USTR - 1996 National Trade Estimate-Australia
Office of the United States Trade Representative

 

1996 National Trade Estimate-Australia

In 1995, the U.S. trade surplus with Australia was $7.5 billion, $889 million higher than in 1994. U.S. merchandise exports to Australia were $10.8 billion, up $1.0 billion, or 10 percent from 1994. Australia was the United States' fifteenth largest export market in 1995. U.S. imports from Australia totaled $3.3 billion in 1995, nearly a four percent increase from 1994.

The stock of U.S. foreign direct investment was $20.5 billion in 1994, 7.6 percent higher than in 1993. U.S. direct investment in Australia is largely concentrated in manufacturing, petroleum and wholesale.

The Government of Australia is continuing a policy of economic reform begun in the 1980s to make Australia a more competitive global economy. Australia was an active participant in the Uruguay Round negotiations and is an original member of the WTO. In addition, Australia is an important advocate of international trade liberalization in the Asia pacific region, particularly through its participation in APEC.

IMPORT POLICIES

Tariffs

As calculated for Australia's GATT trade policy review, the trade weighted average tariff was 4.1 percent in 1993/94; a projected 2.8 percent in 1996/97; and a projected 2.2 percent in 2000/01. This represents a 72 percent reduction compared to 1987 figures. With the conclusion of the Uruguay Round, Australia bound over 94 percent of its industrial tariff lines.

At APEC's 1995 ministerial and leaders meeting, Australia committed to bring forward by one year the date on which its final Uruguay Round tariff bindings are phasing down -- some 2800 tariff lines in total. For industrial products where bindings are accelerated in this way, final bound rates will be achieved on January, 1998. For agricultural products, they will be achieved on January 1, 1999.

In May 1994, the Australian Government released a white paper reiterating its commitment to unilateral tariff reform. Other than for some textile, clothing and footwear (TCF), parts and motor vehicle items, the general tariff rate will remain at a maximum of five percent beyond 1996. Under this program, the Australian Government pledged that, with the exception of TCF and certain automotive products, all other tariffs will be reduced in stages to five percent by July 1, 1996. This includes reduction of traditionally high tariff goods of particular interest to U.S. exporters such as wine, torque wrenches (was at 17 percent), and aluminum screening (was at 16 percent). In the Uruguay Round, Australia did not join most other OECD countries in agreeing to phase out tariffs on paper and paperboard products. Nor did it adhere to the "zero for zero" agreement for distilled spirits (Australia is the third largest market for U.S. exports of distilled spirits). Reductions in tariff rates are estimated to increase potential U.S. exports by over $5 million.

The tariff rate on passenger motor vehicles and their original equipment components, currently 25 percent

(down from 27.5 percent as of 1 January 1995), will be reduced in stages to 15 percent by January 1, 2000. Similarly, tariffs on light commercial and four-wheel drive vehicles and components will be reduced to five percent by July 1, 1996. Replacement components for passenger vehicles will remain at 15 percent from July 1, 1996 until the year 2000. Under automotive arrangements, automobile manufacturers may import duty free dutiable imported components up to a value equal to 15 percent of their automobile production in a given year.

By July 1, 2000, Australia will reduce tariffs on carpets to 15 percent (currently as high as 25 percent), and textile, clothing and footwear items to a maximum of 25 percent. Tariffs on cotton sheeting and woven fabrics will fall to 15 percent from the current maximum rate of 28 percent. Tariffs on apparel and certain finished textiles will be reduced to 25 percent (now up to 40 percent). Footwear tariffs will fall to 15 percent (now up to 30 percent) and tariffs on footwear parts to 10 percent (now up to 17 percent).

STANDARDS, TESTING, LABELING, AND CERTIFICATION

Although Australia became a signatory to the Tokyo Round Agreement on Technical Barriers to Trade on March 1, 1992 (and has now acceded to the WTO Agreement on Technical Barriers to Trade), it maintains restrictive technical requirements and design rules for automobiles, certain automobile parts, electronic equipment, medical and telecommunications equipment, and machinery parts and equipment. In light of its Uruguay Round commitments, Australia is rewriting its standards in a number of areas to bring them into conformity with its new international obligations.

