Annual Report 2005-2006

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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, including trade facilitation :: WTO development agenda :: Supporting the WTO and trade liberalisation in other international trade bodies :: WTO Compliance and dispute settlement :: WTO accessions :: EU enlargement and WTO obligations :: New free trade agreement negotiations :: Implementation of existing free trade agreements :: Outlook


The department pursued Australia's trade interests through multilateral, regional and bilateral trade negotiations.

A successful conclusion to the World Trade Organization (WTO) Doha Round negotiations remained the department's number one trade priority. A stronger multilateral trading system would be the most effective way of providing Australians with increased access to world markets for their products and services.

The department actively pushed for an outcome to the Doha Round. We supported Mr Vaile's involvement in an intensive program of ministerial meetings in an effort to move the negotiations forward. These included the 6th WTO Ministerial Conference in Hong Kong in December 2005 and a series of smaller ministerial meetings. In Geneva in late June 2006, Mr Vaile attended a meeting of trade ministers in an attempt to break the deadlock in the negotiations. This was not possible and after a further meeting of key players, including Mr Vaile, in late July the negotiations were suspended.

The department continued to protect and advance Australia's trade interests through the WTO dispute settlement system, including through actions designed to ensure that the European Union (EU) fully implemented the decisions taken in the sugar and geographical indications WTO disputes, to which Australia had been a party. Implementation of the decisions will serve the interests of Australian producers.

The department maintained an active bilateral and regional trade liberalisation agenda. We continued intensive efforts to negotiate four separate free trade agreements (FTAs)—with China, Malaysia, the United Arab Emirates and, together with New Zealand, with the ASEAN countries.

The department and Mr Vaile conducted regular consultations with stakeholders on the Government's trade negotiating agenda, including through Mr Vaile's WTO Advisory Group involving representatives from business, trade unions, academia and non-government organisations. We issued by email and on the department's website a monthly bulletin advising key stakeholders of developments in the Doha Round negotiations. We conducted advocacy and outreach activities to inform and support current FTA negotiations.

WTO Doha Round negotiations

Photo - See caption below for description
During a break in a high-level Doha Round negotiating session, Minister for Trade Mr Mark Vaile addresses a press conference on 2 May 2006 at the World Trade Organization headquarters in Geneva. Photo: AAP Image/Fabrice Coffrini
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The department coordinated Australia's participation in the major WTO Ministerial Conference in Hong Kong in December 2005. The conference made some progress agreeing that agricultural export subsidies should be eliminated by the end of 2013 and taking some important steps to increase trade opportunities for least developed countries. However, the Hong Kong meeting did not reach agreement on the core issues of opening markets for agriculture and industrial products and reducing farm subsidies.

Following the Hong Kong conference, the department continued intensive efforts to bring the negotiations to a successful conclusion. By the end of June 2006, however, the WTO's 149 members were yet to reach agreement and the negotiations were suspended in July. Key players, however, say they remain committed to finding a way forward and Australia will be working hard to revive the negotiations.


Mr Vaile and departmental officials were at the forefront of efforts to achieve an ambitious Doha Round outcome in agriculture, which remains at the centre of the Doha negotiations because of the extent of distortion in world agricultural trade. The department maintained pressure on key WTO members to deliver real improvements in market access for Australian producers, as well as substantial reductions in trade-distorting domestic support and the elimination of export subsidies.

Australia worked in the Group of Six (Australia, Brazil, the EU, India, Japan and the United States), which brings together key WTO members, in an effort to break the deadlock in the negotiations.

The Cairns Group of 18 agricultural exporting countries, led by Australia, continued to push hard for agricultural trade reform. The Group welcomed Pakistan as its 18th member. The Cairns Group strengthened its ties with the G20 group of developing countries in an effort to advance reform, including by issuing a joint negotiating proposal on the phasing out of agricultural export subsidies.

The department continued to work closely with the National Farmers' Federation and other peak Australian agriculture industry bodies to refine negotiating positions and strategies.

We made significant efforts domestically and internationally to build support for agricultural trade liberalisation. Departmental officials presented trade policy training seminars in Australia and key regional countries and briefed senior industry and civil society representatives on agriculture negotiations.


