Senate Foreign Affairs, Defence and Trade Legislation Committee [Part 2], , 1:41:31 to 1:52:20
The hearing covers safeguard mechanisms for the dairy industry and the EU's decision to reduce quotas and increase tariffs on Australian steel.
Topics: EU free trade agreement, Manufacturing, Exports
Speakers: Senator Matthew Canavan, Cathy Raper, George Mina, Unknown Speaker, Senator Raff Ciccone
>> Is there is there some safeguard mechanism or something we could reimpose
it? There is a safeguard provision built into the agreement um that should there be um a sudden surge of exports um that is damaging our industry then we can um suspend that tariff um uh elimination for a certain period of time. We should
also add sorry >> sorry just add on that point that in addition to the FDA specific safeguards we also have access to the ongoing uh who safeguards agreement. So that that is a a continuing feature of the trade policy landscape between us and the
>> but we'd have to wait for the influx of imports to take safeguard action. As
with all safeguard action, one needs to uh tie the tie the uh the allegation of of injury uh to to a rise in imports. Indeed.
>> So, is there anything stopping us say giving our dairy industry a$12022 per kilogram subsidy just like the EU does? Could we do that?
Well, Senator, you you are aware that a this deal massively improves the balance towards
>> I don't want to be here all night. Can I just is there anything as deal which
>> but it isn't it is relevant to your question because your question goes to whether we should be subsidizing for a a tariff reduction but if you are leveling the playing field in our favor there's no rationale for
>> yes there is because the EU contin subsidiz I mean we're not leveling the playing field in any way shape or form because as you said earlier the EU producers get 16 to 17% the dairy industry say 30% of their income from So my question is so simple question is there any disagreement which would stop us providing equivalent like subsidies to our dairy industry to level the playing field
>> I'm afraid senator I don't agree with the proposition uh
>> I'm not asking for your policy opinion though indeed it's not usually
>> it's embedded in the question Senator that no requirement to uh
>> I'm just saying is there anything in the deal which would stop us providing a subsidy to our dairy industry
>> well to to the dairy industry uh writ large.
>> I'm not asking whether it's a good or bad deal.
>> There is there is no of course there is this this deal is not a subsidies deal. So
>> can I just get a clear answer? Is there anything in this deal which would stop us providing subsidy support directly to our dairy?
>> Yes. I just said no there is.
>> Okay. Thank you. That's all I was wanting to get to. I wasn't asking for a policy opinion or whether it was good or bad. Uh but I do dispute that it's level the playing field. It's certainly not doing that. Um moving on to steel. Um will the the CG the CIE modeling sorry uh will it model the EU's steel tariff at 50% or 25% or some other level?
>> It will model the current EU tariff which is at 50%.
>> That'll be the baseline.
>> Um uh it's a 50% out of quota rate. There is of course a quota that applies before that but they will model that current um EU measure.
>> Right. So they've also reduced the quota, haven't they, as well? I believe
>> they have reduced the quota. Yes.
>> What's been the change there?
>> Um well, it's different quotas for different countries on different steel products. Um but for Australia, our um annual duty-free quota under this new EU measure is 47,320 tons.
>> How does that impact some of our exporters?
>> Um it does. It is less than we um were exporting to the European Union before the measure was introduced.
>> What was it before? the tariff? Was that the quota or was that the 300,000 tons quoto? We were paying we were exporting and paying the tariff rate on top sometimes.
>> We were exporting and paying the then EU tariff rate which I think was 25% under this um measure. Um but if we do have a side letter to this FTA on steel which allows us to come back and have a conversation and that includes being able to seek an additional quotota as an FTA partner because our current quota is as a non-FDTA partner.
>> I'm very disappointed in this part of what the EU has done. I I mean I I don't see how this in any way could be the act of a friend or somebody who wants to do a deal with us. I mean yeah we're not a major threat to their steel industry. We hardly produce any steel relative to themselves. >> So what has been their rationale for singling us out to double our our tariff and to significantly reduce the tariff-free access that we previously had.
