To strengthen the multilateral trading framework and further liberalise global trade, including pursuit of a post-Uruguay Round agenda.
The Trade Negotiations and Organisations Division is responsible for the advancement globally of Australia’s trade policy objectives. Central to this responsibility is Australia’s commitment to strengthening the multilateral trading system by agreement on and implementation of fairer, more comprehensive and more liberal rules for trade.
Improved access to new and existing markets is a special priority. In pursuit of this objective the division makes particular use of the internationally agreed rules of the General Agreement on Tariffs and Trade (GATT). The division works to ensure practical benefits can be obtained for Australian exporters. It does so in conjunction with other divisions and posts, and in particular through the Australian Mission to the GATT in Geneva. The division collaborates closely with representatives from Australia’s major trading interests (agriculture, industrial goods, services, intellectual property and investment) to identify and remove impediments to market access and to secure export opportunities.
The principal objective for the division during 1993-94 was to secure a substantive outcome to the Uruguay Round of Multilateral Trade Negotiations. The Uruguay Round negotiations were completed on 15 December 1993, and the signing of the Final Act of the Uruguay Round together with the adoption of other decisions and declarations in Marrakesh formally brought the Uruguay Round to an end on 15 April 1994. The Uruguay Round was launched with the Punta del Este (Uruguay) Declaration on 20 September 1986.
Sub-program activity helped to identify, contain and liberalise barriers to Australia’s international trade;
A substantive outcome to the Uruguay Round which reflected Australia’s trading interests;
Australian influence was extended in ongoing GATT/WTO negotiations, including through the maintenance of Cairns Group cohesion and effectiveness;
Wide support and cooperation in sub-program activity was received from relevant industry bodies, the private sector and state governments.
Trade policy in the post-Uruguay Round environment
The conclusion of the round has reinforced and expanded the multilateral trading system. It underpinned a boost in international business confidence which will support longer term increases in global economic activity and trade. Between 1993-94 and the end of the six-year implementation period the increases are estimated at more than $400 billion and $1000 billion respectively. This will translate into a major net increase in world income, economic growth and employment in developed and developing countries.
The framework for the global trading system is provided by the GATT. As a result of the round outcomes a stronger and more comprehensive framework will be established in the form of a World Trade Organization (WTO). The WTO will oversee the administration of Uruguay Round agreements, the GATT, agreements on services and intellectual property and the four plurilateral trade agreements on dairy products, meat, government procurement and civil aviation.
The WTO will be the forum for future multilateral trade negotiations. It will administer a new streamlined dispute settlement mechanism-a key objective for Australia in the round. The Marrakesh ministerial meeting also adopted a decision to establish a WTO committee on trade and the environment.
The influence of the expanded WTO-based multilateral trading system will increase as the liberalisation negotiated through the round takes effect. The scope of issues to be covered by the WTO creates a very heavy post-Uruguay Round workload. Particular issues include continuing negotiations on services, provisions for review of the Uruguay Round agreements within stipulated time frames, and the monitoring of implementation of commitments.
For the time being, however, the focus must remain on the passage of national legislation to implement the commitments which have been agreed, particularly by the major economies (United States, European Union and Japan) and to ensure the establishment of the WTO from 1 January 1995.
Concurrently a new agenda of trade issues is evolving. The extent to which the WTO should be involved in this work is the subject of considerable debate.
Australia’s priorities
Improving Australia’s international competitiveness is a key objective of the Government’s economic policy. Domestic programs of structural adjustment and micro-economic reform have also put Australia in a stronger position to pursue bilateral, regional and multilateral trade interests.
The division has sought to secure outcomes from multilateral trade negotiations which would build on Australia’s improved competitiveness by expanding market access and opportunities Australian exporters. The outcomes have provided this in all sectors. In broad economic terms, recent studies by the Industries Commission and the Australian Bureau of Agricultural and Resource Economics suggest that Australia’s exports could increase by as much as $5 billion and Australian gross domestic product by as much as $4.4 billion over the next 10 years. A short analysis of the outcomes by sector is set out in succeeding sections.
