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Department of Foreign Affairs and Trade - Annual Report 2000-2001
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OUTPUT 1.1
Protection and advancement of Australia’s international interests through the diplomatic network and Canberra-based activity

OUTPUT 1.2
Provision of policy advice and analysis to Portfolio Ministers

1.1.6 and 1.2.6: Trade development/coordination and Asia-Pacific Economic Cooperation

Effectiveness indicators

Overview

The department faced a more challenging global economic environment in its pursuit of opportunities for Australian business over the past year. In the absence of agreement to launch a new round of multilateral trade negotiations, and facing an increasingly uncertain economic outlook, particularly in East Asia, many national governments adopted a cautious approach to unilateral trade liberalisation. This attitude was reflected in bilateral and regional trade forums in 2000–01. Nevertheless, the department was able to achieve agreement to important new initiatives, such as beginning negotiations on the Singapore–Australia Free Trade Agreement Click to view related information - opens in new window, the development of a Closer Economic Partnership between the Association of South East Asian Nations (ASEAN) and Australian and New Zealand (AFTA–CER) Click to view related information - opens in new window, and initiating discussions with Thailand on a possible bilateral trade agreement.

As in past years, the department was a major driver of key APEC Click to view related information - opens in new window achievements. We played a pivotal role in securing strong, concrete APEC support for the launch of a new round of World Trade Organization (WTO) Click to view related information - opens in new window trade negotiations, including authoring a major report on APEC progress on tariff reductions. We also made a significant contribution to the globalisation debate with the publication of a report outlining APEC’s decade of progress in delivering the benefits of globalisation and trade liberalisation to communities in the region. Active engagement with international and domestic constituencies was a hallmark of our APEC-related work.

The department’s work with key trading partners, through bilateral and sectoral initiatives, helped to maintain or improve market access in a number of areas Click to view related information - opens in new window. Some notable wins include a successful finding of the WTO disputes panel ordering fair access for our lamb exports to the United States and cuts in Egyptian raw sugar tariffs.

The department successfully managed the 2000 Review of Export Credit and Finance Services and is implementing the Government’s decision to establish a private sector alliance with the Export Finance and Insurance Corporation’s (EFIC) Click to view external web site - opens in new window short-term export credit insurance business. The aim of the alliance is to ensure Australian exporters are able to obtain internationally competitive export credit insurance services.

See description below - click image for a larger version

In April 2001, during the first-ever visit of an Australian Foreign Minister to Saudi Arabia, Alexander Downer visited the Jeddah showrooms of Al-Jomaih, a major retailer of Australian-built General Motors cars.

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Asia-Pacific Economic Cooperation (APEC) Click to view related information - opens in new window

Support for the launch of a new round of multilateral trade negotiations

The department was successful in ensuring APEC made a significant contribution to the task of launching a new round of WTO trade negotiations in 2001, including through strong statements of support from both APEC Leaders at their meeting in Brunei in November 2000, and APEC Ministers Responsible for Trade (MRT) at their June 2001 meeting in Shanghai.

We secured APEC support for an initiative to sponsor developing economies to attend a WTO seminar on industrial tariffs, and released the study APEC Progress on Tariffs: Implications for a New Agenda (Click to view), which was launched by Mr Vaile in Shanghai in June 2001. The report was welcomed as clear evidence of the success of APEC efforts in opening markets.

Although an Australian proposal for a moratorium on increasing applied tariffs in the lead-up to Doha did not attract consensus from APEC members at the APEC MRT, the proposal was tactically valuable because its wide support helped the department achieve agreement to stronger language on support for a new WTO round.

The department intensified its contribution to the globalisation debate through APEC, with the Prime Minister, Mr Howard, launching our report Open Economies Delivering to People: APEC’s Decade of Progress at the APEC Leaders meeting. The report outlines the benefits of globalisation and highlighted the role of trade liberalisation in boosting economic growth and delivering social benefits. Its findings have been cited by several APEC leaders in countering inaccurate arguments by some anti-globalisation advocates.

