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Thursday, 18 November 2004
Page: 6


Senator SANDY MACDONALD (9:42 AM) —The implementation of the Thailand-Australia free trade agreement will be of importance to both Australia and Thailand and builds on the very close personal, economic and strategic partnership between Thailand's 65 million people, with their economy growing strongly, and Australia's 20 million people, with our economy also growing strongly. The implementation date is planned for 1 January 2005, which is also the day that the US-Australia free trade agreement is planned to start. This is not coincidental. It shows that while Australia pursues its multilateral responsibilities with vigour, particularly with respect to the WTO and APEC, it is also determined to create close personal bilateral relationships and agreements with like-minded trading nations—particularly with the United States, also now with Thailand, previously with Singapore and hopefully in the future with China and other countries in North Asia where Australia's economic and strategic future lies in such strength.

Bilateral trade between Australia and Thailand continues to grow. Statistically, Thailand was our 12th largest source of exports in 2003 and our 13th largest source of imports, with two-way trade approaching $6 billion. Major Australian exports to Thailand include non-monetary gold, aluminium, cotton, wool, dairy products and copper. Major imports include motor vehicles, heating and cooling equipment, computers, crude petroleum and seafood. Unfortunately, relatively high tariffs and other market access restrictions have constrained export growth for Australian producers and primary producers. Thailand's average applied tariff is around 15 per cent but with much higher peaks for some products, including various processed foods and beverages.

In order to implement the Thailand-Australia free trade agreement, two pieces of legislation require amendment—and that is what we are talking about today—firstly, the Customs Act 1901 and, secondly, the Customs Tariff Act 1995. Passage of these amendments is the primary process in our domestic implementation, and the prompt passage of this legislation will allow us to meet the target date, as I said, of 1 January 2005, which is the date we have agreed on with Thailand for entry into force. The amendments of the Customs Act will incorporate the rules for determining whether goods originate in Thailand and are therefore eligible for preferential duty rates, and the product-specific rules are modelled on those applied in the Australia-United States free trade agreement. The amendments also allow Customs to conduct verification of Australian exporters to ensure that the goods they export to Thailand are produced in Australia. I should make it very clear that these new rules have been endorsed by Australian business as a cheap and easy way to prove origin. I have to say that the negotiation of these FTAs is now pretty well covered by our Minister for Trade, the Hon. Mark Vaile, and by the trade negotiations in the Department of Foreign Affairs and Trade.

The Customs Tariff Act will need to be amended also to codify the preferential duty rates incorporated in the Thailand-Australia free trade agreement and the volume-triggered special safeguard mechanism which will apply to imports of Thai tuna and pineapple, two important Thai imports into Australia. This agreement was negotiated over eight negotiating sessions conducted in Australia and Thailand from August 2002 to October 2003. The agreement was signed by Mr Vaile and his Thai counterpart in Canberra on 5 July during the visit to Australia of Prime Minister Thaksin and nine of his cabinet ministers. That visit underlined the high priority that the Thai government accords to this agreement, as does the Australian government.

I have to say that this is an outstanding result. This is a very important agreement. It is a very important country; it is a very important neighbour to Australia. It demonstrates the government's commitment to opening up new opportunities for Australian exporters and investors in East Asia, and it will link Australia to the second largest and fastest growing economy in South-East Asia. It is really a very special relationship. Thailand's economic performance over the past few years has been strong and Prime Minister Thaksin's government is promoting policies that are aimed at building a more open and regulated economy—and he is doing it very well.

The Thailand-Australia free trade agreement will be Thailand's first comprehensive free trade agreement with a developed economy. It will be Australia's fourth free trade agreement and the second with an ASEAN member. It is also the first FTA between a developed and a developing country in the region, and it sets the benchmark for future trade liberalisation in the region. I cannot state how pleasing it is that this free trade agreement has been signed. It really is very, very exciting. It is a good arrangement with good access, and our future and our trade links lie both in South-East Asia and in North Asia, so it is very important.

