Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Industries Assistance Commission - Report - Electric lamps, dated 6 February 1986 (No. 379)


Download PDF Download PDF

The Parliament of the Commonwealth of Australia

ELECTRIC LAM PS

Industries Assistance Commission Report

6 February 1986

Presented 9 April 1986 Ordered to be printed 17 April 1986

Parliamentary Paper No. 95/1986

n \ - y /

A U S T R A L IA ,.,'- ~->>XXXXXX . ' / / / Ζ ' ΐ ϊ Τ χ XXX

INDUSTRIES ASSISTANCE COMMISSION REPORT

ELECTRIC LAMPS

6 FEBRUARY 1986

No. 379

INDUSTRIES ASSISTANCE COMMISSION REPORT

ELECTRIC LAMPS

AUSTRALIAN GOVERNMENT PUBLISHING SERVICE CANBERRA 1986

Commonwealth of Australia 1986

Printed by C . J. THOMPSON, Commonwealth Government Printer, Canberra

INDUSTRIES ASSISTANCE COMMISSION REPORT NO. 379 ELECTRIC LAMPS

THE HONOURABLE THE MINISTER FOR INDUSTRY, TECHNOLOGY AND COMMERCE

I forward the Commission's report on Electric Lamps in accordance with the reference of 7 February 1985 under section 23 of the Industries Assistance Commission Act 1973.

A.J. Cahill Secretary

14 February 1986

For the purpose of inquiry and report on this matter, in accordance with Section 19 of the Industries Assistance Commission Act 1973. the powers of the Commission have been exercised by:

D.L. McBride.................................. Commissioner

C.R. Meares......................... Associate Commissioner

In accordance with Section 20 of the Industries Assistance Commission Act 1973. Mr C.R. Meares has declared an indirect pecuniary interest by virtue of his wife's shareholdings in a company which made submissions to the Commission. This interest is as follows:

Mrs J.M. Meares

G.J. Coles 1320 shares

CONTENTS

Page

SUMMARY 1

RECOMMENDATION 3

1 INTRODUCTION 4

1.1 The Reference 4

1.2 Goods Under Reference 4

1.3 Public Inquiry And Other Information Gathering 4

1.4 Requests And Suggestions 5

1.5 Previous Reports 6

2 INDUSTRY AND MARKET CHARACTERISTICS 7

2.1 Background 7

2.2 Production Costs 7

2.3 Employment Trends And Labour Characteristics 9

2.4 The Market 9

2.5 The Operating And Marketing Agreements And Their Effects 12

2.5.1 The Agreements 12

2.5.2 Effects Of The Agreements 14

3 ASSISTANCE 16

3.1 Components Of Assistance 16

3.2 Nominal And Effective Rates Of Assistance 23

3.3 Changes In Assistance In Recent Years 25

3.4 The Agreements And Assistance 25

4 ASSISTANCE ISSUES 26

4.1 Effects Of The Many Changes In Assistance 26

4.2 Disparities In Assistance 27

4.3 The Assistance Options 29

4.3.1 The Commission's Favoured Option 29

4.3.2 Other Options 31

4.4 The Commission's Responses To The Specific Reporting Requirements In Part 3 Of The Minister's Reference 32 4.5 Tariff Harmonization . 37

APPENDICES

A THE REFERENCE A.l

B LIST OF PARTICIPANTS B.l

C SUMMARY OF REQUESTS AND SUGGESTIONS C.l

D TARIFF PROVISIONS D.l

E THE PRICE RAISING EFFECTS OF ANTI-DUMPING ACTION E.l F CHRONOLOGY OF ASSISTANCE FOR ELECTRIC LAMPS OVER RECENT YEARS F.l

G ELMA LETTER ON INVESTMENT INTENTIONS G.l

. .·

χ· •

■ · ,. I

' ·:

r/

V ‘

SUMMARY

What's the report about?

Common tariff rate of 15 % recommended

Three local producers

Complex assistance environment

Many previous changes in assistance - a source of

distraction

This report is concerned with government assistance to the Australian "electric lamps" industry. The main products of this industry are light globes and fluorescent tubes.

The Commission recommends that all electric lamps and parts therefor under reference be dutiable at a common rate of 15 per cent. This would involve:

. a reduction in tariff assistance of five percentage points for fluorescent lamps;

. an increase of five percentage points for filament lamps (including UV filament lamps); and

. a 13 percentage point increase for all other lamps under reference, which presently attract a duty of 2 per cent, leaving aside any reductions in duties which might arise via the Commercial Tariff Concession Orders (CTCO)

System.

The biggest Australian producer of filament and fluorescent lamps is Electric Lamp Manufacturers (Australia) Pty Ltd (ELMA), located at Newcastle, New South Wales. ELMA wholly owns the adjacent Newcastle Glass Works (NGW) and is itself

owned jointly by four international lamps producers. The Australian affiliates of these four distribute ELMA's entire output. ELMA operates, and the subsidiaries of its owning partners market under two Agreements which have been authorised by the Trade Practices Commission.

Two small firms specialise in making a small range of ultra-violet (UV) lamps, Ultra-Violet Supplies (Vic.) in Melbourne and Gelman Sciences in Adelaide. Neither firm made a formal submission to the inquiry.

The incentives environment for this industry is complicated - tariffs, anti-dumping action, government purchasing preferences, labelling regulations, tariff concessions and Developing Country (DC) preferences are all in place.

ELMA has applied a significant level of resources to seeking government assistance; the ready-availability of assistance may well have directed its attention away from making

improvements in production and marketing. For example, the Commission's analysis of the ELMA Agreements highlighted the constraints which these place on ELMA's ability to improve its competitiveness. It appears to the Commission that a single

marketing entity selling ELMA's lamps could have lower costs, a more cohesive marketing strategy and a more effective marketing and distribution organisation than those resulting from the present structure.

Neglecting dumping duties,

industry now moderately assisted

Sound basis for recommend­ ations

No more blank cheques

Lamp production likely to be competitive at the recommended tariff rate

For the bulk of local lamps production, the weighted average nominal and effective rates of assistance due to tariffs alone are currently about 10 per cent. On this basis the lamp industry could be described as moderately assisted. If however, other forms of protection such as dumping duties are taken into account, the rates of assistance could be twice as high.

The uniform 15 per cent tariffs recommended would give the industry as presently structured a weighted average effective rate of assistance of approximately 10 per cent. This is about the average effective rate now applying on goods using similar processes and is equivalent to the existing average effective rate due to tariffs for the bulk of lamps production under reference.

The level of assistance recommended is not based on any estimation of the assistance which would be required to maintain Australian production of lamps. Indeed, the Commission wishes to see a move away from an assistance regime so flexible that it conveys the impression of a readiness on the Government's part to provide whatever assistance would be needed to support the continuation of a lamp manufacturing

industry in Australia (or worse, to sustain ELMA's market position) regardless of market circumstances.

The ELMA Board claimed that in the event of the assistance being set at the recommended rate of 15 per cent, it

"... would not consider investing the very large sums of money needed to continue to improve the manufacturing technology and production efficiencies, provide significant cost savings and introduce new product types."

Such statements need to be seen in perspective. In the Commission's view, given an efficient marketing organisation and strategy, ELMA would be very competitive at the recommended rate. In any case, two importers indicated

interest in Australian manufacture of lamps in the event that ELMA ceased.

2

RECOMMENDATION

The Industries Assistance Commission recommends that all electric lamps and parts therefor under reference be dutiable at a rate of 15 per cent.

The Commission draws attention to its comments on Tariff Harmonization, Developing Country preferences, Commercial Tariff Concession Orders, production costs, the operating and marketing Agreements, the various

components of assistance and the effects of the many recent changes in assistance.

D.L. McBride Presiding Commissioner

C.R. Meares Associate Commissioner

CANBERRA, AUSTRALIAN CAPITAL TERRITORY 6 FEBRUARY 1986

3

1 INTRODUCTION

i.l The Reference

On 7 February 1985, the Minister for Industry, Technology and Commerce referred to the Commission for inquiry and report within 12 months, the matter of assistance to the industry in Australia producing and/or selling electric lamps

(falling within sub-items 85.20.2, 85.20.3 or 85.20.9 in Schedule 3 of the Customs Tariff). In the same reference, the Minister also referred for inquiry and report, by 31 May 1985, the question of what level of assistance should be provided the

production of filament lamps in Australia between the cessation of the then current temporary duty on 12 July 1985 and the implementation of the Government's decision on long-term assistance arrangements for the lamps industry. A copy of the reference is included as Appendix A.

The reference arose from representations made by the major local manufacturer, ELMA.

1.2 Goods Under Reference

The reference covers all electric discharge lamps, electric filament lamps (including infra-red and ultra-violet lamps), arc lamps and parts therefor, except filament lamps and parts therefor of a kind commonly used in motor vehicles.

ELMA, the major Australian manufacturer of electric lamps, produces a range of filament lamps and fluorescent discharge lamps at its Newcastle plant. The glass bulbs and tubes' used in its general lighting service (GLS)1 2 lamps and fluorescent

lamps are made in the adjacent Newcastle Glass Works (NGW), which is wholly owned by ELMA. The principal areas of interest in the inquiry from the industry's viewpoint are:

- filament lamps . GLS

. Decoratives; and

- fluorescent lamps . 38mm . 26mm.

Two small firms specialise in making germicidal ultra-violet (UV) lamps of the filament and cathode types, Ultra Violet Supplies (UVS) in Melbourne and Gelman Sciences Pty. Ltd. (Gelman) in Adelaide. Infra-red, neon and arc lamps are apparently not produced locally.

1.3 Public Inquiry And Other Information Gathering

A public hearing on the matters raised in paragraph 4 of the Minister's reference, and dealt with in the Commission's interim report of 29 May 1985, was held in Sydney on 6 May 1985. The public hearing on the question of long-term assistance arrangements was held in Sydney on 16 December 1985.

1 Bulbs and tubes, unless otherwise stated, are the words used to describe the empty glass container before the insertion of the electrical components which converts the bulbs and tubes to filament and fluorescent lamps respectively. 2 This refers to general lighting service lamps which are the ordinary filament

lamps such as are normally used in the home.

Submissions were made by 21 participants in writing. The participants and the abbreviations used in this report are listed in Appendix B. To supplement this information, the Commission also visited and had discussions with the following companies which are involved in the trade of lamps in Australia:

The Commission also spoke with union representatives during the course of its visit to the ELMA plant at Newcastle, NSW. Further, the Presiding Commissioner visited and held discussions with the management of the following overseas plants in June 1985:

. GTE Sylvania at Tienen, Belgium; . NV Philips at Roosendaal, Netherlands; and . EMGO at Lommel, Belgium.

In addition, Commission staff had discussions with officers of the Department of Employment and Industrial Relations (DEIR) in connection with DEIR's employment surveys and studies of related matters in Newcastle and the Hunter region.

1Λ Requests And Suggestions

A summary of requests and suggestions made in submissions to the inquiry is contained in Appendix C.

In brief, ELMA, the selling Partners (ie GEC, Philips, Thorn and Crompton) and the Australian Glass Workers' Union requested an increase in tariff assistance for filament and/or fluorescent lamps. The Federated Ironworkers' Association sought to increase assistance by way of quantitative restrictions on filament lamps of a

type made by ELMA.

Other participants, including Coles, Tungsram, Mirabella and GTE, generally requested either a reduction in tariff assistance or that both filament and fluorescent lamps be dutiable at minimum rates.

The removal of DC preferences on imports from certain countries was requested by ELMA and Tungsram. The latter also sought the removal of dumping duties currently applying on certain goods under reference.

Electric Lamp Manufacturers (Australia) Ltd GTE Australia Pty Ltd Tungsram Australia Pty Ltd Mirabella International Pty Ltd G.J. Coles & Coy. Ltd GEC Australia Limited

Philips Lighting Industries Thorn-EMI Lighting Crompton Lighting Pty Ltd Ultra-Violet Supplies (Vic.)

- ELMA - GTE - Tungsram - Mirabella - Coles - GEC - Philips - Thorn - Crompton - uvs

5

1.5 Previous Reports

The Commission and/or the Temporary Assistance Authority (TAA) have reported to the Government on the electric lamp industry on six previous occasions over the last decade.3 In most instances, the Minister's reference resulted from direct representation by ELMA.

Following the Commission's interim report of 29 May 1985, the Government decided that the temporary additional assistance then accorded the production of filament lamps in Australia would be allowed to lapse on 12 July 1985, as scheduled.

3 Australia. IAC, Filament, Fluorescent and Other Discharge Lamps, Report no. 57, AGPS, Canberra, 1975. Australia. IAC, Fluorescent and Filament Lamps - Short Term Assistance, Report no. 253, AGPS, Canberra, 1980. Australia. IAC, Fluorescent and Filament Lamps, Report no. 298, AGPS, Canberra, 1982. Australia. Temporary Assistance Authority, Fluorescent and Filament Lamps, Report no. 59, AGPS, Canberra, 1983. Australia. Temporary Assistance Authority, Filament Lamps, Report no. 64, AGPS, Canberra, 1984. Australia. IAC, Interim Report, Electric Lamps - Filament Lamps, Report no. 365, AGPS, Canberra, 1985.

6

2. INDUSTRY AND MARKET CHARACTERISTICS

2.1 Background

The world lamp industry is dominated by a few corporations, some of which are shareholders in ELMA.

ELMA began manufacturing filament lamps in 1931 with government assistance. NGW, which supplies ELMA with bulbs for GLS lamps and tubes for fluorescent lamps, was established in 1941 (bulbs for decorative lamps are imported). ELMA's production of fluorescent lamps commenced in 1943.

ELMA is wholly owned by a consortium of four international companies:

The General Electric Company Ltd UK (GEC UK) NV Philips, The Netherlands (NV Philips) Thorn Lighting Ltd UK (Thorn UK) Crompton Parkinson Limited UK (Crompton UK)

- 35 per cent; - 35 per cent; - 20 per cent; and - 10 per cent.