Work on trade facilitation in a range of APEC sub-forums continued to produce real cost savings for Australian businesses in areas such as customs, business mobility and standards harmonisation. The department continued to provide strategic direction and administrative assistance for Australia’s chairmanship of the APEC Automotive Dialogue, a senior government–industry forum established to address key issues of concern to the automotive sector and to facilitate greater regional integration.

APEC and the New Economy

The department is working to ensure APEC economies can maximise the benefits of the so-called New Economy in various ways, such as through targeted small to medium enterprise (SME) e-commerce awareness seminars in developing APEC economies. As a result of a departmental initiative, APEC economies are preparing action plans to record their progress on meeting APEC’s paperless trading goals for 2005–10.

We also played a leading role in the design of the electronic Individual Action Plan (e-IAP) system, which contains information on member countries’ annual progress towards achieving APEC’s trade and investment liberalisation goals. We delivered a comprehensive training program for enabling APEC economies to produce e-IAPs that more effectively communicate and encourage reform and market-opening activity.

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Report on APEC Progress on Tariff Reduction

The report APEC Progress on Tariff Reductions: Implications for a New Agenda examines tariff reductions in APEC economies and the impact of these on the flow of trade.

The report demonstrates APEC’s success in translating its commitment to open trade into real and sustained reductions in tariff levels, with average tariffs declining from 12 per cent in 1995 to 8 per cent in 2000. The reductions have made a substantial impact on trade flows, with imports increasingly taking place at low tariff levels and encouraging the expansion of exports. Over two-thirds of imports in APEC now take place at very low tariff levels (in 2000, 69 per cent of imports in APEC were subject to tariffs of 5 per cent or less, compared to 59 per cent in 1995).

As well as underlining the benefits of continued tariff reductions, the report reinforces the need for APEC to remove other barriers to trade if it is to maximise the benefits of open markets.

ASEAN, Australia and New Zealand (AFTA–CER) Click to view related information - opens in new window

The department provided substantial analytical input into the work of the High Level Task Force (HLTF) on the feasibility of an AFTA–CER Free Trade Area, and logistic support to the Australian representative of the Task Force, the Hon. Tim Fischer MP. In the absence of consensus in ASEAN to proceed with the HLTF’s recommendations for further trade liberalisation and to start Free Trade Area negotiations, we were able to secure ministerial agreement to the establishment of an AFTA–CER Closer Economic Partnership (CEP) at the annual ASEAN–CER Ministerial Consultations in Chiang Mai, Thailand, in October 2000. The objective of the CEP is to promote closer economic integration with ASEAN and to facilitate trade and investment flows. We consulted extensively with business on our approach to the HLTF’s work and on the development of the CEP. Officials-level discussions began in June 2000 on development of a possible framework for the CEP, which will form the overriding architecture of our economic engagement with ASEAN.

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Indian Ocean Rim Association for Regional Cooperation (IOR–ARC) Click to view related information - opens in new window

The department continued its efforts to promote trade and economic cooperation in the Indian Ocean region through Australia’s participation on the Indian Ocean Rim Association for Regional Cooperation (IOR–ARC). The March 2001 Oman Ministerial meeting of IOR–ARC resulted in only modest progress in developing the association’s program of trade and economic cooperation. Against this background, Australia played an important role in achieving agreement to the establishment of a High Level Task Force that is to make recommendations on the future directions and operations of IOR–ARC by the end of 2001.

Figure 13. Australia’s top ten exports markets 2000–01

Click for a larger version. This information is available as an image only - a paper copy is available by phoning (02) 6261 3114 or from Ausinfo bookshops or by visiting www.ausaid.gov.au/publications

(a) Special Administrative Region of China Source:
Compiled by DFAT from ABS data

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Export credit policy Click to view external web site - opens in new window

The department successfully managed the 2000 Review of Export Credit and Finance Services, which included extensive public consultation. The Government accepted all of the review’s recommendations, including an initiative to establish a private sector alliance with the Export Finance and Insurance Corporation’s (EFIC) short-term export credit insurance business. The alliance arrangement will include a commitment by the Australian Government for EFIC to divest the credit insurance business to the selected alliance partner following a trial period. The department is currently managing the implementation of the alliance and contingent divestment process in conjunction with an Interdepartmental Coordination Committee.

