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Foreign Affairs, Defence and Trade Legislation Committee
Program 1—International Relations, Trade and Business Liaison
Subprogram 1.5—Multilateral Trade Policy and Negotiations

Senator COOK —Can someone give me a summary of what Australia is doing in preparation for the Seattle ministerial meeting slated for November[hyphen]December this year? What preparatory steps have we undertaken or have in view?

Mr Hussin —I think we covered the situation at the last hearing on 11 February. In the process, there was an initial phase of identifying objectives. We are in a phase at the moment of actually lodging proposals between now and the summer in the Northern Hemisphere, beyond which there will be the process of negotiating the mandate for Seattle.

In terms of our activity, we have been active in that process. I think I have mentioned here before that we have been active with the Friends of a New Round in trying to stimulate and broaden support for it. We welcome very much the United States, in the form of President Clinton in the State of the Union address, coming on board and supporting a new round,
although exactly how their position will be developed remains to be seen. We have been working very hard with the Cairns Group. We have been the first country to put proposals forward in the second stage. We have put forward three building blocks in relation to an agricultural mandate. I think we and only a couple of other countries have actually lodged proposals at this time.

We will also be working with the Cairns Group on putting together a broader proposal for a later stage. We have lodged a couple of papers giving our views in the industrials area. It is an objective of ours to broaden the built[hyphen]in agenda to include industrials as well as agriculture and services. We have put forward papers on tariffs and on non[hyphen]tariff measures which have got good support. We are also active in the preparations on services.

There will be another ministerial meeting of the Friends of the Round in Budapest at the end of this month which Mr Fischer will be attending. That will also be attended by the four Quad trade ministers. That will be an opportunity for the Friends of the Round, which is a broad group involving developing countries as well as some non[hyphen]Quad developed countries from Europe, to convey our views very directly to the quad countries. Beyond that, we will have a meeting of the Cairns Group at ministerial level in late August in Argentina, where we hope to put the finishing touches on exactly what the group will be pushing for in terms of the mandate. That is, I guess, a broad picture.

My colleague has just mentioned to me that Mr Fischer has invited—I think it is the first time we have done so—submissions from the public, business and NGOs on what they would be seeking in a round and what their views are. The deadline for those submissions was 30 April. We have extended that for those who have sought a little additional time. We will obviously be looking at what comes out of that process.

Senator COOK —I take it that that is not an exhaustive list, but they are the main points. Is it the intention at all of Australia to try to obtain a consensus for the round within APEC?

Mr Hussin —My APEC colleagues are here also. Yes, I think we will be looking to get a strong message out of the leaders meeting in September this year and very strong support from the APEC countries for the launch of a round. That is one of the objectives that New Zealand has put forward as the chair and host country this year.

Ms Fayle —I would just add that that is in fact one of our priorities for APEC this year as it is for New Zealand in the chair. Quite a lot of work is going on both in the formal meetings and also in bilateral dialogue surrounding those meetings and between senior officials to try to shore up support within APEC for a new round.

Senator COOK —The built[hyphen]in agenda of the Uruguay settlement specified that this year we would have a sectoral round on agriculture. That seems now to have been forgone in the interests of developing a more general round in the Seattle talks. Is it true that we have given up pursuing a stand[hyphen]alone sectoral round for agriculture?

Mr Hussin —No, it is not true. The agreement was that we would resume the agriculture negotiation, as you recall from the Uruguay Round, by the end of 1999. So, indeed, one can argue about whether it is the last day of December or the first day of January, but that is the schedule. Whether or not there is a new round, that will go ahead, as will further negotiations on services and, indeed, other review elements of the built[hyphen]in agenda.

What we are trying to do is to build on that built[hyphen]in agenda and include some of the areas that traditionally have been very important to a round to give it balance—that is, the industrials area—and also allow it to be a little more broadly based so that we can get into a situation
where we will get the sort of trade[hyphen]off potential available that will allow us to get the biggest results in agriculture and services. But if all else fails, certainly we have not forgone any opportunity at all as far as agriculture or services are concerned.

Senator COOK —In that case, have we set ourselves goals or objectives to achieve for the agricultural sectoral negotiations?

Mr Hussin —The goals that were set by Australia were in the context of the Cairns Group ministerial meeting in April last year in Sydney. There is what is known as a vision statement which incorporates these goals. In simple terms they are: the elimination of export subsidies on this occasion; deep cuts in all tariffs, particularly tariff peaks and tariff escalation, obviously tackling some of the high tariffs that have come out of the tariffication process; and getting substantial reductions in domestic support—the domestic subsidies that are part of the problem.

The agreement that came out of the Uruguay Round had some flaws in it. We would like to see the accumulation of the subsidies across the agricultural sector reduced on a commodity specific basis so that there is not the ability to shift support, depending on what world market prices will allow, and having no absolute cuts for any particular commodity. In those three areas quite ambitious goals have been set, and they have been signed up to by all of the Cairns Group countries.

Senator COOK —Can you tell us what steps we have put in place, given that we will pursue agriculture sectorally, in order to achieve those outcomes that you referred to?

Mr Hussin —Firstly, we need to get a strong mandate, and that is what we are aiming to generate at the Seattle meeting this year. We are looking to expand the support for the position that the Cairns Group is taking by outreach to developing countries—outlining to them the benefits that they can gain from agricultural reform. The Cairns Group is cooperating in doing that, and we plan to do some work with India and Egypt in that regard.

A research program is also under way, using the Bureau of Agricultural and Resource Economics—with cooperation in research from industry—to give us the intellectual support for the enterprise, and we are boosting our own resources in the department in the lead[hyphen]up to those negotiations. As in the past, we are trying to get close cooperation with the United States.

