Trade and Assistance Review 2004-05

Governments assist industries through a range of mechanisms, including tariffs and regulatory restrictions on imported goods and services, as well as subsidies and tax concessions for domestic producers.

• Assistance generally benefits the industry that receives it but can penalise other Australian industries, as well as taxpayers and consumers.
• Some types of assistance, such as R&D funding, may deliver net community benefits; others entail net costs to the community.

Tariffs on imports of manufactures have declined steadily over time, with most items in 2004-05 facing a tariff rate of 5 per cent or entering duty free. Automotive products and textiles, clothing and footwear items attract higher tariffs.

• The Government has announced continuing transition programs designed to move both sectors to lower levels of assistance. Tariffs on imports of these goods were reduced further in 2005.

Budgetary assistance to industry totalled an estimated $4.6 billion in 2004-05.

• $2.6 billion was provided in budget outlays — the main components were funding for CSIRO (21%), certain R&D programs (13%) and Austrade’s export promotion and grants (11%).
• The Automotive Competitiveness and Investment Scheme was the most significant tax concession, accounting for more than one-quarter of the almost $2 billion of such assistance provided.

In addition, significant drought relief has also been provided to farmers and rural communities in recent years.

• The Australian Government expended $220 million on drought support in 2004-05, with expenditure projected to increase considerably in 2005-06.

The tourism industry has received significant assistance in recent years. Further assistance and other policy initiatives to encourage additional travel and tourism-related investment have been recommended by a Government-appointed consultative group.

There has been mixed progress on international trade liberalisation recently.

• There has been some progress, albeit limited, in the WTO’s Doha Round.
• There has been a rapid worldwide increase in preferential trade arrangements. Australia has recently concluded a number of PTAs, with more in prospect.

A number of countries, including Australia, have unilaterally undertaken significant reform of their tariff arrangements over recent years.

Budgetary grants and tax concessions provided Australian industry with $4.6 billion in assistance last financial year, according to a Productivity Commission report.

Trade & Assistance Review 2004-05 provides the Commission's latest estimates of budgetary assistance to industry provided by the Australian Government.

The report shows that the manufacturing sector was the major recipient of budgetary assistance. Textiles, clothing and footwear and the automotive industries remain the most highly assisted areas of manufacturing. The Government has announced continuing transition programs designed to move both sectors to lower levels of assistance, with tariffs in both sectors falling again last year.

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.

The report also focuses on the recent worldwide surge in preferential trade agreements, in which Australia has participated.

• Preliminaries
  Cover, Copyright, Foreword, Contents, Abbreviations
• Key points
• Chapter 1 Introduction
• Chapter 2 Budgetary assistance estimates
• Chapter 3 Selected developments in assistance
  3.1 Reform of tariff arrangements
  3.2 Selective investment incentives
  3.3 Export marketing assistance
  3.4 Assistance to tourism
  3.5 Industry-specific assistance for primary producers
  3.6 Drought relief
  3.7 Anti-dumping measures
• Chapter 4 Selected developments in international trade policy
  4.1 Multilateral trade negotiations
  4.2 Preferential trade agreements
  4.3 National tariff reform
• Appendix A Detailed estimates of Australian Government budgetary assistance
• Appendix B Anti-dumping and countervailing activity
• References