WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Customs Tariff Amendment Bill (No. 6) 1997
Date Introduced: 26 November 1997
House: House of Representatives
Portfolio: Industry, Science and Tourism
Commencement: As specified in the 'Main
Provisions' section of this Digest.
The principal amendments:
- reduce from 1 January 2005 the general rate of tariff for
imports of passenger motor vehicles (PMV) and certain components
for PMV to 10%; and
- reduce from 1 January 2005 the general rate of tariff for
imports of clothing and finished textiles to 17.5%, imports of
cotton sheeting, woven fabric, carpets and footwear to 10%, and
footwear parts, sleeping bags and table linen to 7.5%.
As there is no central theme to the Bill, a brief background to
each major amendment is outlined below.
Schedule 2 - Reductions in the Tariffs on Passenger Motor
Vehicles
The effect of the amendments proposed by Schedule
2 of the Bill is to reduce the general rate of tariff on
imports of passenger motor vehicles (PMV) and certain components
for PMV to 10% from 1 January 2005.
The amendments give effect to an joint announcement of the Prime
Minister, Minister for Industry, Science and Tourism and the
Treasurer of 5 June 1997. In that announcement it was stated:
The current schedule for PMV tariff phasing will continue in
relation to tariffs to 2000
- from 1 January 2000 the tariff will be at 15 per cent and will
remain at that level for the next 5 years.
- there will be no differentiation for micro/light vehicles and
four wheel drive vehicles. Light commercial vehicles will remain at
5 per cent.
The Government will legislate forthwith for the tariff to be
reduced to 10 per cent on 1 January 2005.(1)
The announcement represents the Government's response to the
Industry Commission's Report No. 58 of 26 May 1997 titled The
Automotive Industry. In respect to PMV tariff rates the Industry
Commission's recommendations included:
The Commission recommends that from 1 January 2001 tariffs on
passenger motor vehicles and components (including aftermarket
components) be reduced at the rate of 2.5 percentage points per
annum until 2004, when the tariff will be at 5 per cent, the rate
currently applying to most Australian manufacturing industries. A
2.5 percentage points per annum reduction for components should
apply even if a slower rate of reductions is set for passenger
motor vehicles.
The Commission recommends that tariffs on micro and light
passenger motor vehicles should be reduced to 5 per cent from 1
January 2001. Micro and light vehicles are defined as those with an
engine capacity below 1300cc, a tare mass below 900 kilograms, and
dimensions at or below four metres by 1.7 metres.(2)
It may be noted that Industry Commission Report No. 58 contained
a Minority Report. The recommendations of the Minority Report in
respect to PMV tariff rates included:
Tariffs on passenger motor vehicles, original equipment and
replacement components be maintained at 15 per cent until 2005,
with a review to be held in, say, 2003 to consider post-2005
assistance arrangement for the industry.
There be no concession tariff treatment for micro/light cars;
2wd utilities be accorded concessional sales tax exemptions (with
the exemption being partial to the extent that such vehicles are
not confined to on-farm/off road use); and that private buyers of
4WD vehicles provided their eligibility for concessional tariff
treatment by demonstrating the proportion of off-road use. The
tariff on 4wds primarily for on-road use should be set at the
prevailing tariff for passenger motor vehicles.(3)
There was no reported support within the Australian motor
vehicle industry for the Industry Commission's recommendations.
Motor vehicle industry executives told the Government prior to the
release of the Industry Commission's Report No. 58 that they wanted
car tariffs held at 15 per cent to about 2004 or 2005.
The South Australian Government unanimously supported an urgency
motion moved by Premier Olsen calling on the Federal Government to
reject any tariff plan which put the nation's motor vehicle
industry at risk.
The Victorian Government called on the Commonwealth to freeze
motor vehicle tariffs at 15 per cent until 2005.
The Leader of the Opposition, the Hon. Kim Beazley, called on
the Government to hold motor vehicle tariffs at 15 per cent from
2000 to 2005.
The Australian Democrats industry spokesman Andrew Murray said
that the car tariff reduction timetable should be frozen now and
not in the year 2000 or the year 2005.
While the Prime Minister's announcement of 5 June 1997 has
received unanimous Australian motor vehicle industry support, the
announcement has attracted some criticism. For example, the
editorial of The Australian Financial Review of 6 June 1997
said:
... the worst aspect of the Howard government's second-rate
tariff compromise is its message that politically powerful
industries don't have to play by the same rules that apply to the
rest of the country. The Government's bizarre 15 per cent tariff
freeze between 2000 and 2005 signals that Treasurer Costello lacks
the political muscle within Cabinet to maintain a rational economic
course. And, without a muscular Treasurer, it signals that the
Government lacks the political heart to take on all the hard policy
decisions needed to lift Australia's economic growth performance
and solve its unemployment crisis. If the Government pursues
halfhearted reform of car industry protection it is unlikely to
tackle further labour market reform, tax reform, or the
waterfront.
The National Farmers' Federation President in a News Release of
5 June 1997 said in relation to the Government's plans on car
tariffs that:
... it is illogical and inconsistent for the Government to
support the removal of tariffs on an Australian industry, and
maintain tariffs on an industry owned by Japanese and United States
interests. Why should Australian industries make the sacrifice for
overseas owned industries which do not.? The position of the car
manufacturers represents vested interests which are resistingthe
surrender of previously conferred benefits , with thinly veiled
threats to divest their Australian operations.
