SENATE - Parliament of Australia · SENATE FOREIGN AFFAIRS, DEFENCE AND TRADE LEGISLATION COMMITTEE...

COMMONWEALTH OF AUSTRALIA

SENATE

Official Committee Hansard

FOREIGN AFFAIRS, DEFENCE AND TRADELEGISLATION COMMITTEE

Consideration of Estimates

WEDNESDAY, 10 JUNE 1998

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CONTENTS

WEDNESDAY, 10 JUNE

Foreign Affairs and Trade—Program 1—International relations, trade and business liaison—

Subprogram 1.1—Interests in North Asia. . . . . . . . . . . . . . . . . . . 157Subprogram 1.2—Interests in South and South-East Asia. . . . . . . 183Subprogram 1.4—Interests in South Pacific, Africa and Middle East 200Subprogram 1.3—Interests in America and Europe. . . . . . . . . . . . 206

Program 7—Austrade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209Program 1—International relations, trade and business liaison—

Subprogram 1.5—Multilateral trade policy and negotiations. . . . . . 214Subprogram 1.6—Trade Strategy Development and Business Liaison 224Subprogram 1.7—Global issues. . . . . . . . . . . . . . . . . . . . . . . . . 235Subprogram 1.9—Information and cultural relations. . . . . . . . . . . 244

Program 2—Passport and consular services—Subprogram 2.1—Passport services. . . . . . . . . . . . . . . . . . . . . . . 246Subprogram 2.2—Consular services. . . . . . . . . . . . . . . . . . . . . . 246

Program 3—Services for other agencies— Subprogram 3.1—Services toparliament, the media and the public. . . . . . . . . . . . . . . . . . . . . 254

Program 4—Secure government communications and securityservices—Subprogram 4.1—Australian diplomatic communications network

(ADCNET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255Subprogram 4.2—Security services. . . . . . . . . . . . . . . . . . . . . . 256

Program 5—Executive and corporate DFAT services—Subprogram5.2—DFAT corporate services. . . . . . . . . . . . . . . . . . . . . . . . . . 258

Program 6—Development cooperation. . . . . . . . . . . . . . . . . . . . . . 259

SENATE

FOREIGN AFFAIRS, DEFENCE AND TRADE LEGISLATION COMMITTEE

Wednesday, 10 June 1998

Members: Sandy Macdonald(Chair), Senator Hogg(Deputy Chair), Senators Bourne, Ferris,Payne and Quirke

Substitute member:Senator Lightfoot to substitute for Senator Sandy Macdonald on 10 June1998 from 5 p.m. till 12 June 1998

Senators in attendance:Senators Cooney, Ferris, Hogg, Lightfoot, Sandy Macdonald, Payne,Quirke and West

Committee met at 9.09 a.m.

DEPARTMENT OF FOREIGN AFFAIRS AND TRADEProposed expenditure, $2,172,328,000 (Document A).Proposed expenditure, $4,662,000 (Document B).

In AttendanceSenator Hill, Minister for the EnvironmentDepartment of Foreign Affairs and TradeExecutive

Ms Joanna Hewitt, Deputy SecretarySubprogram 1.1—Interests in North AsiaNorth Asia Division (NAD)

Dr Alan Thomas, First Assistant Secretary, North Asia DivisionMr Gary Quinlan, Assistant Secretary, East Asia BranchDr Richard Rigby, Assistant Secretary, North East Asia Branch

Subprogram 1.2—Interests in South and South East AsiaSouth and South East Asia Division (SED)

Mr Nick Warner, First Assistant Secretary, South and South East Asia DivisionMs Annabel Anderson, Acting Assistant Secretary, Mainland South East Asia BranchMr Colin Heseltine, Assistant Secretary, Maritime South East Asia BranchMr Tim George, Assistant Secretary, South Asia and Indian Ocean BranchMr Jon Philp, Director, ASEAN Regional Issues and Burma SectionMr Chris DeCure, Director, Images of Australia Unit and Philippines, Malaysia, Singapore,

Brunei SectionSubprogram 1.3—Interests in America and EuropeAmericas and Europe Division (AED)

Mr Justin Brown, Assistant Secretary, Office of European AffairsMs Michelle Marginson, Assistant Secretary, Americas Branch

Subprogram 1.4—Interests in South Pacific, Africa and Middle EastSouth Pacific, Africa and Middle East Division (PMD)

Mr James Wise, Assistant Secretary, New Zealand and Papua New Guinea BranchMr Joe Thwaites, Assistant Secretary, Pacific Islands Branch

FAD&T 152 SENATE—Legislation Wednesday, 10 June 1998

Program 7—AustradeMr Peter Langhorne, Executive General Manager, Corporate and GovernmentMr Ian Chesterfield, General Manager, Corporate Finance and AssetsMr Michael Tindall, General Manager, Export Finance AssistanceMr Michael Crawford, Manager, Government and PolicyMr Brent Juratowitch, National Manager, Export AccessMr Leith Doody, General Manager, Marketing and Promotion Group

Subprogram 1.5—Multilateral Trade Policy NegotiationsTrade Negotiations Division (TND)

Mr Peter Hussin, First Assistant Secretary, TNDMr Stephen Deady, Assistant Secretary, World Trade Organisation BranchMr Michael Potts, Assistant Secretary, TIBMr Mark Pierce, Assistant Secretary, SSBMr Michael Carney, Manager, TIBMr Allan McKinnon, Assistant Secretary, Agriculture BranchMr Graeme Thomson, Principal Adviser, TND

Subprogram 1.6—Trade Strategy Development and Business LiaisonMarket Development Division (MDD)

Ms Pamela Fayle, First Assistant SecretaryMr Phillip Sparkes, Assistant Secretary, APEC and Regional Trade Policy BranchMr David O’Leary, Assistant Secretary, Trade Development BranchMr Michael Mugliston, Assistant Secretary, Trade and Economic Analysis Branch

Subprogram 1.7—Global IssuesInternational Security Division (ISD)

Ms Deborah Stokes, First Assistant Secretary, ISDMr Tony Godfrey-Smith, Acting Assistant Secretary, Strategic Policy and Intelligence

BranchMr John Griffin, Director, Conventional and Nuclear Disarmament Section

Subprograms 1.7.6 and 1.7.7Australian Safeguards Office/Chemical Weapons Convention Office

Mr John Carlson, Director of SafeguardsInternational Organisations and Legal Division (ILD)

Mr Roland Rich, Assistant Secretary, International Organisations BranchMr Richard Rowe, Legal AdviserMr Dominic Trindade, Deputy Legal Adviser

Subprogram 1.8—International Legal IssuesInternational Organisations and Legal Division (ILD)

Mr Richard Rowe, Legal AdviserMr Noel Campbell, Deputy Legal AdviserMr Jonathan Brown, Acting Assistant Secretary, Environment Branch

FOREIGN AFFAIRS, DEFENCE AND TRADE

Wednesday, 10 June 1998 SENATE—Legislation FAD&T 153

Subprogram 1.9—Information and Cultural RelationsPublic Affairs and Consular Division (PCD)

Mr Les Luck, Assistant Secretary, Parliamentary and Media BranchMs Jean Dunn, Assistant Secretary, Overseas Promotions and Olympics BranchMr John Oliver, Assistant Secretary, Consular Branch

Subprogram 2.1—Passport ServicesPassports, Services and Security Division (PSD)

Mr John Buckley, First Assistant SecretaryMr Robert Tyson, Assistant Secretary, Passports Branch

Subprogram 2.2—Consular ServicesPublic Affairs and Consular Division (PCD)

Mr John Oliver, Assistant Secretary, ConsularSubprogram 3.1—Services to Parliament, the Media and the PublicPublic Affairs and Consular Division (PCD)

Mr Les Luck, Assistant Secretary, PMBMr Hugh Borrowman, Director, MPL

Subprogram 3.2—Services to Foreign Representatives in AustraliaMr Les Luck, Assistant Secretary, PMB

Subprogram 4.1—ADCNETPassports, Services and Security Division (PSD)

Mr John Buckley, First Assistant SecretaryMr Doug Woodhouse, Assistant Secretary, Information Technology Branch

Subprogram 4.2—Security ServicesPassports, Services and Security Division (PSD)

Mr John Buckley, First Assistant SecretaryMs Lydia Morton, Assistant Secretary, Diplomatic Security and Countermeasures Branch

Subprogram 5.1—Executive DirectionMs Frances Adamson, Assistant Secretary, EXB

Subprogram 5.2—DFAT Corporate ServicesCorporate Management Division (CMD)

Ms Ruth Pearce, First Assistant Secretary, CMDMr Doug Chester, Assistant Secretary, Staffing BranchMr Patrick Lawless, Director, Staffing Operations Section, Staffing BranchMr Peter Baxter, Assistant Secretary, Finance Management Branch, FMBMr Robert Newton, Budget Manager, FMBMr John Page, Budget Policy Team, FMBMs Estelle Stauffer, Budget Policy Team, FMB

Australian Agency for International Development(AusAID)Program 6—Development Cooperation

Mr Bruce Davis, Acting Director General



Ms Francesca Beddie, Acting Assistant Director General, Corporate Policy and South AsiaBranch

Mr Laurie Engel, Acting Deputy Director General, Asia and Corporate DivisionDr Sun-Hee Lee, Director, South Asia SectionMr Peter McCawley, Deputy Director General, Program Quality GroupMr Murray Proctor, Acting Deputy Director General, Pacific, Africa and International

DivisionSubprogram 6.1—Country Programs

Ms Francesca Beddie, Acting Assistant Director General, Corporate Policy and South AsiaBranch

Mr John Caldwell, Acting Assistant Director General, Papua New Guinea BranchMs Joanne Crawford, Director, Governance GroupMr Robin Davies, Acting Assistant Director General, South Pacific BranchMr Laurie Engel, Acting Deputy Director General, Asia and Corporate DivisionMr Mark Fleeton, Director, Indonesia SectionMs Ali Gillies, Acting Assistant Director General, Africa and Humanitarian Relief BranchDr Robert Glasser, Acting Assistant Director General, Mekong BranchMr Ernst Huning, Assistant Director General, Indonesia, China and Philippines SectionDr Sun-Hee Lee, Director, South Asia SectionMr Peter McCawley, Deputy Director General, Program Quality GroupMr Murray Proctor, Acting Deputy Director General, Pacific, Africa and International

DivisionMs Margaret Regnault, Director, North Asia SectionMs Ellen Shipley, Director, Health GroupMr David Swan, Director, Philippines Section

Subprogram 6.2—Global ProgramsMs Joanne Crawford, Director, Governance GroupMs Ali Gillies, Acting Assistant Director General, Africa and Humanitarian Relief BranchMr Peter McCawley, Deputy Director General, Program Quality GroupMr John Munro, Director, Humanitarian and Emergencies SectionMr Murray Proctor, Acting Deputy Director General, Pacific, Africa and International

DivisionMs Miranda Rawlinson, Assistant Director General, International Programs BranchMs Ellen Shipley, Director, Health Group

Subprogram 6.3—Corporate ServicesMs Francesca Beddie, Acting Assistant Director General, Corporate Policy and South Asia

BranchMs Joanne Crawford, Director, Governance GroupMr Scott Dawson, Assistant Director General, Resources BranchMs Jacqui De Lacy, Director, Corporate Planning and Budget SectionMr Laurie Engel, Acting Deputy Director General, Asia and Corporate DivisionMr Peter McCawley, Deputy Director General, Program Quality Group



Ms Wendy Messer, Director, Finance and Administrative Support SectionMs Ellen Shipley, Director, Health Group

Subprogram 6.4—Australian Centre for International Agricultural Research, (ACIAR)Dr Robert Clements, DirectorMr Chris Thurlow, Associate DirectorDr Ian Bevege, Principal AdvisorMr Alan Barden, Corporate Affairs ManagerMrs Rosemary Berzins, Budgets OfficerCHAIR —I declare open the Senate Foreign Affairs, Defence and Trade Legislation

Committee. The committee will consider particulars of proposed expenditure for ForeignAffairs and Trade. I welcome Senator Hill and Ms Hewitt. I advise that we will begin withquestions of a general nature and then consider the particulars of proposed expenditure on asubprogram basis, beginning with subprogram 1.1. With the exception of program 7, Austrade,which will be considered between subprograms 1.4 and 1.5, subprograms will be consideredin sequential order. I ask the officers giving evidence before the committee to state their nameand position when first giving evidence in the usual way. Finally, the committee has agreedthat the deadline for the provision of answers to any questions on notice taken at these hearingsis 10 July 1998. Senator Margetts, who has been unable to attend, has a number of questionson notice. These have been handed to the department for an answer. Minister, do you wishto make an opening statement?

Senator Hill—No.CHAIR —We will move to general questions and overview.Senator COOK—I indicate that I have no questions on subprograms 1.8, 1.9, 3.2 or 3.3.

I have one question which I propose to put on notice for program 8.CHAIR —The only problem with that, Senator Cook, is that if there are any other senators

in the building who wish to come in and ask questions then those officers may be needed.Senator COOK—I know, but I thought I should indicate up-front. As the day unfolds, it

might be that people can leave early. It is my expectation—and I know the answer you gaveme a moment ago is, again, the right answer here, in that it does depend on others and notjust on what Senator Hogg and I may have—that we will not need to go to a dinner break.Perhaps just before lunch we might see whether a shortened lunch hour might get us throughfor the day.

CHAIR —We are happy to oblige you, Senator Cook, providing the minister is happy withthat.

Senator COOK—First of all, can the department or the minister please advise me of whatarrangements the department makes to hedge its funds for overseas posts? I particularly havein mind the way in which the dollar has suddenly declined. This obviously undermines thevalue of funding our posts in the United States. What arrangements do you make to hedgeagainst that sort of event?

Ms Hewitt—I will say a few brief words and then my colleague Peter Baxter from theFinance Management Branch will be able to elaborate if you want further detail. At themoment those arrangements are handled on a whole of government basis; in other words, theTreasury, in conjunction with the Reserve Bank, handles the hedging arrangements for all ofthe government’s foreign currency requirements. We have an agreement with the Departmentof Finance and Administration which enables us to have a fully neutral budget outcome



eventually in so far as foreign exchange ups and downs are concerned. So at a later point inthe year we are able to recoup the losses, which will be the case for this year, which have beenmade due to the declining value of the Australian dollar. I think for this year’s activities wehave estimated that the adjustment factor for that overseas part of our outlays will besomething in addition to 10 per cent. It is a very big question for the portfolio.

Senator COOK—How does it work? Does the value of the Australian dollar at the timeof the budget become your benchmark and the Reserve Bank and the Treasury manage thehedging arrangements to deliver to you that real money outcome? Is that how it goes?

Ms Hewitt—No, it is not quite like that. This is probably the point at which I should passto my colleague who has been discussing the issue in some detail with DoFA in recent times.

Mr Baxter —As Ms Hewitt said, we have a resource agreement with the Department ofFinance and Administration whereby our budget is adjusted to reflect foreign exchangevariations. The Department of Finance and Administration sets a budget rate at the start ofeach financial year against which the fluctuations are measured, and we receive fullsupplementation on that basis. This is crucial to us, obviously, because about half of ourrunning cost budget is spent overseas. The anticipated budget rate for the forthcoming financialyear is US66.64c. So if the current trend continues we will receive additional supplementationthrough the additional estimates process and through the budget next year.

Senator COOK—That is against the US dollar. Do you have a figure against the tradeweighted index?

Mr Baxter —No, I do not. We do not operate on that basis. We operate on a budget ratethat is set by the Department of Finance and Administration centrally on a whole ofgovernment basis. We make our transactions overseas a process through the Department ofFinance and Administration’s own systems, and that picks up exchange rate fluctuations and,on that basis, we get our back adjustment.

Senator COOK—So the real money outcome for you is related to the Australian dollarbeing at US66.64c.

Mr Baxter —Yes, and then we are adjusted against that. This year we have received $12.6million under the resource agreement to compensate us for foreign exchange losses.

Senator COOK—Can you explain this part to me? In so far as the appropriation bills thatwe are inquiring into are concerned, they are expressed in Australian dollars. Should theAustralian dollar remain, for whatever reason, below US66.64c for a sustained period, doesthat mean you are automatically supplemented to that value or does it mean that there is afurther appropriation required?

Mr Baxter —No. We are automatically supplemented to that value under the resourceagreement.

Senator COOK—I see. Okay. Thank you. I have no further questions.CHAIR —There being no further general questions, are there questions on the overview?Senator COOK—On the overview, can someone direct me to where I would find in the

portfolio statement a comparison of the ASL. I can see some comparisons on appropriationsbut not on staffing.

Ms Hewitt—That is not information that is contained in that form in the portfolio budgetstatement, but we would be happy to give you a general picture of what is happening on thestaffing front if that would be of interest.

Senator COOK—Yes.



Ms Hewitt—It is for us a much more comfortable year than we have been able to reportin the last couple of years in that we have now, through the various actions we have taken,adjusted our staffing levels to comfortably fit within the budget parameters we have beenaccorded. That does mean we have brought the numbers down quite considerably, as youwould be aware, Senator, over the last couple of years. We now have a total of just over 2,000staff, excluding our locally engaged staff members at missions overseas. About 1,500—thatis, 1,491—of those staff members are in Australia. Just over 500—that is, 533—are basedoverseas.

That is a reduction of 19 per cent of staff numbers in Australia and a 21.6 per centreduction in staff members overseas in the period since June 1996. So we have had a coupleyears of quite noticeable decline in our staff numbers, but we do now believe we havestabilised. We have closed our redundancy general offer program. We do not expect at thisstage to be making any further reductions, Senator.

Senator COOK—So that is a 19 per cent reduction for staffing in Australia and 21.6 foroverseas.

Ms Hewitt—Yes.

Senator COOK—That is A-based staff overseas.

Ms Hewitt—That is right.

Senator COOK—Do you have a figure as to whether or not locally engaged staff overseashas reduced and, if so, to what extent?

Ms Hewitt—I probably have. It just might take me a moment to find it. We have a totalof 1,588 locally engaged staff members. I am just trying to see whether I have a reductionfigure. Could I come back to you on that?

Senator COOK—Certainly.

Ms Hewitt—That just might take us a moment to find.

Senator COOK—If you are going to come back to me, I would not mind if you could, sinceyou have given me a percentage reduction in the staffing from June 1996, give me what thevariation is up or down for locally engaged staff.

Ms Hewitt—We will provide you with that and hopefully can do so during the day, Senator.

Senator COOK—I have no further questions on the overview.

CHAIR —We now move to program 1, international relations.

[9.23 a.m.]

Program 1—International relations, trade and business liaisonSubprogram 1.1—Interests in North Asia

Senator COOK—I would like to ask a few questions about the Japanese economy. It ismy understanding that, at the last two meetings of the G7, or the G8 now, understandings werearrived at which suggested that the Japanese economy should engage in lifting domesticdemand and a series of steps should be taken to do so. Does Australia have a view about whatshould be done in the case of prolonged low demand in the Japanese economy?

Dr Thomas—It has been the Australian government’s view for some time that the bestoutcome in relation to Japan will be achieved if the Japanese government is able to continuealong its path of structural reform of its economy and further deregulation of its economy.



There have been many calls internationally for Japan to engage in stimulating domesticdemand, as you have mentioned, and pump priming in the traditional sense.

From our point of view, we have simply said that we welcome any measures whichultimately help to improve the growth prospects of the Japanese economy given how crucialit is, but we do not see it as our role to lecture Japan in any way on its need to do that. Allof our meetings with Japanese leaders and between our ministers and them have really pushedthe line that, in the longer term, it is far more essential that they continue to restructure andto deregulate and, through that, Australia and other countries will gain increased access to thatvery large economy to our mutual benefit.

Senator COOK—Do we in any way associate ourselves with what the G8 has said toJapan? Are we a fellow traveller with them or do we have an independent view that we haveput?

Dr Thomas—Even the G8 are not completely united. The Americans have been the mostvociferous in suggesting to Japan how to spend their money and how to stimulate theireconomy in terms of tax cuts and so forth. The French government has taken a rather differentview and has been much closer to the line that we have been pursuing. So I do not think thereis a particular consensus there. Our bottom line is that we welcome any efforts by Japan toimprove its economic position, given how crucial it is to the region and to the world at large.

Senator COOK—What is our view of the immediate outlook for the Japanese economy?

Dr Thomas—Certainly, in the short- to medium-term it is very sluggish. As I say, thereare deep-seated structural problems. In terms of growth rates, it is difficult to predict at thisstage. Our Treasury’s official forecast, as you would have seen in the budget papers, was 0.25of one per cent. Most of the assessments we have seen are somewhere around zero per centto one per cent. The big stimulus package which Prime Minister Hashimoto announced inApril, which was about $A190 billion, is certainly likely to help keep the economy in positivegrowth in the short term but, as with all stimulatory packages, eventually the effects of thatmay wear thin.

In the medium- to longer-term it really depends on the pace of the economic reforms thatthe Japanese government is prepared to carry out in terms of how much growth it will be ableto achieve, but we would expect it to be fairly sluggish in low growth for some time yet.

Senator COOK—Do you have a view on the pace and depth of the reforms that theHashimoto government is committed to in terms of whether they will answer the economicmalaise that Japan is going through, whether they will be fast enough and deep enough?

Dr Thomas—Certainly the big bang financial reforms which started with full force from1 April set out an agenda for changes to the financial and banking system which, if fullyimplemented, will have a very positive effect on the Japanese economy and on those countries’economies that relate to Japan. The Prime Minister himself of course has to contend with someproblems within the Japanese Diet to get his legislation through. There is an upper houseelection due in July. We will have to see what the result of that is in terms of how strong aposition the government will be in to carry out those reforms at the pace that it would liketo and at the pace at which many of us in other countries would like that to happen.

Hitherto the reforms have been fairly slow coming. The cry has been fairly universal aroundthe world for the pace of that reform to quicken. Australia has been part of that cry, but Icannot really predict how quickly it will happen. Certainly with the collapse of some of thesemajor securities houses—Yamaichi Securities and Sanyo Securities—and with the collapse



of some banks already, I think crunch time is clearly there. The Japanese government is awareof that fact. I think they will be trying very hard to implement those reforms.

Senator COOK—The Japanese economy at the moment seems to be suffering from the twinevils of a huge degree of spare capacity and stocks overhanging supply. The traditionalresponse to that has been to export their way out of those difficulties. Do you have a viewas to whether or not their success in exporting their way out of their difficulties is likely toreduce their stocks and lift capacity demand?

Dr Thomas—It is very difficult to say at this stage because their trade with the rest of theworld is falling at the moment and, as you say, their inventories are very high. With the stateof all the economies with which they trade being in relatively depressed states as well, it isdifficult to see any quick turnaround on that and, of course, the value of the yen is going tohave a big impact on how that pans out. But even that will not be as simple because, as theyen falls, while Japan may be able to export more, it is going to have a potentially profoundeffect on other currencies around the region and risks other major devaluations. So, in arelative sense, it is very hard at this stage to tell what sort of competitive position Japan isgoing to be in.

Senator COOK—You have raised the question of the yen, and one of the other currenciesis the Australian dollar. There is a fair bit of economic debate at the moment that thedownward passage of the Australian dollar is tied to the downward passage of the yen—todescribe a similar path on any graph that you might produce of currency devaluation. It is quiteimportant to have a view about how soon Japan might turn itself around. Can you commenton that at all?

Senator Hill—How soon? I do not think we would want to comment on your assessedlinkage of the two.

Senator COOK—I am not saying that. There is a fair bit of persuasive evidence that thatmay be true—I do not know if it is true—but if you draw a graph of how the yen has beendevalued—

Senator Hill—We hear what you say but we would not want to speculate.Senator COOK—My question was not about speculation—Senator Hill—Well, it could be said that you linked the two in framing your question.

Therefore, I want to make sure that the answer to the second part should not be interpretedas a view on your assessment.

Senator COOK—I was not inviting the officer to speculate on what the yen might becomeon a day-to-day basis or, indeed, to confirm or express a view about whether or not there isa direct link between the way in which the value of the yen has declined against the greenbackknocking on to the way in which the Australian dollar has declined against the greenback. Imake that as an observation leading to the question: when do you think the Japanese economymight turn around?

Dr Thomas—There are so many variables that I really would not like to speculate. I canonly repeat my earlier remark that, without further significant structural reform, we can expectvery low growth rates in the Japanese economy beyond the turn of the century. If thosereforms are implemented and depending on what happens to the yen, we may see a better pick-up but it will be some years.

Senator COOK—At what value of the yen against the greenback would we start to beginto worry that the recovery of the Japanese economy has turned into a prolonged recession?



Dr Thomas—I would not want to get into speculation on that. I have seen variouscommentators say that 150 yen is a fatal point at which the whole world starts to get worried.But we are not really in the business of plotting those sorts of exchange rate movements, andI would just be speculating.

Senator COOK—Can you tell us what the impact of a slow Japanese economy and theimpact of a major overhang in stocks with fairly large spare capacity might have on Australianexports to Japan; what is the outlook for the immediate future?

Dr Thomas—So far it has been a case of Australia going against the trend. Whereas importsfrom almost everywhere to Japan are falling, in Australia’s case our exports have actually goneup or have at least held up relatively well. I can give you some figures. In the 10 months toApril this year for example, our exports to Japan increased 15 per cent. The latest ABS datasuggest there is a slight slowing in the rate of growth of those exports and that will be effectedfurther if the Japanese economy continues to stagnate. But, nonetheless, there has been anincrease.

Our trade surplus with Japan is still over $1 billion, although it is down about 24 per centin the March quarter compared with the previous year. It is quite difficult to analyse why thatis the case. Partly we believe that many of the sorts of things we are exporting to Japan areessential inputs into Japan industry which it needs while it continues to try to recover itseconomy and export its way out of problems. It maybe puts us in a slightly different positionfrom some other countries.

Some of our major raw material exports are still up. For example, coal is up about 11 percent over the previous year, and our market share is fairly steady. Iron ore exports are downslightly. That relates to falls in Japanese steel production, which has fallen quite considerably—about 15 per cent in the period April to June this year, which is the lowest level of steelproduction since 1971. So that obviously is going to have an impact on us. Food stuff exportsto Japan have been fairly volatile on a monthly basis but, overall, have shown a fall of about6.3 per cent. So it is a bit of mixed picture but, in terms of our bigger items like coal, theyhave held up quite well.

Senator COOK—You would expect the demand for coal to ease slightly in the comingmonths as we move into a northern summer and the demand for electricity generation, heatingand so forth eases, wouldn’t you?

Dr Thomas—I do not have any particular predictions about that for the period ahead.Certainly, the price which we are getting for our coal has dropped by about five per cent thisyear. But I have not seen a prediction of the actual tonnage we are expecting to sell.

Senator COOK—They are interesting figures that you have given us on the performanceover the last 10 months. What is the outlook; how do you shape that?

Dr Thomas—It is going to depend on various things. We are still cautiously optimistic thatthose exports will hold up reasonably. As I say, the rate of increase of the exports is falling,the rate of our dollar and the state of the Japanese economy, among other things, will havea big impact on how that all pans out.

Senator COOK—But with excessive stocks and spare capacity you would not think—Dr Thomas—We have to assume it is going to drop.Senator COOK—And with dwindling demand for Japanese exports, given slower world

growth, you would expect it to slow as well, wouldn’t you?Dr Thomas—Yes.



Senator COOK—One of the areas of considerable foreign comment on the Japaneseeconomy relates to the true extent of Japanese debt.BusinessWeek—Asian editionon 18 Mayput public debt at $US4.5 trillion and unofficially as much as 250 per cent of GDP when thedebt of Zaito, an off balance sheet government lender, was included. They put non-performingloans officially at $US600 billion and unofficially at $US770 billion dollars. Companyliabilities debt exceeds equity on an average of four to one, which is driving recordbankruptcies and thus impacting on consumer and investor confidence. Are those figures aboutright as far as the department is concerned?

Dr Thomas—They are comparable to some figures we have seen. They are partly areflection of the fact that the system is becoming a bit more transparent, and we are able toget these figures on bad loans, et cetera, coming out of Japan. Even though in absolute termsthey seem extraordinarily high, we have to keep it in perspective and realise we are dealingwith the second largest economy in the world with a GDP approaching $US5 trillion.

Despite all these gloomy comments I may have made about the Japanese economy beingsluggish and despite the sorts of figures you have just given us, we still have to rememberJapan is the world’s largest creditor nation. It is the largest giver of overseas aid; it has oneof the highest savings ratios; and it is still the second largest economy in the world. We arecertainly not about to write it off in any sense.

In the long term, we are quite confident that the Japanese economy will turn around andcan cope with even those sorts of figures. But it all depends—in terms of when and how thatis managed—on the pace of these reforms which are put in place. They are aimed to addressexactly those sorts of problems which have been masked for many years by a very inefficientfinancial banking system, an overregulated system. The government has shown though thatit is willing to allow some banks to fail. That certainly sends some messages through thesystem.

Senator COOK—Sure, one always keeps these absolute figures in perspective given thesize of the Japanese economy, but public debt of that order is obviously a worrying factor.Are you confident that the government will push ahead and make reforms to the financialsystem that will start to shake out some of this debt?

Dr Thomas—We certainly hope so. The legislation that has been put in place and outlinedby the government are the sorts of reforms which we and others believe will address thosesorts of problems.

Senator COOK—That has a big effect on all the other economies in the region, includingours, and I want to move to some general questions about the effect of the Asian financialcrisis on north Asia. I think it is predicted that this year the economy of South Korea willcontract 3.8 per cent; is that about the right order of magnitude?

Dr Thomas—Yes, we would put it at at least that. I think the IMF’s original estimate wasfor minus one per cent, but that has certainly been revised. From our recent discussions withKorean officials, they put it in the range from minus three to even as high as minus five. Butminus three point something certainly is in the ballpark.

Senator COOK—Minus 3.8 per cent is my figure in the ballpark. This is our second or thirdbiggest trading partner and with the South Korean economy being afflicted in similar termsto the Japanese one—large overhang of stocks, massive spare capacity and contracting worlddemand—what do you see as the outlook for South Korea?



Dr Thomas—In terms of Korea, the economy has at least improved fairly dramatically sincelast December when it was on the verge of imminent default of its short-term debt of about$US150 billion. Since then we have had an IMF package and a new president has beeninaugurated who is fully committed to implementing that package. They have managed to doa deal with the international banks to rollover about $US22 billion worth of short-term debtto longer terms.

So we think that the government has at least got off to a good start. While there are somefairly horrendous problems still in the Korean economy with expected further bankruptcies,rising unemployment and labour strife

and how the government is going to deal with that—while all of those problems are there, wethink the Korean government has made a very good start in implementing this package.

There is going to be negative growth this year and, in terms of our trade, our exports toKorea are down and will probably be down by over $1 billion or so over the year. But,nonetheless, I think there are some grounds for optimism. Korea is much more industrialisedthan some of the other South East Asian economies which have had to be the recipients ofan IMF rescue package. We think that its turnaround time is likely to be a bit quicker, but itmay well take two or three years. We are encouraged by the actions that the government hastaken. Its foreign reserves, for example, have started to build up again. It has about $US32billion of reserves now and expects to have $US40-odd billion by the end of the year. Thatis quite an achievement coming from virtually zero at Christmas time.

Senator COOK—Nonetheless, it is looking at a 3.8 per cent contraction in economicperformance this coming year and Australian exports are down in dollar terms by $1 billion,I think you said, over the year.

Dr Thomas—Our predictions are that exports will be down from $6.8 billion in 1997 tosomewhere between $5½ and $6½ billion in 1998. There is such a big range there becauseit depends largely on the gold exports, which traditionally, as you know, have been a bigcomponent of the trade and are rather volatile.