Negotiations over the resource-intensive process of confirming the details of the commitments which other participants had made to Australia, and the commitments Australia had made to others, became the principal task. In a number of cases verification involved difficult and complex bilateral access negotiations. These negotiations had to be completed before the round could be formally finalised at Marrakesh. New post-Uruguay work programs have been established. Development of the new post- round international trade agenda presents new trade policy challenges which are being taken up by the Department.
At the same time the Department has continued to be substantially involved in the operational activities of the GATT. Accessions of important trading partners, particularly China and Taiwan, as new contracting parties; detailed examinations of the trade and economic policies of contracting parties under the trade policy review mechanism; and renewed emphasis on the consideration of regional trading arrangements are all part of an expanding multilateral agenda. Australia has significant policy interests and has made substantive contributions to the work being conducted.
Working with Australian industry
Since the negotiations ended, a priority has been to publicise the outcomes of the round with particular emphasis on the identification of new or expanded opportunities for Australian industry. The aim of the division is to enable industry to make the most of opportunities. The implications for Australia of the new trade agenda have been the subject of extensive consultations with industry, unions, and the community.
The division has been working to intensify its links with all sectors of domestic industry by building on its existing close collaborative associations and by developing new arrangements. Through increasing engagement with representative bodies of the agricultural, manufacturing, services and intellectual property sectors the division is better able to formulate bilateral and multilateral trade negotiation strategies.
These close links with industry, and the division’s responsibility for negotiating better market access for industry, have further strengthened the Department’s ability to contribute to formulation of Australian industry policies and programs, particularly those which enhance Australia’s international competitiveness and exports.
The division has maintained and expanded its well-established consultative arrangements with Australia’s agricultural, manufacturing and intellectual property sectors. It initiated and is developing further opportunities with the services sector. The Department and Austrade have been the major sponsors of a substantial new service exports study, ‘Intelligent Exports’. The study was intended to identify and develop policies to deal with impediments to Australia’s services exports. The Department gave emphasis in drafting the study to market development and access issues and the protection of intellectual property rights.
The division works directly with services industries through the Accountancy Market Access Committee, the Telecommunications Export Task Force, and other industry groups representing tourism, construction, health and education services. The aims of the division are to ensure that Australia’s multilateral and bilateral trade negotiating strategies, help to realise Australia’s export potential in these areas, and to identify new market development activities that the Department can implement.
The Cairns Group
Australia has traditionally been able to exert a significant influence on the multilateral and plurilateral agenda, well beyond that of other countries of Australia’s size. Senior-level political engagement throughout the negotiations, but particularly in the closing stages, has reinforced Australia’s ability to ensure that its priorities are taken fully into account. The outcomes of the Uruguay Round, particularly in agriculture, where the Cairns Group played a very significant role, and in services, demonstrate the benefits for Australia of an activist approach.
The Cairns Group-a group of 14 agricultural fair traders-established itself as the third force, with the EU and the US, in the Uruguay Round’s agricultural negotiations.
Formed in 1986 to counter European opposition to the inclusion of agriculture in the round, representing about 20% of the world’s agricultural exports and roughly the same population as the EU and the United States combined, the group caucussed effectively throughout the round and was instrumental in ensuring a positive outcome on agriculture. The Cairns Group made it clear that there could be no conclusion of the round without a satisfactory deal on agriculture, and helped bring agriculture more fully into the international trading system.
Although the group has no formal structure, the Australian Minister for Trade acts as chairman at its meetings. The Department acts as the secretariat for the Cairns Group and, through its post in Geneva, takes the lead in developing positions and strategies for dealing with key issues.
In May 1994 the first ministerial meeting of the Cairns Group since the completion of the round was held in Montevideo. Ministers underlined that the group was still in business. The meeting was highly successful in terms of establishing a new sense of direction and purpose for the group in the post-Uruguay Round environment.
Cairns Group ministers sent a strong message to the major trading countries that the group will insist on the full and prompt implementation of Uruguay Round commitments and will resist any backsliding or circumvention of obligations. The group is determined to continue to be a strategic player in the new World Trade Organization (WTO) particularly in the Committee on Agriculture. The group agreed on an ambitious work program that includes the active monitoring of agricultural protection and support policies in key markets such as the US, EU and Japan. As part of this program the group plans to hold a policy seminar in Washington on the forthcoming US Farm Bill.