Each of the shareholders has a subsidiary in Australia which distributes ELMA's output. Details of the Agreements which govern ELMA's relationship with its shareholders and their subsidiaries are set out in section 2.5 of this report.

Australia also produces a small range of UV lamps.’ Germicidal UV lamps of the filament and cathode types are produced by UVS and Gelman. Apparently there are some seven manufacturers of UV lamps world-wide. UVS has operated principally as a producer and distributor of locally made and imported UV lamps and products for some 30 years. It is a wholly Australian-owned private company. Gelman is a subsidiary of an overseas parent company.

Although UV tubes have a superficial resemblance to fluorescent tubes, the processes and materials used would not appear to be interchangeable. Fluorescent tubes are made of ordinary glass while UV tubes are made of Vicor (a very high

melting point, 96 per cent silica glass) or from pure silica.

2.2 Production Costs

The relative importance of the inputs used to produce lamps varies between products and between ELMA and NGW. For NGW, overhead expenses are the single largest component of costs. Wages costs are also relatively high.

The single largest component of ELMA's costs is materials. Overheads account for the next largest cost component, followed by wages. An analysis of ELMA's production costs revealed that over a wide range of output levels the cost of producing the marginal unit of output is significantly less than average unit costs. The implications of this are discussed in section 2.5. 1

1 There are three types of UV lamps; UVA - black light lamps, UVB - suntan lamps, and UVC - germicidal lamps. Only the last mentioned are known to be made in Australia.

7

The effective rates of assistance accorded GLS and standard flourescent lamps are of the same order as their respective nominal rates (See Chapter 3 for discussion). For other lamps however, for a given amount of nominal assistance, the effective rate is somewhat less.2

A comparison of the processes employed in Australia with those used overseas suggests that some of ELMA's older facilities and processes are internationally uncompetitive because of the use of older technology. ELMA said that if it were able to purchase bulbs for filament lamps at similar prices to those available to its overseas competitors its lamp costs would compare favourably with those achieved in the larger overseas plants.3

Evidence submitted by ELMA, and information from other sources, suggested that large scale technology for making bulbs and tubes would not be feasible here. Even the smallest bulb machine available which uses the most modern technology would have too much capacity for the likely local market. Unless there were substantial exports its use would result in increased production costs for bulbs and tubes. The present technology employed by NGW seems to be the cheapest way of supplying bulbs and tubes to a manufacturer of ELMA's size, given the domestic orientation of ELMA's output.

Confidential costings submitted to the Commission suggested that the option of importing bulbs and tubes for both GLS and fluorescent lamps would not be economically feasible for ELMA because of high transportation costs. Further, importation of either bulbs or tubes, and continued manufacture of those which are not imported, would make glass component manufacture uneconomic.

Stockholdings in the industry have varied considerably over recent years. Stocks have appeared excessive, even having regard to the seasonality of demand. Importers, in general, have lead times of up to six months between order and supply which often result in a holding of stocks representing more than six months sales. ELMA and its selling Partners are in a better position, as the delay between order and delivery of domestically-produced lamps is much shorter.

Nonetheless, for ELMA, its selling Partners and importers alike, storage is an important cost item because lamps are generally a bulky, low cost product. For local manufacture, there is a cost compromise between the economies of large production runs and the resultant increases in inventory storage costs.

Production of UV lamps in Australia is very labour intensive; they are all hand built. This is apparently also the case with overseas manufacture.

2 The similarity of the nominal and effective rates for ordinary lamps is due to the relatively high level of value added in producing the lamps and to the similarity of the duties on the raw materials and on the finished products. On other lamps, for example, decoratives, value added is relatively more significant, resulting in nominal rates being greater than the effective rates of assistance.

3 Australian production is about one tenth of that in the UK and about one hundredth of that in the US. A modern, state-of-the-art 'Ribbon' machine for making glass bulbs, which was viewed by the Presiding Commissioner in Belgium, could produce Australia's annual bulb demand in less than two weeks.

8

2.3 Employment Trends And Labour Characteristics

Total employment in the production and distribution of electric lamps of the type produced by ELMA in Australia is about 570 persons. Employment in the production of filament and fluorescent lamps peaked in 1978 at 703 persons when there were two Australian manufacturers of these goods, ELMA and Thorn. The

latter ceased production in 1979.

Direct employment by ELMA in lamp production declined between 1980 and 1983 and there were retrenchments. In mid-October 1985, employment at ELMA and NGW totalled 469 persons.

During the course of its visit to ELMA, the Commission observed that trade skilled jobs represented only a small proportion of total employment while about one-quarter of the employment was in managerial and support areas. About half

the labour force were process workers, most of whom were female. The majority were young and English speaking. Labour turnover has been relatively low.

Much of the reduction in the total number employed by ELMA over the six years to 1985 has taken place in the process/glass worker group of employees. Although total employment has increased since 1983 owing to ELMA's improved sales

performance, employment in this occupational grouping has continued to decline. ELMA said that the decline in employment levels has largely resulted from increased efficiency following the introduction of new technology.

GEC, Thorn, Philips, Crompton, GTE, Tungsram and Mirabella together employ some 90 persons directly in the importation or distribution of goods under reference which are of the type produced by ELMA. Direct lamp employment by the three last mentioned importing companies totals about 40 persons for lamps of

the type produced by ELMA.

Direct employment in UV lamps production by UVS and Gelman totals about 8 persons.

2.4 The Market

The four selling Partners and a small number of importers, each with its own distribution network, supply almost the total Australian market for filament and fluorescent lamps. The importers include GTE, Tungsram and Mirabella. The selling Partners also import fluorescent and filament lamps of types not produced

by ELMA. Sales are made to retailers (the largest two being Coles and Woolworths), wholesalers, agents, direct to industry and by tender to government and semi-government instrumentalities.

Sales of filament lamps by the ELMA Partners for the period 1978 to 1984 fell by about 16 per cent. In the year to December 1985 however, sales of filament lamps increased by 6.3 per cent. For the same 6 year period, sales of fluorescent lamps increased by about 4 per cent. Fluorescent sales continued to rise in 1985 with an

increase of 9.4 per cent for the year. Filament lamp stocks fell by 28 per cent in 1985 whereas fluorescent lamp stocks remained stable.

Although there has only been a relatively small increase in the number of units of fluorescent lamps sold between 1978 and 1984, there has been a significant change in type sold. Between 1978 and 1981, virtually all fluorescent sales were of 38mm lamps. By 1983, however, 26mm lamp sales had become the more important and,

in 1985, represented about two-thirds of sales. ELMA said it introduced 26mm tubes into its range of goods during 1982 as an "early response to international trends towards the 26mm tube, and the need for ELMA to remain technically

foremost".

9

Philips argued, and produced figures to demonstrate, that on the basis of retail price information for lamps of similar dimensions, Australian consumers were not disadvantaged compared with overseas consumers. Nonetheless, Australian consumers are worse off than they otherwise would be in the absence of tariffs and other price-raising assistance measures. Import data indicate that the ex­ factory selling prices prevailing overseas are considerably below those in Australia. The Commission was unable to assess reliably the relative levels of prices to the ultimate consumer in Australia and overseas.

Some ELMA products have recently made strong in-roads into the local market at the expense of imports. Evidence indicates that two factors are largely responsible for this. First, the prices of certain imports from the main countries of origin have increased, in some cases owing to anti-dumping action and, more recently, because of exchange rate depreciations. Second, at least one of the selling Partners has been willing to sell lamps purchased from ELMA at a much

lower price than previously.

Imports of electric lamps since 1982 are summarised in the following Table.

Table 1 : Imports of Electric Lamps3; 1982 to 1985 (Ό00 units)

Year

Fluorescent Lamps

(tariff item 85.20.2)

Filament Lamps (tariff item 85.20.3)

Other Lamps under reference1 3 (tariff item 85.20.9)

1982 5 998 28 745 4 162

1983 4 632 29 280 6 495

1984 6 746 41 835 5 767

1985 (9 months to Sept) 4 653 29 687 4 125

a Parts for lamps are not included. b Includes lamps such as arc lamps and UV, neon gas and mercury vapour discharge lamps.

Source: Compi led from data suppl led by ABS.

ELMA regards a considerable proportion of lamp imports as not being competitive with its production. Details of imports of lamps of the types considered by ELMA to be competitive with its range are shown in Table 2. From that table it is apparent that lamp imports of the types competing with local production have

increased substantially in recent years. 4 *

4 This table has been compiled on the same basis as Table 3.1 in TAA, Fluorescent and Filament Lamps, Report no. 59, 1983.

10

Table 2 : Imports of Lamps Considered by ELMA to be Competitive with its Production; 1977-78 to 1984-85 ('000 Units).

1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85

Fluorescent 18W, 20Wa 36W, 40Wb 58W, 65WC

529 1005 149

481 1968 108

899 2734 265

1271 2559 128

1135 2746 350

T otal 1683 2557 3898 3958 4231

Filament Not exceeding 169V 1111 783 1474 1391 700

Exceeding 169V but not exceeding 229V 45 195 78 74 92

Exceeding 229V but not exceeding 260V 4832 2917 7513 6761 10791

Exceeding 260V 32 72 9 7 42

646 885 936

1620 2650 2901

131 369 351

2397 3904 4188

953

91

13623 189

1324

66

16791 112

950

257

21544 213

T otal 6020 3967 9074 8233 11625 14856 18293 22964

a Prior to 1.7.81 the relevant s ta t is tic a l codes covered only 20W tubes, b Prior to 1.7.81 the relevant s ta t is tic a l codes covered only 40W tubes, c Prior to 1.7.81 the relevant s ta t is tic a l codes covered only 65/80W tubes.

Source: Compiled from information supplied by the Australian Bureau of Statistics and by ELMA.

ELMA submitted evidence showing that its share of the market has been reduced substantially by import competition over the last 6 years. In support of this claim, ELMA offered evidence to suggest that between 1978 and 1989 its share of the total market was reduced by about 28 per cent for filament lamps and by about

16 per cent for fluorescent lamps. However, the Commission's analysis shows that these observations were based on the supply of lamps to Australia (local production plus imports) rather than actual sales, ie the data did not take account of movements in stock levels. It was found that over the period analysed by ELMA, production of filament and fluorescent lamps declined by 9 and 2 per cent respectively. The reduction in production of filament lamps is significant; these reductions are small in comparison to the reductions in market shares suggested by ELMA.

The Commission understands that UVS and Gelman supply about two-thirds of the Australian market for germicidal UV lamps. UVS estimates that the size of the domestic market for this type of lamp is of the order of 20 000 units per annum. Both UVS and Gelman export a significant proportion of their total production. UVS sees very high growth rates for germicidal UV products in Australia, South East Asia and later in the People's Republic of China.

2.5 The Operating And Marketing Agreements And Their Effects

2.5.1 The Agreements

ELMA has two principal agreements with its owners and their Australian subsidiaries, the 'Shareholders' Agreement' and the 'Third Party Lamp Sales Partnership Agreement'. For underlying reasons which the Commission will explore below, ELMA and the Partners have not shown much marketing aggression against imports. The Commission considers that these arrangements may not have functioned in ELMA's best interest.

. The Shareholders' Agreement

This Agreement sets out the basis for shareholder participation in ELMA and the basis for the provision of management and technical expertise, which is provided principally by NV Philips.

The operation of ELMA's business is overviewed by ELMA's Board of Directors which is made up of representatives of the owners' Australian subsidiaries (the selling Partners). The Board monitors budgets, costs, inventory levels, production, investment, etc through monthly meetings. It does not set marketing strategy which is left in the hands of the individual selling Partners. The Board is advised by an ELMA Advisory Committee in regard to product range, quality, etc. Day to day management of ELMA is through a Factory Manager, who is responsible for all aspects of manufacturing and engineering, and a Commercial Manager, who takes charge of the product when it is complete and distributes it to the Partners.

The Agreement is consistent with the Partners mutual wish that they source as much of their lamp needs as possible from ELMA, thereby achieving economies of scale and reduced costs of manufacture of lamps by focusing on a single manufacturing facility.

Under the Agreement, ELMA may sell lamp products only to the Partners; it may not sell direct to Australian consumers. The Partners undertake to purchase from ELMA all of their requirements of lamps of the types made by ELMA; they undertake not to import such lamps. The Partners sell ELMA's production into the

12

Australian market in competition with one another and with importers. This Agreement has been registered by the Trade Practices Commission (TPC) and is subject to further review.5

The transfer price of lamps from ELMA to the selling partners is set at a level such that ELMA will earn profits sufficient to pay a dividend at a rate of not less than six per cent per annum on its paid up capital. This is a very small return by normal commercial standards.

Each of the ELMA Partners has access to new products from its overseas affiliated sources and introduces them to the Australian market when it is commercially attractive to do so. During this market development stage and before local manufacture by ELMA is considered justified, the Partners have

freedom to import their requirements of these new products. When the level of local sales justifies it, the Partners may choose by a majority decision of the Board of Directors to initiate manufacture at ELMA. NV Philips is then obliged to

provide the technology. The ELMA product becomes available on equal terms to all Partners.

The manufacturing processes used by ELMA employ NV Philips' technology and equipment, and NV Philips has an on-going obligation to maintain ELMA technology and product quality to world standards. For this, NV Philips receives annual fees based on percentages of the value added in the three principal processes, viz glass making, filament lamp making and fluorescent lamp making.

