Senator WEST —In relation to Austria, what contact has our ambassador in Vienna had with ministers in the new Austrian government?

Mr Quinlan —He has had no contact with ministers in the Austrian government. He did present credentials to the president who, of course, is the head of state. That was in early May. I think it was 3 May. That is the sum total of his contact.

Senator WEST —Is it intended that he have contact with ministers in this current government?

Mr Quinlan —I think, Senator, when Mr Downer announced the policy on this in late February, he made clear that the level and nature of our contact bilaterally with the Austrian government would depend on the circumstances of how they demonstrated their commitment to upholding democratic principles—or to principles in fact that they enunciated in the preamble to the coalition agreement. Clearly that is an assessment that would have to be made if it was felt there was a need for such bilateral contact. But that is not the circumstance at the moment.

Senator WEST —Thank you. What about Macedonia? Has the government given any consideration to the possible establishment of a consular presence in Australia by the former Yugoslav republic of Macedonia?

Mr Quinlan —Yes, Senator. That matter is still under consideration. I am advised that there is an honorary consul in Australia but the question of a more fundamental representation and diplomatic representation is under active consideration.

Senator WEST —Active consideration just at the Australian level or including Macedonia?

Mr Quinlan —At the Australian level. The Macedonians, and this was a matter of discussion in this committee before, having indicated an interest in establishing representation in Australia at an appropriate time.

Senator WEST —What impediments are there for allowing a Macedonian consular presence in Australia? Are there any?

Mr Quinlan —As I said, Senator, the question is under consideration. It is under consideration by the government. I cannot comment on the question of whether there would be impediments or not. I do not think that would be appropriate in a public forum. All efforts involved are being considered by the government at ministerial level.

Senator WEST —Thank you. That is all I have on those two areas.

Senator COOK —Australia does not have a framework trade treaty with Europe, does it?

Mr Quinlan —No, Senator, it does not.

Senator COOK —Why not?

Mr Quinlan —Senator, I should step back a moment. It depends how you are defining a framework agreement. The government does have, with the European Union, a joint declaration on relations which was concluded in June 1997, which of course goes very much to the sort of framework principles that apply to the relationship.

Senator COOK —But we both know that that is, in ranking order, at the lowest end of the food chain and not the highest form of trade relationship nations or groups of nations have with the European Union, don't we?

Mr Quinlan —Whether it is at the lowest end of the food chain or not I am sure would be a matter for debate but it is certainly less than a treaty status agreement.

Senator COOK —Yes. We were close, were we not, in 1996 leading into 1997, to concluding a treaty status agreement with the European Union?

Mr Quinlan —Consultations, negotiations, at that stage were fairly well advanced, yes.

Senator COOK —Why did it never happen?

Mr Quinlan —The government took a decision at the time that the continuing insistence at that stage by the EU to include provisions which in fact would have allowed either party to suspend or terminate the agreement unilaterally—and essentially on the basis of undefined criteria—had created a situation where it was not possible to conclude an agreement. There was, in effect, an impasse over that issue.

Senator COOK —And thus the talks collapsed?

Mr Quinlan —The talks were then diverted into the channel of concluding a joint declaration instead of a treaty.

Senator COOK —Moved down the food chain to a joint declaration.

Mr Quinlan —Yes, Senator. I should repeat the point, Senator, that the joint declaration does include the essential principles and elements that would have been included in the earlier document that was being talked about.

Senator COOK —I will come to that in a second. What you are talking about is the issue over which these negotiations, as you put it, collapsed. It was what is colloquially known as the `human rights clause', isn't it?

Mr Quinlan —Yes, Senator.

Senator COOK —That condition was that both of us, Australia on our hand and Europe on its, would recognise the UN Declaration on Human Rights as the benchmark for testing human rights abuse.

Mr Quinlan —Yes, Senator.

Senator COOK —This is a provision that the European Union has sought in all trade treaties of recent years, isn't it?

Mr Quinlan —To my understanding it is, Senator, yes.

Senator COOK —A number of countries that might be thought to have less of a commitment to human rights than Australia have accepted this provision.

Mr Dauth —This has all been rehearsed in public a hundred thousand times, Senator, in recent years.

Senator COOK —I am sorry, Mr Dauth.

Mr Dauth —This has all been gone over in public many times in recent years.

Senator COOK —So you agree?

Mr Dauth —What you are doing is recounting something that has been discussed between the government and the opposition a lot. It is not as if we are providing information here.

Senator COOK —No, I am just re-establishing the facts. If you are happy to concur with the facts, that is fine. I can move to my next point. Since the treaty collapsed in 1997, has there been any analysis of opportunities forgone because we do not have a treaty arrangement with the European Union? What have we missed out on?

Mr Quinlan —Senator, frankly, that is an impossible question to answer because we can never know what we have missed out on in a variety of trade situations that exist.

Mr Dauth —It is perfectly possible we missed out on nothing.

Mr Quinlan —Yes, indeed.

Senator COOK —And it is perfectly possible, on the other hand, we missed out on quite a lot.

Mr Dauth —Mr Quinlan has answered that question by saying you cannot know that, but my gut instinct is that we have missed out on very little or nothing.

Senator COOK —I would like your definition of `very little'.

Mr Dauth —No, I do not want to offer a definition in this context. I just think, Senator, you are looking for us to provide you with a point and not only can we not do so but I think in fact the point is not there.

Mr Quinlan —Senator, the economic relationship of the EU is extremely robust when you take them as a single entity. They are, of course, our largest trading relationship. In these situations, in a mature economic and market situation when we confront with the EU and the relations between the two of us, the market really determines ultimately what the commercial transactions will be. Demand is pushing us in the direction as required and those needs are met. They are met in the marketplace itself. It is the healthiest economic relationship we have.

Senator COOK —I do not dispute that it is a good relationship. What I am coming to is that it could be an even better relationship and, because of this government's dogged resistance on the human rights clause, our commercial links are being inhibited. That is the point I am coming to.

Mr Dauth —That is an assertion of yours, Senator. What we are saying to you is that there is no evidence to support such a proposition.

