Trade and Assistance Review 2011-12

Annual report series

Trade and Assistance Review 2011-12 was released on 12 June 2013.

The review contains the Commission's latest quantitative estimates of Australian Government assistance to industry. The Review also:

identifies recent developments in assistance to industries and sectors of the economy
reports on recent international policy developments affecting Australia's trade and disputes settlement in the global trading system
provides an overview of the different facets of intellectual property systems and how this relates to innovation, trade and commerce.

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Methodological Annex: Estimation Framework, Coverage and Re-benchmarking of Estimates (PDF - 2403 Kb)

Methodological Annex: Estimation Framework, Coverage and Re-benchmarking of Estimates (Word/Zip - 875 Kb)

Government assistance to industry is provided through tariffs, budgetary outlays, taxation concessions, regulatory restrictions on competition and other measures.
- Assistance generally benefits the industry receiving it and, if well targeted and designed, can deliver wider community benefits, but it can also come at a cost to other industries, taxpayers and consumers.
The assistance estimates presented in this Review mark the commencement of a new series based on the 2008-09 ABS input-output tables.
Using the new series, tariff assistance to industry was $7.9 billion in 2011-12 in gross terms. After allowing for the cost to industries of tariffs of $6.8 billion, net tariff assistance was $1.1 billion.
Assistance of $9.4 billion was also provided through budgetary outlays and taxation concessions - $5.1 billion in budgetary outlays and $4.3 billion in tax concessions.
Net assistance from tariffs and budgetary measures was $10.5 billion in 2011-12.
The effective rate of assistance (net assistance as a proportion of unassisted value added) for manufacturing is about 4 per cent and 3 per cent for primary industries.
- Effective assistance to the TCF and motor vehicle industries at around 7 and 9 per cent, respectively, although much reduced, remain higher than average.
Budgetary assistance in 2011-12 was $0.4 billion lower than in 2010-11. There were large decreases from the winding down of the Small Business and General Business Tax Break, reduced outlays on drought relief payments reflecting (at the time) improved conditions, and large increases in carbon-related support to industry.
Since the May 2012 Budget, the Australian Government announced further budgetary assistance of over $430 million, most to be spent over the next five years.
In relation to trade policy, with the stalling of the Doha Round of multilateral trade negotiations, Australia has been promoting alternative pathways including in the areas of trade facilitation and trade in services, where consensus may be reached.
Intellectual property (IP) law has a pervasive impact on innovation, production, trade and consumption and is the theme topic in this Review.
- IP law aims at encouraging the creation of beneficial new ideas.
It influences firms' capacity to derive pecuniary benefits from innovations and creations. It also influences the activities of firms and individuals seeking to use IP protected goods and services.
- Because of the pervasiveness of IP law, it is important that the design, operation and review of IP systems be carefully governed.
- For such a diverse topic area, an issue is whether there would be a role in the medium term for an independent overarching framework-style review, to complement ongoing topic-specific reviews into current issues and developments.

In 2011-12, Australian Government budgetary outlays, tax concessions and import tariffs provided Australian industry with $17.3 billion in assistance in gross terms, according to the latest annual review by the Productivity Commission.

After allowing for the cost impost of import tariffs on industries using goods as inputs, the net assistance received by industry was estimated at $10.5 billion. The majority of this is budgetary outlays and tax concessions of around $9.4 billion, while the net tariff component amounted to around $1.1 billion.

Trade & Assistance Review 2011-12 sets out the Commission's latest estimates of the Australian Government's assistance to industry. It also documents recent industry and trade policy announcements.

The effective rate of assistance for manufacturing is around 4 per cent and 3 per cent for agriculture. The effective rate of assistance to the motor vehicles and textile, clothing and footwear industries at around 9 and 7 per cent respectively. Although much reduced over recent decades, these rates remains well above the average for manufacturing.

The Review notes that, since May 2012, the Australian Government has made announcements involving proposals for a further $430 million in budgetary assistance to industry, most to be spent over the next five years. This support predominantly relates to transitional assistance to the fishing industry, the automotive New Markets Initiative, tourism programs and carbon emission reduction and energy efficiency measures.

The Review also reports on intellectual property (IP) systems, the design and implementation of which has important implications for Australia's innovation and trade. The Commission has also recently completed a report on Compulsory Licensing of Patents. These reports could provide a base for further work on what is likely to be an area of increasing trade and innovation policy interest.

The inclusion of IP in the global trading system that accompanied the establishment of the World Trade Organisation in 1995 signalled a significant elevation of IP in economic policy making. Given the capacity for IP systems to facilitate or inhibit innovation, creative activity and trade, it is important that the design, operation and review of IP systems be carefully governed.

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Trade and Assistance Review 2011-12

Annual report series

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Methodological Annex

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