Schedule 3 - Reductions in the Tariffs on Textile, Clothing and
Footwear (TCF)
The effect of the amendments proposed by Schedule
3 of the Bill is to reduce from 1 January 2005 the general
rate of tariff for imports of clothing and finished textiles to
17.5%, imports of cotton sheeting, woven fabric, carpets and
footwear to 10%, and footwear parts, sleeping bags and table linen
to 7.5%. The proposed amendments commence on 1 July 1998
(clause 2).
The amendments give effect to a joint announcement of the Prime
Minister and Minister for Industry, Science and Tourism of 10
September 1997. Key features of the announcement, the stated
objective of which is to provide 'a practical transition, designed
to promote investment and innovation in the TCF industries and
encourage the development of long-term, sustainable, real jobs',
included:
The current schedule for TCF tariff phasing will continue
through to 2000.
TCF tariffs will be maintained at the same level from 1 July
2000 until 1 January 2005.
The Government will introduce legislation in the current session
to implement a reduction in TCF tariffs on 1 January 2005.(4)
An attachment to the announcement contained the
following schedule of TCF tariff reductions for the period
1997-2005.
1997 1998 1999 2000 2001 2002 2003 2004 2005
% % % % % % % % %
Clothin
g & 34 31 28 25 25 25 25 25 17.5
finishe
d
textile
s
Cotton
sheetin 22 19 17 15 15 15 15 15 10
g &
fabrics
Sleepin
g 13 12 11 10 10 10 10 10 7.5
bags,
table
linen
Carpet 21 19 17 15 15 15 15 15 10
Footwea 24 21 18 15 15 15 15 15 10
r
Footwea 17 14 12 10 10 10 10 10 7.5
r
parts
Other
(eg. 5 5 5 5 5 5 5 5 5
yarns,
leather
)
The joint announcement could be said to represent the
Government's response to the Industry Commission's Report No. 59 of
9 September 1997 titled The Textiles, Clothing and Footwear
Industries. In respect to TCF tariff rates all Commissioners agreed
that assistance arrangements after 2000 should involve a reduction
of TCF tariffs to 5 per cent in order to bring TCF into line with
the general tariff rate for manufacturing.(5) The Commissioner's
had differing views as the rate by which TCF tariffs should be
reduced.
Commissioners Cosgrove and Snape recommended that TCF tariffs
should be reduced steadily to 5 per cent by 1 July 2008.(6) For
example, they proposed in relation to clothing and other finished
textiles that the tariff rates be reduced to 25% in 2000, 22% in
2001, 19% in 2002, 16% in 2003, 13% in 2004, 11% in 2005, 9% in
2006, 7% in 2007 and 5% in 2008.(7)
Commissioner Brass recommended that there should be no further
reduction in TCF tariffs in the period from 2000 to 2005.(8) In
2004, there should be an administrative examination of
international progress in trade liberalisation.(9) If the
administrative examination returns a positive finding, TCF tariffs
should be reduced to 5% over the period from 2005 to 2010.(10)
There has been no reported support by the TCF industry for the
Industry Commission's recommendations in respect to TCF tariff
rates. The TCF industry, TCF unions, Victorian Government, the
Footwear Manufacturer's Association of Australia, the Council of
Textile and Fashion Industries of Australia, the Australian
Business Chamber and the Federal Opposition supported a freeze in
TCF tariff rates from 2000 to 2005.
While the joint announcement of 10 September 1997 has received
unanimous TCF industry support, the announcement has attracted some
criticism. For example, the National Farmers Federation and the
Australian Consumer's Association urged the Federal Government to
support a continued tariff phase-out in the interest of consumers
and natural fibre producers. The Senior Vice President of the
National Farmers Federation in a News Release of 8 September 1997
said:
Cabinet must understand the potential damage to our trade
prospects if calls by the TCF industry for a tariff pause are
adopted. A decision to pause is no decision. Failure to maintain
the pressure for tariff reform on TCF will be harmful to our
agricultural export industries. Clinging to tariff protections at
the cost of efficiency means fewer export sales - this means lost
revenue of around $2300 each year for the average broadacre
farm.
- Joint Press Release, Prime Minister, Minister for
Industry, Science and Tourism and the Treasurer, 5 June 1997.
- The Automotive Industry, Industry Commission, Report
No. 58, Vol 1, 26 May 1997, p. LXI.
- Ibid., at p. LXXII.
- Joint Press Release, Prime Minister & Minister for
Industry, Science and Tourism, 10 September 1997.
- The Textiles, Clothing and Footwear Industries, Report No. 59,
Vol. 1, 9 September 1997, p. LXVII.
- Ibid., at p. LXIX.
- Ibid.
- Ibid., at p. LXX.
- Ibid.
- Ibid.
Ian Ireland
5 December 1997
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
IRS staff are available to discuss the paper's contents with
Senators and Members
and their staff but not with members of the public.
ISSN 1328-8091
© Commonwealth of Australia 1997
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
1997
Back to top