Senator COOK —There is no evidence?

Mr Dauth —No.

Senator COOK —You are saying that?

Mr Dauth —I am saying that there is no evidence, at least available to us, that there has been any inhibition of the growth of our bilateral commercial relationship with Europe.

Senator COOK —Last month there was a quote that appeared in the Australian Financial Review from the ambassador from the European Union to Canberra, which said that the existence of such a treaty would enhance the relationship considerably but we would have to wait for a change of government for it to arrive.

Mr Dauth —You would not expect him to say anything very much. Was that Aneurin Hughes?

Senator COOK —Yes.

Mr Dauth —I assume he gave some examples, did he, of where commercial opportunities had been lost? I do not know of any and the department does not know of any.

Senator COOK —I read it in the Financial Review. You have to ask the reporter whether he gave examples that were not reported. What was reported is what I have said.

Senator Alston —The rhetoric was reported.

Senator COOK —The rhetoric is very important.

Senator Alston —I said the rhetoric was reported.

Senator COOK —What is your point, Minister?

Senator Alston —That there was no substantiating evidence to support it.

Senator COOK —You think this is an unsubstantiated statement?

Senator Alston —Yes.

Senator COOK —You do?

Senator Alston —Yes.

Senator COOK —And you would say that to the ambassador?

Senator Alston —Yes, absolutely I would.

Senator COOK —You would?

Senator Alston —Often do, actually.

Senator COOK —Are you aware that if we had treaty status with the European Union there would be many more bureaucratic resources devoted to Canberra and the bilateral relationship than there are now? Are you aware of that?

Mr Quinlan —Senator, we have seen the media story that you are referring to and have noted the quotation that is alleged to have been made by Mr Hughes. As the minister has indicated, the rhetoric is clear on his part. I think what you are referring to is the fact that because we do not have treaty status, in terms of the budget formatting by the commission they find it difficult to identify a line in their budget to allocate to Australia. That means that there are certain administrative hiccups which they encounter every now and again when funding activities relate to Australia. The EU recognise that. It is an administrative hiccup. We understand that there are efforts to correct that on their part and that is a matter for the EU. We do not assess that to be, in any pragmatic sense, a constraint.

Senator COOK —I would have to turn to my personal experiences, which are somewhat extensive of late. If you want me to go to particularities I will but, for the sake of saving time, when I was recently in Europe it was drawn to my attention that there are all sorts of arrangements the European Union engages in with Canada, with North America and with other economic entities—which it does not engage in with Australia—in the areas of research and development, IT and a whole raft of other industry sectors. It is because we are not of a treaty status level. You want some examples; there are three of them. We are not on the screen. The other nations are. Surely that is reported back to you from posts. This is a laughing matter, is it?

Mr Dauth —No, it is not, Senator.

Senator COOK —Well, why are you laughing?

Mr Dauth —I am not laughing.

Senator COOK —You are!

Mr Dauth —Absolutely, I am not laughing, Senator.

Senator COOK —All right.

Mr Dauth —I am saying that you have a view on this and that the view of the government is different and that we are just engaged in scoring points here in this discussion. We are not able to offer you information and we cannot take account of the policy prescription that you would prefer the government took up. That is it. We have reached, it seems to me, a point which we often reach in these exchanges where we are unsatisfied. But we cannot take it forward. Spare us! You are critical of the government's policy, Senator, and that has been recorded and is now even more clear to us than the last time you raised it. But, frankly, what do we do? How do we take this forward?

Senator COOK —That is a good question, so let me rephrase my question which picks up that point. Have you had a look at countries that have treaty status with the EU and the type of interchange that goes on between the EU and those countries, compared to the type of interchange that goes on between the EU and Australia? Have you done that analysis?

Mr Quinlan —Senator, in the preparations for the earlier negotiations, both for the treaty and then for the joint declaration, I understand that kind of analysis was done. We try our best to pick up good ideas from wherever we can in the marketplace and of course to apply best practice. We have an extremely pragmatic and, as I said, robust relationship with the EU. We have a whole range of specific agreements relating to a whole series of areas of cooperation—sectoral areas and others. As the market requires, those sorts of things are addressed on a case by case basis. Just looking at science and technology and R&D that you mentioned, since the conclusion in 1997 of the joint declaration, within the framework of that agreement 37 new projects, for example, have been undertaken with the EU in that area.

Senator COOK —I have not denied that we have a strong relationship with the EU but my question was different from that. My question was, have we looked at the nature of the relationship that other nations have that have got treaty status, a status we do not have? Have we assessed whether it is more beneficial to them, because of that higher level of expression of relationship, than the one we have—a straightforward analytical issue. Have we done that? Mr Dauth asked me what suggestions I have. I did not realise it was my job to make suggestions to the department but maybe I can suggest if you have not done it, it is worthwhile doing that.

Mr Dauth —I do not think the government has in its mind, Senator, the possibility of changing the set of institutional arrangements we have with Europe. The agreement reached in 1997 is, I think, where the government wants to be on this.

Senator COOK —And you do not propose to conduct any in-house analysis to assess whether we are missing out on commercial opportunity or not?

Mr Dauth —What we do in-house and how we advise ministers is not appropriate territory for this committee or, indeed, any committee.

Senator COOK —You added what you advise the minister. I am asking are you doing any in-house analysis of opportunity forgone?

Mr Dauth —I am not able to answer that question, Senator.

Senator COOK —Why not?

Mr Dauth —Because I am not able. We do work that ministers want, Senator. We do not get off on frolics on our own. The process of government—you know it, as I keep saying, better than I—is a matter of our offering advice to ministers and ministers asking us for advice.

CHAIR —As you very well know, Senator Cook.

Mr Dauth —On this issue the government is comfortable—

Senator COOK —I do not very well know it.

CHAIR —You were a minister for a very long time.

Senator COOK —But I do not very well know it. In my experience it is often the case that the department will come forward with what it regards as a helpful suggestion. Having done a bit of analysis it will say, `Here is an interest that you might wish to consider, Minister.' It does not wait always to be directed on everything in a micro-managed way, as you are suggesting.