In pushing for an ambitious outcome, we held a Cairns Group[hyphen]US seminar last week in Washington, which was very well attended by congressional people, the press and academics, to try to lift the level of interest in the United States in the agricultural negotiations. Interest is strong with the Farm Bureau—the traditional areas—but they themselves are making efforts to broaden interest beyond agriculture into food processing. One of the advantages we too have this time around is a very strong interest in the food processing industries in a good agricultural outcome that goes beyond the base commodities.

Senator COOK —I will come to how you read what most commentators identify as growing protectionist sentiment in the United States and the immediate outlook on that score, given the upcoming presidential elections. Just sticking with the agricultural round for the time being, what have you got tied down to try to lock in an outcome in Seattle that Australia would feel comfortable with or the Cairns Group would be happy with? You have given me a range of objectives, but is there anything in the program that will provide the organisational stepping stones to achieve those objectives?

Mr Hussin —What do you mean by the `program'? Whose program?

Senator COOK —You expressed an intent to engage India in a discussion on this, and you expressed an intent about a couple of other points. These still remain intents rather than actual events that have engaged those countries. What I am looking for is some sort of indication of when an engagement will take place, with whom, and how you intend to follow it through.

Mr Hussin —I mentioned the activities that we were involved in last week in the United States. I mentioned the activities at the end of this month in Budapest with the Friends of the Round and the Cairns Group ministerial in August. They have all been key steps for us. We are involved in the process which is ongoing in Geneva. There is a research program under way. We have a consultative group with the farm industry here to keep them involved in the process. We are cooperating with the NFF, which has set up the Cairns Group Farm Leaders grouping. All of those are steps along the way. The Geneva steps are a little slower—we are not seeing a lot put on the table at the moment. In three of the four Quad countries, an internal consultative procedure is going on, so the EU, the United States and Canada have not been in a position to articulate what they are seeking.

We are looking at doing our own outreach activities in June, so we do have concrete steps. Mr Fisher will be taking advantage of his coming trip not only to Budapest but also to the OECD ministerial meeting in Paris. On the agenda there again is support for a round, and we will be pushing very hard to get that at that time. We hope at that time also to release a study which demonstrates some of the benefits that are available from a round in the various key market access sectors. At the same time, the Bureau of Agricultural and Resource Economics is doing similar work which will be released and taken around to interested countries later in the year. So I think there is a program there, and I would say that we, as in the past, have been more active than most other players in pushing agriculture and pushing for a round.

Senator COOK —Indeed, although I think there is an onus on us to be more active than most because if we do not push the issue it is unlikely that anyone else will take the leadership on that. Perhaps you will take this on notice, Mr Hussin: in the six[hyphen] to seven[hyphen]month slot between now and the November[hyphen]December Seattle meeting are there any particular Cairns Group activities that might be staged to help us push this issue further? Or are you just looking at the program, like the OECD, in June and seeing how we can utilise those events that are already on the calendar? Are there any other particular events that we might be doing to energise this process?

Mr Hussin —I think I have mentioned most of them. We are obviously working with the Cairns Group and looking at how we can plug other gaps. The Latin American countries are trying to push out support for Cairns Group objectives in their part of the world, and we have also been talking to South Africa about doing more in Africa. We will take advantage of any opportunities that we can create between now and then. I think that is the situation. As I say, things are slow at the moment because other countries are not coming forward with their own objectives in these areas.

Senator COOK —The NFF a month or so ago lobbied the Joint Committee on Foreign Affairs, Defence and Trade of this parliament about a lack of resources it argued existed within the department and a lack of funding it argued had not been provided to ABARE to do the research work necessary to provide the basic information from which we can press our case. You have drawn attention to the work that ABARE is doing. Has there been any change in the NFF position or does it still remain critical of the resources we are applying to the agricultural round?

Mr Hussin —We have developed a work program very closely with industry, and it was signed off with the Agricultural Trade Consultative Group that I mentioned earlier. Also, I believe that the Bureau of Agricultural and Resource Economics plans to put greater resources into this area. I do not have the numbers. To that same end, we in the department will be expanding our own resources in the agricultural branch of my division quite substantially in the next couple of months. I think that there may be some lack of knowledge on the part of some about the extent of the resources that are being put in. We are satisfied that that will be enough to carry us for the rest of this year, having looked at the research program we have under way and the expansion of resources that we have planned. There will be another job to do once this is launched—an ongoing job.

Senator COOK —Would you include the NFF in the group that you have designated as having some lack of knowledge?

Mr Hussin —I guess we will need to talk very closely with them and explain the resources that are already at work on some of those issues. As I say, the work program that we have been engaged in was developed with them.

Mr Dauth —There does seem to be some underestimate of the resources being applied in at least one recent public statement from the NFF.

Senator COOK —I will have to pursue the ABARE funding in their estimates, not in your estimates, but that seems to be the direction in which most of their criticism was aimed, although they did refer to corporate knowledge in the department and so forth and the run[hyphen]down of your department's resources.

Just turning to the United States for a minute, in the speech you referred to by President Clinton, the State of the Union address he gave on 27 January, he of course invited the world to join him in a Kennedyesque flourish about free trade—certainly noble sentiments. In that same speech, though, he made remarks that I would categorise as protectionist, at least in their sounding if not in their fact, about the US steel industry and other industries in the United States.

He is not moving to present again to Congress—probably understandably—the fast[hyphen]track authority question. Will the US, in your judgment, be in a position to play a strong hand at Seattle, given that there is identifiably a rising tide of protectionist sentiment in the United States domestically and that they will be turning their minds to the presidential primaries at about that time, or will have already done so, where this sentiment is likely to be highlighted more and because of what at least some might say are the mixed messages in the presidential State of the Union address about the round and about protectionism on the other hand?

Mr Hussin —I think that there is quite often a tension between free trade objectives and what some countries regard as unfair trade activities. Our colleagues in the United States quite often move in that direction in their thinking. There is a concern obviously about the protectionist sentiment in the Congress and I think that has been recognised by some of the supporters of open trading systems in the last few weeks. There have been in US circles signs that there is more of a coalition of businesses aware of the benefits and of the pressures in some sectors.

