitive. 
12. Although strict sanitary and 
phytosanitary (SPS) measures remain, steps have been taken to improve import risk analyses in order to make the process more transparent, efficient, and timely.  According 
to the authorities, as international standards 
do not exist in some areas, the share of national standards that are equivalent to international standards remains at around 40%.   
13. Australia has observer status in the 
WTO Committee on Government Procurement, but has no intention of becoming a party to the GPA.  The authorities consider that accession to the agreement would impose unnecessary costs and delays on procurement operations.  
Government procurement of motor vehicles 
still incorporates local-content requirements. Australia WT/TPR/S/178 
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14. Discretionary export licensing 
restrictions are maintained for reasons related to SPS, the environment, and alignment with international agreements.  Export quotas 
remain on some cheese products and merino 
sheep. Despite the corporatization or privatization of some state-trading enterprises, and the termination of some state-trading arrangements, exports of certain agricultural 
products are still managed by such 
enterprises.   
15. Export assistance includes mainly the 
Export Market Development Grants (EMDG) scheme, duty concession programmes, and export finance, guarantee, and insurance 
operated by the Export Finance and Insurance 
Corporation (EFIC).  Although local-content requirements were removed under the EMDG in June 2006, the values of the EFIC's contracts with recipients of such assistance 
continue to depend on the degree of local 
content.       
16. Assistance is also provided to 
encourage the development of domestic industry.  It may take the form of tariff concessions, tax incentives, grants, or 
concessional loans.  Assistance delivered 
through the tax system accounts for more than two fifths of total annual budgetary assistance.  The Tax Expenditure Statement publishes details of these tax measures annually, 
enhancing their transparency.  The import 
duty credit under the Automotive Competitiveness and Investment Scheme (ACIS) is the most significant industry-specific assistance programme.  However, the 
apparent lack of cost-benefit analysis of some 
schemes, including tax measures, makes it difficult to determine whether the assistance has yielded net social benefits. 
17. Reform regarding competition policy 
continues.  As part of the National 
Competition Policy, governments undertake to 
review and reform legislation that restricts competition.  Following the review of the National Competition Policy, the Council of Australian Governments (COAG) endorsed a 
new National Reform Agenda, including competition and regulatory reforms.  In 
addition, with a view to reducing the regulatory burden, the Banks Taskforce made a large number of recommendations 
(including regular review and cost-benefit 
analysis of regulations), most of which have been accepted, fully or partially, by the Government. 
18. Australia's recently signed regional 
trade agreements changed various aspects of 
its trade policies, including protection of intellectual property rights. Amendments to the Copyright Act 1968, and minor changes to the Patents Act 1990 were made to incorporate requirements under the AUSFTA.  
The authorities state that these changes are 
applied on an MFN basis to all WTO Members. 
(4) S
ECTORAL POLICY DEVELOPMENTS  
19. The agriculture sector (including 
forestry and fisheries) accounts for a relatively 
small portion of the economy, but plays a much bigger role in exports.  With around two thirds of the sector's output exported directly, it is the most export-oriented sector after mining.  Domestic support for 
agriculture remains well below the OECD 
average.  Tariffs on agricultural products remain low (averaging 1.4% in 2006), but ad valorem equivalents for a few non-ad valorem duties are much higher.  
Despite the privatizati on/corporatization of 
some state-trading enterprises, state-trading arrangements have been maintained for exports of some agricultural products.  In addition, Australia's quarantine framework 
remains strict. 
20. The mining sector has been one of the 
major driving forces behind Australia's recent economic growth.  Owing to the global boom in mining commodities, Australia's terms of trade have increased by around 30% over the 
past three years.  The mining sector operates 
in a competitive market.  There are no sector-specific restrictions on foreign investment, and the sector receives very little government WT/TPR/S/178 Trade Policy Review 
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assistance.  The effecti ve rate of assistance for 
mining was virtually zero in 2003/04.   
21. Reforms aimed at simplifying the 
regulatory framework have continued in the 
electricity sector in order to create a fully 
competitive national market.  As Australia has limited water resources, reform is being  
undertaken to establish a market framework for the management of water resources in both 
urban and rural areas. 
22. The share of manufacturing in GDP 
and employment fell during the review period.  Nevertheless, manufacturing continues to receive the largest portion of budgetary assistance.  In 2003/04, ERAs for textiles, 
clothing and footwear and motor vehicles and 
parts, in particular, were 24.2% and 10.6%, respectively, much higher than the average of 4.5% for manufacturing as a whole.  The ERAs may have fallen subsequently, as a 
result of Australia's unilateral reduction in the 
tariffs for these sectors in 2005.   
23. Services dominate Australia's 
economy, accounting for nearly two thirds of GDP and roughly three quarters of employment in 2004/05.  During the review 
period, government assistance to services has 
been increasing, mainly through measures to encourage investment, R&D, and exports.   
24. The legislative and institutional 
frameworks for financial services have 
changed little, although stricter prudential 
regulations were announced in 2006 to bring them into line with international practices.   
25. The regulators of telecommunications 
and broadcasting, the Australian 
Communications Authority (ACA) and the 
Australian Broadcasting  Authority (ABA), 
were merged to form the Australian Communications and Media Authority (ACMA) from 1 July 2005.  It was also announced that foreign ownership restrictions 
on media would be removed from 2007. 
26. Australia's merchant fleet has shrunk, 
reflecting its growing reliance on foreign-flagged vessels.  However, it seems that 
despite the recent global boom in mining commodities and the associated increase in demand, exports have been constrained by the 
lack of transport facilities, particularly coal 
ports in some parts of Australia.  In response, an Export and Infrastructure Taskforce was established to identify infrastructure bottlenecks.  The taskforce found evidence of 
capacity constraints at mo st of Australia's bulk 
ports for coal and iron ore.  The regulatory framework was identified as the greatest impediment to the development of Australia's infrastructure.  Accordingly, the COAG has agreed to a range of initiatives to improve 
planning for ports and associated shipping 
channels and, through its new National Reform Agenda, measures to reform the regulatory system for infrastructure. 
27. During the review period, a few policy 
changes on civil aviation have been 
implemented.  In particular, since the signing of a bilateral agreement in 2003, international airlines from New Zealand have been accorded cabotage rights.  Also, price regulation of airport services has been relaxed 
since 2002, and the Government has 
discontinued price notification and price-cap arrangements for all airports, and introduced price monitoring for the seven most important.  
(5) P
ROSPECTS  
28. Australia's economic growth is 
expected to remain strong.  The authorities are of the view that as a result of the ongoing and deepening structural reforms, the economy is now very resilient to external shocks.  The 
major challenge in the short term is to 
maintain macroeconomic stability in the face of the high commodity prices.  However, the authorities believe that the economy's vulnerability to an eventual end to the commodity price boom has been reduced 
owing to earlier reforms, such as the 
introduction of a floating exchange rate in the early 1980s and more flexible domestic markets for goods, services, capital, and particularly labour.  Nonetheless, in the face 
of the slowdown in total factor productivity in Australia WT/TPR/S/178 
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recent years, there also appears to be a need 
to press ahead with structural reforms as outlined in the National Reform Agenda, especially those concerning key infrastructure-
related services, such as electricity, water, and 
transport, in order to raise productivity  further.  Increased productivity would also 
enable Australia to address the longer term challenge of an ageing population and the associated rise in hea lth and social welfare 
costs and implications for the labour market.