In December 1995, the Australian Minister for Small Business, Customs and Construction announced several proposed changes to Australia's standards setting and compliance regime. The changes include, inter alia:

  • Following consultation with the states and territories, the introduction of national trade measurement legislation to create a new national trade measurement system. The new system will be administered by the national standards commission;
  • The creation of a working party of commonwealth officials to examine the desirability and feasibility of a new system of conformance marks for the voluntary sector and a single conformance mark for the regulated sector; and formal recognition of the joint accreditation system of Australia and New Zealand (JAS-ANZ) by the commonwealth and New Zealand Governments as the joint national accreditation body for certification.

In addition to federal level regulations, products imported into Australia must also comply with state packaging regulations. In 1991 the states agreed that any product, including imports, meeting the legal requirements of one state could be sold in all other states and territories. Thus, importers need only meet the requirements of the state of import.

Federal law requires that country of origin be clearly indicated on the front label of some products sold in Australia. Labels must also give the name and address of a person in Australia responsible for theinformation provided on the label. These and similar regulations are being reconsidered along with other standards in light of Uruguay Round obligations.

Livestock imports are limited by quarantine and health restrictions. Breeder, feeder and slaughter steers may be imported, but all must undergo the same veterinary tests. American poultry products (uncooked poultry and live birds, and hatching eggs) cannot be imported due to questionable veterinary restrictions. Regarding the import of processed cooked poultry meat, Australia issued a risk assessment recommending temperature/time requirements so extreme as to discourage imports from the United States. The public comment period on the draft concluded in August 1994, but no final action has been taken. A similar ban exists on cooked pork (except canned products)

Prior to 1994, imported feed grains generally were banned from entering Australia, ostensibly due to phytosanitary concerns. During the drought, however, the U.S. obtained approval to export feed grains to Australia to supplement domestic production. While the U.S. has requested approval to continue exporting, Australia has yet to grant approval for further imports.

Phytosanitary regulations prohibit or severely limit the entry of many fruits from the United States, including Florida citrus, cherries (Australia recently completed a risk analysis on importing cherries from San Joaquin County, California, which will be published for public comment), grapes, blueberries, stone fruit, apples and pears. The United States is awaiting a response from Australia on the assessment for entry of each of these exports.

Australia also forbids the importation of all fresh, chilled, and frozen salmon for alleged health related concerns. The United States joined Canada in consultations with Australia on this matter under Article XXII of the GATT 1947. In November 1995, the United States requested separate consultations under the WTO. Talks were held in December 1995, but were inconclusive. Restrictions are being reviewed under Australian quarantine and inspection service risk assessment procedures. A draft risk assessment was released in May 1995 as a discussion paper for public comment. The Australians have not committed to a date to issue the final risk assessment.

Australia recently announced that it has begun an exhaustive independent review of its animal and plant quarantine policies. Following public hearings, the findings of review committee are expected to reported by October 1, 1996.

Since 1983, under the "Closer Economic Relations" (CER) Agreement, Australia and New Zealand have sought harmonization of standards, technical regulations (including labeling) and testing procedures, and the removal of restrictive trade practices between their two countries. A side effect has been that phytosanitary or animal health restrictions imposed by one country are often followed by the other.

GOVERNMENT PROCUREMENT

The United States continues strongly to urge Australia to join and adhere to the WTO Agreement on Government Pprocurement. In August 1995, the Australian Government released a discussion paper on accession issues.

Since 1991, foreign information technology companies with annual sales to the Government of Australia of less than $40 million have been "invited" to enter into fixed-term arrangements (FTAs), and those with sales greater than $40 million to enter into partnerships for development (PFDs). Recently, Australian firms have been permitted to enter into FTAs and the PFD program. Although companies are not de jure required to join, there is strong de facto pressure to join in order to do business.

As originally designed, both FTAs and PFDs contained performance targets that companies pledged to meet. According to the Australian Department of Foreign Affairs and Trade, target percentages are no longer discussed with companies negotiating either FTAs or PFDs. Companies now undertake to use their "best endeavors" to fulfill commitments which themselves can be renegotiated following changes in circumstances such as a business downturn.

ln 1992, this scheme was extended into the telecommunications customer premises equipment (CPE) sector, largely replacing the requirement that suppliers of cellular mobile telephones, pabx small business systems, and first telephones have industrial development arrangements (IDAs) in place before obtaining licenses to connect their equipment to the public switched network. The IDA is a scheme under which companies must commit to meet industrial development objectives in order to gain approval to connect certain CPE (standard telephones, pabx, small business systems and cellular mobile telephones) to the communications network. Beginning in July 1993, companies participating in PFD or FTA programs have been able to seek exemption from the IDA scheme on a case by case basis. The IDA scheme is scheduled to terminate in June 1996.

