Arch Bevis (Brisbane, Australian Labor Party, Shadow Minister for Aviation and Transport Security) Share this | Link to this | Hansard source

I rise to speak on the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006 and the Customs Amendment (2007 Harmonized System Changes) Bill 2006. These bills amend the Customs Tariff Act to bring it in line with the third review of the World Customs Organisation’s Harmonised Commodity Description and Coding System, or the harmonised system as it is commonly known, and to update the Customs Act slightly to give Customs the power to ensure that Australia will be compliant with the new changes as soon as they come into effect on 1 January next year.

I turn first to the Customs Tariff Amendment (2007 Harmonized Systems Changes) Bill. This bill will update the Customs Tariff Act to ensure that Australia continues to be in line with international standards with respect to the harmonised system. The harmonised system is a standardised classification system that is developed and maintained by the World Customs Organisation. Australia is a signatory to the international convention establishing the system, which first came into force in 1988 and which is reviewed every four to six years. The system basically provides a six-digit classification code for all sorts of products and commodities, everything from works of art to wood pulp to ammunition. The six-digit classification code is then taken by Customs and supplemented with an additional two digits for other purposes.

As I said earlier, this system is reviewed and updated by the World Customs Organisation every few years to take into account the changing circumstances and fluctuations of world trade. To quote the World Customs Organisation, the latest revision was based on the following factors, amongst others:

Technological progress;

Changes in trade patterns—that is, to alter classifications where there are low levels of international trade;

Amendments relating to social and environmental fields ...

The review, in total, contains nearly 700 classification changes to the harmonised system, which translates to approximately 1,200 changes to the implementation of the system by Customs.

The second bill, the Customs Amendment (2007 Harmonized Systems Changes) Bill, updates the Customs Act to ensure that the changes to tariff concession orders are in place before the cut-over date of 1 January 2007. In order to properly update Australia’s tariff concession orders, Customs advises that the CEO will be required to revoke about 750 tariff concession orders, replacing them with 1,200 new ones. The problem at the moment is that, at present, the CEO of Customs may only make changes to tariff concession orders under the act after the classification change has taken place. So the CEO would not be able to make the required changes until after the classification change had taken place, which would have raised the potential to prove disruptive to trade. The customs amendment bill will introduce a new section to ensure that the CEO has the power to make these replacements before the formal change has taken place but in anticipation of the change. So the tariff changes will be in place before next year and will take effect from the exact cut-over time, allowing, we all hope, a smooth transition into the new arrangements.

In addition, the bills make some amendments to current rates of duty. Although Customs advises that it has attempted to maintain existing rates of duty and preference as far as possible, there are three items which have altered duty rates. The first is certain plywood and veneered panels containing bamboo, where the general rate of duty will move from free to five per cent. The second is certain carbonising base paper, where the general rate of duty of five per cent will be retained, except if imported from Canada when it will attract a rate of duty of 2.5 per cent or free. Similarly, for carbonised paper imported from certain developing countries, we are advised that the preferential rate will move from four to five per cent or free, depending on the nature of the goods. The third is adhesive paper, where the general rate of duty of five per cent is preserved, except if imported from Canada, when it will attract a rate of either 2.5 per cent or free.

Labor’s understanding from information provided by the government is that the first of the three changes, that is, to plywood and veneered panels, would only have affected goods to the value of $1,350 in the three years to 30 June 2005. In relation to the change of duties for Canadian goods, the second change would not have affected any goods imported in the three years to June 2005. The goods imported from developing countries that fall under the second category only attract approximately $500 worth of duty in the same time period. The third change—to adhesive paper imported from Canada—relates to goods which had a total duty paid of around $42,000 in the same time period as the others. From these figures it is obvious we are not talking about substantial changes in tariffs or duties, or a substantial amount of goods.

The updated changes to the harmonised system tariffs will require the amendment of the rules of origin of two of Australia’s free-trade agreements: the Australia-US Free Trade Agreement and the Thailand-Australia Free Trade Agreement. Negotiations for these changes to the rules of origin are, we have been advised, currently underway and, additionally, are currently being examined by the Joint Standing Committee on Treaties, which is expected to report in mid-October, after which new amendments for the purposes of updating those agreements will be required.