Obviously, the steel issue is one that is of concern to us both indirectly as a supplier of raw materials to steel industries around the world and in a more general policy sense. But we are hopeful that the traditional supporters of open trading systems in the United States will come to bear in the next few months. It is positive, in our view, that the United States undertook to host this meeting and it was very positive that it was the first time the US had actually come out in favour of a round as such as opposed to a series of negotiations yet to be determined.
A round, as you know, carries with it connotations of linkages between the issues and of a broader agenda than the Americans have perhaps been favouring in recent years.

So we do recognise the difficulties, the very real protectionist pressures in some sectors in the United States. In that regard we have some concerns about what might happen in lamb but, more broadly, we are hopeful that, by the United States hosting this conference and given the period we have between now and then to work with them, some of the benefits that they will see, particularly in agriculture and services, will be brought to bear.

Senator COOK —How do you rate the likelihood that the Seattle meeting will in fact kick off a new round?

Mr Hussin —I might have to come back here next year.

Senator COOK —I hope you can come back.

Mr Hussin —I feel fairly confident that it will do so. We have the United States in favour of a round; we have the EU, which has been in favour of it for quite a long time; we have Japan and Korea—a couple of the countries that, as you know, have resisted movement on agriculture before. But the fact that agriculture is going to proceed no matter what is a stimulus to them to agree to a broader enterprise. Looking at some of the difficulties around the system, I think people will come to the realisation that trade basically can be part of a solution to some of those economic difficulties and that a round is the way to go. That is certainly the message that we will be conveying.

Mr Dauth —There is a lot of work to do, though. I am sure my colleagues would agree that our confidence is tempered by a realisation that there is a great deal of work to do during this year.

Senator COOK —Would you rate the possibility highly, though?

Mr Dauth —It would be impossible for us to talk about high or low percentages. I do not think it would be a productive exchange at all. I think there is a measure of confidence. Ministers have that confidence and are carrying it forward, but there is really a lot of work to do.

Senator COOK —If a round were to proceed, would you be confident as well that the Seattle meeting would impose a time limit—say, a three[hyphen] or four[hyphen]year limit—by which it must be completed? That is one of the issues that is also under active consideration.

Mr Hussin —I think that in fact will be a precondition of some of the players for actually going along with it. I do not think anybody wants to see a repeat of the seven[hyphen] or eight[hyphen]year rounds that we have had in the Kennedy round and the Uruguay round, so I do think that there will be an attempt to put a very tight time line on it. From our own perspective in preparing for it, we will be urging countries to bear in mind the need to get early results at the same time as they think about what might be on the agenda. The more complex issues and the ones that might in fact delay things, the degree of ambition and complexity—as opposed to the need to finish it early—will have to be thought about very carefully by all those concerned in the lead[hyphen]up to Seattle.

Senator COOK —How many countries are in the Friends of the Round group?

Mr Hussin —There are 14 at the moment. I think there are a couple of others that are being invited as well who may well join. And it runs across Asia, Latin America and Europe, as I mentioned.

Senator COOK —If I can move to another area, China's accession to the WTO seems to have taken a boost with the Chinese Prime Minister's visit to the United States just the other week. How do we assess the likelihood of China gaining entry to the WTO at Seattle?

Mr Hussin —The assessment of most of us would be that there is a very good chance now, given that in the lead[hyphen]up to Zhu's visit to Washington the advances made on the Chinese side were very significant. Obviously, in some ways the fact that it was not concluded at that point might mean that some of the issues will be revisited and, of course, the United States signing off with China was never going to be sufficient. There are other countries, ourselves included, who have bilateral issues that are still outstanding with China, so there would have been a need to continue those discussions.

But there are signs that the Americans and the Chinese are continuing to negotiate with a sense of purpose and within time constraints. The Europeans will be visiting Beijing during this month, as will Mr Fischer. We will have another round of discussions with the Chinese this month. Canada has had some further discussions following those that the Chinese had in Washington. So there is a momentum there so that, unless something goes awry between now and the middle of the year, the market access area of the negotiations with China can be settled. We then have some work to do on some of the systemic issues that are still to be finalised in the working party in Geneva. But there are a lot of people, the Chinese included, who are working very hard to see them in the WTO before Seattle so that they can actually participate in the new round.

Senator COOK —Do we have a work program with China to settle our outstanding matters relating to their accession?

Mr Hussin —Yes, we will be having meetings with them later this month—at official and then ministerial level.

Senator COOK —Do we expect to conclude our outstanding issues later this month?

Mr Hussin —There are no guarantees in this game but certainly our intention is to come as close as we can to doing so.

Senator COOK —How would you characterise our attitude to the current state of the negotiations? Are we very close or a long way away? How would you characterise it?

Mr Hussin —Some of the issues that were of interest to us were obviously also of interest to the United States and Canada in the agricultural sector and services. So, in a sense, some of what has been achieved—although not finalised—between those players will meet a great deal of our own objectives. We still have some particular sectors that we have prime interests in that we need to settle. I cannot put a number on it, but I think we are a good way there. However, we still have some important issues to finalise.

Mr Dauth —This is a very live negotiation. In some considerations in this a measure of confidentiality about our negotiating position is very understandable at this time, I am sure.

Senator COOK —I agree, but I thought I read somewhere or heard the minister himself expressing quite an optimistic view about the likelihood of those talks succeeding.

Mr Dauth —We have expressed that today too, but as to the fine detail of the end game, as it were, I think it would be improper of us to comment further on that.

Senator COOK —Let me put the question in a slightly different way: given that to all intents and purposes significant progress has been made between China and the United States and the fairly avidly predicted likelihood of China's accession in Seattle, does it make it harder for medium powers like Australia to negotiate particular bilateral interests we have if the
Chinese are of the view that, with not much further effort, they will get there anyway? Is our task made more complex by the open speculation that they are almost home?