Senator COOK—And one that South Korea seems to be getting out of?

Dr Thomas—Yes.

Senator COOK—A big lump went through and then it seems to have stopped buying gold.

Dr Thomas—In fact, for the period from December 1997 to March this year the raw datashows our exports to Korea declined 23 per cent, but if you remove gold, the decline is only6.4 per cent.

Senator COOK—I was going to go to the sectors most affected. When you say we aredown $1 billion, are you saying therefore most of that is gold? What are the other areas?

Dr Thomas—Certainly a big hunk of it has been gold, but the other areas that have beenhit by the downturn include beef, down 64 per cent; textile fibres, down 57 per cent; petroleumand petroleum products, down 56 per cent; and non-ferrous metals, down by 34 per cent. Thereare a few pluses though, I am pleased to say. Coal went up 36 per cent, iron and steel roseby 10 per cent, and metal ores and metal scrap rose by 25.7 per cent. Much of the coalincrease has been in steaming coal—demand in power stations, power generation—which ismaking up for any fall in demand for coking coal in the steel industry.

Senator COOK—Coming off a northern winter into a northern summer you would notexpect those figures to hold up?



Dr Thomas—It is difficult to say in the iron and steel area. Korea is also selling largeamounts of steel to neighbouring countries because it is quite competitive at the moment.

Senator COOK—Going back for a minute to Japan, you forecast for the ROK in Australiandollar terms $1 billion worth fewer exports this year. What is the forecast for Japan inAustralian dollar terms?

Dr Thomas—We do not really have an overall predicted figure for Japan at this stage interms of dollars. I could certainly provide you with the latest figures, but I do not have themall with me.

Senator COOK—You do not have a forward view like you have got for Korea?

Dr Thomas—We are still hoping it will be an increase, but we do not know how much ofan increase. With Korea it has been such a severe downturn that we have done a closeranalysis of those so far because industry is hurting. I can give you last year’s figures for Japan.

Senator COOK—Okay.

Dr Thomas—In 1997 our exports to Japan were $16.8 billion and imports were $11.4billion. There are really so many variables at this stage that it would be very hard to put afigure on how that is going to come out at the end of the year.

Senator COOK—I am more interested in your predictions. These figures are publiclyavailable now, aren’t they?

Dr Thomas—Yes.

Senator COOK—That is fine. I can look them up.

Dr Thomas—They are ABS figures.

Senator COOK—You gave us a prognosis for the Republic of Korea as an economyrebounding. We know that it is likely to be still between two to five per cent contracting—myfigure was 3.8 per cent. It is rebounding in the sense that it is coming off a much worsesituation, but it is not what you would say healthy yet. This is an export economy basicallydependent on world demand. What is your prognosis for its recovery? When do you expectit to be back in the black, so to speak?

Dr Thomas—Many commentators are predicting in relation to Korea that it will be two tothree years. That may be optimistic, but that is the sort of time frame we have in mind, whichis probably quicker than a number of the other regional economies.

Senator COOK—Two to three years does depend on the state of the global economy ofcourse?

Dr Thomas—Very much so.

Senator COOK—It also depends of a number of domestic factors that the president andadministration have to manage.

Dr Thomas—It does. He has to come to terms with labour discontent as unemployment risesto record levels. He also has to contend with the lack of majority in the national assembly,but there have been some local government elections in Seoul in just the past week in whichthe ruling party has done very well. That has strengthened the president’s hand in a symbolicway. I think we are going to see a considerable number of defections from non-ruling partypeople in the national assembly which will help the president to get his legislative programof reform through the assembly.



Senator COOK—I am sorry to do this to you, Dr Thomas, but I have just now discoveredmy list of questions on Japan and there are some that I have omitted. I understand that theJapanese government’s economic planning agency is expected this Friday to announce figureson the growth of the economy. There is a fair bit of commentary that they are going toannounce negative growth—they will be in recession. Do you have any comment on that?

Dr Thomas—I cannot predict what they are going to say at this stage, Senator. The figureswe have always give a range of possibilities. People, including ourselves, had been predictingzero or negative growth for the Japanese economy for this year, but the stimulus packageannounced in April has changed that at least for the short term. It is going to be probably atleast September or so before that package is fully fed into the economy and we can see whatsort of impact it will have on the growth rate. So I really cannot say what the Japaneseagency’s figures are going to say on Friday.

Senator COOK—Is there any program of visits intended by Australian ministers,particularly by the trade minister, to Japan in the next three or four months?

Dr Thomas—I do not think there is a specific visit scheduled at this stage, but as a matterof course our trade minister and our foreign minister tend to visit each of the countries inNorth Asia at least once every year at a minimum.

Senator COOK—When was the Prime Minister last in Japan?

Dr Thomas—I am sorry, I do not have the actual dates. I can find that out. It was beforemy time, unfortunately, but I think it was last year.

Senator COOK—Does he have any plans to visit there in the next three or four months?

Senator Hill—The Prime Minister? I do not think so.

Senator COOK—Not at this stage?

Senator Hill—I do not think so. I can get something more definitive if you really want it.

Senator COOK—I would be pleased if you could, Minister. When is the next meeting ofthe AJMC due?

Dr Thomas—Probably some time in the first half of 1999 we would expect it to be held.They are held approximately every 18 months or so.

Senator COOK—Where is it to be held this year—in Australia or in Japan?

Dr Thomas—In Australia this time.

Senator COOK—That is why there is an appropriation in the budget papers for it?

Dr Thomas—Yes.

Senator COOK—That concludes my questioning on Japan permanently. For Korea, hasthe Australian support for the IMF bailout of the Korean economy been drawn down inKorea’s case yet?

Dr Thomas—At this stage, no. That depends on some further negotiations that are to beconcluded. We are not going to advance those unilaterally before other donors who have madea bilateral donation under the second tranche of moneys. That will all be done in concert. TheKorean government itself has been a little ambivalent as to whether it wants that money earlyor not. At one stage there was a suggestion that it would like it advanced a bit earlier, but ithas more recently given signals that it feels it might send the wrong message to theinternational community if it asks to have it advanced. But at this stage, no, it has not.



Senator COOK—There was some controversy earlier this year about the United Statesoffering its exporters into the Korean market special credit arrangements. That was portrayedas helping the Korean economy, but many of us, including the government, thought it wasabout stealing market share. What is the situation with that now? What has happened?

Dr Thomas—That was the GS 102 program of the Americans?Senator COOK—Yes.Dr Thomas—Partly as a counter to that, the Australian government itself increased the

capacity of EFIC to offer trade finance insurance to Australian exporters of agriculturalproducts to Korea. That was announced some months back by the government. It was a $A300million facility of the national interest account in the first instance and that was increasedrecently to about $A500 million. That has been taken up quite eagerly by Australian exporters.Another action which the government took was to approach Korean authorities and ask themto waive the regulation which restricted the availability of longer term credit on the importof items carrying a tariff in excess of 10 per cent. We were recently successful in obtainingthat waiver.

We feel that these two things have helped to protect Australian exporters to some extent,but there is no question that the American scheme is a subsidy scheme and it is somethingwhich we watch with some concern. We have made comments to the Koreans that we wouldnot want to see it used in any way to disadvantage Australian exporters to Korea.

Senator COOK—What have we done about this with respect to the United States? Havewe raised the question with them? I have a recollection that the Prime Minister may have infact done this.

Dr Thomas—I would have to refer that to my colleague who handles the Americas, Senator.Senator COOK—I will ask them when we come to the Americas.Dr Thomas—But I can certainly say that our embassy in Washington has been asked many

times to get as much information as possible about the scheme and the way it operates. Wehave been feeding that into our deliberations in terms of what we might do to counter anypossible effects of it.

Senator COOK—But our response has been to match or in part meet the American creditchallenge by lifting the amount of credit we extend to our own traders. One can easily getsucked into some sort of credit race here, which is not desirable. Dealing with the problemat source with the Americans is obviously an option.

Ms Hewitt—Perhaps I can make a couple of points, and I am sure these can be elaboratedon when we get to the relevant area of the bilateral programs. We certainly have been activein dialogue discussion both with the American embassy in Canberra and in contacts with theUS authorities from Washington. I would like my colleagues to elaborate in detail if there isan interest on your part. But I want to assure you that it has not been a passive approach.

Senator COOK—I remember seeing the Prime Minister make some representations. DareI say it, even I said something about this. I remember the Americans having some responseto what the Prime Minister had said. I was wondering what has become of that and whetherthere has been any change in the American point of view. I am quite happy to deal with thatwhen we come to the United States. Have we raised these matters at the WTO in any way?

Ms Hewitt—Again, I think that is something we ought to take up when we get to theAmericas discussion and in consultation with colleagues who work in our Trade NegotiationsDivision. There is always, as you would be aware, a limit to what can be done in relation to



disciplines on agricultural trade under the WTO arrangements. There are a large number ofexclusions and so forth. This area of credit is still an area of less rigorous discipline thanAustralia would like to be the case. We were actively engaged in negotiations through theOECD on export credit arrangements. We have been very energetic in pursuing our concernsthere, along with a number of other OECD countries. But there are limits, frankly, to whatcan be done under the WTO disciplines in this area.

Senator COOK—Yes, but we are coming up to next year as being the year of agriculturalsectoral trade negotiation. This is obviously a factor in that context as well as in the contextof our bilateral relationship with Korea. I am happy to keep these questions back until wecome to those issues. Let me turn to North Korea for a moment. I wonder whether Dr Thomascould give us a quick overview of the state of the North Korean economy and where we areup to with food aid and the changes within North Korea.

Dr Thomas—Information is very hard to come by in relation to North Korea, but from thebest intelligence we can gather the economy is in an appalling state. Some would argue thatit has already collapsed but the regime goes on. Their whole economy is certainly in anadvanced state of de-industrialisation. They are literally cutting up factories and selling theparts of factories for scrap to try to raise some export dollars. There are chronic shortages offood and of fuel. They are very largely dependent on international assistance and on assistancefrom the south. During this regional crisis, the south’s capacity to provide that assistance isgreatly diminished.

Australia has given quite generously in terms of humanitarian aid to North Korea. We havegiven so far about $9.5 million in food aid. Parallel to that we have also given some $10.8million to KEDO, the Korean Energy Development Organisation. That serves two purposes.One is to prevent the development of a nuclear weapons program in Korea but it also helpsprovide for some of Korea’s energy needs through the provision of heavy fuel oil. That hasbeen our main contact with North Korea in the recent past. As you know, we do not have anydiplomatic relations with that country. We rely very much on reports from NGOs and variousinternational organisations in terms of the situation on the ground.

Senator COOK—There have been reports about aid being ciphered off to a privileged fewand not getting to its destinations and meeting the needs of the ordinary people in North Korea.What guarantees do we have that Australian aid provided to that country actually goes to thepeople who are in need?

Dr Thomas—AusAID are probably better placed to answer that, but I can say in a generalsense that it is an issue which we and other donors have raised when possible with the NorthKorean authorities. We have received considerable assurances about their permittinginternational monitors into the country to see where and how the food aid is being distributed.There was also recently a technical mission to North Korea from the European Union whichexamined the situation on the ground in terms of food aid distribution. The Australiangovernment has been briefed quite extensively by that delegation following their return, withsome fairly reassuring comments in terms of food aid getting out to where it is supposed to.But AusAID could give you more detail on that.

Senator HOGG—Do we have an ongoing commitment this year to food aid?

Dr Thomas—We give aid to North Korea largely in response to requests from the worldfood program. The latest $2 million-plus that was handed over was in response to an appealput out in January this year, as I recall. We would expect further requests for food to comethrough that channel.



Senator HOGG—Surely it is an on demand response; it is not something that we havedeliberately set out and, in spite of their failing economy, said that we will give now another$4, $5 or $6 million.

Dr Thomas—Again, AusAID would be the more appropriate people to ask. In the time thatI have been in this position, it has been in response to specific requests to the internationalcommunity.

Senator COOK—I have no further questions on North Korea. Can I turn now to China.I notice in the most recent publication of theAustralian Business Chamberthat came out thismonth—so it is as up to date as can be—a publication entitled ‘The Asian crisis and Australia’.Their summary of the circumstances in China is that China is set for ‘an increasingly difficulttime over the next 12 months or so’. They justify that statement by stating:

Some of that is directly related to the secondary effects of the sharp falls in regional currencies, someof which have fallen by over 50 %, while China’s currency has held firm against the US$. Add to thisthe fact that 37 % of all exports from China in 1997 were to the Asia (ex Japan) region (54 % includingJapan), and it is easy to see why economists are becoming increasingly concerned about prospects forChina’s exports for the rest of this year.

They then go on to point to the pace of reform, the new program adopted by the NationalPeople’s Congress. They observe that, in their view, reform has been relatively slow over thepast five years. They continue:

There are increasing concerns that one of the critical components of that reform i.e. the shedding of some30-50 million "under-employed" could well start to result in substantial social pressures in an economywhich is not structured to deal with high levels of unemployment.

Their final comment in the summary is that there are concerns growing on the health of thebanking system, apart from the state owned enterprises system, and nervousness over thisregion’s most important economy is increasing. Is that a fair summary?

Dr Thomas—Some parts of it are similar to some views we would have, but I think it isa bit alarmist. It overstates the situation a bit. There is no question that there are greatchallenges ahead for the Chinese leadership, the new Premier Zhu Rongji. It is going to bevery difficult for them to achieve their stated official growth rate of eight per cent GDP forthe year. That said, it is still our assessment that China remains, in relative terms, insulatedfrom some of the worst effects of the regional crisis. It is having an impact; there is no doubtabout that. China’s exports are down. Again, you would have to look at the figures. Its exportsgrowth rate is down to 11.6 per cent for the first four months of this year.

We saw some modelling recently which said that, even if China’s export growth rate fellto five per cent, it would still manage to turn in a trade surplus for the year of about $US33billion. That is down, but it is still a very credible result. In terms of the growth rate, we wouldprobably expect growth to come in somewhere between the five and seven per cent rangerather than eight per cent. That seems to be a growing consensus amongst market analysts,but it is always difficult to tell in terms of figures with China.

The pace of reform certainly has been slow. The easier things have been done to date, butthe new leadership has stated that it is very determined to carry on with the reform of all thestate owned enterprises. It has set a very tight timetable. Three years may very well be tootight, but the political will is there. There is no question that it will lead to furtherunemployment. We see figures as high as 15 to 18 per cent urban unemployment in China,and that will be one of the major challenges for the government to cope with.



With regard to the health of the banking system, certainly for some time externalcommentators have considered China’s major banks to be technically insolvent. But there hasbeen a very great injection of funds into those recently by the government, a recapitalisation.It is only the beginning. They still have enormous debts, but it is not a fully free marketsystem as we know it. The government has many tools at its disposal to get through thoseproblems.

It has a relatively closed economic system but still very good externals. Let me turn to theoverall picture. I mentioned the trade surplus but, generally speaking, their exports last yearwere up 21 per cent over the previous year to $US182 billion and their imports were up 2.5per cent to $US142 billion. That is a very strong external position from which it has toapproach these challenges. If you combine that with the relative protection of its currency fromforeign attack, as it is not convertible on the capital account, and combine that with a newand very determined political leadership in China, I think you have some of the ingredientsthere to continue with the reforms that are needed. But it is a mixed picture. It is clearly notgoing to be easy.

Senator COOK—If you are predicting growth to be recalculated from the official figureof I think eight per cent to what the popular range is of five to seven per cent, given the sizeof the Chinese economy, that is a fair reduction in demand for export goods. What impact andin which sectors will that have on Australia?

Dr Thomas—I would say that about 75 per cent of our total exports to China still remainprimary products. We think that will remain relatively stable at least for the rest of this year.We expect relatively low growth in exports of wool and iron ore. They together account forabout 40 per cent of our exports to China. That is largely because obviously this year is goingto be a very difficult one for China’s textile and iron and steel industries.

Senator COOK—Just for clarification, you say that we are looking at lower growth of theChinese economy overall—popularly or by consensus, around five to seven per cent downfrom eight.

Dr Thomas—Yes.

Senator COOK—So it is down by two to three per cent. Are you saying that you expectin that climate nonetheless to increase our exports of wool and iron ore but at a lesser rateof increase, or do you expect our exports of wool and iron ore to contract?

Dr Thomas—I think they will go down.

Senator COOK—To what extent?

Dr Thomas—It is difficult to put a figure on it. If you look at 1997, for example, with ourexports, the rate of increase dropped to 2.5 per cent; the previous year they had increased by23 per cent. That is a pretty steep decline. If that trend is to continue, we will have asignificant drop. Our total exports for the first quarter of this year were $1.1 billion, and thatis a decline of 10 per cent over the first quarter of 1997. So they are going to drop overall;there is no doubt about that.

Ms Hewitt—I would make a comment just at this point. I think we do need to be a bitcareful about getting into predictions. We do not have official predictions of what forwardexports will be. Obviously we keep an eye to developments, and we certainly are veryconscious of the need to adopt a careful defensive strategic approach to our export industries.But I think it really is just very, very difficult for us to get into that level of precision withexport projections for particular commodities.



An awful lot will depend on what happens to China’s export growth. Those commodities,for example, are classic inputs to export industries. There was a growth rate, as Dr Thomasmentioned, of 11 per cent in those industries last year. Even if there is a lower rate of growth,I think there is still some prospect that our exports of the primary commodities might holdup reasonably well—better than some end product exports from other economies. I just wantedto make the point that I think we do need to be very cautious about signalling expectationshere in a very fluid situation when it is difficult to be precise.

Dr Thomas—That is right. I can give you those figures, as I did for the first quarter, butI would be very hesitant to extrapolate from those. Even our big businesses who export toChina have had great difficulties trying to make predictions about what is going to happento their particular sectors. Our export trade with China generally has been subject to fairlyvolatile swings over the years, making predictions really quite difficult.

Ms Hewitt—Then there is a whole area of services trade which we expect might be ratherprospective in the period ahead. Again it is hard to foresee developments, but we have hadsome recent success with licences for Australian operators in the financial sector, and so on.While we may not have dramatic growth at rates that we have become accustomed to in recentyears, I think at this stage we are not so gloomy in our outlook that we would be talking aboutnegative things.

Senator COOK—I accept all those as obvious qualifiers, but page 37 of the portfoliostatement, under this subprogram, states:Strategies

To achieve its objectives, the subprogram will:

. analyse and evaluate developments in North Asian countries and economies to enable provision ofpolicy advice on political, security and economic issues which carry implications for Australia,including the effect of the East Asian economic downturn and the policies of the new Chinese and ROKgovernments . . .

It is in that vein that I am trying to get a clear idea.

Ms Hewitt—I understand exactly the context. I am just saying that I think sometimes it isdangerous and counterproductive to get into predictions about precise results. Certainly I thinkthe information you have had from Dr Thomas indicates that a lot of work is going on. Butwe think it is difficult, particularly given that a number presented by us as officials to you ina forum like this would be regarded as having some official authority. I do not think at thispoint we would like to firm up on numbers because we believe that there are too manyimponderables.

Senator COOK—I am aware of that. But can I just say this: most people did not predictthe East Asian financial crisis and, as a consequence, a lot of Australian companies got hurt,some of them quite severely. As a consequence there were many bankruptcies, particularlyin the tourist sector. I am not trying to skew the predictions, and I accept the qualifiers aroundwhich you make them. Quite clearly, forecasts are always to be treated with some degree ofcaution.

But since this is a role of this subprogram set out in your portfolio statement, I think it isworthwhile to get a very clear idea from an authoritative committee such as this for Australiantraders who are dealing with the region so they can know what the government analysis mightbe—albeit that they too ought to see that analysis against the background of those qualifiers.They then can take whatever remedial action that might be necessary to protect their interests.



Senator Hill—But I do not think that is the purpose of this inquiry at all. It is quitelegitimate to be pressing the departmental officers to assess whether they are meeting theircommitments as set out in the paper—whether they are doing their work, whether they areputting sufficient resources into the basis for their predictions, and so forth. But this committeeis not to be an authoritative statement on the state of the economies of Asia, or even anauthoritative statement on the state of Australian trade with Asia. That is not what theestimates are all about.

I know that the practice has been to treat all this with goodwill and to range freely—andI do not want to be unreasonable in that regard. Senator Cook particularly seeks to pressofficers on the detail of their predictions, and I think what is worrying me is more what hehas just said—of their predictions being an authoritative statement for Australian business uponwhich it should base its trade or investment decisions. I do not think that is what this is aboutat all; it never has been, Mr Chairman.

Senator COOK—Through you, Mr Chairman: I am interested in your remarks, Minister.I thought we were in the business of going to the detail of why we make these appropriationsin the public interest, and the objectives of this part of the subprogram are as I have quotedthem from your portfolio statements. Surely part of the debate about budgetary allocations andappropriations is about the work and advice that the department can offer.

Senator Hill—I have no quarrel with that—how the department operates, whether it hassufficient skills, whether it is giving sufficient emphasis to this particular area of itsresponsibility. All of those issues obviously are quite legitimate. But to try to turn it into acommittee to explore the state of the Asian economy for purposes of Australian investmentand trade is not its purpose.

Ms Hewitt—I was particularly concerned about putting forward an actual number andregarding that as having some official status as a predictive outcome. I think, as has beenevident, we are very happy to explore the factors that might influence outcomes and give youa broad sense of where we think trade patterns are moving, and so forth. But I really justwanted to suggest that it was rather difficult to firm up on particular numbers, other than byreference to commentary that is available, for example, in relation to the GDP growth numberfor China.

Senator COOK—I am interested in the department’s own view of these things, I must say.I think that is what the taxpayer pays the department for—not to keep these things a secretbut, where possible, to be able to express a view about these things. So I am interested inparticular numbers at particular times.

All I am trying to do is get very clear in my head what departmental intelligence is aboutthe state and nature of the economic circumstances we are going through for our largest tradingpartners. These things wax and wane; sometimes they are good news, and sometimes they arebad news. At the moment we are going through a tough spot, and governments can be sensitiveabout that. But I do not think that means that the questions cannot be answered.

CHAIR —They can certainly be asked, Senator Cook. If the government chooses to answerthem, that is a decision that they will make. But I think we should just proceed, because weare wasting our time.

Senator COOK—Thank you, Mr Chairman. We were talking about the expected downturnin the Chinese economy and which sectors we thought would most affect Australia, and wewere talking about primary products and focusing on wool and iron ore. I think the figure ofour exports that Dr Thomas gave us was 75 per cent.



Dr Thomas—Being primary products, yes.Senator COOK—Ms Hewitt makes the point—which is a valuable point to make—that an

Australian company, Colonial Mutual, has been granted a licence to provide life insurance inChina.

Dr Thomas—Yes.Senator COOK—Let us hear some of the good news; what other breakthroughs have we

had that might balance this negative position?Dr Thomas—In that services area generally, as well as the insurance licence, we received

a further legal licence in December when Mr Downer visited China. That was announced. Thatwas to the firm Hunt and Hunt. We now have, I think, four legal licences in China, and abanking licence for the ANZ. We will be pushing on with a quest for a further insurancelicence for another Australian company. At the time the Chinese government announced thelicence for Colonial Mutual, it also indicated that it would expect to grant a second licenceto an Australian company; I think the words were ‘in the not too distant future’. But we arepressing on with that.

We have also managed to secure from the Chinese ‘approved tourist destination’ forAustralia. That has the potential to boost the number of inbound tourists from China quiteconsiderably. It means that they will be able to come here on tourist visas, whereastraditionally most Chinese have visited as officials of delegations on business visas. They aresome of the—

Senator COOK—These are important changes, but the economic value of these changeswill not show up in the immediate future, will they.

Dr Thomas—There will be some delay—Senator COOK—They will be manifested down the track.Dr Thomas—But, nonetheless, they are all positives.Senator COOK—Yes, they are all positives. They are consistent with an opening up of the

Chinese economy, but the consistent part is that Australian companies are taking a share ofwhat is potentially a major market in services provision.

What is the prognosis for the other 25 per cent of our exports to China? Are they to bedowngraded by about the same amount of growth—that is, we will hold our relative marketposition—or are they to be affected in some other way?

Mr Quinlan —Again we cannot actually be precise with these sorts of things, but there area number of trends which have been evident over a few years in some cases. In the case ofETMs, for example, there has been a declining trend in exports to China over a number ofyears, largely resulting from increased competition and the price competitiveness of South-EastAsia. Whether there will be a change in those relativities as a result of recent developmentsis not yet showing up in the figures, so we cannot say.

There also may be some downward trend in the export of some industrials with the declinein the growth rate in China. I might comment that there has been a downward trend in ourexports to China since last October, and I guess we would expect that to continue with adecline in the growth rate in the Chinese economy.

In relation to things such as tourism, that could increase but again that will not show up fora little while. With the conclusion of the approved destination status for Australia for Chinesetourists, over the next couple of years we could quite confidently expect there would be a



substantial increase, everything else being equal. Again, what the impact of the declininggrowth rate in China and difficulties in China might be on the market for Chinese tourism isyet to be seen. That is probably about it, because most of the other comments related toprimary products.

Senator COOK—Do you have any comment on the possible growth of export and educationservices with Chinese students coming to Australia to study for degrees and so forth? Is thatan area where you think there will be improvement or not?

Mr Quinlan —In relation to education services, that is Australia’s third largest servicesexport of course. In relation to the Chinese market, there have been some problems over thelast few years but we are holding up relatively well. I think there has been an increase instudent numbers over the last little while. I would have to go through the figures.

Senator COOK—You can take that on notice, Mr Quinlan.Mr Quinlan —Sure.CHAIR —We might take a short break unless you are caught midstream, Senator Cook.Senator COOK—No, that is fine by me.

Proceedings suspended from 10.32 a.m. to 10.46 a.m.CHAIR —Senator Cook, would you like to continue.Senator COOK—We were just talking about the expected improvement in tourism from

China. I am advised that the department of immigration harbours concerns about overstays,people claiming refugee status while they are here and things of that nature. To what extentis that a factor in our promotion of Australia as a tourist destination for Chinese now able totravel? Are they matters that affect the potential inflow of Chinese tourists?

Mr Quinlan —Perhaps I could give you those figures that you requested first if you likeand we will deal with those.

Senator COOK—Sure.Mr Quinlan —Obviously, the primary people responsible for these sorts of figures are both

DEETYA and DIMA. As we understand it, for 1998 it is expected that there will be about4,000 Chinese students studying in Australia. That compares with about 3,700 the year before.

In terms of the comparison of the numbers of visas granted for students between the lastquarter last year and the first quarter this year, there has been a very significant increase—39.03 per cent in fact—but in terms of the absolute numbers that percentage increase obviouslydoes not flow through the year and relates to the seasonal factors of when the applications andso on have to be made and approved. But there is still an increase over time. There was a bitof a dip in 1996, but it has come back since then.

In relation to students and overstay rates and so on, I guess I could say that there is aproblem in relation to China and people coming from China to Australia in respect of overstay.Again, this is primarily the responsibility of DIMA, but the overstay rate is in the order ofmagnitude of about 12 or 13 per cent, which compares with a global overstay rate of 1.4 percent, so the discrepancy is very substantial and there clearly has been a question there for thegovernment to address.

In relation to students, this has clearly been a factor in the development of student policyover the last few years and, because of high overstay rates in the past, the entry requirementsfor Chinese students were tightened considerably in November 1992. DIMA is currentlyreviewing the overseas student visa program, and I understand that the report of that will be



available later this month. That presumably will then be considered by the government andthere will be a response and a further evolution of policy if necessary over the next little while.

In respect of the way this impacts on the development of our policy on Chinese tourism,it has been a factor in the minds both of ourselves and of the Chinese government. TheChinese government itself does understand that there is an overstay problem and it is asconcerned as we are to manage that problem, so the arrangements that are currently beingnegotiated between the two governments to apply to the approved destination status facilityfor Chinese tourists to Australia will clearly take that into account. Those negotiations are stillunder way, and we expect that they will be completed within the next few weeks. We arethinking of a memorandum of understanding which would address those sorts of issues as well.

Senator COOK—Is that in general terms true as well about Chinese students coming toAustralia under our education promotion initiatives?

Mr Quinlan —Sorry?

Senator COOK—About Chinese students. In our attraction of full-fee paying foreignstudents to Australian universities, can we appropriate those concerns about the overstay issueand the immigration matters that you have referred to in relation to tourism directly to thestudents as well?

Mr Quinlan —My understanding, and this would be more properly directed to theimmigration department, is that it is not as significant a problem in relation to students as itwas in the early 1990s. I cannot give you an order of magnitude because I do not have thosefigures.

Senator COOK—I see. Thank you. What is our current view of China’s bid to join theWTO? How close to accession are they in our view?

Dr Thomas—I will invite my colleague Mr Quinlan again to make some remarks since hehas been intimately involved with the negotiating team on WTO matters. Just by way ofgeneral comment, the Australian government remains committed to China joining the WTO.We have been very supportive of that in a general sense. We have been endeavouring tofinalise a bilateral settlement access package with China. As far as things are concerned atthe moment, with the Clinton visit to China looming at the end of this month, all attentionreally has moved to that visit, from the Chinese side at least. We are not expecting any greatbreakthrough as a result of that visit. Our expectations are modest, but we expect there to besome movement at least in relation to the US-China bilateral package and that of course willhave implications for us and for others.

Another question we ask ourselves in a general sense is how anxious China is to join theWTO at this point. It has been a longstanding policy goal of the Chinese government. But,in recent times, we have seen indications that certainly the new Premier, Zhu Rongji, has madeit clear that he will not in any way prejudice his economic reform agenda within China,including through concessions by China, in relation to its WTO negotiations. So we also haveto see how that pans out.

That just sets a bit of the context within which we have been continuing to talk to theChinese about our own concerns. Our bottom line is, at the very least, to maintain access forour trade no less than it has been hitherto and, where possible, to make some useful gains forAustralian exporters. But I will pass over to Mr Quinlan, who has been involved in the detailof those negotiations.



Mr Quinlan —I might comment that Mr Hussin, who heads the Trade Negotiations Division,also has a very primary role in this question of WTO accession by China. So I will limit mycomments to just a couple, if I could. First of all, on the general question of accession,progress has been made this year, but obviously not as much progress as countries like us andother WTO members would like. The last accession working party was held in Geneva in earlyApril, at which stage China put down a revised offer on industrial tariffs, which was asignificant improvement over the past. But still, I think, in the eyes of most, that did not goquite far enough.

In relation to services, which remains one of the key and most critical areas, the Chineseapproach at the moment is to negotiate bilaterally with major players on services questionsand then bring back, if you like, the results of those sorts of negotiations into the more generalaccession working party context. They are focusing, in the first instance, on services theyconsider easier to handle—that is, accounting services, legal services and professional services.They are leaving the more complex ones—the financial services, basic telecoms and some ofthe distribution services—until later in the day.

In relation to non-tariff measures, it is thought that the next working party will see an offerby China. The next working party may be in mid-July or a bit later. It will be post the Clintonvisit to China. So people are waiting to see what the offers there are.

In relation to agriculture, that is obviously a critical area for all of us and also a verydifficult area for China to handle internally. That is an area in which people have not yetadequately engaged, except on a bilateral basis. In relation to our own bilateral market accessnegotiations, we had some discussions with the Chinese in Geneva in April, and we areseeking to re-engage with the Chinese to see if we can advance that package further. Thereis still a way to go, a gap to be bridged, and I think that is clearly understood by both sides.At the moment, the Chinese focus is clearly on the Clinton visit and what might come out ofthat, so we would expect to be able to re-engage fairly soon, hopefully, after that.