We have also received a number of undertakings from the government regarding this legislation. Firstly, the government will approach the Joint Standing Committee on Treaties to ascertain whether it is appropriate for them to consider the legislation in its entirety. Secondly, Labor have sought assurances from the government that, in the event of underpayment of duty by industry arising out of any transposition error in the changeover, the government will not seek to recover the underpaid duty.

Labor are supportive of the bill. It implements changes which will ensure that Australia remains in line with what are almost universally accepted international standards and avoids the onerous financial and administrative burdens that our importers and exporters would incur if we failed to comply with them. As I have already said, some aspects of the changes to the free trade agreement arising out of the new harmonised system are being examined by the Joint Standing Committee on Treaties.

It is normal practice that the treaties committee report prior to the matter being dealt with in this parliament. Labor are concerned that we do not have the final report from the joint treaties committee on the aspects that have been referred to it. However, we believe that these changes should also be referred to the Senate Standing Committee on Foreign Affairs, Defence and Trade to ensure that there is proper time for any interested stakeholders to make any suggestions regarding drafting errors that the government may have missed, or other problems with the bill. That is something we would encourage the government to pick up.

Other than that, the Labor Party in principle supports the bill. If there are any matters that arise out of either the Joint Standing Committee on Treaties or the Senate Standing Committee on Foreign Affairs, Defence and Trade, then this matter will be further considered in the Senate where, I have no doubt, my colleague Senator Ludwig will do that job with his usual great eye for detail and efficiency.

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

I am pleased to participate in this debate on the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006, which is a technical bill. The general philosophical debate on tariffs, as you may recall, Mr Deputy Speaker Jenkins, was very strong in Geelong, in the electorate of Corangamite, regarding motor cars and TCF. I was a proponent, as most people in this chamber know, for lower tariffs—sometimes much to my own detriment.

I notice my good friend the shadow minister at the table. We had some interesting debates on these matters. To be fair to the opposition, they were in favour of lowering tariffs from time to time, when it suited them politically. I recall Prime Minister Keating supporting lowering tariffs until he came to a certain election and wanted to put them up a bit. It has been an interesting debate.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

Mr Crean interjecting

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

The shadow minister shakes his head and says that he did not have an ambivalent position. We on this side of the parliament supported the then Labor government in lowering the tariffs. The former minister would recall that. We were very supportive of the Button plan and even some changes to the TCF industry. We complimented the then government on their attitude. But they were ambivalent from time to time. I think the shadow minister changed his mind and looked for long-term manufacturing plans. To be fair, they did bring about a change in the attitude to tariffs—very strongly supported by the then opposition.

We have a position now where the car industry is world competitive and the tariffs have been reduced from about 150 per cent down to the current negligible levels. Likewise in the TCF industry—

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

Captain Zero. You’d have them down at zero.

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

We have the member for Corio. Fancy him turning up here in this debate. He does not know very much about tariffs. He has been a very vocal opponent of the member for Corangamite on the tariff issue. He has been known to say on the public record that I am Captain Zero. That is absolutely incorrect. I support a negligible tariff level.

It is worth recording on the record that the member for Corio worked for Senator Button. He was the architect of those changes in the car industry. The member for Corio would have been in the back room developing the Button plan and reducing the number of manufacturing plants—I think there were seven—down to four major plants. Yet he has been on the public record attacking the member for Corangamite about the tariff plans when it has suited him politically. Fundamentally, even the member for Corio understands the value of lower tariffs. He knows the Ford company in his own electorate is now world competitive, productive and efficient. In many ways we think that the company’s activities at Geelong and Broadmeadows compete with those in Detroit. In the last little while the Ford company head office has been in some difficulty.

I am delighted to see my two good friends, particularly the member for Corio. He turns up in this chamber to make sure the member for Corangamite is honest and true, which he always is. He is at long last acknowledging on the public record his support for a lower tariff regime.

This is a technical bill, not one for major debate across the chamber. It involves a lot of technical detail. I am pleased that on this occasion the Labor Party is supporting the government on good policy. That is an unusual situation. They should support the government across the board on a number of issues, such as industrial relations and free trade. The member for Corio will be having a lot to say about the mandatory code later today.