The department continued to push for commercially meaningful improvements in market access for non-agricultural products (known as 'industrials'), which include manufactures, minerals, energy, forestry and fisheries products. They account for around 90 per cent of global trade in goods and 76 per cent of Australia's merchandise exports. We conducted consultations with industry and other federal government departments to determine the product areas of most interest to Australian exporters. We also worked closely with the United States, the EU and Japan, among others, which share our goal of an ambitious outcome on industrial products.

While the Doha negotiations achieved progress on a number of technical issues, the core issue of the size of tariff cuts in this sector was not resolved. The principal reason was that key developing countries—which have the highest industrial tariffs—remain reluctant to offer further reductions until they see progress in the agriculture negotiations. Although it has been agreed that developing countries will not have to cut tariffs as deeply as developed countries, the extent of the differentiation is an issue that remains to be resolved.


The further liberalisation of trade in services is a priority objective for the department through the Doha negotiations. This reflects the fact that services now represent more than 70 per cent of Australia's GDP and the value of our services exports reached a record $37.2 billion in 2005.

The Doha negotiations on trade in services moved into a new phase with the launch of the 'plurilateral' process agreed by ministers in Hong Kong. Under this process, groups of countries make requests to other groups for improved market access in specific sectors. The department worked closely with domestic agencies and like-minded WTO members to develop requests in 13 priority service sectors and represented Australia in two rounds of plurilateral negotiations in Geneva. These efforts helped generate some new momentum, but many WTO members are waiting to see how much progress is made on agriculture and industrials before moving on services.

The department conducted extensive domestic consultations on Australia's second revised services offer. With the suspension of negotiations the timing for the lodgement of services offers is unclear. Australia's initial (2003) and first revised (2005) offers were well received by other WTO members, and the second revised offer will be aimed at maximising Australia's influence in the final phase of the negotiations. All of Australia's offers are conditional on acceptable counter-offers from our trading partners.

The department played an active role in discussion of possible disciplines on domestic regulation of services. The aim of these disciplines—covering qualification requirements and procedures, licensing requirements and technical standards—is to increase transparency and ensure that market access for services providers is not undermined by protectionism disguised as regulation. We also engaged in negotiations on rules to avoid the trade distorting effects of services subsidies and new disciplines covering government procurement of services.

WTO rules, including trade facilitation

Negotiations on WTO rules on anti-dumping, subsidies, countervailing measures and fisheries subsidies intensified. The department led Australia's participation in these negotiations and developed proposals on prohibited export subsidies to ensure fairer and more predictable rules for Australian exporters in world markets. We were also active in negotiations on fisheries subsidies, including by co-sponsoring a paper on aquaculture. Australia was one of the WTO members that sought strengthened WTO rules to mitigate harmful trade and the environmental effects of over-fishing and overcapacity in the fisheries sector. Although progress on this issue has been limited, discussions have become more focused with the move to text-based negotiations.

The department continued to participate actively in negotiations on WTO rules applying to regional trade agreements (RTAs)—free trade agreements and customs unions. Our aim is to strengthen the WTO standards applying to RTAs to avoid whole sectors—especially agriculture—being carved out of such agreements. Subjecting RTAs to review and effective disciplines in the WTO is important to Australia's broader trade objectives by ensuring that comprehensive FTAs are concluded that can serve as building blocks to broader trade liberalisation.

The negotiations on trade facilitation have the potential to reduce the costs and time associated with the import, export and transit of goods across borders. The department focused on making customs procedures simpler and more predictable to reduce associated business transaction costs. We worked to build confidence among developing country WTO members concerned about their capacity to implement any new rules in this area. This reflected the interest of Australian exporters in ensuring developing countries can implement negotiated outcomes.

WTO development agenda

The department actively promoted the potential benefits for developing countries of comprehensive trade liberalisation through the Doha Round, particularly in agriculture. Australia cooperated closely with developing country agricultural exporters through the Cairns Group to press for agricultural trade reform. Agriculture is the most distorted sector in world trade, where developing countries stand to gain substantially from liberalisation.