In February 1995, the Bureau of Industry Economics published an evaluation of the PFD and FTA programs. In which it recommended that both programs be continued, but that their "unwarranted emphasis on the information technology and telecommunications sector's trade balance outcome" should cease.

Beginning on February 1, 1992, the Australian Government implemented a "restricted systems integration panel" (RSIP) scheme. The RSIP was a panel of 15 selected private companies through which all commonwealth information technology requirements involving systems integration activity were to be sourced, except for purchases with an estimated value of less than $1 million. Late in 1994, an interagency review of the RSIP found that the scheme had not made a significant contribution to industrial development. The RSIP was disbanded, and the new "information technology services common use contract panel "(ITSCUCP) was formed in 1995. It will be used by Australian agencies in planning and implementing information technology purchases. Membership in the new panel is much broader than the old RSIP. Any information technology company may join upon demonstrating acceptable levels of Australian product development, investment in capital equipment, skills development and/or services support, and local sourcing. Potential members of the ITSCUCP also will be evaluated on their Australian R&D activities, export orientation, and development of relationship with Australian and New Zealand suppliers and consumers. The ITSCUCP is too new to evaluate from the perspective of its impact on foreign access to Australia's government information technology market.

In December 1992, the Government of Australia announced an initiative requiring government business enterprises (GBEs -- central government-owned companies such as Air Services Australia) to consider industrial development objectives such as "developing local industry capabilities" and export potential in their procurement activities. The idea is to allow "local companies the maximum opportunity to compete for government business consistent with the commercial objectives of GBEs and the need to obtain value for money." While the new policy does not specifically direct GBEs to give preference to local suppliers, it does bias them towards buying locally and favoring one major-project bidder over another if its package of incentives for the development of local industry is superior to that of its competitor based on past experience. This new policy has become a significant element in determining the procurement choices of GBEs, and will potentially influence decisions on millions of dollars worth of imports.

Further, the Government's May 1994 employment and industry policy statement strengthens such efforts to use government procurement policy to encourage local industrial development. It creates an endorsed suppliers arrangement for day-to-day government purchases of major office machines under common use contracts. Under this arrangement, prospective vendors will be assessed for inclusion on the list of endorsed suppliers in relation to their commitment to"world's best practice" -- i.e., standards, quality and service, and commitment to long-term, commercially sound Australian activities and compliance with government policies. The mandatory requirements that suppliers will need to satisfy for "long term activity" are: product development; investment in capital equipment, skills development and service support; and sourcing products and services locally. Non-mandatory factors which will be evaluated in judging applicants for endorsed supplier status include: R&D activities; export orientation; and technology transfer.

The May 1994 statement also requires industry impact statements to be drafted for procurement of $7.4 million or more, and establishes a two envelope system for such tenders. Under the latter system, bidders will be required to submit detailed information regarding Australian industrial involvement (AII) separately (in "envelope 2"), and bids will be judged both on price and product specifications, as well as industrial involvement grounds. Several U.S. firms have expressed concern that the two envelope system reduces the transparency of the bidding process by affording the Australian Government the opportunity to increase AII targets during the bidding process. In October 1995, the industry commission published a study critical of the two-envelope system, and invited public comment on possible changes.

EXPORT SUBSIDIES

Australia maintains several programs intended to enhance Australian exports. These include:

Export market development grants (EMDG) scheme: This program aims to encourage Australian exporters to seek out and develop overseas markets for goods, services, industrial property rights, and technology that is substantially of Australian origin. EMDG grants are provided to reimburse Australian residents who have incurred eligible expenditures while developing overseas markets for Australian products or services. Grant recipients are reimbursed for up to 50 percent of their eligible expenditures above A$15,000, but no recipient may receive more than A$200,000 in reimbursements in anyone grant year. In addition, claimants with export earnings exceeding A$25 million, or who have received eight previous grants, are not eligible.

Commodity boards: Several national and state commodity boards control the marketing and export of Australian agricultural products. Activities for these marketing authorities are financed in large part by the producers, but the boards often enjoy export monopoly status conferred by the federal or state government.

While some of the boards' domestic activities have been deregulated, the export of wheat and rice remains under the exclusive control of commodity boards. Currently, the Australian wheat board strictly regulates wheat marketing abroad, but consideration is being givern to the possibility of liberalizing this activity beginning in the latter half of 1996. The export of barley from certain states likewise remains strictly regulated.