Mr Dauth —Senator, the government has been very clear on this subject. It is very comfortable, very content, with where it got to with the agreement in 1997.

Senator COOK —What is our objection on the human rights basis? What particularly do we find offensive about the Universal Declaration of Human Rights?

Mr Dauth —That has also been a matter of public discussion some years ago. Ministers of the day of those times, still the same ministers—the Prime Minister and the foreign minister—answered questions about this. I am not sure we have anything to add to what has already been said.

Senator COOK —So we have not changed our position?

Mr Dauth —No, we have not.

Senator COOK —And we still cannot say `sorry'.

CHAIR —Thank you, Senator Cook. Do you have more questions on Europe?

Senator COOK —I have a lot more questions.

CHAIR —Then let us proceed.

Senator COOK —You cannot tell me whether or not there has been any internal analysis about opportunities forgone by not having treaty status?

Mr Dauth —I think we have answered that question.

Senator COOK —You are not going to tell me. That is the answer, I understand.

Mr Dauth —We have answered the question.

Senator COOK —I thought one of the objectives of the department was to enhance Australia's trading relationship. That is an objective set down in your performance indicators. Doing such analysis would suggest a prudent way of framing advice to achieve that outcome, wouldn't it?

Mr Dauth —Senator, you are flogging a dead horse here. I have given you an answer.

Senator COOK —You are very evasive.

Mr Dauth —No, I am not evasive at all, Senator. I have said to you that the government's position on this issue is very clear. It has been clear now for at least three years.

Senator COOK —Let me ask a question specifically to this: do you do any analysis in trying to deliver the corporate objective of the department of trade on where there are opportunities forgone because of our treaty relationships? Let us not relate it just to Europe; let us relate it across the board. Do you do any of that analysis?

Mr Dauth —I am sorry, I do not see that we can give you an intelligent, helpful answer here. You want us to say something which—

Senator COOK —I would just like you to say yes, you do, and that you are an alert department, keeping an eye out for opportunity wherever it might arise. That is what I would like you to say.

Mr Dauth —Is that your impression of us, Senator, or not?

Senator COOK —Given the evasiveness now, I have to seriously question it. I have to seriously question it.

Mr Dauth —Senator, the government has a policy on this issue. It has had a policy in place for three years. It is not for us to debate that policy.

Senator COOK —I am not asking you to debate the policy—

Mr Dauth —Okay.

Senator COOK —Because the last question I put was, does the department do any analysis in trying to achieve its objective in improving Australia's trade performance about where there might be opportunity forgone?

Mr Dauth —The department does a tremendous amount of work. As you know, our people are constantly on the lookout for trading opportunities. We spend more than half our resources looking for trade opportunities. There are all sorts of ways in which we do that and, as a former minister for trade, I am sure you will be aware of many of them.

Senator COOK —So you do an analysis? If you had told us that in the beginning, you would have saved a lot of time.

Senator FERGUSON —You have answered your own question, Senator Cook. Perhaps we could move on.

Senator Alston —You are essentially wanting the department to sign on to your political agenda, right? You are entitled to have your view. You have made it abundantly plain that you disagree with the government's approach. You certainly have not persuaded me that there might not be a whole raft of reasons why the EU might have stronger relationships with some countries rather than others and it may have nothing to do with treaties, so the premise seems to me to be flawed in any event. To keep insisting that somehow the department should tell you what their policy agenda is is something you well know is not available to you, and you would have resisted vigorously if you were still sitting on this side of the table.

Senator COOK —Thank you for that quite unhelpful intervention, Minister.

CHAIR —One you would have given, yourself, Senator Cook. Let's move on.

Senator COOK —No, I would have expected the department to be alert to opportunity, wherever it might occur. I actually take the fact that Australia needs to improve its trade performance as being quite an important issue, both for the economy of the country and—

Senator Alston —You should not insult the department by suggesting that they are not interested in maximising trade opportunities.

Senator COOK —I beg your pardon?

Senator Alston —You should not insult the department by suggesting that they are not interested in maximising Australia's trade opportunities.

Senator COOK —I should not? I said I take—and perhaps you should listen carefully, Minister—the objective of maximising Australia's trade opportunities quite seriously and regard it as important for the economy and for the nation.

Senator Alston —There is nothing to suggest that anyone else does not. Are you suggesting the department does not? If not, we are in agreement and we can move on. If you are, it is insulting.

Senator COOK —I would hope there would be more exhibition from the department about what they are doing to try and find areas of maximising Australia's performance than the answers to the questions I have put have shown, and if you regard that as insulting, I am disappointed that you take it that way and not as constructive criticism.

Senator O'BRIEN —Firstly, I wanted to ask some questions which relate to trade with the EU and Denmark in particular. I wanted to find out: has the minister or the department initiated discussions with the Danish government regarding subsidisation of Danish pork exports to Australia?

Mr Quinlan —Perhaps I could ask my colleague Sue Tanner to answer that one.

Ms Tanner —Senator, we believe that is being handled principally in AFFA, in another department.

Senator O'BRIEN —Not a trade matter?

Ms Tanner —It is a trade matter, and our people in TND are looking at the access questions, so they may be able to help as well. It was certainly going to be on the agenda of the discussions which we were to have in May with agriculture officials of the European Union who were coming to Australia.

Mr Quinlan —Those discussions will be held slightly later in the year. We are still settling the date, Senator, for those.

Senator O'BRIEN —Slightly, or a lot later?

Mr Quinlan —The dates are not yet settled. In fact there is a range of possibilities, but in the next few months.

Mr McKinnon —We have, along with our AFFA colleagues, looked at the issue of subsidised Danish pork to determine on what products the subsidies are being applied and to what extent and whether the Europeans are acting in consistency with their WTO obligations. We found that the pork subsidies that have been applied have been applied in a way that is rather hard to identify but in basically a WTO-consistent fashion and they have run out. The WTO obligations mean that the Danes have up until now an entitlement to subsidise about 700,000 tons of pork a year, and that dropped sharply to 400,000 tons as a result of the Uruguay round outcome. The remaining pork that has been subsidised in the Australian market is, we understand from our inquiries with both government officials and also with people who are actually conducting that trade, very much the last drops coming through the pipeline. There is no new trade being written.

