Annual Report 2005-2006

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Your location: Performance > Outcome 1 > Output 1.1 > 1.1.6 Trade development/policy coordination and Asia-Pacific Economic Cooperation

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

1.1.6 Trade development/policy coordination and Asia-Pacific Economic Cooperation

On this page: Overview :: APEC :: Trade finance :: Trade policy coordination and business liaison :: outlook


In preparation for Australia's year as host of the Asia-Pacific Economic Cooperation (APEC) forum in 2007, the department played a major role in shaping APEC's future agenda and strengthening it as a key regional forum. We led the preparation of a report on the APEC region's progress towards free and open trade and investment, the Mid-term stocktake of progress towards the Bogor Goals; continued initiatives to promote greater consistency and cohesion in regional trade agreements and free trade agreements; promoted greater focus in APEC's work on economic reform and 'beyond-the-border' impediments to trade; and led APEC's response to the challenges posed by avian influenza and other emergencies for the region's growth, stability and welfare.

This work has produced tangible benefits for APEC member economies and their people and reinforced Australia's leadership role in the forum. It has provided a foundation for building substantial outcomes from Australia's year as APEC host.

The department began a review of the Export Finance and Insurance Corporation, a wholly Government-owned entity that provides finance and insurance products to Australian exporters where they cannot be sourced through commercial channels. We represented the Government in Paris Club negotiations with Russia which produced an agreement on the full and early repayment of Russia's remaining trade-related debt to Australia.

The department undertook extensive consultations with business and community groups to promote and provide input to the Government's trade policy. We produced for public distribution a targeted range of promotional material and information outlining the Government's trade agenda, including the annual Trade 2006 statement drafted by the department and delivered by Mr Vaile.

To regulate the livestock export trade with key partners the department participated in delegations to Egypt, Oman and Qatar to advance negotiations on bilateral memorandums of understanding to provide a robust and durable basis for longer-term trade.


For the first time since its inception in Canberra in 1989, the APEC forum will return to Australia when we host it in 2007. We are using this opportunity to strengthen APEC's work agenda and operations and reinforce its role as the pre-eminent regional forum. The department has been working to make 2007 a watershed year for APEC.

Trade data for 2005 showed that APEC economies accounted for over two-thirds of Australia's trade. In 2005, total trade with APEC was $254 billion, up 14 per cent from 2004. Since 2000, our trade with APEC members has grown by an average of 4 per cent per year.

Today's APEC has a far more diverse agenda than the first meeting. In addition to its core functions of trade and investment liberalisation and facilitation—which have seen APEC economies contribute 61 per cent of world economic growth between 1989 and 2003—APEC now covers capacity-building, economic and technical cooperation, a range of sectoral issues, human security and a strong business dialogue. Through the department's efforts, Australia has led the push to diversify APEC's agenda to incorporate additional issues in keeping with our interests.

Trade and investment liberalisation and facilitation

The department played a lead role in preparing a major APEC report, the Mid-term stocktake of progress towards the Bogor Goals. As well as reviewing progress towards APEC's goals of free and open trade and investment in the region, the stocktake outlined further actions needed to reach liberalisation targets. The report was endorsed by the APEC Ministers' Meeting in Busan, South Korea in November 2005.

We led the Government's efforts in APEC to reinvigorate the momentum of the Doha Round of World Trade Organization (WTO) multilateral trade negotiations. At meetings in South Korea in November 2005 and in Vietnam in June 2006, we played a lead role in drafting APEC Leaders' and Ministers' statements. Consistent with our interests, the statements emphasised the urgency of advancing the Round and the importance of supporting an open, rules-based, multilateral trading system under the WTO for global economic growth and development.

Reflecting the continuing trend in international trade towards regional trade agreements (RTAs) and free trade agreements (FTAs), we stepped up our efforts within APEC to promote consistency and coherence across RTAs and FTAs in the APEC region. At Busan we secured agreement for APEC to develop comprehensive 'model measures' on as many commonly accepted RTA/FTA chapters as possible by 2008. The model measures are a guide to provisions that might be included in an FTA. They promote the Bogor Goals by identifying RTA/FTA provisions that increase trade and reduce business transaction costs.

As part of this important commitment, we co-hosted two FTA negotiation workshops in Malaysia and Indonesia. The Malaysia workshop—funded by the AusAID Public Sector Linkages Program—was attended by approximately 40 trade officials from 15 economies. We provided participants with a comprehensive introduction to issues likely to arise in FTA negotiations, including tariff elimination, aspects of trade facilitation, trade in services and investment.

The Indonesia workshop was designed to develop the skills base of Indonesian trade negotiators to allow them to complete trade-liberalising FTAs. The department produced the Guide to negotiating free trade agreements which is being translated into Indonesian and other languages.