Mr Hussin—I do not have anything really to add to what Dr Thomas and Gary Quinlanhave said. I think they have summarised well where we stand on the issue, and we will waitand see whether there is re-invigoration in the next few weeks. We are certainly ready to re-engage just as soon as the Chinese are able to do so in a meaningful way on some of theissues that are outstanding between us.

Senator COOK—The US has just extended most favoured nation treatment to China, hasit not?

Dr Thomas—Yes.

Senator COOK—Just ahead of the visit of the President?

Dr Thomas—Yes.

Senator COOK—That does normalise trading relations between the United States and Chinaback to the situation that existed before the Tiananmen Square issue; is that right?

Mr Hussin—I think it is required under US law that the MFN be revisited annually, so ithas been proceeding on that basis. I think President Clinton has recently signalled that hewould, again, extend that for a further 12-month period.

Senator COOK—But it is my understanding that the US has had some export embargoeson China of some goods that it broadly—and observers say ‘very broadly’—defines as defencerelated. Some pundits are predicting that, during the Clinton visit, those embargoes will be



modified and the US will commence selling, for example, nuclear power stations to China,things of that nature. Are you saying that the renewal of MFN does not relate to that?

Mr Hussin—No, not as far as I know. Those particular controls are quite outside the WTOtype framework.

Mr Quinlan —In relation to nuclear equipment, for example, that required the certificationof an agreement, which was arrived at between China and the United States in the mid-1980sbut which was held in abeyance pending a number of commitments by China on non-proliferation issues. It was judged in the context of President Jiang’s visit to Washington lastNovember that those commitments by China had been given. In fact, China has been certifiednow for the export from the United States to receive certain types of nuclear technology—nuclear power stations and the like. But what Mr Hussin said is basically correct. Some ofthe other issues which are defence related will be looked at separate from MFN.

Senator COOK—Before the United States normalised its trade relationship with Vietnam,we had a strong market in Vietnam. After it did, the popular thing at the Vietnam end becameto drop Australia and go to the United States sources of supply. If there is a loosening up ofrestrictions on trade between the United States and China, do you expect a similar sort ofreaction to Australian export goods?

Mr Quinlan —I do not know, but I do know that it is something that is on our mind. Weare in the process of talking to people in the United States about it.

Senator COOK—What about talking to the Chinese about it?

Mr Quinlan —That is an option, yes.

Senator Hill—Talking about what?

Senator COOK—The effect on our trade after the United States normalised its traderelationship with Vietnam was that we were assured by the Vietnamese they would take apositive view of Australia. In fact, what happened was that Australia lost a lot of its exportmarkets to United States goods that came in, and many observers thought that, where we werecompetitive, we lost markets unfairly because of the new normalised situation. That issomething to guard against.

Senator Hill—But that is fundamentally different, isn’t it? As I recall, before then UnitedStates trading with Vietnam was illegal.

Senator COOK—But there is an illegality in the United States trading with China if it isrelated to what people regard as a very broad definition of defence related goods. Theexpectation is that that definition will be narrowed considerably to what might be regardedas a more normal definition of defence related goods.

Senator Hill—I do not know that we have a lot of trade with China in the area of defencerelated goods.

Senator COOK—The question is whether they are in fact defence related goods, if I mightinterpose. I am asking: what effect is there?

Ms Hewitt—I think we need to keep it in proportion. My recollection—we would need tocheck the figures—is that trade with Vietnam continued to grow very strongly. In fact, afterthe normalisation of relations with the United States, clearly there were some new opportunitiesfor American exporters, but our own trade situation with Vietnam has remained very healthyand the growth rates have been very encouraging. Perhaps there might have been speculationaround the immediate period of that change.



Senator COOK—I can assure you that there was a long line of exporters to my doorcomplaining about it.

Senator Hill—There is only so much the government can do. Basically, what you need isthe right goods at the right price and market vigorously.

Senator COOK—If it were as simple as that we would all be happier, but it is not,unfortunately.

Senator Hill—I think it is a pretty good start.

Senator COOK—That does not necessarily mean that you will still win the market.

Dr Thomas—We are very aware of it, though. Similar things happen in relation to Koreaand Japan and potentially in China. We monitor that very closely. We certainly makerepresentations to those governments if we can identify any areas where we think Australianindustry exporters are going to be disadvantaged vis-a-vis their American counterparts. Thatis about all we can say on that at this stage. Our influence is limited, but we certainly takeit very seriously.

Senator COOK—Can you provide an update on the status of the bilateral Australia-Chinahuman rights dialogue?

Dr Thomas—Certainly. The first dialogue was held in Beijing in August last year. Thesecond round of that dialogue is scheduled to be held in Canberra for the first week in August.So that will take place in the near future. We felt that first dialogue was very successful. Wewere able to raise a number of issues on the agenda which hitherto the Chinese had not beenprepared talk to us about. It covered a full range of concerns of government and NGOs, andit also enabled us to talk to people beyond the foreign ministry in Beijing, which was a newdevelopment.

At that particular dialogue, the government also announced a $300,000 program of technicalassistance, which is funded through AusAID. Under that scheme, various Chinese officialsand delegations have been brought to Australia, exposed to Australian judicial processes.Various courses have been designed for them in terms of how the penal system works, howthe judiciary works and so forth. There were also educational programs in relation tointernational covenants, what these would mean, how these could be implemented and so forth.

Building on what we think was a very constructive beginning, we will have the second roundof talks in Canberra in August. We have a very full agenda again. We will be able to raiseindividual dissident cases with the Chinese in these contexts. We are able to discuss Tibet andlots of subjects which are quite sensitive in other contexts. We are also looking at ways inwhich we might involve NGOs a little more. We have been talking to a number of othercountries who have recently had their own dialogues with China and who use similar sortsof mechanisms where they too have involved NGOs quite successfully. That is where thingsare at at the moment.

Senator COOK—Do you know at what level the Chinese delegation will be represented?Will the PLA be a member of it?

Dr Thomas—The Chinese will be represented by a deputy head of their foreign ministry—Vice Minister Yang Jiechi.

Senator COOK—Will the PLA be part of that delegation, do you know?

Mr Quinlan —Not that we would expect. Arrangements on the Chinese side have not yetbeen finalised.



Senator COOK—I have a question or two about thePetro Ranger, a vessel that wasreportedly pirated.

Dr Thomas—Captain Blyth’s vessel.Senator COOK—Yes. He is an Australian, not an Englishman.Dr Thomas—Yes.Senator COOK—Not to be confused with the other Bligh.Mr Quinlan —He does speak with an English accent. We have spent several hours with him.Senator COOK—He has chosen to be an Australian, I understand. Firstly, how the ship

came to be docked off Hainan Island is a question of conjecture. But then the allegations thatseemingly were made against the captain and the crew are also a matter of some interest. Canyou provide some information on any of the following fronts: the length of period he was keptin detention, confined to his vessel; whether or not at the end of the day he was cleared ofany allegations or charges; or whether or not a convenient arrangement was made to releasehim?

Dr Thomas—It all happened on my turf, but our consular area took responsibilities for thedetails of that case.

Ms Hewitt—They certainly would be prepared to answer questions under the consularprogram.

Senator COOK—The review given for the Hong Kong economy by the Australian businesschamber is one in which there are positive signs, but, nonetheless, the economy is in recessionat the moment. The prospects of it turning into six per cent plus growth looks a long way off.Tourist arrivals are down. Domestic demand growth is down and the growth in China, as youhave remarked, has slowed. Nevertheless, they believe that the Hong Kong economy is ableto weather the storm, despite the fact that it has a pegged currency. Is that a fair descriptionin your view of the situation in Hong Kong?

Dr Thomas—Again, elements of it are fair. I think the OECD recently listed Hong Kongas one of the two freest economies in the world. We believe Hong Kong’s fundamentals andits economic structure place it in a very strong position to weather problems of the crisis.Unlike China and Japan, whose economic problems are very much domestically driven in thefirst instance and have been exacerbated by the crisis, in Hong Kong’s case it is largely a resultof the crisis and it is having some temporary problems, as we would put it.

Their latest growth rate figure is minus two per cent. This is the first time since 1985 thatHong Kong has had negative growth for any significant period. So there is going to be a majorslow-down. There has been a huge mark-down in asset values in Hong Kong. A lot of peoplehave lost their fortunes. Real estate prices have dropped by about 40 per cent, for example.We would have to expect realistically zero or negative growth for the remainder of the year.The Hong Kong government itself has conceded that its estimate of 3.5 per cent growth for1998 is no longer sustainable, but as of yesterday it had not put out an alternative growth rate.It has decided not to put one out. Most analysts would expect to be around zero or negativegrowth.

A key issue is the dollar peg. We are told that it is going to be held. It is going to dependa lot on what Beijing does in relation to its own currency. We have to take that at face valuethat they are not going to devalue at least for the rest of this year. The big question is: whatwould happen to the yen, which will put enormous pressures on other currencies? Again, Iam not going to get into speculation on that.



Hong Kong still has enormous and significant interests for us. We have one of our largestexpatriate business communities based there; 350 Australian companies are headquarteredthere; 1,000 Australian companies have representative offices there. We are in there for thelong haul. We have significant investment there. Add that to Hong Kong’s good economicfundamentals, as I mentioned in the early part of my remarks, plus the fact that it is notburdened by any public debt. It has the third highest foreign exchange reserves in the world.There is room to believe that Hong Kong will manage to ride out this problem. It will be atemporary one. But there is no doubt it has been severely hit by the regional downturn.

Senator COOK—Dealing with the whole of the North Asian Division—I have left outTaiwan obviously, as it is a strong economy within the region—am I right in thinking thatabout 54 per cent of all of our trade is with North Asia, the region we are talking about?

Dr Thomas—I do not have the precise figure. It is in the 40s though.

Senator COOK—I had a 54 per cent figure. I am happy to amend that.

Dr Thomas—I would have to check that.

Mr Quinlan —If it is 54 per cent, it has increased substantially. It was 44.1 per cent twoyears ago. I am sure we can give you the right figure.

Senator COOK—What is our percentage of trade to Japan alone?

Dr Thomas—It is our largest trading partner. It is 19.8 per cent.

Senator COOK—It is our single biggest trading partner.

Dr Thomas—By far.

Ms Fayle—The figures based on 1997 calendar data, which are the last comprehensivefigures available, have Asia at 63.9 per cent; North Asia at 41.8 per cent; and South East Asiaat 15.3 per cent. That is 1997 calendar data in Australian dollar terms.

Senator COOK—Thank you. Obviously, we have looked at each of the major tradingpartners and the prognosis for them. There is no point in my labouring the point about that.Let me turn to the East Asian Analytical Unit for a moment—this is a regular exchangebetween you and I, Ms Hewitt.

Ms Hewitt—That is right.

Senator COOK—We had better perform our duet again, otherwise these estimates will notbe complete. In the 1995-96 budget the East Asian Analytical Unit received $1.3 million. Icannot find a figure for it in this budget. Can you tell me what it is?

Ms Hewitt—Yes. Its total budget at the moment is a little under $1 million—it is $957,000,more or less. That comprises, as I think we have explained at previous estimates hearings, acombination of running costs from within the departmental budget, very substantially fromour own running costs; and the unit has also been successful in attracting small but very usefulgrants from other departments and from some corporate sponsors to bring the total close to$1 million.

Just to recap quickly, as you would remember, the money under which the unit was fundedpreviously was specific purpose appropriation that was approved by cabinet, but it had asunsetted life. When that grant expired a couple of years ago we decided within the departmentthat, given the priority we attached to the work, we would find money from within ourresources; in other words, take funds from other parts of our activities to keep the unit’sactivities going.



You will have seen that they have continued their successful publication series. We havehad a very good response recently to a report on the Philippines, which has just been launchedin the Philippines. There are three or four important projects in preparation in the unit at themoment.

Senator COOK—Of the $957,000, how much is support from other agencies, departmentsor the private sector and how much is appropriated to them directly?

Ms Hewitt—I will have to do this on the run, Senator. The money that comes from otheragencies varies a little because it is project specific. We are expecting a contribution of$70,000 from the industry department, from DIST, to assist in the preparation of an importantreport on financing and provision of private sector infrastructure in Asia. That is work currentlyin progress. We have a contribution total of $40,000 from our portfolio partner, Austrade. Theyhave made a contribution of around that amount.

Also, $50,000 has been granted from the Australia-Korea Foundation for a study that isunder way now into economic developments and prospects in Korea. The corporate sponsorsare Pacific Power at $20,000, BHP at the same amount and National Mutual, also $20,000.I think that is the total, Senator. We are still in discussion with some other departments, butso far that is what we have managed to collect. We also have some grants but I think theywere from last year’s budget from AusAID. That was a fairly substantial contribution to theinfrastructure project—that is, $140,000 from AusAID. I think AusAID also contributed somefunds to the Philippines report, but I think some of that money was received in the previousfinancial year. So a total of less than $200,000 of the $956,000 comes from outside thedepartment’s resources.

Senator COOK—So assuming it is $200,000, you will put in $757,000 directly?Ms Hewitt—That is right, Senator.Senator COOK—That was up from the $440,000?Ms Hewitt—Yes. We built it up a bit further this year from the low point last year. It also

relates to cycles in the work that is under way and recruitment patterns and so on.Senator COOK—What is their immediate work program?Ms Hewitt—The two reports that I mentioned, the one on infrastructure in Asia and the

Korean report. There is a report on financial market liberalisation in East Asia post thecurrency crisis. There is a possibility of a report a little later down the track looking at thelonger term impacts of the economic situation in East Asia. That is less well defined at thisstage, but it is in mind.

The unit has been very active working with our other divisions. We have now establisheda small board to work with the unit which comprises the heads of the South East and NorthAsia Divisions as well as Ms Fayle from the Market Development Division. I chair that groupto make sure that we maximise the interaction and the benefit that flows from the depth ofanalytical work that can be done in the unit. So there is good cross-fertilisation between thework of the divisions, which, as you would appreciate, is more short to medium term asopposed to the more reflective analytical work that is done in the unit. They did organise, forexample, a round table of academics and business economists recently as well as some peoplefrom other government agencies to discuss the implications of the Asia financial crisis. Theyhave been very active in seminars and briefings of the business community as well.

Senator COOK—Thank you very much. I must say, Minister, I always think this is a dis-economy. Sixty-three per cent of our trade goes to this region and we are cutting the funds



of our analytical unit in order to understand better what the circumstances are in this part ofthe market. I just think it is a terrible dis-economy by the government. You have heard meon this point several times. I make this point again, and I will continue to make it.

Senator Hill—It is not really the place to make it, Senator, but, nevertheless, you have madeit.

Senator COOK—I can make it in the other place.

Senator Hill—It is probably the view of someone who overemphasises the role ofgovernment in these things. Your approach was somewhat different to ours.

Senator COOK—I do not think I am overemphasising the role of government at all. WhatI am saying is that government is ideally placed to provide an intelligence service for theAustralian business community and to point to areas of opportunity. Other private sectoragencies draw heavily on the East Asia Analytical Unit in their work, but without that basework being done, there is certainly a gap in the market.

Senator Hill—You do not always get a better product by spending more money either.

Senator COOK—That is true, but you do not always get a better result by spending lessmoney, which is also true. My contention here is that you can do better than we are doing asa nation.

Senator Hill—But we spend what we can afford.

Senator COOK—I do not know. The federation fund could kick in and help us in a bigway here, Minister. But, seriously, it looks at market opportunity for Australian business fora better understanding of the ebbs and flows of the economies in our major trading sector. Inrelation to the Australia-Japan Foundation, one of the performance indicators in subprogram1.1 is increased Australian profile in the region through the Australia-Korea Foundation, theAustralia-Japan Foundation and the Australia-China Council. Yet I note that the Australia-Japan Foundation has received a funding cut from just over $1 million in 1997-98 to $921,000in this budget. Given the centrality of Japan as our major trading partner and leading worldeconomy, why have we gone about making that cut?

Mr Baxter —Senator, perhaps I can answer that. One of the reasons for what appears to bea cut is the fact that the difference between the 1997-98 estimated outcome and the 1998-99budget figure is explained by the carry over that the AJF brought into the 1997-98 fiscal year.That was brought about by the six month vacancy for the director of the AJF. So the director’sposition was vacant for six months and there was a saving in the salary money that isattributed to that position.

Senator COOK—So, while the Japanese economy is engaging in a slow motion slide intonegative growth, we were not able to fill the position for how long, six months?

Mr Baxter —It was vacant for six months, yes. That is my advice.

Senator COOK—And thus made a saving.

Mr Baxter —That money was carried over into the 1997-98 budget. So the vacancy, whileI am not sure of the details, must have been in the previous financial year for them to carryover that fund.

Ms Hewitt—The money was not lost to the program, Senator. It was simply deferredexpenditure. It can be used in other ways. There was a deliberate decision taken not to reducethe funds of the councils, foundations and institutes in the current year.



Senator COOK—We have filled the position now and it is up and running in a normal sortof way, is it?

Ms Hewitt—I understand so.

Dr Thomas—Yes.

Senator COOK—Have there been any cuts to the Australia-Korea Foundation and theAustralia-China Council?

Dr Thomas—Not this financial year, Senator. The program money is largely quarantined.We also have a small amount of administrative money for each of the foundations which fundsthe staff and their travel and administrative expenses.

Senator COOK—Quarantined at real or constant dollars?

Ms Hewitt—We only quarantine in nominal, Senator. It would be a bit risky to dootherwise. There was quite a deliberate decision taken not to reduce those appropriations evenin the context of fairly significant running cost cuts for the department as a whole. So theyhave, relatively speaking, fared very well.

Dr Thomas—Can I say also, Senator, those three foundations you mentioned have beenintegrated into our North Asia Division over the past financial year whereas they werepreviously attached to our cultural relations area. They still operate in a semi-autonomous way.They each have independent chairs and boards, but the secretariat of each of the foundationsare fully integrated into my general divisional staff. We also supplement and complement theiractivities as we can. But all the spending decisions as such of those foundations are taken bytheir boards.

Senator COOK—Before I leave subprogram 1.1, I am not quite sure where it appears, butyou had a special unit monitoring the Asian economic crisis or the Asian financial crisis.

Ms Hewitt—It is located in the market development division, Senator.

Senator COOK—Right. Okay. I better remember to ask about that when we come to that.It is still in existence, I take it.

Ms Hewitt—Yes, it is.

Senator COOK—Has it been expanded or reduced?

Ms Hewitt—Neither. It is probably at the same level as the time we last spoke.

Senator COOK—Does it still have three officers?

Ms Hewitt—I would defer to Ms Fayle and perhaps we could take it up there. Because theirwork is so interactive with the two Asian Divisions, I think it is probably a higher numberof staff. If you add the proportions of time of staff outside the Market Development Divisionworking with the unit, I had in my mind that it was somewhere closer to five or six equivalentfull-time staff. I would ask Ms Fayle to elaborate.

Senator Hill—Not unless it is necessary. Do you really want to go further on that?

Senator COOK—On what resources?

Senator Hill—You have been told that it is roughly the same size.

Senator COOK—No, that is fine. I do not need to go there. It is roughly the same size.No changes have effectively been made. Does it do any different work or is its workdescription the same as you gave us the last time?



Ms Hewitt—I think it is broadly the same. Obviously as events have unfolded in the regionwe have needed to particularly focus on looking forward along the lines of some of thediscussion we have already had this morning. I think one of the major areas of focus for thework of the unit is now looking for watch points, if I could use that expression, factors thatwe will need to take very special account of in coming to conclusions about the implicationsof developments for the Australian economy and for our exporters. But it has been a verydemanding area of activity simply because events have unfolded as they have. It is obviouslyclearly a set of issues of enormous importance to the Australian economy, so we are givingit a great deal of attention.

Senator COOK—What are those watch points? What are those factors of key importance?Ms Hewitt—Again, Senator, if we could defer this until the Market Development Division

discussion. I think that is probably something Ms Fayle is better placed to answer.Senator COOK—Just going back to the East Asia Analytical Unit before I move off this

section, the Australian-Korea Foundation gave $50,000 to the EAAU, did it?Ms Hewitt—Yes.Senator COOK—Is that out of their current grant?Ms Hewitt—Out of the program funding, yes. It has quite recently been approved. In fact,

Dr Perkins is off in Korea on the first stage of that study at the moment.Senator COOK—So this is one section of DFAT funding the work of another section?Ms Hewitt—No, it is not departmental money, Senator. That money is earmarked and

quarantined. As Dr Thomas explained, the decision making on its allocation is entirely in thehands of the board. A submission was put by the unit to the foundation. They receive requestsfor grants from all kinds of bodies in the arts world and in all sorts of areas of interest in theAustralia-Korea relationship. This was simply one such request. I think the Korea Foundationregarded the work as important and high priority. I should mention that in fact the unit didapproach some Korean corporations for assistance to fund the project but our timing wasregarded as not propitious on this occasion. It was indicated to us that they did not have a lotto spare just at the moment.

Senator COOK—Okay. Thank you. I have no further questions on subprogram on 1.1.Dr Thomas—Senator Cook asked a question about the Prime Minister’s visit to Japan earlier

this morning. I now have that information. Just for the record, Prime Minister Howard visitedTokyo in September 1996. Japanese Prime Minister Hashimoto paid a visit to Australia inApril 1997.

Senator COOK—It is our turn to reciprocate. I am sure Prime Minister Beazley will bepleased to go.

Dr Thomas—The agreement between the two ministers was to meet on an annual basis.They usually meet in the corridors of APEC or other meetings as well as between fully-fledgedbilateral visits.

Senator Hill—Simon Crean was there.Senator COOK—It might be Prime Minister Costello. Is that what you are saying, Minister?CHAIR —Before we leave subprogram 1.1, I have a question on the bilateral talks between

Australia and Taiwan which occurred in the early 1990s and which were suspended becauseof the WTO negotiations. I understand that they are going to occur again?

Dr Thomas—Yes.



CHAIR —When?Dr Thomas—You are quite right. They were, as you say, subsumed into the WTO

negotiations. We recently responded to a Taiwanese request that these talks might be resumed,as they had been held previously. We have put a proposal to the Taiwanese saying we wouldbe prepared to resume under certain conditions. We would like them to look at some particularmarket access issues in which we have a particular interest. If they are prepared to giveconsideration and to discuss those issues, then we are willing to sit down at a table and resumethe fully fledged trade policy talks with them. The ball is in the Taiwanese court at themoment in terms of timing. We have offered to hold them in the second half of this year.

Mr Quinlan —The timing is related in the first instance to the legislative program in Taipeiitself, the meetings of the Legislative Yuan and so on. The Taiwanese have indicated it wouldbe after the Legislative Yuan has completed its current budget session, which we understandwill be late June, early July. So we would expect it would be some time after that.

CHAIR —At what level are bilateral talks of this nature held?Dr Thomas—We would expect them to be chaired at deputy secretary level.CHAIR —Thank you.

[11.32 a.m.]Subprogram 1.2—Interests in South and South-East Asia

CHAIR —I welcome the officers from the South and South East Asia Division of thedepartment and ask that Senator Cook continue with questions on subprogram 1.2.

Senator COOK—If I can start with Malaysia very briefly: when is the Prime Minister goingto visit Malaysia?

Mr Warner —As you are aware, the Prime Minister did have plans to visit Malaysia acouple of months ago, and that visit did not take place. There have been discussions betweenForeign Affairs, the Malaysian authorities and the Department of the Prime Minister andCabinet about arranging new dates. I do not think at this stage we have come up with a setof dates suitable to both sides.

Senator COOK—Are you likely to finalise that in the next couple of months?Mr Warner —I would hope so, but the fine detail of this is with the Department of the

Prime Minister and Cabinet, not with us.Senator COOK—I see. What priority do you assign for a prime ministerial visit given that

the invitation has been out there for a considerable amount of time?Mr Warner —We would assign a high priority to a prime ministerial visit to any of the

countries in this division.Senator COOK—But I am not asking about the others—Mr Warner —And that would include Malaysia of course.Senator COOK—Yes, I know. But on the bilateral agenda, for example, we have the issue

of ASEM in which Malaysia has taken a particular stance against Australian membership.There are some other matters on the bilateral agenda too. Does that cause you to assign withinthis region, acknowledging that all countries are very important, any higher priority toMalaysia?

Mr Warner —No, I do not think so.Senator COOK—What weight do you put on Australia’s membership of ASEM?



Mr Warner —Australia has very good credentials to join ASEM on the Asian side and, asyou are aware, prior to the London meeting we were quite active in putting our credentialsforward in the region and on the European side. I think we have good credentials.

Senator COOK—I have always thought that. But what weight do you assign; how importantis it for Australia to become a member?

Mr Warner —I think it is reasonably important.

Senator COOK—Do you have any special lobbying or other arrangements to encourage—Ithink the next one is at the end of the century, isn’t it?

Mr Warner —The next one is in Seoul in the year 2000.

Senator COOK—To encourage countries that may have taken a negative view of Australia’smembership to change their position?

Mr Warner —Seoul 2000 is a fair way away. For the moment, we would be happy to sitback and look at the situation and see how views develop; then some time in the next sixmonths or in the next year to 18 months look again at how we would approach themembership issue.

Senator COOK—President Habibie of Indonesia, in his role then as vice-president, alsoopposed Australia’s membership of ASEM at the London summit. How confident are you nowthat his position has changed?

Mr Warner —There was almost no discussion of membership at the ASEM summit inLondon.

Senator COOK—We were not admitted at London.

Mr Warner —That is true.

Senator COOK—Your point is there was little discussion about it. We were not admittedthough is my point. But my question really was: are you confident that now President Habibiehas changed his position from the one he held at that summit in the little discussion that wenton to one in which it is conducive?

Mr Warner —I am not aware of Habibie making any comment at all during the ASEMsummit on the membership issue.

Senator Hill—I would have thought President Habibie would have other matters on hismind.

Senator COOK—I find this interesting, Minister, because President Habibie told me aboutsix weeks ago that he would be a strong supporter of Australia becoming a member of ASEM.

Senator Hill—That is good news.

Senator COOK—He was then a vice-president; he was not the president. It is all right forhim to tell me—I am an opposition figure—but what has he told the government is myquestion?

Mr Warner —We have had private assurances, as you have had, and we have had publicassurances from the Indonesians both before the London summit and subsequently, that theyare supportive of our membership bid and aspirations.

Senator COOK—That would suggest that some of the difficulties we encountered at Londonwould be less at Seoul, but we are still down to the issue of Malaysia’s view. Do we haveany intention to talk to Malaysia about this in any detail?



Mr Warner —As I said before, Seoul 2000 is a long way off. For the immediate future, wehave no plans to talk to anyone in any detail about ASEM and our membership.

Senator COOK—The question of the Prime Minister’s visit is still indeterminate; we donot know when that might proceed. I take it that you do not expect it to proceed in the nextthree or four months?

Senator Hill—That is up to the Prime Minister.Senator COOK—Do you expect it to proceed in that time, Minister?Senator Hill—It is not for me to say. If you want us to ask him how likely or unlikely it

is, I will see what sort of a response we get.Senator COOK—I just thought it would be very interesting to hear what his views would

be about the poorly informed and economically illiterate currency traders that he has remarkedon recently and also Prime Minister Mahathir’s view on that matter. But that is another issue.

Senator Hill—I know the Prime Minister was enthusiastic about the prospective visit. Soit is a pity but—

Senator COOK—He is enthusiastic?Senator Hill—He was enthusiastic about the prospective visit as it then was; so I would

assume he is still anxious to visit as soon as reasonably possible.Senator COOK—Can I just turn to Indonesia. I am probably out of order but can I just

say that the department and Ambassador McCarthy in particular need to be congratulated fortheir handling of a very difficult situation in Indonesia, especially for the attention that thedepartment and the ambassador have given to the welfare of Australians in that country overwhat has been a very difficult time. I think it has been an excellent performance. What is yourassessment of the Indonesian economy? How soon do you think it will be before it returnsto positive growth?

Mr Warner —These are pretty big questions—Senator COOK—Indeed.Mr Warner —All the macro-economic indicators for Indonesia are looking pretty bad and

much worse now than they were three, four or five months ago. We are looking at a contrac-tion in the economy of the order of 10 per cent or maybe more, unemployment perhaps risingto over 20 per cent by the end of this year and with the rupiah sitting around 11,000 to $US1.How soon? I do not know. How soon depends on two things: one is getting the IMF packageback in place and getting it fully implemented; and the other is underlying that with a processof political reform.

Senator COOK—Does the department in any way think they got it wrong in making itsassessments of the developments in South-East Asia—the problems with Thailand andIndonesia, the Malaysian economy, the difficulties in the Philippines and the problems of thefinancial crisis? Is the department concerned that it may not have called the outcome as wellas it ought to have done?

Mr Warner —You are not talking here about predicting the crisis or you are?Senator COOK—Both predicting it and, once into it, the depth and the extent of it.Mr Warner —We are very happy with the assessments that we have made as the crisis has

unfolded and, in particular, I think our assessments of Indonesia have been spot on—at leastfor the last six or seven months.



Senator COOK—I have in mind evidence given here by Mr Dauth previously. I said atthe time that I thought he was too laid-back and too reassuring that this crisis was going tobe more easily contained. Since then it has got considerably worse. I take it Mr Dauth wasexpressing the view of the department at the time, albeit in the reassuring tones that he did,but—

Ms Hewitt—Perhaps if I could add a little to what my colleague has said. We are allconscious of the fact that mainstream observers, the business economists and the markets haveturned significantly less optimistic in sentiment as the crisis—if we use that expression—hasevolved from September last year over the following nine months or so. To some extent, weare guided in our own judgments by material that is coming from reputable sources—I amtalking about the international financial institutions, the informed analysts and so on. But, asmore information has come to light and as markets have reacted to that, sentiment has becomemore negative. We have factored that into our assessments as they have evolved.

But I think it would be true to say that we have always cautioned in responses here to youat the committee and elsewhere that prediction is a difficult and a dangerous business. We havedone our best to read and look forward as has been possible on the basis of informationavailable to us, but it is not our core business to be economic forecasters. That is not our role,but we do need to be informed and aware of views as they are emerging and have a goodeffort put into analysis of the factors which might influence the way the economies evolve.Clearly there is a substantial Australian interest in doing that.

We have certainly put a great deal of effort into the process. I do not think with hindsightour expectations have been proven correct all the time, but I do not think we are RobinsonCrusoe in that. I think that would be true of the analysis that has been undertaken in all ofthe major institutions and globally. If I can just put that tempering comment on the table inorder not to create any impression in your mind of complacency on our part and to assure youthat we continue to give the work a very high priority.

Senator COOK—Thank you. When I was asking these questions we were in the crisis itself.I thought Mr Dauth’s answers were decidedly up-beat, given the circumstances that realisticallywe were facing. Since I take it that he was expressing the view of the department, it did appearto be further off base than I would have imagined, even if the department were wanting totake a reassuring view for Australian investors. That is an observational point. You have toldme that you do not regard that your analysis was off the mark?

Mr Warner —I think the analysis was pretty good, particularly, as I said, in respect ofIndonesia.

Senator COOK—What is your assessment of the likely path of political reform in Indonesianow?

Mr Warner —That is another sixty-four dollar question.Senator COOK—Let us make it a sixty-four thousand dollar question.Mr Warner —Or million dollar question?Senator COOK—Indeed.Mr Warner —Clearly there is a division of opinion. There is a group, including around

President Habibie, who are looking at a well-orchestrated and modulated process of reformthat would lead up to elections in mid-1999, and clearly there is another group, essentiallyoutside of government, that is looking for reform more quickly. It is very hard to predict,therefore, what the timetable will be.



Senator Hill—After your vicious attack on Mr Dauth I can understand Mr Warner beingparticularly cautious.