Senator O'BRIEN —That is of subsidised pork or pork generally?

Mr McKinnon —That will be all the pork from Denmark; the bulk of the pork that is being exported at the moment.

Senator O'BRIEN —When you say it will have run out, they will have used up their entitlement to export subsidised pork?

Mr McKinnon —To apply subsidies to their pork exports, so that the upsurge has been as a result, we think, of an application of subsidies to pork that is being exported to the Australian market, but with the extinguishment of their entitlement to apply those subsidies the Australian market is no longer attractive to them.

Senator O'BRIEN —So for the coming financial year the pork industry can expect no further importation of pork from Denmark?

Mr McKinnon —We would expect there would still be some exports of pork in the more specialty smallgoods type area, but not the bulk exports of pork that we have seen. That is our expectation at this time and we are monitoring it on a monthly basis and reporting to our minister, who has a great interest in it. But the latest information we have from the trade is that they are not writing any more trade, so our expectation is that we will see a drop-off of pork exports from Denmark to Australia.

Senator O'BRIEN —What is the likelihood that the United States will be pursuing access to our market for fresh or frozen pork?

Mr McKinnon —I could not say, Senator. I think our market in world terms is a reasonably priced market. That is, if we look at prices per kilo for pork around the world, our market is generally an attractive one, and for that reason the US has got an interest in our market, as would any other significant pork producer. Similarly, we have an interest as a significant pork producer in any market that might buy pork but I do not know of any specific application they have made or interest that they have shown.

Senator O'BRIEN —I think there are issues between different sorts of pork imports, fresh frozen and different cuts, et cetera. What effect has the current Australian dollar rate had on importation of pork products, if any, or would you like to take that on notice?

Mr McKinnon —I would rather take that on notice, Senator. My instinct is, if the Australia dollar is weaker, then that would make the pork imports again less attractive.

Senator O'BRIEN —Yes. I believe that case has been put on many occasions soit would be interesting to see the reality.

Mr McKinnon —The figures that we were able to get for pork imports from the Australian Bureau of Statistics lagged by, on average, a couple of months. We tend to find that they are seven to eight weeks behind. I think maybe again that would be something that would reinforce that trend out of Europe to less pork.

Senator O'BRIEN —Going back to the meeting with the Danish government that we were referring to earlier, when do you think it will be known when that meeting is to be held?

Mr McKinnon —This is the consultation in fact with the EU generally, of course, in which Denmark will participate. As I say, those dates are being actively considered at the moment. On both sides there are a number of slight problems just in locking in schedules. We are certainly putting every effort into it at the moment and we are hoping to conclude some dates in the next 10 days or so. I cannot commit that that will be the outcome then, but that is certainly the ambition we have, yes.

Senator O'BRIEN —Is it not appropriate to seek to meet with the Danish government about the matter? Is that an inappropriate or an irrelevant action?

Mr McKinnon —No.

Senator O'BRIEN —I am trying to find out why we do not seek to talk to the Danish government.

Mr Quinlan —It is in no sense inappropriate.

Mr McKinnon —No, it is not inappropriate. We have, I think, approached it in several different ways. We have picked it up with the commission to find out what subsidy regimes are applicable on a commission wide basis to pork and how that applies to the Danish pork. I believe also that Minister Truss wrote to agriculture commissioner Fischler to point out that Australia was concerned about the level of Danish pork imports into Australia, so we have picked that up in several different ways. Our industry has also had discussions with the Danish pork industry but again, for the moment, with the pork imports, as a result of all that activity and inquiry, and having established from the people who are doing the trade themselves that they are no longer riding the trade, we are hopeful that we will see a fairly sharp drop-off in pork imports from Denmark revealed over the next couple of months, which is not to say that we would leave that issue. We would be concerned if in the future there was a refreshing of any entitlement and the Australian market became attractive again for any other reason, to see again a surge in pork from Denmark, but at the moment the trend is, as I say, in the opposite direction.

Senator O'BRIEN —When you say `a refreshing of any entitlement', I got the impression from your earlier answers that the entitlement to subsidy was effectively on its last legs or dead. What do you mean by `a refreshing of entitlement'?

Mr McKinnon —In the most simple terms, coming out of the Uruguay Round they had an export subsidy entitlement which was stepped down over six years. But, because of a quirk in the way those agreements were written, some of the entitlements that were not used in earlier years were saved or banked and brought forward into later years, so in fact what the Europeans had been able to do was—rather than having to cut their subsidised pork exports in line with those commitments that they made in the Uruguay Round to cut their subsidy entitlements—bank some of the subsidy entitlement and apply it to later years, so we saw a slight upsurge in later years and the effect of the cuts should have been the opposite.

But now that we have come to the end of the implementation period they no longer have such flexibility, so we are down at the bottom of the step. Where it had surged up, they had to come right down, and they are back at a floor level. The effect of that is that their subsidy entitlements drop off from about—I am not sure that these are the exact figures—in the order of 730,000 tonnes, they are entitled to apply subsidies to around 430,000 tonnes; quite a significant drop. Australia was a marginal market given the distance and I think that is what gives us some hope that we will see a significant drop-off.

Senator O'BRIEN —I thought I understood what you were saying before. That is why I was asking about your comment that their entitlement might be refreshed. I did not understand that.

Mr McKinnon —We are down to the 400,000 level, but that is yearly, so in a new year they could again do 400,000. My hope would be, given that that has been a sharp drop, that that 400,000 tonnes would not see Australia as a first market or as a positive market.

Senator O'BRIEN —I suppose the currency issue will play some factor there. Thank you for that.

Senator FERGUSON —Mr McKinnon, is it true that during the past 12 months Australia has achieved record inputs and record exports of pork?

Mr McKinnon —I cannot guarantee the figure for imports. I think that is true, it is the case for exports.