. The Third Party Lamp Sales Partnership Agreement

Each selling Partner maintains its own sales force which operates independently in the Australian market. In addition, this Agreement provides for one of the selling Partners to be the 'Managing Partner' which is responsible for 'third party lamps sales' (ie sales through the Partner to large non-partner purchasers such as Coles), under broad policy guidelines agreed to by the ELMA Board of Directors. The

designated 'Managing Partner' is rotated every five years; it is currently GEC. * 1 1

5 Under the' Trade Practices Act certain conduct which may otherwise breach the Act can be authorized by the TPC on public benefit grounds. If the TPC grants authorization, the conduct in respect of which the application was made gains immunity from action for contravention of the Act. The

Shareholders' Agreement, with the exception of clause 5 and part of clause 11, was granted authorization on 20 April 1982. The parts of the Agreement which have not been authorized are the subject of notifications. Parties engaging in conduct which may breach the exclusive dealing provisions of the Act can lodge a notification in respect of that conduct. Once lodged, a notification gives statutory protection until revoked by the TPC on the grounds that competition is substantially lessened and there are no outweighing public benefits. If an agreement is not lodged for authorisation or notification with the TPC the signatories may be at risk of breaking the provisions of the Act even though public benefit may exist.

In the TPC report on the Shareholders' Agreement in 1982 the public benefit was deemed to exist and to outweigh any reduction in competition. However, the report acknowledged that 'in the absence of import competition there

might be no benefit to the public to weigh against the restriction of competition which the Agreement involves'. A further review of the Agreement by the TPC has been delayed pending the outcome of this current IAC inquiry.

13

2.5.2 Effects of the Agreements

In the Commission's judgment, the management and control structures which flow from these Agreements have not been, and are not, to ELMA's best advantage. The 'Board of Directors/Advisory Committee' arrangement seems to have resulted in a delayed response to ELMA's need to improve its manufacturing performance and industrial relations, reduce its manpower and costs, and to make appropriate

investment over time in improved facilities. Even though ELMA and its Board have been aware of a severely declining market share since 1979, only in the past two or three years is there evidence of a management response.

Similarly, a Board structure which appears to prevent ELMA or its Board from having the ability to set prices and thus prevents it from having a marketing strategy, seems to have delayed its commercial responsiveness to many years of declining market share in the face of imports. Only since 1989 has there been evidence of an effective and potent attack by one of the selling Partners on certain large segments of the market.

ELMA's incremental (ie 'marginal') cost of producing lamps is significantly below the landed duty paid price available to importers. This could have been used to displace imports each time they have occurred. Such a strategy could have maintained a high production level and more competitive costs. The Commission recognises that the use of incremental pricing as a marketing tool has to be very selective and usually of limited duration. Nonetheless there are times when such commercial flexibility could be a desired strategy. In the view of the Commission

it appears that the Agreements have constrained this type of competitive flexibility.

The selling Partners compete with one another in the market place and this might appear to inhibit their ability to co-operate to work mutually to ELMA's advantage versus the importers. Further, having chosen to have four marketing organisations, the Partners appear to be prohibited by law from having an

integrated marketing strategy which includes pricing. This must reduce considerably their ability to meet the threat of the importers 'head on'.

The Partners said that the multiplicity of marketing, sales and distribution arrangements Australia-wide was efficient and necessary to provide effective competitive service to their customers. They further claimed that, as a consequence of the price competition between the Partners, the Australian community had enjoyed lower prices than would otherwise be the case.6

The Partners also argued that even if there were a change to a single ELMA marketing and distributing organisation, about one third of the current sales and distribution overheads would persist in the Partners' organisations. The Commission considers however, that economies could be made in the remaining two-thirds.

The Partners asert that, because ELMA sales are only incremental to their base business, ELMA sales impose no extra cost burden. The Commission finds it* difficult to accept this argument. The cost data provided by the Partners in respect of sales and distribution show clearly that costs are high. It seems almost inevitable that current arrangements must lead to some duplication. If there were, for example, a single owner of ELMA (say one of the present Partners), it

6 Evidence from importers showed that for some GLS lamps some "Partner" sales were 5 or 6 cents below the lowest selling price of the importers and that this practice had continued for 10 months.

19

seems unlikely that it would establish four national marketing, sales and distribution systems in the pursuit of efficiency.

It appears to the Commission that a single marketing entity selling ELMA's lamps could have lower costs, a more cohesive marketing strategy and a more effective marketing and distribution organisation than those resulting from the present structure.

In the event that ELMA were marketing its products in competition with the Partners and other importers (this assumes a separate marketing organisation), ELMA would be forced to set its selling prices competitively in the same way as does every other Australian manufacturer faced with direct competition from

importers. Because of the high volume of lamps produced by ELMA and the potential to sell not only to the Partners but also to others, it could be highly competitive in terms of marketing and distribution. Because it is the highest volume source of lamps in Australia, ELMA (if it were its own marketer and distributor) would be likely to have the lowest marketing and distribution costs. At the Draft Report Hearing, Philips, GEC and Thorn contested these views.

The selling Partners argued that the Agreement relating to the access of new products from overseas affiliates was potentially advantageous to ELMA because there exist, in effect, four organisations practising market development and thus expanding ELMA's opportunities.

The technical fees paid to NV Philips are not insignificant. The ELMA Board asserts that it has carefully tested their levels for reasonableness and claims that because of each Partner's individual access to such technology from its own

sources overseas, they are well positioned to check this. In the Commission's experience, for the more mature parts of the technology, the fee appears to be high.

The incentive for the 'Managing Partner' to develop the third party market is undermined somewhat by the requirement of the Agreement that the control be rotated every five years, regardless of the success of the incumbent. This appears to compound the disincentive which arises from the 'Managing Partner' having to

share with the other Partners the profits from its efforts. At the Draft Report Hearing, the present 'Managing Partner', GEC, questioned this observation and informed the Commission of its current aggressive marketing strategies.

15

3 ASSISTANCE

In measuring levels of assistance, the Commission makes use of both nominal and effective rates of assistance. The nominal rate of assistance measures the extent to which assistance increases the gross returns per unit of output for producers relative to the hypothetical situation of no assistance. In the case of filament and fluorescent lamps it is 20 and 30 per cent less than the respective tariff rate (ie. tariffs of 10 and 20 per cent give nominal assistance of 8 and 14 per cent, respectively).1 Differences in nominal rates disturb relative prices of goods and therefore consumption patterns.

The second measure of assistance, the effective rate, measures the net protection received by an industry or production process. It takes into account both the subsidy effect of protection on an industry's output and the tax effect of protection on its inputs. For example, tariffs on competing imports benefit producers by enabling them to increase the price of their output. However, to the extent that tariffs increase the price of inputs used in the production process, producers are penalised. Whereas the nominal rate relates only to the first of these effects, effective rate calculations take them both into account.1 2

Tariffs are only one of the forms of assistance relevant in a consideration of the extent of protection associated with lamp making. Other measures which have the potential to affect assistance to the industry, including anti-dumping action, labelling regulations, government purchasing preferences, tariff concessions and Developing Country preferences are considered below. To the extent that it has been possible, and given the limitations of available data, the Commission has attempted to integrate these various assistance mechanisms into its consideration of the assistance environment for lamps.

3.1 Components Of Assistance

. Tariffs

Detailed tariff provisions are set out in Appendix D.

1 The valuation of imported goods to which tariffs apply in Australia is the free-on-board (fob) price. Thus, the degree to which tariffs allow the prices of domestically produced goods to increase is less than the tariff rate because the tariff does not apply to the costs of importation (freight, insurance etc.). The nominal rate is based on the landed duty free (ldf) price and therefore takes this effect into account. 2 Because of the integrated nature of the ELMA lamp assembly operations and

the glass bulb and tube manufacturing processes of NGW, the Commission considered two alternatives for the calculation of effective rates for filament and fluorescent lamp production - firstly, using the glass bulbs and tubes as an input into the lamp-making process and secondly, using sand and other glass­

making materials as the inputs. Because of transport considerations, ordinary glass bulbs and tubes for filament and fluorescent lamps are essentially non-traded between Europe and Australia. This implies that the assistance afforded electric lamps protects domestic value added not only in the lamp assembly operation but also in the glass manufacturing process at NGW. This has led to the Commission adopting sand and other such inputs as the appropriate starting point. The rates derived from the two alternatives are not significantly different.

16

The General rates of duty applying to the goods under reference are:

- Filament lamps (including infra-red and UV), 10 per cent;

- Fluorescent discharge lamps, 20 per cent; and

- Other (including arc lamps and UV discharge lamps), 2 per cent.

Fluorescent discharge lamps from DC countries are dutiable at 10 per cent, except from Taiwan where the General rate applies. Other goods under reference are Free from DC sources.

Lamps manufactured in New Zealand or Papua New Guinea are free of duty.

The above rates apply to certain parts as well as to complete lamps.

. Anti-dumping action

Under Article VI of the General Agreement on Tariffs and Trade (GATT), dumping is deemed to have occurred when goods are exported at prices below those at which they normally sell in the domestic market of the exporting country. The GATT Anti-Dumping Code which elaborates on the broad concepts of Article VI of

the GATT specifies that, where it is established that imports have been dumped, and where there is a causal link between the dumped imports and material injury to a domestic industry, dumping duties may be imposed. The Code also specifies

that anti-dumping action be taken only to the extent necessary to remove injury to the domestic industry. Australia's anti-dumping legislation is aligned with the GATT Code.

Anti-dumping action can assist local industries by raising import prices in one of three ways. It can lead to dumping duties on imports, it can encourage exporters to increase fob prices to the assessed 'normal value' to avoid dumping duties and, in some cases, complaints of dumping are resolved by the authorities reaching

'price agreements' whereby exporters agree not to price their goods below a certain value.

Dumping duties have been imposed on imports of certain filament lamps from Belgium and certain fluorescent discharge lamps from the Federal Republic of Germany, the German Democratic Republic, Hungary, Japan, Thailand, the Republic of Korea, Taiwan Province, the Philippines and Canada.

For certain filament lamps, anti-dumping action was first taken on 21 June 1983 when, as an interim measure, cash securities were imposed. Dumping duties have applied since 12 October 1983. On 9 February 1989 the Minister for Administrative Services - on behalf of the Minister for Industry and Commerce -

declared that electric filament lamps from Belgium were being exported to Australia at an amount less than their normal value. The Minister further declared, pursuant to Sub-Section 8(5) of the Customs Tariff (Anti-Dumping Act 1975, that the dumping duty to be collected should be "... equal to the product of

(a)1.2 and (b) the amount per lamp, if any, by which the export price is less than

17

$A0.19 ..." This Australian currency amount, which in real terms was less than the normal value at the time of assessment, is what is known as the "non injurious fob" (nifob). It is the minimum export price which it is deemed will not cause injury. Although the declaration of a nifob is now quite common, the Ministerial direction that a dumping duty be calculated such that it be in excess of the actual difference between the nifob and the export price is unusual.3

GTE lodged an appeal with the Federal Court against Australian Customs Service's finding of dumping. The case was heard on 15 and 16 November 1985 but has been adjourned to February 1986.

A rate of dumping duty of 1.2 provides a potent incentive to exporters to increase prices to the nifob.4 The exporters' increase in price would then be of the same magnitude as the dumping duty that would have been otherwise collected by Australia. The Commission has examined price data for imports from Belgium which show that prices have been raised to the nifob following the imposition of dumping duties (see Appendix E).

In the case of certain fluorescent lamps, cash securities were imposed on 11 December 1984 and dumping duties after 13 September 1985. The 'normal values' are contained in confidential appendices to Australian Customs Service Dumping Report, No. 108, and now appear in Confidential Instructions though why these figures are confidential is not known to the Commission. Consistent with the usual practice, the rate of dumping duty for fluorescent lamps is Ί.0'.

GTE has requested the Minister to revoke the anti-dumping action taken against imports of fluorescent lamps from the Federal Republic of Germany and Canada. The request has been refused and consequently a reference concerning this anti­ dumping action has been sent to the Commission under section 15(4) of the Customs Tariff (Anti-Dumping) Act 1975. The Commission is due to report to Government on this matter on 15 April 1986.

The Commission estimates that for the period March 1983 to February 1985 the effect of anti-dumping action on certain filament lamps has been to increase both

3 The Commission notes that sub-section 8(4) of the Customs Tariff (Anti­ Dumping) Act provides that, subject to sub-section 8(5), dumping duty payable in respect of goods to which section 8 applies is the sum equal to the amount by which the export price of the goods is less than the 'normal value'. Sub­ section 8(5) allows the Minister to prescribe a dumping duty less than that payable under sub-section 8 (4). 4 Under the current arrangements of a nifob of $A0.19 cents for filament

lamps, a tariff of 10 per cent and a rate of dumping duty of 1.2, goods exported to Australia at 16 cents say, would attract a dumping duty of 3.6 cents and a tariff of 1.6 cents. Because importers would then be paying a price (21.2 cents) in excess of the nifob plus tariff, it would be in their

interest, and that of the exporters, that the export price be raised to the nifob. This would have the effect of causing a transfer of funds from Australia to the country which is the source of the import. On the other hand, if the rate of dumping duty were 1.0 (the usual value) the duty paid price including dumping duty would be less if the exporters were to continue

to dump than if they sought to avoid dumping duty by raising the delivery price to the nifob. The price under dumping would be 20.6 cents (ie 16 cents fob plus 1.6 cents tariff and 3 cents dumping duty). By contrast, increasing the price to the nifob would result in a duty paid price of 20.9 cents (ie 19 cents fob plus 1.9 cents tariff). Thus the use of 1.2 has meant a transfer of

funds to the exporting country.

18

the nominal and effective rates of assistance to local producers against Belgian goods by around 10 percentage points, ie it about doubles the rates which would apply if the General tariff alone were in place.

The Commission's analysis of the effects of anti-dumping action on fluorescent lamp prices is inconclusive. Average prices are not as meaningful as in the case of filament lamps because of the wide and changing range of fluorescent lamp imports. Further, an individual analysis of shipments did not show separate price series for a sufficient range of lamps to reveal any consistent effects of the anti­ dumping action.