Senator COOK—I did not make a vicious attack on Mr Dauth. We can all get thingswrong. I just asked the question in view of a decidedly up-beat assessment. Holding it againstperformance, obviously you then say how good or how bad were you and modify. I am notcriticising Mr Dauth. I regard him as a highly competent officer. We are all struggling to cometo terms with what is happening in our region. It is of vital importance to Australia. Thequality of analysis provided by the department is fundamental to our understanding I think.

Senator Hill—But best guesses are not all that helpful either. As Mr Warner has said—andI think it is undoubtedly true—it is very difficult to predict. We are in uncharted waters.

Senator COOK—But the strength of this department, Minister, is that it is the expertdepartment in the whole of Australia about this region. If it cannot tell us anything, no-onecan. It is no good telling us what we can already see in the rear-vision mirror. The strengthof this department is to understand where the region is going. That to me seems to befundamental.

On that theme, does the department still hold the view expressed by the foreign ministeron 19 May 1998 on Radio National, two days before Vice-President Habibie—as he thenwas—became president, that, ‘You wouldn’t have got very far if you just had the presidentstanding down and the vice-president taking over’? Do we regard that we have not got veryfar?

Mr Warner —We regard that we have a very good working relationship with the newgovernment and the new president.

Senator COOK—But do we regard that we have not got very far in terms of bringing aboutsome stability in Indonesia by the accession to the presidency of the vice-president?

Mr Warner —Could you just repeat those negatives please, Senator?

Senator COOK—Mr Downer said, ‘You wouldn’t have got very far if you just had thepresident standing down and the vice-president taking over.’ He said that on 19 May 1998on Radio National, which is two days before the president stood down and the vice-presidenttook over. All I am asking is: is that still our view?

Senator Hill—But that is not what has occurred. Other things have occurred as well—thereis now a new cabinet; there is a process of political change; all sorts of things. What MrWarner has said, notwithstanding the change that we have witnessed, is that it is still verydifficult to predict the path ahead.

Senator COOK—Yes, but what the foreign minister said was that we will not get very farif the vice-president takes over.

Senator Hill—No, that is not what he said. That was not the quote that you just put. Yousaid if it were just simply a substitution, but that is not what has occurred. There is a newgovernment and they are working out a new path. It will not be an easy path, we all recognisethat. We want to be supportive of the process that is taking place because it is in our intereststo be so supportive.

Senator COOK—So the foreign minister would have been right if he said, ‘You wouldn’thave got very far if you just had the president standing down and the vice-president takingover’, but if the vice-president when he took over put some new people in cabinet and didsome other things, then it would be different?



Senator Hill—No, the foreign minister and the Prime Minister were at the time saying thatbasically the process of change is for Indonesia to determine. Indonesia has determined it andwe want to be supportive.

Senator COOK—I agree with all of that.

Senator Hill—It is in our interests to be supportive.

Senator COOK—I agree with all that, but he went further.

Senator Hill—It is hardly in our interests to try to revisit the past and give it aninterpretation that might achieve some short-term political gain at the expense of ongoing goodrelations.

Senator COOK—Why did the foreign minister say that?

Senator Hill—I think I have made the point that a simple substitution at that time in theview of the foreign minister would not have achieved a process of significant change. But Iam saying that what has occurred is more than that.

Senator COOK—You are also saying no good will be done by Australia commenting onthis; it is for Indonesia to settle its own affairs?

Senator Hill—I am saying that there will not be much good done by commenting on thepast.

Senator COOK—This is 19 May. It is the warm past, the recent past.

Senator Hill—There has been a lot happen in a short period of time. I think that it wouldbe in Australia’s interests to be concentrating on the future.

Senator COOK—What do you think, Minister, that the foreign minister meant when heuttered those words?

Senator Hill—I think I have answered that twice already—that Indonesia needed more thana simple substitution. More than a simple substitution has in fact occurred.

Senator COOK—The MelbourneAgeof 22 May 1998 on page 6 said that Dr Habibie hasa negative attitude towards Australia. Do you share the view of theAge?

Mr Warner —No, I do not.

Senator COOK—What do you think Dr Habibie’s attitude is to Australia?

Mr Warner —As I said before, since Dr Habibie took over the presidency we havedeveloped a very good, close, sensible working relationship with him and with his government.I think he thinks well and positively of Australia.

Senator Hill—Dr Habibie will act in the best interests of Indonesia and it is clearly in thebest interests of Indonesia to have good relations with Australia. We are important for security,stability, trade and economic reasons and for cultural exchanges. As you know, it is now avery integrated relationship and Dr Habibie would appreciate that as well as anybody else.

Senator COOK—I think Dr Habibie does appreciate it. He told me at great length at thebeginning of May how much he appreciated it.

Senator Hill—So what is the point in dragging up the view of some journalist?

Senator COOK—The MelbourneAge is hardly ‘some journalist’; this is a respectablenewspaper. It is a reasonable question to ask, given that those views have been put in thepublic domain, what the official view is.



Senator Hill—Well, ask what the official view is. I cannot see the relevance of the viewof the journalist from the MelbourneAge.

Senator COOK—I have asked what the official view is.Senator Hill—But you tried to colour it. You did colour it.Senator COOK—I invited, Minister—Senator Hill—You tried to build a picture. You tried to create a picture, again I guess for

some short-term political purpose.Senator COOK—That may well be your interpretation, Minister, but I think it could be

only your interpretation, with the greatest respect. What is the official view that Australia has?Senator Hill—It has been given.Senator COOK—That was just by you now?Senator Hill—And the official.Senator COOK—Your summary of a moment ago—Senator Hill—How ridiculous it would be to be sitting here seeking to pass judgment on

President Habibie who has been in the job a couple of weeks. Let us see how the relationshipdevelops under his presidency, but I think you have got good reason to assume that Indonesiashould continue along the path—which I think has been an extraordinary path—of developmentover the last 10 or 15 years.

Senator COOK—I have given my judgment on President Habibie’s view. I just gave it amoment ago. It is on theHansard. I am asking for your judgment because it does go to thecentral core of Australia’s relationship with Indonesia. I think you have given a view. If thatis the view, then that is your view. I am happy to pass on. I do not know why you arelabouring it. You seem to be ultradefensive, Minister.

Senator Hill—No, not at all. I have been sitting here very patiently for three hours.Senator COOK—I thought you had been doing some work on your files. Just returning

to an earlier point, has Australia had an opportunity, apart from presenting its complimentsto President Habibie on his elevation to the presidency, to put a full view to President Habibieabout Australia’s view of the Indonesia-Australia relationship yet?

Mr Warner —Ambassador McCarthy was invited to call on President Habibie soon afterhe became President. He spent I think, from memory, over an hour or an hour and a half withthe president. They had very detailed discussions about the bilateral relationship and abouta whole range of issues that are of interest and importance to both of us. So yes, he did; yes,we have.

Senator COOK—Good. In that discussion on the bilateral relationship and a whole rangeof important issues, did we canvass our position on ASEM again with the president?

Mr Warner —I cannot recollect, but apparently not. Mr Heseltine tells me no. This wouldnot surprise me. As I said before, ASEM Seoul 2000 is a long way away.

Senator COOK—That is true, but when I met the president when he was vice-presidentat the beginning of May I did not intend to the raise the ASEM issue with him. He raised itwith me and proceeded for 20 minutes to discuss his version of the events. It is a long wayaway. It was a matter that was on his mind—uppermost in his mind it would seem from mydirect experience in my discussions with him. We have not put this officially to him, I thinkyou have said. Are any Australian ministers intending to visit Indonesia in the near future?



Mr Heseltine—We did have scheduled the next meeting of the Australian-Indonesianministerial forum for August. Unfortunately, because of some other distractions which I thinkwe can all understand, the Indonesians felt that they were not in a position to have thatmeeting in August. It will be rescheduled to either later this year or perhaps early in the newyear. In the meantime, we do have planned, in order to keep some momentum going in thebilateral relationship, a program of bilateral visits in both directions. At this stage, we are stillworking on that idea and are having discussions with the minister’s officers.

Ms Hewitt—Perhaps I could also add that our secretary to the department, Dr Calvert, hasjust completed a two-day visit to Jakarta. It was a visit aimed in part at consultations internallywithin the mission to take stock of how things are proceeding there, given the tremendousworkload pressures that have been on our staff in Jakarta. In addition, the secretary was ableto complete some quite important calls on the Indonesian authorities.

Senator COOK—That ministerial forum was scheduled for Adelaide I think, not forIndonesia. My question was whether any Australian ministers are going to visit Indonesia. DoI take it that there are no immediate plans for any Australian minister to visit?

Mr Warner —We would hope that Mr Downer will be able to get to Indonesia in the nextfew weeks or the next month. This is really an issue for Defence, but there are annual bilateraldefence talks at ministerial levels scheduled for later this year. We would hope and we areconfident that they can go ahead. Those are the only two that I can think of at the moment.

Senator HOGG—Before we move off Indonesia, we have lost our footprint through RadioAustralia into Indonesia as a result of the closure of the Cox Peninsula. As a result of therecent crisis, what was the effect of the loss of Radio Australia on the expatriates in the localcommunity? Do we have any feedback on that?

Mr Warner —This is really an issue that falls within a different program.Senator HOGG—What program should it be directed to?Ms Hewitt—It comes under our consular services—subprogram 2.2.Mr Warner —In the meantime I will give you one or two points. I do not think it is at all

true to say that we have lost the footprint for Indonesia. I think there has been a reduction inthe strength of the signal to some parts of Indonesia. Perhaps the signal in some parts ofIndonesia cannot any longer be picked up, but it is certainly not true across the 16,000 islands.

Senator HOGG—What about central places such as Jakarta and so on?Mr Warner —I believe it is audible in Jakarta. In respect of the recent consular operation,

my answer would be that it had no effect at all. We had in place in Indonesia a very effectivewarden system, and there were any number of ways to communicate with Australians.

Senator HOGG—I am going to pursue that under subprogram 2.2. I was interested primarilyin the role of Radio Australia, particularly to expatriates and also to the local community. Ithought this may have been the place to get some views.

Senator LIGHTFOOT —I guess my question would go to Mr Warner. Would it be correctto say that Australia’s relationship with Indonesia is not so much an economic one but onethat embraces security?

Mr Warner —I think it is a multifaceted relationship. Before the current crisis, our exportsto Indonesia and imports from Indonesia were doing extremely well.

Senator LIGHTFOOT —What were they in generic figures in terms of a percentage?Mr Warner —Perhaps Ms Fayle can help me.



Ms Fayle—Our exports to Indonesia were worth about $3 billion in Australian dollars.

Senator LIGHTFOOT —About two per cent of our exports?

Ms Fayle—Four per cent.

Senator LIGHTFOOT —They have increased over what period?

Ms Fayle—They have been increasing over the past decade. There have been some ups anddowns but a pretty consistent increase in the level of our exports. Indonesia had been one ofthe markets that we had been increasing our share of over the last decade.

Senator LIGHTFOOT —Of the Asian economies that have suffered over the last 12 months,particularly South Korea, Thailand and Malaysia, where does Indonesia sit in terms of thatfour per cent of exports?

Ms Fayle—Korea is a much larger market for Australia and takes by itself about nine percent as a share of our total exports. I do not know if we have the figures for Malaysia, butit is not as large a market as Indonesia for us.

Mr Heseltine—Indonesia was our ninth largest export market in 1997. Malaysia was justa bit behind that I think.

Ms Fayle—I can tell you that if you wish.

Senator LIGHTFOOT —It would be reasonable to say that Indonesia’s economy is onlya fraction of that of Australia’s, would it not?

Mr Warner —It would be reasonable to say that.

Senator LIGHTFOOT —Would 10 or 12 per cent of the Australian economy be areasonable generic figure?

Ms Fayle—It is probably a little higher than that. The ASEANs altogether are a little largerin economic size than the Australian economy.

Senator LIGHTFOOT —The aggregate of ASEAN?

Ms Fayle—The aggregate of ASEAN.

Senator LIGHTFOOT —Only slightly, I take it.

Ms Fayle—Yes. Indonesia is by far the largest economy as a member of ASEAN.

Senator LIGHTFOOT —So the economy of Indonesia is very important to Australiaobviously. It is a rhetorical question.

Ms Fayle—Yes, obviously.

Senator LIGHTFOOT —What I was getting to was that, with respect to Mr Warner’s phrasethat it was a multifaceted association we have with Indonesia, it is therefore important thatwe maintain diplomatic relations with Indonesia that are at the highest practicable level.

Mr Warner —I certainly accept that.

Senator LIGHTFOOT —More so than perhaps even Malaysia. I do not want to get intoanything of a diplomatic nature there.

Senator Hill—I would not agree with that.

Senator LIGHTFOOT —The minister does not agree with that. I should rephrase that.

Senator Hill—They are both very important to Australia.



Senator LIGHTFOOT —They are both very important to us, yes. What I was getting atis that Dr Habibie followed President Suharto in exactly a constitutional and legal manner tothe presidency. Is that correct?

Mr Warner —Sorry, could you rephrase that?Senator LIGHTFOOT —Dr Habibie followed into the presidency strictly in a constitution-

al—an Indonesian constitutional—manner.Mr Warner —Yes.Senator LIGHTFOOT —There is no criticism from Australia with respect to that, is there?Mr Warner —No, there is not.Senator LIGHTFOOT —In terms of our diplomatic relationship with Indonesia, it was

incumbent upon Australia in a very proper fashion to support that ascendancy of Dr Habibie.Is that correct?

Mr Warner —Yes.Senator LIGHTFOOT —I cover that because there may have been construed from some

previous questioning from the Senate committee that there was some criticism of Australia.I am not aware of any at any particular level.

Senator Hill—We have congratulated President Habibie on becoming president, wished himwell and stressed the importance of the relationship between our two countries and the waywe want to build on what has been a very positive growth path in all facets of our relationship.

Senator LIGHTFOOT —I think that is well said, Minister. I would like to finish on oneaspect of it that is perhaps more parochial, and that is the continuing advent of Indonesianfishing boats, particularly from the southern island of Java, into Australian territorial waters,those waters off the north-west coast, particularly of Western Australia. It would seem thatone of the most deprived areas of Indonesia, particularly with this economic devastation thathas hit the 200 million Indonesians, is that area, which seems to have suffered greatly as aresult. It was never a wealthy area. What is Australia’s position with respect to those fishingboats that come into Australian territorial waters? Has that position softened at leastappreciably since that economic downturn?

Mr Heseltine—I think the detail of that is something that the department of immigrationwould be fully across. We have continued our efforts as a government to talk to the Indonesianauthorities, to work with them in such a way as to encourage them to reduce the incidenceof illegal fishing by Indonesian fishermen. As far as I am aware, there has not been anyincrease. I am not aware of any increased incidence of that since the economic downturn.

Senator LIGHTFOOT —It was not the increase so much but the continuing advent of it.Mr Heseltine—Yes. It would be part of our agenda to continue talking to the Indonesian

authorities, including the local level, to encourage them to discourage that sort of activity.Senator LIGHTFOOT —I have not seen any division of aid to Indonesia that is specifically

directed towards assistance on the southern coast of the island of Java. Has any assistance beenspecifically directed towards that? Because I assume that would have an effect on the reductionof boats that would come into our territorial areas.

Senator Hill—We have a significant aid program to the eastern islands of Indonesia.Particular emphasis has been put on it in the last few years. We will ask the AusAID peopleto give further details, but we do have specific programs of which I am aware in support ofthose fishing villages that you are talking about. On the one hand, we are trying to educate



them as to Australian territorial waters and what that means, but on the other hand we are alsorealistic as to their state of poverty and are looking to support them in the development ofalternative sources of income. How successful we have been we may be able to get somefurther evidence on later in the day. I think it is a very big challenge. I suspect we have onlyjust scratched the surface. We obviously have to do it in cooperation with the Indonesiangovernment, but it has been a priority that the Indonesian government has identified for usin the past. I presume they would wish us to continue that direction of assistance.

Senator LIGHTFOOT —Minister, the reason I bring that up is that I am often in contactwith a high level bureaucrat—at least a bureaucrat that was in a high level in the previousadministration—and he is concerned, as is his former department, that that area may causesome friction. It would be relatively easily fixed if we were to concentrate more on assistanceto the people in those fishing villages. He described them as being ‘the most deprived andpoorest of all Indonesian people as a group’.

Senator Hill—I think we have just put the aid people on notice for later in the day that theywill be required to specifically answer questions about this matter. In fact, if you are not goingto be here later in the day, we may be able to lasso them at the moment.

Senator LIGHTFOOT —I will be here later in the day, Minister, but whatever isconvenient.

Senator Hill—No, then we will stick to the order of the program. We would only changeit if you were not present.

Mr Heseltine—Under the Australian-Indonesian development area initiative, which starteda year or so ago, which covers the eastern Indonesia area—and I presume that covers the partsof Indonesia that you are talking about—we have in mind working with local authorities ineastern Indonesia to jointly promote development.

Certainly some of the area sectors that are being looked at are in the fisheries area, andmining and agriculture as well. Regrettably, the sorts of activities we had hoped to pursueunder AIDAI also, if you like, have fallen as slight victims to the general economic downturnand the distraction of the Indonesian government with other things. But the Australia-Indonesiaministerial forum meeting that we mentioned earlier, which is scheduled for August inAdelaide, was also going to have the ministerial council of AIDAI look at ways in which wemight move that forward. So that too has been postponed to a later date.

But certainly AIDAI is an area where a very big range of Australian government departmentsare working to develop initiatives. A lot of them would be commercial; others would comeinto the aid area.

Senator LIGHTFOOT —It was made known to me, at least in the top end of Jakarta, thatAustralia is considered to have considerable expertise with respect to aquiculture, as opposedto agriculture, and that aquiculture was one area that Australia could foster with its aid on thatsouth coast of Java.

I personally hold a great interest in that particular area not just because of its economics—that particular area being shared in some parts with Australia in the Timor Gap, for instance—but particularly with respect to those fishing boats coming to Australia in what were traditionalwaters for Indonesia, and it forms some problem for us. Rectification in those areas couldcause potential conflict with our closest or at least our most populous neighbour. Of course,New Guinea is our closest neighbour, and Indonesia is not terribly far away from that country.

Senator Hill—We will get some more information later in the day.



Ms Fayle—I might just add the data that you were after before. Our exports to Indonesiain calendar year 1997 were worth $3.4 billion; that is four per cent of our total exports, as wesaid. Malaysia was $2.4 billion, which was 2.8 per cent of our total exports.

Senator LIGHTFOOT —Those figures need to be drastically reviewed, don’t they.Ms Fayle—Things will change, yes.Senator LIGHTFOOT —They have not been marginally reduced; they have been drastically

reduced. They really mean nothing in terms of our current exports to and imports fromIndonesia. Would that be correct?

Ms Fayle—They do not mean ‘nothing’ but certainly they will need revisions not onlybecause our exports have been falling to those markets—

Senator LIGHTFOOT —I did not mean to say that they were nothing; I just meant to saythat those figures are so inaccurate—

Ms Fayle—They would be inaccurate now, yes.Senator LIGHTFOOT —when compared with contemporaneous figures that they should

not be regarded as contemporaneous.Ms Fayle—That is correct.Senator Hill—If you were an exporter of live cattle, you would understand, wouldn’t you.Senator LIGHTFOOT —I am. I must declare a position to the minister.CHAIR —Ms Fayle, is it correct that Indonesia in recent times has been the single largest

destination for Australian wheat?Ms Fayle—No, I do not believe so. It has been our largest destination for cotton but not

for wheat. I believe that in recent times we export quite a lot of wheat to Pakistan, forexample, and middle eastern destinations.

CHAIR —I thought it shared the priority with Iran. Would you find that out, please?Ms Fayle—Yes.CHAIR —I would also like to know whether it is possible to compare the period of, let us

say, the first five months of this year with the first five months of last year.Ms Fayle—We only have data up until the end of April, but I can certainly get that for you.

Specifically, you want a comparison of our wheat exports?CHAIR —I would, because I believe that it is our single biggest market—not only our

biggest market in South-East Asia or Asia for wheat, but our biggest market anywhere. Also,it is a new market, developed over the last six or so years.

Ms Fayle—Yes.Senator COOK—The anti-Hanson unit: I am not sure what its right name is, but you did

establish one. Does it still exist?Ms Hewitt—You might be referring to the Images of Australia Unit. It still exists, and it

is in Mr Warner’s division.Senator COOK—Pauline Hanson and the One Nation Party have attracted a fair bit of

publicity in Australia recently. What has the representation of that publicity been like in ourregion? This Australian images abroad, the anti-Hanson unit, obviously monitors this.

Mr Warner —We can talk about general perceptions of Australia abroad in respect of theracism debate. In the last few months what we have found is that there has been a more



balanced reporting of that in the region; secondly, greater understanding of the reality and thecomplexities of Australian society; thirdly, that those societies have been suffering throughthis economic crisis, and that has led to some distraction, if you like; and, fourthly, that theeconomic crisis and Australia’s response to it—including through these IMF packages—haveled to a greater understanding of Australia’s position and role and, indeed, that we are lookedon more favourably in the region because of the way we have responded.

Senator COOK—When you say that there has been a more balanced presentation, do youmean balanced in the sense that she is seen in a political context in Australia?

Mr Warner —I do not think it would be appropriate for me to talk about one particularmember of parliament. I would much prefer to talk about the general debate on racism inAustralia, if we could.

Senator COOK—Everyone else talks about her, and we have talked about her here before.Senator Hill—That is part of the problem.Senator COOK—She did not go away, Minister.Senator Hill—That is because people keep pumping her up.Senator COOK—Come on; I know that you have a vested political interest in putting that

point of view.Senator LIGHTFOOT —I think that is out of order, Mr Chairman. I think that should be

withdrawn.Senator COOK—I thought the Prime Minister had the view that he ought to ignore Hanson

and she would go away. I have not noticed that she has gone away.Senator LIGHTFOOT —I do not think the minister has a vested interest in maintaining

that view.Senator COOK—I think the minister has a vested interest in maintaining the viewpoint that,

if you ignore her, she will go away. I think that is what he has just said.CHAIR —I think it is probably best not to have a debate about Pauline Hanson. You ask

your questions, Senator Cook.Senator COOK—I think it is hard to have a discussion about Australia’s image abroad—Senator Hill—We do not want a discussion; we want questions.Senator COOK—Yes, my questions are to the point about Pauline Hanson. She burst onto

the scene in Australia, then died a political death, and now she is back with bells on.Senator Hill—You are just editorialising now. With respect, give us a try with some

questions.Senator COOK—I did.Senator Hill—I will have another go at it and see if we can—Senator COOK—I am not going to ignore Pauline Hanson or what she stands for, Senator.

You might wish to. I will not, and I will deal with her.Senator Hill—What is the question?Senator LIGHTFOOT —I certainly would like to ignore her.Senator COOK—That is your call; you do it. If we get a chance to be on the hustings

together in Western Australia soon, you will find me not doing it.Senator Hill—It is before next May. Sorry, what was the question?



Senator COOK—I will give the question some more point: has the resurgence of publicityin Australia about the likelihood of the One Nation Party winning seats in Queensland, orobtaining sufficient base vote in Queensland to win Senate seats—that reporting which sodominates our press at the present time—been reflected to any extent in the area under scrutinyby the Australian images abroad anti-Hanson unit?

Mr Warner —The Asian press in the last few weeks has begun again a little to focus onthose issues and to report them perhaps more than they had in the previous three, four, five,six months or so. But we believe that reporting is done generally—not always, but generally—in a more balanced way than perhaps was the case many months ago.

Senator Hill—Do you think that the increase in reporting in Asia of recent times is justsimply a reflection of the increased effort in reporting in Australia, or don’t you know?

Mr Warner —Yes, it is. Generally, the Asian press—and I will be corrected if I have itwrong—is picking up Australian wire service reporting. So, if the wire service reporting isincreased here, it will increase there.

Senator COOK—The renewed electoral support of the One Nation Party and the emergenceof its leader, Pauline Hanson: is that the nature of the reporting about that phenomenon?

Mr Warner —It is more general. It is about what Australia is, what it represents as a countryand a society, and it is about racism broadly.

Senator COOK—So you are saying that the particular point about the possibility of theOne Nation Party winning a seat or two in the Queensland state election, or the apparentgrassroots support as reported by any of the opinion polls that get published in Australiannewspapers about the level of electoral support and the possibility of winning Senate seats,has not been reported in Asia?

Mr Warner —No, I think those elements are being reported but I think within a broadercontext.

Senator COOK—The role of this unit is to counter adverse images of Australia abroad,I understand?

Ms Hewitt—It is to project positive images of Australia abroad, I think.Senator COOK—That is a better way of putting it.Mr Warner —I would actually say both.Senator COOK—Project positive and counter negative. Has the incidence of this amount

of reporting led you to take any action to counter the negative or project the positive?Mr Warner —Yes, it has, of course. But this unit, run by Mr DeCure, has been in place

now for about a year. So it is not that we started it up and killed it off and have started it upagain; it has been in operation the whole time and remains so now.

Senator COOK—My question was: what have we done to present a more balanced viewor accentuate the positive and negate the negative?

Mr Warner —We have continued to do what we have done for the past year. That includessuch things as bringing to Australia editors and journalists from a whole range of regionalnewspapers, TV crews and others, and on occasion responding to articles that have been runin regional newspapers.

Senator Hill—Do you take credit for the more balanced reporting that is now occurring inAsia?



Mr Warner —Absolutely. It is part of my performance agreement, thank you, Minister.

Senator COOK—How many editors or television crews come out to Australia under thisprogram?

Mr DeCure—In the last 12 months we have had—and I will work through it—seven editorsfrom Hong Kong, eight from Malaysia, three from Singapore, four from Thailand, five fromthe Philippines just recently, and there is a group coming from Korea later this month. Wehave also had TV crews from the Philippines and Singapore, and we have one coming fromThailand earlier next month.

Senator COOK—We have some coming in the next month. Over what period of time haveall these visitors come here? When did you start bringing them out?

Mr DeCure—The first group came in October of last year.

Senator COOK—How do you characterise their reporting out of Australia? I imagine theycome in order for you to encourage them to see a more balanced view, whatever that is.

Mr DeCure—Essentially, the objective of the program is to expose Australia to these peoplewho often do not have a comprehensive understanding. We start from the premise that weessentially have a very good story to tell and that, in bringing them here and exposing themto a broad range of Australians, they will go home with a much better perception of Australiaand that will be reflected not necessarily in stories they write immediately but in the tone ofreporting in the long to medium term.

Generally speaking, their comments at the end of the visits have been very positive. Mosthave said that it has certainly enhanced their understanding of Australia in a number of areas,including our technological capability, the multiculturalism of our society and so forth. I thinkwe have seen some very positive stories on Australia across all of those areas—on theAustralian economy, on our technological capability, on multiculturalism, on their own ethniccommunities in Australia and so forth.

CHAIR —Excuse me, Senator Cook. It being half past 12, the committee will now adjournfor lunch.

Proceedings suspended from 12.31 p.m. to 1.35 p.m.

CHAIR —I reconvene this meeting of the Senate Foreign Affairs, Defence and TradeLegislation Committee and we are in continuation on program 1.2. Senator Cook had the call.

Senator COOK—Thank you. I was just asking a few questions about the Images ofAustralia Unit, what I colloquially call the anti-Hanson unit. What is the budget for this unit?

Mr Warner —The unit has been going for 12 months. Therefore, its budget is about to runout. It started with a budget of about $500,000. That is pretty well spent.

Senator COOK—Is this half a million dollar budget going to be renewed in theseappropriations?

Mr Warner —We have looked at the possibility of renewing it for, say, the first six monthsand therefore maybe a quarter of a million dollars. As that six months unfolded, we wouldreview it again.

Ms Hewitt—This would be a matter for allocation within the department’s running costs.We have got meetings scheduled within the department for the first few days of July. Thatis when we will make our final allocations within programs.



Senator COOK—So you do not know yet but you will know later in July what you actuallyallocate, but it is likely to be in the ballpark of a quarter of a million dollars to cover therunning costs for the next six months.

Ms Hewitt—It sounds as though that is the division’s proposal to the department’s seniorexecutive.

Mr Warner —Yes.

Senator COOK—It is yet to hurdle the obstacles at that level, but it is not a bad workinghypothesis. As I recall, when this unit was originally set up, it drew on the activities of theparticular units and divisions elsewhere in the department as well. The total cost of runningthe Images of Australia Unit was not the amount of money assigned to it. To look at its realcosts, you would have to look more widely. Have you any idea what the wider cost demandsmight be in the department?

Mr Warner —No, I do not. The half a million dollars essentially covers the programactivities of the unit.

Senator COOK—I see.

Mr Warner —As you say, the unit has drawn on the expertise of elsewhere in thedepartment and indeed in other agencies and departments outside DFAT. That includes theNorth Asia Division, the Parliamentary and Media Branch, the OPB, which used to be theCultural Activities Branch, et cetera.

Senator COOK—And our embassies in places like—

Mr Warner —And posts of course.

Senator COOK—And posts. I do recall that, when concerns about a xenophobic Australiawere at their height in the early days of Hansonism, the issue was very widely canvassed inthe media in Hong Kong and in the former, if I can put it in these terms, British Common-wealth countries, Malaysia and Singapore particularly, where they had a closer association toAustralia. But it was not only there; it was in Thailand, Indonesia and other major centres.Do those posts report to this unit regularly?

Mr Warner —Yes, they do.

Senator COOK—They report as monitors of the local media, do they?

Mr Warner —Yes, they would say that in the last reporting period, whether it was a weekor longer, there were X numbers of stories covering these general issues.


Mr Warner —And occasionally they would provide analysis, if there had been a changein the trend, of why that change had occurred.

Senator COOK—Would they report only on the media, or would they report as well onthe attitudes or feedback they got from local business people, political figures or other peoplethey would come up against in the community who may raise these matters? Was that partof their brief, too?

Mr Warner —That sort of reporting is bread and butter reporting for a post anyway. Theywould be reporting on that sort of thing, so the unit is not specifically tasking on that but wedo get that sort of reporting and analysis.



Senator COOK—So the half a million dollars for the year gone—and the prospective, withall the hedged comments about it, quarter of a million dollars for the coming six months—wasfor programs of bringing people to Australia?

Mr Warner —Not just for bringing people to Australia. I think Chris described before lunchmore fully the activities of the unit. Some of the publications or articles that we do back intothe region are captured by that half a million dollars as well. But, Chris, do you want to givea more detailed run-down.

Mr DeCure—There is a range of programs. Clearly, the most expensive, if you like, arethe visitors programs, but we would prepare talking points for posts on how to respond onparticular issues. We provide material on developments in Australia which may be useful forplacement in regional newspapers—sometimes through posts; sometimes we attempt to placethose directly through news wires. We simply spend a fair bit of time on monitoring and, insome cases, subcontracting material. But they are the major activities.

Senator COOK—The minister earlier—and I do not blanch that this is a fair description—talked about why we don’t talk about it in the Hanson context but in the anti-racism context.Is it the anti-racism dimensions of this phenomenon that you concentrate on? I ask thatquestion out of my paranoia on the trade front, but she has raised many protectionist argumentsas well. I really want to know to what extent any of that is fed back into the network that youhave.

Mr Warner —I am sorry, Senator, can you just run that one past me again?Senator COOK—I suppose the phenomenon that attracted most attention was the racist

element of and worries about Australia becoming a xenophobic, racist country from the veryearly reporting. But the Hanson phenomenon is wider than that. It has a dimension to it aboutindustry protection, the raising of a tariff wall around Australia, those issues. I am asking: doesour Images of Australia Unit concentrate on Australia as a tolerant, multicultural country andpromote that image, or is there a commercial trade dimension to this? Do you get feedbackon whether we are going more protectionist, whether we should do something about openingup our economy or how do we use our leverage in APEC, for example?