Mr Dauth —Negotiations are always complex.

Senator COOK —I will turn to the director-general position of the WTO for a moment. That seemed to be a complete stand-off as recently as just this week. With concern about drift in the WTO's program now that the outgoing director-general has left and with the importance of the up-coming program—preparation for Seattle and the possible further round, and certainly the issue of agricultural negotiations that are on foot—how do we see the issue of the selection process being resolved? Do we anticipate any breakthrough or do we anticipate a continuing deadlock?

Mr Hussin —The best way to answer that is that at the moment we are expecting a period of deadlock. How long that will last, we do not know. I think you are well informed. There have been attempts to form a consensus for each of the two candidates who are very evenly balanced in the competition. It has not been possible to this date to achieve consensus for either of them. It is likely that there will be some period of reflection needed before the next move can be made. I think it is impossible to predict when the matter will be finalised. We share the concern that this should be done as quickly as possible. The minister has expressed that many times. Just how the deadlock will be resolved is impossible to say. We are hoping that it will be done as soon as possible.

Senator COOK —Would it be fair to say that the burden of the effort at the present time seems to be in parties backing their particular champion rather than in trying to resolve the stand-off—that everyone is digging in deeper behind their candidate rather than there being a recognition of the damage drift will do to the standing of the WTO and its forward program and the necessity to leap over the deadlock and find a solution?

Mr Hussin —Part of the problem is that they are so very close in numbers that it is very difficult for anyone to see that the game is up.

Senator COOK —It is a big swallow for someone to back off in those circumstances.

Mr Hussin —That is right. As I say, a period of reflection is needed where some fairly frank talking and thinking can be done by all those players about some of the issues you mentioned. I cannot predict at what point there will be a resolution.

Senator COOK —But it is not there yet and it does not appear to be.

Mr Hussin —Not this week, it doesn't.

Senator COOK —In the paper today, I saw something about the minister rejecting the idea of a third candidate. In the event of a prolonged deadlock, a third candidate becomes a reasonable possibility, does it not?

Mr Hussin —It is a possibility, yes, always. I think most others feel that we now have two quality candidates and we are hoping it will be resolved in favour of one of them. It is an obvious fact that the longer it goes on there is always a possibility of a third.

Senator COOK —Are we undertaking any initiative to try to broker an outcome?

Mr Hussin —As you know, we are supporting Dr Supachai. The minister has made it clear that we could go along with a consensus for Mike Moore. We are not involved in any brokering beyond that at this point.

Senator COOK —On 26 March, the Australian Financial Review ran an article on its front page announcing that Australia had lost the Howe Leather case. The minister then responded by telling the Age the following day:

It is absolutely wrong to say that the case has been lost. Some elements of the Howe settlement have been ticked; other elements have been queried. We are going to work through that.

Given that the minister has effectively announced the result of the case, why does the government persist in maintaining that it cannot release the result until it is translated into French and Spanish?

Mr Hussin —The reason we persist with that is that that is the understanding on which the dispute settlement system works.

Senator COOK —But it has been some weeks now. If you sent it off to SBS, they would do it overnight!

Mr Hussin —There is a deal of dispute settlement activity going on at the moment. There is a backlog. We are expecting that we will receive the result in the next couple of weeks—by mid[hyphen]May.

Senator COOK —How firm do we think mid[hyphen]May might be before the translators do their task in this decision?

Mr Hussin —We would say that mid[hyphen]May is firm.

Mr Deady —As Mr Hussin said, the latest advice we got from the secretariat in Geneva at the end of last week was that they are looking at around 17 May—that week is now the estimate of when the translation will be completed and will be circulated to members.

Senator COOK —This is just a procedural blockage in getting the decision out. The key countries involved in this are Australia, the United States and Mexico. Arguably, Mexico's national language is Spanish, but I am sure most of the Mexican people dealing with this matter can read English as well. Why can't we just break through this procedural delay? Isn't it a bit of an insult to us to keep us on the backburner waiting after the decision is made for a long drawn[hyphen]out process of simple translation?

Mr Hussin —It is a difficulty that all countries face that have been involved in the system. Some of these reports are enormous pieces of prose and quite complicated material. They do take time. It is a matter of what resources governments are prepared to give the WTO to put into it. As I say, the backlog at the moment is affecting everybody on each case.

Senator COOK —Yes, but the banana case between the US and the European Union was released immediately.

Mr Hussin —The outcome of that was released because there were very tight deadlines applying. There was an arbitration as a result of a dispute about whether or not the EU had properly implemented an earlier panel report. The outcome of that was a relatively simple decision.

Senator COOK —To move on to Japan's rice tariff: we have backed off in that case, have we not?

Mr Hussin —We have withdrawn the objection that we lodged in Geneva, yes.

Senator COOK —Why did we do that?

Mr Hussin —The minister made clear that there was quite an intense reaction—an overreaction, we might say—to what was essentially a technical objection.

Mr Hussin —An overreaction by whom?

Mr Hussin —By agricultural interests in Japan. There was a concern that this might have a commercial impact on Australian exports. Also, we had rounds of consultations with the Japanese and made clear our view of the methodology that they could have used. The agricultural agreement is open to interpretation and whether or not Japan's methodology would be found to be formally inconsistent is doubtful. As the minister said, in consultation with the industry, he decided that we would withdraw the objection, making very clear to the Japanese that we will pursue the tariff on out[hyphen]of[hyphen]quota rice imports in the upcoming agriculture negotiations, whether they proceed by themselves or in the context of a round.

Senator COOK —Our position is not changed on merit, though, is it?

Mr Hussin —We still would argue, concerning the principle behind the tariffication, that, in the circumstances, Japan should have chosen other prices to make the calculation. That is the basis of the argument we put, that you should get the product that is the most similar. The agreement itself is not as specific as we would like it to be in terms of what prices would be used and it is arguable that you have some discretion in the prices that you choose. We have made clear what we think were the appropriate prices. The Japanese hold to the view that what they did was in accordance with the agreement.