Agriculture
As a result of the Uruguay Round, the rules and disciplines of the General Agreement on Tariffs and Trade (GATT) have been extended for the first time to trade in agricultural commodities-a goal which has eluded the global trading community for the past 45 years. The fundamental changes in prospect for world agricultural trade represent major trading opportunities for the Australian rural sector.
The total agricultural package negotiated in the round contains significant potential benefits for Australia’s rural producers, worth about $1 billion a year. The benefits will flow from reform commitments to world agricultural trade in three major areas: market access, domestic support and export subsidies.
The Australian Bureau of Agricultural and Resource Economics (ABARE) estimates that Australia can expect to receive an extra $330 million in beef exports, $210 million in dairy products, $320 million in wheat, $50 million in coarse grains, $30 million in rice and $10 million in sugar. Other farm sectors will also benefit.
The package provides for a major reduction over the next six years in the level of production and export subsidies by the European Union (EU) and the United States. This is a major achievement. For the first time, agriculture will be subject to effective international disciplines and the trade distorting effects of subsidies will be progressively reduced. Australia and its partners in the Cairns Group will be better off as it is likely that the volume of subsidised exports would have continued to grow rapidly in the absence of the Uruguay Round outcome.
It should be emphasised, however, that the gains will not fall automatically into Australia’s lap. The practical outcomes will depend on the extent to which Australian exporters actually capitalise on the new access opportunities. In addition Austrade will need to work hard to ensure that the commitments entered into in the round are fully implemented. The challenge for Australia and other members of the Cairns Group is to ensure that the momentum for agricultural trade reform is maintained.
Industrial goods and minerals
The Uruguay Round achieved the biggest market access tariff reduction package ever achieved in GATT negotiations, being 30 times larger than outcomes achieved from previous negotiating rounds. Most tariffs will be cut by at least one third. Expanding markets such as Korea, Thailand, Indonesia and Latin American countries, all of which have traditionally maintained high barriers to trade, have agreed to reduce tariffs.
Highlights of results on market access for industrial products include:
99% of tariffs of developed countries will be bound (i.e. cannot be raised above an agreed level);
72% of developing country tariffs will be bound;
a 38% reduction in developed country tariffs to 3.9%; and
an increase from 20% to 43% of products facing zero tariffs in developed countries.
During the Uruguay Round, Australia negotiated bilaterally with 24 trading partners, and specifically targeted major trading partners including the ASEAN countries, US, EU, Japan and Korea in an effort to open up increased market access opportunities for Australian exports of industrial products.
The round secured significant and widespread market access gains on industrial products of special interest to Australian industry. Overall, a trade-weighted cut from Australia’s trading partners on industrial tariffs of around 50% was achieved. Major trading partners will eliminate tariffs on steel, pharmaceuticals, construction equipment, furniture, medical equipment and beer, and most OECD countries will harmonise tariffs on chemicals at low levels.
A major result of the Uruguay Round for Australia was the conclusion of a coal agreement with the EU. Among other things, the EU has committed itself to an immediate standstill in the aggregate level of subsidised coal production and a gradual and regular reduction in coal production. The EU also committed itself to binding its coal tariffs at zero. The Australia-EU Coal Agreement is expected to underpin an expansion in additional coal sales by the year 2000 of at least $500 million and increase employment opportunities in the coal industry.
Australia also negotiated good outcomes with the US on zinc alloy, and on copper with Japan and the US.
Another key sectoral outcome of the negotiations on industrial products was the agreement to phase-out the Multi-fibre Arrangement (MFA) over ten years and bring the textiles and clothing sector under the GATT/WTO. Australia was not a member of the MFA but fought hard in the negotiations for the rights of countries outside the MFA to be properly taken into account in the final agreement. The removal of the MFA will open up the US and EU markets to increased exports of textiles and apparel, which is likely to increase demand for Australian wool and cotton products.
Services
As chair of the Negotiating Group on Services, Australia was influential in formulating a series of compromises critical to the achievement of the outcome on services. For the first time services trade will be subject to rules and disciplines established under the General Agreement on Trade in Services (GATS). The negotiations involved very difficult issues on the treatment of individual sectors such as audiovisual, financial services, maritime, basic telecommunications and movement of personnel. Any of these could have unravelled the negotiations on services. Compromises were achieved which, rather than leaving incomplete outcomes, will see continuing work in most of these sectors over the next two to three years which aims to produce commitments. The outcome will also result in further rounds of general services negotiations, at least every five years, the aim of which will be to further liberalise trade in services.