Senator FERGUSON —It is for exports?

Mr McKinnon —It is for exports, yes.

Senator FERGUSON —And at some stage during that 12 months there were also record prices?

Mr McKinnon —We did touch on some very good prices about three to four months ago where it was something like $2.40 a kilo. It has come down a little bit since then. The pork farmers were telling me that the prices were not good enough but we believe they were better than they were before.

Senator FERGUSON —And all that was achieved without banning any imports?

Mr McKinnon —That was done without banning any imports for trade reasons.

Senator FERGUSON —I would love to be able to contact some of the people who organised meetings of pork producers prior to the 1998 election, but they are very hard to find.

Mr McKinnon —They are still there and they still ring me up, Senator.

Senator FERGUSON —Thanks, Mr Chairman.

Senator O'BRIEN —I am sure we can find them for you, Senator Ferguson, and I am sure they will all be rejoicing about the Singapore market, which has been the difference for the industry. I do not think they can be accused of starting the disease in Malaysia which did it for them!

Can I go on to the Americas part of this subject. Firstly, I wanted to ask some questions, which I have already asked of AFFA and they have referred me to this department, which relate to consultation between Australia and Uruguay with regard to the US beef market. I understand that informal contact was made with Australia with regard to this matter, that Uruguay contacted the United States to seek quotas beyond their quota limit for beef into the US market and they were told that there was no prospect of an addition to their quota, given the fact that this was election year in the United States, and it was suggested that they may be able to persuade Australia to grant them, in some form, part of the unused part of Australia's 380,000-tonne quota into the United States.

Mr Quinlan —I should, just by way of explanation, explain that on these market access issues in fact both the geographic divisions and the Multilateral Trade Division obviously work very closely and, because of the particular WTO angle on most of them, a good deal of the work, of course, is led by the multilateral trade division—so Alan McKinnon.

Mr McKinnon —There was such an approach from Uruguay, Senator. As I understand it, at the instigation of the United States as well, they suggested to the Uruguayans that they might approach Australia for a reallocation of some underutilised quota.

Senator O'BRIEN —Without going into the specifics—and AFFA have put a view to me that there would be consequences if we could redirect part of our quota in terms of the price of beef in the US but, without going to that argument, is it possible for Australia to make arrangements for another country to use part of our quota entitlement for United States beef that we are not using?

Mr McKinnon —I think in practical terms, if the United States were open to such an arrangement, it would be possible.

Senator O'BRIEN —Would it be possible to make such arrangements without prejudice to our existing quota rights?

Mr McKinnon —Again, the quota allocation is basically at the US's behest and no-one is questioning that, so if they were to say that that is the basis on which the arrangement was being done then it may be possible.

Senator O'BRIEN —I understand that we advised Uruguay that we would not be agreeable to the proposition that they put to us. Is that the case?

Mr McKinnon —That is the case, Senator.

Senator O'BRIEN —Was that decision a matter for the trade minister or another minister?

Mr McKinnon —Mr Vaile made that decision after—as with all of these things—discussion with industry and after establishing what their interests were to the detail of the particular commercial concerns that were driving them. But Mr Vaile had personally spoken to the meat industry to get a sense of their interest in this matter and then he explained it to the Uruguayan ambassador here who said he completely understood that that is the position that industry took. We did our best, we had a look at it. Industry had an industry perspective, and the Uruguayans completely understood that when it was explained to them.

Senator O'BRIEN —Is there any potential danger to our quota rights in the US given that we are using only 280,000 of the 380,000 tonne quota per annum?

Mr McKinnon —No. To my understanding there is no such danger. It is within a quota amount—that is where the market equilibrium basically is—and were the prices in the US market higher, we could utilise more of that market.

Senator O'BRIEN —Are there potential consequences in terms of the shares, the access to the US market that is available to other producers, particularly given the Argentinian situation where they have now been declared free of foot-and-mouth?

Mr McKinnon —This is a rather complex and fuzzy area of trade law and policy and it will be a big issue in the next round of negotiations to sort out the rules governing the allocations of quotas within a tariff rate quota. But at the moment I think the basic allocation of the quota by country is the responsibility for the importing country, and I do not see such an issue arising, as you are suggesting, Senator, in this case.

Senator O'BRIEN —You do not see it arising in this case? That is, it cannot affect the allocation of quotas? Is that what you are saying?

Mr McKinnon —Because this is a rather complex and fuzzy area of law it is not impossible that the basis of quota allocation could be challenged for any quota anywhere. But there has not been a great incidence of that and I cannot see it is likely in this case.

Senator O'BRIEN —Going back to your answer in relation to our 380,000 tonne quota, seeing it in the light of a significant beef producing player who now has a changed status which would make it a more attractive producer for the US market, is it reasonable to assume that factor might interconnect with the factor of us not using our quota?

Mr McKinnon —I have not seen any suggestion in anything I have seen in the US, in anything the administration has issued, nor have I seen that suggestion raised by our industry as a concern. They are more generally of course concerned that Argentina is a big and ambitious competitor on the world-wide markets.

Senator O'BRIEN —I am given to understand that the main threat from Argentina in terms of beef production is not into our market but into the markets that we export beef to.

Mr McKinnon —That is right.

Senator O'BRIEN —That is quality beef exported to markets in competition with Australian beef.

Mr McKinnon —I am sorry, Senator, that is what I was referring to also. Generally our industry is very alert to that.

Senator O'BRIEN —One of those markets would be the United States?

Mr McKinnon —One would be the United States.

Senator O'BRIEN —If there is a reallocation of quota, whether it affects our quota entitlement or not, if there is more Argentinian beef and not a subtraction from someone else, then there would be more export beef going into the US market.

Mr McKinnon —If there is a reallocation of quota?

Senator O'BRIEN —Yes.

Mr McKinnon —Again the whole genesis of this particular approach from Uruguay was that the United States did not want to reallocate its own quota.