Senator COOK —When we backed off, did we confer with the rice growers in Australia? If we did, did we obtain their agreement to our change of course?

Mr Hussin —There were consultations and they were well aware of what the government was going to do. The minister spoke to them.

Senator COOK —But they don't agree that we have done the right thing, do they?

Mr Hussin —As far as I know, they very much agree that we did the right thing.

Senator COOK —I have had different advice. I will check mine. You said, Mr Hussin, in your answer that there was a concern—this is my description, so correct me if I am wrong—that there may have been—again my description—retaliation against Australian exports to Japan had we persisted, given the strength of the reaction by the rural interests in Japan. I want to come back to that, but have I understood you correctly? Is that what you were saying?

Mr Hussin —I think that is a fair description of what I said, yes.

Senator COOK —To the first part of it, the reaction from the rice growing interests in Japan was—it is the Mandy Rice[hyphen]Davies rejoinder, isn't it?—`They would say that, wouldn't they?', because it is their fiefdom that is being challenged. You would expect from the French, if we challenged them on agriculture, a similar vociferous reaction. Almost anyone would come back strongly. So why are we surprised, in Japan and Korea, when we push for market responses on rice, that they have reacted strongly. It is what you would expect, is it not?

Mr Hussin —Basically, we were consulting in accordance with an agreement about the technical methodology used to achieve an end. Those sorts of discussions are held quite often on a range of issues and I guess in this sense the Japanese reaction was greater than would have been the case from other countries in other circumstances. But, essentially, it was a technical objection about the issue.

Senator COOK —I understood you to say that we got a stronger reaction from the Japanese rice growers than we anticipated. Should I understand you to have said that it was over the technical nature of our difference, rather than over the idea that their market might be liberated a little bit more?

Mr Hussin —No. What I was saying was that the objection we had was a technical objection. Quite often, technical objections can be discussed without the depth of reaction that we saw in this case.

Senator COOK —In terms of our concern about the second leg—possible retaliation in other Australian exports—how do we arrive at that concern? What evidence is there; what basis do we have for making such a judgment?

Mr Hussin —I think the feedback that we receive about the commercial climate is the basis for reaching that assessment.

Senator COOK —Some of our biggest exports are iron ore and coal. Were we concerned at all that the dollar value or volumes being taken in the Japanese market of those commodities would have been reduced?

Mr Hussin —I think the concern was more in the agricultural area.

Senator COOK —We might have had retaliation against us, say, in our beef.

Mr Hussin —No, I did not actually suggest retaliation; I suggested that the commercial climate would deteriorate and that that might have an impact on our commercial dealings. I think you are extrapolating in describing what I am talking about as retaliation.

Senator COOK —When I asked you for confirmation—I am not being slavish about this—I used the word `retaliation' and I thought you accepted that as a description of what you meant. I am not trying to be difficult about that. Have we had any discussions with other countries, such as the United States for example, which, in the Uruguay negotiations pushed ahead of us for the opening of the rice market, about the now view of the Japanese in terms of their obligations under that agreement and enlisted wider support than just Australia in pressing Japan on this matter?

Mr Hussin —We certainly did talk to the United States. They were unclear until very close to the deadline as to what they would do and they decided for their own reasons that they would not object. There were objections lodged by the EU, by Argentina and by Uruguay.

Senator COOK —The way in which we would circumvent the possible commercial downside of pushing for a principle such as this, which has a commercial upside upon its achievement, would be to be part of a general argument, not be solely the country pushing an issue. Did we try to develop a united front with other consumers, the ones you referred to?

Mr Hussin —We did discuss the matter in Geneva with representatives of all of those governments.

Senator COOK —Were they prepared to back us?

Mr Hussin —Some lodged objections; others did not.

Senator COOK —When we withdrew, did we consult with them that we were going to throw ourselves into reverse?

Mr Hussin —We advised them that we were going to, yes.

Senator COOK —Were any of them left holding the parcel when the music stopped?

Mr Hussin —I do not know. They all have their own ability to do what they will, but I am not aware of the situation that applies with the other countries involved.

Senator COOK —My concern at the bottom line here—let me put it to you in the form of a question because the Chairman might draw me up if I don't—is that if we start something, we get a stronger than anticipated reaction and we therefore back off, don't we confirm with
the powers that we are negotiating with that, at any time we pull them on on a justifiable cause like this, if they shout loud enough we will run away—we will fold our tent and just retreat? Isn't that a terrible precedent that we would have to combat in the future?

Mr Hussin —I would rather say that what we have done is demonstrate to Japan that we will indeed look very carefully at what they choose to do in terms of the methodology that is there, and we will object when we think that there is a reason to object. We have made absolutely clear that we will be pursuing that tariff when these negotiations resume at the end of this year. I might add that what we are talking about here is an out[hyphen]of[hyphen]quota tariff. It is not the tariff that will apply to the minimum access rice that will continue to flow. So we are basically talking about what we will negotiate about in the next round and what the level of that tariff will be when we start. That is really the impact. I do not think there was ever a potential that trade would flow over that tariff, whether it was at the level it was set at or at a lower level that would be achieved by alternative methodology.

Senator COOK —My concern is this: we are the permanent chair of the Cairns Group. The Cairns Group stands for agricultural trade liberalisation in the world. If we are going to succeed in the agricultural round we are now entering or push agriculture to a pre[hyphen]eminent position in the upcoming world round—if there is one—then if we pick a fight, we pick an argument or we stand up for principle on an issue like this and we are able to be stared down, that is not a terribly good precedent to start our negotiations on those other matters, is it?

Mr Dauth —The ministers took decisions in defence of Australian interests and, as you will know very well yourself, that is a pretty good guideline in every circumstance. I do not think that Mr Fischer would regard this as setting any sort of precedent. But, as to whether it does or not, that is a much larger policy argument that really has to be had with ministers rather than with us.