>> Um well the EU's rationale is that it had a safeguard measure in place under WTO rules for eight years. Safeguards are required to be um implemented on a global basis. They're not directed at one partner. They're directed to the whole world. um that measure expired um and they were not allowed to renew it under WTO rules. The EU believed that its industry was still um under threat and has introduced this this new measure. Um under this measure it has given countries country specific quotas. We have one. We hope to get more. Um but it's a response to the the global problem of structural excess capacity. Um that u that we are not responsible for. >> And the side letter to the agreement makes very clear that we are not the source of that problem.
>> But if we're not the source of that problem, how is can the EU under international law be justified in in taking safeguard action against our steel?
>> Because safeguards are required to be applied on a global basis. But you said
they're providing country specific quotas
>> within that glo they've got to apply the measure across the board but then they can provide quotas within that measure on a country specific basis.
>> Are we planning to take any action against the EU about this in the through
have a provision in the FTA on entry into force so we can come back and have a conversation via this side letter I should say not a provision um to seek a country specific quota uh sorry an FTA partner specific quota um which would allow us to increase our action.
>> Just coming back to my question are we considering WTO action
>> at the moment we have um provisions in place that we um will and um seek to access. So that's where we are um tracking our policy at the moment. So,
we're not taking WTO action.
>> We are not currently planning to do
>> I mean, we just lost our last blast furnace for structural steel. Uh we do export significant amount of I think uh hot coils, rolled hot coils to the EU. You said it's 300,000 tons. That's not immaterial. Uh in the context of our production, it's possibly getting around 10% of a production once it goes. Uh I I I I don't understand how we're I mean I can understand what the EU is doing and you're right there's a there's a structural overupp of steel. I wish we took a little bit more action perhaps like this for the to against the people that are contributing to this but we are clearly not the party contributing to this issue yet we are facing EU action on it
>> and Senator we are taking action to work with other partners to try and address this problem of global excess steel capacity. We are members of the global forum on excess steel. Um along with the the European Union um and just three weeks ago when the minister was in Milwaukee um we adopted a comprehensive framework for joint action um to address this very issue. So Australia and the EU together with other partners are working together to try and and solve this problem at its root cause. Um measures like the EUs at the moment are a band-aid while we work on that larger endeavor.
>> So what's the root cause? Um Jeff SEC
the global forum and excess steel capacity
>> and the root cause of course under those opaces are distortions in domestic markets that lead to excess subsidies uh and and lead to distortions on global markets. We I think uh are all aware of those pressures particularly in the steel industry certainly >> globally I mean
>> right um so this side letter does that does that constrain us to maintain our tariff on um uh EU steel at a maximum of 5%.
>> Um that's our I believe that's our WTO bound rate but we can check that.
>> Would we though have like safeguard provisions under the WTO to increase above 5%.
>> Well, safeguard is a very particular mechanism where you need to do an investigation and show threat etc etc but those provisions do remain available to us.
>> Okay. And they remain available regardless of the side letter with the >> Okay. I mean the EU uh apparently exported 785 million ton dollars worth of iron and steel to Australia last year. We exported 285. Uh if there's if there's someone contri contributing to the excess supply, it's not us yet. We're facing further risk to our industry. Have we done any work on whether or not the EU's increased tariffs, which are significant as we've gone through, puts at risk our steel industry any further?
Well, Senator, um this is a a a question relating to uh the impact of of trade on on domestic performance and no we have not done any modeling or analytical work but quite clearly this is this is not going to be helpful. Um neither is the rise in uh in steel safeguard actions in fact worldwide. Uh it's precisely why we're investing in this cooperative effort uh with uh the European Union and the United States and others.
>> Doesn't sound very cooperative.
[laughter] >> Well, certainly there are measures being taken unilaterally which is which is precisely why we want to get ahead of >> ahead of this trend. Uh, of course, uh, Minister Farrell in his capacity as our representative to that global forum has been, uh, advocating strongly for these these outcomes, as has Minister Ayres, uh, in his work with with countries on excess capacity.
>> So, the CIE work won't look at this issue at all then in terms of the impact of the EU's increased steel tariffs.
>> It'll model the outcomes of the agreement. So, the current EU measure will be part of that model.
>> Oh, yeah. We're just we're letting our steel industry wither. Okay. Um
>> Senator Ghosh has a few questions. You've got you've had I'll move the call along and then come back to you Senator Go.