Chapter 7.2
Effect of the GATT agreement
7.61 International trade agreements have the potential of opening
markets for our value-added agricultural products.
7.62 Following seven years of international trade negotiations, the Uruguay
Round of the General Agreement on Tariffs and Trade was finalised in Geneva
on 15 December 1993. The outcome was a set of new understandings and agreements
that will govern international trade in the future. The treaty came into
effect during 1995 with many of its key provisions to be phased in over
six years. [65]
7.63 The GATT agreement has three main features:
- A reduction in domestic support levels by 20 per cent over six years;
- improved market access provisions resulting from the conversion of
all import restrictions to tariffs with these tariffs progressively reduced by 36 per cent
over six years; and
- reductions in the volume of subsidised exports by 21 per cent over
six years while budgetary expenditure on export subsidies is to be simultaneously
reduced by 36 per cent. [66]
7.64 The Australian Bureau of Agricultural and Resource Economics (ABARE)
has estimated that Australia's key farm sectors should benefit in terms
of export returns by around $1.1 billion per year when the GATT agreement
is fully implemented. [67] According to the Department of Foreign Affairs
and Trade:
The Uruguay Round has delivered a fundamental change to world agricultural
trade, a change which will have a profound and permanent effect on the
way agricultural policy is formulated, as well as on the way key markets
for our products think about their own agricultural sectors. Australian
exporters will therefore now need to re-think their approaches to these
markets. There are considerable long term opportunities for Australian
exports ... But these can only be realised if Australian rural industries
adopt quickly to the new environment, and make swift adjustments and
improvements in marketing, quality control, new product development
... Value-adding will of course be a central part of all this. [68]
7.65 Despite a positive perception of the GATT agreement the Tasmanian
Government told the inquiry that as of September 1995 “only minimal
benefits have come forward at this stage” for Tasmanian companies
involved in value-adding. [69]
7.66 The impact of the GATT agreement on the cotton, beef and dairy
industries is discussed below.
Cotton industry
7.67 Under the GATT agreement protective measures against the import
of cotton textile products will be phased out over a period of ten years.
The Australian Bureau of Agricultural and Resource Economics is of the
view that in the long term the easing of trade restrictions will lower
the cost of producing manufactured cotton products leading to the increased
consumption of cotton. This will result in higher prices being paid for
raw cotton. The removal of restrictions on the import of cotton products
into countries in the European Union, the United States, Canada, Norway,
Finland and Austria will provide an added impetus for the shift of cotton
processing facilities away from these countries to low labour cost, developing
countries. [70]
7.68 The Committee understands that the effect of the GATT agreement
on cotton prices over five years from 1995 is likely to be small due to
the fact that the greatest reduction in the level of protection will occur
at the end of the phasing in period of the agreement. [71]
Beef industry
7.69 The Australian beef industry will benefit from the GATT agreement
due to improved access to the United States meat market, lower tariffs
in Japan [72] and expansion of the Korean import quota
for beef. As a result of the GATT agreement the European Union has agreed
to refrain from exporting subsidised beef to key Asian and Pacific markets
that are of major importance to Australian beef exporters. Also as a result
of GATT there will no longer be a Meat Import Law in the United States
for beef. This law was to be replaced by a “tariff quota” set
significantly above then existing access levels. [73]
7.70 Despite these developments the Australian Meat and Livestock
Corporation warned that:
Even after the GATT agreement has been implemented the industry will
continue to face a range of tariff and non-tariff barriers in many existing
and potential markets. ... over the next few years there will be a proliferation
of non tariff barriers, such as health and hygiene standards, and nutrition
labelling requirements, often justified on the grounds of consumer safety.
In some cases these will act as barriers to the production and export
of more highly value-added products. [74]
Dairy industry
7.71 The market support paid to Australian exporters of dairy products
in 1994 constituted an export subsidy under the terms of the GATT agreement.
These exports were to be subject to a 21 per cent subsidy cut under the
GATT agreement. If the 1994 marketing arrangement remained unchanged support
payments could only be paid on around 35 000 tonnes of butter, 65 000
tonnes of skim milk powder and 49 000 tonnes of cheese exports by the
year 2000. However, according to ABARE there were a number of options
open to the dairy industry in 1994 to bring marketing arrangements in
line with the GATT agreement. One option would have been to internalise
industry support so that assistance is unrelated to exports. A second
suggested option would have been to remove the market support arrangements
completely. [75]
7.72 As a result of the GATT agreement the European Union agreed to
increase skim milk powder imports from 69 000 tonnes to 71 000 and to increase butter
imports from 80 000 tonnes to 90 000 tonnes and cheese imports from 104 000 to 215
000 tonnes. In the United States butter imports were to rise from 320 tonnes to 7 000
tonnes, skim milk powder from 820 tonnes to 5 500 tonnes and cheese imports from 111
000 tonnes to 140 000 tonnes. However, Mr Curran of United Milk Tasmania in
commenting on the affect of the GATT agreement on his company's exports stated:
We are seeing some additional cheese access into the US, albeit very
small. We are seeing the commencement of some additional cheese access
into Europe and that is yet to actually materialise substantially. [76]
7.73 The GATT agreement also provided for restrictions on subsidised
exports. As a result the United States was required to reduce dairy exports
under their Dairy Export Incentive Program from the 1994 levels of around
120 000 tonnes a year to no more than 68 000 tonnes a year by the
year 2000. [77]
7.74 Because Australia is a very efficient dairy producing and exporting
country it is expected to significantly benefit from improved access to
markets in Europe and the United States. [78]
However, Mr Peter Gallagher, Chief Executive Officer with the Australian
Dairy Industry Council told the Committee in April 1995 that the United
States had “dumped 15 000 tonnes of dairy products into the Asian
markets for the first time” and they “will go on doing this
because they are allowed to under the Uruguay Round settlement for the
next six years.” [79] Mr Gallagher
warned that this would have a depressing effect on prices paid for dairy
products in the Asian region. [80]
The Asian Pacific Economic Cooperation forum
7.75 The Asian Pacific Economic Cooperation forum was established in
1989. The forum combines the economies of countries from East and South
East Asia, North America and the Pacific Ocean region. The major objectives
of APEC are “the integration and the release of product and factor
markets from restrictive regional and global trade policies.” [81]
At the Bogor, Indonesian APEC summit held in 1994 it was agreed that the
organisation would pursue the objective of free and open trade and investment
in the APEC region by the year 2020. These objectives were beyond those
agreed to under the GATT agreement. [82]
7.76 It has been argued that Asian countries emerged from the Uruguay
Round with “their very high tariff barriers largely intact and, “to
the extent that reductions are scheduled they will take place over a long
time-frame.” [83]
7.77 In 1994 77 per cent of Australia's exports went to APEX countries
with 67 per cent of its imports sourced from APEC economies. It has been
estimated that with the removal of “merchandise trade protection”
among APEC countries Australia would benefit by $6.7 billion in 1994-995
dollar values in 2020. Approximately half this benefit would come from
agricultural exports. [84]
7.78 The main impediment to achieving agreement among APEC members in
relation to the further liberalising of agricultural trade has been provided
by Japan and Korea who have expressed strong opposition to such moves.
