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Wednesday, 28 February 2001
Page: 24705

Mr SECKER (10:11 AM) —I welcome the opposition's bipartisan support for the Customs Tariff Amendment Bill (No. 4) 2000. I remind the House again that we owe a lot to a former member of the chamber—the former member for Wakefield, Bert Kelly—who tirelessly fought a campaign to reduce tariffs in this country against considerable opposition from within his own ranks at the time. He certainly went against the prevailing idea that tariffs were some sort of protection and showed that, in actual fact, all tariffs ever did was make consumer goods more expensive and industries lazy and inefficient, and stop innovation. As a result, industries were not able to compete overseas.

The measures in today's bill are fourfold. The major amendment proposed by the deal is the reduction of duty on 30 tariff subheadings from five per cent to three per cent. On a lesser scale, the bill adds Angola and Madagascar to the list of least developed countries in schedule 1 of the Customs Tariff Act, which contains a list of the countries and places to which special rates of duty apply. The effect of the change will be to accord a five per cent tariff margin to imports to Australia from both Angola and Madagascar. Item 17 of the bill provides concessional entry for goods that have been exported from Australia and are subsequently reimported in a non-altered condition.

The proposed amendments are intended to clarify the operation of the concession so that the goods produced in Australia are not granted the concession if drawback or refunded duties have been claimed on them and not repaid to the Commonwealth or if the goods were excisable but excise has not been paid. Additionally, the proposed amendments are intended to ensure that goods are not granted the concession if they contain components which were previously imported duty free under the Tradex scheme or the Manufacturing in Bond scheme.

Finally, part 4 of the schedule of the bill reintroduces a five per cent rate of duty on imports of covers of woven fibreglass fabric. This reintroduction follows the identification of a local manufacturer for such goods which has been a very strong part of the whole legislation and which has been supported by both parties for many, many years. The Customs Tariff Amendment Bill (No. 4) 2000 is quite an important piece of legislation. While it might sound fairly dry to many people listening to the debate, it is the culmination of events which began as a great travesty for an important Australian business which has a substantial number of ordinary South Australian workers among its stakeholders through their superannuation funds.

This business is producing product of the highest quality. It is moving ahead, using the best technology that the modern era can supply, in order to grasp major export opportunities that would benefit this great nation, from the South Australian Superannuation Fund members and their other major shareholders, such as the NRMA in New South Wales, Perth's Schaffer Corporation and Rothschilds, to the employees of the company and, indeed, all Australians, through their major export program. It is a company that has done everything right for the benefit of the whole community. That company is Howe Leather.

The dispute that has led to the major amendment in this legislation began in 1995 when Howe Leather won a $US75 million contract to supply leather for car seats for General Motors in the United States of America. This showed that we could indeed compete globally with the best companies in the world, and that we certainly had a quality product. The foundations for the company's present-day success were laid down in the 1970s after a management buyout. The new owners went overseas to look for new orders in the furniture and car industries. They also began to research dyeing techniques and invested to improve overall quality.

During the 1980s, Howe Leather consolidated itself in the Asian motor industry, but it was the German car manufacturer, BMW, that guided them in making the decision to try to enter the United States market in 1994. BMW wanted to diversify its own suppliers and not be reliant on any one region for its product, to ensure their own stability. As I said, in 1995, Howe Leather won a $US75 million contract to supply leather for car seats used by General Motors in the United States.

As more contracts followed, the two companies which had previously dominated the US market got a bit twitchy and lobbied the US government to launch a World Trade Organisation challenge to the industry programs which had rewarded Howe Leather for increased sales. These competitors argued that these programs amounted to export subsidies, which are illegal under the WTO rules. The Clinton administration then threatened Australia with the imposition of tariffs on a range of our imports, including wine, beef, car parts and other unrelated goods, unless Australia required Howe Leather to repay $30 million of government grants which the WTO had declared illegal. Under Australian law, the government had no power to take this action. But still the unprecedented harassment of Howe Leather continued.

