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JOINT STANDING COMMITTEE ON TREATIES
22/11/2010
Treaties tabled on 15, 21 and 24 June 2010

CHAIR (Mr Kelvin Thomson) —I declare open this public hearing of the Joint Standing Committee on Treaties ongoing review of Australia’s international treaty obligations. The committee will take evidence on 10 treaty actions which were referred to the committee on 16 November. I thank witnesses for being available for this hearing. I welcome Mr Clogstoun from the Department of Foreign Affairs and Trade. Although we do not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and warrants the same respect as proceedings of the House and the Senate. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of the parliament. I now invite you to make any introductory remarks that you wish to make before we proceed to questions.

Mr Clogstoun —I have a short opening statement to make. My colleagues from other departments, particularly Australian Customs and Border Protection Service and the Department of Innovation, Industry, Science and Research, are attending and will be on hand to assist in answering some of the more technical questions members may have. I would also mention to the committee that the national interest analysis is available and that reflects our collective views on the importance of the proposed amendments to article 3 and amendments to annex G of ANZCERTA and why it is important to move forward to ratify these amendments.

There are two separate treaty actions being proposed here owing to the differences in the means by which amendments to article 3 and annex G would be implemented and the timing differences that would arrive from this. The article 3 amendments will be implemented through amendments to the Customs Act 1901, while amendments to annnex G will be implemented through amendments to the Customs (Rules of Origin) Regulations 2006.

These amendments reflect the broader benefits of deeper economic links between Australia and New Zealand so as to advance economic integration between the two countries. The proposed amendments to ANZCERTA are consistent with its central role in the trans-Tasman economic relationship and continued efforts to advance this relationship.

On January 2007, the current ANZCERTA rules of origin entered into force. In negotiating these rules of origin, both Australia and New Zealand agreed to include a provision in ANZCERTA requiring that rules of origin be reviewed within three years of the new rules taking effect. In order to meet this obligation, a review of the rules of origin was commenced in November 2008 and completed in March 2010. The review was promoted on the DFAT and DIISR websites and newspaper advertisements were run in the Australian and the Australian Financial Review on 3 February 2008.

The review recommended that changes should be made to article 3 of ANZCERTA and the product specific rules for around 700 tariff lines to simplify the rules that determine the eligibility of goods for preferential access. This simplification has been reflected in Australia’s more recently concluded FTAs, namely those negotiated with Chile and with ASEAN. The amendments will ensure that ANZCERTA reflects best practice and remains one of the world’s most exemplary FTAs.

The proposed amendments will reduce the administrative burden for both Australian and New Zealand exporters and are more user-friendly to assist them in claiming preferential status for eligible goods. Australian industry bodies were consulted extensively in the development of the proposal, initially in February 2009 and then throughout the review process. In the main, no opposition was expressed to the changes. However, the major manufacturers of men’s suits in Australia opposed the removal of ex-factory regional value content from the product specific rules of origin that is proposed to apply to men’s suits from 1 January 2012.

There will be no impact on Australian state and territory laws. However, New Zealand will undertake all changes to its domestic law necessary for its compliance with the proposed treaty action through amendments to the relevant regulations.

CHAIR —Thank you. Can you tell the committee which tariff lines retained the factory cost regional value content rules of origin?

Mr Clogstoun —There are about 700, but I will let my Customs colleagues detail—

CHAIR —It is not necessary to go through them one by one.

Mr Clogstoun —Okay. I will take that question on notice.

CHAIR —What effect do you think that the change in the rules of origin for the tariff lines will have on producers of those tariff lines?

Mr Clogstoun —The only impact is that some items going into New Zealand are duty free. Some intermediate items that come into Australia are subject to tariffs and that may affect some of the production of some items, in particular men’s suits, where fine quality woollen cloth goes into New Zealand free, but we still have a tariff on certain textile lines.

CHAIR —So has the department done work on what you see as being the impact on local manufacturers?

Mr Clogstoun —The Department of Foreign Affairs and Trade has not, but the Department of Innovation, Industry, Science and Research may have.

CHAIR —Would it be possible for you to take that question on notice and advise the committee as to whether the department has undertaken any impact work?

Mr Clogstoun —Yes.

Mr FORREST —Further to your question, Chair, I would be interested to have some sort of comprehensive list about what commodities or products are affected, either favourably or unfavourably, by these changes.

Mr Clogstoun —Sure. I will be in touch with my colleagues in other departments and will draw up a list of the items that would be still subject to tariffs.

Mr FORREST —That is from a New Zealand perspective as well as our own.

Mr Clogstoun —Yes. I am not sure but I think most New Zealand intermediate goods enter duty free.

Senator CASH —I note that you said that you consulted extensively and that in the main no opposition was expressed to the changes. There was opposition, however, and it is stated as strong opposition, from the Australian men’s suit manufacturers to any change to the product specific rules for their products. What was the nature of their opposition?

Mr Clogstoun —Because the New Zealanders had a tariff advantage over the cloth they were importing, whereas because of the textile tariffs the Australian producers of men’s suits still had to pay a tariff on goods imported. That was their main concern. There were other concerns, such as the strength of the Australian dollar, labour rates and so on, but that was their main concern.

CHAIR —As there are no other questions, I thank you for attending, Mr Clogstoun, to give evidence today. If the committee has any further questions, the committee secretariat may seek further comment from you at a later date.

Mr Clogstoun —Thank you.

[10.26 am]