2. Multilateral trade
Overview
The WTO framework of agreements, understandings and decisions sets out agreed rules for trade between its 145 members, which account for more than 90 per cent of world trade. (A further 27 countries, representing 3.8 per cent of world trade, are currently seeking to join the WTO.) Based on fundamental principles of openness, transparency and non-discrimination, WTO rules ensure fairer, more secure access to world markets for all members. They impose disciplines on arbitrary restrictions on trade, prevent countries with major market power from taking unfair advantage of smaller players and provide a binding mechanism for settling trade disputes.
Australia's own economy has benefited greatly from trade liberalisation and deregulation over the years. As a medium-sized economy whose prosperity depends on exports, Australia has a major stake in maintaining an open, non-discriminatory system of enforceable international trade rules. Australia therefore participates actively across the full WTO agenda, defending the interests of Australian exporters and helping to ensure that the system works fairly and effectively for all members, including developing countries.
When necessary, Australia does not hesitate to invoke the WTO's dispute settlement mechanism to protect its rights, achieving significant commercial and systemic gains - for example, in response to US safeguards on lamb imports, Korean restrictions on imported beef and, more recently, Canadian dairy subsidies (see box Australia and WTO dispute settlement).
The Doha Development Agenda
Australia's objectives
Australia's overall objective for the negotiations is to achieve, as quickly as possible, significant improvements in market access for agriculture, services and industrial products.
Australia wants to see agricultural trade placed on the same footing as trade in goods, ending the discrimination that damages efficient agricultural producers and denies developing countries the full benefits of the global trading system. Without a satisfactory conclusion on agriculture, there can be no conclusion to the Doha Round.
Like Australia, the developing countries will not accept the status quo and rightly demand action on this most distorted of global markets. Reinforcing with certain developing countries the vastly superior long-term advantages of fundamental agricultural reform over the short-term attractions of preferential trading arrangements will continue to be a key focus of Australia's efforts in the agriculture negotiations.
Other Australian priorities for the negotiations include securing substantial market access gains for Australia's world class services export sector and our manufacturing and other industrial sectors, and guarding against the misuse of legitimate public policy objectives to justify disguised barriers to trade. Australia has submitted 30 proposals in the Doha Round negotiating groups and more than 50 further papers in other Doha-related WTO working groups.
The Sydney Mini-Ministerial - sending the developing country message to the WTO
The Informal Meeting of Ministers hosted by Australia on 15 November 2002 aimed to build momentum in the Doha Round negotiations during the lead-up to the World Trade Organization's (WTO) Fifth Ministerial Conference in Cancun, Mexico, in September 2003. This was the first informal Ministerial meeting since the launch of the Doha Round in November 2001, illustrating Australia's commitment to, and leadership role in, the WTO.
The Sydney meeting brought together ministers from 25 countries - including 17 developing countries - representing a cross-section of regions, levels of development and interests, and WTO Director-General Supachai. They discussed ways of taking the negotiations forward, particularly on development-related and market access issues. All WTO members represented at the meeting, both developed and developing, agreed the Doha round must deliver substantial trade liberalisation in agriculture, goods and services to the benefit of all members.
The meeting advanced a pressing issue for developing countries - improved access to medicines to treat HIV/AIDS, tuberculosis, malaria and other debilitating diseases.
Other development issues also featured on the agenda, including the review of special and differential treatment provisions for developing countries, and the role of trade-related technical assistance and capacity building activities. The inclusion of these issues underlined the key role that developing countries and development-related issues are playing in the Round.
Sydney
Informal Meeting of Trade Ministers
Agriculture
The agriculture negotiations are entering an important phase, with a negotiating framework scheduled to be finalised by 31 March 2003. Deep cuts to the high levels of support and protection that distort world agricultural markets are essential to the Round's success, and to the creation of an efficient, equitable and environmentally sound global agricultural industry. According to the OECD, total agricultural support and protection in OECD countries amounted to US$311 billion in 2001 (equivalent to more than 80 per cent of Australia's 2001 gross domestic product).
The Centre for International Economics estimates that the benefit to Australia (including productivity improvements) from a 50 per cent cut in agricultural support could be as much as US$1.3 billion annually by the expected end of the Doha Round implementation period.
Centre
for International Economics
Australia also works closely with other major players to achieve agricultural trade reform. Australia enjoys a close working relationship with the United States in the negotiations, with US Trade Representative Robert Zoellick being a guest of the Cairns Group Ministerial Meeting chaired by Mr Vaile in Bolivia in October. Australia is in frequent dialogue with the European Union to press for the reform of Europe's Common Agricultural Policy. The Government also uses every opportunity to encourage Japan to take an active role in the negotiations and to reduce its own high levels of agricultural support and protection.