In close cooperation with relevant agencies, in particular the Treasury, we have driven APEC's increasing focus on structural reform and so-called 'beyond-the-border' issues, where a lack of transparency and predictability in the conduct of business or lack of confidence in enforcement of intellectual property rights can impede trade and investment. We supported outcomes promoting streamlined customs procedures, standards and other business facilitation measures and played a significant role in promoting APEC's work on transparency and anti-corruption.

Secure trade and human security

The department contributed to APEC's efforts to promote human security and secure trade—the safe movement of goods and people through measures to protect cargo, ships, international aviation and people in transit—in the region. In relevant APEC meetings we continued to highlight the link between secure trade and trade facilitation as mutually reinforcing goals.

Following the 2004 Indian Ocean tsunami, Australia led efforts to revitalise emergency response capacity-building within the APEC region and to promote greater regional cooperation in an emergency.

As co-chair of the APEC Task Force on Emergency Preparedness, we led a comprehensive stocktake of emergency preparedness activities across APEC and member economies in 2005. The stocktake identified areas where APEC could build knowledge, training and expertise to enhance emergency preparedness. In June 2006, we led a simulation exercise that tested pandemic communications networks across the 21 APEC member economies (see box on page 96). In addition, we drove efforts to establish a contact list of emergency and pandemic management coordinators for APEC economies to ensure effective communications during emergencies. We worked with the APEC Secretariat to develop a website that will serve as an online platform for coordinating APEC's emergency preparedness activities.

FIGURE 13. Australia's exports by broad category 2005

FIGURE 13. Australia's exports by broad category 2005

Source: ABS Catalogue 5302.0 Balance of Payments and International Investment Position, March Quarter 2006

Photo - See caption below for description
Parliamentary Secretary to the Minister for Trade Mrs De-Anne Kelly (front, centre) attending a press conference at the APEC Ministers Responsible for Trade meeting in Ho Chi Minh City, Vietnam, in June 2006. Mrs Kelly is the first woman to represent Australia at this meeting of the APEC forum. Photo: Courtesy of Buu Ha, Vietnam Investment Review
Enlarge image :: Photo gallery


We were again at the forefront of APEC's efforts on counter-terrorism and secure trade. In June 2006, Australia co-hosted a workshop in the Philippines on how to conduct airport vulnerability assessments of the risk posed by shoulder-fired missiles, or Man-Portable Air Defence Systems. The workshop responded to a commitment by APEC Leaders in 2005 that each APEC economy should conduct an assessment of a major airport by the end of 2006. We are working closely with relevant agencies to implement other practical security-related initiatives in areas such as border controls, energy security, transport security, supply chain security and terrorist financing.

APEC reform

To bring operational reform to APEC, the department was a key member of a 'Friends of the Chair' process aimed at improving APEC's work structure and practices and reducing duplication. For example, as chair of the Steering Committee on APEC's economic and technical cooperation (ECOTECH) activities, we streamlined and prioritised ECOTECH activities and sought to improve management of APEC forums.

Business cooperation and public outreach

The department and the APEC Business Advisory Council stepped up their efforts to engage business and promote public support for APEC through media and outreach activities. We organised an APEC Australian Business Forum addressed by Prime Minister Howard in Sydney in October 2005. The forum served to increase business awareness of the opportunities in APEC. A high-level Business Consultation Group was formed in May 2006 to advise Mr Howard on APEC 2007. It met with him in June 2006.

APEC's response to the threat of pandemic influenza

Australia is a major driver of regional efforts to prepare for and respond to the threat of avian and pandemic influenza. Our leadership of the APEC Avian Influenza Preparedness and Response Meeting in Brisbane in October 2005 strengthened APEC's political commitment to tackling the threat of a regional pandemic.

We led APEC's 2006 APEC Pandemic Response Exercise, which tested regional communications in the event of a human-to-human outbreak. Over 100 health and disaster management experts from all 21 member economies participated. The outcomes will provide direction for future work to help build the region's preparedness and response capability. APEC's efforts in preparing for pandemic influenza build on the work of regional and international organisations such as the World Health Organization.

APEC is focused on providing technical assistance to member economies already affected by avian influenza. At the APEC Leaders' Meeting in November 2005, Prime Minister Howard committed $100 million over four years for initiatives to combat the threat of pandemics and other emerging infectious diseases within the region. Of this funding, $10 million is being used for APEC activities on avian influenza, including the simulation exercise and the establishment of a regional register of experts who have specialist skills in human and animal health disaster response.


Busan meetings map out future trade liberalisation

When APEC began in 1989, reducing tariffs was the primary focus. While progress has been uneven, APEC has significantly addressed that challenge, with average applied tariffs in APEC economies falling from 16.9 per cent in 1989 to 5.5 per cent in 2004. Business has boomed, with APEC economies making up 61 per cent of world economic growth in the period.