At the Hong Kong Ministerial Conference parties reached agreement to give least-developed countries duty-free, quota-free access to developed country markets for at least 97 per cent of products. Australia had already taken a leadership role on this issue through its decision in 2003 to provide duty-free, quota-free access for all products from all least-developed countries with no phase-in periods or exceptions.

We helped developing countries enhance their trade policy and trade negotiation capacity, including by initiating or supporting AusAID-funded regional and bilateral trade-related technical assistance and capacity-building programs. Through these programs we provided comprehensive trade policy and WTO training for officials from Cambodia, China, Indonesia, Laos, Papua New Guinea, the Philippines, Thailand and Vietnam.

Mr Vaile announced at the Hong Kong ministerial conference that Australia, through AusAID, would contribute up to $4 million over five years to the WTO's Aid for Trade initiative to help developing countries build the capacity to take advantage of the opportunities provided by trade liberalisation. In 2006, the Government, again through AusAID, contributed an additional $500 000 to the WTO Global Trust Fund to support developing country participation in the Doha negotiations. This took Australia's overall support for the Fund to almost $2.5 million.

Supporting the WTO and trade liberalisation in other international trade bodies

The department pushed for a successful outcome to the Doha Round in other international bodies, including APEC and the Organisation for Economic Co-operation and Development (OECD). We supported the involvement of Prime Minister Howard and Mr Downer at the November 2005 APEC Leaders and Ministerial Meetings in Busan, South Korea, and the attendance of the Parliamentary Secretary to the Minister for Trade, Mrs Kelly at the June 2006 APEC Ministers Responsible for Trade meeting in Ho Chi Minh City, Vietnam (see sub-output 1.1.6 for more information). At these meetings, the department helped negotiate strong statements of support by APEC Leaders and Ministers for the Doha Round. At the May 2006 OECD Ministerial Council Meeting, Mr Vaile hosted a gathering of ministers at the Australian embassy in Paris in an effort to refocus key WTO members on the urgent need for a breakthrough in the negotiations.

WTO compliance and dispute settlement

The department led Australia's involvement in a number of WTO disputes in 2005–06.

Following the successful WTO challenge in 2005 by Australia, Brazil and Thailand to European Union (EU) sugar export subsidies, the EU was given 12 months, expiring on 22 May 2006, to make its measures WTO compliant. While the EU did introduce a number of reforms during this period, it also increased its subsidised sugar exports to record levels, which had a negative impact on the Australian sugar industry. Australia has formally reserved its WTO rights and is monitoring closely EU implementation.

As a result of a WTO challenge by Australia and the United States, the EU substantially revised its regime for the protection of 'geographical indications' (that is, geographical names or words that describe a product that has a geographical location closely associated with it, such as 'champagne'). Under the revised regime, those outside the EU have improved rights to protect their interests.

The department continued to work closely with relevant agencies on the challenges by the EU and the Philippines to aspects of Australia's quarantine regime.

We continued to ensure Australian agricultural trade interests were reflected in the development of international rules and standards on food regulation and quarantine measures, in particular in the international food standards setting body—the Codex Alimentarius Commission—and the WTO Committee on Sanitary and Phytosanitary Measures. The department worked with domestic stakeholders to ensure national regulation in these areas was consistent with international rules and standards.

The department coordinated Australia's involvement as a third party in a range of WTO disputes, including: the ongoing EU Beef Hormones dispute; the US Foreign Sales Corporations case; the EU Customs Laws case; Brazil's import regime for re-treaded tyres; Chile's Price Band system for agricultural imports; and EU and US large civil aircraft subsidies disputes. Australia also joined as a third party in consultations requested by the US, the EU and Canada on China's measures on automotive parts. Australia's interest in broader WTO legal issues provided the rationale for our involvement in the US Foreign Sales Corporation case and the EU Customs Laws case.

The WTO rules-based system, especially the WTO's dispute settlement procedures, is crucial for Australian exporters. The department continued to play an active role in the ongoing review of the WTO Dispute Settlement Understanding, which aims to improve the effectiveness of dispute procedures.

To enhance our good standing in the WTO, the department liaised extensively with other agencies and state governments to ensure compliance of Australian industry assistance measures, including investment incentives, with Australia's WTO obligations.