We also managed whole-of-government coordination of National Interest Account transactions, including assessment of risks and benefits of proposed transactions. Demand for National Interest Account products was lower in 2000–01 than 1999–2000, reflecting both reduced demand from exporters and projects requiring support, and the increased willingness of the private sector to cover transactions which have traditionally received National Interest Account support. Exports worth $117 million were supported by National Interest credit insurance, loans, bonds and guarantees during the year. Income of $18.6 million was received from National Interest Account transactions, while $20.5 million was paid in claims. Most of the National Interest support provided during the year was for the export of wheat. Exports supported by EFIC’s Commercial Account grew to $6.4 billion in 2000–01, from $5.5 billion in 1999–2000.

Constructive work continued with participants to the OECD Arrangement on Guidelines for Officially Supported Export Credits towards agreements regulating the use of export credits for agricultural products and increasing cooperation amongst export credit agencies on environmental matters. The department also represented Australia at meetings of the Paris Club Group of creditor countries. No Australian debt was rescheduled by the Paris Club during the year. A bilateral agreement was reached with Indonesia to implement the April 2000 Paris Club agreement to reschedule Indonesia’s debt.

We worked with Treasury and AusAID to implement the Government’s policy to forgive bilateral debt owed by poor countries when they qualify for debt relief under the IMF/World Bank Heavily-Indebted Poor Country (HIPC) initiative, announced in April 2000. Nicaragua was the first country to qualify under the policy, reaching its decision point under the HIPC initiative in December 2000. During the year, some US$126,440 of repayments due from Nicaragua were forgiven.

Figure 14. Direction of Australia’s merchandise exports 2000–01

Click for a larger version. This information is available as an image only - a paper copy is available by phoning (02) 6261 3114 or from Ausinfo bookshops or by visiting www.ausaid.gov.au/publications

Source: Compiled by DFAT from ABS data

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Market access Click to view related information - opens in new window

We continued to place a high priority on the removal of market access barriers to Australian exports through a range of initiatives, working in conjunction with Austrade and other relevant government departments and agencies.

The department has five sectoral market access facilitation units for the Agriculture, Automotive, Information, Processed Foods, and Textile Clothing and Footwear industries. The Market Access Team’s achievements are reported under output 1.4 on page 126.

The units continued to work closely with Australian exporters, including those in regional areas, to identify priority market access issues for their industry sectors. Tangible results included tariff reductions for wool in Russia, Mexico and Pakistan, the resumption of cheese exports to the Japanese dairy processing industry and the signing of a memorandum of understanding with India on cooperation in the information industries, which provided for the establishment of the Australia–India Information Industries Network.

The Australia-India information network will be used to encourage business-to-business links between Australia and one of the leading countries in information technology development.

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Market Development Task Force (MDTF) Click to view related information - opens in new window

The Market Development Task Force (MDTF)—which is chaired by the departmental secretary and includes senior representatives from Austrade, the Department of Industry, Science and Resources, and Agriculture, Fisheries and Forestry Australia—has improved Australia’s access to international markets through the use of a targeted, whole-of-government approach. The MDTF identifies specific market access issues in key markets and develops a coordinated action program aimed at achieving their removal. The MDTF helped achieve market access wins in Asia, Europe, the United States, the Middle East and Latin America by coordinating and focusing attention and efforts to reduce particular barriers. Some examples of MDTF successes were:

Figure 15. Australia’s exports by broad category 2000–01

Click for a larger version. This information is available as an image only - a paper copy is available by phoning (02) 6261 3114 or from Ausinfo bookshops or by visiting www.ausaid.gov.au/publications

Source: Compiled by DFAT from ABS data

The department continued to help Australian industry improve its export performance and links with global industry. We played a coordinating role in joint industry–government missions to Thailand in November 2000 and April 2001. Representations were also made in major markets of the Middle East, the United States, Japan, Korea and China. Although efforts to remove barriers to automotive exports made no significant progress, promotional efforts and representations had some impact and automotive exports increased by almost 30 per cent from $3.22 billion in 1999 to a record $4.2 billion in 2000.