Ms Hewitt—We do have work in the Market Development Division under way focusedspecifically on communicating the benefits of trade liberalisation. There is work that has beendesigned for the domestic audience. You might have seen a publication the department putout last year. It had a bright orange cover and a little flyer that went with it. We would behappy to send them to you, if you have not seen them.

Senator COOK—I have it. I actually quote from it from time to time.Ms Hewitt—We have also sponsored work of a similar kind but focused on the regional

economies. One such project is under way but going into its second phase in the APECcontext. We have also been very active in sponsoring similar work in the OECD, which isaround now in draft form. I am not sure whether anyone is here from the relevant area, butI think it might have been approved by the OECD ministers when they met a few weeks ago.So it is an act of part of our trade diplomacy, but it is handled in a different part of thedepartment.

Senator COOK—How much of the budget for the unit is spent on bringing visitors toAustralia, in percentage terms?

Mr DeCure—I do not have the figures.Senator COOK—I do not need the precise figures.



Mr DeCure—The ballpark figure would probably be about three-quarters, perhaps a bitmore.

Senator COOK—What does the remaining 20 or 25 per cent go on?Mr DeCure—It can be a range of things from commissioning stories for publication to

paying to actually have stories placed through news wire services and other related activities.[1.46 p.m.]

Subprogram 1.4—Interests in South Pacific, Africa and Middle East

Senator COOK—I should know the answer to this question, but where is New Zealandranked as a trading partner to Australia? It is in the top five, I think.

Mr Wise—It is No. 4.Senator COOK—The outlook for the New Zealand economy has come under notice lately.

What is the department’s view of the outlook for the New Zealand economy?Mr Wise—The department monitors the situation in New Zealand’s economy very closely,

given that New Zealand is our fourth largest trading partner, and I think this year we wereexpecting that bilateral trade with New Zealand would, for the first time, exceed $10 billion.Our assessment is reflected, I think, also in the overall public assessments of the New Zealandeconomy. As the New Zealand government have recognised, they have concerns about theircurrent account deficit and they are feeling the effects of the Asian crisis.

Senator COOK—I will not ask you to comment further. There is a view being put aroundthat New Zealand is the next economy to go under. That is speculative, and I do not knowthat you would want to answer that. When is the Israeli Prime Minister, Mr Netanyahu, comingto Australia? What is the arrangement for his visit?

Mr Thwaites—Dates are still under discussion. August has been spoken of and the middleof August is the sort of date that is being sorted out between Israeli representatives here andthe Prime Minister’s department. I can give you nothing more exact than that.

Senator COOK—When might this be sorted out?Mr Thwaites—I do not know.Senator COOK—As far as the Middle East process is concerned, what is your assessment

of the current impasse? Is that likely to be resolved or not?Mr Thwaites—We certainly would hope that the very persistent efforts that have been made

by parties, including in particular the United States, to revitalise that process will bear fruit.They have not done so far. Like most other parties who are not direct parties to thediscussions, we regret that very much, and we do repeatedly urge the two principal parties toget back to the table and try to continue the process through direct discussions. We do notthink there is any immediate cause for optimism on that. We hope that circumstances willdevelop which will allow those talks to resume.

Senator COOK—I think the US plan calls for an Israeli withdrawal from 13 per cent ofthe West Bank as the next step in the peace process. Where does Australia stand in respectof that proposal? Do we support it or not?

Mr Thwaites—We generally do not try to take a position on the specifics of the negotiation.We do not think that is in any sense helpful. We would consider that whatever figure the twoparties can themselves agree on is the right figure. Clearly, there was some hope that theymight agree on that particular figure you mentioned. It was not borne out. Maybe it will come



back on to the table as the next step. We do not attempt to prescribe for the parties principalto the dispute what elements of a solution they should pick up.

Senator COOK—Fair enough. Without going to what percentage of the West Bank, doesthe problem about progressing the peace process boil down to resolving the question of whatdegree of Israeli settlement will continue on the West Bank?

Mr Thwaites—That is one amongst many issues that are embroiled in the dispute. Clearly,it is a very high profile one at the moment. We do not regard continuation of settlementactivity in these circumstances as other than harmful to the peace process, but there are alsoobligations on the other side of the picture in relation to provision of security guarantees andother matters where there is definitely room for more to be done and more good faith to beshown. We hope that both sides will get back to showing that good faith.

Senator COOK—Turning to Iran for a moment, it is my understanding that BHP is theleading tenderer for the construction of an oil/gas pipeline in Iran, but what is holding up thisprocess is the possibility of US sanctions against foreign countries building such projects in,among other countries, Iran. Are you aware of this?

Mr Thwaites—Yes.

Senator COOK—How do you define the circumstances? What is the issue here? I put itin words of my understanding. I want to ask the department how they see it. What is the issue?

Senator Hill—You have introduced the subject of a commercial interest of a particularAustralian company in this discussion. Presumably, unless you are wanting to be mischievous,you are doing this with their agreement, but the officers will have to consider what theirrelationship is with this particular company, if any assistance is being sought from theAustralian government in relation to a commercial endeavour.

Senator COOK—I am not being mischievous. I just want to define the degree of difficultyhere. Perhaps I can rephrase the question.

Senator Hill—It might have been better to simply ask if the threat of US sanctions isimpeding commercial development.

Senator COOK—I am happy to take that question and pose it to the officer.

Mr Thwaites—We certainly have some concerns about the potential impact of USlegislation which has extraterritorial application, in particular, in relation to Iran—the Iran andLibya Sanctions Act. There have been some developments on that recently where theadministration was able to grant a waiver to countries of other nationalities in relation to anarguably comparable sort of investment, although how the criteria are applied is one of thebig issues that has not been tested very often.

I think my colleague who speaks for the Americas and Europe Division may want tocomment on this further. Certainly, we have never accepted that that extraterritorial applicationshould have an impact on investments by Australian companies in third countries. But, as amatter of practicality, in our discussions with the companies we tried to ensure that the issueis managed so that the long-term interests involved are not affected and that potentially moredamaging actions are not provoked.

Senator COOK—You referred to some further discussions about the Helms-Burton Act.This may be appropriate under the Americas and Europe Division perhaps. My understandingis that, in trans-Atlantic talks between Europe, the European Union and the United States,Prime Minister Blair is credited with brokering with President Clinton an escape clause for



Europe under that act. Do you know if any such initiative has been made in the case ofAustralia to the US with respect to Iran or any other country?

Mr Thwaites—I am not aware of any such initiative. But, again, as you commented, it maybe a matter on which other officials may want to comment.

Ms Hewitt—Our colleagues from the Americas and Europe Division have now arrived andjoined us. I do not know whether either of them might be in a position to comment on yourquestion.

Mr Brown —Yes, you are right. During the recent EU/United States summit, there was anagreement between the two sides, which is a very complex one, to provide for waivers forEuropean Union companies in certain circumstances from the provisions of ILSA, the IranLibya Sanctions Act, and also ongoing waivers from the Helms-Burton Act in relation to Cuba.The question now is: to what extent will Australian companies, particularly in relation to Iran,be able to secure the same sort of waivers that are being provided to the three companies thatMr Thwaites has already mentioned—a Malaysian company, a French company and Russiancompany—in relation to the South Pars project?

We, of course, have registered our expectation to the United States administration that wewould receive the same sort of waiver, but the administration has indicated that they will allbe considered on a case by case basis and that there is a range of criteria in terms of thecooperation between the two countries on non-proliferation issues and so on, which will beused in reaching a decision on whether such a project will be granted a waiver. We have beenvery consistent all along in expressing our opposition to the principle of extraterritoriallegislation. So there is no daylight between our own position and that of the European Union.I think we are in a pretty good position to argue our case in the way the European Union has.My colleague might want to add to that.

Ms Marginson—No. I would not actually add to my colleague’s comment beyond sayingthat the national interest provisions that the US has applied in the case of the EU clearly haverelevance to the Australian case; that is, assistance with non-proliferation, WMD and counterterrorism in relation to Iran. Our case for arguing a claim on behalf of any Australian companythat may have an interest would obviously be well founded in those areas.

Senator COOK—Will the United States be applying the same criteria to us as it does toEurope if it is applying it on a case by case basis? In other words, it is not likely, for example,that France or Russia or Malaysia can apply for this contract but we cannot? They are the threecountries bidding for it.

Ms Marginson—If we were to seek a waiver on behalf of a particular company with aparticular interest, we would argue that it should be treated on exactly the same basis as thewaiver granted to those other three companies. We do not have any guarantee, reading throughthe US announcement and in subsequent discussion, that that decision is going to be appliedequally in every case at every time. The Americans have made it clear that they will look ateach case on its merits. They clearly wish to retain that override on this decision.

Mr Brown —If I can just add to that. Part of the reason we have not received an explicitguarantee is uncertainty as to how the Congress will react. So the US administration naturallyis not in a position to pre-empt how certain unpredictable elements in the Congress mightrespond to a specific project.

Senator COOK—What I am trying to get at is painfully obvious, but maybe I am not doingit very elegantly. My understanding on the arrangements reached between the European Union



and the United States—please correct this if it is wrong—is that France is able to bid for thisparticular project. If we are being reviewed on a case by case basis as we apply to the UnitedStates for a waiver, it is not at all clear whether an Australian company could bid for thisproject. Is there a likelihood of the Europeans, by virtue of their government to governmentagreement, being able to proceed whilst we are not able to proceed?

Ms Marginson—I think you are positing, in a sense, a hypothetical situation, Senator, ifI may say. It would always be open to any Australian company, should they choose to bidon that project, to be associated, for example, with a European partner. That association wouldobviously be beneficial in the circumstances, although on an individual basis, as I mentionedbefore, looking at the grounds on which the waiver was accorded those three companies, wehave—and any Australian company has—a good case. But it has not been tested in relationto any particular Australian company at this stage.

Senator COOK—I appreciate that you could sign up with a European co-partner and thenget around the obstacle, but if it is in the commercial interests of an Australian company—theywant to put their steel into this pipeline, for example, and not European steel—how do theythen stand? It seems to me that, I have to say, the way these answers are flowing, and I amnot reflecting on them, just observing them, the Europeans are past the obstacle but we arenot and it is unclear where we stand if we go up to a formal request on this.

Ms Marginson—No Australian company has asked us to seek a waiver on their behalf atthis stage, Senator.

Senator COOK—Okay. Has the Australian government then made any overtures to theUnited States at an official level, at a ministerial level or at a prime ministerial level, like theBrits did as chair of the European Union to President Clinton, for the European principles thathave been agreed, if I may call them that, with the United States in relation to the Helms-Burton Act to be extended to Australia?

Ms Marginson—Official level representations have been made. References have been madein ministerial discussions to our concerns about the whole issue of extraterritoriality and theapplication of waivers. This has not been raised at prime ministerial level.

Senator COOK—No.

Mr Thwaites—If I can add that the point is that there are no projects involving Australiancompanies which are at that threshold which requires the specific request to be made.

Senator COOK—I appreciate that, but I also appreciate this: if you are an Australiancompany, whether you go up to the government to seek a waiver in part may be a decisionon the commerciality of the project, whether it is worthwhile you entering into a commercialrisk and bidding for it. If you have a chance of winning, then you might go and get a waiver,but it may also be in part a judgment call as to whether Australia would succeed in thesecircumstances.

My question is about what trail-blazing the Australian government is doing given that theprinciple has been established with the Europeans for us to enjoy the same treatment from theUnited States. You remove an uncertainty if they know they are going to be treated the sameway as France, for example. That is my point. My understanding is that official overtures havebeen made. It has figured in ministerial briefings, but it has not gone further than that.

Ms Marginson—Not at this point.

Senator COOK—Have we asked for the European principles to be extended to us?



Ms Marginson—We have, in our discussions with US officials on the decisions that weretaken, made the point that, on the basis that the decision was made, Australia would clearlyfit the same sort of category. We have made that quite emphatically clear at the officials level.

Senator COOK—Is there any indication when this matter might be resolved then?

Ms Marginson—It will have to go before the Congress, Senator. It is not clear at this pointjust how long that will take. There is a bit of a groundswell in Congress which could impedethe agreements.

Senator COOK—But the European principles have cleared the congressional obstacle.

Ms Marginson—No. Congress has to sign on to the agreements that have been made bythe administration.


Senator Hill—Would you expect Congress to deal with it on a case by case basis?

Ms Marginson—Yes.

Senator COOK—It seems blindingly clear that, if the Europeans get it, we are entitled toexpect the same treatment, but I cannot read the mind of the US Congress.

Mr Brown —Also a number of elements of US industry are starting to oppose the deal withthe European Union because they see it as in fact discriminating in favour of foreigncompanies. So that is another uncertainty.

Senator Hill—What was that? Say it again slowly for me.

Mr Brown —The whole uncertainty about whether the South Pars waiver will be approvedby Congress is more complicated by the fact that a number of American companies which areprevented from investing in Iran see this waiver as discriminating in favour of foreigncompanies. So they are obviously feeding those views to their congressional representatives.

Ms Marginson—Because American companies remain bound by the provisions of ILSA.

Senator Hill—I am sorry. I missed one point. Did you say that the agreement the Europeansreached is an agreement relating to specific companies?

Ms Marginson—Yes.

Senator Hill—So they have negotiated a deal on behalf of specific companies?

Ms Marginson—A specific project.

Senator Hill—So when you talk about an agreement with the Europeans, is that the rightway to express it? Is it an agreement between states?

Ms Marginson—It is an agreement with the Europeans over this particular project whichhas established a set of criteria from which one could extrapolate that they would be appliedin similar cases. It is, as my colleague said, a somewhat complicated set of agreements.

Senator Hill—So, from an Australian perspective, although the way it has been put is thatwe are a step behind, nevertheless, if Congress agrees with the European deal, you could alsointerpret it positively and say that it is a leg in the door for foreign companies in thedifficulties with the American legislation.

Ms Marginson—We have taken the view that the administration’s decision is in fact asomewhat encouraging sign of flexibility in this area, but the congressional step remains tobe taken.



Senator COOK—I do not disagree with your interpretation of it. You could put it the otherway too. The Europeans have opened the door. It is really for us to open the door further inour favour, but, if in a particular project the Europeans are allowed through the door but weare not for the same project, then there is positive discrimination against Australia. All I amestablishing is that that is the case at the moment. There is still more work to be done on this.

How is the American government approaching Congress? With treaties on trade theyapproach it as a yes/no thing in that you vote for the lot and you accept the good with the bad.How are they dealing with this? Is it a one-off in this particular project? How does it comebefore the Congress?

Mr Brown —I am not 100 per cent sure. There are provisions in the Helms-Burton and theIran Libya Sanctions Act legislation that enable the administration, through the President, toprovide for waivers. The dispute to date has been the limits to congressional patience withwaivers by the President. My understanding would be that the President would do a deal withcongressional leaders on the various elements of the package which would enable these waiversto continue. That is my understanding, but I am not 100 per cent sure.

Ms Marginson—In the case of Helms-Burton, there is a specific amendment required tothe legislation. That gives Congress a stronger voice in possibly rejecting the proposal. In thecase of Iran and Libya Sanctions Act, the emphasis in the Congress at the moment is onworking to close the door against such a waiver actually being exercised again. So there aretwo different approaches working here, Senator.

Senator COOK—I see. Okay. I have no further questions to the South Pacific, Africa andMiddle East Division, but I am happy to go back to the Americas and Europe Division.

CHAIR —Senator Quirke has some questions.Senator QUIRKE—I will not take up much time of the committee. I have had a company

contact me about the Sudan. They have been offered some contracts in the Sudan. I was assurprised as the Minister was a moment ago about that. Does anybody know what the currentsituation is with the United States embargo in respect of trade with the Sudan? Does anybodyhave any information on that? If you have not, I am happy to take it on notice.

Mr Thwaites—I think we will have to take that one on notice, I am afraid, Senator.Senator QUIRKE—I would like to put a couple of other aspects to you as well then. I

would like to know how comprehensive this embargo is.Senator Hill—What embargo?Senator QUIRKE—I have been told that there is an embargo on it. If that proves not to

be so, I would be quite happy to find out about it and so will the company that contacted me.Mr Thwaites—Sudan is one of the countries which fits into a certain category in the eyes

of the US which would not support that, but I actually do not know if there is one or not.Senator Hill—What, in relation to defence related equipment or everything?Mr Thwaites—Support for terrorism and issues of that kind.Senator Hill—I will get some information. I am doing business with Sudan. It is very

promising to see Australian companies are that ambitious.Senator COOK—A South Australian company I expect.Senator QUIRKE—In fact, it is a Victorian one with a branch in South Australia that has

been offered a piece of the management contract there of some services in the Sudan. It hasnothing to do with any military or those sorts of purposes. In fact, it is to do with the water



supply system as I understand. The allegations they have made to me is that there are someCanadian companies that are working in the Sudan and that in fact the United States has placeda lot of pressure on them, through all sorts of means, to terminate those contracts. So I wouldbe quite happy, Minister, if somebody comes back on notice and lets me know the currentsituation there so I can advise the company accordingly.

Senator Hill—I do not know whether the whole of the committee wants the informationor whether we can just organise a briefing.

Senator QUIRKE—I am quite happy for myself.Senator Hill—Are you happy with that, Mr Chair?CHAIR —Yes, I am, Minister.Senator COOK—I do know that, if it will not insure you against business risk in the Sudan,

they regard it as off the scale.CHAIR —I take it that we have now finished subprogram 1.4.

[2.13 p.m.]Subprogram 1.3—Interests in America and Europe

CHAIR —Senator Cook, I understand you have some questions on subprogram 1.3.Senator COOK—I have, and on one of those elements we have just covered. Firstly, where

does the fast track approval rank now in the legislative agenda for Congress?Mr Brown —Unfortunately, fast track has not moved much further since our last—Senator Hill—Slowly.Mr Brown —It is the fast track on the slow track. The situation is that the administration

continues to talk encouragingly about pressing forward with fast track but there has been littleaction this year. This being a mid-term congressional election year, I think the expectationis that they probably will not put it up this year. Possibly next year is the most encouragingprediction I have heard.

Senator COOK—Next year we will start hearing all the positioning of presidentialcandidates and it will then get caught up in that campaign.

Mr Brown —Yes, that is true. There has been very little discussion of fast track. It seemsthat the forces that led to its withdrawal in late 1997 really have not changed. The key amongthose being the positioning by Vice-President Gore and Congressman Gephardt which wasa critical factor in determining its prospects in 1997—none of that has changed. A lot of thestatements that President Clinton made at the recent WTO ministerial conference were veryencouraging, but he has stopped short of saying he would put up a new fast track bill. So, tothat extent, I think it is not all that encouraging.

Senator COOK—So it is on the backburner until next year and then we will have to takeour chances, but no-one is particularly optimistic. I understand that the Minister for Traderecently registered his concerns with the US Agriculture Secretary, Dan Glickman, and specialTrade Representative, Charlene Barshefsky, about export subsidies recently announced by theUS under its EEP and DEIP programs. What was the US reaction and what are we proposingto do further about that?

Mr Brown —I might just say something briefly as an introduction. We were verydisappointed—and this was the gist of Mr Fischer’s representations to Mr Glickman and MsBarshefsky—when in May the United States announced they had reactivated EEP. As you



might know, EEP has been dormant for some time primarily because of the healthy state ofthe world’s grains markets. As those markets have started to taper off, there has been a build-up of pressure. The ostensible reason given by the US for reactivating EEP was a subsidisedEU barley sale at around the same time.

DEIP, the equivalent in the dairy sector, has had a slightly more chequered history. It hasbeen used for the last couple of years more or less consistently, including in our region, butat much lower volumes. Our concern, which Mr Fischer put to Mr Glickman and MsBarshefsky was that this was a very concerning development which was opposed by the CairnsGroup. We saw it as a retrograde step in terms of the progress that has been made over thelast few years and as not setting a good signal for the future WTO agriculture negotiations.The US is in no doubt about our views. The question is to what extent will they resist industrypressure to make further subsidised sales or whether they will sit back and allow the marketto settle for the moment. I might ask my colleague to add anything further to that.

Ms Marginson—Returning to the representations that Mr Fischer made while in Geneva,the response that we received was that any additional action that the US might take onsubsidies would be measured, and targeted only at subsidising countries. In the case of theuse of EEP recently, on 27 May, that was in direct response to the EU barley shipment to theUnited States which caused a great deal of concern to the US agricultural sector. So, in thatvery narrow instance, one could argue that the US has met its undertaking not to targetinnocent parties.

However, it is a matter of very considerable concern, as my colleague said, that EEP andDEIP are now back out there. We are using every occasion to continue to remind the UnitedStates of the undertaking that President Clinton made some time ago that innocent parties, likeAustralia, would not be disadvantaged as the US uses EEP and DEIP. To the extent that itis useful to our purposes, there is a very strong climate of awareness in Washington that ourinterests are going to be brought very forcefully into the US consideration every time EEPand DEIP are in prospect. The Americans do tend to let us know in advance, albeit sometimesjust in advance, that they are proposing to use EEP or DEIP in a particular market.

Senator COOK—The EU subsidised barley export, did that compete with any of our barleyexports?

Ms Marginson—It was a direct shipment to the United States in that particular case. I amnot aware that it was a competitive problem for us. It was more a matter of principle in thatsubsidies are objectionable.

Senator COOK—I know our record on this in government and I know that it is a continuingproblem for Australia, so let us hope we can get to a situation where we are not collateralvictims of some US expression of subsidies. This may not be an appropriate question underthis section but maybe you do know the answer, so I will ask it: is this question of EEP andDEIP a matter for us in the WTO year of agricultural trade liberalisation next year; 1999, isthis one of the issues on which we are going to be pressing?

Mr Hussin—Yes, it is very much at the centre of what we are seeking. The Cairns Group,at its meeting in Sydney in April, targeted the elimination of export subsidies. On the US side,obviously the EEP, DEIP and programs like that are very much in our sights just as thecontinued use by the EU of its restitution system is in our sights. We are encouraged by theposition the United States is taking to support the elimination of export subsidies, the fact thatit is prepared to put its programs on the table. But, as my colleagues have said, we are a bitconcerned about this renewal of the use of EEP and DEIP, particularly at a time when prices



for grains, for example, are softening. You might see a situation of tit for tat where barley fordairy or other products emerges that will make the negotiating climate a bit more difficult nextyear. But certainly that is a high priority for us. It is something we will be pushing, and itappears we will have the United States with us in that endeavour.

Senator COOK—Is there any basis for Australia to take action or to raise questions withinthe WTO about these programs—short of the Round?

Mr Hussin—Not at the moment, because the use of those programs by the United Statesfalls within the reduction program that the US accepted as part of the outcome. We have nogrounds to claim that it is breaching its commitments in the Uruguay Round at this point.

Senator COOK—On these programs, does the US make an appropriation of funds to backthese programs or are they taken on a case-by-case basis; in other words, do we know howmuch money they have there potentially for subsidy now?

Mr Hussin—I think we would know that in our system and my colleagues may well knowthat—yes, money is appropriated—but I am not aware of the situation at the moment as towhat is available.

Ms Marginson—Yes, it is.Mr Hussin—One of the concerns that we had in the DEIP case is that the United States

used subsidies which it had allocated but not utilised during a WTO period. We were alsoconcerned in the European situation at the potential for them to call on subsidies that theycould have used in past years but did not and to roll forward the so-called accumulation ofexport subsidy entitlements. So we were concerned in that case but I am not aware of whatthe sum of money available for the EEP is and the degree to which it is utilised.

Ms Marginson—I cannot give you the exact figures but I can certainly provide them. Asfar back as the Farm Bill, there was an allocation set aside for these programs.

Senator COOK—I would appreciate the figures, but do you have a ballpark figure thatcomes to mind?

Ms Marginson—It is several billions of dollars, if not more.Senator COOK—So that is what our farmers are facing potentially should these programs

swing into play—and that is US dollars not Australian?Ms Marginson—Yes.Senator COOK—Has there been any change in our ASL dedicated to the US market or

in embassy, consular or other staffing in the United States over the last year?Ms Marginson—I cannot answer that, I am afraid, partly because it is not something that

I have taken up in the few weeks that I have been in the branch. But perhaps my colleaguesin CMD have a comment.

Ms Hewitt—I suppose we do not collect information on precisely that basis any longer. Wehave a salary and an administrative allocation to the division which does not distinguish, inthe sense of being allocated, between either the Americas or the Europe side of the division’soperations. The division would need to take it on notice but we could tell you what the staffingprofile of the relevant work units would be.

Senator COOK—That is fine; I am happy for you to take it on notice.

Mr Brown —There has certainly been no change in the staffing profile for the division inCanberra or for the embassy in Washington. The reason I am hesitating is that, as you know,



our consulates in the US are Austrade managed. I am not 100 per cent sure of any changesthere.

Senator COOK—I think Austrade are in the room; I am going to ask them the samequestion.

Ms Hewitt—Could we take it then that you are happy with the answer that there is nochange in the profile, subject to whatever Austrade may want to tell you about their operation.

Senator COOK—Okay. The OECD ship building agreement is the next on my check list—what is your readout; is it likely to get endorsed by Congress or not; is it on the list at all?

Mr Brown —I will let my colleague answer that one.Ms Marginson—The advice that I have is that the agreement is currently before the US

Senate. One of its limitations previously is that it had been linked to a wider maritimederegulation bill. That is no longer the case. Therefore, the assumption is that it could cometo an earlier vote than if it had been in the larger, more complex bill.

But in making any prognosis about the passage of the bill, the key thing that it will haveto do is ensure that the supporters of the Jones Act itself are reassured that no elements relatingspecifically to the Jones Act have been caught up with the bill and that it directs itself entirelyto the international disciplines on ship building subsidies. I do not have a readout as to whetherJones Act supporters are satisfied that the bill, as the bill currently sits in the Senate, meetsall their requirements. But the view is that it has a much better chance of getting through thanit had. I cannot give you a time frame though.

Mr Brown —In the past, the OECD ship building agreement had been held up because ofthe Senate Foreign Relations chair, Jesse Helms’s action in putting forward a very ambitiousbill for the repeal of the Jones Act. So the OECD agreement became hostage to those sortsof extremely major disputes within the congress. The Jones Act reform, Jesse Helms’sinitiative, has now been pushed back; so the prospects of the OECD agreement gettingthrough sooner rather than later seem to be increasing. That is certainly the argument we areputting in the Congress and to the Administration. But progress on this issue has been glacialfor many years, and it is not getting any faster.

Senator COOK—I have no further questions.CHAIR —Thank you, Mr Brown and Ms Marginson. We move now to program 7—

Austrade.[2.31 p.m.]

Program 7—AustradeCHAIR —I welcome representatives of Austrade.Senator COOK—I have got a series of questions which I will read into the record. I expect

that you will want to take them on notice. It might save us a bit of time. Does Austrade haveany public relations or promotional campaigns under preparation or currently under way? Ifthe answer to that question is yes it does, for which program or subprogram of Austrade’sprograms does it apply? What is the timing of the campaign—when does it start and finish?What is the cost of the campaign—what budget have you provided for it? From whence inthe appropriations comes the funding? How did the campaign arise? Was a decision made byAustrade to conduct this or was it suggested to it by the government, specifically the minister?How many consultants do you employ? What do they consult you about? How much do youpay them? How were they selected?



Mr Langhorne —I gather the question on the consultants relates to the advertising awarenesscampaign. The answer is yes, we do have an awareness campaign under way at the presenttime. I will take the majority of your questions on notice and provide answers, but I cananswer some of them. The first point I make is that the campaign was instigated by Austrade.It was instigated for the purpose of increasing the awareness of export assistance programsavailable to business and where business could go to receive help for their export activities.

There is a second what I guess you would call awareness campaign that we do run throughthe export market development grants scheme. In other words, we advertise regularly advisingpeople when the scheme is about to begin and when the grants entry test and so on are aboutto take place. But the main campaign we are running at the moment is an awareness campaign.

I will give you some broad details. Media coverage on that campaign commenced on 14April. It is to run for seven months in newspapers, magazines, business and trade journals.It involves a number of airport posters as well. The budget for the campaign is $625,000. Itis being provided through appropriation. The key objectives of the advertising campaign andclient brochures associated with it are to raise the awareness in Australian businesses of thebenefits of going international and taking advantage of trade liberalisation, to raise awarenessof the assistance programs provided by the federal government, clearly to spell out the servicesprovided by Austrade and to increase the number of new and potential exporters seekingassistance from Austrade.

Another point I make is that Austrade has participated in awareness campaigns for someyears now, but this is a consolidated effort. It is a campaign that we would see running fora number of years, although after the initial period we would see the amount of expenditurecoming down after we have made the initial impact.

Senator COOK—You did give me the date, but I am sorry I did not catch it. When doesit commence?

Mr Langhorne —The date the media coverage commenced was 14 April 1998. It is plannedto run for seven months. In regard to your question about consultants and so on, I would haveto take that on notice.

Senator COOK—Who is managing the campaign for you? Do you have an outside agencyappointed to manage it for you or are you doing that in-house?

Mr Langhorne —My understanding is that the campaign is being managed within Austrade.Mr Doody, the general manager in that area, may have more details in regard to that.

Mr Doody—We are managing it in-house, apart from the actual placement of the media,which is done through an external party who is an expert in that area. The actual campaignitself is managed in-house.

Senator COOK—Who is the external party?Mr Doody—It is an external consultant that is working through a group called the

Principals, who have been helping us on the strategy itself.Senator COOK—How were the Principals selected?Mr Doody—It was through a tender process when we first started looking at this. They were

the successful party that won that tender.Senator COOK—Did Austrade write the terms for the tender itself?Mr Doody—Yes.Senator COOK—Who made the selection?



Mr Doody—It was done by a panel internally.Senator COOK—Did you go through OGIA, the government advertising agency, for this

campaign in any way?Mr Doody—Can I take that on notice please?Senator COOK—Yes, indeed. Does Austrade have currently running any promoting of

Australia as a country for trade in any of our major trading partners?Mr Langhorne —I guess that is our business. All our overseas operations and our Internet

site would be directed towards that particular activity. We are involved with the Departmentof Foreign Affairs and Trade in a major promotion that is due to take place in the Philippineslater this year. That would be the only major program that we are running, but I would makethe point that we are continually involved in programs in all our markets in promotingAustralia and Australian business.

Senator COOK—I accept what you say and I accept your correction of me that essentiallyAustrade’s purpose in life is to do this work. But the only special promotion, if I may put it,in addition to what you would normally do is the Filipino one, is it?

Mr Langhorne —That is the only major promotion.Senator COOK—Are there any other minor promotions that you would want to tell us

about?Mr Langhorne —Apart from the ongoing activities associated with business missions,

ministerial missions and so on, I think the answer would be no, it is business as usual.Senator COOK—I have a series of questions which you may wish to take on notice which

I will now ask. Does Austrade own or lease any property with vacant space? If so, what isthe location of the building? How much vacant lettable space is available? What is the costper square metre of that space? What contracts have been entered into regarding that space?Have there been any recent attempts to sublet or renegotiate leases for available space? I donot expect you to have that at your fingertips. I would be delighted if you did have. I amhappy for you to take it on notice.

Mr Langhorne —We will take most of it on notice. The answer is yes, we do have vacantspace. The answer is yes, we are trying to sublease that space and have sublet some. The restof the questions we will take them on notice.

Senator COOK—Which trade fairs does Austrade intend to participate in over the comingyear?

