Senator SCHACHT (8:18 PM) —The opposition supports the Customs Tariff Amendment Bill (No. 4) 2000. Some people might say that this is the `rats and mice' bill that picks up on and overcomes a number of administrative mistakes that this government has made in administering the tariff system in Australia. I will not be quite as uncharitable as that, because as a former customs minister I know that, no matter how hard you try in issues as complicated as the tariff list in Australia, from time to time, despite the best efforts of the officers, occasional slip-ups will be made in the definition of what should be in the table and what should not be. All governments try hard with this, and although my government, when we were in office, certainly tried very hard, occasionally we had to bring in legislation to amend the tariff act to take account of the fact that there had been some administrative difficulty.

The major issue of this bill, though, is not an administrative difficulty. It is about outlining the agreement reached between the Australian government and the American government over the Howe Leather company issue. This is a saga that goes back to the time of the government I was a part of, and it has flowed through to be resolved only in recent times. I have to say that, generally, I find it extraordinary in many ways that the American government—which is without fear or favour whenever it has felt its own interests are at stake—has intervened and has used tariffs and penalties to protect its own industry, irrespective of whatever else its administration may say about free trade, and that, whenever the heat has been applied in a particular local area of industry in America, the American Congress and the American administration have always backed away from supporting their rhetoric in favour of free trade.

One of the most notorious examples was the Jones act, which has protected the American domestic shipbuilding industry for over 100 years now. You cannot sell ships into the American market for domestic use along the coast, because that trade is reserved for shipbuilding in America. We have a very efficient, highly effective fast-ship building industry in Australia that is world competitive and does not rely on subsidies or protection, other than a small shipbuilding bounty which is very modest by comparison with what most other countries provide. We have maintained in opposition, as we did in government, that that bounty should be maintained until all the other countries producing ships come clean and sign the OECD agreement on shipbuilding to get rid of the subsidies amongst the major players. We quite rightly said that we will sign on when we see the colour of the money of the United States and of Western Europe.

Senator Cook —The US knocked it back twice.

Senator SCHACHT —As my learned senatorial colleague and shadow minister for trade—and Minister for Trade in seven or eight months time—quite rightly points out, the United States knocked back the opportunity to sign the agreement, under domestic pressure. So they have a warped and rotten system of protection for the shipbuilding industry in their country, and this is to the disadvantage of the efficient fast-ship builders in Australia that are now world famous.

Take another area: sugar. The Americans have consistently provided protection for the production of sugar cane in America. This has meant that efficient producers, such as Australia, are at a disadvantage selling into what is a very big domestic market. Some years ago in America, a major manufacturer of confectionery in Chicago, employing 800 workers making confectionery, closed the factory and said, `We can't compete with imported confectionery if we can't use world's best price for sugar. If we have to pay the highly subsidised price for American sugar, our confectionery is no longer competitive.' So, in a short-sighted way, the American government sat by and watched a major manufacturer close, and 800 jobs went out the window.

We all know that, about nine months before the last American presidential election, suddenly out of nowhere the American government announced tariffs on the importation of Australian lamb and sheep meat. This was done apparently to protect a very small number of what could only be described as hobby farmers in the Rocky Mountains region, I understand, of the United States: farmers who had a few sheep and wanted to protect their market. In many cases, as I say, they were hobby farmers and not major meat producers. But that tariff went on, and that affected access for Australia into that market.

Looking back at the history of the Howe Leather arrangements, I have to say that our good and powerful friendly allies the Americans are not very friendly when it comes to trade matters when dealing with Australia. I know that all sides of this parliament have at times expressed exasperation at the Americans' inability to match their rhetoric on free trade with what they actually do. Indeed, Americans take on and complain about Howe Leather and then go to the WTO and complain about leather arrangements; but when asked whether they will allow the WTO to deal with agricultural markets and products, they and the Western Europeans sit on their hands. We have not been successful in getting the WTO to deal with agricultural commodities in the way it has been dealing with manufactures in other areas—and regional areas, and in particular our farmers, have suffered.

The Howe Leather company in Australia is an example of which we should be proud. Instead of exporting raw skins overseas to be made into leather for someone else to do the value adding, Howe Leather developed in Australia a high quality leather product, value adding, so that we would export the leather and not the skins. Certainly that company did this with assistance from Australian industry programs at a time when the Labor Party was in government. I think those arrangements were available to any company that wanted to invest in developing leather and other related products in Australia. The Americans did not mind Howe's activities until it got serious about winning contracts in America. In May 1995, Howe won a $75 million contract to supply leather for car seats used by General Motors. As more contracts followed, the two companies that had previously dominated the US market requested that the US government launch a World Trade Organisation challenge, based on the assistance that had been provided to Howe.

Howe had been rewarded under the export assistance grants that we had provided, and I believe those grants are available to any company, Australian owned or foreign owned, operating in Australia. The program does not discriminate about who owns the company as long as it is based in this country. The WTO rule was that Howe had to pay back the $30 million it had received in government assistance. The Clinton administration also threatened to impose tariffs on imports of Australian wine. That threat was a very serious one to be made to our growing wine industry. The Americans had picked an industry that we would be sensitive about and then threatened to undermine it. They also threatened beef, car parts and other unrelated goods that had nothing to do with leather. But, generally, they had a scattergun approach and picked out the most vulnerable industries and threatened to put a tariff on them unless something was done to Howe.

