Annual Report 2003-2004
 

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1. Overviews2. Performance3. Corporate4. Financials5. Appendixes6. Glossaries and Compliance Index

Your location: Performance > Outcome 1 > Output 1.1 > 1.1.5 Bilateral, regional and multilateral trade negotiations

OUTPUT 1.1: Protection and advocacy of Australia’s international interests through the provision of policy advice to ministers and overseas diplomatic activity

1.1.5 Bilateral, regional and multilateral trade negotiations

On this page: Overview :: WTO Doha Round negotiations :: Agriculture :: Industrials :: Services :: WTO rules :: WTO development agenda :: Supporting the WTO and trade liberalisation in other international trade bodies :: WTO compliance and dispute settlement :: WTO accessions :: EU enlargement :: Free trade agreements :: ASEAN

Overview

The department pursued Australia's trade interests through an active and coordinated strategy involving bilateral, regional and multilateral trade negotiations.

We placed particular emphasis on the World Trade Organization (WTO) and ongoing efforts to secure an outcome in the Doha Round negotiations that will result in real improvements in the trading environment for Australian goods and services. We also played a frontline role in pursuing complementary bilateral and regional initiatives where these provided opportunities to deliver substantial gains to Australia which could not be achieved in a similar timeframe elsewhere.

The department has strongly advocated an ambitious outcome for the WTO Doha Round. We are pressing for better access for Australian goods and services in global markets and the correction of long-standing imbalances in the global trading system, particularly in agriculture. Despite our strong efforts to secure a positive outcome at the WTO Ministerial Conference in Cancún, Mexico, in September 2003, negotiations stalled due to differences between some of the main players. Since then, we have supported Mr Vaile's work to ensure that WTO members remain committed to the Doha Round and the multilateral trading system.

Agriculture is the key to progress in the Doha Round. The department advocated an outcome on agricultural trade liberalisation that meets the ambitious mandate agreed in Doha in 2001. A key vehicle for this advocacy was the prominent role played by Australia as Chair of the Cairns Group of fair traders in agriculture. The department supported Mr Vaile's management of the Cairns Group, his leadership of its activities in Cancún and efforts to ensure that the Group retained cohesion and influence in the period following the conference. Australia also participated actively in the 'five interested parties on agriculture' (FIPs) process, together with the European Union, United States, India and Brazil, which was influential in brokering a consensus outcome on the framework for the agriculture negotiations.

The department also worked to advance and protect Australia's interests through the WTO's dispute settlement system. We managed Australia's challenges against the European Union's sugar regime and its legislation on geographical indications. We coordinated Australia's response to separate challenges by the EU—known as the European Communities in the WTO—and the Philippines to aspects of our quarantine regime. In addition, Australia is a third party to a number of other disputes with important systemic or legal implications.

The department led intensive negotiations with the United States for a free trade agreement (FTA). We supported Mr Vaile in the final stages of the negotiations—culminating in the signing of the agreement by Mr Vaile and the United States Trade Representative, Ambassador Robert Zoellick, on 18 May 2004. The FTA will provide for deeper economic integration with the world's largest and most dynamic economy and will create significant new benefits and opportunities for Australian exporters. The Government allocated an additional $3.4 million to the department for the FTA negotiations and advocacy in 2003–04.

The department maintained strong momentum in FTA negotiations with other major trading partners. In particular, we successfully led negotiations with Thailand on a comprehensive Thailand–Australia Free Trade Agreement (TAFTA). Prospects for further trade opportunities in South-East Asia increased with ASEAN's announcement that it supported an FTA between ASEAN, Australia and New Zealand. We also began work with China on a feasibility study towards a possible FTA (see sub-output 1.1.1 for more information).

WTO Doha Round negotiations

The past year was a difficult one for the Doha Round of multilateral trade negotiations. Its nadir was the failure of WTO members to reach agreement on a framework for the next phase of the negotiations when they met at the biennial WTO Ministerial Conference in Cancún, Mexico in September 2003 (see box on page 71). The department supported Australia's delegation to Cancún, led by Mr Vaile and including parliamentarians, representatives of other federal government agencies, Australian states and territories, industry, and non-government organisations (NGOs).

Since the setback in Cancún, the department has worked hard to rebuild momentum in the Round. We supported Mr Vaile's participation in a subsequent number of formal and informal ministerial meetings designed to renew political commitment to the Round. We also undertook broad-ranging consultations with domestic stakeholders on developments in the Round. We supported Mr Vaile's WTO Advisory Group—comprising representatives from industry, academia and NGOs—which plays a role in sharpening Australia's negotiating positions, by injecting the views and concerns of business and the broader community.