Senator O'BRIEN —I have moved from Uruguay to Argentina. I think Argentina has made some proposal to us in relation to trading beef into the EU for example. But I am interested to know, given on the one hand we have Uruguay seeking access to part of our unused quota for a particular season, one season only, on the other hand we have Argentina with changed circumstances already seeking access for their beef into the European Union as a trade for access for our lamb and some sort of swap.

What I am leading to is we have got a quota entitlement for beef into the US of 380,000 tonnes. We are using 280,000 tonnes of that quota, as I understand it. I understand industry was opposed to the request made by Uruguay because they thought it would affect price in the US market, or that was their explanation. Really I am looking at the interconnection with their view of the market and a player like Argentina whose beef would be very attractive in the United States who have some sort of reputation for quality beef. I am just wondering what matters the department is considering in relation to potential threats to our quota given its under-utilisation and the challenges which are emerging from the other parts of the Americas.

Mr McKinnon —Again, Senator, that is why I referred back to the Uruguay example, because it was the US unwillingness to change quotas, even for a relatively small producer like Uruguay which led them to suggest that Uruguay come to us to see if we would reallocate part of our quota. So Argentina being perhaps a much bigger case, you could perhaps surmise as well that the United States would be again unwilling to make significant adjustments to their quota. But to answer your question more directly, I do not see any direct link at this stage to the fact that we are not utilising our full quota and the fact that Argentina has emerged as a foot-and-mouth free producer.

Senator O'BRIEN —In relation to the Uruguay matter, it was Mr Vaile, and not Mr Truss, that made the decision in relation to Uruguay's contact, if I could put it that way.

Mr McKinnon —I am sure Mr Truss was involved as well. I am not sure of the extent to which he was involved but I followed the issue through my involvement with Mr Truss's office and was in the meeting with Mr Truss when he relayed the result of all the deliberations to the Uruguayan ambassador. I drew the conclusion that it was Mr Vaile who had then made the sole decision but that may not necessarily be true.

Senator FERGUSON —Mr Truss is in charge of—

Mr McKinnon —That illustrates my point, that Mr Vaile might have had carriage, but with the Uruguayan contact—again maybe through that Cairns group contact. He was the one who relayed that decision to the Uruguayan ambassador in Canberra.

Senator O'BRIEN —Could you check that matter and give us a considered answer on notice just so that there is no confusion between the two ministers as to whose decision it was?

Mr McKinnon —Certainly.

Senator FERGUSON —Could I just ask one thing. Senator O'Brien might be interested in this because we actually visited Uruguay and a request was made by the Uruguayans who were in the midst of the most devastating drought for, I think, a hundred years. Whom did the minister take advice from before deciding that some of our quota could not be allocated to Uruguay on a one-off basis, which was all they asked for. Was it the Meat and Livestock Australia or the NFF or was it the foreign affairs department or the trade department rather? Who actually tendered the advice to the minister that would have caused him to make that decision?

Mr McKinnon —In the first instance Minister Vaile requested advice from us in the agriculture branch in the Trade Negotiations Division of Foreign Affairs and Trade. We spoke with our colleagues in AFFA in the meat and livestock area, again to my knowledge there may have been a completely parallel request at that same time. We took information from the meat and livestock branch from their contacts in the meat industry. I do not know exactly which part of the meat industry that was. We provided that information to the minister and subsequently the minister, as I understand it, had direct contact himself with MLA and at no stage did I know of the National Farmers Federation being involved. It was done directly with meat interests, the meat industry.

Senator FERGUSON —Do you know whether at any stage of the discussions any weight was given to the fact that this is a Cairns group partner who supports us in practically all of our deliberations and all of our submissions and all of the decisions that are made, which was suffering a one-off devastating drought, the worst in living memory? Was that part of the consideration when the decision was made not to reallocate what I think was a small portion of our quota? I think they were looking for 15,000 tonnes.

Mr McKinnon —It mostly was a consideration, I think. If it had not been Uruguay the minister might—I should not speculate on his motives but he went directly to the industry himself to ascertain to his own satisfaction what the industry concerns were. He took bureaucratic advice but then also went to the industry directly to talk to them. I think his reason for doing that was because he wanted, if it was at all possible, to do something for Uruguay. He was well aware of the situation in Uruguay and also Uruguay is such a good Cairns group partner. I do not know if I would characterise them as supporting us but they are a very active—often to the forefront—member of the Cairns group. That was something that paid out positively in our assessment of it—not to their ultimate positive effect, I know.

Senator O'BRIEN —I understand, going back to comments you made, the Americans were not prepared to do anything in relation to additional quota. My understanding was that the American departmental office had said to Uruguay, `There's no point in approaching us about additional quota this year. It's election year and we won't get anything through Congress.' Is that the way it was reported to the department?

Mr McKinnon —Not to my recollection.

Senator O'BRIEN —That would be a quite reasonable view from departmental officials in the United States. The reality is they would not have got anything through Congress, would they?

Mr McKinnon —That may or may not be the case. Similarly, when the view was relayed to the Uruguayan ambassador, he said he completely understood that government had to do what our industry saw as in their best interests. It is completely consistent with that.

Senator O'BRIEN —I suppose. Ever the diplomat. In relation to the situation with the US of course we have had—I am not sure if Senator Cook has touched on this—the most recent farm bill, the $US28 million—

Senator COOK —No, not yet.

Senator O'BRIEN —I just want to touch on that but you will probably develop it much more fully. I note that in relation to that farm bill there was a story on AM on Tuesday of this week. The Minister for Agriculture, Fisheries and Forestry, Mr Truss, is quoted as saying in relation to this farm package:

What it in practice has done has meant that the United States level of farm support is now back to similar levels, in fact perhaps even higher, than what it was when the GAT round of trade reform began. So the Americans—their lawyers I guess, have been smarter than the diplomats. They devised ways to get around trade rules and in doing so they've completely undermined the integrity of trade reform.

Does the department agree with the minister's view as to the undermining of the integrity of trade reform by the United States?

Mr Dauth —We would not be so bold as to comment on the remarks of a minister of the government. That is something you would have to ask ministers about. I am sorry, I do not want to be unhelpful, Senator. There has been, I think, a model of useful information exchange but I do not think it is fair to ask us to comment on the public statements of any minister, let alone the minister of another portfolio.