For Australia, the outcome on services represented a broadly satisfactory outcome to years of multilateral trade tension about the role of services in the multilateral trade system. Services are firmly established in that system and on the negotiating agenda. Agreement on universal rules will result in greater certainty and transparency for Australia’s service exports, and reduced discrimination favouring service suppliers from other countries. Agreement will also lead to more open market access in the longer term, depending partly on the outcomes of the sectoral negotiations mentioned above. The agreement to conduct subsequent negotiating rounds in five years time aimed at further liberalisation will give Australia an important chance to improve market access conditions.
The Uruguay Round achieved some liberalisation in the insurance, financial, and professional sectors. Examples included reforms made by Japan and Korea further opening up their insurance or financial markets, the phase-out within 10 years of Thai preferences disadvantaging Australian professionals, and changes in Brazil which will allow foreign investment in its construction and engineering sector by the year 2000. Adequate provision was made in the final arrangements for sensitive Australian domestic interests such as audiovisual policy.
Intellectual property
Australia played an active role in the successful conclusion of the Agreement on Trade Related Aspects of Intellectual Property (TRIPS) in the Uruguay Round. Working in close consultation with industry the Government ensured that TRIPS will provide significant benefits for Australian industry.
By bringing the protection and enforcement of intellectual property rights under the multilateral trading system, the outcome will provide a more secure environment for Australian exporters of products and services with high intellectual property content. In particular it will ensure that there is widely based protection for Australian intellectual property right holders against piracy, counterfeiting and other infringements in our export markets, especially in the Asia-Pacific region. It will also encourage business and investor confidence in innovation and technology transfer
The outcome will benefit a wide and growing range of Australian industries. TRIPS will be increasingly important as Australia expands its export of goods and services with a high component of value-adding intellectual property. Current export industries that will benefit include music, book publishing, computer software, wine, elaborately transformed manufactures, mining, agricultural, telecommunications and chemical and pharmaceuticals.
The Government continued its ongoing cooperative activities in the Asia-Pacific region to encourage stronger protection of intellectual property rights, particularly through infrastructure development. A program of cooperation on intellectual property with Indonesia was established, including training in intellectual property.
New trade issues
An agenda of new trade issues emerged in the latter stages of the round negotiations. At first much of this agenda was driven by domestic pressure on the US Administration. This encouraged other participants to put forward their trade policy objectives for the post-round environment. By the time of the Marrakesh meeting there was a long list including almost every trade-related activity ranging from exchange rates to immigration.
Trade and environment became the most prominent and potentially divisive of these issues. A tendency emerged for developed countries with high standards of environmental protection to line up against developing countries, particularly those that rely on exports of natural resource-based products. Terms of reference were agreed for a WTO Committee on Trade and Environment at Marrakesh. This committee will explore the relationship between trade measures and environmental measures to the extent that it is within the competence of the multilateral trading system. This is defined in the decision taken at Marrakesh as ‘trade policies and those trade-related aspects of environmental policies which may result in significant trade effects’.
Efforts are now being made to identify and deal with other issues which have a major impact on the international trading system and might appropriately be addressed in the new WTO. These include trade and competition policy, trade and labour standards and trade and investment. It is not yet clear when, or indeed if, any of these issues will be placed on the WTO agenda. Discussion is still at an early stage and more analytical work needs to be undertaken on them, especially in the identification of the trade linkages, before a role for the WTO can be defined. Analytical work being undertaken by the OECD and in other forums will assist in this regard.
Australia is prepared to join in discussions on the consideration of these issues in the WTO but is sensitive to the concerns of developing countries. A thorough process of consultation to develop a consensus on handling each of the new trade issues in the multilateral arena has been advocated.