In 2004, increased political commitment from key WTO members has injected renewed momentum in the Round. In February 2004, WTO members reactivated the Doha Round's negotiating groups that had not met since Cancún. Australia's Ambassador to the WTO, David Spencer, was appointed as Chair of the Dispute Settlement Understanding Review negotiation. The department advocated and protected Australian interests in these negotiations in Geneva across the full range of Doha Round issues, working with like-minded countries and providing intellectual leadership.

Setback at Cancún

The Fifth WTO Ministerial Conference took place in Cancún, Mexico from 10 to 14 September 2003. The conference's aim was to set a framework for the next phase of the Doha negotiations. Unfortunately, WTO members failed to reach agreement.

The immediate cause of the breakdown at Cancún, after five days of difficult negotiations, was the failure to agree on whether to begin negotiations on the four so-called Singapore issues (investment, competition policy, transparency in government procurement and trade facilitation). A last-minute offer by the European Union to drop two of the four Singapore issues from the negotiations failed to win the support of some developing countries, as well as others. This left the Mexican Chair of the conference, Foreign Minister Derbez, with little choice but to conclude the conference without agreement.

Although the Singapore issues were identified as the cause of the breakdown in Cancún, the push for agricultural reform was the key issue sitting behind the conference's overall dynamics.

Australia was looking for a clear and firm commitment to agricultural reform, particularly from those countries that maintain the largest subsidy programs. As chair of the Cairns Group, Mr Vaile played an active role in efforts to achieve an ambitious outcome. The Cairns Group met daily at either Ministerial or senior officials level. It cooperated closely with others seeking agricultural trade reform, including the emerging G20 group of developing countries. Ultimately, a lack of ambition by the United States and the European Union, reflected in a framework text put to the conference, prevented any prospect of real reform. This deeply disappointed proponents of agricultural trade liberalisation.

At the conclusion of the conference, some developing countries and a handful of NGOs claimed that blocking progress in the negotiations was a sign of strength and an indication of the growing power of developing countries. Many others recognised, however, that the breakdown of talks represented a missed opportunity to negotiate an outcome that would benefit poor countries.

Photo - See caption below for description
Minister for Trade, Mr Mark Vaile (centre), then Deputy Secretary, Peter Grey (left), and Ambassador and Permanent Representative to the WTO, David Spencer (right), at the Cairns Group Ministerial Meeting in Cancún, Mexico in September 2003. Photo: Manuel Diaz.
Enlarge image :: Photo gallery

Agriculture

Australia was at the forefront of efforts to develop an acceptably ambitious negotiating framework on agriculture in the WTO that will deliver substantial outcomes in reducing the high levels of domestic support in developed countries, improving market access and ensuring fair export competition.

The department promoted this core objective at a series of agriculture negotiating sessions and informal meetings in the WTO. They took place during the lead-up to the Ministerial Conference in Cancún in September 2003 and after formal negotiations resumed in February 2004. In the intervening period, we helped to build momentum for re-starting the Doha Round negotiations—with progress on agriculture the most urgent priority—as quickly as possible.

The department supported Mr Vaile's role as Chair of the Cairns Group, including by helping to organise the Group's 26th Ministerial Meeting in San José, Costa Rica, in February 2004. The meeting strongly reaffirmed the Group's commitment to substantial agricultural trade reform in the Doha Round and its interest in collaborating with other reform-minded countries—such as the G20 group of developing countries—to advance the agriculture negotiations.

As negotiations intensified from April to June 2004, the department developed new approaches to help bridge the gaps in key areas (such as market access) and contributed to Cairns Group coordination, the five interested parties (FIPs) process, collaboration with the G20 and outreach to other developing countries. We provided support for Mr Vaile's participation in informal ministerial meetings on ways to advance the agriculture negotiations in May (in Paris) and June (in Sao Paulo) and participated in the FIPs process which met intensively at senior officials level in the months leading up to conclusion of the framework agreement.

Industry consultation was a high priority throughout the reporting period. We gave feedback on progress in the negotiations, including the implications for Australian objectives and negotiating positions of key proposals for a draft negotiating framework. Mr Vaile addressed peak industry organisations on these issues at the National Food Industry Council meeting in February 2004 and the Agricultural Trade Consultative Group meeting in March 2004.

Industrials

Progress in negotiations on non-agricultural market-access (known as industrial products) effectively stalled after Cancún. Many developing country members were waiting to see what was likely to be achieved in the agriculture negotiations before engaging actively in the industrials negotiations. Nevertheless, the department continued to work closely with a range of developed and developing countries to encourage a high level of ambition in the negotiations.

Specifically, we continued to advocate the conclusion of a negotiating framework that focuses on cutting tariffs with application to all members and with no product exclusions. We also supported efforts to reduce non-tariff barriers and to shape areas where developing countries might be flexible. Contact with industry stakeholders confirms that this approach would maximise the opportunities to achieve real market access gains for Australian exporters.