Following my discussions with the two members opposite, I return to the bill before the House. I am pleased to support the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006 and the Customs Amendment (2007 Harmonized System Changes) Bill 2006. Through these bills the Howard government are implementing our international obligations towards the facilitation of an efficient international trade regime through the maintenance of a consistent worldwide system of codification and description of commodities and products. The codification system is integral to the efficient trade of products on the international market.

Mr Deputy Speaker, you would be aware that Australia is a signatory nation to the International Convention on the Harmonised Commodity Description and Coding System, or the harmonised system for short. It has been developed as a means of describing consistently those commodities and products that are traded internationally. One of the difficulties that we have had in the tariff debate is to ensure that there is a comparison of like products between one nation and another. The harmonised system was developed by the World Customs Organisation and covers about 5,000 commodity groups. More than 190 countries, nearly all the countries in the world, use the harmonised system. It is the international language for traded products.

Australia has based its commodity classifications for traded goods on the system since 1988. The classifications are contained in the customs tariff for imports. The harmonised system classifications are used by nations for collection of international trade statistics and for the imposition of tariffs and duties. The system is a vital tool in international trade.

The reason for implementing these bills is that the harmonised system is reviewed periodically by the World Customs Organisation and the recent third review has resulted in a number of changes to the classifications, which are required to be implemented by January 2007. The recent review has deleted classifications for goods where there has been a low level of international trade, and amendments have been made to clarify existing descriptions.

Recognising technological developments and changes in industry practices, the review amends the classifications for a wide range of information technology and consumer electronic products. The review of the harmonised system has also recommended changes to system classifications to individually identify hazardous chemicals and pesticides such as chlorofluorocarbons, mercury compounds, aldrin and asbestos. The enhanced clarifications of classifications for such products will assist with monitoring and control of the international trade of these products, in accordance with the international Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade.

While the bills deal with quite a technical feature of international trade, it is important that Australia takes action to institute the changes of classifications and to comply with the consistent, internationally recognised harmonised system if we are to encourage further freedom in international trade, and I emphasise that point. In the context of these bills I make the observation that free international trade is a good thing and needs to be encouraged, championed and fought for in the interests and for the benefits of the Australian people, as I have been arguing with the member for Corio over the last 15 years. Both nations are better off and the member for Corio understands that, but he has a bit of trouble articulating it to the people of Geelong; but eventually he will come good.

The maintenance of a consistent and harmonised worldwide language for the trade of goods is an important element of encouraging freer trade. Do you understand ‘freer trade’, Member for Corio? That is when you can send the goods overseas and import some goods—a little textbook operation for you. Effective negotiations on trade access and the removal of tariffs and non-tariff barriers requires a clear understanding of what is being discussed, and a harmonised classifications system is an integral part of the process. The Howard government has taken key steps to argue for real reform in international trade, particularly in agricultural trade, which is close to the heart of the member for Corio. Whilst he lives in an industrial city, he does understand agricultural trade—the only member of the other side who does. He even knows more about it than the member for Hotham, because he has a background of it. The member for Hotham has an academic understanding of agriculture but not a real understanding, like the member for Corio has.

As chair of the Cairns Group, a coalition of agricultural exporting nations, Australia is leading the campaign against export subsidies in agriculture and against other market-distorting measures embraced by protectionist nations. The member for Corio used to be a bit of a protectionist, but he has improved. It is estimated that the elimination of export subsidies could be worth $600 million per year to Australian dairy farmers. Dairy farmers in Corangamite, Colac and Alvie, where the member for Corio used to come from—they have good dairy farmers up there now, since he left—and across south-west Victoria export about 80 per cent of their product. The removal of export subsidies and the opening of higher value export markets will have a significant positive impact on farmers in Corangamite and the whole of south-west Victoria.

There is no choice for many Australian industries but to seek export of their products. This is especially so for agriculture, because the domestic population is not large enough to consume their total production. The export culture is clearly understood by farmers and primary industry, although not so much in some other manufacturing industries. As a result, it is vitally important that the government take action to continually open doors to new markets for our exporters and to tear down the barriers and export subsidies that corrupt the international market.

It is disappointing that the opposition has not always supported the government’s attempts to open new markets for Australian exporters, but the Howard government has led the charge in the Doha Round of multilateral World Trade Organisation negotiations. We have pushed for bilateral trade agreements with the United States, Thailand and Singapore to maintain the pressure with key trade partners to remove barriers to our export products.

