Trade and Assistance Review 2002-03

The gross value of assistance to industry provided by the Australian Government was equivalent to over $10 billion in 2002-03.

This included the equivalent of $6.8 billion in the form of tariff assistance on outputs.

• Virtually all of this was directed to industries in the manufacturing sector.
• The resulting higher prices of manufacturing inputs meant that net tariff assistance to the other sectors (agriculture, mining and services) was negative.

Budgetary assistance totalled $4 billion in 2002-03.

• $2 billion was provided in budgetary outlays - the main components were funding for CSIRO (19%) and Austrade’s export promotion and grants (15%).
• The Automotive Competitiveness and Investment Scheme was the most significant tax concession, accounting for almost one-third of the $2 billion of such assistance provided.

The manufacturing sector is the major beneficiary of Australian Government assistance. In 2002-03, it received the equivalent of $4.4 billion in net tariff assistance as well as $1.8 billion in budgetary assistance.

• Textiles, clothing and footwear and the automotive industries remain the most highly assisted manufacturing industry groupings, although the Government has announced continuing transition programs designed to move both sectors to lower levels of assistance.
• The Government has substantially increased assistance to ethanol recently.

Measured assistance to most agricultural activities remains low.

• A key exception is the dairy industry, notwithstanding a decrease in assistance since its deregulation in 2000.
• Although not included in the Commission’s estimates, significant drought relief has also been provided to farmers and rural communities over the past year.

The services sector received some $757 million in Australian Government budgetary assistance in 2002-03. However, tariffs on manufactured inputs increased service industries’ costs by some $2.5 billion that year.

• Although not included in the Commission’s estimates, some pockets of the services sector, such as the legal and medical professions, benefit from regulatory restrictions on competition.
• Significant increases in assistance for tourism and medical indemnity insurance suppliers have recently been provided and/or announced.

There has been little progress on international trade liberalisation recently.

• The recent collapse of WTO talks in Mexico is a setback for multilateral reform.
• There has been an increase in preferential trade arrangements (PTAs) - Australia itself has concluded PTAs with Singapore and Thailand recently and is negotiating a PTA with the United States.

Import tariffs, budgetary grants and tax concessions provided Australian industry with the equivalent of more than $10 billion in gross assistance last financial year, according to a Productivity Commission report.

Trade and Assistance Review 2002-03 provides the Commission’s latest estimates of industry assistance provided by the Australian Government.

Most Australian industries have relatively low rates of assistance by historical standards, but pockets of high assistance remain. Significant new assistance measures have been announced recently for medical indemnity insurers, ethanol producers and farmers affected by the drought.

The report shows that the manufacturing sector was the major recipient of assistance. Textiles, clothing and footwear and the automotive industries remain the most highly assisted manufacturing industry groupings, although the Government has announced continuing transition programs designed to move both sectors to lower levels of assistance.

The report notes that particular forms of assistance, such as R&D subsidies, can deliver net community benefits if well designed. But it also indicates that industry assistance can entail significant costs to consumers, taxpayers and other industry — for example, tariffs on manufactured imports penalised businesses in the services sector by some $2.5 billion in 2002-03.

• Preliminaries
  Cover, Copyright, Foreword, Contents, Abbreviations
• Key points
• Chapter 1 Introduction
• Chapter 2 Assistance estimates
  2.1 Australian Government budgetary assistance
  2.2 Tariff assistance
  2.3 Agricultural pricing and regulatory assistance
  2.4 Trends in anti-dumping activity
  2.5 Combined assistance
• Chapter 3 Recent developments in assistance arrangements
  3.1 Drought relief
  3.2 Agricultural adjustment assistance
  3.3 Tourism
  3.4 Ethanol
  3.5 Pharmaceuticals
  3.6 Textiles, clothing and footwear
  3.7 Medical indemnity arrangements
  3.8 Investment attraction and project-specific assistance
  3.9 Anti-dumping arrangements
• Chapter 4 Recent developments in trade policy
  4.1 Multilateral trade negotiations
  4.2 Preferential trading agreements
• Appendix A Estimates of Australian Government budgetary assistance
• Appendix B Combined assistance estimates
• Appendix C Anti-dumping and countervailing activity
• References