WTO accessions

Saudi Arabia acceded to the WTO in December 2005. Tonga completed its accession negotiations but still has to finalise its WTO membership. The department worked hard to ensure they did so on terms that provided improved market access for Australian companies. Saudi Arabia's accession package included improvements in access for a range of products of interest to Australia, notably passenger motor vehicles. The department also worked closely with Tonga to help it complete its WTO accession. Tonga is now undertaking domestic ratification of the outcomes. The department is continuing to work with Samoa on its accession.

The department, in consultation with other agencies, completed bilateral market access negotiations on goods and services with Vietnam, Russia and Ukraine. The negotiations will lead to improvements in market access in areas including meat, dairy products and sugar, as well as banking and mining services. These outcomes will take effect when these countries join the WTO. The department is currently working with other WTO members and acceding countries, including Algeria, Lebanon, Yemen and Kazakhstan, on completing the terms under which they could join the WTO.

EU enlargement and WTO obligations

The department worked closely with domestic industry in relation to the impact of EU enlargement on Australian interests in the WTO. In particular, we were concerned about changes in the WTO tariff obligations of the 10 new EU members. The changes affected some agricultural products where the EU tariff was higher than the tariff applied previously by the newly acceding member. The department negotiated with the EU to secure compensation for these tariff changes through improved market access for sugar, beef, sheepmeat and cheese.

New free trade agreement negotiations

The Government's Free Trade Agreement (FTA) agenda engages key trade partners in negotiations to deliver concrete outcomes in realistic timeframes. Australia's existing FTAs—with the United States, Singapore, New Zealand and Thailand—cover 24 per cent of our current two-way trade in goods and services. Current FTA negotiations—with China, Malaysia and, together with New Zealand, with the ASEAN countries—cover close to a further 19 per cent of total two-way trade. These figures show the importance of these markets to Australia's economy. As a critical component of the Government's overall trade policy, the department manages FTA negotiations within a coherent, whole of government framework aimed at maximising the gains for Australian exporters.

The department's FTA negotiating strategies were informed by a coordinated program of stakeholder consultations with industry, state and territory governments and public interest groups. These consultations helped identify impediments to increasing Australia's exports in target markets. As the negotiations progressed, the department held detailed consultations on sector-specific issues, including agriculture, intellectual property, rules of origin, services, automotives and textiles, clothing and footwear. The department provided opportunities for Australian companies to meet face-to-face with negotiating partners to allow a direct exchange on their business interests.

In all, the department held over 400 stakeholder consultations.

China Free Trade Agreement

Australia and China are embarking on a historic venture by negotiating a bilateral FTA—the first such agreement China is negotiating with a major developed economy. Significant economic complementarities, already substantial economic ties and a strong commitment to trade liberalisation mean that an FTA could deliver substantial gains for both parties. To produce the greatest benefits, the negotiations will need to cover not just increased market access for goods, services and investment, but also 'beyond-the-border' measures, including intellectual property rights and transparency-related issues. Because of the complex range of issues, the negotiations will be difficult and will take time. Prime Minister Howard has said Australia will only agree to an FTA that delivers commercially meaningful outcomes for Australia.

High-level political support has provided impetus to the negotiations, including in meetings between Prime Minister Howard and China's Premier Wen Jiabao in Canberra in April 2006 and in Shenzhen in June 2006. Both leaders confirmed their commitment to a comprehensive and high-quality FTA.

Since the launch of negotiations in April 2005, the department has led Australia's participation in five negotiating rounds. At the fifth round of talks, held in Beijing in May 2006, we made progress in drafting the agreement's blueprint. For example, both sides agreed that in addition to goods and services, the FTA would include provisions on investment and government procurement. The parties agreed to begin market access negotiations at the next negotiating session, scheduled for September 2006. Earlier rounds laid the groundwork for substantive negotiations by allowing an in-depth exchange of information on respective trade regimes.

The department is pursuing a targeted advocacy program in China to build relationships and focus key Chinese decision-makers on the positive contribution a high-quality FTA could make to China's economic development. The program has included a major conference on services in Beijing in April 2006 and a conference on manufacturing, intellectual property, resources and investment, which Mr Howard addressed in Shenzhen in June 2006. Under the advocacy program we have also supported visits to Australia by influential Chinese figures, high-level sectoral seminars in Beijing and capacity-building courses for Chinese officials on FTA issues.

