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Rules of origin: US, Thai FTA’s ’most restrictive’

US, Thai FTA’s ’most restrictive’

December 22, 2004

RULES of origin laws under two Australian free trade deals will be some of the most restrictive in world trade, a new report has found.

A Productivity Commission report into trade and assistance reviews found conditions attached to the free trade agreements signed with the United States and Thailand would be more restrictive than similar deals.

The two free trade deals come into operation from January 1, with the Government promoting both as delivering great benefits to Australian farmers, manufacturers and the services sector.

But the commission, in its examination of the rules of origin which will govern the two deals, said they both came up well short of other agreements already in operation.

Rules of origin cover where a product is made, and whether it is sufficiently made in a certain country to come under the auspices of the free trade deal.

The commission said the most restrictive rules of origin applied to the North American Free Trade Agreement, but the Australia-US and Australia-Thailand deals were not far behind.

"(It) suggests that the Thai-Australia free trade agreement and the Australia-US free trade agreement rules will be more restrictive than those applying in pre-existing arrangements made by Australia," the commission found.

Rules of origin in trade deals are important, because they can skew production or make the agreement redundant.

In the trade deal with the US, a "yarn-forward" rule which governs that yarn used to make fabric must be formed within either Australia or America, has been incorporated.

"This rule is widely regarded as being highly prescriptive concerning the sourcing of inputs into textile production and hence restrictive," the commission said.

The commission found assistance provided by the Federal Government was worth around $11 billion in 2003-04.

The assistance covers such direct protection as tariffs to support for the CSIRO.

Tariffs provided assistance worth $7.5 billion, with most protection afforded to the manufacturing sector, in particular the tariff, footwear, clothing and automotive areas.

The dairy and sugar industries received the most assistance among agricultural sectors.