Trade and Assistance Review 2001-02

Industry assistance has declined significantly over the past decade, particularly import restrictions. However, while most industries and firms now receive low assistance, some still receive substantial support.

Gross assistance to industry amounted to over $14 billion in 2001-02, including $6.8 billion in tariff assistance on outputs and $7.2 billion in budgetary programs.

Commonwealth budgetary assistance has edged up since 1997-98, and totalled $3.9 billion in 2001-02.

• The main components of the $2.2 billion in budgetary outlays were funding for CSIRO (17%), Austrade’s export promotion and grants (15%), the R&D Start scheme (11%) and the TCF Strategic Investment Program (7%).
• The Automotive Competitiveness and Investment Scheme was the most significant tax concession, accounting for almost one-third of all such assistance.

The manufacturing sector is the major beneficiary of Commonwealth assistance. In 2001-02, it received $4.4 billion in (net) tariff assistance as well as $1.9 billion in budgetary assistance.

• Textiles, clothing and footwear and the automotive industries remain the most highly assisted manufacturing industries.

Commonwealth assistance to most agricultural activities remains low. Exceptions include the dairy industry, notwithstanding a decrease in assistance since its deregulation in 2000, and the sugar industry.

The services sector received some $900 million in Commonwealth budgetary assistance in 2001-02. However, tariffs on manufactured inputs increased service industries’ costs by some $2.3 billion in that year.

In 2001-02, State and Territory governments are estimated to have spent $3.3 billion on programs that assist industry (of which up to $1.2 billion involved programs that provide incidental support).

• This represents a real increase of 15 per cent since 1994-95.

Increasingly assistance programs are designed to provide incentives for industries to adjust to market pressures. Assistance to the four most highly assisted industries — textiles, clothing and footwear, automotive, dairy and sugar — embody significant adjustment incentives.

Increases in assistance are in train for tourism and, in response to the drought, the rural sector. Changes have also been introduced in relation to export programs, assistance for small businesses and ethanol production.

Targeted support to individual projects and firms continues to be provided by State governments, often in competition with each other, as well as through the Commonwealth’s Strategic Investment Incentive Program.

Total assistance to Australian industry has continued to decline, but was still over $14 billion in 2001-02, with manufacturing the major recipient, according to a Productivity Commission report.

Trade and Assistance Review 2001-02 provides the Commission’s latest estimates of Commonwealth assistance, and updates estimates of State assistance last published in the mid-1990s.

The report shows that budgetary assistance (grants, tax concessions, etc) now provide more assistance to industry than tariffs. State outlays have grown to $3.3 billion — 15 per cent higher in real terms than in 1994-95. Commonwealth budgetary assistance has edged up to almost $4 billion.

Most Australian industries have relatively low rates of assistance by historical standards, but pockets of high assistance remain. The Commission said that assistance programs are increasingly designed to provide incentives for industries to adjust to market pressures. The four most highly assisted industries — textiles, clothing and footwear, the automotive industry, dairying and sugar — are all on adjustment programs.

The report notes that particular forms of assistance, such as R&D subsidies, can deliver net community benefits if well designed.

But it also warns 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 $2.3 billion in 2001-02.

• Preliminaries
  Cover, Copyright, Preface, Contents, Abbreviations
• Key findings
• Chapter 1 Introduction
• Chapter 2 Assistance and structural change
  2.1 The changing structure of production and trade
  2.2 Sectoral changes
• Chapter 3 National assistance estimates
  3.1 Commonwealth budgetary assistance
  3.2 State budgetary assistance
  3.3 Tariff assistance
  3.4 Agricultural pricing and regulatory assistance
  3.5 Restrictions on trade in services
  3.6 Trends in anti-dumping activity
  3.7 Combined tariff, budgetary and agricultural pricing and regulatory assistance
• Chapter 4 Recent developments in assistance to selected industries
  4.1 Dairy
  4.2 Sugar
  4.3 Citrus growing and processing
  4.4 The automotive industry
  4.5 Textiles, clothing and footwear
  4.6 Tourism
  4.7 Airlines
  4.8 Ethanol
• Chapter 5 Recent developments in assistance to activities and firms
  5.1 Accelerated depreciation provisions
  5.2 Export assistance
  5.3 Small and medium sized enterprises
  5.4 Drought relief
  5.5 Commonwealth investment attraction and firm-specific assistance
  5.6 State and Territory investment attraction and firm-specific assistance
• Chapter 6 Recent developments in trade policy
  6.1 Multilateral trade negotiations
  6.2 Preferential trading arrangements
  6.3 The WTO's Trade Policy Review of Australia
• Appendix A Commonwealth budgetary assistance estimates
• Appendix B State and Territory budgetary assistance estimates
• Appendix C New South Wales budgetary assistance estimates
• Appendix D Victorian budgetary assistance estimates
• Appendix E Queensland budgetary assistance estimates
• Appendix F Western Australian budgetary assistance estimates
• Appendix G South Australian budgetary assistance estimates
• Appendix H Tasmanian budgetary assistance estimates
• Appendix I Australian Capital Territory budgetary assistance estimates
• Appendix J Northern Territory budgetary assistance estimates
• Appendix K Anti-dumping and countervailing activity
• References