RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/244 
1 March 2011  
 
(11-0907) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
AUSTRALIA 
 
  
 
This report, prepared for the sixth Trad e 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 
Mr. Sergios Stamnas (tel:  022 739 5382). 
 
Document WT/TPR/G/244 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/244 
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CONTENTS 
  Page 
SUMMARY   vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE POLICY FRAMEWORK  vii 
 (3) T RADE POLICY DEVELOPMENTS  viii 
 (4) S ECTORAL POLICY DEVELOPMENTS  x 
 (5) O UTLOOK  xi 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  5 
 (i) Growth, incomes, and employment 5 
 (ii) Prices 8 
 (3) M AIN MACROECONOMIC POLICY DEVELOPMENTS  8 
 (i) Monetary and exchange rate policy 8 
 (ii) Fiscal policy 9 
 (4) M AIN STRUCTURAL POLICY DEVELOPMENTS AND CHALLENGES  10 
 (5) B ALANCE -OF-PAYMENTS DEVELOPMENTS  11 
 (i) Current and trade accounts 11 
 (6) D EVELOPMENTS IN MERCHANDISE TRADE  13 
 (7) T RENDS AND PATTERNS IN FOREIGN INVESTMENT  16 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 18 
 (1) O VERVIEW  18 
 (2) G ENERAL CONSTITUTIONAL AND INSTITUTIONAL FRAMEWORK  18 
 (3) S TRUCTURE OF TRADE POLICY FORMULATION  19 
 (i) Executive branch es of government 19 
 (ii) Advisory bodies 19 
 (4) T RADE LAWS AND REGULATIONS  20 
 (5) T RADE POLICY OBJECTIVES  21 
 (6) T RADE AGREEMENTS AND ARRANGEMENTS  22 
 (i) WTO 22 
 (ii) Preferential and regional trade agreements 23 
 (7) T RADE DISPUTES AND CONSULTATIONS  28 
 (8) F OREIGN INVESTMENT REGIME  28 
III. TRADE POLICIES AND PRACTICES BY MEASURE 31 
 (1) O VERVIEW  31 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  33 
 (i) Registration and documentation requirements 33 
 (ii) Tariffs 34 
 (iii) Other charges affecting imports 42 WT/TPR/S/244 Trade Policy Review 
Page iv 
 
 
  Page 
 
 (iv) Customs valuation and rules of origin 42 
 (v) Import prohibitions, restrictions, and licensing 43  (vi) Contingency measures 45 
 (vii) Standards and other technical requirements 47 
 (viii) Government procurement 54  (ix) Local-content requirements 59 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  59 
 (i) Registration and documentation 59  (ii) Export prohibitions, restrictions, and licensing 59 
 (iii) State trading 60 
 (iv) Export assistance 60 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  64 
 (i) Taxation 64 
 (ii) Production assistance 68  (iii) Competition and consumer policy 70 
 (iv) Corporate governance 76 
 (v) Intellectual property rights 77 
IV. TRADE POLICIES BY SECTOR 84 
 (1) O
VERVIEW  84 
 (2) A GRICULTURE , LIVESTOCK , FORESTRY , AND FISHERIES  85 
 (i) Features 85 
 (ii) Main developments 86  (iii) Selected subsectors 90 
 (iv) Forestry 92 
 (v) Fisheries 93 
 (3) M
INING AND ENERGY  94 
 (i) Mining 94 
 (ii) Energy 95 
 (4) M ANUFACTURING  100 
 (i) Automotive 102 
 (ii) Textiles, clothing, and footwear (TCF) 104  (iii) Pharmaceuticals 105 
 (5) S
ERVICES  106 
 (i) Features 106  (ii) Domestic support 107 
 (iii) Commitments under the General Agreement on Trade in Services 108 
 (iv) Regional and bilateral agreements on services 108 
 (v) Financial services 109 
 (vi) Communications 114  (vii) Transport 119 
 (viii) Tourism 123 
REFERENCES   125 
APPENDIX TABLES  137 
 