Developing countries and agricultural reform - the leading role of the Cairns Group
In developed countries, agriculture typically represents 3 to 5 per cent of economic activity. But for developing countries it is usually far more important, often constituting 50 per cent of the economy and employing a large proportion of the workforce.
Yet agriculture is the most corrupted of international markets and developing countries do not have the financial resources to compete with subsidies approaching US$1 billion per day in wealthy countries. So developing countries see progress on agricultural trade reform as the key to the success of the Doha Development Agenda.
Australia is working closely with developing countries to further our common interests in the agriculture negotiations. Fourteen of the 17 members of the Cairns Group of agricultural fair traders are developing countries and a number of other countries, including Egypt, Kenya and Uganda, are cooperating with the Cairns Group to put the Doha agricultural agenda into practice.
Coalition-building is important to Australia's prospects in the Doha Round negotiations and the Government contributed to the Cairns Group's outreach efforts throughout the year. In May 2002, Australian trade officials held a training course in Pretoria, South Africa, for trade officials from 25 African countries. And senior Australian officials visited key African capitals, including Cairo, Dar-es-Salaam, Gaborone, Kampala and Nairobi, to discuss prospects for closer WTO cooperation between the Cairns Group and the African Group.
The Cairns Group proposals
As Chair of the Cairns Group, Australia led the development of detailed negotiating proposals to give effect to the Doha mandate. These proposals, tabled by the Cairns Group in September and November 2002, call for ambitious reforms across the three main areas of the agriculture negotiations: market access, domestic support and export subsidies.
The Cairns Group market access proposal contains specific formulas for cuts to agricultural tariffs - which currently run to 1000 per cent in some cases - to 25 per cent or lower for developed countries. It also calls for a large expansion of access through increases in tariff quota volumes - which in most countries are usually only a few thousand tonnes - to millions of tonnes.
The proposal on domestic support targets the production-distorting payments some major developed countries make to their inefficient agricultural producers. The proposal is designed to reduce trade-distorting domestic support and to tighten the rules governing non-distorting support.
The proposal on export competition calls for the elimination of all forms of export subsidies. It also proposes that rules be tightened to ensure that export credits and food aid are not used to circumvent commitments to remove export subsidies, without reducing the availability of genuine food aid to meet humanitarian needs.
Australia's stake in services trade
Exports of services are now worth more than $30 billion annually to Australia. They constitute 21 per cent of our export earnings and contribute 4 per cent of our gross domestic product (GDP). Australia's major services markets are the United States (to whom we exported $4.6 billion of services in 2002), the United Kingdom ($3.5 billion) and Japan ($3.5 billion).
Australia already accounts for 1.1 per cent of world exports of commercial services (compared to 1.0 per cent of world goods exports) and we rank 25th as a service exporter. Currently more than half of our services revenue comes from expenditure by foreigners in Australia, reflecting Australia's attractiveness as a tourist destination and the strong demand for our education services. But other industries - such as communications, property, business and professional services, finance and insurance, and transport and storage - stand to gain from the growth in global services trade.
Australia has a substantial interest in the steady growth of international trade in services. According to Productivity Commission modelling, the gains to Australia from further liberalisation of global services trade would be very significant - US$2 billion per year - a 0.2 per cent increase in Australia's GDP.
Gross value added by sector, 1974-75 to 2001-02 - $ billion (real prices)
Services trade
The General Agreement on Trade in Services (GATS) is a WTO-administered international treaty to which Australia has been a signatory since its inception in 1995. The Doha Ministerial Meeting in November 2001 agreed on timeframes for the market access phase of the GATS negotiations. The negotiations are conducted in a request-offer format: initial requests were sought by 30 June 2002 and initial offers are due by 31 March 2003, with negotiations to conclude by 1 January 2005.
Australia's overarching objective for the GATS negotiations is to improve market access conditions for Australian services exporters.
Australia is well placed to participate in these negotiations given our open and competitive regulatory environment resulting from two decades of reform.
As at December 2002, Australia had made initial GATS requests of 35 WTO members, based on consultations with industry, state and territory governments and community groups. These requests seek the removal of market access barriers and regulatory measures that discriminate against Australian service exporters in overseas markets across 21 service sectors.
By the end of 2002 Australia had received requests from 22 WTO members across a wide range of GATS sectors. These sectors include professional, financial, telecommunication, environmental, tourism and transport services.
Trade liberalisation expands the range and quality of services available to consumers at competitive prices. Nevertheless, some important Australian services interests need to be taken into account in negotiations. The Government will not agree to any diminution of Australia's right to pursue legitimate policy objectives in the regulation of services sectors, nor will it compromise Australia's capacity to fund and maintain public services. Cultural policy objectives will be taken into account in the negotiations.