Mr Langhorne —We have something in the order of 115 trade fairs that we propose toparticipate in during 1998-99. Rather than read them all out, I will make them available toyou. When our operational plan becomes available, they are set out in the front of that planfor each country, listing the particular fair involved. In addition to those fairs that are set outin our operational plan, we do get involved in a number of other trade fairs in assistingcompanies going into that market through that fair, but we may not have an Australian standthere. It depends on the circumstances, but we will be involved in some 115 fairs this year.I will start by making this document available for you which sets them out.

Senator COOK—Thank you.Senator HOGG—Just on that point, does that also go to the likes of the Expo bid that we

had for the Gold Coast recently? Would you get involved there?Mr Doody—We would not be involved in that, no.



Senator COOK—I acknowledge that that is an impressive number of trade fairs, but it isnot all of the trade fairs that potentially you could attend. Do you have any criteria to decidewhich ones you go to and which ones you do not?

Mr Langhorne —It depends on the requirements of Australian business, which particularmarkets and sectors they were looking to target at a particular point in time. It would alsoobviously depend on whether or not we were looking to develop the market, whether smallto medium exporters were looking to get into the market and so on. But they are generallytargeted around priority sectors.

Senator COOK—Do you provide feedback to the Images of Australia Unit, the anti-Hansonunit?

Mr Doody—Not in a specific sense, Senator.Senator COOK—You are consulted by them from time to time, though, are you?Mr Crawford —I might just clarify that. Any problems that our staff overseas come across

in relation to this debate is referred through the post back to DFAT, not specifically to us.Senator COOK—Routinely?Mr Crawford —Routinely, if there are any.Senator COOK—Your advice as I understand it to Australian exporters in Asia in the face

of the Asian economic crisis is to try to maintain a presence in those markets, to wherepossible renegotiate their contracts to take account of the changed economic circumstances,but above all to remain visible until such time as those economies rebound. Is there anyspecific program that you offer that helps Australian exporters achieve that?

Mr Crawford —Yes, we instigated some months ago what was called a marketdiversification and market defence strategy for Australian companies operating out of ourexport advisory marketing unit. Just to go back to the advice, one of the key pieces of advicewas to protect relationships that had been built up. So posts are providing advice and assistancefor companies to maintain relationships even if those relationships are not at the present timedelivering business. So yes, there is an active program and strategy to provide assistance onboth those fronts—market defence and market diversification.

Senator COOK—What funds do you have for that program?Mr Crawford —They are internal funds. There are no additional funds.Senator COOK—As needed, as part of your normal duties. Is that how you describe it?Mr Crawford —Correct.Mr Tindall —The export market development grants scheme also assists exporters to remain

visible in markets by reimbursing promotional expenditure.Senator COOK—As I read the budget papers, the export market development grants scheme

was underutilised this current financial year.Mr Tindall —The appropriation does not actually reflect what we will spend on the export

market development grants scheme this year. They are slightly distorted by the fact that wehad a carryover last year which we used to pay grants and which, in the end, reduced the needfor draw down. In fact, we predict that we will spend $162 million roughly this year on theEMDG scheme. There was $150 million appropriated for grants for the 1996-97 financial year.There was roughly $22.8 million appropriated for grants that have been carried forward fromthe previous year.



We estimate that we will spend $150 million on 1996-97 claims. We estimate we will spendabout $10 million of the $22.8 million on pre-1996-97 claims. That is due to lesser thanexpected demand on the funds for that year. In the end, if you add up the appropriation, wehave returned $28 million to consolidated revenue, which ends up at the $144.8 figure, whichis in the appropriation now, and reflects the $172.8 million minus $28 million plus the $18million that we had to carry over. It ends up at $144 million, but the bottom line is that wewill spend $162 million this year.

Senator COOK—I will go back to theHansardto sort all that out I think. The shortfallthat you had previously you have been able to roll over and use as demand requires insubsequent years. That is the track record.

Mr Tindall —That is right.

Senator COOK—The $150 million is the total amount for the scheme, and from that youdraw your administrative costs. What proportion of the $150 million goes to administrativecosts?

Mr Tindall —The EMDG Act provides that we are able to spend up to five per cent of theamount appropriated by parliament. Five per cent of $150 million is $7.5 million.

Senator COOK—Yes, but because it has a limit on how much you can draw does not meanto say—

Mr Tindall —That we do not have to spend up to it.

Senator COOK—Yes. Do you draw it all?

Mr Tindall —We are in the final stages of working out the administrative budget for thisyear, but it depends on a number of factors, including some of the corporate costs that we mayneed to absorb from within the EMDG program budget. But it will be somewhere between$7 million and $7.5 million.

Mr Langhorne —Which I think works out at slightly less than the five per cent when thetotal cost of the scheme is taken into account. I think the total cost is about $162 million, soit is slightly less than five per cent.

Senator COOK—So you are doing better than the parliament allows you to. Can you giveus some figures on how the number of applications for EMDG grants have varied year on yearfor the last couple of years?

Mr Tindall —In 1996-97 we received 3,729 applications. For the 1997-98 financial yearwe received 3,253 applications. So there is a reduction of some 450 from the previous year.For the year before that, I have not got the figure in front of me, but it was somewhere around3,700 applications. There was a small increase.

Senator COOK—Did you have a look at what reasons there were for a 500 reduction inthe number of grants?

Mr Tindall —The major reason for the reductions was the introduction of a $50 millionturnover threshold for companies claiming. We estimate there are about 150 companies thatwere no longer able to claim because they were over that $50 million income threshold, anda number would have dropped out because the amount of eligible expenses they were ableto claim was reduced below the threshold amount for a grant to be payable. There are alsoother factors—global economic factors and domestic conditions—that would contribute tovariations in the number of claims. I am not going to try to analyse those.



Senator COOK—Can Austrade outline the new budget measures under the program entitled‘Export action response to Asia economic developments’? What is meant by that?

Mr Langhorne —It is a program that is designed to help with market diversification andmarket defence strategies. When we look at market defence, we are looking at defending ourmarkets not only in Asia but also in other parts of the world, as other countries at least in theshort term redirect their attention out of Asia. That program is still under development.

Senator COOK—The funding for that I think is $2.234 million for 1998-99. That is whatwe are proposing to appropriate.

Mr Langhorne —It is a four-year program. I think it is $10 million over four years.Senator COOK—Essentially for third market development. If it is under development I

suppose you have not yet finalised it, but have you come to any conclusions yet about whichmarkets you will be looking at intensified activity in because of this extra funding?

Mr Langhorne —We are still looking at that within the portfolio.Senator COOK—Do you yet have any readout on how that will be spent in terms of

funding Austrade staff or going directly to exporters?Mr Langhorne —I imagine that the majority of the funds will be in the context of running

costs—in other words, for programs that relate directly to Austrade’s activities. So the majorityof the money would go towards funding staff within Austrade. That does not mean, by theway, that Austrade would necessarily be employing permanent staff. We could very welldecide to employ specialist staff or staff under contract, depending what the final decision ison where those particular funds should be directed.

Senator COOK—I have no further questions.Mr Crawford —I would like to clarify a question in regard to the Office of Government

Information and Advertising. We do not actually use it. We answered a similar question onthis issue from Senator Faulkner a few weeks ago which is already in theHansard.

Senator COOK—Thank you.

Program 1—International relations, trade and business liaisonSubprogram 1.5—Multilateral trade policy and negotiations

Senator HOGG—My question goes to the issue of the Multilateral Agreement onInvestment. I do not think I have had as much correspondence on any issue as I have on this.Everyone who knows their e-mail address has e-mailed me something on it, invariably inprotest against that agreement. Can you tell me what stage the actual negotiation of theagreement is at? Then I have some subsequent questions.

Mr Hussin—Firstly, I think you are aware that the lead negotiation in the MAI is with theTreasury, but we are obviously very interested in it, supportive of it and consulted on it. Thesituation with the MAI is that, at the OECD ministerial forum in May, it was agreed that therebe a six-month pause in the negotiations. It was not announced as such, but it was agreed thatthe next negotiating group meeting would be in October. There had been some discussionthere. Some were in favour of going ahead with it; others were in favour of having a pause.Some were inclined towards moving the negotiation to the WTO and ceasing in the OECD.It was agreed to press on with it but to have a pause in the negotiations. So that is where itstands. We expect it will be returned to in October this year.

Senator HOGG—Whilst you said that Treasury are taking the lead, and I understand that,have you looked at the impact of that on our foreign policy needs?



Mr Hussin—We did make a detailed submission to the treaties committee, which set inperspective how we saw the MAI. It looked at the range of investment instruments, bothplurilateral and multilateral efforts, that have been made in APEC and the WTO. It lookedat the OECD negotiation and put that in perspective. Essentially, there are elements of theOECD negotiation that we see as very positive because they pick up the same sorts ofprinciples that are included in other areas of our trade and investment regimes and the presentWTO—things such as non-discrimination and national treatment, which are the basis of thetrading system.

In essence, we are in support of the negotiations. We are in support of clear and transparentrules. We believe that having an agreement on investment or investment instruments is usefulfor Australian firms wishing to invest oversees in giving them security, and equally investmentinternally has been very positive for this country. I understand that you are referring to a rangeof reservations that people have about the MAI. I would note that there are a range ofexemptions which countries are able to take under that instrument, and Australia will, in thedraft as it stands, take quite a wide range of exemptions to cover our particular interests.

I do not want to go any further than that. As you know, there is a committee of theparliament that has been looking at the agreement. If it goes to a further stage and is com-pleted, obviously that text will come back ad referendum. It will be looked at again by thetreaties committee and scrutinised by the parliament. That process will be open to all groupsonce again. Currently, the state of play on the negotiation is available very widely to interestgroups so that they can study the agreement and make their own judgments on the implicationsof it.

Senator HOGG—Is the preferred position for it to go out of the OECD and into the WTO?

Mr Hussin—There is a separate process going on in the WTO, and also there has been aprocess in APEC. There are some rules relating directly to trade that are already covered inthe WTO under the trade related investments measures agreement.

There is a process in the WTO—and you would call it a bottoms up type approach—oflooking at transparency rules and trying to build confidence in transparency and then movingto a further stage on the investment issue. But certainly we are not in favour of simply movingthe negotiation as it stands in the OECD across to the WTO, because we believe that is muchmore than the traffic could bear in the WTO.

Senator COOK—We are dealing with the world’s greatest conspiracy here with multilateralagreements, are we?

Mr Hussin—So I am told.

Senator Hill—This is the first instance where I think a proposed agreement has beenreferred to the treaties committee. How can the treaties committee be considering it when itis still in the process of being negotiated? In other words, what is it considering—just proposedclauses?

Mr Hussin—Minister, I think it is considering the draft as it stands. I think you are right.I am not aware—although my colleagues probably in this room might be able to correct me—of that being done with any other agreement in the negotiating stage. But I do not expect thereis anything to stop that happening.

Senator Hill—So those changes that occur through the negotiations get referred back to thecommittee to be fed into its process?



Mr Hussin—No, this was a specific reference. I imagine that the next reference will be—ifand when the agreement reaches a stage where it is agreed between the negotiators, adreferendum to their governments.

Senator COOK—That is the decision of the parliament. The purpose of it was that one ofthe big criticisms of the government was lack of transparency. If I have received one letteron this, I have received several hundred—and I may not be alone in that. One of the mostconsistent allegations was lack of transparency. Therefore, the government, because it has themajority in the House, referred to the treaties committee as some way of balancing thatcriticism.

Senator Hill—I do not see it as criticism of government; I am just trying to work out howit would work during the process of negotiation. I have trouble with how it would developin parallel.

Mr Hussin—I think that is a fair point, Minister, because obviously throughout a negotiationthings vary and positions vary, and sometimes texts are not always fully agreed or evenpartially agreed.

Senator Hill—It is my observation that there is more concern at a community level inAustralia about this proposed agreement than perhaps anywhere else in the world.

Senator COOK—No.CHAIR —For some reason, the conspiracy theorists have got hold of it.Ms Hewitt—I think there is quite a lot of community debate, for example, in Canada and

in some of the European countries.Senator COOK—In New Zealand.Ms Hewitt—Yes.Senator HOGG—Parts of Europe.Ms Hewitt—Parts of Europe. But in Canada particularly some of the criticism has been quite

vociferous.Senator Hill—At the community level.Ms Hewitt—At the community level and on the basis of very ill-informed information about

the contents.CHAIR —But I think it is worth saying that you can round up the usual suspects of those

people who are pushing it in this country.Ms Hewitt—I think the Internet too has been one of the actors in the play.Senator COOK—I think it is fair to say—Senator Hill—This is quite an interesting political experience.Senator COOK—I think it is fair to say that the Australian debate took off after the

Canadian debate. With the Canadian government having exposed its position to the communityin response to the pressures on it, a lot of the conclusions that people made about what theythen saw got passed over to Australia, via the Internet or directly, and there is a widespreadcommunity concern about it which crosses the whole spectrum of politics, the like of whichI have not encountered for some time.

Senator Hill—But the bureaucrats will put their minds at rest, will they not? They will buildcommunity confidence in the process.



Mr Hussin—I think that is right, Minister. I think there is an education process that willhave to go on over the next couple of years.

Senator COOK—You will not be signing this in the next three months, will you?Mr Hussin—As I have said—and I do not think you were here—the discussions do not

resume until October in Paris.Senator COOK—Is it true that the French government has made a decision to oppose it

outright?Mr Hussin—Certainly at the OECD meeting it seemed that the French were opposed to it

to the extent of saying that negotiations should not continue. But they, in the event, went alongwith the consensus to have the pause and resume in October.

Senator COOK—Is it true to say that there is considerable opposition, if not a majorityopposition, to it in the US Congress?

Mr Hussin—I really do not know the situation there. Certainly the United Statesadministration has been a proponent in the administration of pushing ahead with it.

Senator COOK—Can someone give me an update on the Howe Leather case: where is itup too, and what has happened?

Mr Hussin—The position is that we have continued to have discussions with the UnitedStates. A panel was established in January this year. We have continued discussions, and thepanel has not met. Recently, the United States sought a second panel on the issue. There hasbeen an initial meeting or consultation with them under that request.

We are a little bit bemused about the dispute settlement rules and the fact that we have twoprocesses co-existing, and we will have to sort that out with the United States. But basicallyour view is that there really is no basis in the United States action; there is no evidence thatthe program of assistance for Howe Leather is having a negative impact in the United Statesmarket. In a sense, what we seem to be facing is pressure to reduce competitiveness orcompetition in that market.

The United States seems to be saying that our assistance program is a prohibited subsidy.Our response, and strong response, is that it is in no way contingent in exports and, therefore,is not in contravention of the WTO. We will continue to take that position through, no doubt,further discussions bilaterally with them and in any other process that continues on Howe.

Senator COOK—If our view is that it is having no market impact in the United States, whatis the prognosis for the case? I suppose that it takes the Americans to agree to that for the caseto be withdrawn.

Mr Hussin—That would be right; there would have to be some accommodation betweenus for it to be withdrawn. But, as I say, the first panel that was instituted has not been takenforward; as I say, we now have a second. What US intentions will be, we can only test byfurther discussions with them.

Senator COOK—What other issues do we have on our slate in Geneva at the WTO? Arethere other trade issues that we are having to defend or actions that we are taking?

Mr Hussin—You would be aware, I think, that a panel case has been mounted against ourquarantine measures on salmon.

Senator COOK—Yes.Mr Hussin—We are not in a position to speak in a way that we would be reported publicly

on that because the actual report on that case has not been made public, and that will not



happen until around 15 June. But the ministers have reflected the fact that there are someadverse findings that relate to the actual risk assessment and its adequacy and also in relationto the consistency of our action on salmon as against other fish imports.

Those issues we are considering. There is the potential for us to appeal. After the panelreport is received, we will have a period to consider whether or not we will appeal. If thathappens, we go to the WTO appellate body which was set up in the Uruguay Round, and therewill be a further hearing basically on the legal reasoning that has been used by the panel toreach the conclusions that it has. So that is the status of that issue.

Senator COOK—When might that be brought to a conclusion? Do you have any notionof that time cover?

Mr Hussin—As I have said, we have, I think, 20 days—and my colleague will correct meif I am wrong—after the panel report is circulated. Then, once an appeal is lodged, I thinkit is something like 60 to 90 days—

Mr Deady—Sixty to ninety days before the appellate body, yes.Mr Hussin—Yes, 60 to 90 days before the appellate body reports. We would then look at

the implications of that appellate body report, if we do appeal.Senator COOK—Are there any other matters?Mr Hussin—There are a number of dispute settlement cases where we are third parties.

There are no other major cases where we are directly concerned, are there, Steve?Mr Deady—No, that is correct. As Mr Hussin has said, there are no other cases, apart from

Howe and salmon, that we are defending in the WTO. There are probably at the moment Ithink about eight disputes to which we are third parties. Some of those are advanced; someof those are just sort of starting off.

Senator COOK—Would it be possible—and I am happy for you to take this on notice—togive us a list of what those eight disputes are about and what their status quo position is?

Mr Deady—Yes.Mr Hussin—Beyond that, obviously we are starting the process of preparation for the

preparatory process itself towards a possible new round of trade negotiations.Senator COOK—I think today the Minister for Trade announced a change in the pork

import tariff arrangements.Mr Hussin—No, not a change in import tariff arrangements. What has been announced is

that the government has decided to establish a mechanism which will allow inquiries forsafeguard action under the WTO and designating the Productivity Commission as theappropriate domestic agency to conduct such inquiries. There are a few steps that will needto be taken before an inquiry can be held. But the outcome of that inquiry certainly one cannotpredict at the moment.

It is true that the safeguard provision under the WTO would allow for emergency action inthe form of either tariffs or quotas, if it were considered that imports were causing seriousinjury. But that would be the focus of the inquiry. So there has been no announcement ontariffs, as such.

CHAIR —Is that known as an inquiry under article 19?Mr Hussin—That is correct. The safeguard provision is article 19 of the original GATT.

But that has been expanded under a safeguards agreement which was part of the UruguayRound outcome.



Senator COOK—So this goes off to the Productivity Commission and they work theirmagic. Is there a timetable for their report to come down by?

Mr Hussin—What we will have to do to allow the inquiry to proceed is publish the actualprocedures for such investigations which will need to be based on the safeguards agreement.That will elaborate on the time frames. Whether or not it will specify particular time framesI am not sure at this stage. But it will reflect the provisions of the safeguards agreement ofthe WTO.

So we do not have a particular time frame at the moment. We have to go through the stepof publishing the procedures under which inquiries would take place, and then for there to bea reference to the Productivity Commission.

Senator COOK—Were you consulted about this announcement before it was made?Mr Hussin—This department and the Department of Primary Industries and Energy have

been consulted or involved in these several issues related to the pig industry for some time.Senator COOK—Does this announcement in any way signify a change in our commitment

to further trade liberalisation in this sector?Mr Hussin—Not at all. As far as I am concerned, the safeguard provisions are an integral

part of the WTO. They are there to deal with situations where imports are causing seriousinjury and they are there to allow a period of adjustment. That is how article 19 was originallynegotiated, so it is fully consistent with the WTO. I do not think it could be seen as runningcounter to our trade liberalisation objectives. I might add that, apart from a handful ofcountries, and the requirement depends on their legal system, almost all OECD countries andseveral other countries have legislation which covers and allows for safeguard action to betaken, so it is not an unusual thing.

Senator COOK—I do not have the minister’s press release nor did I hear the radiobroadcast reporting it, which I understand was this morning, but the figure of $10 million hasbeen reported. What is that for?

Mr Hussin—There was an amount of $10 million provided to the industry, I think it wasearlier this year, for adjustment purposes. In fact, the announcement increases the volume offunding to be provided to the industry to $18 million or $19 million. That money is for a rangeof measures to improve conditions for the industry, to assist them in becoming morecompetitive and to assist them in rural adjustment terms as well.

Senator COOK—Why was the decision made now? What decided the timing of thisdecision?

Mr Hussin—As I said, we have been looking at this issue for some time. Departments havebeen looking at it. It went to the government in the normal way.

Senator COOK—And the minister decided?Senator Hill—Perhaps I should listen to that one.Senator COOK—Yes, I think you probably should. This issue has been before the

government for some time. The government announced today—with the Queensland electionon Saturday—that it is going to put some $10 million of taxpayers’ money into helping bailout this industry sector. I was asking you, Minister—through Mr Hussin, but I think you arethe right person to ask—why you decided to do it this week. Why not next week after theQueensland election?

Senator Hill—I can assure you it has got nothing to do with the Queensland election at all.



Senator COOK—Can you?Senator Hill—You would have no doubt been as aware as I am of the degree of concern

within the pig industry about the way in which circumstances have changed against theirinterests so rapidly. The government has been addressing that for some time. As you know,we earlier announced the provision of $10 million under the national pork industrydevelopment program. We continued to examine what other options were available for us tocontinue to support this industry during what seems to be a significant time of change for it.Yesterday was really the first day that we could bring that to a conclusion.

Senator COOK—So it has got nothing at all to do with the Queensland election. It ismerely coincidental that this is three days before the election.

Senator Hill—No, we would have liked to have done it a week before if we could havebut there were complex issues that had to be worked through. Regrettably, I think there is quitea bit of misinformation out there on the circumstances of international trade, but we think wehave made the right decisions in the right circumstances.

Senator COOK—I see. Why was it $10 million? Why wasn’t it $11 million or $9 million?Senator Hill—It was $9 million.Senator COOK—I understood it was $10 million.CHAIR —No, it was $9 million.Senator COOK—Okay.Senator Hill—It was another $9 million on top of the previous $10 million.Senator COOK—Why was it $9 million? How was it calculated?Senator Hill—It was made up of $8 million to a new pig meat processing grants program

that would provide investment grants to specialist pig meat processors. I can tell you how thegrants work if that is of interest to you.

Senator COOK—Not necessarily. I am just sticking with the ballpark figure.Senator Hill—The reason for that is that we are trying to encourage the industry to become

more export orientated. It is obviously in its long-term benefit with the greater marketopportunities offshore. There are some encouraging signs in relation to the construction of newprocessing plants, but there is an argument that the industry has not adapted quickly enoughto changing circumstances, so we are putting in that extra support in relation to thedevelopment of the processing plants which we believe will contribute to the development ofthe market. The safeguard measures have been discussed here today. That is the second aspectof the announcement. The third key announcement is the provision of the extra $1 million toestablish a national pig industry initiative under the soon to be launched Farmbis program.I can give you further details on that if you would like them as well. Basically, $8 million and$1 million added up to $9 million.

Senator COOK—Do you know when the Farmbis program, under which the special piginitiative of $1 million, will be launched? Not Friday?

Senator Hill—Details will be finalised in consultation with the Pork Council of Australia.I do not know beyond ‘soon to be launched’.

Senator COOK—Probably Friday at this rate, Minister.Senator Hill—Our chairman probably has a better idea than me.CHAIR —I do.



Senator Hill—The message is that we want to get on with the job. It is an importantindustry. They have been hit and, as I understand it, a lot of it simply relates to the reductionin the price of beef, which has encouraged people to eat beef rather than pork. That hasbrought down the price of pork. The pig industry does not have the flexibility, as I understandit, of some other rural industries. You have got to turn off the animals at particular times andyou do not have the flexibility also of pushing them out into the back paddock when themarket gets a bit tough. All of this has developed into something of an immediate crisis andthe government has felt that it should respond in this very positive way.

CHAIR —Was there an earlier opportunity for this government or the previous governmentto introduce the general safeguard mechanism?

Mr Hussin—The situation is that article 19 of the GATT has existed for many years, since1947 to be precise. We had in previous years, under the Industries Assistance CommissionAct, a Temporary Assistance Authority which received applications or references fromgovernment to look at safeguard issues. The Temporary Assistance Authority itself wasdisbanded in 1983 and the temporary assistance provisions were removed from the IAC Actin 1989. That did not mean that a safeguard action or an inquiry could not be pursued but,with the Uruguay Round being introduced, there is an obligation to actually have procedureswhich are published and notified to the WTO. Those procedures and arrangements were notin place, so that was one of the reasons why we had to do that before we moved to the inquirystage on this occasion. In answer to your question, I guess there could have been anopportunity. The question I suppose is whether there was a request to do so.

CHAIR —Is it true that my colleague on my right, Senator Cook, inexplicably failed toinclude such a safeguard mechanism in legislation introduced into the parliament in 1994 atthe conclusion of the Uruguay Round of multilateral trade negotiations?

Mr Hussin—I would say it is a fact that such legislation was not introduced. I would onlyadd to that that the Uruguay Round introduced a requirement to have such a process in place.It did not mean that it necessarily had to be put in place, but it is a precondition to take thissort of action.

Senator Hill—It provided the capacity, the authority, to put it in place.Mr Hussin—That is right; it provided the mechanism to do so.Senator COOK—Just a small correction, I was not in charge of that legislation at the time.CHAIR —You were the minister, though.Senator Hill—So who do you want to dob in? Who was it who missed this important

opportunity to safeguard Australian industry?Senator COOK—Well, the argument is whether an important opportunity did go past to

safeguard the Australian industry.Senator Hill—And you argue that it did not.Senator COOK—And whether a request was before the government at the time.Senator Hill—And you are arguing it did not.Senator COOK—I do not know. I was not in charge of this part of the legislation at the

time.Senator Hill—You are washing your hands of your government’s failure.Senator COOK—No, I am not. I am absolutely sure we focused on this at great length in

cabinet. I am sure we devoted a whole day to debating it.



Senator Hill—Anyway, we can be assured that you will cooperate with the currentgovernment now.

Senator COOK—I am pretty sure you will find that we will cooperate with the currentgovernment on this initiative.

Senator Hill—With a red face.

Senator COOK—No. Perhaps you can tell me this: when deciding the $9 million, was thatdone in consultation with the Pork Council?

Senator Hill—I think the Pork Council has been closely involved in the negotiations. I thinkthe council plus a great number of the industry.

Senator COOK—So this was a deal done with the government and the Pork Council.

Senator Hill—I do not think there was a deal done. It was a government decision, but thegovernment obviously consults with industry groups as it develops its position. I would bevery surprised if that did not occur in this case.

Senator COOK—I appreciate that, but what is the Pork Council’s reaction to it? Are theysatisfied with it?

Senator Hill—I do not know. You would have to ask them.

Senator COOK—I ask that because I notice that, in theCourier-Mail of 9 June, the OneNation party claims that it would provide a $20 million short-term rescue package for the pigindustry. I am just wondering who got it right—Pauline Hanson or the government?

Senator Hill—We think the initiatives we announced today are obviously the correctoutcomes in the current circumstances.

Senator COOK—Thank you, Minister. I move to the Millennium Round that has beenmooted, principally by the Europeans but supported now by Australia, to take place from theyear 2000 on, sometime after that date. What level of support is there in the world for thatround going ahead? Is Japan committed? Is the United States committed? Which othercountries support it?

Mr Hussin—The idea of a Millennium Round was first put forward by Sir Leon Brittanlast year. Mr Fischer was an early supporter of that proposal, for reasons that I am sure youare familiar with.

Senator COOK—I think he followed me.

Mr Hussin—He may well have. I am not sure on that. I think that was done for similarreasons—that having a broad negotiation is essential for Australia if we are to get the sortsof trade-offs we need to achieve the ends we are seeking in as short a time as possible. Sowe have been supporters for some time, together with a range of what you would call middlelevel countries—some developing countries, like Argentina; some developed countries, likethe Swiss—in agitating for a broad based round.

At the WTO ministerial meeting, or shortly before then, Japan came out in support of around, as has Korea. Very encouragingly, the Americans, in the form of President Clinton,who attended the WTO meeting, which was also the 50th anniversary of the GATT, alsosupported the idea of a broad based negotiation. The US has some difficulties in terms of howbroad based it is, how linked the elements are and whether the time frame for all the elementsis the same, but they have certainly moved much closer to at least a broad negotiation whichwill allow the sorts of trade-offs and coverage that we have been seeking.



Generally, some of the developing countries were hesitant because of what people havedescribed as trade liberalisation fatigue. The Asian crisis itself might have introduced anunsettling element for them. Even so, I think some of the key developing countries have beengood supporters of the idea—Thailand and Singapore. The countries least supportive—India,Pakistan and Egypt—are more preoccupied with implementation of the Uruguay Round andwhether or not the benefits that they thought they would receive in areas like textiles havebeen coming through fast enough. They are also concerned that the adjustments they aremaking are greater than they thought and taking longer. So they are less inclined.

But the outcome of the meeting was very positive in the sense that we have a preparatoryprocess which points in the direction of a broad based negotiation, and there will be a decisionon that next year. One other positive element is the US decision to host the ministerialmeeting, probably in the last quarter of next year, where the decision will be taken on exactlywhat the enterprise is and how broad it is.

Senator COOK—So we would have reason to be optimistic that, after the beginning of theyear 2000, we might venture forth on a new world round of trade liberalisation? Is that toostrong a statement that we would be optimistic about that?

Mr Hussin—No, I think we would be optimistic of that. The actual breadth of thenegotiation and exactly how it would go forward are matters to be discussed. One otherimportant development at the WTO meeting was that the decision made it clear that theagricultural negotiations, which are due to start before the end of next year, will proceed ontime whether or not they are linked with a wider enterprise. We were certainly keen to getconfirmation of that.

Proceedings suspended from 3.33 p.m. to 4.01 p.m.CHAIR —We are proceeding with subprogram 1.5.

Senator COOK—Thank you, Mr Hussin, for that overview of where the millennium roundis up to and the consensus gathering for it. I just want to ask you a few questions about theagricultural round. That is slated to kick off in the last quarter of 1999. To what extent is thereconcern that with the European emphasis on a millennium round, whenever that might be—unfortunately it appears to be sooner rather than later—negotiating an agricultural round willbe caught between a sectoral round on agriculture, which, classically, as far as the Europeansare concerned, is a difficult issue for them to come to—I am being polite to the Europeanswhen I say that—and the future, yet indefinite, possibility of a millennium round, a full-scaleround? That is to say, will we have the negotiating manoeuvrability in a sectoral round? Willwe get pushed back into having to wait for the millennium round to come before there areto be any real gains in agriculture? I think, in terms of the juxtaposition of the agriculturalround, the millennium round is a real danger for us. Do you agree?

Mr Hussin—I think this is a difficult issue. On the one hand, we recognise that if we wantto get the movement out of the Europeans, the Japanese, Koreans and others where we haveeither marketing interests or subsidy reduction interests we need to have a broader negotiationwhich allows a certain degree of trade-offs across sectors. At the same time, you raised thequestion that if you have a round that is so wide and complicated that it takes many years tocomplete then, in a sense, you are held hostage by that wider round. Part of the task for usis to find a way through that maze and into a situation where we can get enough trade-off toallow substantive results but avoid being tied up forever in tackling the most difficult issuesthat a broad round might raise. They are the sorts of issues that we will be confronting in thenext 12 months.



Generally, we have taken the view that we need to have a millennium round and to haveagriculture involved in it to get the best possible outcome. There are other ideas which havebeen floated. The United States has floated the idea of having some sort of continuationprovision which would allow the Uruguay Round cuts to continue over the period of thenegotiation on agriculture. So you would at least get some start or some continuation of reformwhile you negotiated. That is an idea that has been thought about that has not yet come intothe actual discussions that will start around September this year. I take the point you aremaking. I think, on balance, we have to have agriculture interlinked with other elements ifwe are to get the sort of result that we want.

Senator COOK—I would rather that we can make a success of the agriculture round. I justfear that the Europeans will want it to slip to a millennium round to make any real gains wherethey might be able to bring into play other issues with other nations on market access in orderto get trade-offs before they approach agriculture in a serious way.