These countries argue that they already face significant adjustments and
political difficulties in implementing their Uruguay Round commitments
and cannot go beyond such commitments at this time. [85]
Footnotes
[65] Year Book Australia 1995,
Australian Bureau of Statistics, Canberra 1995, p. 465.
[66] Vernon Topp, Outlook for the
Australian Dairy Industry, Outlook 94, Vol. 3, Agriculture: collection of papers
delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994 organised by
ABARE, pp. 235-235: see also Year Book Australia 1995, Australian Bureau of
Statistics, Canberra 1995, pp. 465-466.
[67] Evidence, DPIE, p. 892; see
also South Australian Development Council, Value-Added Food Processing in South
Australia, Draft 24 May 1995, pp. 18-19 .
[68] Submission, Department of
Foreign Affairs and Trade, p. 2; see also Senate Rural and Regional Affairs and Transport
Legislation Committee, Examination of Estimates 1995-96, Additional Information,
Vol. 4, November 1995, pp. 572-573.
[69] Evidence, Tasmanian
Government, p. 823.
[70] M. Forester and others, Outlook
for Cotton, Outlook 94, Vol. 3, Agriculture: collection of papers delivered at the
Outlook 94 Conference held in Canberra 1-3 February 1994, organised by ABARE p. 134; see
also M. Foster, Outlook for Cotton, Outlook 95, Vol. 2, Agriculture: paper
delivered at the Outlook 95 Conference held in Canberra 7-9 February 1995, organised by
ABARE p. 236.
[71] M. Foster, Outlook for Cotton,
Outlook 95, Vol. 2, Agriculture: paper delivered at the Outlook 95 Conference held in
Canberra 7-9 February 1995, organised by ABARE p. 236.
[72] Under the agreed GATT schedule
tariffs on beef imports into Japan are scheduled to fall by 1.9 per cent a year from 48.1
per cent in 1995 to 38.5 per cent in the year 2000. Dr Bruce Standen, Significance of
APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of papers
delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by
ABARE, p. 49.
[73] Year Book Australia 1995,
Australian Bureau of Statistics, Canberra 1995, p. 467.
[74] Evidence, AMLC, pp. 311, 334.
[75] J. Bills and others, Outlook for
the Australian Dairy Industry, Outlook 94, Vol. 3, Agriculture: collection of papers
delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994, organised by
ABARE, pp. 235-236.
[76] Evidence, UMT, p. 860.
[77] J. Bills and others, Outlook for
the Australian Dairy Industry, Outlook 94, Vol. 3, Agriculture: collection of papers
delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994, organised by
ABARE, p. 235. For additional information on the effect of GATT on dairy industries in the
United States and Europe see T. Gleeson and others, Outlook for the Dairy Industry,
Outlook 96, Vol. 2, Agriculture: collection of papers delivered at the Outlook 96
Conference held in Canberra 6-8 February 1996, organised by ABARE, pp. 259-260.
[78] For a more detailed analysis of
opportunities for Australia's dairy exports to Europe and the United States see J. Bills
and others, Outlook for the Australian Dairy Industry, Outlook 94, Vol. 3,
Agriculture: collection of papers delivered at the Outlook 94 Conference held in Canberra
1-3 February 1994, organised by ABARE, pp. 236-237.
[79] Evidence, Australian Dairy
Industry Council, p. 132.
[80] Evidence, Australian Dairy
Industry Council, pp. 12-133; see also Evidence, Murray Goulburn Cooperative
Company Limited, pp. 247-248 and T. Gleeson and others, Outlook for the Dairy Industry,
Outlook 96, Vol. 2, Agriculture: collection of papers delivered at the Outlook 96
Conference held in Canberra 6-8 February 1996, organised by ABARE, pp 257-258.
[81] T. Podbury and others, Implications
of APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p. 30.
[82] T. Podbury and others, Implications
of APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p. 29.
[83] Denis Gastin, Agribusiness - What
Do We Need To Do To Compete In Asia?, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p.158.
[84] T. Podbury and others, Implications
of APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, pp. 29, 36.
[85] B. Gosper and others, APEC -
Progress and Implications for Agricultural Trade, Outlook 96, Vol. 2, Agriculture:
collection of papers delivered at the Outlook 96 Conference held in Canberra 6-8 February
1996, organised by ABARE, pp. 44.