. Commercial Tariff Concession Orders (CTCOs)

A CTCO is a provision for reducing or eliminating the customs duty otherwise payable on imported goods. The goods must comply with prescribed conditions or criteria, the usual criterion being that no goods serving similar functions are produced or capable of being produced in Australia. In both the private and public sectors the handling of CTCO applications absorbs considerable time and effort.

There are nine CTCOs that apply to electric lamps and parts which allow entry at a rate of 2 per cent (see Appendix D for details). There has been considerable liason between the Australian Customs Service and ELMA concerning the wording

of the CTCOs. The two main concessions (in terms of range of products covered) are written in a form which specifies the products to which the concessions do not apply (ie products produced by ELMA are listed as exclusions). Other concessions, which include concessions for lamp parts, are written in the usual inclusive form.

Several amending pages of Consolidated By-laws and CTCOs have been issued over the past few years, apparently with the aim of preventing importers using concessional entry where small changes in the description of goods would have undermined assistance (eg by changing the description of lamp voltages from 260

to 262 volts). At the Draft Report Hearing it was claimed by GTE that the effect of the CTCOs has been to actually favour ELMA's Managing Partners as importers.

Gilbert Gray, Thorn and Turrella all made reference to existing CTCOs in their submissions to the Commission and requested that they be continued. Tungsram, asked for a clarification of the Commission's draft recommendation for an increase of the General rate from 2 per cent to 15 per cent for lamps falling to

sub-item 85.20.9 and asked whether CTCOs would apply to goods falling to this sub-item and which were not available from local sources.

The Commission in reaching its conclusions about what substantive assistance should apply to lamps, has not addressed the question of how the CTCO system should operate. That is an issue with implications far beyond those associated with this inquiry. Nor has it examined the merits of individual CTCOs.

Nonetheless the Commission assumes that the CTCO system will continue to apply and has therefore looked at the effects on the lamp industry of the system as it presently operates.

19

The importation of lamps on the one hand, and lamp parts on the other hand, under CTCOs could be expected to have quite different implications for assistance to lamp making.

In each year from 1982 to 1985 concessional entry of filament and fluorescent lamps under by-law or concessional entry has been about 30 per cent by quantity and 60 per cent by value. Thus concessional imports for these lamps were, in general, those in the higher cost bracket,5 and closer examination of the data shows that most of the higher cost lamps entering concessionally were filament lamps. The Commission considers however that any erosion of assistance to lamp making via the CTCO system is likely to be minor.

Parts of lamps such as spirals, cathodes and lamp-caps are imported entirely under CTCOs. This lowers production costs and increases the effective rates of assistance available to local production. In the case of filament and fluorescent

lamps produced by ELMA, the effective rates are raised by one or two percentage points through concessional entry of parts. Following the Commission's usual practice the estimates of effective rates of assistance have taken this into account.

. Labelling regulations

Importers are required to adhere to an extensive range of labelling and packaging regulations under both the Commerce (Imports) Regulations and the Customs (Prohibited Imports) Regulations. Under these Regulations, importers of lamps must, for example, mark the country of origin in English, state the rated voltage and wattage in the case of filament lamps, and conform to a variety of regulations relating to units of measurement, statement of dimensions and size of print.

In 1983, shipments of lamps imported by Mirabella were refused entry by Customs on the basis that labelling regulations had not been complied with. The individual packages containing the lamps were marked with the country of origin but the

lamps themselves were not. Compliance with Customs' ruling on the matter cost Mirabella about $15 000 for the re-labelling plus some $8 000 for extra air freight on a consignment to supplement stocks while the re-labelling was being undertaken. In sum, these costs added some 15 per cent to the fob cost of the

lamps.

With later shipments, having the lamps labelled before shipment in Italy to conform with Customs' requirements added little if anything to Mirabella's fob cost. Thus the evidence indicates that in the case of lamps, the costs associated with conforming with the import labelling requirements are minimal; however, measures to rectify contravention can be costly. Given that the labelling regulations are only mentioned in the Commerce (Import) Regulations and covered in general terms in the Third Schedule of the Prohibited (Import) Regulations the exact requirements might not be widely known. Moreover, the wording of some of

the regulations gives scope for alternative approaches to labelling. Thus some confusion about Customs' interpretation of the requirements from time to time on the part of importers is understandable.

In the Commission's view these regulations do not increase significantly the assistance to the local lamp manufacturing industry.

5 As would be expected, because of the 2 per cent General rate applicable to goods falling to sub-item 85.20.9, by-law or CTCO entries of "other" lamps are negligible.

20

. Government purchasing preferences

In addition to the assistance described above, ELMA receives some benefits from government purchasing preferences. Purchasing preferences give the ELMA Partners an advantage over foreign suppliers when placing tenders with the Commonwealth or some State Governments.

At present, ELMA's home State Government of New South Wales, for example, awards contracts to local firms with a tender price up to 10 per cent higher than the duty paid price tendered by an overseas competitor. In addition, the New

South Wales Government currently permits 'second chance tendering' when the home State manufacturer's initial tender is not competitive with the import or interstate price. However this situation will shortly change. On 8 November 1985 the Minister for Industry, Technology and Commerce announced that agreement had been reached to end all forms of State purchasing preferences from i July

1986.

The Commonwealth Government also applies a preferential margin to local tenderers. In general, this margin is 20 per cent. However, for very high value contracts this percentage may be increased at the relevant Minister's discretion.6

The extent of assistance afforded by government purchasing preferences depends on such factors as the size of government demand in relation to total domestic production and the degree of competition between suppliers. In the absence of

detailed information these are difficult to quantify. In the case of lamps, however, only a small percentage of total sales of ELMA lamps are made to government authorities (ELMA estimates this to be 12 per cent of total sales of its lamps). Further, to the extent that there is competition between the ELMA

partners, erosion of the assistance effects of purchasing preferences can occur. The Commission estimates that government preferences would add, at the very most, only one or two percentage points to the nominal and effective rates of assistance for electric lamps. The assistance effects of government purchasing

preferences may be somewhat greater for fluorescent lamps than for filament lamps however since the proportion of fluorescent lamp sales to government is considerably greater than the corresponding figure for filament lamps (ie 15 per cent of total sales, by volume, for fluorescent lamps compared with only 5 per

cent for filament lamps).

. Developing Country preferences

ELMA requested that the DC preference currently accorded imports of filament lamps from Brazil be removed. ELMA, in support of its request, said that imports from Brazil were now at a high level, were directly competitive with its own

products, were produced using modern technology and were competitive against other competing countries in their own right. Tungsram, also submitted a request with respect to lamp imports from Brazil, and in addition requested the removal of the DC preference on both filament and fluorescent lamp imports from Taiwan

6 For Commonwealth Government purchases of less than $10 000, the 20 per cent preference margin is applied as an addition to the price of imported goods. For purchases over $10 000 the price tendered by a domestic producer is discounted by the preference margin before it is compared with a competitive tender by an importer and, for purchases greater than $100 000,

there is scope for Ministerial discretion to apply a higher discount (normally up to a maximum of 30 per cent).

21

and Korea. The Commission notes, as pointed out earlier in this section, that the General rate of duty currently applies to imports of fluorescent lamps from Taiwan.

Imports of filament lamps from Brazil, which commenced in 1983, have increased substantially since that year, from just over one million lamps valued at some $A200 000 to almost 3.5 million lamps valued at more than $A900 000 in 1984-85. in the most recent year for which data are available, imports from Brazil comprised approximately 15 per cent of total filament lamp imports in terms of both value and volume. Imports of filament and fluorescent lamps from Taiwan and Korea comprise only a small percentage of total imports.

The DC preference arrangements were developed as:

'a means of helping to offset the competitive disadvantage faced by the new industries of the less developed countries and of putting them in a better position to compete with major industrial countries for a greater share of Australia's import trade'.7 8

At the time the requests were made for removal of particular DC preference margins the Government's policy was that when this aim was not being realised the preference could be withdrawn or modified. Changes to the margin of preference depended on two criteria:

- injury or threat of injury to the Australian industry; or

- the absence of a competitive need for the preference margin, in the sense that the country concerned could compete successfully with other countries on the Australian market at the General rate.

From the wider perspective of the guidelines laid down in section 22(1) of the Industries Assistance Commission Act 1973, which requires attention to general community welfare, DC preferences can be seen as an obstacle to efficient resource use. They are instruments which have the potential to widen disparities in assistance between like goods. They complicate the Tariff adding uncertainty to the incentives environment surrounding production and consumption decisions.

The degree of uncertainty resulting from and the significance of the DC preference scheme will soon change. On 3 January 1986 the Government announced a revised system of granting tariff preferences to developing countries to be introduced from 1 July 1986.® Under the revised scheme the developing country tariff rates will be set at 5 percentage points below the General tariff rate where the General rate exceeds 5 per cent. The scheme will not apply to goods where there is no protective rate, and there will be no provision for graduating either products or countries from the scheme though there are special

transitory provisions for certain industries.

7 Australia, Parliament, House of Representatives, Hansard, 19 May 1965, p. 635. 8 Department of Industry, Technology and Commerce, News Release, 3 January 1986, Ref. 3/86.

22

For the lamps industry, the new scheme will involve a reduction in the DC preference margin from 10 to 5 percentage points and the reintroduction of a preference margin for imports of fluorescent lamps from Taiwan. Though the revised DC preference scheme will operate from July 1986, the Commission has included in this report an analysis of the effects which the availability of DC preferences is currently having on the electric lamp industry.

In the case of the vast majority of filament lamps, imports from Brazil, imports from General tariff sources, and domestically produced lamps are close substitutes. This is supported by ELMA's claim that imports generally are directly competitive with their own products.

Taking account of this substitutability, and given that imports from General rate sources still constitute the majority of world filament lamp supplies, the prevailing price of lamp imports would tend towards the level of the world price plus the current 10 per cent General rate of duty.

The contention that General tariff sources are the price setters, and hence that the DC preference margin has not eroded the protective effect of the General tariff, receives support from indications that Brazil's position as a supplier has often changed following quite small changes in its exchange rate vis-a-vis other supplying countries. If Brazil were the price leader, it might have been able to cut

its margin to maintain sales. Furthermore, direct price comparisons suggest that fob prices ex-Belgium and ex-Hungary have been consistently lower than those from Brazil over the past year.

Therefore, whilst overall import competition has increased, and the proportion of imports from Brazil compared with total imports has also risen, there is little reason to suggest that any injury to the domestic industry could be directly attributed to the availability of the preferential margin on imports from Brazil.

Removal of, or a reduction in this margin of preference is unlikely to result in any decline in import competition. Rather, the likely outcome would be the switching of import sourcing from Brazil to other DC's or to General rate sources; ie it would be purely trade diversionary.

Thus the only implication of the preference for Australian national income would therefore appear to be the implicit transfer of tariff revenue from Australia to Brazil. Similarly, in the case of lamp imports from Taiwan and Korea, the Commission's analysis again indicated that the only effect of the preference

margin has been that of trade diversion.

The Commission does not propose any change to the existing preference arrangements (including the margin of preference) in the interim period pending the introduction of the Government's revised DC preference scheme, it considers

that the only implications of the introduction of the revised scheme, in the case of fluorescent and filament lamps, will be a reduction in margins of preference to 5 percentage points and the reintroduction of a preference margin for fluorescent lamp imports from Taiwan.

3.2 Nominal And Effective Rates Of Assistance

The assistance accorded lamp making in Australia is complicated. The chronology of assistance set out in Appendix F shows that it has changed greatly over the past decade. On one hand there is tariff assistance, anti-dumping assistance, import labelling regulations and State and Commonwealth preferences whilst, on the

other hand (notwithstanding the apparent unimportance of DC preferences) this

23

assistance stands to be partly eroded by preferential entry of like products. In sum, nominal assistance is greater than the General tariff rate and could be as much as double that rate. , ' ,

Both the nominal and effective rates of assistance accorded lamp production in Australia through tariffs alone are of the order of 15 per cent for fluorescent lamps and 10 per cent for filament lamps. When, however, other areas of assistance (and disassistance) are taken into account, the nominal and effective rates of assistance accorded lamp production are higher than those rates. The weighted average nominal and effective rates of assistance for lamps of a type produced by ELMA which are attributable to tariffs are, because of the dominance of filament lamps in ELMA's output, just above 10 per cent.

To understand how this assistance affects patterns of resource use and consumption in the economy, the rates of assistance enjoyed by industries which compete for resources and the rates of price-raising assistance on like goods in consumption need to be considered.

Whereas many of the lamps under reference could be seen to compete with each other in the consumer's mind, it is difficult, in modern societies at least, to imagine that consumers would regard lamps generally as being more substitutable with any particular consumer good than another. In the long run, it might be thought that lamp prices would affect, for example, building design, but how the consumption of particular items would be affected by this is difficult to predict. In looking at possible distortions in consumption patterns, by far the most relevant consideration is the substitutability between the various types of lamps under reference.

On the production side, there are no obvious comparisons, but lamp making is part of ASIC sub-group 3357 'Electrical machinery and equipment nec'. ASIC groupings are built on process similarities. The average effective rate of assistance for this group of activities, according to the most recent Commission estimates, was about 12 per cent in 1982-83. Again, since the effective rates of assistance for different types of lamps differ in the same way as the nominal rates, there is the likelihood of a wasteful diversion of resources between, say, fluorescent and filament lamp manufacturing. Fluorescent lamp making receives effective assistance via tariffs of about 15 per cent while the equivalent figure for filament lamp making is about 10 per cent. But, the similarity of effective assistance between lamps in general and other relevant electrical goods suggests a lesser distortion in that direction. Both lamps as a whole and ASIC group 3357 receive effective assistance via tariffs of around 10 per cent. Therefore, the focus of attention on the production side is the difference in effective assistance between the processes for making different types of lamps.