Dairy exports are made both by the private sector and an arm of the state's dairy corporation. Australia terminated its export support payment scheme for dairy products on June 30, 1995, but instituted a new internal support program on July 1, 1995. The United States is closely monitoring this new program for compliance with Australia's Uruguay Round commitments.

International trade enhancement scheme (ITES): Support available under the ITES program is primarily directed toward the establishment of foreign markets or the expansion of sales for specified goods and services in specified markets. Under the scheme, participants may receive financial support up to a total of A$5 million, in the form of concessional loans to fund export promotion activities and market research or the direct provision of Australian Trade Commission (AUSTRADE) services relating to product development, export management, establishment of an overseas market presence, market research, and other AUSTRADE-approved activities.

Automotive export facilitation scheme: Under the terms of an export facilitation scheme, manufacturers of automotive vehicles and components receive subsidies based on the level of exports of specified automotive products. The subsidies are in the form of duty rebate "credits" which recipients can, in turn, use to offset their duty liability on imports of specified automotive products. In general, the level of subsidies is determined based on the sales value of the eligible exports, but the calculation is also done in a way which rewards domestic value-added. The greater the value of any qualifying exported product, the greater the import credit granted. Significantly, however, there is no requirement that the imported products be consumed in the production of exported products, as there normally is in a duty drawback system. Indeed, imports of finished vehicles for consumption on the Australian market are fully eligible for duty rebates under this scheme.

The subsidy benefits are freely transferable and may be sold among participants in the program. Current information indicates that the scheme will remain in force until at least December 31, 2000. Although benefits are progressively reduced each year between 1991 and 2000, the level of the duty rebate would still be significant in the year 2000, when Australia's duty on imported vehicles and components will be at 15 percent.

LACK OF INTELLECTUAL PROPERTY PROTECTION

With a few exceptions, Australia now provides world class intellectual property protection for copyrights, patents, trademarks, designs and integrated circuits copyrights, and plant breeders rights. Some specific issues remain of concern.

ln late 1993, the Australian Government revealed a loophole in the copyright act regarding unauthorized live ("bootleg") recordings. After U.S. representations, the Australian Government took regulatory steps to close the loophole by providing prospective protection from bootlegging to U.S. performers.

In April 1995, the Australian Cabinet overturned a not-yet implemented 1992 decision to allow the parallel importation of compact discs. Simultaneously, the government began examining extending performers protection in copyright law. In mid-1995, the Copyright Law Review Committee (CLRC) released its report on computer software protection, which recommended against changing copyright law to allow the parallel importation of computer software. However, the CLRC's report also contained recommendations which would allow software decompilation for interoperability and error correction purposes. The majority of the U.S. software industry opposes the CLRC's software decompilation recommendations.

In September 1995, Australia's Minister for Communications and the Arts announced that the copyright act would be amended to give artists and copyright owners a technology-neutral electronic transmission right. The new right will apply to all transmission including cable, satellite, microwave and existing forms of broadcasting.

The motion picture industry states that the Australian Government contravenes its own copyright law by allowing the unauthorized public performance of films to Australian prison inmates and navy personnel.

Australia does not provide applicants for marketing approval for pharmaceuticals and agricultural chemicals a period of "marketing exclusivity" during which the data they submit with their application will not be used to review later applications. The United States maintains that the TRIPs agreement requires that such data be protected against "unfair commercial use." The United States interprets "unfair commercial use" to preclude the use of the data to review later applications for a period of time. While the Australian Government claims that it does not use data without the consent of the submitter, a report prepared for the Australian Government indicates that data will not be accepted in the first instance unless the consent is given. We have raised this issue on numerous occasions and in various fora. The Australians disagree with U.S. TRIPs interpretation. We are currently reviewing our options as to resolution of this issue.

Although most copyright owners can prevent the parallel importation of works into Australia, parallel importation of books is permitted under strictly limited circumstances. When foreign publishers do not make available in Australia editions of new works within 30 days of original publication abroad, or when an Australian edition becomes unavailable and remains so for 90 days, parallel importation is allowed. The motion picture industry is concerned that the Australian Government may relax some of the prohibitions in the copyright law against parallel imports. Their concern arises from the affects of parallel importation and copying of NTSC format laser discs into Australia.

SERVICES BARRIERS

Local content requirements for broadcasting and advertising

The Australian Broadcasting Authority (ABA), the broadcasting regulator for radio and television in Australia, liberalized rules governing local content in television advertising effective January 1, 1992. Under current rules, up to 20 percent of the time used annually for paid advertisement during the hours of 6:00 a.m. until midnight can be filled with messages produced by non-Australians. At present, those rules do not appear to have a serious effect on trade.