The Government is undertaking a program of close consultation with Federal agencies, industry stakeholders, individual firms, state, territory and local governments, and the public on Australia's approach to the GATS negotiations. The Government is committed to keeping interested parties informed as the negotiations proceed, within the bounds of restrictions imposed by the confidentiality of government-to-government communications.
The
General Agreement on Trade in Services (GATS)
Main
features of the GATS Agreement
Industrial products
Despite several rounds of multilateral trade negotiations spanning decades, tariff and non-tariff barriers continue to impede Australian access to many export markets.
The Uruguay Round outcome did not adequately deal with tariff peaks, tariff escalation (where raw materials attract a lower tariff than semi-processed materials and finished outputs) or the widespread use of specific and compound tariffs. Moreover, tariff reductions were not evenly spread across all products or sectors.
In the Doha Round, Australian negotiators are pushing for greater market access opportunities for Australia's exports of industrial products. Australia is pleased with the broad mandate on the industrials negotiations in the Doha Declaration as it does not exclude sensitive products such as forestry and fisheries nor does it restrict methods for achieving further reductions in tariff and non-tariff barriers. Industrials negotiators are considering whether tariffs should reduce on the basis of an across-the-board formula, on a sectoral basis, on a request-offer basis, or through a combination of these or other arrangements. Australia is seeking a formula approach, possibly augmented with other approaches to ensure that a balanced outcome addressing the interests of all WTO members is achieved.
Trade
in industrial (non-agricultural) products
Non-agricultural
market access negotiations (WTO)
Australia's
tariff commitments
Dispute Settlement and Rules
As a trading nation Australia has an interest in ensuring the international trading system is open and fair, and has enforceable rules. Without such rules, small and medium sized countries such as Australia would find themselves at the mercy of major trading powers.
The WTO's dispute settlement system, established in 1995, is now a cornerstone of the international trade rules system and its caseload of more than 200 disputes has led to the development of an important body of international law.
Notwithstanding its achievements, there is still room for the WTO's dispute settlement system to be improved. Recognising the system's importance to Australian businesses, the Government is working to improve its operation and effectiveness. The Government is also promoting and defending the interests of Australians involved in trade. The Department of Foreign Affairs and Trade delivers legal services to Australian businesses interested in looking into how they may be able to use the WTO dispute settlement system to solve a specific trade problem.
Australia
and WTO dispute settlement
At a government-to-government level, Australia is actively involved in Doha Round negotiations on two areas important to Australian businesses: anti-dumping, and subsidies and countervailing measures.
Subsidies
and countervailing measures (WTO)
Australia and WTO dispute settlement
Australia was a party to four World Trade Organization (WTO) disputes in 2002: two as a complainant and two as a respondent. We were a third party in five other disputes.
As a complainant
Australia was a joint complainant with ten other WTO members in a challenge to the United States Continuing Dumping and Offsets Act (the Byrd Amendment'), which sought to have duties levied on foreign companies paid to their US competitors. The WTO Appellate Body has determined that this is against WTO rules.
Australia is a joint complainant with Brazil in a challenge
to European Union (EU) sugar export subsidies 
.
The EU is currently exporting some 5 million tonnes more than its
WTO export subsidy commitments. A record number of third party countries,
mostly sugar exporters from Africa, the Caribbean and the Pacific,
participated in a first round of consultations in Geneva in November.
Australia and Brazil assured those countries that they were not seeking
to challenge their special preferential access to the EU and called
on the EU to honour its commitments to those countries.
About 80% of Australia's sugar production is exported. Australia is a low cost producer and a price taker, compared with EU producers who receive double the world price with the benefit of domestic and export subsidies. The Australian Bureau of Agricultural and Resource Economics has estimated that a reduction in EU sugar price support to nearer the world price could result in a 20 per cent increase in world sugar prices.
As a respondent
In November 2002, consultations were held at the Philippines' request on Australia's quarantine measures on pineapples and separately on other fruit and vegetables. Quarantine conditions for imports of pineapples from the Philippines have been in place since 8 October 2002.
And as a third party
Australia was a third party to New Zealand and US complaints against Canada's dairy subsidies. In December 2002 the Appellate Body found that Canada's contested measures were export subsidies in excess of its WTO quantity commitment levels for cheese and other dairy products. This case was of direct commercial interest to Australia in several important dairy markets. Other Australian third party involvement included:
- a US complaint against Japan's quarantine measures on apples (case at the panel stage)
- a US complaint against Mexico's telecommunications services arrangements (panel stage)
- a Korean complaint against US line pipe safeguards (case completed)
- an Argentine complaint against Chile price band provisions on imports (case completed).