The consideration of any likely production distortions in lamp making would need to embrace lamps beyond this reference, the production of which could involve

9 The wider, 3-digit ASIC industry group 335 'Appliances and electrical equipment', might also be considered to contain production processes which would compete closely with lamp making. The average effective rate of assistance for this group was about 29 per cent in 1981-82 and about 20 per cent in 1982-83. However, the group is dominated by several production processes which are not likely to be competitive with lamp making but which have relatively high rates of effective assistance (eg. Radios and T.V.s, 38 per cent; Water heating systems, 37 per cent; and Batteries, 94 per cent, in 1982-83). In the Commission's view, this makes the ASIC 335 group average an inappropriate basis for comparison with lamp making.

24

similar skills and processes. Motor vehicle lamps, cathode ray tubes, photographic flashbulbs and valves have available assistance ranging from free to 25 per cent plus the Motor Vehicle plan in the case of motor vehicle lamps. The latter provides potential protection in excess of 100 per cent. Because of the variety of rates and with no dominant rate obvious, this group of goods offers little guidance

in setting the rate for, lamps under reference.

This discussion is taken up in Chapter 4.

3.3 Changes In Assistance In Recent Years

There have been many changes in the assistance accorded the industry over the last ten years. Some of these have resulted from Government decisions following Commission or TAA reports, others from dumping reports after complaints by ELM A, and there have also been changes to Consolidated By-Laws and CTCO's.

The Commission or the TAA have reported to the Government on the Australian lamps industry on six occasions during this period. There have also been two anti­ dumping inquiries carried out by the Australian Customs Service.

Details of the changes in assistance and of the various reports on the industry are contained in Appendix F. It is the Commission's view that there have been too frequent changes and that these many changes have not operated in the best interests of the industry in that they have created uncertainty in the business environment.

3.4 The Agreements And Assistance

The Commission has sought to obtain a clearer understanding of the potential implications of the partnership arrangements. As indicated in section 2.5, there are constraints associated with the Agreements which appear to have raised costs in the Australian lamp industry. It appears that ELMA and the Partners have

sought to mitigate these effects by recourse to government assistance, which in fact has been frequently and freely given. This may have been at the expense of more fundamental approaches to improving their commercial effectiveness and at the expense of actions to improve ELMA's competitiveness through measures to reduce the costs of production, distribution and marketing. It would seem to have been easier for ELMA to ask for more government assistance than to address the structural problems of the current industry arrangements.

25

4 ASSISTANCE ISSUES

The reference to the Commission on electric lamps has arisen from representations by the major local manufacturer to the Government. As has been the case with past requests by the industry for assistance reviews, increasing competition from imports appears to have been the basis on which the reference was sent.

Notwithstanding this, the Government requires the Commission to have regard to the desire of the Commonwealth to encourage the development and growth of efficient Australian industries that are internationally competitive, export- oriented and capable of operating over a long period of time with minimum levels of assistance. The Commission is required to take an economy-wide approach involving consideration not only of the industry under review but also the interests of other industries and of consumers, and to consider any action which might be necessary to facilitate adjustment to change.

Key issues canvassed in this chapter include how present assistance levels for lamps compare with those of competing products and how the past ready-provision of assistance has tended to support inefficient business structures and business methods.

4.1 Effects Of The Many Changes In Assistance

Over the last five years ELMA has succeeded in obtaining steady increases in assistance for fluorescent and filament lamps. The nominal rates have increased, there have been periods when temporary duties have been applicable and dumping duties have applied to various lamps. It is a concern that this industry seeks progressively increasing assistance. Three effects have resulted:

. Uncertainty

Throughout the course of this inquiry, various concerns have been expressed regarding the effects of the numerous changes in the level of protection for the lamps industry. The uncertainty created by an environment of continual changes in assistance, and the effects of this on planning, investment and decision-making within the industry, have been recognised by ELMA, the selling Partners and importers alike.

. Misdirection of effort

In recent years, ELMA's response to the ready-availability of assistance has been to ask the Government to give protection against import competition rather than adopt an appropriate commercial strategy to combat import growth. The numerous changes in assistance and the efforts of ELMA management to obtain them may have diverted

management's attention away from more constructive avenues for improving the competitiveness of the industry.

. Improvement in competitiveness delayed

It is difficult to be precise when assessing the effects of the continual changes in assistance on expectations within the industry. However, the Commission considers that had there been stability in assistance arrangements, the industry may have reviewed its structure and strived

for improvements in economic efficiency much earlier than in fact has

26

occurred. It is likely that this would have placed the industry in a far better position to cope with the increasing international competition which arose.

These effects point to the need for a stable assistance environment for the electric lamp industry to ensure that future industry decisions are based on normal commercial considerations without the added complication of continually changing government support. The Government apparently holds this view as it wants this

inquiry to be the last for the industry for quite some time.

Consistent with this approach, there is also a need to remove the incentive that at present exists within this industry for substantial resources to be devoted to seeking Government assistance, in whatever form, instead of attempting to improve its competitiveness by programs and strategies based on 'self-help1.

4.2 Disparities in Assistance

At the current General tariffs of 10 per cent for filament lamps and 20 per cent for fluorescent lamps, and ignoring the effects of anti-dumping action and other non-tariff barriers, both the nominal and effective rates of assistance accorded lamp production are of the order of 10 per cent for filament lamps and 15 per cent for fluorescent lamps. Lamps comprising the 'other' category, and which are also

under reference, currently enter at 2 per cent. Only UV lamps (and only a small volume of them) are produced locally however, so the current weighted average nominal and effective rates for total lamps production owing to the General tariff are both about 10 per cent.

As noted in Chapter 3, other forms of assistance to lamps include anti-dumping provisions and government purchasing preferences. Government purchases are not a major part of ELMA's business but anti-dumping action and other non-tariff measures may double both the nominal and effective rates of assistance for

certain classes of lamps. Complicating the assistance structure for lamps further are CTCOs and DC tariff preferences.

An integral part of the Commission's concern with efficiency matters is the narrowing of assistance disparities. Disparities in assistance can have adverse effects on both the efficiency of resource use and patterns of consumption. Disparities in effective rates of assistance, especially for activities which use

similar processes and compete closely for particular resources, may prevent resources from being allocated to their most efficient use. Further, disparities in nominal rates of assistance between similar consumption goods may affect the relative price relationships between such goods, thereby distorting consumer

choices and resulting in losses in consumption efficiency. Greater uniformity in levels of assistance can therefore provide a framework within which production and consumption choices more closely reflect resource scarcities and consumer preferences, leading to improvements in community welfare.

The priority is to establish uniform assistance for groups of goods which compete most closely both in the consumer's mind and for resources. From the viewpoint of consumption decisions the consumer has some degree of choice between filament and fluorescent lamps. This is less apparent in the case of 'other' lamps. On the

production side, filament and fluorescent lamps are manufactured on the same site at ELMA's Newcastle factory, implying a closeness of resource requirements

27

for making them. The setting of a common rate of assistance for the types of lamps made by ELM A is therefore an important objective.'

Considerable difficulty has been experienced in identifying particularly close substitutes from outside the goods under reference. The ASIC classification which includes manufacture of the goods under reference is sub-group 3357, 'Electrical machinery and equipment nee'. The average effective rate for this group is of the order of 12 per cent although there is a wide range of rates applying to individual product types within that classification.

ELMA made comparisons between the rates of assistance it requested for lamps and those applying to manufacturing industry generally and claimed that its request for assistance at about the average for manufacturing industry would not be distortive. Whereas all resources may be ultimately mobile and the manufacturing industry average effective rate (about 25 per cent) is of some interest as a broad point of reference, the Commission does not accept that the manufacturing average should be given any prescriptive significance in determining assistance for individual industries.1 2 Certainly, it is a doubtful benchmark for an industry such as this one with relatively low measured rates of assistance. It is the Governments' desire to encourage the development and growth of industries that are capable of operating over a long period of time with

minimum levels of assistance. The Commission, therefore, must be very cautious, especially in piecemeal inquiries, in recommending increases in assistance to any industry. Raising assistance to industries with assistance levels presently below the manufacturing average could have significant effects on the economy and could well be counter-productive. About 70 per cent of manufacturing value added presently receives assistance less than the manufacturing average effective rate. Consequently, increases in assistance to industries presently below the average would inevitably lead to an increase in the average level of assistance to manufacturing as a whole, which is contrary to the Government's stated desire.

For the above reasons, ELMA's request for a long term tariff rate of 20 per cent supplemented by an additional rate of 10 per cent for a period of at least five years will not be put forward as an option by the Commission.

ELMA said that its investment plans depended on the granting of the assistance requested - only with that assistance, it was claimed, would ELMA gain sufficient market share to obtain scale economies and thus lower unit costs. This argument seems to presume that a firm with the potential to gain (profitable) scale economies would not take up that opportunity without increased government assistance. The Commission cannot see how increased scale could be worthwhile

from the community's viewpoint if it did not yield sufficiently improved returns to justify extra investment by ELMA itself.

The ELMA Board submitted evidence that if the Commission's recommendations of a 15 per cent tariff were accepted, the ELMA Board "... would not consider

1 The Commission's 1982 report on Fluorescent and Filament Lamps (no. 298, 25 February 1982) identified no reason on resource allocation grounds why filament lamps should be discriminated against by having only minimal tariff assistance in the long term. The Commission's

recommendations were aimed at lessening the previous bias in assistance in favour of fluorescent lamp production, ie the recommendations moved towards reducing the prevailing disparity, but did not completely eliminate it. 2 For a discussion of the use of industry assistance averages in recommending levels of assistance, see IAC, Annual Report, 1980-81, AGPS, Canberra, p.9.

28

investing the very large sums of money needed to continue to improve the manufacturing technology and production efficiencies, provide significant cost savings and introduce new product types" (see ELMA's letter to the Commission on 3 January 1986, copied in Appendix G).

It is not clear that a failure to increase assistance to lamp making would lead to the demise of ELMA. On the contrary, given an efficient marketing strategy, ELMA would be very competitive at about the present level of assistance. In any case, two importers indicated interest in Australian manufacture of lamps in the event that ELMA ceased production.

4.3 The Assistance Options

4.3.1 The Commission's Favoured Option

The Commission favours the setting of rates of assistance on categories of like goods under reference at similar levels. In the case of filament and fluorescent lamps, setting similar tariff rates for both lamp types would result in similar effective rates of protection for the two production processes. The Commission will recommend that the tariff rate for both filament and fluorescent lamps be set at 15 per cent, yielding a weighted average effective rate of assistance for the

bulk of the lamps under reference of about 10 per cent.

The fundamental reason for recommending a common tariff rate of 15 per cent for these lamps is one of economic efficiency. Greater uniformity in assistance would provide a framework within which production and consumption choices more closely reflected resource scarcities and consumer preferences, leading to

improvements in community welfare. Those industries which could be the closest competitors for resources with the making of filament and fluorescent lamps (such as those in ASIC sub-group 3357), have effective assistance at about 10 per cent. As noted earlier, on the consumption side, relevant substitutes for filament and

fluorescent lamps are even less obvious than on the production side, so in looking for an assistance level which would keep assistance disparities ro a minimum, effective rates of assistance amongst production alternatives have been the main consideration.

Little has changed in the relative levels of assistance to industries since the Commission recommended tariffs of 20 per cent and 10 per cent on fluorescent and filament lamps, respectively, in 1982. A tariff rate of 15 per cent for both types of lamps now would imply virtually no change in the average effective rate

for the industry. At the same time, the Commission considers it sufficiently important in the interests of removing a disparity in assistance between filament and fluorescent lamp-making for the filament lamp tariff to be raised by five percentage points. At that level, filament lamps would remain moderately assisted

and given that a within-lamp-industry disparity would simultaneously be removed, some net movement towards an environment conducive to efficient resource use could be expected.

The other types of lamps under reference seem quite different to the types produced by ELMA, and quite different to each other, at least in terms of end use. However, UV lamps aside, little information is available to the Commission about how such lamps are manufactured.

Of lamps in the 'Other' category, only UV lamps are produced locally. In the Tariff, UV lamps of the filament type are currently grouped with a wider class of filament lamps which are imported with 10 per cent duties. By contrast, UV lamps of the discharge type enter under the same classification as arc, neon, sodium and certain other speciality lamps at two per cent duty. Thus in seeking even-handed

29

treatment for UV lamps of different types, there might be some appeal in terms of administrative simplicity, in setting tariffs for UV lamps of the discharge type at the same 15 per cent rate that is being recommended for filament lamps in general. By the same logic, the tariff for all lamps in the same category as UV discharge lamps would be raised from two per cent to 15 per cent too.

However, Australia's adoption of the Harmonized Tariff in January 1987 will change the situation. From that date it seems certain that UV lamps.of both the filament and discharge types will be classified together in a category with arc and infra-red lamps. Most other lamps will get caught up in one of the general filament or discharge lamp import categories. Thus the impending Harmonization reduces the pressure to recommend 15 per cent tariffs for UV and other lamps on administrative grounds, and makes the setting of separate rates for those categories (if assistance considerations point in that direction) more of an option. Whether different rates would be warranted is a matter which involves difficult judgements and the Commission has considered a number of issues:

. Achieving the same rates for like goods

UV filament and UV discharge lamps are likely to be substitutable in both production and consumption. A common rate of assistance for both types of lamps would therefore contribute to economic efficiency. In arriving at a common rate for these lamps it would seem appropriate to avoid a reduction

in assistance to the manufacture of UV filament lamps which is moderately assisted at present. The production of UV filament lamps appears to be an efficient user of Australia's resources.

Further, though it is possible to find what might be thought to be similarly made products, such as cathode ray tubes, which receive only minimal tariff assistance, on average moderate tariffs apply to the goods in ASIC class 3357 - the 'mixed' group which includes UV and other lamps. A tariff rate of 15 per cent on UV and other lamps would provide a level of assistance to these goods which would be similar to that which applies to the ASIC class as a whole.