I will make a few comments on the free trade agreement that this government has signed with Singapore. The agreement came into effect in July 2003 and was Australia’s first FTA since the closer economic relations agreement with New Zealand some 20 years ago. The member for Corio is leaving the chamber. He is learning something; it would be a pity if he left, because this is quite helpful to him. The SAFTA eliminated tariffs in general and increased market access for many Australian exporters of services in the education, environment, telecommunications and professional services sectors. In a joint statement by Minister Vaile, Minister for Trade, and his counterpart the Singapore Minister for Trade and Industry, George Yeo, on the occasion of the SAFTA coming into force, the ministers emphasised the important link between bilateral agreements and achieving progress on multilateral discussions. The statement said:

The ambitious outcomes from SAFTA will complement our efforts in the World Trade Organization, especially the success of the Doha Development Agenda.

These agreements are not just economic; they have benefits in bringing our nations closer together and developing stronger links between business and government, resulting in an enhanced overall relationship.

Mr Deputy Speaker Jenkins, I think I have been to Singapore with you and we have noted the importance of trade to that nation. They have built the wealth of their people by trading with Australia and other nations around the world. I think you understand the importance of free trade. Even coming from your seat of Scullin, where you have had some pressure on you to maintain tariffs, you understand that free trade does develop wealth, does help Australians and does help improve the standard of living. Even you understand that. We are working on the member for Corio’s understanding, and he is improving. He is not quite as good as you in understanding these matters but, as I say, he is improving.

The free trade agreement with the United States came into force on 1 January last year, and there is evidence that the agreement is delivering real benefits to Australian exporters and the whole community. In 2005, sheepmeat and lamb exports to the United States increased by 20 per cent to a value of $350 million. The member for Corio understands that as the shadow spokesman. There was an argument about the export of lamb meat to the USA, and I think both the government and opposition were strong on the view that the tariff barriers imposed by former President Clinton and his administration had to be removed. I think the member for Corio and I were united on removing that barrier so that Australian lamb producers could get access to that lucrative market. Dairy exports to the US increased by 35 per cent to $165 million. Again, that is a very important market for Australia. Australian services exports to the United States increased by 4.1 per cent and are worth $4.5 billion.

Substantial gains for Australian businesses are achieved through this government’s ability to recognise freer international trade, and there are benefits helping to generate the extra jobs that we have seen created and the growth in wages that has been recorded in recent years. As I say, the trade with Singapore and other smaller nations helps in the longer run. Australia has been able to negotiate trade agreements and push for reduced tariff barriers as a result of the consistent international harmonised system of product classification.

In supporting these bills, it is appropriate to reflect briefly on the tariff rates. While it is the intention of these bills to preserve to the greatest extent possible the existing levels of tariff protection for Australian industries, it should be noted that the changes to the harmonised system classifications will bring about several minor changes to some tariffs in the ‘nuisance tariff’ category—those tariffs five per cent or under.

I compliment the government on moving away from these nuisance tariffs. The politics behind it was that the government received, I think, about $1 billion of revenue from those lower tariffs, but they took a strong and bold decision to remove them—I think in the last budget or the budget before. I was very supportive of that because they could have been left in the budget and the government could have received some income, yet the government took the strong policy position.

Nuisance tariffs applying to certain adhesive paper imported from Canada will be abolished under these changes. An approximate total of $868,000 worth of such product was imported into Australia from Canada over the past three years to 30 June 2005. This will result in a revenue loss of approximately $43,000 over a three-year period. The tariff rate will increase for certain plywood and veneered panels containing bamboo from three per cent to five per cent. Over the past three years, the total value of such goods imported to Australia was $1,350. As a result, the new tariff imposition on Australian consumers will be negligible, amounting to approximately $67.50 for the whole nation over a three-year period, calculated on the current rates of trade.

Tariffs will be cut on certain carbonising base paper imported from Canada. These products currently face a five per cent tariff, but under the changes will attract a tariff rate of either 2.5 per cent or zero. Carbonising paper imported from developing countries will see tariff rates move from four per cent to either five per cent or zero, depending on the nature of the goods. A total of approximately $10,000 worth of imports of these products from developing countries has occurred over the three years to 30 June 2005.