Services

With Australia's services exports growing over the past ten years at an annual average rate of 6.6 per cent, we are keen to take advantage of the liberalising opportunities provided by the WTO negotiations on the General Agreement on Trade in Services (GATS). Some domestic stakeholders expressed concern over the past year about the potential for the GATS to force Australia to liberalise public services. The department made clear that the GATS does not affect the public provision of services or the right of governments, at the federal, state and territory level, to regulate in the public interest.

In line with the Government's commitment to release as much information on the negotiations as is practicable, the department made available on its website in June 2004 an updated discussion paper on the GATS negotiations. That paper summarises the so-called 'offers' that have been made by WTO members on services liberalisation, with particular reference to those of interest to Australia. It will help with public consultations planned for the second part of 2004.

The GATS negotiations have not made as much progress as expected. Some developing countries have difficulties in identifying possible commitments. Others link offers on services to progress in the agriculture negotiations. The department has worked to encourage more developing countries to make liberalising offers, including by offering technical assistance. In April 2004, the department, with AusAID assistance, organised a workshop in Mauritius for a number of African countries and provided hands-on technical assistance on how to schedule GATS commitments.

To help maintain momentum in the GATS negotiations, we launched an initiative in April 2004 in the WTO that urged countries to make legally binding commitments aimed at freeing up freight movement. Through this initiative, we are seeking better access for Australian goods in international markets.

WTO rules

Australia has been an active participant in the negotiations on rules aimed at clarifying and improving WTO disciplines on anti-dumping, subsidies and countervailing measures, and fisheries subsidies. The department submitted a range of technical papers and comments, including two general concepts papers, one on anti-dumping, the other on subsidies and countervailing measures. We also submitted a further elaborative paper on subsidies. Other WTO members have viewed this approach as a constructive means of improving understanding and narrowing differences.

WTO development agenda

Australia contributes $500 000 per year, through AusAID, to the WTO Global Trust Fund, set up at Doha to fund capacity-building programs in developing countries (103 of the WTO's 147 members are developing countries). The department has also initiated and delivered, in conjunction with AusAID, a range of regional and bilateral training programs to help developing countries participate effectively in the Doha Round negotiations and put specific WTO agreements into practice.

Supporting the WTO and trade liberalisation in other international trade bodies

The department was active in other international organisations to promote trade liberalisation and encourage progress in the Doha Round negotiations.

During the year, we provided strong support for the Government's efforts in APEC to get the Doha Round back on track. We helped secure strong and ambitious statements in support of the Doha Round in the APEC Leaders' Declaration in October 2003 and in the statement of the Chair of the meeting of APEC Ministers Responsible for Trade in June 2004. As a result, APEC succeeded in narrowing differences over key issues and opening the way for progress in the Round in 2004. We also led efforts in APEC to highlight the fact that FTAs and regional trade agreements can contribute towards free and open trade in the region.

The department supported Mr Vaile's participation in the Organisation for Economic Co-operation and Development Council Meeting at Ministerial Level (OECD MCM) held in Paris in May 2004. We highlighted Australia's strong economic performance and the value of cutting-edge research by the OECD in areas of current focus for domestic policy, centred this year around demographics and the effects on economic growth of ageing populations. The outcome of the OECD MCM built successfully on officials' work in support of the Doha Round and in the OECD's Trade and Agriculture Committees. It resulted in a broadly based political-level commitment to the key objective of developing a framework text for advancing the Doha Round. A meeting of Cairns Group and G20 members held in the margins of the OECD MCM added to the momentum.

The department also provided Australia's participation in the eleventh quadrennial meeting of the UN Conference on Trade and Development held in Sao Paulo, Brazil, in June 2004. The Australian delegation used the forum to promote Australia's aid program and strong record on trade and development, specifically through trade capacity building in support of emerging trade needs of developing countries and through advocacy of the development dividends of a reinvigorated global trading system.

WTO compliance and dispute settlement

The department was responsible for managing Australia's participation in WTO dispute settlement to promote and defend Australia's trade interests.

We continued to prosecute our case against the EU's sugar regime, challenging some of their most market-distorting export subsidies. We are also challenging the European Commission's legislation on geographical indications for foodstuffs and other agricultural products (but not wines and spirits, which are covered by separate legislation). We worked closely with other government agencies in responding to separate ongoing challenges by the Philippines and the European Union to aspects of Australia's quarantine regime. While the dispute panels were established in the second half of 2003, the panellists have not yet been appointed.

The department advocated Australia's interests as a third party in a number of disputes involving important systemic or legal issues. These included:

On other systemic or trade rules issues, we worked closely with Australian industry in responding to concerns about automotive subsidies provided by South Africa. Informal bilateral consultations were held with South Africa in Geneva in February and April 2004.

