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Government decision: IAC report on domestic refrigerating appliances, etc



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MEWS RELEASE 78/80 BACA

GOVERMEUT DECISION; IAC REPORT ON DOMESTIC REFRIGERATING APPLIANCES. ETC.

The Minister for Business and Consumer Affairs, Mr Wal. Fife, and the Minister for Industry and Commerce, Mr Phillip Lynch, announced today the Government's decision on the Industries Assistance Commission's report of 5 February 1978 on Domestic Refrigerating Appliances. Etc.

The report covers domestic refrigerators, vertical and chest freezers, washing machines, clothes dryers, certain room air conditioners and evaporative air coolers.

The Government had accepted (with minor amendment, for technical reasons) the Commission's recommendations on long-term rates of protection for the 'whitegoods' industry but had made variations to the recommendations on short-term rates for some products, as well as to the period for implementation of the long-term rates.

(Current import protection, the Commission's recommendations and the Government's decisions are shown in the Appendix.)

The Minister for Industry and Commerce had received a report on this industry from the Electrical Industry Advisory Council, whose members included representatives of manufacturers, trade unions, retailers and consumers.

This report had been useful to the Government in its consideration of policy towards the industry.

In considering the Commission's recommendations the Government had had two objectives particularly in mind. '

The first was that, if the industry was to survive its current economic difficulties, plant throughout must be allowed to increase.

Only in this way could the industry obtain the economies of scale needed to compete against imports at reasonable levels of protection.

The second was that restructuring needed to take place within the industry, if it was to have a long-term future in the Australian environment.

The Government had noted the Commission's belief that a restructured industry could well employ more people than at present, and the fact that the industry accepted that restructuring was necessary.

In broad terms, the short-term rates of protection recommended by the Commission would have had approximately the same effect as the protective measures applying until today.

Under these measures production had been static and employment and the domestic industry's market share had been declining, for most products covered by the report.

The Government had therefore decided to introduce short-term rates which, on some products, were rather higher than those recommended by the Commission.

This decision should enable producers to increase their output and hence to win economies of scale.

In accepting (with a minor amendment, for technical reasons) the Commission's recommendations for long-term rates of protection for tils industry, note had been taken of the Commission's finding that restructuring should enable the Australian industry to become competitive at these moderate rates of protection.

The Commission had proposed that rates of duty be phased down to their long­ term levels over zero, two or four years, depending on the product.

The Ministers said that the Government agreed with the Commission that restructuring was needed, and thst the industry should intensify its efforts towards res true taring.

The Government had rejected, however, the concept that pressure to restructure should be applied via rapid reductions in tariffs.

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A policy of rapid reduction in protection would certainly cause restructuring, but with a degree of disruption that would not be acceptable to the Government or to the community in general.

The Government had therefore decided that rates of protection on «certain products should be phased down over six years, rather than four years as recommended by the Commission (details are shown in the Appendix).

Nevertheless, the Government wished to dispel any idea that the industry could relax in its efforts towards restructuring.

Indeed, the Government considered that the industry should publicly demonstrate to the community the success of these efforts. '

To this end, the Government would consider, in three years time, requesting the Commission to hold a public inquiry into the restructuring which had taken place in this industry in the interim.

Prices of domestic appliances (which include the goods under review) had risen far less quickly than prices generally in the last few years., the Ministers said.

The Government would look to this good price record being maintained or bettered during the adjustment period.

z During the adjustment period, tariffs on some products would be above the level of assistance considered appropriate to support economic production in the longer term.

It was important that this fact did not encourage the entry to the industry of new firms which might not be able to compete successfully at the long-term rate of assistance. ' '

This was consistent with the Commission's conclusions that there were too many producers within the current industry, but did not, of course, apply to moves by the current producers to rationalise their product mix, nor to joint ventures involving the present producers. >

Some specific aspects of the Government's decisions called for special comment.

The current quantitive restriction on chest freezers had the effect of limiting imports' to about 60,000 units per annum.

This figure was small in relation to the 194»000 units which had been imported in 1975-76, just before the restriction had been imposed.

The Government believed that the increase in duty on these goods would suffice to hold imports to a reasonable level.

It was, however, impossible to predict with certainty that this would be the case and the Government had therefore decided to retain the quantitative restriction for one further year, but at a level sufficient to restrain imports (other than those from New Zealand under special NAFTA trading arrangements) to 50,000 units.