Australia is actively involved in efforts to improve the WTO dispute settlement system and to make it work more efficiently. We are participating in the WTO Review of the Dispute Settlement Understanding scheduled for completion by May 2003 (Australia's proposal was submitted in June 2002). Three Australian nationals were selected as panellists in disputes.
Intellectual property issues
The Doha Round negotiations cover four important intellectual property issues:
Geographical indications
Negotiations are under way for a multilateral register for wine and spirit geographical indications (GIs). Australia supports a voluntary register based on the domestic laws of members of the WTO to protect GIs. Australia rejects assertions that the Doha Declaration mandates negotiations to extend to all products the level of protection currently provided to wine and spirit GIs under the agreement on trade-related aspects of intellectual property rights (TRIPS). There is no evidence that such extended protection is necessary.
Access to medicines
The fundamental issue is what arrangements can be put in place for poor countries to obtain affordable medicines without coming into conflict with trade-related intellectual property rights. Most of the political and technical trade-related problems were solved at the Doha Ministerial Conference. Trade issues were only part of the problem. Action elsewhere, at the international and national levels, is needed on funding the purchase of discounted drugs, providing medical training and improving infrastructure. Within the WTO, the remaining issue is the details of an exception to intellectual property rules for countries with insufficient manufacturing capacity. A text is near to resolution but there is no consensus on the scope of diseases to be covered by the exception. Developing countries see this issue as an indicator of the commitment of developed countries to the Doha Development Agenda.
Biotechnology patenting
It will be important for the TRIPS Council to assess how best to protect traditional knowledge and folklore and to minimise the risk of bio-piracy. Australia supports examination of options to encourage disclosure in patent applications of the source of biological resources used in an invention. Such disclosure must not affect the validity of the patent.
Technology transfer
Under the Doha mandate the TRIPS Council must develop a mechanism for monitoring incentives in place in industrialised countries for the transfer of technology to least developed countries. In 2002 Australia submitted a detailed report on its incentives to transfer technology to least developed countries. Australia supports a mechanism that reports such incentives, without a link to WTO compliance procedures.
Intellectual
property and international trade
TRIPS
material on the WTO website
Trade and the environment
Trade and environment issues remain prominent in the Doha Development Agenda, reflecting, in particular, the priority the EU places on these issues. At Doha, ministers agreed to negotiations on some key issues.
On the relationship between existing WTO rules and specific trade obligations in multilateral environmental agreements (MEAs), many WTO members, especially developing countries, believe that no changes are necessary to WTO rules as they are already supportive of environmental objectives. These countries are particularly concerned to ensure that any changes to the existing rules do not become de facto trade barriers that are misused to undermine any improvements in their access for products such as textiles and agricultural goods to developed-country markets. Australia's proposal for a phased approach to the negotiations on trade and environment issues has received widespread support and we will continue to work for an outcome acceptable to all members.
Australia has supported efforts to develop better procedures for exchanging information between the MEA secretariats and the relevant WTO committees, and to develop arrangements for MEA secretariats to have observer status in the WTO Committee on Trade and Environment.
Progress has been limited on the reduction or elimination of tariffs and non-tariff barriers to environmental goods and services, with no resolution of important definitional questions. The majority of WTO members continue to support an approach that classifies these goods and services based on end-use criteria, for purposes such as environmental protection, conservation and remediation. A small number of members have promoted the concept of environmentally friendly goods', where classification is based on production and processing criteria, including where the end product would have no environmental impacts in the importing country. Australia supports market-driven approaches to the production of environmentally friendly goods and services, consistent with WTO rules. But attempting to regulate these products through the negotiations would create practical difficulties in tariff classification and customs surveillance. And increased trade protectionism may result, running counter to the intent of the negotiating mandate.
Negotiations
on trade and environment (WTO)
Australian assistance to developing countries
Australia has responded quickly and positively to the needs of developing countries in the Doha Round of multilateral trade negotiations. The Australian Government will provide $28 million of trade-related technical assistance and capacity building activities in 2003. Among these activities are a number of new initiatives, including:
- $500 000 contribution to the WTO's Global Trust Fund for trade-related technical assistance
- $500 000 contribution to the Geneva-Based Agency for International Trade Information and Cooperation (AITIC) to assist with their work with those countries that do not have permanent representation in Geneva (2002)
- duty-free and quota-free access for all products produced in LDCs and East Timor, effective from 1 July 2003
- $3.4 million three-year WTO capacity building project in the Asia-Pacific region, aimed at enhancing the capacities of those countries to benefit from trade liberalisation
- trade policy training for officials from developing country governments
- a $3 million Sanitary and Phyto Sanitary Capacity Building Program (quarantine program) for ASEAN countries over five years
- Australian-sponsored APEC seminars on trade and the environment and trade and geographical indicators.