  Australia WT/TPR/S/244 
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CHARTS 
    Page 
I. ECONOMIC ENVIRONMENT  
 I.1 Product composition of merchandise trade, 2006 and 2009 14 
I.2 Direction of merchandise trade, 2006 and 2009 15 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Distribution of MFN tariff rates, 2006 and 2010  36 
III.2 Tariff escalation by 2-digit ISIC industry, 2010 37 III.3  Average applied MFN and bound tariff rates, by HS section, 2066 and 2010  38 
IV. TRADE POLICIES BY SECTOR  
 IV.1 Interest rate spread, January 2006-June 2010  113 
 
  
TABLES 
 
I. ECONOMIC ENVIRONMENT  
 I.1 Selected macroeconomi c indicators, 2005-10 1 
I.2 Basic economic indicators, 2005-10 6 
I.3 Balance of payments, 2005-10 12 I.4 Inward stock of foreign direct investment by country and economic activity, 2005-09 16 
I.5 Outward stock of foreign direct investment by country and economic activity, 2005-09 17 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Australian tariff structure, 2002, 2006, and 2010 35 
III.2 Summary analysis of the Australian preferential tariffs, 2010 39 III.3 Duty forgone through tariff concession arrangements, 2005/06-2009/10 40 
III.4 Main import prohibitions, restrictions, and controls, 2010 43 
III.5 Structure of tax revenue, 2005/06-2008/09 64 III.6 Excise rates, as at 30 April 2010 66 
IV. TRADE POLICIES BY SECTOR  
 IV.1 Budgetary assistance to primary industry, 2005-09 89 
IV.2 Budgetary assistance to manufacturing, 2005-09 101 
IV.3 Budgetary assistance to the services industry, 2005-09 107 
IV.4 Structure of the financial system assets, June 2006-June 2010 110 
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APPENDIX TABLES 
    Page 
I. ECONOMIC ENVIRONMENT  
 AI.1 Net foreign debt structure, 2005-10 139 
AI.2 Merchandise exports by group of products, 2006-09 140 
AI.3 Merchandise imports by group of products, 2006-09 141 AI.4 Merchandise exports by destination, 2006-09 142 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
 AII.1 Principal notifications under WT O Agreements, 2007-20 December 2010 143 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 AIII.1 Subsidies notified under WTO provisions, 2007/08 and 2008/09 145 
IV. TRADE POLICIES BY SECTOR  
 
AIV.1 Effective rate of combined assistance by industry grouping, 2005-06 to 2008-09 148 
 
 
 