Senator COOK —I accept what you say, Mr Dauth, but equally those with whom we have to negotiate—perhaps the people in Tokyo—might see it as a precedent. If they do, our task is made a lot harder.

Mr Dauth —I return to what Mr Hussin said. We think we made clear what our position was and, at the end of the day, the minister acted in defence of Australia's interests. But as for further debate about the policy, I think that is really not something which we can engage in.

Senator COOK —I see. Okay. I have made my position clear. If you are in these things you see them through. If you back down, you create a situation in which people can monster you at any time and threaten commercial interests.

CHAIR —Can I interrupt you there for a moment, please?

Senator COOK —Sure.

CHAIR —Can we report progress? We were hoping that we might be able to finish at 6.30. Do you think that your questioning will be completed by that time—6.30?

Senator COOK —Yes, I do.

CHAIR —Good. Thank you, Senator Cook.

Senator COOK —I will move off the rice issue with Japan. This is a pro[hyphen]Japanese issue. I am not anti[hyphen]Japanese—far from it. There are issues with our major trading partner that we need to defend them in. I move to the US steel legislation. We have got a self[hyphen]interest here in making sure that no quotas are applied to steel in ports. We provide the constituents, the commodities, that Japanese treated steel producers sell in the United States. We would be silly
if we took any other position. Do we regard that, if the bill before Senate in the United States is passed, it would be a breach of the WTO guidelines?

Mr Hussin —I would have to clarify what bill you are talking about. The quota bill?

Senator COOK —Yes, the quota bill. It has got a name. I think it is the `fair treatment for steel bill' or some such. It is a pretty uninspired title, but that is what it is.

Mr Hussin —We have not examined that legislation directly. But I think our view would be, from the sound of what that bill intends, and if that bill were to come into law, that we would regard that as probably being in breach, as I understand the bill. But, as I say, we have not examined it closely.

Senator COOK —Have we had any discussions with the White House in any way about what the President would do? Would he exercise his power of veto if the bill was carried?

Mr Hussin —I have not followed that issue very closely. I understood that the administration was opposing that bill.

Senator COOK —Sorry?

Mr Hussin —I thought that the administration was opposing that bill but, as I say, I am not close to the issue.

Senator COOK —I understand the administration is opposed to the bill, and there has been some talk that the President may exercise a veto if it is were carried. But at this stage I am not sure that that is so firm as to say it is bankable. So my question is: have we ascertained what the intention of the President would be if that bill was carried?

Mr Cobban —Yes, we have had discussions with the US administration. I do not think we could go so far as to say we have a clear view as to what the President would do were that bill to be brought forward in its current form.

Senator COOK —Sorry, I did not quite hear you. You do not have a clear view?

Mr Cobban —No.

Mr Dauth —They may not have a clear view themselves.

Senator COOK —When do we expect a vote on it?

Mr Cobban —I do not know because I think it is still caught up in the congressional process between the House of Representatives and the Senate requiring a—

Senator COOK —The Senate is conducting hearings—I know that bit. I have made a submission to it. Do you have any idea when the Senate might come to a vote?

Mr Cobban —No, I do not have the timetable.

Mr Hussin —There is other legislation which is also before the Congress which pertains or relates to steel, and it is some adjustments to their legislation that covers safeguard action.

Senator COOK —Yes.

Mr Hussin —So I think that there is a range of legislation and there will probably be some trade[hyphen]offs and discussion between the various proponents before we see what is actually put forward to a vote.

Senator COOK —I am just concerned that we have put our case forward to the authorities and that we continue to press them to counter this legislation rather than have to go off to the WTO and perhaps run the ignominious risk of having some worry about other Australian exports being threatened.

Mr Cobban —We, working together with BHP, have made representations—I think this week—in Washington on this issue.

Senator COOK —My concern is not just for Australian steel exports that would be directly affected but for commodity exporters in iron ore and coal who would be affected as a knock[hyphen]on effect.

Mr Cobban —We have raised that as well.

Senator COOK —In that sense we would be defending the right of free trade to the Japanese—

Mr Hussin —That is right.

Senator COOK —and the Korean steel industry.

Mr Hussin —I think when MITI Minister Yosano was here that was a feature of the joint press release and the press conference that he had with Mr Fischer.

Senator COOK —Yes, I know that is on the record but I must say I never had the impression it was being energised to the level that made me feel comfortable. But I know that we did have that on the record as an issue.

Mr Hussin —It certainly did come up and was energetically supported on our side as well.

Senator COOK —Came up from the Japanese side?

Mr Hussin —I think it was certainly an issue that we both had on our minds when we talked about that particular communique. We had that concern that you articulated about the raw materials trade, as I mentioned earlier, some time ago.

Senator COOK —Okay. If President Clinton imposes an import quota on Australian lamb imports, as has been proposed by the United States International Trade Commission, do we consider that will be a breach of WTO rules?

Mr Hussin —We have been studying that issue and we have raised a range of questions that have been discussed in Geneva—I think yesterday—on the safeguard action the United States has taken. There are several recommendations, I am sure you will appreciate, that were put forward. I think there were two individuals from the ITC who put forward recommendations, and then there was one that the main four members put forward. Depending on which one of those comes forward, there will be a different WTO perspective, but I would think that we would have great difficulty in WTO terms in seeing the harshest of those justified. But I might ask my colleague Mr Deady for a comment on that.

Mr Deady —The consultations under the WTO Safeguards Agreement were held with the United States last night in Geneva, and we did put to the United States a great number of concerns that we had with aspects of the ITC investigation. Many of them are quite technical in nature. As you would be aware, the ITC found in fact a threat of serious injury rather than actual injury, so that raises in its own sense a number of issues as to what remedies may be open to the United States. The question of what constitutes the domestic industry in the United States is also a matter that we took up. So there is a whole raft of issues that we have consulted with the United States on. I might add that the New Zealanders had similar consultations which we also participated in at the end of last week.