The department also provided advice on the compliance with WTO rules and disciplines of proposed government industry assistance and investment incentives. We conducted seminars on related rules issues for other government agencies and helped Australian exporters facing anti-dumping action.

WTO accessions

Negotiation of the terms under which new members join the WTO continued to be a priority. The department sought to ensure new members provided improved market access for Australia and fully implemented WTO rules. During the year, Nepal joined the WTO, becoming the 147th member and the first Least Developed Country to join the WTO since 1995. WTO Members also approved Cambodia's negotiation package in 2003, but its membership is awaiting ratification. The department concluded bilateral market access negotiations with Tonga. We are conducting accession negotiations with a number of countries still seeking accession, including: Algeria, Kazakhstan, Russia, Samoa, Saudi Arabia, Ukraine and Vietnam. In these negotiations we are seeking to build on Australia's existing commercial arrangements in these markets, open up new opportunities of interest to Australian business and, more generally, encourage the adoption of transparent and market-based trade policies in these countries.

EU enlargement

The department is also engaged in WTO negotiations to pursue the interests of Australian exporters following the recent enlargement of the European Union and the adoption by ten new member states of common EU economic and trade systems. Australia is seeking to maintain market access or receive offsetting benefits for any deterioration in market access for Australian goods.

Free trade agreements

Australia–US Free Trade Agreement

The department successfully led negotiations for a Free Trade Agreement with the United States (AUSFTA) and supported Mr Vaile in the final stages. Following more than a year of intensive bilateral engagement, the AUSFTA was signed on 18 May 2004 by Mr Vaile and the United States Trade Representative, Ambassador Robert Zoellick. The signing was an important step in improving access for Australian exporters to the world's largest and most dynamic economy (see box for summary of key outcomes for Australia).

Key outcomes for Australia from the AUSFTA

During these intensive and broad-ranging negotiations, the department successfully protected Australian interests in a number of sensitive areas, including the Pharmaceutical Benefits Scheme, intellectual property, local content in Australian broadcasting and audiovisual services, and sanitary and phytosanitary measures. We met a strong defensive stance from the United States on sugar and were not able to gain increased access for Australian sugar producers.

Thailand–Australia FTA

The department successfully led negotiations with Thailand on a comprehensive Thailand–Australia Free Trade Agreement (TAFTA). From its entry into force, scheduled for January 2005, it will provide real benefits for Australian exporters, investors and service providers through improved access to the sophisticated and rapidly growing Thai market (see box below).

Thailand–Australia Free Trade Agreement

Formal bilateral negotiations on the Thailand–Australia Free Trade Agreement (TAFTA) began in May 2002 and ended in October 2003. Prime Ministers John Howard and Thaksin Shinawatra signed the agreement in July 2004.

TAFTA is a major market opening agreement. It will result in Thai tariffs on virtually all goods imported from Australia being eliminated by 1 January 2010. It will also substantially improve the environment for services trade and bilateral investment.

The Agreement contains 19 chapters and runs to over 1200 pages. It is comprehensive, covering goods, services and investment, as well as rules covering areas such as competition policy, e-commerce, industrial standards, quarantine procedures, intellectual property, government procurement and dispute settlement.

When TAFTA comes into force, over $700 million of current Australian exports to Thailand will benefit immediately from tariff cuts. More than half of Thailand's 5000 tariffs—which apply to nearly 80 per cent of Australian exports—will be eliminated on entry into force. Many Australian companies formerly locked out of the Thai market by high tariffs and quotas will enjoy new opportunities, particularly in agriculture, processed foods and beverages, mining and automotive products.

In services and investment, Thailand will eliminate or relax foreign equity restrictions in a number of sectors of interest to Australia. They include mining, certain construction and distribution services and management consultancy services.

The department consulted widely within and outside government on measures to implement TAFTA. We also initiated a public awareness program to heighten understanding about the opportunities created by the agreement and published a user-friendly guide for Australian business which outlines TAFTA's benefits and requirements.

ASEAN

In April 2004, ASEAN Economic Ministers—later endorsed by ASEAN Foreign Ministers—announced their support for an ASEAN, Australia and New Zealand Free Trade Agreement.

This is a most positive step for ASEAN-Australia relations. It builds on a wide and deep network of economic, commercial and financial relations the department has helped foster between Australia and ASEAN. It offers the scope for new trade opportunities for Australian companies in ASEAN in the future. It will also complement the department's other activities in the region, in particular its successful negotiation of free trade agreements with Singapore and Thailand and its ongoing trade facilitation and promotion program through the AFTA-CER Closer Economic Partnership (CEP).

The department is actively engaged with ASEAN to develop the FTA proposal and ensure that it develops in a manner that is WTO-consistent, high quality and comprehensive in scope.

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Department of Foreign Affairs and Trade Annual Report 2003–2004
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