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Trade policy coordination and business liaison

Based on its analyses of Australia’s trade performance, the department advised ministers on global economic, trade and financial developments and their implications for Australian foreign and trade policy. The department contributed to coordination of government trade policies and efforts by providing advice, input and comment on a range of domestic policy considerations. This helped to ensure consistency with international obligations and compatibility with trade objectives.

The department maintained close dialogue with other agencies on international economic issues, including trade and foreign direct investment. The International Economic Policy Group, chaired by the Department of the Prime Minister and Cabinet, remained a central vehicle for our participation in a whole-of-government approach to considering international economic and trade developments with the potential to affect Australia’s national interest.

Trade Outcomes and Objectives Statement 2001 (TOOS 2001) Click to view related information - opens in new window

The Trade Outcomes and Objectives Statement 2001 was released in April 2001 by the Minister for Trade, Mr Vaile. It is the Government’s major annual trade policy statement, presenting a comprehensive analysis of trade and investment policies, achievements and challenges. In addition to in-depth market analyses, the statement examines Australia’s bilateral, regional and multilateral objectives and achievements, and includes a series of sectoral reports and analyses of the trade-related aspects of important international issues. The report attracted favourable comment from a wide range of business and industry sectors.

National Trade Consultations (NTC)

The department continued to improve the National Trade Consultations process, which is the central forum for consultations between the Federal and State/Territory Governments on trade issues. The State and Territory Governments were consulted on such issues as the Australia–Singapore Free Trade Agreement negotiations, the implications of a United States withdrawal from the Kyoto protocol and Australia’s strategy for bringing about a new round of global trade negotiations.

Trade Policy Advisory Council (TPAC) Click to view related information - opens in new window

The department administered the Trade Policy Advisory Council, which is the main body through which the Minister for Trade is able to obtain direct input on key trade policy issues from senior business representatives from a range of industry sectors. Mr Vaile briefed Council members on the Government’s trade strategy at the Council’s three meetings in Sydney, Melbourne and Canberra. Council members provided input on issues such as communicating the benefits of trade and issues relating to the need for a new WTO round.

World Economic Forum’s Asia/Pacific Economic Summit 2000 (WEF: Melbourne Summit)

The department supported the organisation of the World Economic Forum’s Asia/Pacific Economic Summit 2000, 11–13 September 2000 in Melbourne, in cooperation with the WEF, the Australian Davos Connection and the Victorian Government. We did this by providing advice on appropriate speakers, securing their participation through our network of overseas posts, and providing support for visiting officials and dignitaries. Despite disruption caused by anti-globalisation demonstrators, the Summit proved to be a unique opportunity to promote Australia’s trade and investment interests and regional role to around 700 private sector representatives—including the Chief Executive Officers of some of the most influential global and regional companies—and 40 high-level government representatives. Both Mr Downer and Mr Vaile were able to make presentations to key business and government leaders.

World Economic Forum’s Summit in Davos (WEF: DAVOS 2001)

The department coordinated Mr Downer’s participation at the World Economic Forum’s Summit in Davos in January 2001. The forum provided Mr Downer with the opportunity to reaffirm Australia’s strong support for the multilateral trading system and the launch of a new global trade round in 2001. Mr Downer also promoted Australia’s economic strengths to WEF participants, building on the success of the Melbourne Summit and the Sydney Olympics.

Direct Aid Program (DAP)

The Direct Aid Program (DAP) is a flexible small grants scheme managed by 47 Heads of Mission/Posts funding projects in 70 countries to help alleviate basic humanitarian hardships. The program focused on helping the poor and other disadvantaged people directly, including through disaster relief and assistance to women where cultural constraints minimise the access of women to other sources of development assistance. The program helps build recognition of Australia and Australian assistance.

Reporting against quality and quantity indicators and administered items begins on page 103. The financial and staffing resources summary for outcome 1 is at Appendix 2.

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Footnotes

  1. 'Development Assistance Program' appears incorrectly in Portfolio Budget Statements 2000-01.

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