The issue placed an intolerable strain, not just on Howe Leather, but on many small Australian enterprises as the threats were made and as politicians and trade officials both here and in the United States argued about the grant that Howe had received. Howe Leather had been a shining example of a company that had displayed efficiency and professionalism. An ability to cut percentages in order to increase profits helped them to become an important global player and to ride the storm of the past four years.

Howe Leather have been outstanding in their negotiations with our government. They have certainly done the right thing at every stage, in order to get the World Trade Organisation and the United States government to resolve this matter. In June 2000, to protect the many other industries that were threatened by the United States with retaliatory measures, our government agreed to a number of measures that would protect our industries and allow Howe Leather to continue as a major global player. We agreed to remove tariffs from a wide range of consumer products, from microwave ovens to skis and condoms, which would reduce the price of about 30 items by up to five per cent from 1 July last year, thus cancelling out the price rises from the GST. I point out that all of these items involve products in regard to which there is no known manufacturer here in Australia. The deal is part of the package that has reduced the penalty to Howe Leather flowing from the World Trade Organisation ruling. The tariffs involved have no value to any Australian industry, but are of enormous value in preventing the Howe Leather issue escalating into a full-scale trade war with the US.

Under that deal, Howe Leather is required to repay $7.2 million over 12 years. Automotive leather will be ineligible for grants under government industry schemes, and tariffs on microwaves and the other items will be suspended for 12 years. It is the removal of these tariffs on those 30 items which forms a major part of this amendment bill. As a result, this bill will protect the jobs of not only over 800 workers at Howe Leather but of countless thousands of other workers in industries that were under threat from the US government retaliation.

Don't get me wrong—I am not taking issue with the role of the World Trade Organisation, as the Pauline Hanson types and the League of Rights people might do. We have taken major issues to them in recent times and sought their assistance as a global umpire. There is no doubt that the World Trade Organisation has helped our lamb producers, not only in the electorate of Barker but all through Australia, with the ruling that what the US had done over the lamb import issue was quite plainly wrong. The World Trade Organisation can certainly be of great assistance to our producers in Australia when unfair actions have been taken by other governments.

Our record in initiating dispute action—on prawns, music copyright protection, Canadian dairy assistance, Indian quantitative restrictions, Hungarian export subsidies, Korean beef and, most notably, the US lamb issue—highlights the active role the government pursues in this area. It is worth noting that all the major parties in Australia support this. They know that in the long and the short term we will all be better off being able to export and having freer trade throughout the world. It is a known fact that, because of our efficiencies—we produce five times what we consume in our home market—we need to export 80 per cent of what farmers in Australia produce. The best way to ensure that happens is to have greater access to overseas markets.

We have established a dispute, investigation and enforcement mechanism through the department of trade to help exporters identify where challenges to the World Trade Organisation could advance their interests. The future of Australia's lamb exports to the United States is now likely to be one of the first major decisions facing the new US President after the World Trade Organisation rejected US import restrictions as a breach of global rules. Political and farm industry leaders here rejoiced at the finding that was handed down recently by a disputes panel of the World Trade Organisation. At the time, the Prime Minister welcomed the ruling as the first bit of international trade justice Australian farmers looked like getting for a long time. He said that the United States restrictions had been wrong from the start but warned that the US was likely to appeal the ruling, which it has since done. According to the President of the National Farmers Federation, Ian Donges:

These imposts have cost our lamb producers around $15 million a year, and caused unnecessary hardship to a number of rural communities.

My electorate of Barker has the largest exporter of lamb to the United States, the Tatiara Meat Company. Indeed, I have personally sold many stock through the Tatiara Meat Company. It has been a very important decision for them. While there are still plenty of exports going to the United States, in some ways we have also given them a signal to look for other markets around the world. In the long term, I think the lamb industry will even benefit from this crazy decision that President Clinton made.

Australia and New Zealand launched the World Trade Organisation action after President Bill Clinton decided, in July 1999, to cap their rapidly growing lamb exports to the US at 1998 levels, saying their growth threatened serious injury to the domestic lamb meat industry. Of course, that was nonsense. There were only 300 lamb farmers in the United States that produced over 100 lambs a year, so we were really looking at quite a small industry in itself, and the reasons given were clearly shown by the World Trade Organisation to be against WTO rules.

