Bills Digest No. 122   1997-98 Customs Tariff Amendment Bill (No. 6) 1997


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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

Passage History

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.

Purpose

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%.

Background

As there is no central theme to the Bill, a brief background to each major amendment is outlined below.

Main Provisions

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.

Endnotes

  1. Joint Press Release, Prime Minister, Minister for Industry, Science and Tourism and the Treasurer, 5 June 1997.
  2. The Automotive Industry, Industry Commission, Report No. 58, Vol 1, 26 May 1997, p. LXI.
  3. Ibid., at p. LXXII.
  4. Joint Press Release, Prime Minister & Minister for Industry, Science and Tourism, 10 September 1997.
  5. The Textiles, Clothing and Footwear Industries, Report No. 59, Vol. 1, 9 September 1997, p. LXVII.
  6. Ibid., at p. LXIX.
  7. Ibid.
  8. Ibid., at p. LXX.
  9. Ibid.
  10. Ibid.

Contact Officer and Copyright Details

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.

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and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1997

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Published by the Department of the Parliamentary Library, 1997

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