. Effective assistance

Apart from UV lamps, little is known about the proportion of value added that would be involved in the production of 'other' lamps. A low value added production process, in combination with the entry of parts at concessional tariff rates, could result in an undesirably high effective assistance even from tariffs of only 15 per cent.

Although the Commission does not have much information about the workings of the current CTCO system or about how lamp manufacture would be likely to develop with changed incentives, observations during its visit to a local UV

manufacturer indicate that the assembly of speciality lamps is not a low- value added, or 'screw-driver', operation. Based on these observations the risk that exorbitantly-assisted industries would emerge in a 15 per cent tariff environment may therefore not be great.

. Competitive pressures and export orientation

In the case of UV lamps, an increase in tariffs would imply a reduction in competitive pressure from imports. It is possible that the present export orientation of UV lamps manufacture would suffer because of the provision of a more secure domestic environment. Whether this would be a significant

risk with a tariff of only 15 per cent is not clear.

30

The CTCO system

With tariffs of 15 per cent, an incentive would be created for importers and users of 'other1 lamps to seek concessional entry - a move which in turn would tend to introduce a bureaucratic element, with all its associated

uncertainties, into decisions about what lamps are to be produced locally.

Though the weight of evidence is not strong either way, the Commission favours an assistance regime in which the manufacture of all lamps is treated equally. A 15 per cent tariff will be recommended for UV lamps of both filament and discharge types, as well as for other lamps in the 'Other' category. There would

also be advantages by way of simplicity in administration of the Tariff arising from the adoption of this approach, both at present and under the Harmonized system.

The Commission also will recommend that, leaving aside any reduction in duties that might arise from the CTCO system, the parts for electric lamps which are under reference be dutiable at the same rate as the complete lamp, viz. 15 per cent.

The level of assistance recommended is not based on any estimation of the assistance that would be required to maintain Australian production of lamps. Indeed the Commission considers it essential for there to be a move away from an assistance regime which is so flexible that it conveys the impression of a readiness on Government's part to provide whatever assistance would be needed to support

the continuation of a lamp manufacturing industry in Australia (or worse, to sustain the present manufacturer's market position) regardless of market circumstances. The Commission considers that in any case, given an efficient marketing strategy the industry will be very competitive at the recommended

rate. Participants views on this matter were varied - although ELMA claimed, with qualification, that it needed considerably greater assistance than 15 per cent tariffs to remain in operation both GTE and Tungsram indicated that, in the event of ELMA discontinuing production, with a 15 per cent tariff in place they would consider lamp manufacture in this country.

4.3.2 Other Options

The Commission also canvassed, but does not propose to recommend, a number of other options for assistance arrangements.

. Option 2

An option that was considered, but rejected, was the setting of the tariff rate for filament and fluorescent lamps at 20 per cent. In assessing the likely impact of that rate, the Commission has considered a number of factors. In particular, the past performance of the lamp industry indicates a tardiness in its responses to the effects of increasing international competition. The Commission is concerned

that this level of tariff assistance would unduly shield the industry from the beneficial effects that flow from competition, and might result in a failure on the part of the industry to continue to seek out and implement improvements in its

production processes, distribution arrangements and marketing strategies. Moreover, it would imply a doubling of the tariff assistance to filament lamps. As little has changed in the relative levels of assistance to industries since the Commission's 1982 recommendation for a tariff rate of 10 per cent for filament

lamps, a doubling of the tariff rate to 20 per cent for these goods is not considered justified.

31

. Option 3

As pointed out previously, the current tariff rate on filament lamps is 10 per cent. As opposed to increasing this rate, a further option would involve the reduction in the rate on fluorescent lamps down to this level, either immediately or progressively. The effective rate of assistance provided by this tariff would be somewhat less than 10 per cent for both fluorescent and filament lamps.

One argument that could be advanced in support of having 10 per cent tariffs to protect the two main areas of lamp production is that it is the Government's expressed intention that this be the last review of the lamp industry for some time. The Government wishes to encourage the development of competitive Australian industries which rely less on government assistance. Maintaining the present long term tariff rate of 10 per cent on filament lamps and bringing the duty on fluorescent lamps down to this level would signal the strength of this commitment. The rate would be in keeping with changes that are likely to occur in the general structure of industry assistance. Any increase in assistance beyond the current long term rate for filament lamps would reduce pressure on the industry to improve its competitiveness by rationalising its selling agreements, distribution networks, etc.

Against the above, it can be said that in view of the assistance currently received by similar industries, it would be premature to bring the fluorescent-lamp tariff down from 20 to 10 per cent. Lamp production would receive lower assistance from tariffs than many closely related activities until assistance to these activities was also reduced. Of course this difficulty will always arise when reviews of assistance are conducted on a piecemeal basis.

It can also be argued that while the industry is deriving substantial benefit from the imposition of anti-dumping duties, it would be inappropriate to fine tune the long term General tariff rate to account for changes in that assistance. The level of assistance provided through such administrative channels is variable and transitory. Rather than fine tuning the long term tariff rate, a better approach would be close surveillance of the extent of anti-dumping action, and other administrative mechanisms, and of their implications for the community at large.

4Λ The Commission's Responses To The Specific Reporting Requirements In Part 3 Of The Minister's Reference

In part 3 of the reference, the Minister requested that the Commission report on a number of specific matters relating to the production of electric lamps in Australia. The Commission has dealt with many of these matters in earlier sections of this report. Nevertheless, the Commission's responses are consolidated below with cross-reference to sections of the report where these matters are covered in more detail.

3(a) (Report on) significant factors that may be affecting the efficiency and international competitiveness of the major Australian producer of electric lamps including: ( i )

(i) the terms and operation of the current joint ownership agreement which governs the production of electric lamps in Australia including distribution, marketing, franchise, patent, or like arrangements

32

The Commission discussed the Agreements and their effects, in detail, in sections 2.5, 3Λ and

In the Commission's view, the Agreements operate to ELMA's disadvantage. They are constraining the company's commercial operations and the competitiveness of lampmaking in Australia.

ELMA submitted that the Shareholders' Agreement has not led to higher consumer prices in Australia when compared with those prevailing overseas. It also said that the structures of individual Partners' selling arrangements have been altered to take account of changing market conditions. Overall, the company believed

that the joint ownership agreement was the most effective mechanism for controlling the manufacture, marketing and distribution of lamps in Australia, particularly in light of the operation of similar agreements in many other countries and the competition between the Selling Partners in the domestic

market.

In brief, the Commission considers that:

- the resulting management control structure has been unresponsive to the need for ELMA to take urgent action over several years to reduce costs and increase its competitiveness;

- ELMA has no coherent commercial strategy;

- within the constraints of the Agreements the commercial competition between the Partners appears to have made co-operation more difficult to take concerted action in ELMA's best interest;

- the technical/management fee paid to Philips puts a relatively high cost burden on ELMA; and

- the distribution arrangements whereby the four Partners distribute ELMA products through four competing marketing and distribution systems almost inevitably lead to duplication and cost several million dollars per annum.

(ii) production scale in Australia and overseas and marketing arrangements prevailing in the international lamps industry

Production scale was discussed in section 2.2. Although it has limited information on the subject, the Commission offers the following comments on the production scale of the processes used by ELMA (including NGW), compared with overseas operations.

Production scale is about one twenty-fifth the scale of the most modern overseas glass (ie bulb and tube) making plants.

In particular, glass tubes for fluorescent lamps seem to be handled more efficiently in the Netherlands than at ELMA. Certainly the process for glass manufacture and its conversion into tubes and bulbs suffers a significant competitive disadvantage; bulb and tube costs are about three times those in

Europe, for example, and this excess comprises a significant percentage of ELMA's production costs.

33

ELMA stated that the overwhelming difficulty was achieving sufficient volume throughput in its glass making operation to lower costs (and to justify further investment).

In respect of marketing arrangements in the international lamps industry, although ELMA claimed that similar arrangements to its own prevail in many overseas countries, the Commission received no information on such agreements and thus can offer no comment on this matter. As indicated in (i) above, marketing of the

local product (and the pursuit of export markets) is constrained by the Agreements under which ELMA and the Partners operate.

(Hi) the appropriateness of technology adopted by the Australian lamps industry

ELMA claimed that, within the volume constraints of the Australian market, it is technologically efficient and has continued to utilise effectively technology available from its Partners' overseas operations.

In section 2.2, the Commission concluded that using the present technology employed in glass making by NGW would seem to be the cheapest way of supplying bulbs and tubes to a manufacturer of ELMA's size, given the domestic orientation of ELMA's output.

In lamp making, ELMA operates two lines for filament lamps and two lines for fluorescent lamps. In each case, one is modern and uses recent technology, and the second one is older and operates at higher cost - particularly in the case of the old filament lamp line for decorative lamps. In the latter cases there seems to be scope to reduce costs and increase competitiveness through investment in more modern technology.

(iv) raw material costs, particularly the cost of glass

As indicated in (iii) above, glass costs for ELMA are high but figures available to the Commission show that it is more economic for ELMA to make glass components locally than to import bulbs and tubes, other than decorative bulbs. In general, tariffs on its raw materials raise ELMA's cost structure for its total

lamps production by a weighted average of about 10 per cent.

(v) the range and quality of electric lamps produced by the local industry

ELMA makes a full range of lamps used in high volume in Australia. It claims to have optimised its range of lamp production. ELMA said that it was closely monitoring the cost efficiencies associated with each of the types produced in a low volume with a view to rationalisation, as necessary. In this regard, it has recently reduced its range of specialty filament lamps.

On the other hand, the ELMA Partners indicated they were planning an investment strategy to exploit a potential opportunity in the highest growth sector of the market, decorative lamps. This is an area where ELMA's processes are currently least competitive.

There was consensus amongst participants in the inquiry that ELMA products were of the same standard in regard to quality as those produced in Europe and North America.

34

(vi) developing country preference arrangements

Developing Country preferences were covered in section 3.1

These fragment the Tariff and, in this sense, are contributing to further uncertainty in this industry at a time when a stable assistance environment would seem to be of importance. The Commission found little evidence to suggest that DC preferences were presently eroding the assistance accorded by the General

tariff rate. It was noted that the Government has announced a revised system of granting tariff preferences to Developing Countries to be introduced from 1 July 1986.

(vii) the numerous changes to levels of assistance to the industry in recent years

This matter was discussed in section k.2.

While serving as a prop to declining competitiveness, the numerous changes in levels of assistance over recent years have generated substantial and undesirable uncertainty in the industry. They appear to have diverted management attention from constructive measures to improve ELMA's competitiveness.

3(b) claims by the industry in Australia that Australian consumers enjoy price levels for lamps lower than levels prevailing in other countries, including countries exporting lamps to Australia

The Commission dealt with this matter in section 2Λ. ELMA and the Partners provided information which suggested that Australian consumers face similar and often lower prices for lamps to those prevailing in overseas countries.

The Commission is unable to offer firm comments on this matter. It has noted that there has been no incentive for deliveries of filament lamps from Belgium below the nifob value since interim dumping duties at a 'rate of 1.2' were

applied. Dumping duties, albeit at a 'rate of 1.0', also apply on fluorescent lamps. In addition there are tariffs and other assistance measures which act to raise the price of lamps on the domestic market.

3(c) ways in which the lamps industry itself, including relevant trade unions, has improved or could improve, the industry's international competitiveness

The local industry participants (ie ELMA management, the Partners and the unions) have adopted measures to reduce costs, albeit somewhat tardily. There was no evidence of labour relations at the moment being anything but excellent. ELMA stated that substantial efficiency gains have been achieved with the introduction of new technology and in the industrial relations, health and safety, and workers' compensation areas.

Notwithstanding this, there may remain significant areas for further cost reduction: by investment in improved processes; expansion of fluorescent and decorative lamp facilities; and the introduction of measures to further reduce

manpower costs. The Philips technical fee seems high.

3(d) the prospects of the lamps industry in Australia becoming efficient, internationally competitive, export oriented and capable of operating over a long period with minimum levels of assistance

35

Unless ELMA chose to install the latest high volume equipment for making bulbs and tubes, to undertake a major expansion of its lamp making facilities and to mount a special export oriented marketing effort, the prospects of local filament and fluorescent lamp production becoming export oriented appear remote, primarily because of high local costs. The Commission was unable to assess the economic feasibility of developing an export industry based on what would undoubtedly be large investments in facilities. The Commission was also unable to test the feasibility of ELMA's exporting into markets where it would compete with its owners. The 'Shareholders' Agreement' certainly appears to work against this. Nonetheless, it seems Australia could have a lamp making industry which was internationally competitive in the sense that it could withstand international competition, was efficient and could survive with a low level of assistance. Ultra violet lamps production seems to be already efficient, export oriented and able to survive with low levels of assistance.

3(e) the direct and indirect consequences for employment

i) in the Newcastle region ii) elsewhere in the Australian economy - for each course of action identified by the Commission as available to the Government

Implementation of the Commission's preferred option (a common tariff rate of 15 per cent for all electric lamps and parts therefor under reference) would be unlikely to result in any measurable consequences for employment either in

Newcastle or elsewhere. Participants views on the consequences were discussed earlier in this chapter when introducing the Commission's favoured assistance option.

A mechanism for measuring the economy-wide effects of economic change is the ORAN! model. For this narrow reference, the direct effects of the change in assistance arrangements would be so small it would be inappropriate to use the model to estimate any employment effects across Australia.