ASEAN–Australia–New Zealand Free Trade Agreement

Australia's trade with ASEAN has grown faster than with any of our other major commercial partners, except China and India. An ASEAN–Australia–New Zealand FTA would underpin Australia's strong and enduring trade links with the region and contribute to an improved climate for investment.


Photo - See caption below for description
Steve Scott (third from left) and Virginia Greville, Lead Negotiator Agriculture (third from right) meeting with members of the Jin Pu Wine Company in Turpan, Xinjiang Province in May 2006 as part of the departmentís free trade agreement advocacy program with China.
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Since starting his posting at the Australian embassy in Beijing in July 2004, Steve Scott has seen Australia's economic relationship with China—our second largest merchandise trading partner—go from strength to strength. The decision by both governments to negotiate a bilateral free trade agreement (FTA) demonstrates our mutual interest in building closer trade and economic ties.

One of Steve's key responsibilities is to contribute to the whole of government effort to negotiate the FTA. His particular role is to 'oversee a major advocacy and outreach campaign designed to convince Chinese officials and business organisations of the merits of negotiating an ambitious and comprehensive FTA.'

Although China's economic opening has created increased trade and investment opportunities for Australia, the size and complexity of China's regulatory environment can create challenges. Steve's job brings him face-to-face with 'a business environment which, culturally, is still very different to our own' and where 'relationships and trust take a long time to cultivate.'

Steve says having the 'opportunity to witness firsthand the remarkable transformation of China's economy and the effect it is having on the global business environment' is a highlight of his posting. He feels privileged to experience China at a 'time of great change and optimism.'

Steve joined the department in 1994. He has had a previous posting to Kuala Lumpur and has been the Director of the department's state office in Perth. He was recently promoted to the department's Senior Executive Service.

Guided by the principles and objectives set by Leaders at the launch of ASEAN–Australia–New Zealand FTA negotiations in November 2004, the department led a whole of government negotiating team to four rounds in 2005–06. Significantly, we secured ASEAN's agreement to negotiate its first comprehensive FTA as a single undertaking, covering trade in goods, services and investment. However, ASEAN has not accepted the inclusion of other important trade-related issues such as intellectual property and government procurement.

The department is working to conclude the negotiations in 2007 in line with the negotiating timetable set by Leaders. We began a substantial program of information exchange on each country's trade and investment regimes and advanced negotiations on possible elements of an FTA, including tariff elimination, rules of origin, services, investment and dispute settlement. The department has built capacity within ASEAN countries to help them negotiate comprehensive commitments and obtain the full benefits of the FTA. For example, departmental officials have led technical workshops on services, investment, rules of origin and intellectual property, and produced working papers across a broad range of trade-related issues to inform the negotiations.

Malaysia–Australia Free Trade Agreement

The prime ministers of Australia and Malaysia agreed in April 2005 to launch negotiations for a bilateral FTA. In 2005–06 there were two full negotiating rounds and 10 inter-sessional meetings on specific issues. Negotiations on goods and rules of origin are well advanced, but progress is slower on services, investment and other trade-related issues such as government procurement where Malaysia has indicated some sensitivities. A high-quality, comprehensive FTA will bring solid and worthwhile gains to Australia, securing access to Malaysia's market and providing certainty for the 3500 Australian firms currently doing business there (see box below).

Australia–United Arab Emirates

In 2005–06 the department led Australia in two comprehensive negotiating rounds for a bilateral FTA with the United Arab Emirates (UAE). This brought to four the number of rounds held since negotiations were launched in March 2005. We made substantial progress in the negotiations as both sides exchanged market access offers and reached agreement on a majority of text for an agreement.

Disappointingly, in early June 2006 the UAE informed Australia that it could not proceed any further with the bilateral FTA negotiation due to the implementation of a unified trade policy across the Gulf Cooperation Council (GCC). The GCC, a regional body comprising Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the UAE, is an evolving customs union. As a step towards deeper economic integration, leaders of the GCC member states agreed to implement a single trade policy.