However, the 2005 Mid-term stocktake of progress towards the Bogor Goals responded to business views that the trade and investment debate had shifted. Tariffs are no longer the major impediment to trade. Instead, the focus has turned to so-called 'beyond-the-border' issues such as intellectual property rights, transparency, corruption, structural and regulatory reform, competition policy and standards.

Australia has played a prominent role in adjusting APEC's direction to ensure its ongoing relevance to business.

Australia played a key role in formulating the 2005 Busan Business Agenda—based on the stocktake report—which revitalised APEC's work program to ensure APEC kept pace with the region's business environment. Its aim is to ensure the Asia–Pacific region remains the fastest-growing region in the world, raising living standards for millions of people.

Trade finance

The department is conducting a review, mandated by Government, of the Export Finance and Insurance Corporation (EFIC). EFIC is a self-funding statutory corporation which provides finance and insurance services to support Australian exporters and overseas investors where private sector financiers or insurers lack the capacity or willingness to do so. In this way, EFIC fills the 'market gap.' EFIC is periodically reviewed to ensure its operations remain relevant and competitive in a changing global financial and trading environment.

The 2006 review has focused on the extent to which EFIC is servicing the market gap. The department has canvassed the views of around 100 exporters, financial institutions and peak industry bodies in all Australian states and overseas. We expect to complete the review in the second half of 2006.

The department represented the Government in prolonged Paris Club negotiations on the repayment of all Russia's outstanding debt to its Paris Club creditors, including Australia. Negotiations produced an agreement on the repayment of Russia's US$185 million debt to Australia, which under the original terms of the debt contract was not due until 2016. Contracted in 1991 as a result of payment defaults for wool and wheat sales during the Soviet era, the debt has now been repaid. The debt was managed by EFIC, on behalf of the Australian Government.

Trade policy coordination and business liaison

Trade 2006 statement

The department drafted the Minister for Trade's annual trade statement, Trade 2006, which he launched in March 2006. Trade 2006 is an important public diplomacy document for the minister and the department. It reviews Australia's 2005 trade outcomes and highlights priorities and strategies for pursuing Australia's national trade interests. These cover trade negotiations, trade promotion and rebuilding and reforming the infrastructure supporting Australia's exports. With Austrade, the department produced and distributed a comprehensive Trade Resources Kit CD-ROM incorporating Trade 2006, other trade policy information, statistics, business guides and specialised teaching resources. The kit was used as an advocacy tool to highlight the Government's achievements across the trade agenda.

National trade consultations

Trade consultation processes—including a ministerial meeting with all states and territories in July 2005—continued to provide an important vehicle for input from business and state and territory stakeholders into the Government's trade policy. They were supplemented by frequent meetings of the Senior Trade Officials' Group, comprising representatives from each state and territory, which the department chairs. Close consultation with the states and territories was particularly important in shaping the Government's position in FTA negotiations, implementing existing FTAs, and revising our services offer in the Doha Round. In these examples a unified and coordinated whole of government approach strengthened Australia's position.

Live animal trade

With the Department of Agriculture, Fisheries and Forestry (DAFF) and industry, the department was closely involved in the planning and conduct of negotiations to conclude new memorandums of understanding (MOU) regulating the livestock export trade with Egypt, Oman and Qatar. We contributed to the development of capacity-building projects in countries that had already signed MOUs with Australia.

A DAFF–DFAT–industry team started negotiations with Egypt on another MOU, to ensure that high standards of animal welfare were maintained at each stage in the handling of Australian live cattle exported to Egypt.

Conflict diamonds

With the Department of Industry, Tourism and Resources and the Australian Customs Service, the department continued to coordinate Australia's involvement in the UN-sanctioned Kimberley Process Certification Scheme for rough or 'conflict' diamonds, introduced on 1 January 2003. Australia's diamond export trade of around $750 million benefits from a secure trading regime involving over 70 countries, including the world's major producers, traders and polishers of conflict diamonds. Conflict diamonds have been used to finance war and civil conflict in Africa. Around 98 per cent of the conflict diamond trade is now covered by the scheme.


Supporting Australia's hosting of APEC in 2007 will be one of the department's biggest priorities. We aim to use our year as host to shape and strengthen APEC's future agenda and operations. We will contribute to the whole of government effort to support the large number of official and business visitors to Australia throughout the year for APEC events and meetings in all states and territories. We will continue to lead efforts in APEC to tackle the threat of pandemic influenza in the region.

We will complete the major review of the Export Finance Insurance Corporation and work with EFIC to implement any recommendations. The department will draft and help launch the Minister for Trade's annual trade statement. With the Department of Agriculture, Fisheries and Forestry, we will continue to negotiate memorandums of understanding with Egypt, Oman and Qatar to regulate the bilateral livestock export trade.

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