Even if there were to be any small scale retrenchments from ELMA, information submitted by DEIR (from its survey of the characteristics and employment experience of current and past ELMA employees) indicates that the ELMA workforce is, and has been, geographically and occupationally mobile, and would appear to have a high propensity for retraining. Notwithstanding this, those employees most at risk (ie. process workers - mainly females) could expect a period of unemployment prior to finding alternative employment. Survey

information is incomplete, but it seems very few people would suffer privation if any of the options listed were adopted. DEIR concluded from its studies of past ELMA employees and the Hunter region labour market that there would seem to be reasonable prospects for absorption into the labour market of any small scale retrenchments which ELMA might implement.

Direct employment in UV lamp manufacture is small (about eight people). Implementation of the Commission's recommendation would mean an increase in assistance to this sector but this would have an insignificant impact on employment.

Regarding the other options which were canvassed but rejected, the Commission considers that, at least in the short run before investments in labour-saving technology could be brought on stream, positive employment effects within the industry might be expected if either the Commission's 20 per cent industry rate option or ELMA's request were implemented. The Commission is concerned,

36

however, that any such gains could be at the expense of employment in other parts of the Australian economy. With respect to the option for a common rate of lO per cent on all electric lamps, the available information suggests that little, if any, adverse consequences for employment within the industry or in associated

industries in Newcastle or elsewhere would occur; even given that assistance for fluorescent lamps would be reduced by 10 percentage points.

In the Commission's view implementation of any of the options considered would not involve very significant employment effects in ELMA. However, in the event that ELMA were to cease production GTE and Tungsram each indicated an interest in commencing manufacture in Australia, though there was no firm

indication of where such a facility might be located.

4.5 Tariff Harmonization

A new Australian Customs Tariff, based on an internationally agreed 'Harmonized Commodity Description and Coding System' is scheduled for introduction on 1 January 1987. In June 1984 the Commission received a reference on Harmonization of the Customs Tariff as part of the process of translating the current Tariff into the Harmonized form. In part, recommendations in that

inquiry are required to 'avoid unnecessary fragmentation and complexity' and to ensure that current assistance levels are 'not substantially affected'. In addition, the Minister directed that, in all future reports, the Commission is to have regard to the Government's intention that the Tariff should be based on the Harmonized

System.

The Commission has examined the Harmonized Nomenclature for the goods covered by this report. It has concluded that its proposed recommendation, if implemented, will not lead to any fragmentation once the Harmonized System is

adopted. Sealed beam lamps of 85.09.9 and filament lamps of a kind used in motor vehicles of 85.20.1 which are not included in the terms of this reference are currently dutiable at 25 per cent. Separate provisions have been made in the draft report on Harmonization for sealed beam lamps and parts therefor at

25 per cent. However no separate provisions have been made for filament lamps of 85.20.1 and if this recommendation is adopted duties on these goods will be reduced from 25 to 15 per cent.

37

1 : ■

APPENDIX A : THE REFERENCE

I, JOHN NORMAN BUTTON, Minister for Industry, Technology and Commerce, in pursuance of my powers under Section 23 of the Industries Assistance Commission Act hereby:

(1) refer the matter of assistance to the industry in Australia producing and/or selling electric lamps to the Industries Assistance Commission for inquiry and report within 12 months of the date of this reference;

(2) specify that the Commission’s inquiry and report include lamps of a kind which, if imported, would fall within sub-item 85.20.2, 85.20.3 or 85.20.9 in Schedule 3 of the Customs Tariff Act 1982 as proposed to be altered;

(3) without limiting the generality of this reference, request the Commission to report on:

(a) significant factors that may be affecting the efficiency and international competitiveness of the major Australian producer of electric lamps including

. the terms and operation of the current joint ownership

agreement which governs the production of electric lamps in Australia including distribution, marketing, franchise, patent, or like arrangements

. production scale in Australia and overseas and marketing arrangements prevailing in the international lamps industry

. the appropriateness of technology adopted by the Australian lamps industry

. raw material costs, particularly the cost of glass

. the range and quality of electric lamps produced by the local industry

. developing country preference arrangements

. the numerous changes to levels of assistance to the industry in recent years

(b) claims by the industry in Australia that Australian consumers enjoy price levels for lamps lower than levels prevailing in other countries, including countries exporting lamps to Australia

(c) ways in which the lamps industry itself, including relevant trade unions, has improved or could improve, the industry's international competitiveness

(d) the prospects of the lamps industry in Australia becoming efficient, internationally competitive, export oriented and capable of operating over a long period with minimum levels of assistance; and

A.l

(e) the direct and indirect consequences for employment

(i) in the Newcastle region

(ii) elsewhere in the Australian economy

for each course of action identified by the Commission as available to the Government;

(4) request that the Commission provide an interim report by 31 May 1985 (without the need for a draft report) on the nature and extent of assistance which should be provided the production of filament lamps in Australia between the cessation of the current temporary duty on

12 July 1985 and the implementation of the Government's decision on long term assistance arrangements for the lamps industry.

7 February 1985 (John N. Button)

Minister for Industry, Technology and Commerce

A.2

APPENDIX B : LIST OF PARTICIPANTS

Name of Participant

I. D. SHAW

B. SMART

J. P. GIBSON

Anthony BALLANTINE

Barry WESTON Max PEARCE

Ron ELSHAW

P. DYER

R. WILLIMS

Robert HERREMANS Bernard TREVANION John HESLOP

Hugh McCa r t h y

Organisation or Company

Aldridge Traffic Systems 6 Queen Street Mitcham VIC 3132

Australian General Electric (Sales) Limited P.0. Box 174 Willoughby NSW 2068

Australian Glass Workers' Union Room 47 Trades Hall Goulburn St Sydney NSW 2000

A.W. Ballantine 6/3 Landenburg Place Greenwich NSW 2065

G.J. Coles & Coy. Ltd GPO Box 1698P Melbourne VIC 3001

Commercial Lighting Improvements Pty Ltd 46 Arcadia Avenue Gymea Bay NSW 2227

Crompton Lighting Pty Ltd 11 Works Place Milperra NSW 2214

Department of Employment and Industrial Relations GPO Box 9880 Canberra City ACT 2601

Electric Lamp Manufacturers (Australia) Pty Ltd Clyde Street Hamilton NSW 2303

Federated Ironworkers' Association of Australia P0 Box 226 Mayfield NSW 2304

Abbreviation

Aldridge

Australian General Electric

Ballantine

Coles

Commercial Lighting

Crompton

DEIR

ELMA

Federated Ironworkers' Association

Name of Participant Organisation or Company Abbreviation

D.H. KATRAK P. JOYCE

GEC Australia Ltd Box 143, Post Office North Ryde NSW 2113

GEC

Richard LIU Gilbert Gray & Co. Pty Ltd

PO Box 83 Rydalmere NSW 2304

Gilbert Gray

Trevor WILLIAMS Clifford BEVES GTE Australia Pty Ltd Sylvania Way

Lisarow NSW 2251

GTE

Mercedes RANOCCHI Mirabella International Pty Ltd 145 Lygon Street East Brunswick VIC 3057

Mirabella

R. BENEDET New South Wales Government

Box 4169 GPO Sydney NSW 2001

A.J. BOETTCHER A. BARGE

Philips Lighting Industries PO Box 1138 North Sydney NSW 2060

Philips

John CAIN Premier of Victoria

(State Electricity Commission of Victoria) 1 Treasury Place Melbourne VIC 3002

SECV

J.G. McLAY C.J. DUNKLEY

Thorn EMI Lighting P0 Box 91 Ermington NSW 2115

Thorn

H.R. SPIER Trade Practices Commission

P0 Box 19 Belconnen ACT 2616

TPC

Bruce ROBINSON George ARCHER

Tungsram Australia Pty Ltd 26 Taunton Drive Cheltenham VIC 3192

Tungsram

BRIAN WELLS Turrella Industries Pty Ltd

P0 Box 282 Gordon NSW 2072

Turrella

B.2

APPENDIX C : SUMMARY OF REQUESTS AND SUGGESTIONS

Participant

Australian Glass Workers' Union

G.J. Coles

Crompton

ELMA

Federated Ironworkers' Association

GEC

Gilbert Gray

GTE

Mirabella

Philips

Thorn

Request

That filament and fluorescent lamps be dutiable at 20 per cent.

That filament and fluorescent lamps be dutiable at 10 per cent.

Supported ELMA's request.

. That the duty on filament and fluorescent lamps be 30 per cent for at least 5 years and 20 per cent thereafter. . Removal of the DC preference on imports

of filament lamps from Brazil.

That quantitative restrictions be applied to limit imports of filament lamps of a type made by ELM A to 5 per cent of the market in 1985- 86 and 10 per cent of the market in

1986- 87.

Supported ELMA's request.

The continuation of Tariff Concession Order TC 8438110 which applies to certain filament lamps.

That all lamps under reference be dutiable at minimum rates.

. That filament lamps be dutiable at

minimum rates. . That it be made compulsory for light

globes to be approved by the State

electricity authorities before they are allowed to be sold on the Australian

market.

Supported ELMA's request.

. That Tariff Concession orders TC 8438110, TC 8438144, TC 8531568, TC 8438111,

TC 8438113 be continued. . That there be no impediment to the

granting of a tariff concession for

certain lamps, provided the existing criteria can be met.

. That the Commission include in its report a statement confirming that no change to the administration of tariff concessions in respect of the goods under reference is proposed. . Supported ELMA's request.

Tungsram . That GLS type filament lamps be dutiable

V at 10 per cent.

. That 26mm, 18W, 36W and 58W fluorescent lamps be dutiable at 10 per cent. . That all other lamps under reference be dutiable at minimum rates. . Removal of dumping duties. . Removal of DC preferences for imports of

filament and fluorescent lamps from Brazil, Taiwan and Korea.

Turrella That Tariff Concession Order TC 8438110 be

continued.

C . 2

APPENDIX D : TARIFF PROVISIONS

Customs T a r if f

Note: Goods under reference the produce or manufacture of New Zealand or Papua New Guinea are free of duty.

Tariff Classification Goods

General rate

Special rate

85.20 ELECTRIC FILAMENT LAMPS AND ELECTRIC

DISCHARGE LAMPS (INCLUDING INFRA-RED AND ULTRA-VIOLET LAMPS); ARC-LAMPS:

85.20.1 - Filament lamps of a kind commonly)

used in motor vehicles ) NOT UNDER REFERENCE

85.20.2 - Fluorescent discharge lamps 20% DC(except

TAIW):10%

85.20.3 - Filament lamps, NSA 10% DC:Free

85.20.9 - Other 2 % DC:Free

D. 1

Dumping Commodities Register

LAMPS, ELECTRIC FILAMENT DUMPING DUTY

- General lighting service (G.L.S.) - Clear or pearl - Bayonet cap or Edison screw - 240-250 volts - 25-100 watts

85.20.3 Stat Code 333

Dumping Duty Payable

BELGIUM An amount equal to

the product of (a) 1.2 and (b) An amount per lamp, if

any, by which the export price is less than A$0.19 per lamp.

Terms, F.O.B., 60 days, packed in 10 x 10 shrink in 100 way carton Applicable to goods entered for home consumption on or after 12.10.83

FLUORESCENT DISCHARGE LAMPS DUMPING DUTY

85.20.2 Stat Codes 258, 269, 27X, 280

FEDERAL REPUBLIC OF GERMANY GERMAN DEMOCRATIC REPUBLIC HUNGARY JAPAN THAILAND

REPUBLIC OF KOREA TAIWAN PROVINCE PHILIPPINES CANADA

Normal Values have been notified to Collectors by Confidential Instruction

D.2

Schedule of Concessional Instruments

Note: Goods admissible via a tariff concession order prescribed under item 50 are dutiable at 2 per cent except goods the produce or manufacture of New Zealand which are Free. * (l)

Tariff Prescribed

Reference Description of Goods Item

85. 20 Caps, fluorescent lamp 50

85. 20 Cathodes, wi re, for fluorescent discharge lamps 50

85. 20 Lamps, filament, but NOT including ANY of the following: 50 ( a) buslamps; ( b) candle type lamps;

( c) fancy round lamps; ( d) general lighting service lamps; ( e) locomotive headlights ( non-reflective type) ;

( f) oven lamps; ( g) pilot lamps ( including normal flush and pigmy) ; ( h) reinforced construction lamps

( including rough service) ; ( i) signal lamps - ES cap ( bulb dia exceeding 19 mm) ; ( j) street series lamps; ( k) traffic signal lamps ( non tungsten

halogen) ;

( l) traction lamps; ( m) trainlamps ( bulb dia 45mm, 50mm or 60mm) ; ( n) tubular lamps - cap ( excluding tungsten halogen and infra-red)

85. 20 Lamps , filament, having a rated voltage 50

greater than 280 V, NOT being goods of a kind commonly used in motor vehicles for lighting purposes

85. 20 Lamps , fluorescent, but NOT including ANY 50

of the following: ( a) germicidal fluorescent discharge lamps; ( b) straight type lamps having a dia

exceeding 20 mm and a length exceeding 550 mm; ( c) straight type lamps having a wattage exceeding 15 W

D. 3

Schedule of Concessional Instruments - Continued

Tariff Prescribed

Reference Description of Goods Item

85.20 Lamps, fluorescent, capable of emitting a red and blue mixed light, of a kind used for stimulating plant growth

50

85.20 Lamps, fluorescent, but NOT including germicidal 50 fluorescent lamps, coloured, being ANY of the following: (a) actinic blue; (b) black; (c) blue; (d) blue-black; (e) blue-green; (f) green; (g) green-yellow; (h) orange; (i) red; (j) violet

85.20 Lamps, fluorescent, tubular bi-pin, 50

125 W or greater

85.20 Parts for filament lamps, being ANY of 50

the following: (a) buttons (of porcelain or glass); (b) discs (of metal or mica); (c) lamp caps; (d) leading-in-wires; (e) spirals (filaments)

D.4

APPENDIX E : THE PRICE RAISING EFFECTS OF ANTI-DUMPING ACTION

Dumping duties are intended to raise the landed duty paid price of imports from a particular source and thereby to improve the competitive position of domestic producers.