Senator O'BRIEN —If I had asked the question another way—as to whether the action of the United States does undermine the integrity of trade reform.

Mr Dauth —That is an easier question to answer.

Senator O'BRIEN —Yes. Let me rephrase my question. Has the action by the United States, the passage of the $28 million farm bill package, undermined the integrity of trade reform?

Mr Thomson —I think the government view is that these large sums of money which the United States is proposing to pay to its farmers do not help the overall cause of bringing about a fairer and more equitable trading system for agricultural products. The question as to whether those sums of money breach the World Trade Organisation agriculture agreement levels is an issue which officials are examining at the present time. At face value and at the argument of the United States, these would be called green subsidies and permissible under the United States's obligations. But we are looking at all of the detail very carefully.

Senator O'BRIEN —If they are permitted, the point can be made nevertheless. I suppose that is the basis of my question. Haven't they devised a way to undermine the rules, although being potentially, at least, within the rules under their legal definition?

Mr Thomson —That is the concern, Senator, yes.

Senator O'BRIEN —It is more than a concern, isn't it? If they get away with increasing the subsidy in this form, they will have established a loophole in trade reform which can be used by, for example, the EU.

Mr Thomson —Senator, it is a moot point as to whether it has established a loophole. The knowledge has always been that the Uruguay round agriculture agreement, which was a sea change on what existed beforehand—which was virtually nothing—was a first step. That is fundamentally why we have all been working assiduously to see another round of negotiations launched. We are at the threshold of that. There is still a big task to wind up the disciplines so that they are increasingly more effective. You heard earlier this afternoon of one example in pork, where the export subsidy disciplines are in fact somewhat effective but the perspective of the government across the whole sector, across each set of commodities, is to make the system more disciplined and more effective so these kinds of decisions are not within the rules.

Senator O'BRIEN —Wasn't it the case that in the US election year, this year, it was always on the cards that ways would be found to extend farm subsidies?

Mr Thomson —Senator, that is a disappointing perspective on political behaviour—in the United States.

Senator O'BRIEN —I  think that you would really like to correct that answer, because I do not believe the department is so naive. The reality is, isn't it, that this was always on the cards and the department knew it?

Mr Thomson —We are constantly concerned and our concern heightens in every second even year in regard to the United States.

Senator O'BRIEN —I understand your answer. Therefore, what additional activities, if any, was the department engaged in, given this was one of those high risk years?

Mr Thomson —The starting point was really the end of the Uruguay round with the expectation of working to see a seamless connection into the next round. That has not been achieved but the principal step in that regard was the hope that the Seattle ministerial meeting of the World Trade Organisation last year would take that step. It has not. We have moved, however, to see this year the agriculture negotiations nonetheless get under way, but it is not that seamless connection that we had hoped for. So we have been doing that. In the meantime there have been continuing representations made at all levels of government.

Senator O'BRIEN —So the government was well aware that this was a year in which there was a high or higher risk that there would be setbacks to the trade reform agenda?

Mr Thomson —The difficulty of proceeding was at a higher level than perhaps in some earlier years.

Senator O'BRIEN —Are you saying that the department was not of the view that in fact there was a distinct possibility that the agenda would be set back this year?

Mr Thomson —Was not of the view?

Senator O'BRIEN —Yes.

Mr Thomson —We have always taken the view that achieving ongoing reform of agriculture remains a very difficult challenge and we work with that piece of information constantly.

Senator O'BRIEN —That is the going forward part of it. Perhaps I did not phrase my question correctly. What I am suggesting to you is that this year there was a greater risk of a setback in the agenda, of taking a step away from trade reform, and that it was a high-risk year because it is one of those years where certain other events impact on it.

Mr Thomson —I think in my comments I have, in the broad, agreed. In particular, there were some additional factors in the United States Congress's decision, including some fairly severe climatic considerations. On the one hand, one cannot precisely foresee those occurrences but, if one looks at agriculture in a global context—you were mentioning the Uruguayan drought—somewhere on the globe often there is an unseasonable situation. We see it, for example, in our own country in relation to the Queensland sugar industry at the present time, including some assistance as a possibility to help those farmers cope with that calamity.

Senator O'BRIEN —But this new farm bill, which runs for five years, will impact on the sugar industry here, won't it?

Mr Thomson —Yes, indeed.

Senator O'BRIEN —I would expect that any government receiving the sort of advice that I think you were given, given the department's view, would be very wary of expecting positive outcomes this year in terms of trade reform, notwithstanding the fact that you would pursue them nevertheless.

Mr Thomson —Maybe that is a separate issue.

Senator O'BRIEN —Thanks for that.

Mr Thomson —Chairman, one of the reasons I came to the table was to add something to the discussion, if I may, on the issue of the Uruguayan beef quota. As someone who, on the government side, has been involved in the negotiation of the arrangement with the United States, there are two points that perhaps are worth making, additional to those made by my colleague Alan McKinnon.

The first is that in terms of the overall outcome of the Uruguay Round agriculture agreement negotiations with the United States, a significant element for Australia was the grant of a country quota for beef and, in particular, the grant of that country quota at a level which turned around the experience, in effect, of the previous 30 years where, as you would know from the experience of the Australian cattle and sheep meat industry—because mutton is included—the experience has been that in many of those 30 years prior to the Uruguay Round the actual limitation imposed on imports by the United States was at levels which were seriously disruptive and damaging to the Australian industry.

The outcome from the United States was to achieve a quota level which would, in foreseeable normal circumstances—and that would mean a drought year or a succession of drought years in Australia, with a big turn-off of cattle—be sufficient to place those cattle into the United States market. So this concept of a shortfall can be a little erroneous. It would be nice if every year we filled the quota, but I think the expectation of both the government and the industry in Australia at that time was that in most years we would not fill the quota.

Senator FERGUSON —How many years has it been in place?

Mr Thomson —The current quota has been in place since 1995, but the US meat import law in various configurations was introduced in 1964.

