Trade and Assistance Review 2007-08

Annual report series

Trade and Assistance Review 2007-08 was released on 27 May 2009. The review contains the Commission's latest quantitative estimates of Australian Government assistance to industry.

The Review also documents:

findings of the major reviews dealing with export assistance, innovation policy, and assistance to the automotive and the textiles, clothing and footwear sectors
developments in assistance in different sectors of the economy over the period November 2007 to April 2009
a stocktake of government measures introduced to reduce carbon emissions or assist firms in adjusting to a less carbon intensive economy
recent international policy developments affecting Australia's trade

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Key points
Media release
Contents
Supporting data

Government assistance to industry is provided by tariffs, budgetary outlays, taxation concessions, regulatory restrictions and other measures.
- Assistance generally benefits the industry receiving it, but it can come at a cost to other industries, taxpayers and consumers.
- Some assistance, such as R&D funding and measures with environmental objectives, can deliver net community benefits if well designed and targeted
In 2007-08, Australian Government assistance to industry amounted to $9.4 billion in net terms (that is, after allowing for the cost impost of import tariffs).
The mix of industry assistance has changed over the five years to 2007-08.
- Net tariff assistance has declined in real and nominal terms, and is scheduled to decline further with the phasing down of automotive and TCF tariffs.
- In contrast, budgetary assistance increased by more than one third in real terms.
Budgetary assistance to industry will increase further.
- The Australian Government has announced outlays of around $20 billion associated with 'traditional' industry support, including assistance to the rural sector, automotive and TCF activities and R&D.
- Concurrently, it announced more than $15 billion associated with infrastructure provision and regional development commitments, potentially providing some assistance to selected service providers or benefits to service users.
- An additional $40 billion is directed to measures announced in response to the global financial crisis, much of which will benefit selected industries.
Other recently announced responses to the global financial crisis, including the guarantee of bank deposits and wholesale funding and assistance to commercial property projects, will also confer assistance to industry.
Policies that aim to reduce greenhouse gas emissions, apart from their environmental effects, also have a substantial impact on the assistance landscape.
- The Commission has identified over 240 measures, involving an estimated $23 billion in government outlays.
- By 2011-12, proposed Australian Government spending would amount to some $8 billion. In that year, the estimated cost to industry of proposed emission permits will be around $12 billion.
The global financial crisis has increased pressures on governments to protect local industries. Although they have collectively committed to resist such pressures, trade restricting measures have been introduced in many countries.
- To help maintain progress, international commitments and surveillance need strengthening. Over time, institutional arrangements that expose the domestic costs of each countries' own protection also have an important role to play.
Governments are pursuing preferential trade agreements as a means of achieving trade liberalisation. More research on the effects of such agreements is needed.

In 2007-08, Australian Government budgetary outlays, tax concessions and import tariffs provided Australian industry with $17.5 billion in gross assistance, according to the latest annual review by the Productivity Commission. After allowing for the cost impost of import tariffs on industries using goods as inputs, net assistance to industry was estimated at $9.4 billion.

Trade and Assistance Review 2007-08 sets out the Commission's latest estimates of industry assistance provided by the Australian Government, and documents recent policy announcements and developments.

While tariff assistance has declined significantly, in recent years, budgetary assistance to industry has been increasing.

Measured assistance will increase further as a consequence of announcements during the year relating to R&D, the automotive sector and the rural sector. These amount to outlays of around $20 billion over coming years. Some elements of the infrastructure and global financial crisis response packages are also likely to have industry assistance implications.

A feature of this year's Review is a stock-take of carbon emission reduction measures announced to date by the Australian, State and Territory governments. The Commission identifies some 240 budgetary and regulatory arrangements, totalling around $23 billion over the medium term. Many of these are inter-related, including with other policy areas such as energy efficiency and transport. The Commission, accordingly, sees a need for nationally coordinated reviews and evaluations of such measures.

Preliminaries
Cover, Copyright, Foreword, Contents, and Abbreviations
Overview - including key points
Chapter 1 Introduction
Chapter 2 Assistance estimates
2.1 Tariff assistance
2.2 Australian Government budgetary assistance
2.3 Agricultural pricing and regulatory assistance
2.4 Combined assistance
2.5 Effective rates of industry assistance since 1970
2.6 Summing up
Chapter 3 Major reviews of industry assistance
3.1 Review of export policies and programs
3.2 Review of the national innovation system
3.3 Review of the automotive industry
3.4 Review of the textiles, clothing and footwear industries
3.5 Summing up
Chapter 4 Recent developments in industry assistance
4.1 Research, development and innovation
4.2 Rural sector
4.3 Manufacturing and services sectors
4.4 Infrastructure provision and regional development
4.5 Responses to developments in global financial markets
4.6 Policy reviews
4.7 Summing up
Chapter 5 Measures related to carbon emission reduction
5.1 Measuring the impact of carbon emission reduction measures
5.2 Level and nature of measures
5.3 Assistance implications
5.4 Processes for evaluation and review
5.5 Summing up
Chapter 6 Recent developments in trade policy
6.1 Responses to the global financial crisis
6.2 The World Trade Organization and the Doha Round
6.3 Developments in Australia's preferential trading arrangements
6.4 Assessment of Australia's recent trade agreements
6.5 Summing up
Appendix A Detailed estimates of Australian Government assistance to industry
Appendix B Anti-dumping and countervailing activity
Appendix C Measures related to carbon emission reduction
References