Australian exports were capped initially at 17,500 tonnes with a prohibitive tariff of 40 per cent slapped on exports above that quota. Last year the quota was increased slightly and the tariff reduced to 32 per cent. Under the Clinton ruling, the tariff would fall to 24 per cent next year and end in mid-2002. But no doubt with congressional elections coming up in the year 2002 there would again be pressure on the Senate and the Congress in the United States parliament to bring back in lamb tariffs and quotas, but the World Trade Organisation ruling will, I think, ensure that they will not even think about that sort of decision making because they would already have previous rulings on it.

At the time the government and the industry expressed enormous outrage, and rightly so, at this horrible decision. We believe that the administration's decision went way beyond the ITC report and its recommendations. We always held that the decision was incorrect and inconsistent with World Trade Organisation rules. We have been energetically pursuing the case on behalf of the Australian industry within the WTO, and December's decision in the year 2000 in our favour was certainly most welcome. Obviously, there is a process to go through yet. The US has appealed the decision but we will continue to assist the industry to pursue the case in what we are confident will be a positive outcome for our industry. Clearly, this is an indication that using the rules and disciplines within the World Trade Organisation to the advantage of individual exporting industries is worth while in that we can use them and we can win.

This will be a great victory for another vital Australian industry. It should give Australian exporters great heart, and of course the government is prepared to put significant resources into prosecuting substantiated cases like this on the industry's behalf with the assistance of industry. So while we were disappointed with the tactics used by the US against Howe Leather, we are still grateful that we can use the World Trade Organisation as a trade umpire to defend our industries. In reaching the solution of the Howe Leather issue the company displayed good grace in accepting the terms of the understanding, which will bring to an end the harassment inflicted on the company over the past four years.

Last year after this agreement was reached, the managing director of Howe Leather, Mr Anton Mayer, was able to bring a totally positive quarterly report to his workers. He was able to report their first full year in the black since this debacle began in 1996. Group sales were around $200 million. The before tax profit was $12 million, and the automotive trim division, which is responsible for more than 70 per cent of their business, was increasing orders to at least $170 million a year for the next five years.

This year they expect to process at least 1.5 million hides with 92 per cent of them exported to the big players of the international automotive industry. Of course, those hides come from our agricultural industry, and there is no doubt that, whilst the Howe company is doing well, it also puts a very strong base to our hide and pelt industry in Australia and it shows that we can produce very good quality leather. Ford, General Motors, BMW, Honda, Mazda and Subaru, big players in the international automotive industry, are all taking orders from Howe Leather. This year it will also include the US cars of Mazda's Tribute, GM's Pontiac Aztec and Ford's Escape. Such successes for both Howe Leather and countless thousands of other Australian small businesses and their contribution to our economy deserve to be assisted by the minor amendments arising from today's bill.

I again pay tribute to Bert Kelly, as I previously did. There is no doubt that his continued action to bring some sanity into the tariff debate has certainly proven to be one of those enduring policies that have taken over the minds and hearts of many of our decision makers here in Australia.

I am pleased to hear that the Labor Party has agreed that a bipartisan approach will be taken on this matter. There has been a myth that tariffs protect industry; in fact, tariffs are a tax on consumers and that so-called protection leads to long-term inefficiencies, a lack of innovation and certainly an inability to compete on the world market.

The member for Denison raised the problem of less developed countries and how free trade helps only to increase average wealth. He suggested that the rich got richer and the poor got poorer. That is an interesting statement to make; it is the sort of thing that people say. It ignores the fact that growth inevitably helps everyone. The alternative, of course, is not to have growth.

Mr Sawford —I think he is talking about schools funding.

Mr SECKER —Schools funding has increased by 26 per cent. I am not sure what the honourable member opposite is talking about.

Mr Sawford —It has gone from 3.6 to 2.1 per cent.

Mr SECKER —I am not sure what education has to do with tariffs, anyway. Education does not have a lot to do with tariffs, but that has never stopped the Labor Party from making a story out of no facts at all. It is with pleasure that I support this bill. We should continue along this path so that we have industries that continue to grow and compete globally. There is no doubt that this sort of action will help that happen.