 Australia WT/TPR/S/244 
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SUMMARY  
(1) ECONOMIC ENVIRONMENT  
1. Since its previous Trade Policy 
Review in 2007, Australia, one of the most open economies in the world, has successfully weathered the global fina ncial crisis without 
any backsliding on trade liberalization or action to influence the value of its currency.  
Although the crisis resulted in economic 
growth slowing from 3.8% in 2007/08 to 1.4% in 2008/09, the slowdown was milder than in most other advanced economies and growth rebounded to 2.3% in 2009/10.  The mild 
slowdown and subseque nt rebound in growth 
were due to, inter alia , strong demand for 
Australia's commodity exports, especially from China, which pushed Australia's terms of trade to its highest level in 60 years;  a flexible 
exchange rate;  a healthy banking sector;  and 
a timely and appropriate policy response to the crisis.  Although Australia is still considered one of the most competitive economies in the world, it has experienced a marked decline in multi-factor productivity growth owing mainly 
to special developments in agriculture, mining, 
electricity, gas, and water.  Inflation has been slightly above or within the central bank's 2%-3% target, and the unemployment rate has remained relatively low, albeit rising gradually from 4.5% in 2006/07 to 5.5% in 2009/10.  
2. Sound macroeconomic policies and 
past structural reforms (of which trade 
liberalization, induced by an exceptionally transparent policy framework, has long been an integral part), together with greatly improved terms of trade, have been among the 
main factors contributing to Australia's 
impressive economic performance during the period under review (as well as the past two decades).  Nevertheless, as from 2008/09, Australia's fiscal position shifted to a deficit, largely reflecting reduced tax revenues, and 
spending relating to the implementation of the 
generous economic stimul us measures.  More 
importantly, however, soaring export prices and low unemployment seem to have reduced the appetite for further structural reforms, 
which appear to have slowed or failed to 
deliver during the review period, thereby possibly affecting the prospects for achieving 
sustained growth in the future.   
3. The responsiveness of the flexible 
exchange rate to commodity price fluctuations helped stabilize export incomes.  In 2008/09, the exchange rate of the Australian dollar 
against the U.S. dollar depreciated sharply, 
thus boosting exports and reducing imports, 
but since then it has been appreciating and negatively affecting Australia's export competitiveness, particularly of agricultural 
exports.  In 2008/09, the trade account turned 
to surplus, mainly reflecting large increases in commodity contract prices negotiated in early 2008 for iron ore and coal exports, as well as the sharp exchange rate depreciation;  subsequently, it returned to a deficit.  Net 
external debt increased, largely reflecting 
interest and dividends paid to foreign investors in Australia (net of income received on 
Australian investment abroad).   
4. The gradual shift in the pattern of 
Australia's merchandise trade towards East Asia was further reinforced as a result of the 
virtual doubling of China's share of total 
exports.  Australia has maintained its open stance towards foreign investment, and has reduced the compliance costs related to notification and remove d foreign ownership 
restrictions in the media sector.  It continues to 
screen large investment projects on the basis of vaguely defined "national interest" criteria restricting foreign ownership in a few sensitive areas (e.g. international aviation and shipping).  Nevertheless, screening does not seem to have 
been a major barrier to inward foreign 
investment.  
(2) T
RADE POLICY FRAMEWORK  
5. Australia's trade policy framework 
continues to be characterized by an unusually high degree of transparency.  This involves rigorous economic analysis undertaken by government institutions  and independent 
advisory bodies (notab ly the Productivity 
Commission), from which policy-makers 
benefit in formulating cost-effective trade and trade-related policies, including continuing regulatory reforms, aimed at removing barriers WT/TPR/S/244 Trade Policy Review 
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to improved productivity and facilitating 
(rather than impeding) the reallocation of domestic resources.  The Secretariat has once again drawn heavily on publicly available 
documents from these institutions in preparing 
its Report for this sixth Trade Policy Review 
of Australia.  
6. While remaining committed to 
multilateralism, more emphasis has been placed on exploring the prospects of broadening preferential trade relations through 
the conclusion or negotiation of 
comprehensive agreements with major trading partners or regional groups (e.g. the Association of South East Asian Nations and Trans-Pacific Partnership Agreement), despite their negotiating and administrative costs, and 
uncertain benefits.  Commitments under these 
agreements go beyond WTO Agreements in a number of areas, including services and investment, and in certain cases (e.g. intellectual property rights) are applied to all trading partners.   