The situation would then be reconsidered in the light of evidence as to the effect of the higher tariff rate.

Imports from New Zealand under special NAFTA trading arrangements will continue to be administered separately and are expected to be up to 40,000 units in the year.

The Commission's recommendations would have provided short-term tariff assistance of 50 per cent on small refrigerators and 45 per cent on larger refrigerators and all vertical freezers.

The production process was almost identical for all of these goods and there was no technological reason for the distinction in tariff treatment.

Moreover, the rise in import share of the market in recent years had been largely due to increased imports of the smaller appliances.

The Government had therefore decided that the short-term rate of 45 per cent should apply to all refrigerators and vertical freezers.

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The Commission had reported that the operation of the current Separate Articles Direction to rotary clothes dryers appears to serve no useful purpose and is detrimental to local manufacturers of these products.

The Commission's suggestion that rotary clothes dryers be exempt from the provisions of the Direction had been accepted.

The treatment of imports of New Zealand origin had been discussed with the New Zealand Government.

In the light of these discussions, it had been decided that a preference margin of 17i percentage points would apply to all goods under reference of New Zealand origin. Details are shown in the Appendix.

It had further been decided (as announced earlier) that Australian and New Zealand officials would undertake, in consultation with the respective industries, a , joint study of the possibility of an arrangement on whitegoods under Schedule B of the New Zealand/Australia Free Trade Agreement. Officials will report to Ministers on this

subject no later than October 1978.

The Commission had made certain recommendations as to the rates of duty which should apply to imports from developing countries. This matter was being considered by the Ministers for Trade and Resources, and for Industry and Commerce.

The Ministers noted that the Department of Productivity intended to enter into, discussions with the whitegoods industry with a view to commencing a productivity improvement program.

i The administrative changes arising from the'Government's decision will be , · announced by the Department of Business and Consumer Affairs by means of Bureau of Customs Notice as soon as possible.

Copies of the Commission's final report, and of the Advisory Council's report, are available at Government bookshops.

CANBERRA, A.C.T 6 July 1978

APPENDIX

P R O D U C T

G E N E R A L R A T E S

C U R R E N T R E C O M M E N D E D B Y I A C G O V E R N M E N T D E C I S I O N

NZ RATES

GOVERNMENT DECISION

R e f r i g e r a t o r s u n d e r 2 0 0 L 25% 30%

V e r t i c a l f r e e z e r s u n d e r 2 0 0 L 25%

R e f r i g e r a t o r s , 2 0 0 L - 4 5 4 L 25% on 2 0 , 0 0 0 u n i t s ,

t h e n 4 ? t %

V e r t i c a l f r e e z e r s , 2 0 0 L - 4 5 4 L 2 5 %

R e f r i g e r a t o r s o v e r 4 5 4 L 30% on 2,500 units,

then 47t %

45% for 2 years

35% for next 2 years

30% thereafter

V e r t i c a l f r e e z e r s o v e r 4 5 4 L 25%

Washing machines 3 0 % o n 4 0 , 0 0 0 u n i t s ,

t h e n 4 5 %

45% for 2 years

40% for riext 2 years 35% for next 2 years

30% thereafter

(plus Q R o f 3 0 , 0 0 0 +

N A F T A * * o n c h e s t

f r e e z e r s u n d e r 350L,

f o r o n e y e a r )

C h e s t f r e e z e r s u p to 3 5 0 L 25%, b u t q u a n t i t a t ­

i v e r e s t r i c t i o n o f

2 0 , 0 0 0 p l u s N A F T A * * 3 5 % f o r 2 y e a r s

30 % t h e r e a f t e r

C h e s t f r e e z e r s o v e r 3 5 0 L 25%

27i% in the short term

C l o t h e s d r y e r s 25% on 7 0 , 0 0 0 u n i t s ,

t h e n 4 5 %

R o o m a i r c o n d i t i o n e r s :

- air-cooled

- water-cooled, "separable”*

- water-cooled, "not separable"*

Evaporative air coolers

3 0 %

25%

35% for 2 years

30% thereafter

25%

2 5 %

25%

in the:

short term

72% in the short term

* "Separable" refers to appliances not incorporating a condensing unit. '

* * " N A F T A " refers to imports covered by trading arrangements reached under Article 3(7) of the N e w Zealand^ Australia Free Trade Agreement. ' -