In late June 2006 Mr Vaile announced the Government would give close consideration to the GCC's wish to negotiate a GCC-wide FTA with Australia. To this end, the department began an analysis of the economic and trade implications of a possible FTA with the GCC. The solid progress made in the Australia–UAE negotiation will provide valuable input for the department's analysis. The GCC is an important and growing market, in particular for Australia's automotive exports, which in 2005 accounted for $1.9 billion of Australia's $4.1 billion in merchandise exports to the region.

Benefits of an Australia–Malaysia free trade agreement

Malaysia is an important market for Australian business

A free trade agreement will help improve our already strong trade and investment relationship.

An agreement will benefit Australian business

A free trade agreement:

A free trade agreement means more jobs, higher incomes, and more affordable, better quality products for Australian families and businesses.

The department advanced our collaboration with two new potential FTA partners. We secured Japan's agreement to the terms of reference and a timeline for the joint FTA feasibility study (see sub-output 1.1.1 for more information); and we reached agreement with Mexico to establish a Joint Experts' Group to examine ways of expanding our economic relationship, including through a possible future bilateral FTA.

Implementation of existing free trade agreements

The department continued to work hard to derive maximum benefit for Australian business from our four existing bilateral free trade agreements.

Implementation of the Australia–United States Free Trade Agreement (AUSFTA) continued in several areas. The department worked with other agencies particularly on the implementation of the new liability scheme required under the AUSFTA for the circumvention of technological protection measures and on fulfilling the Government's AUSFTA commitment to review Australia's arrangements for the supply of blood plasma fractionation services. With regard to access to the US for professional services, the department helped representatives of the legal profession establish a network of contacts in the US who support our initiative to improve access for Australian lawyers and helped representatives of the Australian accounting profession increase the number of US states that recognise their US mutual recognition agreements. We also helped representatives of the Australian engineering profession launch mutual recognition discussions with US state engineering boards (see sub-output 1.1.3 for more information).

In the lead-up to the second Singapore–Australia Free Trade Agreement (SAFTA) Review, the department continued to ensure the Agreement remained relevant to Australian business. To this end, we sought better access for Australian services providers in the legal, education and telecommunications sectors, and discussed other potential improvements to SAFTA with Singaporean officials (see sub-output 1.1.2 for more information).

The department, with its Thai counterpart, reviewed the operation of the Thailand–Australia Free Trade Agreement (TAFTA) at the inaugural Joint Commission meeting in Bangkok in December 2005. The two sides agreed to begin negotiations on services, investment, competition and business mobility and to establish a working group to consider improved market access (see sub-output 1.1.2 for more information).

Working with the Department of Industry, Tourism and Resources and the Department of Agriculture, Fisheries and Forestry, we completed negotiations with New Zealand on new rules of origin under the Australia–New Zealand Closer Economic Relations Trade Agreement (ANZCERTA). We began work with the Treasury and New Zealand on an investment protocol to ANZCERTA (see sub-output 1.1.4 for more information).


Photo - See caption below for description
Minister for Trade Mr Mark Vaile and his Malaysian counterpart Dato’ Seri Rafidah Aziz shake hands after signing the Memorandum of Understanding on Information and Communications Technology during the 12th Malaysia–Australia Joint Trade Committee Meeting in Kuala Lumpur on 26 August 2005. Photo: AAP Image/Tengku Bahar
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The department will continue to advance liberalisation of trade and investment conditions through multilateral, regional and bilateral trade negotiations. As a top priority, we will work through the WTO to create a fairer trading system, more open world markets and greater opportunities abroad for Australia's farmers, manufacturers and service providers. To this end we will continue to push WTO members to show the flexibility and courage needed to break through the current stalemate in the Doha Round negotiations.

In tandem with our efforts in the WTO, the department will pursue the best outcomes for Australian business in our ongoing FTA negotiations with China, Malaysia and, together with New Zealand, with the ASEAN countries:

The department will provide advice to inform the Government's decision-making about whether to negotiate an FTA with the Gulf Cooperation Council and mobilise resources to lead such negotiations if required.

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