Mr Hussin—I guess that is a danger. On the other hand, I guess it is the judgment ofwhether the Europeans are going to be prepared to give on agriculture without having at leastsome other issues involved where they can achieve some positives.

Senator COOK—I have no further questions on multilateral trade negotiations, MrChairman.

CHAIR —Thank you, Senator Cook. We move now to subprogram 1.6, trade strategydevelopment and business liaison.

[4.06 p.m.]

Subprogram 1.6—Trade Strategy Development and Business Liaison

Senator COOK—Can someone please explain to me what the budget measure under thisprogram entitled ‘export action’ consists of exactly?

Ms Hewitt—Senator, we can give you a brief indication of what is involved for thedepartment. Some of the funding is to be for Austrade programs. I understand discussions arestill under way on that aspect of it. But, so far as the department is concerned, we have beengranted an amount of $897,000 over a period of four years. It is essentially to bolster ourcapacity to involve private sector input into the APEC sectoral liberalisation process. We havea very large program of activity, as you are aware, under way under the early voluntarysectoral liberalisation project, EVSL. We expect to need some business people to participateactively in those negotiations as they go forward. We also have a program of analysis andresearch that needs to be funded in some specific sectoral areas. So the money is to be usedfor that broad range of purposes. It is a little over $200,000 per year over that four-year period.

Senator COOK—I see. So it is not a lot of money.

Ms Hewitt—Not for the department. The bulk of the allocation there really will be Austradeprograms. As I say, there is still a lot of work going on. They are consulting us but the workis not yet complete. I understand the government will finalise the detail of that later.

Senator COOK—Since it is the voluntary sectoral liberalisation programs of APEC, whywouldn’t those funds be given directly to the department? Why would they show up as aspecial program nebulously entitled ‘export action’?

Ms Hewitt—It was a combination of additional things that we thought were particularlyimportant against the backdrop of more difficult economic conditions in the region. From thedepartment’s perspective, as I say, that is considered a particular priority at this time to



encourage and inject as much momentum as we can into the EVSL activity. But it is a broaderrange of issues being considered for the portfolio as a whole.

Senator COOK—As far as the business liaison services are concerned, has there been anyincrease in the number of business people speaking to the department concerned about theeconomic crisis in Asia?

Ms Fayle—Yes, Senator, there has been an increase. We have quite a number of phone callsevery day from representatives of various industries talking particularly to the East AsiaEconomic Unit people who man the phones there and who have a lot of dialogue with theprivate sector that they initiate themselves. But they have been, over all the months of thisyear, taking an increase in phone calls.

Senator COOK—Of what order?Ms Fayle—I do not have exact numbers on that, but I can find that for you and get it to

you if you wish.Senator COOK—Yes. Thank you. Is the liaison unit strapped in terms of staffing to meet

this flow of enquiries?Ms Fayle—Business liaison is a broad area handled by a branch in the division, the

particular unit. No, I would not say the East Asia Analytical is stripped. I think we discussedearlier the staffing for the unit. There would be the equivalent of about five to six staff yearsinvolved in the economic unit. There are three full-time officers. While they are extremelybusy at the moment, they also have resources in our posts and right throughout the relevantgeographic parts of the department to call on. They do a lot of teamwork with those otherofficers in responding to enquiries and preparing material. No, I do not think they are strappedat the moment, but they are extremely busy.

Senator COOK—Is the bilateral trade negotiating unit in this division?Ms Fayle—The Market Development Task Force secretariat is contained in the division,

yes.Senator COOK—Right. I think we have had a presentation from you before about what

the approach of this unit is. What are the major breakthroughs that have been achieved in bilat-eral trade negotiation over the last 12 months?

Ms Fayle—The Market Development Task Force had its first full year of activityculminating in November 1997. During that first 12 months they pursued 101 priority objec-tives across 25 markets. They achieved outcomes for 37 of them, substantial progress for 18and made some progress with a further 30. So there were 16 that they could not progresswhich were usually dropped off in favour of other priority items or continued in other waysat post or by other officers.

During the last six months, a further eight priorities have been achieved with positiveoutcomes. I can give you some examples of the things that we have pursued and achieved.For example, in Malaysia our representations ensured that the applied wheat and milk tariffsremained at zero. We also put a lot of effort in February 1998 in helping Monash Universitybecome the first international institution to be invited to apply for a licence to operate a branchcampus in Malaysia. In New Zealand our representations resulted in subsidised electricalcompliance testing services ceasing and new charges being introduced to put the New Zealandgovernment testing laboratory on a commercial footing.

I can give you examples from a number of different economies, but we have had successesright across the range in terms of tariff levels, in terms of non-tariff barriers and in terms of



negotiating framework agreements on things such as double taxation. There has been a fullrange of things. Also, trade promotion is covered by the Market Development Task Forceactivities. Jointly with Austrade, a number of targeted sectoral promotions have achievedoutcomes in terms of hard dollar amounts that we put on the exports that have been derivedfrom those promotional activities.

Senator COOK—What has happened to the 74 of the 111 cases that you took up whichhave not yet got an outcome? Have they been discarded?

Ms Fayle—There are 16 that have had absolutely no progress. In some cases, we havecontinued them for an extra six-month period. In other cases, they have been put aside to behandled in other ways. The focus of the Market Development Task Force is short term. Whenpriorities drop off the priority list, it does not mean that we stop doing anything to achievethem. It usually means that we have realised that it is going to take a longer term concertedeffort and therefore we relegate them to other forums.

Senator COOK—I may have taken the figures down wrong, but I thought you took up 111cases—

Ms Fayle—We had 101 priority objectives during the first complete year.Senator COOK—That is 101 priority objectives. That is not particular cases, is it? It might

be groups of cases.Ms Fayle—No, they are generally specific priorities. We generally have around three for

each of the 25 markets, but there is a rolling program. Some of them are dropped off becausethey are achieved and then replaced with others. There was a total of 101. Some were therefor longer periods of time than others.

Senator COOK—And 37 have got outcomes?Ms Fayle—Thirty-seven have been completed with positive outcomes. Substantial progress

was made on 18. Of course, we still have some of those on the list.Senator COOK—And regarding the ones that you have discarded completely, is it possible

to know what they are? I do not expect you to recite them now.Ms Fayle—There are some examples in the trade statement. I am not sure if anyone

remembers some of them; I cannot off the top of my head.Senator COOK—You could take it on notice.Ms Fayle—Yes.Senator COOK—Does Australia assign to APEC the order of priority that we previously

did as an important bilateral negotiation in our region? APEC is under this division, isn’t it?Ms Fayle—Yes, it is. APEC is what we consider regional trade policy and that falls within

this division. Yes, we do still ascribe high priority to APEC. We use it to achieve whatevergains we can in terms of market opening and as a form of dialogue with what really amountsto most of our major trading partners.

Senator COOK—So you are saying that APEC has not been downgraded in any way bythe department?

Ms Fayle—No.Senator COOK—Has it been downgraded by the government, Minister?Senator Hill—APEC?Senator COOK—Yes.



Senator Hill—No. What are you talking about?

Senator COOK—Perhaps you could explain why it is that, at the next APEC trade ministersmeeting in Malaysia at the end of this month, I understand Australia is being represented notby the Minister for Trade or the Minister for Foreign Affairs but by the ParliamentarySecretary to the Minister for Trade?

Senator Hill—Possibly because Mr Fischer spends a lot of time travelling.

Senator COOK—Indeed, but as a priority—

Senator Hill—He cannot travel constantly, and there are a lot of priorities. It does not meanthat APEC has been downgraded at all. Mr Fischer said in his statement:I am not able to attend this particular meeting of APEC because of my heavy domestic commitments andthe pressure of business in the Australian Parliament . . .

He is, after all, Deputy Prime Minister as well as Minister for Trade.

Senator COOK—This is the pre-eminent meeting—

Senator Hill—It goes on:The Kuching meeting unfortunately conflicts with the final fortnight of Budget sitting, with its very heavylegislative program, so it is appropriate that I remain in Australia at this time.

He has selected Senator Brownhill to represent him. I might say in passing that I think SenatorBrownhill has done an excellent job as assistant to Mr Fischer in trade matters.

Senator COOK—Without criticising Senator Brownhill because he is a charming chap but—

Senator Hill—Mr Fischer agrees with me when he goes on to say:David Brownhill and I have worked closely on these issues for years, and as my personal envoy he isan excellent choice to carry Australia’s message forward at Kuching.

So you should not read into that any downgrading of the importance of APEC. It is amisunderstanding on your part.

Senator COOK—Well, at the APEC trade ministers meeting the time before last, Iunderstand the trade minister could not attend for domestic political reasons. He cannot attendagain now. On the previous occasion, the foreign minister stood in his shoes. And thegovernment argued that this was a horizontal transfer of power or responsibility—

Senator Hill—Is that the expression we used?

Senator COOK—No, I am summarising the expression that you gave. With the greatestof respect to Senator Brownhill, who is a delightful tennis player and a charming chap, onedoes not expect that a parliamentary secretary can cut the mustard at this level with other tradeministers without countries with which Australia deals seeing us as consciously downgradingour presence in APEC.

Senator Hill—I think you grossly understate Senator Brownhill’s status and capacity. I donot have the list of the delegations that he has led, but I know from my personal knowledgethat, in trade negotiations and giving a trade presence, he has been doing an excellent job andis widely respected. You just have to go around the Canberra diplomatic community and askthem. He is well informed on trade issues and on international issues generally.

Senator COOK—But it is true that a parliamentary secretary—representing a nation likeAustralia that has been primary in the movement of APEC—does not command the same cloutas the minister at a time in which the APEC negotiations have reached a very difficult stage?



Senator Hill—The implication of Mr Fischer’s statement is that if it were not for the specialcircumstances of the end of the budget session and the heavy workload—perhaps if the LaborParty would let through a few of our bills it would help us in that regard—and that it is justnot possible at this time. That happens with all ministers. There are many internationalmeetings that I should attend, but I have to be very selective. I am much more selective thanMr Fischer. I would be interested to do a comparison of his travel with that of previous tradeministers. If you think travel is a critically essential part of the job, which no doubt it is, Ithink you will find that he is pretty high up the list.

Senator COOK—I have never criticised the trade minister for the amount of travel heundertakes. But, in all honesty, I have often criticised him for the priority he assigns to whichtravel he undertakes and to what he sees as important in the agenda—

Senator Hill—That is okay. You can do that; that is part of your job.Senator COOK—I do. It is my job. But does not the government take the point that at a

time in which the budget speech refers to the Asian economic crisis, at a time in which weare looking at lower returns from our trade account than previously, and at a time in whichthe progress in APEC liberalisation is fraught with difficulty and we are in the implementationstage—the stage that is harder to achieve—we are not represented at one of the key meetingsby the actual minister?

Senator Hill—I do not necessarily quarrel with what you are saying. It is consistent withwhat would have been Mr Fischer’s desire. He clearly would have wished to be able to attendthis, but he has a number of different responsibilities. He is leader of one of the major politicalparties in this country. As Deputy Prime Minister he has a responsibility to the parliament.I know what happens when ministers in the Senate do not turn up to answer questions, andI suspect it is somewhat similar in the House of Representatives. There is a heavy workloadbefore the parliament at the moment, and he has had to make a hard decision. If he were aminister that seemed to be shirking his international responsibilities, then you might have somesort of a case. But clearly, on the evidence, that does not apply to Mr Fischer.

Senator COOK—Well, that is an argument—Senator Hill—It is one of those unfortunate things. Sometimes these hard decisions have

to be made and Mr Fischer, in this instance, has put the domestic agenda and his responsibili-ties to the parliament ahead—

Senator COOK—Have you just made a case for someone other than Mr Fischer, who isnot the leader of a party in the coalition and without the same weighty domestic responsibili-ties, becoming trade minister so we can have a full-on representation that we need atinternational fora and at the level we need?

Senator Hill—I do not think it is fair to suggest that Mr Fischer has not given a full-oneffort. I do not know any minister, in all the time I have been here, who has worked harderthan Mr Fischer.

Senator COOK—Well, I can name a few.Senator Hill—I do not know any minister who has worked harder than Fischer.Senator COOK—In the government, that may be true.Senator Hill—Any minister, I said, in the time I have been here. I had 13 years of your

lot; I took that into account. I hear what you say. It is a point to raise. But I do not think itstands an objective test either in the circumstances of Mr Fischer’s record as minister or inthe circumstances of your assessment of Senator Brownhill.



Senator COOK—You are aware this is the second time in 2½ years that the trade ministerhas not appeared at this meeting?

Senator Hill—I understood there was another occasion but, as you said, the foreign ministerattended on that occasion.

Senator COOK—What are the objectives for Australia at the APEC trade ministers meetingin Malaysia?

Ms Fayle—We have a number of objectives. The primary one is to try to pursue the earlyvoluntary sectoral liberalisation agenda to maximise the outcome to the benefit of Australia.In doing so, that is part of a broader desire to shore up the momentum for trade liberalisationin the region in what is a very difficult year. We see that as a very important objective.

We have a range of other objectives. Australia is chairing an electronic commerce task force,which is designed first of all to upgrade the knowledge and information on the implicationsof electronic commerce throughout the region. It will then move on to discussion and then,hopefully, to an agreement on some principles for that to operate in the region.

We are also pursuing some programs on communicating better the benefits of tradeliberalisation, as was mentioned earlier today, and also we have interests in a broad range ofthe economic and technical cooperation agendas that will be discussed at the meeting. But theprimary objective is really to shore up the momentum for trade liberalisation in the region.

Senator COOK—On that score, is it true that a number of APEC member countries areseeking to review their individual agreements in the context of the Asian crisis or for someother reason?

Ms Fayle—Individual action plans—Senator COOK—Yes, the IAPs.Ms Fayle—This is something that is required of every member economy each year. It is

certainly the case that member economies are required this year to review their individualaction plans and to put up new action plans for 1998-99. That process is part way through.At about this time draft individual action plans will be submitted by the various economies.We have not yet seen those draft plans from the economies, so I cannot comment on whatsorts of changes are being made. One would imagine that a number of the economies of theregion have taken a number of liberalising steps as part of their response to the crisis and aspart of IMF packages. We would hope to see some of those steps reflected in their individualaction plans.

Senator COOK—But at this stage there is no indication—or is there—that some of thesecountries might be wishing to walk away from commitments made in earlier IAPs?

Ms Fayle—No, there is definitely no indication at this stage that economies are seeking towalk away from commitments already made. There is an indication that the going will betough to extract further commitments from a number of the member economies simply becauseof the environment that they face at the moment.

Senator COOK—Has the market access facilitator for the automotive industry beenappointed?

Ms Fayle—Yes, he has. His name is Christopher Langman and he was appointed in March.Senator COOK—What is the nature of his duties?Ms Fayle—He is responsible for a broad range of market access activity relating to the

automotive sector. He is part of a broader automotive trade strategy that involves trade



promotion and industrial collaboration elements that are handled out of the industry portfolio.He is really a one-stop shop point of contact for business in that sector to talk about problemsthey are having getting into markets. He coordinates activity throughout our department inareas relating to the WTO and APEC as well as our bilateral desks and our posts. He alsoliaises closely with Austrade and the industry portfolio.

Senator COOK—Whom does he report to?

Ms Fayle—He reports to me. There is also a broader advisory group set up within thedepartment that consists of the two deputy secretaries that have trade responsibilities, Mr PeterHussin from the Trade Negotiations Division and me. The four of us sit as an advisory groupover a number of market access facilitators that have been recently appointed.

Senator COOK—Does he report to anyone in DIST?

Ms Fayle—Not directly, no. However, he does liaise very closely with them. For example,he works very closely with Ian Grigg, who has been appointed as the Prime Minister’s specialautomotive envoy to focus a little more on investment promotion activities and industrialcollaboration activities but also with an interest in market access issues.

Senator COOK—Does Mr Grigg report to you at all or is he just related—

Ms Fayle—No, Mr Grigg is appointed as the Prime Minister’s special envoy. He does reportto a new automotive trade council, which has been established, which has both ministers MrMoore and Mr Fischer on it as well as representation of both the car manufacturers and theautoparts manufacturers in Australia.

Senator COOK—If I can just turn to the Australia Summit. It is on next week, isn’t it?

Ms Fayle—That is correct.

Senator COOK—How many special visitors are being funded by DFAT to attend theAustralia Summit?

Mr O’Leary —The answer to that is none. Some of the senior figures—like Tung Chee Hwafrom Hong Kong, Dr Supachai from Thailand and Mr Lee Yock Suan from Singapore—arecoming as guests of government, but the department is actually not funding any visitors.

Senator COOK—So everyone, apart from those three, who is attending the summit are fullfee paying attendees, are they?

Mr O’Leary —No, a number of the other speakers are being invited by theInternationalHerald Tribune, which is the organiser of the summit. Speakers fees and accommodation arebeing paid by them. In addition, they have arranged some complimentary registrations, butin those cases there is no coverage of airfares, accommodation or the like.

Senator COOK—How much DFAT time has been committed to assisting theInternationalHerald Tribunein organising this summit?

Mr O’Leary —I would say something in the order of 10 or 15 per cent of my time has goneto it in attending steering committee meetings with other sponsors. Another officer has spentabout 10 per cent of her time and one desk officer at ASO4 level has been full time.

Senator COOK—Does DFAT charge that out to theHerald Tribuneor do they just wearthat cost?

Mr O’Leary —That is part of our normal running costs.



Senator COOK—You may need to take this on notice, but when you say that 10 per centof your time and 15 per cent of another officer’s time, I assume that is constantly over all ofthe time that theHerald Tribunehas been designated as the promoter of the summit?

Mr O’Leary —Yes.Senator COOK—Can you give us the number of hours of DFAT officers’ time that has

been taken up in supporting theInternational Herald Tribunesummit?Mr O’Leary —I think we would have to take that on notice and it would be an estimate

only.Senator COOK—I thought you would. As far as the summit is concerned, has the

International Herald Tribunesublet parts or elements of the organisation, presentation ormounting of the summit to any groups?

Mr O’Leary —Yes, they have. They have reached an agreement with Havre and GulliverPty Ltd about making arrangements within Australia for the conference. They have also enteredinto an agreement with Creative Conferences, which is looking after the logistic side ofrunning the conference. I think they also have an arrangement with Graeme Willingham PublicRelations for the media side of it. That has been a more recent activity as the conference getscloser.

Senator COOK—How were those subcontractors, if I can term them that, selected?Mr O’Leary —I do not know—you would have to askInternational Herald Tribune. It was

an arrangement they reached. It was a normal commercial arrangement, I think.Senator COOK—You were not consulted?Mr O’Leary —Not on that, no.Senator COOK—You had no hand in the selection?Mr O’Leary —No; that is right.Senator COOK—A number of government departments, state and federal, are sponsors.

What is entailed in being a sponsor? What is the cost of being a sponsor?Mr O’Leary —The amount of the sponsorship can differ. Commonwealth government

departments and the Victorian government were involved in providing initial seed money forthe conference. The DFAT portfolio provided $250,000—$150,000 from DFAT and $100,000from Austrade. The Victorian government provided $200,000. Those were the initial seedmoneys. Subsequently, DIST provided $125,000 and most recently the Western Australiangovernment has become a sponsor at $50,000. So there is variation, if you like, in the amountsthat government agencies and different state governments have provided.

Amongst the corporate sponsors there has basically been three levels of sponsorship. Thereis what is known as a platinum sponsor and ANZ has provided $250,000. There is a goldsponsorship level. National Mutual and the Pratt Foundation have each provided $125,000.Philips Electronics is a silver sponsor, providing a lesser level of sponsorship at about $50,000.As I understand it, theAustralian newspaper and Australian Television International areproviding at least the equivalent of $50,000. In those cases, if you like, it is in kind throughpublicity for the conference. So the grand totals are: public sponsorship $625,000 and corporatesponsorship $725,000. So there is now a majority of sponsorship from the private sector.

Senator COOK—As far as the sponsorship goes, DFAT is not included in that list?Mr O’Leary —Yes, I mentioned that in the DFAT portfolio $250,000 has been provided.

Of that, $150,000 has been provided by the department.



Senator COOK—Right, and $100,000 by Austrade?Mr O’Leary —That is right.Senator COOK—What does sponsorship entitle you to apart from the publicity? Do you

have a say in the program, the selection of speakers or do you get a given number of officersable to attend free of the registration cost?

Mr O’Leary —Our sponsorship has enabled us to be represented on the steering committeefor the summit, which has met roughly at two-monthly intervals, except for the last few monthswhen it has been monthly as obviously the preparations have become more intense. So it hasenabled us to have a major say in the content of the program for the summit. We were fullyconsulted in that and obviously made a significant contribution to it. We have also had asignificant role in relation to speakers at the conference. It goes without saying I think that,in relation to the range of high level speakers from other governments, DFAT was instrumentalin having them come to the conference through our international network.

Senator COOK—Do you get any free spots at the conference or do you have to pay?Mr O’Leary —No, I think you would find the Prime Minister and the Minister for Trade

are invited simply because of their positions.Senator COOK—What I mean is: are any DFAT officers able to attend the conference free

of the registration fee?Mr O’Leary —I forget the exact number now, but I think we have got somewhere between

15 and 20 complimentary registrations for attendance at the conference.Senator COOK—Are any of the DFAT officers having to pay a registration fee?Mr O’Leary —I would have to check that. I think there are one or two who have chosen

to do so. For example, I am aware that the head of our state office in Western Australia choseto register in that manner.

Senator COOK—They were outside of your quota of freebies?Mr O’Leary —I think it was done independently. When she knew that the Western

Australian government was going to be involved, she just decided to register. She has her ownresources. But as it happens, the quota that we have had, which is about 20, we have filledwith people from the relevant areas in Canberra and indeed with a number of our heads ofmission who are coming back for the purposes of the meeting, often accompanying ministerswho are attending.

Senator COOK—Are you including the cost of recalling your heads of mission toaccompany ministers or other guests from particular countries in the $250,000 that you haveput in or is that an additional charge?

Mr O’Leary —That would be additional, but it is customary certainly when heads ofgovernment come back—if you like to regard for these purposes Tung Chee Hwa as beingin a special category—for the head of mission to accompany them. The others would be doingso from their own travel funding. We in Canberra are not actually funding that.

Senator COOK—But it is a cost to the taxpayer.Mr O’Leary —It is coming from the post, yes. But a number of those things would happen

fairly normally with ministers of that level coming out to Australia anyhow whether it werefor the summit or for some other bilateral purpose.

Senator COOK—But Supachai, for example, is coming for the summit?



Mr O’Leary —I think in practice he is. He was actually invited to do a wider visit but hashad to limit it just to the summit because of constraints on his time.

Senator COOK—Can I have a list of what the costs are of this particular extra support—Ido not mean this pejoratively—the hidden support, the cost of bringing back diplomatic peoplefrom overseas posts to support the activities of the summit?

Mr O’Leary —Yes, we would have to obtain that.

Senator COOK—Thank you. The registration cost is $1,200 a head for anyone registering.Is that the right figure?

Mr O’Leary —That is right in part. There are different categories of registration. Those whowere 1996 NTIOC delegates as well as any pastInternational Herald Tribunedelegates atother summits they have organised or indeed IHT subscribers come in at $900. Anyone whoregistered before 1 April—they had a sort of early bird registration to encourage earlyregistration—do so at $960 and the rest at $1,200. So they have had different rates.

Senator COOK—Do we know how much theHerald Tribuneis putting into this?

Mr O’Leary —I do not, no.

Senator COOK—But if you happen to be a subscriber you get it cheaper than if you arenot a subscriber, so for them it is a marketing device as much as anything.

Mr O’Leary —Possibly so. They are a commercial business.

Senator COOK—What are the enrolments at this stage?

Mr O’Leary —My understanding is that they are currently around 450.

Senator COOK—Which compares to—not last year; we did not have one last year—theyear before?

Mr O’Leary —The number of delegates who attended the 1996 NTIOC were, accordingto the information that has been provided to me, 1,076, of which 370 were governmentofficials and secretariat staff—

Senator Hill—How many? Can you just repeat that?

Mr O’Leary —Three hundred and seventy were government officials and secretariat staff,bearing in mind it was a government-run conference. All the logistics and what have you wererun by the government.

Senator Hill—Three hundred and seventy? Senator Cook, was that yours?

Senator COOK—No, it was yours.

Senator Hill—No wonder we changed it.

Senator COOK—I do not know why you have reached that conclusion, Minister. Are yousuggesting that the department loaded up unnecessarily the representation of governmentpeople?

Senator Hill—I think it is a very large number.

Senator WEST—How many in the department?

Senator COOK—That is what we are looking at in terms of enrolments of the businesssector from those figures. There are 400-plus now compared to 706 the last time NTIOC washeld.



Mr O’Leary —Some 129 were employees of the sponsors last time. Obviously some of thosewho have registered this time would be in that category, but I do not have the break-up at thispoint.

Senator COOK—So we are looking at about 250 more at NTIOC than are enrolled at thisstage—and there will probably be some late enrolments—for this private sector bash.

Mr O’Leary —That is probably correct, but we do not know the final figures yet. There isa tendency for these conferences to get a lot of registrations towards the end when peopleknow what their commitments are and they make up their mind. We do not know the fullfigure yet.

The other point I would make about the enrolments so far, just looking through the lists thathave come to us, is that there is a definite trend towards higher level participation from theprivate sector this time in comparison with the previous occasions, which I assume hassomething to do with the level of the participants coming from abroad as well as presumablythe subject matter of the conference, which is heavily focused on the Asian financial situationand its impacts on us.

Senator COOK—The level of participation from abroad and the subject matter do notdepend on whether it is done by the government or by theInternational Herald Tribune. Itis an independent issue of those. As to the point you make about the Asian crisis, these figuresfor enrolments do look a bit low, do they not, in comparison to the impact that is having onthe Australian economy and the number of companies that are affected by it in Australia?

Mr O’Leary —I cannot answer that, Senator. I guess it is up to people to decide whetherto register or not. Certainly I know that the organisers were looking at a target range of about500 and expect to get there.

Senator COOK—Will DFAT be doing any assessment after the Australia Summit of thesuccess of it compared to NTIOC or any other criteria?

Mr O’Leary —We will certainly be doing an evaluation of the conference. I would imaginesome comparisons will be made with NTIOC, although the people who are running the summitnow from our perspective are not the same people who were handling NTIOC. Just how goodthose comparisons will be, time will tell. But we certainly will do some comparative analysis.

Senator COOK—The question for the taxpayer, though, is whether this is the best way ofgetting the maximum bang for the buck in promoting Australian trade.

Senator Hill—The best time to judge that is afterwards, is it not?

Senator COOK—You can judge it beforehand according to the number of enrolments. Thatgoes to the reach of the conference.

Senator Hill—Except your model resulted in 350 officials going.

Senator COOK—No, that was your model.

Senator Hill—No, it was not. We rolled over your model; that was our mistake. That iswhy we have now changed the format.

Senator COOK—Is that why you changed it? You did not chop down the number of publicservants—

Senator Hill—We changed it, as you know, for a number of reasons. The first reason wasthe cost. What was the cost of the old model to the taxpayer?



Mr O’Leary —Over the four years the direct Commonwealth funding for NTIOC was $6.1million and indirect costs—which I assume include the salaries of a lot of people who wereinvolved in preparing it—were a further $5.9 million.

Senator Hill—We have discussed all these things before. Secondly, there was the view thatit had become tired and it needed a new format. Thirdly, there was the view that, if it was runby the private sector, it might achieve a different mix of representation. It sounds as if thatmay be occurring.

Ms Fayle—One of the main reasons was that the private sector themselves had indicatedthat they wished the private sector to play more of a role in running, organising and decidingthe agenda for the conference.

Senator Hill—Your philosophy is that the government needs to run all of these things, butwe have a different approach.

Senator COOK—That is not my philosophy.Senator Hill—It was the policy of your then government.Senator COOK—No, with NTIOC I think you will find that quite a deal of emphasis has

been put on finding commercial sponsorship for it and meeting a lot of the costs by involvingthe private sector. There is no point in debating the models between us here, but the questionfor your government for this amount of public expenditure in both direct costs and otheroncosts or hidden costs is whether we are succeeding effectively in the goal of promotingAustralia and trade opportunities in Australia. That goes to a range of other criteria. If theInternational Herald Tribuneis charging a lower rate for its subscribers, clearly it is amarketing opportunity for them and they get some commercial advantage out of it. But, if theyare getting a big commercial profit out of it, that is a matter for consideration too, I wouldhave thought. It goes to whether there is a better way of doing things.

Senator Hill—We do not mind them earning a profit. It encourages good performance.Senator COOK—You do not mind a foreign company running an Australian trade

promotion.Senator Hill—If it advances Australia’s interests, I do not mind.Senator COOK—That is the question. I have no further questions under this section, Mr

Acting Chairman.ACTING CHAIR (Senator Hogg) —If there are no further questions, we move to

subprogram 1.7—Global issues.[4.52 p.m.]

Subprogram 1.7—Global issues

Senator COOK—A major subprogram priority for 1998-99 under this section is to establishpositive relations with the new Indian government in support of foreign and trade policyobjectives. Did the Prime Minister congratulate the Prime Minister of India on his election?

Ms Hewitt—Senator, I think we might have incorrectly perceived programs. I understandthat we have moved to subprogram 1.7, which is global issues.

Senator COOK—That is right.Ms Stokes—The South Asia people are not here. We can talk about the nuclear test issue

but in terms of the—Senator COOK—The nuclear test issue is a global issue.



Ms Hewitt—That is right. The bilateral India relations are handled under South Asia.

Senator COOK—I see. What our Prime Minister may have said to their Prime Ministeris not a global issue; it is a bilateral issue.

Ms Hewitt—That would normally be handled in the bilateral area. I do not think there isanybody still here who could help at that level of detail. We could certainly take questionson notice.

Senator COOK—I guess the point of my question when we come to it is whether therewas any discussion at all between the two leaders about nuclear weapons and weapons testing.

Ms Stokes—I am not aware that there was such a discussion but we can take that on notice.What I can tell you is that after the new Indian government came to office we maderepresentations specifically on the nuclear matter. We did that through our high commissionerin New Delhi. He called on the Indian minister for defence and on the senior principal adviserto the Indian Prime Minister and spoke to him about our concerns on nuclear matters.

Senator COOK—What is your assessment now that both India and Pakistan have hadmultiple tests? What is your analysis now of the situation in the subcontinent?

Ms Stokes—I think we have a whole series of concerns. There is obviously a heightenedlevel of tension in the South Asian region. That is obviously of considerable concern not onlyto Australia but also to the international community more broadly. We have a second set ofconcerns which relates to encouraging both India and Pakistan to cap their weaponisationprograms, and that is again an international concern that Australia shares. Thirdly, we are veryconcerned to take as many actions as we can to shore up the international nuclear non-proliferation regime. Obviously the tests that India and Pakistan have undertaken presentserious challenges to that regime.

Senator COOK—How do you categorise the situation? Are we in a holding pattern now?

Ms Stokes—I would like to think we are in a holding pattern. I think it is unclear. Thereare a number of actions being taken internationally. You would be aware that the P5 at theministerial level met last week. There is a G8 meeting later this week in London. The effortsby the international community focus very much at drawing to India’s and Pakistan’s attentionvery clearly the international disapproval of what they have done and to ensure that theyrecognise their status is not going to be increased by the actions that they have taken. I thinkthat is the stage we are at now. We are certainly encouraging India and Pakistan to showrestraint.

Senator COOK—Do we think India might undertake further testing?

Ms Stokes—We could not rule that out.

Senator COOK—Do we think Pakistan might undertake further testing?

Ms Stokes—We could not rule that out.

Senator COOK—Both are open questions.