This agreement is a major marketing agreement. It will lead to the complete elimination of Thailand's significant trade barriers across all sectors, for some tariffs are up to 200 per cent, and substantially improve the environment for services, trade and investment. The agreement will also create improved conditions for broad commercial and regulatory cooperation between Australia and Thailand and improved business mobility at a time when that is becoming increasingly important.

On entry into force, more than half of Thailand's 5,000 tariffs, accounting for nearly 80 per cent of Australian exports, will be eliminated. Over $700 million of current Australian exports to Thailand will benefit immediately from tariff cuts in the first year alone, and it is estimated that Australian exporters could save around $100 million in customs duties. Tariffs not immediately eliminated will be phased down, and 95 per cent of all current trade between Australia and Thailand will be completely free by 2010. Longer phase-out periods and special quota arrangements will apply to a small number of agricultural goods. Importantly, the tariff preferences contained in this agreement are only available to Australian exporters and therefore give them an enormous advantage over their competitors in an increasingly sophisticated Thai market. Many Australian companies formerly locked out of the Thai market by high tariffs and quotas will now enjoy new opportunities, particularly in areas such as agriculture, processed food and beverages, and automotive products.

I should say that the most important thing, particularly for agricultural producers, is market access. After you have market access, if you have a good product, you can succeed but if you have no market access you cannot. This agreement provides that market access. After that, just as in examples you can see in the United States with lamb, once the market is exposed to Australian product, it likes it and the product stands and succeeds on its own quality and price.

On industrial tariffs, Thailand will immediately eliminate its 80 per cent tariff on large passenger motor vehicles and will reduce its 80 per cent tariff on other passenger vehicles to 30 per cent, phasing to zero in 2010. Tariffs on all automotive parts, components and accessories, currently up to 42 per cent, will be immediately reduced to a ceiling of 20 per cent and then phased to zero in 2010. Thai tariffs on machinery and equipment currently up to 30 per cent will either be immediately eliminated or phased down to zero by 2010. And Thailand will immediately eliminate the current tariff on wheat, ad valorem equivalent of between 12 and 20 per cent; barley, rye and oats, ad valorem equivalents of up to 25 per cent; and the tariff and tariff rate quota on rice. This means that the tariff on wheat gluten, which is exported to Thailand for its prawn industry—and I suspect that quite a few of the imported prawns that come into this country are fed on Australian wheat gluten—will be reduced to nought per cent. On beef, Thailand will immediately reduce the tariff to 40 per cent, down from 51 per cent, and, for beef offal, to 30 per cent, down from 33 per cent, and will phase these rates to zero in 2020.

As Australia already grants tariff-free access to many Thai products, Australia's tariff commitments in the agreement are slightly more modest than those of Thailand. Of particular note is that Australia will grant improved access for Thai imports of automotive products, textiles, clothing and footwear, steel and plastics, and chemicals subject to tariff phasing arrangements. In all cases, these phasing arrangements were developed following extensive consultation with Australian industry groups.

In the long term, dynamic gains from the Thailand-Australia free trade agreement promise to yield even larger benefits to the Australian economy and to Australian families. The Centre for International Economics has estimated that the agreement will result in a boost to the Australian economy of at least $2.4 billion over the first 20 years of its operation. The agreement has other important economic effects on Australia. So overall it is a good story; it has been well negotiated.

I make the point that, apart from the direct economic benefits, the implementation of the Thailand-Australia free trade agreement will also enhance Australia's broader trade, economic and security interests in the region—a region that is of such vital importance to us and a region, of course, in which this government has been able to build very, very strong links. A substantive and comprehensive FTA between our two countries will signal strong support for multilateral, regional and bilateral liberalisation initiatives, and it will also create an open and regional trading environment and promote strength and stability in the region. I thoroughly support the legislation.

(Quorum formed)