7. Australia has continued to provide 
duty-free treatment for imports from least 
developed countries (LDCs), while preferences to other developing countries are being eroded by MFN and other preferential tariff cuts.  It has been an active provider of 
demand-driven aid for trade at multilateral, 
regional, and bilateral levels;  policy in this area is based on improving market access, and 
building competitive economies.  
8. 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.  These jurisdictions remain responsible for a number of trade-related policies, such as standardization, government procurement, and state-trading, 
and have legislative powers in a number of 
areas.  The COAG Reform Council, which aims to achieve a seamless national economy, is also responsible for implementation of the National Reform Agenda  (NRA), which has 
been rather slow. (3) T
RADE POLICY DEVELOPMENTS  
9. The tariff remains one of Australia's 
main trade policy instruments, albeit a minor source of tax revenue (1.9% of total tax revenues).  Unilateral redu ctions in tariffs (on 
1 January 2010), including peak rates, applied 
to textiles, clothing, and footwear (TCF) as 
well as to passenger motor vehicles (PMVs), reduced the average applied MFN tariff rate to 
3.1%, from 3.8% in 2006;  further unilateral 
reductions are envisaged by 2015.  Whereas the average applied MFN tariff for agricultural products is 1.4%, that fo r industrial products is 
roughly 3.4%.  Some 96% of tariff rates are now within the zero to 5% range.  The tariff 
structure was simplified and now involves 
seven rates (four ad valorem,  one specific, one 
compound, and one alternate).  Most tariff rates (99.7%) are ad valorem , a feature that 
contributes to the transparency of the tariff.  
By contrast, non- ad valorem  rates tend to 
conceal relatively high tariff rates, particularly those on used vehicles, which seem to be rarely applied.  However, these changes have done little to change the pattern of tariff escalation, which means that effective rates of 
MFN tariff protection can be considerably 
higher than nominal rates.  Some 96.5% of tariff lines are bound, thereby imparting a high degree of predictability to the tariff.  Applied MFN tariff rates currently fall short of bound 
rates by an average of about 7 percentage 
points and up to 55 percentage points for clothing items.  While the consequent gap between bound and applied MFN rates provides considerable scope for the authorities 
to increase applied tariffs within bindings, this 
does not appear to have happened during the 
period under review.   
10. Documentation requirements have 
remained minimal, and computerized customs clearance has facilitated virtually all imports and exports;  trade facilitation has been supported by the Enhanced Trade Solutions 
programme, and import clearance performance 
has been measured with a Time Release Study device.  The transaction value has been mostly 
used for customs valuation purposes. Australia WT/TPR/S/244 
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11. Import prohibitions and restrictions in 
the form of technical regulations and stringent quarantine requirements have remained in place, in principle, to preserve, inter alia,  
public health, the environment, safety, or 
security.  Changes were made to ensure that all standards developers work together, avoid duplication, and work in harmony with international standards, as well as to centralize 
the Commonwealth Government's power for 
introducing mandatory product safety and information standards as from January 2011.  Although Australia continues to maintain strict SPS measures, which it considers proportionate to its appropriate level of 
protection, it recognizes that zero-risk is 
unattainable and launche d reforms involving a 
shift from "quarantine to biosecurity".  Whereas the net benefit to the community as a whole (including domestic consumers) needs 
to be demonstrated in order for the adoption of 
a standard, SPS measures are taken without similar cost-benefit analysis, including due account of the trade eff ects of such measures 
for stakeholders along the supply chain, although import risk analyses are expected to 
address the issue of economic consequences to 
relevant stakeholders.  Recourse to anti-dumping and countervailing action has been steady with most initiations and measures relating to items originating in Asia.  No 
safeguard measures were adopted during the 
period under review. 
12. Australia has continued to use 
government procurement as an instrument of economic policy aimed at fostering industrial 
development in certain sensitive areas (e.g. 
real estate property or accommodation, R&D services, and motor vehicles) that are exempt from the mandatory procurement procedures applying to procurement above certain thresholds.  The target of sourcing at least 10% 
of purchase value from small and 
medium-sized enterprises (SMEs), as well as preference margins for local suppliers and local-content requirements by certain state governments have been maintained and, in 
certain areas, reinforced but applied in line 