The link between trade and labour standards is the most contentious of these issues. The United States and some European countries are pressing for early consideration of the linkages between trade and labour standards while developing countries are strongly opposed arguing that it is an attempt by developed countries to neutralise developing countries’ comparative advantage in labour costs. Australia has been a strong supporter of improved international labour standards. Australia sees the International Labour Organisation as continuing to have prime responsibility for setting international labour standards but is prepared to consider a legitimate role for the WTO. The Department is considering what role the WTO should play, taking account of the views of the Australian community and trading partners.
Regionalism
As the Uruguay Round of multilateral trade negotiations drew to a close, countries began to examine other means to advance trade liberalisation and to pursue specific trade objective not addressed in the Uruguay Round. There has been a notable increase in interest in bilateral and regional trading arrangements. The creation of the North American Free Trade Arrangement (NAFTA) involving the US, Canada and Mexico is the most significant of these, but the proposed expansion of the European Union to include some of the European Free Trade Area (EFTA) countries and development of the ASEAN Free Trade Arrangement (AFTA) are other important initiatives. As a result of a review of free trade arrangement options for Australia, the Department looked closely at a proposal by Thailand’s Deputy Prime Minister, Dr Supachai, to look at possible linkages between the ASEAN Free Trade Area (AFTA) and the Australia-New Zealand Closer Economic Relations Agreement (CER). During Prime Minister Keating’s visit to Thailand earlier this year, the idea of AFTA-CER linkages was raised directly with him by the Thai Prime Minister, Mr Chuan, who expressed interest in exploring the idea. Mr Keating also discussed possible linkages with the Indonesian President, Mr Soeharto, during his visit to Indonesia in June. The New Zealand Government is also interested in the idea.
The Government’s interest in promoting linkages between AFTA and CER is based on its commitment to strengthening economic ties in the Asia-Pacific region. The development of AFTA-CER linkages, together with APEC, will enhance regional economic integration. In particular, AFTA-CER linkages should encourage increased investment in the region by offering investment opportunities in a larger, integrated AFTA-CER market. It could also improve regional competitiveness through complementary production and infrastructure development.
Consideration of possible AFTA-CER linkages is at an early stage. ASEAN countries have generally reacted positively to the concept of developing linkages but there are some sensitivities about progressing too rapidly. In discussions with ASEAN countries, it has been made clear that Australia understands the sensitivities and is prepared to move at a pace acceptable to all ASEAN countries.
GATT activities
Australia has always been an active participant seeking to maximise the economic advantages to Australia from work in the GATT on trade issues as well as the management of the GATT agenda, work program and Secretariat.
Trade Policy Review Mechanism
Australia has been one of the principal advocates of the Trade Policy Review Mechanism (TPRM) and was the first country to be reviewed under the new arrangements. The second review of Australia took place in February 1994. Coordination, presentation and much of the preparation of the Australian Government’s report was the responsibility of the Department. More than 40 reviews have been held since December 1989. Australia has been an active participant in most cases as it provides an opportunity to encourage economic reforms which support Australia’s commercial interests in the countries under review.
The GATT assessment of Australia’s trade and economic policies was overwhelmingly positive with Australia’s economic reform program, particularly in trade liberalisation being highly commended. The independent report prepared by the GATT Secretariat stated that,
‘Australia has pressed ahead with its far-reaching, ambitious program of economic reform. Tariffs have come down and are being reduced further under a predetermined agenda up to the year 2000; subsidies are being cut and deregulation and privatisation are injecting competition into many formerly shielded areas of goods and services.’
Australia remains one of the strongest supporters of the multilateral trading system as embodied in the GATT and sees trade and internal liberalisation as complementary tools to improve the sectoral balance of the economy, increase multi-factor productivity and, thus, promote international competitiveness.
Accessions
In the past three years the number of GATT contracting parties has risen from 101 to 123.
As governments in developing countries and countries in transition come to recognise the economic benefits of closer integration into the international trading and financial system there has been a very significant increase in interest in joining the GATT and in future, the WTO. This trend has been reinforced by the increased coverage offered as a result of the outcomes of the round especially in services and intellectual property.
The accession process gives all interested existing members the opportunity to scrutinise the trade regimes and policies of the applicant government and identifies the aspects which would be incompatible with the obligations to be assumed when membership occurs. Bilateral negotiations supplement this process to establish conditions for market access which are consistent with membership.