It should be emphasised that these changes in tariffs do not represent a specific reform measure but are the consequence of implementing the changes to classifications under the international harmonised system, which has been agreed to worldwide. Australia’s domestic tariff rates have been declining and in many industries they are not what they were. The nuisance tariffs of five per cent have been removed. Relatively minor fluctuations in the exchange rate can wipe out overnight the effect of the tariff protection. I add to that, in the last few moments I have, that the exchange rate is a key factor in this whole tariff debate. As the member for Corio and the member for Hotham would fully understand from the very strong debates we have had on tariffs, the impact of the tariff can be greatly affected by a change in the exchange rate.

I conclude by saying that, whilst this is a technical bill agreed to by the opposition, in philosophical terms it is a step in the right direction. Countries around the world understand that with a lower tariff regime, through the World Trade Organisation, they need to play the game. They need to understand that rules are rules. Countries that have had a number of non-tariff barriers have not been playing the game and have been able to get around these harmonised rules and the WTO. The new legislation, with the cooperation of other countries, makes it harder for those countries that do not want to play the game properly to actually agree and accommodate these fairly technical rules on harmonisation so that the world will be a better place because more trade will take place. We see evidence of this in our commodities boom right now. The trade that we have enjoyed internationally has improved the standard of living, particularly in Western Australia. I know it is more difficult in the TCF industries and the manufacturing industries to argue these points. But, in the longer run, all nations around the world will be better off if we can reduce tariff barriers, trade with one another and enjoy the benefits of the comparative advantages of those countries that do things well in trading with other countries. These are fundamental to the arguments for freer trade and improving standards of living for all the nations, both poor and rich, around the world. I commend the bills. I commend the philosophic stance behind them and I thank the opposition for supporting the bills so wholeheartedly.

Christopher Pyne (Sturt, Liberal Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Link to this | Hansard source

I wondered why the member for Lyons was in the chamber. He is not due to speak on the next bill. I assumed he must be here to respond to the excellent speech from my colleague the member for Corangamite, but he only came into the chamber to heckle and shout.

I thank those members who took part in the debate: the member for Brisbane and the member for Corangamite, who gave an excellent contribution amidst great fanfare from the opposition, who get a great kick out of the member for Corangamite each time he speaks. He is an adornment to the parliament. There is no question about that.

I am here to sum up these bills on behalf of the Attorney-General, who is unfortunately delayed in cabinet and unable to be in the House. On his behalf, I am summing up the Customs Tariff Amendment (2007 Harmonized System Changes) Bill 2006 and, concurrently, the Customs Amendment (2007 Harmonized System Changes) Bill 2006. These amendments implement changes that result from the third review by the World Customs Organisation of the harmonised commodity description and coding system, which is commonly referred to as the harmonised system. As a signatory to the international convention on the harmonised system, Australia is required to implement the changes from 1 January next year. The third review of the harmonised system has deleted classifications for goods where there have been low levels of international trade. Amendments have also been made to clarify existing descriptions and terminology in the harmonised system and to reflect developments in technology and changes in industry practices.

This review also provides new classifications to separately identify a number of hazardous or dangerous chemicals, pesticides or waste products. This will facilitate the monitoring and control of international trade in these products under various United Nations conventions, including the Rotterdam convention. While giving effect to the changes to the harmonised system, the bill ensures to the greatest extent possible the preservation of existing duty rates and levels of tariff protection for Australian industries and margins of the preference accorded to Australia’s trading partners. The bill will provide certainty for Australia’s importers and exporters and ensure consistency with Australia’s international trading partners. I commend the bill to the House.

The second bill that we are debating concurrently is the Customs Amendment (2007 Harmonized System Changes) Bill 2006 and this contains amendments to the Customs Act 1901. This bill will enable the revocation of about 700 tariff concession orders that will be affected by the amendments to the Customs Tariff Act 1995 which are contained in the bill that I previously discussed. Up to 1,200 tariff concession orders will also need to be made to replace those that will be revoked. Tariff concession orders provide free rate of customs duty for imported goods when there are no substitutable domestically produced goods. This bill will ensure the seamless application of tariff concession orders to goods imported before and after 1 January 2007. I commend this bill to the House.

Question agreed to.

Bill read a second time.