with FTA commitments.  Foreign participation in bidding or the gran ting of duty concessions may require the submission of an Australian 
Industry Participation plan, an element also used for the granting of duty concessions under the Enhanced Project By-Law Scheme.  
Australia has remained an observer of the 
WTO Agreement on Government Procurement (GPA) but has followed negotiations on the revised GPA.  Its comprehensive FTAs contain chapters committing Australia to 
principles of transparency and 
non-discrimination in government procurement.  
13. Export controls or quantitative 
restrictions to, inter alia,  manage 
access-related import quotas operated by 
public sector entities affect certain primary and 
therapeutic goods to ensure, inter alia,  
adequate domestic supply, and to enforce standards.  Exports of merino sheep were liberalized as from January 2010.   
14. Export assistance, consisting of direct 
grants (e.g. through Export Market Development Grants) and tax concessions (e.g. Tradex), has been maintained and revised.  In addition to local-content requirements termed as "Australian activity", export finance is, 
inter alia,  conditional upon "national interest" 
criteria.  Export credit terms seem to be in line with OECD guidelines.   
15. Support for domestic production and 
trade has been provided through tax and 
non-tax incentives, with steady, albeit 
declining, emphasis on R&D spending as well as regulatory restrictions on competition.  Some of the industry-specific programmes (e.g. dairy, automotive, pharmaceuticals) were 
ended or amended dur ing the period under 
review.  The special Luxury Car Tax, which is levied at the same rate on domestic and foreign cars, but nonetheless seems to fall disproportionately on imports, was raised from 25% to 33%.  The effective rate of combined 
assistance (i.e. tariff, budgetary, agricultural 
pricing and/or regulatory assistance) remained relatively high for TCF, PMVs, grain, sheep and beef cattle farming,  and horticulture and 
fruit growing activities;  support for primary 
production depended on the effects of climate.  WT/TPR/S/244 Trade Policy Review 
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In addition to certain commodity export 
activities, state involvement in the economy involving the provision by government trading enterprises of services in key infrastructure 
sectors (e.g. water, electricity, ports, rail, urban 
transport), are not always on a fully commercial basis. 
16. Australia has further strengthened 
protection of intellectual property rights by 
expanding its international commitments.  The 
competition policy framework, which remains characterized by a long list of special regimes and exemptions, including at the state or territory level, has been updated in several areas with particular emphasis on cartel 
criminalization.  Legislation enacted on 
13 July 2010 is aimed at strengthening consumer protection and enforcement at the national level. 
(4) S
ECTORAL POLICY DEVELOPMENTS  
17. Despite its relatively small 
contribution to GDP, Australia's highly market- and export-oriented agriculture remains of fundamental importance.  Average applied MFN tariff protection for the sector (excluding forestry) remained negligible, at 
1.4 %, compared with 3.4% for manufacturing.  
Some sensitive items (e.g. cheese, certain vegetables, and certain oils and fats) continue to receive tariff protection, and tariff-rate quotas affect certain types of cheese and curd.  
Non-tariff measures, such as the strict 
quarantine and inspection regime, export and/or production levies, and a single-desk arrangement on rice remain in place;  similar statutory arrangements for grains, wheat and 
sugar were dismantled during the review 
period although entities that operated under these arrangements remain active.  A new bilateral agreement on wine trade relating to geographical indications was signed with the EU.  Despite a wide range of assistance 
programmes, the sector's overall level of 
support has remained relatively low, equivalent to 0.1% of GDP;  the majority of this assistance was delivered in the form of non-trade-distorting budgetary outlays, and 
was within Australia's de minimis  WTO commitments.  Since 2009, no 
industry-specific support has been provided to the dairy sector.  A policy has been put in place to address the profitability and 
sustainability of Australia n fisheries as well as 
illegal fishing.   
18. Mining, which operates in a 
competitive market environment with seemingly no industry-specific restrictions on 
foreign investment and little government 
support compared with other sectors, remains critical to Australia's economic performance despite the pronounced decline in its multi-factor productivity.  Despite reforms aimed at creating a nationwide energy market 
and strengthening price signals vis-à-vis 
consumers, Australia's electricity generation, transmission, and distribution remain segmented geographically;  generation capacity is largely owned or controlled by the 
Government and ceilings  on retail electricity 
rates remain in place.  A National Strategy on Energy Efficiency is being implemented, and renewable power generation has been the focus of government assistance to the sector.  Some state governments provided subsidies at 
