What Type of Trade Policies Were Adopted by the Australian Government Toward the Automotive Sector?

1. What type of trade policies were adopted by the Australian government toward the automotive sector?

• Tariffs: The Australian industry of automotive has applied significant tariff reform (as if from 1st –Jan - 2005); tariffs on passenger vehicles and components are reduced from 15% to 10%; and from 10% to 5% in 2010.
• Australia has no incentive on exports or trade balancing requirements.
• Investment requirements: Australia has no regional /local content provisions, profit repartition requirement, foreign exchange requirements, specific equity restriction or limit related to foreign investment.
• Import restrictions: Australia maintains no quotas or bans.
• Regional trade arrangements:  1. Australia applies some regional trade arrangements such as the Australia – US free trade agreement. 2. The Thailand  – Australia  free trade agreement, and the Thailand - Australia free-trade agreement The Thailand-Australia Closer Economic Relations Free Trade Agreement (CERFTA) (as if from 1st –Jan - 2005). 3. Australia and New Zealand Closer Economic Relations Agreement Australia and New Zealand are parties to the bilateral Closer Economic Relations (CER) Trade Agreement.
• Singapore-Australia free-trade agreement.
• Canada: Imported passenger vehicles receive 2.5 % tariffs instead of 7.5% (preferred tariffs – the vehicles must have not less than 75% content commercially manufactured in Australia).
• Manufacturing free trade zones: Australia does not apply the manufacturing free trade zone.
• The Duty draw back arrangements: The Scheme allows exporting companies to hold and reclaim refunds of payments of goods that are being subject to customs duties where those as other goods for export or if goods are re-exported unused since ingress. The goods get claimed only after exportation.

1. Are the free trade agreements (FTAs) Australia entered responsible for the weaknesses in the automotive industry? Should the Australian government have decided against signing these agreements? 

I believe that there are many reasons that would lead me thinking that the FTAs is responsible for the weaknesses of the automotive industry. Firstly, a trading partner with FTA are not the lowest cost procedure risks in emerging (trade diversion) efficiently we can claim that the importing country will shift it’s ordering buying from a sufficient country with tariff towards less sufficient and no tariffs country. Thus, will lead the importing country to lose the tariff’s revenue and the customers will not benefit from the reduction tariffs in the first place.

Secondly, is the (ROO – Rules of Origin) whish another cost associated with FTA. The ROO is implemented to help to stop the imports coming from third party through FTA partner (will circumvent tariff requirement). In other words, ROO might be either value- added based requirements or product specific requirement; which in both cases will raise the administration costs for businesses, their paper work requirements, the custom service and the auditing the ROO. (These costs will be high when considering that the complexity and the large number of FTAs and the numerous number of different requirements).

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