Australia has consistently been active in the bilateral negotiations which take place. At the multilateral level Australia wants to be satisfied that the participation of new members will strengthen the multilateral trading system or conversely that the WTO/GATT is not weakened by special exceptions or arrangements. Bilaterally, Australia seeks to secure new levels of market access for Australia, to ensure that Australian interests are not disadvantaged and that market opening measures offered by an applicant are accorded strictly in line with the most favoured nation principle.
Accession arrangements and market access schedules are being negotiated with China and Taiwan. Seventeen other countries are engaged in the accession process. In 1993-94 accessions were concluded with Paraguay, Honduras and Slovenia. In financial year 1993-94 Australia’s exports to the 20 countries seeking membership amounted to $5.69 billion. Of these, China and Taiwan were the most commercially important being Australia’s seventh and ninth largest markets and the only two countries among Australia’s 20 largest trading partners not to be contracting parties to the GATT.
Regional cooperation
Australia is presently a participant in a number of GATT working parties examining free trade areas, including NAFTA, MERCOSUR and the EC and EFTA agreements with a range of European countries.
Australia’s objectives in this work are to exert maximum pressure to ensure that free trade areas are not used to weaken the multilateral trade rules and, to the extent possible to protect Australian commercial interests by ensuring that FTAs are not simply used as vehicles to introduce preferential trading arrangements.
Dispute resolution and settlement
The arrangements for dispute settlement under the WTO will involve greater streamlining of procedures, an appellate system and provision for compensation and suspension of concessions. In particular, the appellate system and rules on provision for compensation represent a significant departure from existing arrangements. A ministerial review of dispute settlement rules and procedures is required within four years after the entry into force of the WTO.
There were no significant changes in the level of activity in formal GATT dispute settlement processes during the year. Australia was involved in one panel dispute under the Subsidies and Countervailing Code. The dispute involved a complaint by the EU about the GATT consistency of Australian countervailing actions on glacé cherries. The EU subsequently withdrew the complaint.
Australia made third party submissions to the panels examining Chile’s complaint against EU measures on apples and the EU complaint about United States ‘gas guzzler’ charges.
At the pre-dispute stage, Australia held consultations with the EU on EU subsidies on glacé cherries and with Canada and the United States on the trade effect of Australian quarantine measures on salmon.
Organization for Economic Cooperation and Development (OECD)
The OECD is the major source of analysis and provides a forum for discussion among industrialised developed countries on the economic, trade, environmental and social policies encountered by the 25 members, largely because of their stage of development. The outcomes of OECD activities which require commitments from member states are agreed by consensus. Australia joined the OECD in 1971.
The major meeting on the OECD calendar is the Ministerial Council Meeting, held each June. This year the Minister for Employment, Education and Training, Mr Crean, represented Australia. Discussion centred on a major report which the OECD Secretariat had prepared on Employment and Unemployment. Ministers agreed that domestic protectionist policies were not an appropriate response to the issue of unemployment. Mexico was endorsed by ministers as the 25th member, membership negotiations with the Central European countries (Poland, Hungary and the Czech and Slovak Republics) and Korea (which is expected to be the next member in 1996) were commenced and a cooperation agreement was concluded with Russia.
Over the past 12 months OECD analysis of the benefits of the Uruguay Round and the organisation’s work on developing the new trade issues (trade and environment, trade and competition, trade and investment and trade and labour standards have been of particular value in exploring some of the central elements which need to be taken up by the wider international community.
United Nations Conference on Trade and Development (UNCTAD)
Since the Eighth Conference held in Cartagena (Colombia) in February 1992, Australia has sought to ensure that the revitalisation process which was initiated at that time has been reinforced in the operational and administrative activities of UNCTAD. The application of new work methods agreed at UNCTAD VIII has meant that the organisation has been better able to meet the needs of developing countries especially the least developed countries.
The Department has taken an active role in the work of restructured organisation at the management and subject specific level. The Department has been responsible for regular high level attendance at the executive sessions of the Trade Development Board (governing body) which meets to guide and adapt UNCTAD’s policy functions to the changes in international economic circumstances. In addition, Australia has contributed to aspects of the substantive work program where it has acknowledged expertise, in particular in the development of services sector export policies, privatisation, trade efficiency and trade policy transparency mechanisms.