the retail level to reduce the price of unleaded 
petrol and diesel;  domestic producers of ethanol and biodiesel used in transport also receive a government subsidy.  
19. Manufacturing policy has been largely 
focused on innovation as a means of, 
inter alia,  improving productivity, and thus 
international competitiveness, and in order to reap benefits from rapid economic expansion in overseas markets.  The average applied 
MFN tariff rate on industrial products has 
declined slightly as a result of unilateral tariff cuts.  Budgetary assistance for manufacturing as a share to GDP is estimated to have remained steady at 0.1%, albeit an increase in value terms;  the TCF and leather industries, 
and motor vehicles and parts activities 
continued to benefit from relatively high effective rates of protection, i.e. more than double the manufacturing sector's average and the highest of all goods industries.  Some 
programmes for the automotive industry have 
been complemented with elements reflecting a Australia WT/TPR/S/244 
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persistent interventionist approach to 
adjustment.   
20. Services remains the largest and 
fastest growing sector of the economy.  
Budgetary assistance to the sector, mainly 
delivered through tax expenditures, rose considerably and in 2008/09 was equivalent to 0.28% of GDP.  Australia's GATS and bilateral RTA commitments remain 
unchanged;  its RTAs generally provide for 
greater commitments on trade in services to signatories than those under its GATS commitments.  Financial services reforms (e.g. prudential rules, Basel II) have been pursued in several areas and policies to mitigate the 
impact of the global financial crisis allowed 
Australia's banks to cope well with the financial turmoil.  Action is being undertaken to remove impediments to Australia's position as a financial services centre in the Asia 
Pacific region.  In telecommunications, the 
formerly government-owned Telstra has been able to retain considerable market power, an issue of concern in several areas, including broadband services;  efforts to address these issues include the passing of new legislation to 
reform the telecommunications regulatory 
regime and the possible establishment of a government-owned National Broadband Network company.  Support to domestic advertisement and film producers has been 
maintained through local-content requirements 
in television broadcasting as well as film production funding.  Efforts have been undertaken to drive the development of a long-term coordinated approach to national 
transport infrastructure planning and 
investment, and to identify priority projects aimed at coping with a variety of shortcomings and coordination of transport infrastructure development between th e federal government, 
the states and territories, and the private sector.  
A new comprehensive policy framework for 
the development of the aviation industry has been established.  A new strategy and additional support have been provided to promote innovation, infrastructure 
development, and growth in the tourism sector.   (5) O
UTLOOK  
21. Australia's economic growth is 
expected to remain strong.  Despite sound macroeconomic manage ment and relative 
economic strength, downside risks to the 
economic outlook relate, inter alia , to the 
withdrawal of the economic stimulus package, the global economic and financial fragility, as well as Australia's increasing exposure to 
commodity prices, its reliance on short-term 
external debt, and the high and growing indebtedness of households.  Australia's growing dependence on mining may amplify the business cycle, as the economy will become more vulnerable to swings in its 
highly favourable terms of trade.  A major 
economic challenge c onfronting Australia, 
with potential trade policy implications, is to formulate appropriate macroeconomic and structural policies to facilitate rather than 
impede adjustment to the effects of its greatly 
improved terms of trade owing to the mining boom and the associated appreciation of the Australian dollar.  The latter is likely to reduce the competitiveness of import-competing activities and non-mining exports, unless 
productivity in these activities can be 
improved.  This will have far-reaching implications for the pattern of growth and structure of the economy by necessitating a reallocation of domestic resources.  Significant 
structural adjustment by the non-mining 
economy will be required.  Market-driven structural adjustment and reforms underpinning productivity growth should enable Australia to strengthen its international 
competitiveness, provide the basis for 
sustained growth, and address the longer term challenge of a growing but ageing population, climate change, and technological change, which is arguably the main determinant of multi-factor productivity growth in the long 
run.  The authorities consider that Australia's 
approach to trade policy should be reviewed against the principles of unilateralism;  non-discrimination;  transparency;  and "the grand unifying principle of" trade policy as an 
indivisible part of overall economic reform.