Fifty percent of a commercial television station's average annual broadcasts between the hours of 6:00 am and midnight must be dedicated to Australian programs. Programs are evaluated on a complex point system based on relevancy to Australia (setting, accent, etc., ranging from no Australian content to a 100 percent Australian production). Trade sources indicate that the content regulation does not have a substantial impact on the amount of U.S.-sourced programming sold to Australian broadcasters, as the mix of programming is driven by the market's preference for Australian themes. In 1994, an average of 44 percent of commercial stations' broadcasting time was devoted to imported programming. The U.S. Government has reiterated U.S. opposition to quotas in the context of the ABA's review of the Australian content standard. Nevertheless, the ABA decided at the conclusion of that review in September 1995 to increase the local content quota to 55 percent effective January 1, 1998.

The regulatory framework for pay television also contains a local content provision which mandates that channels carrying mostly drama programs (not sports or music channels) must allocate 10 percent of their program acquisition expenditures on new Australian dramas. There is substantial supporting the Australian Parliament for reexamining and potentially increasing the local content quota. A 1995 amendment to the Broadcasting Services act of 1992 provides for a Ministerial review of Australian content on pay TV by July 1, 1997, with this review to include consideration of the feasibility of increasing the Australian drama expenditure requirement to 20 percent.

Telecommunications

In recent years, the Australian Government has taken steps to partially privatize its telecommunications sector, Australian satellite (AUSSAT). For example, the previously government-owned telecommunications company, for example was recently sold to the Optus Consortium which has significant U.S. participation. Optus is allowed to compete with the government-owned Telstra Corporation. In addition, a third cellular telephone carrier, voda phone, was licensed in 1993. At present, it is 95 percent British-owned; it must, however, become majority Australian-owned by July 2003. The Australian Government has announced that the current restrictions on the number of licensed carriers will be removed from June 30, 1997. In addition to licensed carrier competition, resale of telecommunications capacity has been liberalized. Resellers, however, can be 100 percent foreign owned.

Australia is a participant in WTO negotiations on telecommunications services which are scheduled to end by April 30, 1996. Australia tabled a status quo offer in September 1995. The offer would bind the current limited level of market access and did not reflect the substance of a telecommunications policy reform plan announced by the government just a month before. The United States has requested that Australia revise its offer to allow unlimited entry for domestic and international services, as envisioned in the reform plan, and to exclude foreign investments in telecom facilities and services from its investment screening law (the Foreign Investment and Takeovers Act).

INVESTMENT BARRIERS

Limits on foreign investment

In Australia, all potential foreign investors are required to submit to a screening process for investment approval. Application of Australia's foreign investment law provides discretion for the government to deny specific foreign investment based on "national interest". Australia's commitments under the GATS agreement of the WTO are limited as a result of Australia's screening process.

Foreign ownership of commercial television stations is limited. A foreign person may not be in a position to exercise control over a commercial television license or have company interests in such a license exceeding 15 percent. The aggregate foreign ownership that may be held in television stations is limited to 20 percent. Legislation also stipulates that no more than 20 percent of the directors of a broadcasting licensee company may be foreign nationals. Foreigners are also restricted to 20 percent ownership interest in any single subscription television license. Aggregate foreign ownership in a subscription television license is limited to 35 percent.

Australia completed the privatization of Qantas in August 1995. Foreign ownership was capped at 49 percent, and no single foreign entity could own more than 25 percent.

OTHER BARRIERS

Bounties

Bounties (production assistance) let domestic manufacturers maintain or increase their market share through price discounting. The use of bounties limits foreign competition at competitive market prices. Bounties are now in place on the following products (scheduled expiration dates are indicated in parentheses): shipbuilding (June 30,1997), computers and circuit boards (December, 2000); machine tools and robots (June 30,1997); fuel ethanol (June 30, 1997); and books (December 31, 1997). Bounties may be reviewed before expiration with some possibly extended or converted to tariffs. Bounties on bed sheeting, textile yarns and printed fabric expired as scheduled on December 31, 1995. Dairy market support payments, which were classified as an export subsidy under the Uruguay Round, were terminated on June 30, 1995 in accordance with Australia's Uruguay Round implementing legislation. The United States will monitor Australia's new internal support program for the dairy sector to ensure Australia's adherence to its Uruguay Round commitments.

 
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