Senator COOK —How should I interpret that? If the President did impose a quota on Australian lamb imports would we regard it as a breach of WTO rules or not? Do I interpret that as, yes, we would?

Mr Hussin —I think you can interpret it that we have a lot of misgivings about the basis for the sort of action that might be taken. If quota action were taken, we would have misgivings about the basis in the safeguards agreement of the WTO for that type of action, as Mr Deady has pointed out.

Senator COOK —Misgivings does not translate strongly into an affirmative view that, yes, it is crook.

Mr Hussin —We have asked the United States a great number of questions that relate to that particular basis, and we will be expecting to receive responses to those.

Senator COOK —And that will go to making up our mind?

Mr Hussin —That may go to making up our mind; it may go to the basis of an action that we might be able to take. We would have to work our way through the provisions of the safeguards agreement and the interpretation that was put on them.

Senator COOK —If I may, I will take a liberty with you, Mr Hussin, and interpret your remarks a little. If we felt that it is a breach of the WTO rules on merit, would we make an assessment as to what type of reaction we would get from the United States and whether other of our commercial interests might be harmed before we proceeded? Or would we proceed on the basis that there is true merit here and let us settle the case on its merits?

Mr Hussin —I think that is much too hypothetical for me to tackle. We have to work our way through these issues. We are talking about a hypothetical decision that the administration does not have to take for another month, and you are asking me to pass hypothetical judgment on its WTO consistency and whether, hypothetically, we would take action or look at other issues. I cannot answer all those questions.

Senator COOK —Dear, oh dear! I must defend myself and say that at least the President has got this in his in[hyphen]tray, he has to make a decision about it, it does concern an Australian export and we are in the business of protecting them; so surely we have looked at what options we have in these circumstances.

Mr Hussin —We are working very hard. We are lobbying very hard in Washington about this issue. We have lobbied people who have been here. We are working with New Zealand and the industry and their representatives in Washington to lobby on the decision itself. As Mr Deady mentioned, we raised questions yesterday in the WTO Safeguards Committee—that is the appropriate place to do it—raising the legal issues that relate to this possible decision. We will come to a decision on what we do about that when we see what the Americans have done and how they respond on the legal basis for what they might do.

Mr Dauth —You are asking us to anticipate policy development, and that is quite improper for us. That is really something which has to be explored at the time with the minister. We will do our best to tell you what the factors are and what we are doing, but it is not for us to anticipate what the minister's mind will be on the day.

Senator COOK —Let me move on, since I have given an undertaking to the chairman to let us all go to dinner at 6.30 or prior to if I can possibly manage it. One of my concerns is that the WTO is becoming an increasingly litigious body. If I may say so, it is a difficulty that having too many lawyers in the argument often produces. But the United States have recently increased the number of staff they have devoted to handling WTO disputes. Do we know how many more people they have put into Geneva to help them with their dispute settlement mechanisms?

Mr Hussin —I am not aware of any increase in their resources in Geneva. As far as I am aware, they have one legal counsel who operates in Geneva, and I was not aware that they had increased those resources. I had heard that there had been an increase in USTR's resources at home. I do not know the extent of that. I do not know whether Mr Deady is aware.

Mr Deady —No, I am not aware of the actual numbers but, as Mr Hussin said, within the USTR they have strengthened the general counsel and enforcement office that they have there. As you know, USTR is a relatively small organisation in any event, and the numbers that they have added are not huge, but they have added some resources.

Senator COOK —My concern is that, if a competitor law company increases the number of lawyers it has got, maybe we do not have to worry but maybe we should be careful that their resource capability is enhanced. It goes to the question of increasing litigiousness within the WTO system itself, as you develop a more universal rules based trading system. Increased staffing in the WTO disputes section would allow Australia to intervene in more cases at the panel stage rather than at the consultation stage, would it not?

Mr Hussin —Do you mean more resources—

Senator COOK —If we had more resources we could be more active at the panel stage rather than just at the consultation stage.

Mr Hussin —I do not really think that is the case. I think we have been active at the panel stage as a third party in relation to a large number of cases, basically wherever our access or interests are concerned or where there might be a rule change which might impact on us. We are third parties, we make submissions, and I think we have had a reasonable impact through our third party submissions on a range of cases. So there is not any distinction, I think, between the consultation stage and the panel stage.

Senator COOK —You do not think more resources would improve our fire power in this area?

Mr Hussin —We are indeed increasing our resources in this area by a couple of people. We have an advertisement that will be placed this week, I think, for additional legal resources, but we have already increased them in the last couple of months. Also, we do have a legal office in the department which we can second people from. We have in some cases seconded people from the Attorney[hyphen]General's Department. We do call on legal resources that exist in other departments or agencies, depending on the issue that is involved. For example, on quarantine cases there is legal advice, as well as policy advice, in AQIS and AFFA that we can call upon. We tend to approach these things, where there is a major issue involved, on a team basis, and we do have extra resources we can call on when we need to.

Senator COOK —I hope you do well next Tuesday night and that the fire power of the department is not called into question. I just express that as a general wish of goodwill towards the department. Sticking with the WTO for the moment, the United States and most other contracting parties make their submissions public. Why don't we?

Mr Hussin —You said the United States and most other contracting parties?

Senator COOK —At the WTO, when they are putting in a major submission, like the Howe Leather case or the lamb case or any number of the most recent cases, they make their submissions public. Often those submissions are prepared in the private sector and edited, modified and finally endorsed by the administration. They are a matter of public record. Why don't we put our submissions out publicly like that?

Mr Hussin —Firstly, I do not think it is common. The United States does make its submissions available for reading in the USTR reading room. I do not think they go beyond that at this point. They are proposing to do more in response to what they argue are pressures from civil society for greater transparency. I think there is a degree of concern on the part of other members about going in that direction, particularly in relation to disputes. There is the question of commercial-in[hyphen]confidence information that might be involved in a dispute. The fact that there is a dispute at issue as well as the elements involved in the prosecution of that dispute can have commercial impacts, even though the information itself might not necessarily be commercial[hyphen]in[hyphen]confidence.