Senator FERGUSON —Have we ever filled our quota?

Mr Thomson —In many years we have filled our quota.

Senator FERGUSON —No, I mean with this new quota.

Mr Thomson —Not since we have had the quota, for the reasons that I have tried to explain. I just wanted to add that to the thinking. The second thing that I wanted to say very briefly, Mr Chairman, was the idea that a one-off reallocation of the quota, no matter how worthy the reasons for that are, would inevitably establish a precedent, and therefore a lot of other quotas which are enjoyed not just by Australia but by other countries would be possibly, very probably, able to be removed. That, too, was a consideration by the industry.

CHAIR —We will shortly be breaking for dinner, but Senator Cook and Senator Hogg have two short questions. Senator Cook.

Senator COOK —Thank you, Mr Chairman. I have a question to Mr Dauth on a matter we were dealing with before, the Philippines-Australia ministerial dialogue, and you may wish to take it on notice now. Have any trade officials attended those talks?

Mr Dauth —I have attended, and I am an official of the Department of Foreign Affairs and Trade.

Senator COOK —But your speciality is not trade, is it?

Mr Dauth —I do not oversight the Trade Division, no. That is a cute answer, I am sorry. The short answer to your question is that Mr Downer, in attending those meetings, is usually serviced by people out of the South and South-East Asia Division.

Senator COOK —Thank you.

CHAIR —Senator Hogg.

Senator HOGG —Thank you, Chair. My question again is to Mr Dauth. In response to questions today from Senator Faulkner on the federation guard, you are undertaking to pursue that matter. Can you tell us where that has progressed to at this stage? Do you have any further advice?

Mr Dauth —Nothing further at this stage. You will recall, Senator, that we undertook to check on what announcements Mr Flood might have made, or other substantial media comment on an attributable basis that he might have made, and, no, I am sorry, we have not been able to check that. We did say that we would have to check with London overnight, so I doubt whether we will get an early response.

Senator HOGG —Excluding the check with London overnight, will you be checking the sourcing of the document on pork?

Mr Dauth —We will have to ask for that. The information I currently have on that—and I am a bit reluctant to be too forthcoming, for fear of misleading you—is that that was not an announcement, it was not a press release by the High Commissioner, it was questions he answered on the record with a journalist who put questions to him. But, as I say, it is better if I get chapter and verse on that and let the committee know when I can.

Senator HOGG —All right. It may well be that Senator Faulkner may wish to pursue that to a small degree this evening, a further degree. I do not know, but thanks very much for that.

CHAIR —Thank you, Senator Hogg. It being 6.30, we shall adjourn until 7.30.

Mr Dauth —I have some information. We did some checking on the Vietnamese journalist. I understand there was an article written in November of last year but the journalist in question is still working at that newspaper as of this morning.

Senator QUIRKE —Good.

CHAIR —We are continuing our consideration of outputs 1.1.3 and 1.2.3—Americas and Europe. Before I call on Senator Cook for some final questions, I understand that you have a short statement to make, Mr Dauth.

Mr Dauth —Simply to add to the answer to a question that Senator Cook asked me about Sue Boyd's leave. She, in an admirably efficient way, approached us first about this on 11 April. We responded quickly on 13 April, approving that. She, of course, reviewed all of that in the lead-up to her departure. She went on leave and then turned herself around.

Senator COOK —Thank you, Mr Dauth, for that information. I had some questions on the agricultural subsidies that the US have just implemented. I think Senator O'Brien has covered most of that. All I would say is that, in terms of the statement made by the minister for agriculture that he cited, I can certainly empathise with all of the aspirations that are expressed in that statement. Obviously, this is an area where there is a very strong bipartisan view about what needs to be done.

However, I have a question concerning EU tariffs on an Australian company called Leading Synthetics. In the Financial Review on 20 May, it was stated that Leading Synthetics, a Melbourne based textile firm, has been hit with punitive tariffs by the European Union for alleged anticompetitive conduct and reliance on Australian government assistance schemes. My first question is: are we aware of this?

Mr Dauth —We can take it now but it is really within the responsibilities of the trade negotiations division.

Mr Thomson —Senator, we are, and have been, in touch with the company. The basic issue is a countervailing case. It is working its way through the European system at the present time. I add that some of the press reportage perhaps has not been entirely accurate about the facts as we understand them.

Senator COOK —I see. What penalties have been imposed?

Mr Thomson —At this point I am not aware that any penalty has been imposed. It is a traditional countervailing investigation which is going through that process. If a prima facie case is found, the expectation would be that the commission, the community, would apply a countervailing duty.

Senator COOK —Is it for the company to deal with the case or do they call on the government in any way for assistance?

Mr Thomson —They have been in touch and some advice has been given, but these are issues that relate to the company's particular circumstances and what use it has made of particular assistance. Somebody has complained, in the same way that our system would work, Senator. They are going through a process of investigation. As we understand it, there are at this point no exceptional aspects.

Senator COOK —They have sought advice and what advice the department can offer has been offered. Is the department now awaiting the outcome of this in order to form its own opinion about whether there is—

Mr Thomson —No, we are monitoring the situation and are in touch.

Senator COOK —But before you make any further decision would you await the outcome?

Mr Thomson —Probably, on the facts that are available to us at this point.

Senator COOK —How frequently does this occur—that particular companies are dealt with in this way in Europe?

Mr Thomson —In Europe from time to time, in the United States from time to time, in other jurisdictions from time to time. I would say, on average, in any particular year, there would be maybe one or two of these cases; in perhaps exceptional years three or four.

Senator COOK —Is there anything in recent behaviour to suggest there has been a tougher line taken and there are more cases or is it regarded as about—

Mr Thomson —I could not say that there was a tougher line taken.

Senator COOK —I have a number of other questions on Europe but I would propose at this stage to put them on notice. I will not be in a position to provide them on notice tonight. If it is okay with you, Mr Chairman, I will provide them tomorrow morning.

CHAIR —Certainly, Senator Cook.

[7.39 p.m.]