. Filament Lamps

To determine the effects of anti-dumping action on the price of imports of Belgian filament lamps, the Commission has analysed ABS import statistics for a period covering 12 months before and after the announcement that dumping duties would be imposed. To support this analysis, which was based on data aggregated such that it includes a few shipments of dearer lamp types, confidential import information for the five months preceding and the four months following the announcement of dumping duties was also examined.

Figure E.l shows ABS Figures for average monthly fob unit values for imports from Belgium, currently subject to dumping duties, for the period February 1982 to June 1985.

As can be seen from Figure E.l, following the announcement of dumping duties, average fob prices increased to a level sufficient to avoid the imposition of such duties. The average price of filament lamps from Belgium for the 12 months before the introduction of dumping duties was 17.63 cents. For the next 12

months the average price was 19.27 cents, a rise of about 10 per cent. That this price increase was due solely to dumping was supported by ABS data showing that this increase came at a time when prices for filament lamps under the same statistical code from all other sources were declining. The confidential import price data available to the Commission verified that the increase in prices attributable to dumping was about 10 per cent.

To ensure that any anti-dumping - related price increase was properly distinguished from price changes due to exchange rate movements, average monthly fob unit values expressed in terms of Belgian francs were also inspected. In the Belgian franc price series, shown in Figure E.2, the price lift accompanying

anti-dumping action was even more obvious. Indeed, for the period under consideration the average monthly fob price in terms of Belgian francs, increased some 15 per cent.

To the extent that prices are raised by anti-dumping action, revenue is appropriated by Belgian suppliers that would otherwise accrue to the Australian community. Using the information presented in Figure E.l the size of the transfer to Belgian suppliers can be put into some perspective. Given that some 5.6 million

lamps were imported in the 12 months following the introduction of dumping duties, the transfer to Belgian suppliers for that period, resulting from anti­ dumping action, would have been about $100 000. 1

1 For a more detailed analysis of the effects of anti-dumping action see IAC, Polyvinyl Chloride Homopolymer (Anti-Dumping) , Report No 330, AGPS, Canberra, 1983, Appendix F, pp69-75.

E.l

FIGURE E2: BELGIAN FRANC AVERAGE MONTHLY FOB UNIT VALUES FOR IMPORTS UNDER TARIFF ITEM B5.20.3/333, FEB 1982 --JUNE 1985

FOB VALUE

.COMPLAINT LODGED

"\ SECURITES IMPOSED

DUTIES ANNOUNCED

NON-INJURIOUS FOB VALUE"

1 AUG ' OCT ' DEC 1 FEB ! APR ' JUN SEP NOV JAN 85 MAR MAY

APPENDIX F : CHRONOLOGY OF ASSISTANCE FOR ELECTRIC LAMPS OVER RECENT YEARS

There have been a considerable number of changes during the last ten years to the assistance accorded the industry.

At the beginning of 1976 the General rate of duty for fluorescent discharge lamps was 41 cents per kilogram while that for filament lamps was 25 cents per kilogram. The average ad valorem equivalents of these rates were 27 per cent and 5 per cent respectively. In May 1976 these General rates were reduced to 15 per cent and Free. At the same time the General rate of duty on other discharge

lamps was reduced from 41 per cent (including primage) to Free.

In the early 1980s, these reductions were steadily reversed. This was a period of gradually increasing assistance for the production of fluorescent and filament lamps.

Details of the various reports during the last ten years on assistance to the industry, their recommendations, and the Government's decisions are set out below in chronological order, along with recent changes to the major By-Laws and Tariff Concession Orders.

27 August 1975 IAC Report No. 57 : Filament, Fluorescent and Other Discharge lamps

The Commission recommended that fluorescent lamps be dutiable at 15 per cent General and that other discharge lamps and filament lamps be dutiable at minimum rates.

19 May 1976 The Government implemented the recommendations in IAC Report No. 57.

14 October 1980 By-law 8060527 was established covering goods as set out below.

Fluorescent Discharge lamps other than:

Straight types having a diameter exceeding 27mm and a wattage exceeding 15w; and

Germicidal fluorescent discharge lamps.

18 November 1980 By-law 8061788, operative from 14 April 1980, replaced by-law 8060527. It covered the following goods.

Fluorescent Discharge lamps other than:

Straight type lamps having a diameter exceeding 27mm;

F.i

Straight type lamps having a wattage exceeding 15w; and

Germicidal fluorescent discharge lamps.

3 December 1980 IAC Report No. 253 : Fluorescent and Filament Lamps - Short Term Assistance

The Commission recommended that short term assistance not be accorded fluorescent or filament lamps. A dissenting opinion proposed that fluorescent lamps be dutiable at 25 per cent General and filament lamps at 10 per cent General until implementation of the Commission's final report on the goods under reference.

23 December 1980 By-law 8062889 replaced by-law 8061788. It covered the same goods from the same operative date.

1 April 1981 The Government implemented the proposals in the dissenting opinion of IAC Report No. 253.

26 May 1981 By-law 8060777 was established, operative from 1 April 1981, and covered:

Filament lamps having a rated voltage greater than 260v, not being goods of a kind commonly used in motor vehicles for lighting purposes.

25 August 1981 By-law 8154334 was established, operative from 1 April 1981 and covering:

Parts for filament lamps.

1 September 1981 By-law 8157916 was established, operative from 1 April 1981, which covered the following goods.

Filament lamps other than:

buslamps candle type lamps fancy round lamps general lighting service lamps

locomotive headlights oven lamps pilot lamps reinforced construction lamps signal lamps

traffic signal lamps street series lamps

F.2

traction lamps trainlamps tubular lamps

7 October 1981 By-law 8157257 was established, operative from 16 July 1981, and covering:

Coloured fluorescent lamps, but not including white, warm white; day or 3500K lamps.

7 October 1981 By-law 8158215, operative from 1 October 1981 replaced by-law 8062889. It changed the specified diameter from 27mm to 20mm.

5 December 1981 By-law 8159836 replaced by-law 8157916. It substituted 'tubular lamps one cap (excluding tungsten halogen and infra-red)' for 'tubular lamps'.

?5 February 1982 IAC Report No. 298 : Fluorescent and Filament Lamps

The Commission recommended that fluorescent lamps be dutiable at 20 per cent General and filament lamps at 10 per cent General.

15 May 1982 By-law 8252005 replaced by-law 8158215. It added the condition 'or a length exceeding 550mm' to 'straight type lamps having a diameter exceeding 20mm'.

.5 June 1982 By-law 8252006 replaced by-law 8159836. It added qualifications to several of the categories as shown in brackets below.

locomotive headlights (non-reflective type) pilot lamps (including normal flush and pigmy) reinforced construction lamps (including rough service) signal lamps (ES cap - bulb dia exceeding 19mm) traffic series lamps (non tungsten halogen) trainlamps (bulb dia 34mm, 50mm or 60mm)

17 August 1982 The Government implemented the recommendation in IAC Report No. 298.

' September 1982 By-law 8254262 replaced by-law 8157257 and covered the following goods.

Coloured fluorescent lamps as follows:

'Far Violet, Violet, Blue, Blue-Green, Green, Yellow, Light Red, Dark Red, Violet Blue, Green Yellow, Orange, Red'.

F.3

16 November 1982 By-law 8255678 replaced by-law 8060777 and substituted 280v for 260v.

24 March 1983 TAA Report No. 59 : Fluorescent and Filament Lamps

The TAA recommended that no temporary assistance be provided for fluorescent or filament lamps.

9 May 1983 Customs wrote to Mirabella setting out details of a

complaint by ELMA. This was that Mirabella was importing lamps which did not show the country of origin, contrary to the Customs (Prohibited Imports) Regulations. Consequently Mirabella had to mark some 300 000 lamps and was subject to a number of official inspections.

21 June 1983 Department of Industry and Commerce, Australian Customs Notice No. 83/134 : Incandescent (filament) Lamps From Belgium

This notified the imposition of dumping cash securities on filament lamps imported from Belgium after the date of the Notice.

13 July 1983 The Government, in its decision on TAA Report No. 59, provided temporary assistance of 10 per cent General and DC for filament lamps for a period of two years, and increased the DC preferential rate on fluorescent lamps

from Free to 10 per cent.

29 January 1984 Tariff Concession Order TC 8438147 was Gazetted, replacing by-law 8154334. It listed the parts for filament lamps to which it applied, as follows:

buttons (of porcelain or glass) discs (of metal or mica) lamp caps leading-in-wires spirals (filaments)

7 February 1984 Department of Industry and Commerce, Dumping Report No. 84 : Electric Filament Lamps from Belgium

The Department found that certain types of electric filament lamps had been imported from Belgium at dumped prices, that these imports had caused material injury to the Australian industry manufacturing such lamps, and that there was a threat of material injury from future imports.

Dumping duty was imposed on these lamps, operative from 13 October 1983, at a rate of 1.2 times the amount by which the export price (as defined) was less than $A0.19 per lamp.

29 May 1984 Tariff Concession Order TC 8438110 was Gazetted, replacing by-law 8252006.

29 May 1984 Tariff Concession Order TC 8438143 was Gazetted, replacing by-law 8255678.

14 June 1984 TAA Report No. 64 : Filament Lamps

The TAA recommended a continuation of the 10 per cent temporary duty on filament lamps until 12 July 1985.

8 August 1984 The Government announced its acceptance of the

recommendations contained in TAA Report No. 64.

10 December 1984 Department of Industry and Commerce, Australian Customs Notice No. 84/289 of 10 December 1984 : Fluorescent Discharge Lamps

This notified the imposition of dumping cash securities, or documentary securities with surety, on a range of fluorescent lamps imported from certain countries after the date of the Notice. The countries specified were the

Philippines, Canada, Federal Republic of Germany, German Democratic Republic, Hungary, Japan, Thailand, Republic of Korea and Taiwan Province.

13 December 1984 Tariff Concession Order TC 8438144 was Gazetted, replacing by-law 8252005. It substituted 'straight type lamps having a diameter exceeding 20mm and a length exceeding 550mm' for 'straight type lamps having a diameter exceeding 20mm or a length exceeding 550mm'.

9 May 1985 Tariff Concession Order TC 8438142 was Gazetted,

replacing by-law 8254262. It excluded germicidal fluorescent lamps and the following colours: far violet, yellow, light red, dark red and violet blue. New colours included were actinic blue, black and blue-black.

29 May 1985 IAC Report No. 365 : Interim Report Electric Lamps - Filament Lamps

The Commission recommended the cessation of temporary assistance for filament lamps on 12 July 1985.

F.5

12 July 1985

2 September 1985

The temporary duty applying to filament lamps lapsed as a result of the Government implementing the recommendation in IAC Report No. 365.

Australian Customs Service, Dumping Report No. 108 : Fluorescent Discharge Lamps from Federal Republic of Germany, German Democratic Republic, Hungary, Japan, Thailand, Republic of Korea, Taiwan Province, the Philippines and Canada.

Customs found that certain types of fluorescent lamps had been imported from these countries at dumped prices, that these imports had caused material injury to the Australian industry manufacturing such lamps, and that there was a

threat of material injury from future imports.

Dumping duty was imposed on these lamps, operative from 14 September 1985, at a rate of 1.0 times the amount by which the export price was less than the normal value.

F.6

APPENDIX G : ELMA LETTER ON INVESTMENT INTENTIONS

Copy

3 January 1985

The Secretary, Industries Assistance Commission, P.O. Box 80, BELCONNEN. ACT 2616

Attention: Commissioner D.L. McBride

Dear Mr. McBride,

Inquiry into Long Term Assistance for the Electric Lamp Industry.

At the public hearing in the above Inquiry on 16 December, witnesses representing the E.L.M.A. Selling Parties were specifically asked to state the view that might be taken by the Board of Directors of E.L.M.A. regarding investments in plant and machinery if the duty request made by E.L.M.A. for a long term tariff rate of 20%

for both Filament and Fluorescent lamps, supplemented by an additional rate of 10% for a 5 year period, was not granted by the Government. This matter has been discussed by the Directors of E.L.M.A. and I am authorised to advise you as follows:-

It is the Board's opinion that assistance at a level significantly less than that requested by E.L.M.A. would be read by Importers as a signal that the Australian Government is not interested in the long term viability of E.L.M.A. Because

major investments in machinery for Incandescent and Fluorescent lamps (including the Glass Works) are massively dependant on E.L.M.A. securing a major share of the Australian market, the Board would find it extremely difficult to recommend

to the Shareholders that major investments in plant and machinery be made in such a climate. Although the level of tariff is but one of the factors that is considered by the Board in making investment decisions, the Board has asked me to convey to you that at the rate of tariff recommended in the Draft Report, it

would not consider investing the very large sums of money needed to continue to improve the manufacturing technology and production efficiencies, provide significant cost savings and introduce new product types.

It is the Board's considered opinion that at the common 15% duty rate recommended in the draft I.A.C. Report, imports would increase to a level such that there would be an inadequate return to support any further major investments in E.L.M.A.

E.L.M.A. would thus be locked into its present standard of technology, plant and equipment (future production capacity limitations) and would become increasingly

G.l

non-competitive. Caught in a spiral of reducing volumes leading to increased costs which then cause a further loss in volume, it would appear that eventual termination of production at E.L.M.A. is inevitable although, of course, the time it takes to reach that stage is an unknown factor. Unfortunately, as is invariably the case in such scenarios, timing is usually shorter than can be expected due to lack of motivation, interest and resignations from key employees who will clearly read emerging trends.

Under these circumstances, the Board of E.L.M.A. would wish to continue to strongly press its request for a long term common tariff rate of 20% for both Filament and Fluorescent lamps, supplemented by an additional rate of 10% for 5 years.

Yours faithfully, For and on behalf of the Board,

JOHN P. SLATER Chairman

G.2