Others are concerned that, if you have a dispute which is basically open to the public, it tends to lock in the two protagonists to a greater degree than in a situation where you have the freedom to negotiate and to discuss things in a confidential manner. When you look at the whole rationale behind the dispute settlement system, it is basically supposed to be there to try to resolve issues before they get to the panel stage. If you end up with a situation where the whole thing is transparent, you might tend to have interests on both sides dig themselves very deep.

There are a range of issues that relate to the proposition you have put, which are indeed being looked at by all WTO members in the review of the dispute settlement understanding which is on at the moment. But the United States is at one end of the continuum on that issue.

Senator COOK —I would not intend to argue with you. I have heard your point of view. Equally, it could be contended that Australians do not appreciate fully the benefits of a freer trading environment, which the rules based system would bring. If they were to see the arguments more often in public, the advantages and the reasons to support such openness would be more apparent. There would be more public support. It would be more comfortable for people such as your minister and me, and for others who would argue for openness. You can make that an equally impressive argument. But we are not in the business of doing that between us here today, and we probably never will be, so I do not intend to make the point fully now.

Has the department ever given thought to releasing the broad outline of its submissions without the commercial-in-confidence part, which obviously you cannot put on the public record? Take the steel issue. There is quite a lot that can be said about the steel industry, and quite an impressive argument can be laid out on paper which would add to the public debate in Australia were it known that these were the views we held and this is what we stood up for in the international arena. Has the department given any thought to how it might better involve the Australian community in the issues that it is on about in Geneva and that affect our wellbeing?

Mr Hussin —I think we have, and for similar reasons. Mr Fischer has been consistently pushing to spread the message on the benefits of trade liberalisation much better. We have some programs that are looking at doing that by distributing material, through educational programs and so on. More directly on the point that you are making and consistent with that policy direction, we are looking at what we can do, particularly with the up[hyphen]coming round, and how we might be able to use the Internet, for example, to get our own views out to clients and interested people. We have no doubt that there will be much greater use of that medium in the future. It is a very useful medium in the sense that it allows people to pull down information of their volition rather than have you try to push it out in written form. So we are looking at doing that.

I mentioned earlier the minister's initiative of a public consultation process on this occasion. That is the first time we have done that. We hope that an open consultation process like that might be very useful for all concerned and for the general public. We have gone to a lot of trouble to try to encourage the widest cross-section of industry and the public to respond to that.

Senator COOK —Moving on, is the department confident that the recently announced strategic investment program, under which $100 million was promised to Comalco in Australia, complies with WTO rules?

Mr Hussin —I am not aware of the detail of the program that you mention; therefore, I have no judgment that I can offer on that.

Senator COOK —Perhaps you might take that on notice. I will not bother you about it in order for you to get up some sort of reply to me. Estimates committees seem to meet with distressing frequency these days and we will all be back together shortly after the budget. I will probably ask you about it in the budget estimates. I just indicate that to you now. On 31 March Japan released a report on WTO consistency of its major trading partners. It listed four areas in which it felt that Australian laws might be inconsistent with WTO rules. They were anti[hyphen]dumping measures, subsidies and countervailing measures, standards and conformity of assessment systems, and government procurement. You are obviously aware of this report. What do you say about it? What is our reaction to it?

Mr Hussin —We do not believe that any of our policies or laws are inconsistent with our WTO obligations.

Senator COOK —Have we made a response to Japan about their findings?

Mr Hussin —My recollection is that we were mentioned very much in passing in the report. It was not very critical of us. I do not know whether or not our embassy has responded to MITI about that. We have in the past where Japan has made great store of criticism of us, but if they were simply expressing doubts then probably we would not see it as being necessary to respond to that. Our anti[hyphen]dumping legislation is examined in the WTO Anti[hyphen]dumping Committee, our subsidy actions in the Subsidy Committee. There are plenty of options for standards and conformance in the WTO TBT Committee. There are plenty of options available for Japan to pursue those issues. I think they were basically making sure they did a comprehensive job and mentioned any concerns that they felt they had.

Senator COOK —Like the Americans do, this was their review of world bilateral trade relations. You are right: we only got a small couple of paragraphs. But they did raise it. We do not, as far as I can tell, intend to amend or change any of our legislation as a consequence, but it does raise the question of what we have done to persuade them that they are wrong.

Mr Hussin —We can find that out for you.

Senator COOK —Just as long as they do not say that if we do not push it too hard our commercial contacts will be all right. That is a bit of a cheap shot, I have to say. Do we intend to do a similar thing: produce a WTO consistency report on our bilateral trading relations?

Mr Hussin —Again, I cannot speak for the minister. I am not sure that that has crossed his mind. Certainly we have not given any advice suggesting that we do so. Those reports, as you have said, basically have an origin that goes back to the original ones that the United States has done. I think the Europeans do one and the Canadians do one. They are named in one another's much more often than anybody else. I do not know that there would be a great policy benefit in doing such a report. We certainly do monitor all the issues that we believe other
countries are in breach of, and we take action whenever we believe we have a case that we can pursue.

Senator COOK —The minister makes an annual report to parliament every February, I think it is. He does not include that sort of detail in that report, does he?

Mr Hussin —He includes details of what we have pursued and what we are going to pursue by way of action in the WTO, so there is a report there, but there is not a listing of potential concerns with other people's policies. As I say, it is issues that have been concluded or are in train.

Senator COOK —It is not a comprehensive report like the American or the Japanese one.

Mr Hussin —It is part of a wider report rather than specifically on that issue.

Senator COOK —I have finished. Thank you very much.

CHAIR —Mr Dauth, as I understand it, the following questions will be only on consular matters, so any of your officers who are not involved in that will be free to go.