Of course, at the time, if Howe had had to repay $30 million to the Australian government, it would have put the company out of action; it would have liquidated the company, and several hundred Australians workers would have lost their jobs. After a long period of negotiation—at times I think it was far too long—a settlement was come to between Australia and the US, and that is what this bill deals with. According to that settlement, Howe will be required to pay $7.2 million over 12 years, automotive leather will be ineligible for grants under government and industry schemes, and tariffs on a range of products will be suspended for 12 years. The government has also agreed to remove leather from being eligible for support under the Textile, Clothing and Footwear Strategic Investment Program scheme and the Automotive Competitiveness and Investment Scheme.

American weight has been brought to bear on the Australian government. And the Australian government? A judgment is asked for here. Did it give in too early? Did it fight it out? Did it give too much? I suspect that in the end Australia might have had to give too much—but we are a smaller economy than the Americans are, and the Americans can say, `Well, you can't really threaten us.'

I do note that in other areas America relies on Australia. We have joint facilities in this country. Some years ago, even Tim Fischer, when he was leader of the National Party, put it on the table. If we continue to be treated like this by America on trade matters, sooner or later the continued existence of the joint facilities in Australia will come into question. We cannot have a powerful ally use our ability to provide it with assistance in world security terms, though it is good for the world, but have our industries undermined and threatened in the way they are here. We cannot expect that we will always be involved, under United Nations arrangements or resolutions, in peacekeeping forces with other Western allies under the leadership of America. We have never backed away from that. We have always put our hand up, even if there has been a domestic dispute about it. We have been doing that for 50 years, but we have not got back from the Americans commensurate treatment for what is supposed to be a close ally.

We have very similar attitudes to America in supporting human rights, democracy and those related issues around the world. But America have to understand that they cannot expect us always to go to the same well when our farmers and our rural communities in particular are being affected by the American policies of overprotection, and they cannot take direct action against us over one particular company to teach us a lesson. I wish the Americans had spent more time attacking the European community over its agricultural policies than picking on Australia, which is an ally through the Cairns Group. The Cairns Group has done more to promote free trade, and particularly trade in agricultural products, than any other group established in the world.

The other thing that I really find interesting is that the government has had to remove tariffs on a wide range of consumer goods. This list is really interesting. The present five per cent tariff, as I understand it, will be removed from a number of products, including: microwave ovens, skis, home glassware, pruning knives, outboard motors, food mixers, hair clippers, condoms, digital tape recorders, video projectors and vacuum flasks. I suppose that, when you go and have a look, every one of those items is manufactured in and exported from America. We have had to give away a whole range of items, where the tariff is removed for a period of years, to settle the Howe dispute.

The speech notes say that none of these items is actually produced in Australia in any large numbers, if at all. When you look at this range of items, it seems odd to me that we do not have any industries in Australia that can produce at least some of these items. The ubiquitous condom should be able to be produced in Australia. I presumed Pacific Dunlop, with their Ansell brand, did produce these in Australia, but obviously they are imported. Digital tape recorders, video projectors and vacuum flasks all seem to me to be value added products that we ought to be producing in Australia under a vibrant, active industry policy. Minister, I would be interested if you could provide us with information on how this list of products was drawn up. Did the Americans actually put an ambit claim in and did we negotiate down from a much larger list of items? Minister, I do not know whether you are here to take the bill or whether you are just in here on duty, but I would appreciate it if the minister representing the customs minister could give us some information about that. It does seem a very odd collection of items. I would like to know how this list was reached.

The Howe Leather matter really is about the issue of trade policy and industry policy writ large and about what it means to have an economy of our size trying to get our companies to become world class, to value add and to sell their products on the world market because of their quality and price. I cannot see why a country such as Australia, or any country, cannot provide some assistance, under certain transparent rules, to companies to grow and establish a factory or a process so that the product is produced.

If we want to look at the greatest subsidy of all in America, which the Americans hide and say is not a subsidy, it is the amount of money the American government give to defence contractors for R&D. They say, `This is not assistance to our industry; this is national security. This is for our defence program.' Anybody who studies the American defence industry and American industry knows that, overwhelmingly, the R&D expenditure for defence flows back into industry and gives America an enormous advantage in establishing new quality products and new technologies which are then produced and sold in a civil market around the world. But the Americans will not count that R&D expenditure or make any concession that some proportion of the R&D they give to the defence manufacturers, running into tens of billions of dollars a year, flows into the domestic market.

I know that the Howe issue has bedevilled this government and bedevilled the government I was a part of when it was first raised, but I really think it ought to be put on record that, though we have a very close political and strategic friendship with America and we agree on a lot of things in the world, their treatment of Australia on trade issues has been abysmal. If this is how they treat an ally, it is not much different from being an enemy. If this country does not have a viable industry employing people, we will not be much advantaged promoting the issues of democracy and human rights around the world. The opposition support this bill, but we hope that our American friends do not see it as necessary in the future to attack their friend Australia on the issue of trade. I commend the bill in some sorrow that it has come to this, but we will support it and we hope this is the last time that we have such a bill dealing with the action the American government have taken.