Ms Stokes—Yes.

Senator COOK—What prospects do you see for India or Pakistan signing the nuclear testban treaty or the non-proliferation treaty?

Ms Stokes—We would like them to do that.

Senator COOK—I think everyone else in the world wants them too as well.



Ms Stokes—According to the Indian government’s statements on this matter, they applyconditions to signing, and at the moment the international community is not prepared toaccede to any of those conditions. We want to encourage them to consider that and certainlyto sign onto the comprehensive test ban treaty. We are certainly encouraging both India andPakistan to participate in negotiations on a new treaty, the fissile material cut-off treaty. Indiahas made some statements that suggest they would be prepared to participate in suchnegotiations. We certainly encourage that to happen.

Senator COOK—Do we just wait and see?

Ms Stokes—No, we are not just waiting.

Senator COOK—I am not trying to put words into your mouth. I am just trying to get anidea of what our posture is.

Ms Stokes—Our posture in relation to India and Pakistan in terms of the tests that they haveundertaken is very clear. The government’s view on that is very clear on the record and hasbeen made through press releases that have been put out. We are continuing to workmultilaterally to continue to put as much pressure as we can on India and Pakistan. Forexample, I will mention some of the actions that we have taken. Australia and New Zealandtook the initiative to propose that a special session of the conference on disarmament be heldin Geneva last week. That was very successful in arriving at a statement expressing veryserious concern about what India and Pakistan have done. Forty-seven countries joined insupporting that statement.

There have been two Security Council presidential statements on testing. There has also beena very strong Security Council resolution on the tests and the situation in the subcontinent.There will be action, we hope, this week in the board of governors of the International AtomicEnergy Agency. We have also raised this issue in the ASEAN Regional Forum, ARF, at thesenior officials’ meeting, and we will continue to raise these issues in that forum. We are alsoaware that the South Pacific Forum has expressed their concern.

So this is just an indication for you, Senator, of the level of international concern about thetests. We also recognise that there is the need to look at longer term issues about the nuclearnon-proliferation regime and to ensure that that is strengthened and not weakened. With theUnited Nations, we are exploring with the disarmament area of the United Nations thepossibility of Australia supporting a 1½ track process to help explore the issues that have beenthrown up by the tests.

Senator COOK—Is there any concern that China, India’s other neighbour, might now gointo further testing?

Ms Stokes—I think some commentators have expressed that concern. We have no reasonto believe that—

Senator Hill—I am sorry, go into what?

Senator COOK—Into further testing.

Senator Hill—Is there any indication that China would?

Senator COOK—Yes.

Ms Stokes—No. Some commentators have said this, but we have seen no indication of that.I believe that the Chinese government made a statement last week or this week that they wouldnot be doing that.



Senator COOK—I imagine that satellite scrutiny of India and Pakistan has improved sincewe all got caught short on these testings in India’s case. Are we aware of any other nationin the world, some nascent nuclear power, that might be emboldened by these tests by Indiaand Pakistan and now want to test as well; or is this the end of it, as far as we know?

Ms Stokes—We would hope that it is the end of it. But, of course, those states that havebeen known as threshold nuclear states still exist. You would be aware of the action that theinternational community has taken in relation to Iraq.

Senator COOK—Yes.Ms Stokes—There are concerns that these threshold states might be emboldened, as you

say. There is no immediate evidence of that, but I think the international community iswatching developments in those countries very closely.

Senator COOK—Is it right that India—and then, separately, Pakistan—because of theAustralian reaction to their tests, have threatened some retaliation against us?

Ms Stokes—I myself am not aware of that.Senator COOK—It was reported to me—and this was by a press person, I must say; they

asked me a question on it—that India had told Australia that, because of our cessation ofmilitary cooperation with them, they would take action against us in retaliation for us doingthat. You are not aware of that?

Ms Stokes—I think I am aware that they issued a statement saying that they were goingto withdraw military cooperation, but we had already—

Senator COOK—We had already broken it off—Ms Stokes—Yes, that is right.Senator COOK—and then they were going to break it off.Ms Stokes—Yes. So I am not aware of anything in addition to that. That does not mean

that there is not something. The South Asia people would know that definitively.Senator COOK—In so far as Pakistan is concerned, is that still the case too—that no

sanctions are being taken by Pakistan against Australia?Mr Stokes—I am not aware of any.Senator COOK—I have no further questions.Senator WEST—Is this an appropriate place to raise the issue of child labour?Ms Hewitt—Really, I think that would have been better handled under the multilateral trade

program, which we have already dealt with.Senator Hill—What is the question?Senator WEST—It relates to the use of child labour in the production of medical equipment

such as forceps, and things like that. The World Federation of Trade Unions in Brussels hasevidence that a number of countries are indulging in this process, this practice.

I am wondering what the department’s attitude is, what it is doing? I presumed that this issuewould come under the subprogram of global issues because all the other things we do withthe United Nations come there. Why doesn’t this issue come under that subprogram, becausethis is an issue that is of major significance in some areas.

Mr Rich —The issue of child labour is primarily handled by the International LabourOrganisation. The Australian government department that principally liaises with the ILO is



the department of workplace relations. But I can tell you that the ILO has established aconference to negotiate a new instrument on child labour. It is an instrument that will belooking at the ‘most hazardous’—I think is the term—forms of child labour. Those negotiationswill begin in the next few months.

Senator WEST—Why doesn’t the Department of Foreign Affairs take some role in the issueof child labour? Whilst it is a labour issue, we do not have workplace relations people in allposts around the world.

Mr Rich —No.

Senator WEST—What does foreign affairs do to ensure that our abhorrence of child labouris registered with those countries where it is discovered?

Mr Rich —I was referring to the multilateral negotiations that are taking place. On thebilateral side, a lot of our posts are investigating the situation and reporting back to Canberra;and, through the aid program, a number of initiatives have been undertaken to try to addresschild labour problems. I think the AusAID people could elaborate further on that.

Senator WEST—The case that was brought to our attention in Brussels was medicalequipment. It was happening in Pakistan, where children who—from looking at this video—would not have been much more than five or six were working on grinders to grind down littleforceps, clamps and things. Given that we have stopped aid to Pakistan as a result of theirnuclear testing, haven’t we, I am wondering where we go, what we do?

Ms Stokes—I would just mention that we have not stopped aid to Pakistan. ‘No new aidin non-humanitarian areas will be entertained’ is the policy in Pakistan. So there is a smallaid program there of about $3 million or so a year.

Senator WEST—But I am wondering what the department’s policy is on chasing this up?What is the policy of making sure that this issue is pursued within all the other United Nationstreaties and in the United Nations as in New York. The ILO is at Geneva. What goes on?

Mr Rich —We believe that the ILO is the principal organ to deal with child labour issues.But there are other organs that also investigate these issues. Perhaps the most effective of thosewould be the committee established under the Convention on the Rights of the Child. Thatconvention has near universal membership in the international community. One of theobligations of states is to produce reports, I think every five years, on the implementation ofthe convention in their domestic situations. The committee established under the conventionwill question the governments of those countries on their report, including on issues coveringchild labour.

Senator WEST—Has Australia ever questioned on that issue?

Mr Rich —I am of the understanding that Australia does not have a representative on thecommittee. I do not think we are on the committee. So it is not a process wherebygovernments can question; there is a committee of experts elected by the United Nations thatdoes the questioning.

Senator WEST—Does the issue of child labour ever get raised?

Mr Rich —Child labour is certainly one of the issues that is covered by the Convention onthe Rights of the Child.

Senator WEST—So you are saying it is not a DFAT area to cover?



Senator Hill—No, he is not saying that, because that is administered through DFAT. Thechild labour in the sense that you are putting is clearly child abuse. It is something that weobviously all find abhorrent.

The issue is: how in intergovernmental relations we can help contribute to changingpractices. A number of vehicles in the multilateral sense have been put to you as ways inwhich we can hopefully have influence. One is through the ILO process; another is throughthe rights of the child process—although it seems that our influence is reduced by the fact thatwe do not seem to be on the committee at the moment, but I guess that is a rotational thing.

Mr Rich —It is.Senator Hill—Do we make representations on a bilateral basis?Mr Rich —We do. I can provide you with details of recent representations. It is an issue

that is of concern. It is an issue that I think has been of particular concern to AusAID because,rather than just criticise, we would like to be able to do constructive things to affect thesituation on the ground.

Senator WEST—Yes, because an additional factor is that such children are often the soleproviders of income for their family. So I recognise that as being a problem too, but I alsorecognise the whole issue. From memory, I think that it was an evolving issue that they werediscovering—

Senator Hill—I do not think it is a new issue.Senator WEST—in that particular medical equipment industry; they thought it was a new

evolution. While we are on these sorts of things, what is happening with CEDAW? Have wemade a report?

Mr Rich —Yes.Senator WEST—How far overdue are we in our report?Mr Rich —We actually caught up on CEDAW. We reported, and I believe that the report

was examined by the committee last year. Where we are behind is on several other of ourtreaties—on the report we have to produce for the human rights committee under theInternational Covenant on Civil and Political Rights. That is the responsibility of the Attorney-General’s Department, and I believe that they are very close to submitting the overdue report.

The Department of Foreign Affairs and Trade is responsible for two reports. One is underthe International Covenant on Economic, Social and Cultural Rights. That report has now beencleared by the minister, and has been the subject of consultations with the community. Thatwill be lodged in the next day or so, actually. The final report we are responsible for is thereport under the Convention for the Elimination of Racial Discrimination. That is certainlyunder preparation. We now have the first draft under way. We hope to have consultations withthe community in the next couple of months.

Senator WEST—Had we achieved anything in the CEDAW report?Mr Rich —The CEDAW report is primarily the responsibility of the Office of—Senator WEST—Status of womenMr Rich —Yes, in the Prime Minister’s department. I think I had better not trespass on their

grounds.Senator HOGG—I just want some direction as to where I can ask a question on the broader

issue of piracy—not the specific issue that Senator Cook was referring to earlier this morning.Is this the correct place?



Ms Hewitt—We can try it, Senator.Senator HOGG—It is just that I tried with Defence yesterday. They tried to give it the

quick flick, and they told me that this may well be the place for this issue.I am concerned with the recent issue of piracy in the South-East Asian area. I note from

one of the clippings that I have been provided with that figures are kept by the InternationalMaritime Bureau’s Piracy Coordination Centre in Malaysia. I do not know the organisation,but it shows that in 1996 there were 228 piracy attacks; in 1995, 188; in 1994, 103; in theyear before, 106; and in 1992, 107. So it seems that there is a growing incidence of piracy.

My concern is about the safety of the sea lanes to the north which carry many of our exportsinto the Asian region. When I asked Defence about this issue, I was given to understand thatthey seem to have some interest in it but not the total interest. I am wondering who isresponsible for examining this issue of piracy, coordinating our role at an international level?Do we have any input into organisations such as the International Maritime Bureau’s PiracyCoordination Centre? What are we doing to safeguard our sea lanes to the north? And whatcooperation is there with Defence on the issue?

Mr Rich —Your first question was who handles that issue. The issue of the safety ofinternational navigation is handled by what used to be the department of transport. I think itis now part of the department of workplace relations. It has responsibility for liaison with theInternational Maritime Organisation, which has a committee on the safety of navigation whichdeals with piracy issues generally in terms of setting the standards and the responsibilities ofthe international community. There may also be regional approaches to some of the piracyissues, and I know that in South-East Asia the ASEAN countries have certainly been discussingthe issue of piracy and actions that they can take.

Senator HOGG—Has that involved DFAT?Mr Rich —We may well have been involved in some of those discussions, but I would have

to take that on notice.Senator HOGG—I would appreciate that. The example quoted in this article is of a concern

by the owner of a liquid natural gas tanker which plies from Dampier to Japan via Singapore.They are saying that the larger vessels have a higher pitch out of the water, have greater speedand are not as vulnerable; nonetheless, there seems to be a growing incidence of piracy anda growing threat there. It seems to me that it does fall to a certain extent within the purviewof this department, even taking your earlier advice.

Mr Rich —If I can just provide a very brief legal perspective, piracy is an international crimewith universal jurisdiction—that is, any country has jurisdiction to arrest a pirate vessel andthat provides a large scope for dealing with the issue. But the tendency has been for theregional countries involved—that is, the coastal states closest to the areas where the piracyactions are occurring—to take the principal responsibility. That would be Thailand, Malaysiaand Singapore in this case.

Senator HOGG—So you are saying that the department of workplace relations—Mr Rich —Deals with the International Maritime Organisation, which is the international

body responsible for safety of navigation, including piracy.Ms Hewitt—I have just been advised also that some discussions are planned in the ASEAN

Regional Forum, the ARF, with which we and our Defence colleagues are involved. I wonderwhether the best way to proceed might be for us to undertake to consult our colleagues inWorkplace Relations and in Defence to try to give you a more coherent answer.



Senator HOGG—I would just like to get a unified view of this because it seems as thougheveryone has a finger in the pie but no-one seems to have complete control.

Ms Hewitt—Yes, there are a number of different perspectives. If we could take away yourgeneral concern about the issue, its handling and initiatives that might be in train, we willcome back to you with an answer.

Senator HOGG—It raises the other issue of the need for commitment of any of our defenceforces as part of a coordinated attempt to either eliminate or protect the sea lanes as they doexist.

Ms Hewitt—If we could take that on notice, I am sure my colleagues will be able tocoordinate that for you.

Senator COOK—Is this the area where I raise the old chestnut of the Patagonian toothfish?

Senator Hill—It is. It is a fish not a chestnut.

Senator COOK—It is a mixed metaphor. I was waiting for someone to pick me up; Ithought I had better pick myself up. What progress have we made? Have we got the agreementbetween South Africa, Australia, New Zealand and anyone else who was going to be in it topursue into each other’s territories people fishing in our territory?

Mr Rowe—The subject of illegal fishing, particularly of the Patagonian toothfish, continuesto be of great concern to us. We have been quite active in pursuing discussions andconsultations with like-minded countries in the period since we last discussed this at the lastSenate estimates committee meeting.

One development, for example, is the apprehension in February of another vessel fishingillegally around the Heard and McDonald islands. That vessel was apprehended. It was a vesselregistered in the Seychelles and it was taken to Fremantle. Prosecutions have been institutedand they will be heard in October this year. That makes it three vessels in the last nine monthsthat have been apprehended fishing for the Patagonian toothfish in Australian waters.

In terms of specific measures, we have continued to consult. The most recent was at theAntarctic Treaty Consultative Meeting, which was held in the last two weeks in Tromso,Norway, with Antarctic Treaty parties, on the subject of illegal fishing in Antarctic waters.We are working actively with those parties in the lead-up to the October meeting in Hobartof the CCAMLR—the Commission for the Conservation of Antarctic Marine LivingResources—to try to gain support for increased enforcement measures and cooperation betweenstates to combat this problem.

As you know, this subject has been on that CCAMLR agenda in the past and we have beenadvocating tighter controls by the flag states of the vessels that are also those flag states whenthey are members of the commission. The agreements in the commission were, firstly, torequire vessels that are registered in their countries to have the VMS—the vessel monitoringsystem—whereby these vessels can be tracked; secondly, to impose controls of a market accessor certification nature on the import of toothfish to ensure that any Patagonian toothfish thatmight be brought onto a local market is legally caught rather than from illegal catches; and,thirdly, to try to ensure that the nationals of the states that are members of the commissionare subjected to more stringent controls in relation to activities that they might conduct infishing for these vessels. That puts the onus very much on the national regimes to institutemeasures vis-a-vis their own nationals. Those are measures that we are continuing to advocatewithin the context of the Commission for the Conservation of Antarctic Marine LivingResources.



In addition, as you mentioned, there is the grouping of east Antarctic coastal states that hada meeting in Cape Town a few months ago. The outcome of that meeting was that the fivemember states will continue to consult actively on ways to introduce more stringent measuresto combat this type of fishing. That is an ongoing process. In addition, we are continuing to—

Senator COOK—Can I just pause you there for a moment, and I do not want to interruptyour flow. It is an ongoing process. How likely is it that we are going to conclude a treatyto join forces to knock off the people poaching in our areas?

Mr Rowe—I think it is going to take some time to actually conclude a formal instrumentbecause, while the intent is there, there is still the need to actually reach agreement on thespecific elements of any such treaty.

Senator COOK—Until we have a formal instrument, nothing will happen between thenations to join forces to knock off the poachers?

Mr Rowe—At the moment, quite a lot of informal cooperation is going on—for example,with the French, which we have discussed before. That has proved very effective in, forexample, the three arrests that the Royal Australian Navy has conducted in the Heard andMcDonald area. So there is an informal level of cooperation and information exchange, forexample, which has proved successful.

What we find, though, is that at the moment there needs to be quite a lot more work doneon the actual measures—fleshing those out and achieving agreement internationally within thedifferent groupings that I have referred to. We are hopeful that at this October meeting of thecommission I referred to that there will be more support for the types of measures that we havebeen advocating, leading particularly to a formal agreement to cooperate in that context. Yes,it is ongoing and there is nothing formal at the moment, but all the efforts that we are takingare designed to achieve such an outcome.

Senator COOK—What is the status of the legal action being taken against the poachersthat we arrested last year? Their ships are still in Fremantle, aren’t they?

Mr Rowe—There were two vessels. One was registered in Belize and the other in Panama.The actual court proceedings will be heard respectively in June and July this year. The vesselregistered in Belize was released on bond. The vessel registered in Panama is still being heldin Fremantle because the bond was not secured. The actual prosecutions fall within the scopeof another portfolio and are being conducted under the Fisheries Management Act, which isnot an act that the Minister for Foreign Affairs has responsibility for. I can confirm that thecourt proceedings will be going ahead in relation to those two vessels. As I mentioned earlier,in relation to theBig Star, which was apprehended in February, the proceedings will be heldin October. The intent, as I understand it, is to prosecute these vessels rigorously because theywere caught red-handed.

Senator COOK—The issue that the Australian fishing interests raised with me, and whichI mentioned last time we discussed this matter, is that it is one thing as to where the ships areregistered and it is quite another thing where the ships are owned. They believed that the initialtwo that we arrested were owned in Spain and in one of the Scandinavian countries.

Mr Rowe—There is a suggestion that the second one was owned in Norway.

Senator COOK—And that the European Union has internal rules about entities that arecaught breaking international treaties such as this. Have we raised this matter with theNorwegian or Spanish governments? Do we know in fact that these vessels are owned in Spain



and Norway? If we do, have we raised those questions with those governments to draw theirattention to the likelihood of an offence?

Mr Rowe—We have raised with Norway, in the context of illegal fishing generally, ourconcerns that, when a vessel is apprehended illegally fishing, the state where the vessel isowned should take responsibility in relation to such illegal activities. In relation to Spain,though, we have not directly raised the matter with the Spanish authorities. In terms of theactual measures that you alluded to, we are not certain that those measures actually wouldapply in these cases.

Senator COOK—What the Australian fishing interests raised with me is that we spend alot of money catching these people but the penalties imposed on them are not a sufficientdeterrent to discourage them from coming back. Essentially, their point is that, the moremassive the deterrent, the less likely it is they will come back and poach. The issue of whatthe Europeans might do to their own if they caught them breaking European Union laws isan element in the level of penalty. I do not know if you have any comment on the point ofview of the Australian fishing interests or not.

Mr Rowe—I would just say that the penalties that are applicable to vessels caught illegallyfishing are very severe and in themselves, certainly in a monetary sense, would be quite adeterrent, I think, to any commercial fishing enterprise. More generally though, as I mentioned,the approach we have taken is to try to build support within the various groupings that I havereferred to for national states to take illegal fishing very seriously by imposing nationalmeasures. We think that is a very valid and potentially productive course to take, because ifwe can get countries where vessels are registered or where it is shown that the vessel is ownedto take stringent measures nationally, that is going to be a positive way to tackle this problem.

ACTING CHAIR (Senator Payne)—As there are no further questions, and no questionson subprogram 1.8, we will go onto the next subprogram.

[5.31 p.m.]

Subprogram 1.9—Information and cultural relations

Senator HOGG—There was a recent bid by Queensland for the 2002 World Expo on theGold Coast. That bid, as we now know, was unsuccessful. Was there any assistance given tothe bid by DFAT or any of the officers of DFAT, whether here or overseas?

Ms Dunn—The department provided assistance through the work, in particular, of its postsin backing the bid for Expo 2002. There was some supportive work within the department,but my understanding is that our activities were primarily directed through our embassiesoverseas.

Senator HOGG—Is it normal, in the case of something such as a world expo, to play, fromwhere I sit, a seemingly low key? As I read it, it was expected to pump at least $500 millioninto Queensland’s economy. The net benefit, or the economic benefit, was projected at around$1.1 billion, and they were talking about between eight million and 11 million people, manyof whom would have been local but a number would have been from overseas. There alsowould have been flow-on benefits throughout other parts of the Australian economy. Is it notusual, therefore, to put some effort of the resources of DFAT, other than in just a pure backupmechanism, at the post where the decision is being taken on these things?

Ms Dunn—I did not want to diminish the activities of the department. The campaign wasspecifically conducted by the Queensland government. In fact, the department seconded twopeople to the Queensland government to assist them in their campaign.



Senator HOGG—That is what I was looking for.Ms Dunn—It had the full backing of the government.Senator COOK—That is of the Commonwealth government?Ms Dunn—The Commonwealth government, yes.Senator HOGG—For how long were those two full-time officers appointed?Ms Dunn—One was appointed for 18 months and the other for six months. My

understanding is they were paid by the Queensland government.Senator HOGG—But those people then would have had access back into DFAT resources

to assist them in their role in assisting the Queensland government?Ms Dunn—Absolutely, and that is why they were seconded there.Senator HOGG—What sort of role would the local embassy have played on the ground

in trying to harness support for the Queensland bid? Any at all?Ms Dunn—I am fairly new to this job, but my understanding is that they were very active

on the ground. They made representations to the relevant officials in the respective hostgovernments, at the ministerial level and down. They were active right up to the last day.

Senator HOGG—I am glad to hear that, because the report on 6 June in theCourier-Mailtells us that three or four votes either way would determine whether it was held at the GoldCoast or in Manila, and yet, when it went to the vote, it was tied. Ultimately, we lost by 43to 35, according to the report in the CanberraSunday Times. Do we know why we failed inour bid?

Ms Dunn—We are having a look at that now. We may never fully know why. Ourpreliminary indication seems to suggest that there was support for the Philippines, as adeveloping country, to hold Expo 2002, and the fact that Australia already has quite a highinternational profile in terms of international events through the Olympics. We also held anexpo in 1988.

Senator HOGG—So when do you think that analysis will be concluded?Ms Dunn—I cannot comment on that.Senator HOGG—When it is concluded, I would be interested in seeing a copy of the report.Senator Hill—Were you going to prepare a report?Ms Dunn—There was no intention to do anything like that at this stage.Senator HOGG—If you could give me some advice as to what the reasons were, if there

is no formal report, I would appreciate that.Senator COOK—Minister, why did the Commonwealth government fail to give any more

assistance to Queensland to help it in what was obviously a very economically important bidfor its state?

Senator Hill—What did the Queensland government seek of the Commonwealth?Ms Dunn—I would have to follow up on that but, from my reading of the documents over

the last few weeks, the government gave an extremely high level of support and was veryactive in backing the Queensland government, wherever it could. As far as I can see, it hasbeen raised at least at one ministerial meeting that I have seen and, I am sure, many others.So we feel that we gave very strong backing to the bid.

Senator COOK—So the Queensland government bungled it. That is fine.



Senator Hill—No, your question is falsely premised.Senator COOK—We are saying the Queensland government bungled it. If we are that close,

the extra effort could have made the difference between winning and losing.Senator Hill—Who says that? Who says the extra effort would have made the difference?

What is the evidence for that?Senator COOK—It is self-evident.Senator Hill—No, it is not at all. We are still trying to assess why we lost. Sometimes with

the greatest effort you still lose, Senator Cook.Senator COOK—Do you? I think a special effort was required in these circumstances,

Minister, but it was not forthcoming.[5.39 p.m]

Program 2—Passport and consular servicesSubprogram 2.1—Passport services

Subprogram 2.2—Consular services

Senator COOK—I understand the government has issued new competitive tendering andcontracting procedures which DFAT is bound to take into consideration in seeking the supplyof blank passport books. Is that true?

Mr Tyson—Yes, we abide by the guidelines for procurement, and we have done that inrelation to the recently signed contract with Leigh-Mardon on the provision of passport book-lets.

Senator COOK—This was a contract for one year, was it?Mr Tyson—This is a five-year contract. It replaces the existing one-year contract, which

was entered into when Leigh-Mardon purchased that component of AGPS in the middle oflast year.

Senator COOK—When this new five-year contract was let, can you describe to me whatthe procedure was? How did you go about calling for tenders for this?

Mr Tyson—We had kept our options open in relation to whether we would go out to tenderat the end of the 12-month period or whether we would seek a new and perhaps longer termrelationship with Leigh-Mardon. In the course of considerations, we took account of the factthat Leigh-Mardon’s production was of a high standard and of a comparable standard to thatwhich we had received before from AGPS. We took account also of the fact that there hadbeen a rigorous tendering process in the middle of last year, and Leigh-Mardon had, obviously,been the successful tenderer.

We considered whether we had some additional leverage because of the fact that Leigh-Mardon had purchased the Uno binding line—the production facility—in Kingston and thatwe were, by far, their largest customer. We thought it would be worthwhile negotiating withLeigh-Mardon to see whether we could arrive at a longer term contract. We did have sucha negotiation, and we were happy with the outcome of that. We felt there were some aspectsof the contract which we negotiated which would have been very hard to extract from an opentendering process, and so we agreed on a longer term contract last month.

Senator COOK—If I can get this right, they had a year’s contract and now there is a five-year contract?

Mr Tyson—Correct.



Senator COOK—Were you aware of any other possible tenderer for a five-year contract?Mr Tyson—Not specifically for a five-year contract. Clearly, we were aware that there had

been other tenderers 12 months ago at the time that that part of AGPS was sold, but we werenot aware of a specific interest in a five-year contract.

Senator COOK—Did you let the so-called market for the potential suppliers of these blankpassports know that a contract would be not a one-year but a five-year contract?

Mr Tyson—As I recall, in the context of the procedure last year, it was made clear to thetenderers at the time that the initial contract would be for one year, and no undertakings weremade beyond that one year. I should say that, in our own case, when we were not involvedin the actual process other than being asked whether we had a particular interest in what periodthat initial contract should be for, we said at the time that we would prefer it not to be alengthy contract. We wanted to be able to assess the performance of whoever won the initialcontract.

On the other hand, it was decided that fewer than 12 months might restrict the field, becausethe equipment in question was quite expensive and the successful tenderer would need to havea reasonable amount of return on that investment. So the decision was made that the initialcontract would be for 12 months. That was our only involvement at the time.

Senator COOK—Obviously I do not criticise the firm that you have selected, but are youaware of criticism that, if it was widely known that the contract would have been for fiveyears, other firms would have been able to tender, and tender against that knowledge in a wayin which they would have been more competitive than the tenders they would have otherwisesubmitted?

Mr Tyson—We are aware that there was one company which had been an unsuccessfultenderer—in fact, it had not made the short list last year—which had an interest in beinginvolved should there be a tender process. That company acknowledged at the time that itsinitial tender had not been competitive. We had some communication with the company. Wesaid that we would keep our options open during that first 12-month period and, if there wereto be a tender process, clearly that company would be free to tender. We are not aware ofinterests from any other company.

Senator COOK—Were they informed about the process that you are engaging in?Mr Tyson—I wrote to them on two occasions in response to correspondence from them.

In both those letters I made it clear that we were keeping our options open. I did notspecifically write to them to say that we were now going to conduct a negotiation with Leigh-Mardon.

Senator COOK—For a five-year term.Mr Tyson—For a five-year term. When we commenced those negotiations it was not clear

that we would necessarily be reaching an agreement to sign a contract for five years. It wasopen-ended negotiation to see what we could extract to our benefit from the negotiation.

Senator COOK—To be fair, that is their complaint. If they knew it was a five-year contract,the basis of their tender would have changed materially, which they believe would haveaffected their ability to win the contract. They did not know that. I cannot put words into theirmouth. There is a question whether or not the process was open and transparent. That is thepoint. You were saying that you did not handle it. Who handled it?

Mr Tyson—It was handled as part of the disposal of the various components of DAS atthe time. We were only involved in the sense that we were main customers for one portion



of that DAS package—that is, only the passport printing components of the AGPS package,which is essentially a printing line in Kingston.

Senator COOK—Where was the decision made to turn it from a duration of one year tofive years?

Mr Tyson—That was made by us in the department.Senator COOK—I have some questions on piracy, in particular thePetro Rangercase. Can

you enlighten us as to why it took so long for the Australian captain, Captain Blyth, to begranted freedom to travel from Hainan Island after his ship was arrested by the Chinesegovernment?

Mr Oliver —I do not think there is anything particularly suspicious about the fact thatCaptain Blyth was detained for a while in China. I think it is reasonable to say that theChinese authorities would have needed a reasonable amount of time to investigate thecircumstances of the vessel’s abduction, if you like, in the South China Sea a week before.Probably, in the circumstances, it is not unreasonable that they should have needed to talk tothe captain, talk to the company that owns the vessel and talk to the crew as well. I do notthink there is anything strange about the fact that Captain Blyth was held there for about fourweeks to enable the Chinese to conduct a reasonable investigation of the circumstances inwhich the ship was taken.

Senator COOK—Do we know what those circumstances were—how come it got pirated,where it got pirated from, and how it ended up in Haikou?

Mr Oliver —Having spoken to Captain Blyth fairly recently, he said that his vessel wasabducted very shortly after it left Singapore and it then proceeded to Haikou. He and his crewdid not know that. They were below deck most of the time. Having reached Haikou and havingbeen taken into the care of the marine police there, there was quite a considerable exercisein trying to establish whether the vessel had been engaged in smuggling—that is to say, thecompany, the crew and the captain may have been involved—or whether they were taken overby pirates shortly after they left Singapore. It is that process which required the Chinese tospend a certain amount of time satisfying themselves about what did happen.

Senator COOK—His cargo was oil.Mr Oliver —Gas oil, yes.Senator COOK—Was his cargo intact when the ship docked in Haikou?Mr Oliver —No. Some of it had been taken off between the time when they were taken by

pirates and when they arrived in the port of Haikou.Senator COOK—On the high seas, part of his cargo was transferred to another vessel.Mr Oliver —Yes.Senator COOK—Do we know what—Senator Hill—The crew would not know anything about that because they were below

decks.Mr Oliver —No, we do not. The crew were below decks and were not able to see what was

happening. What did happen was undertaken by the people who took the vessel over.Senator COOK—Do we know why, out of all of the ports, a hijacked or pirated vessel out

of Singapore would have ended up in Haikou? Of all the ports in that region that it could havegone to, why did it choose to go to that one? Do we know that?



Mr Oliver —I think the short answer is that there are many ports to which it could havegone. I guess those who took the vessel over did intend to unload the cargo on to various othervessels on route and maybe dispose of the vessel somewhere in the region. From thedepartment’s point of view, more particularly from a consular point of view, the whys andwherefores of the act of piracy, if you like, are of less particular interest to us than thecircumstances of Captain Blyth, who is an Australian national. I guess the whole question ofhow the act of piracy occurred, who may or may not have been responsible, is really a matterfor the company, the marine police in the port of Haikou and the Chinese authorities. Thedetails of that are something we are not privy to.

Senator COOK—I accept that. It does not curb our curiosity, but obviously that is the rightanswer. In conducting consular activities on behalf of an Australian national, who was thecaptain of the ship and who was confined to his vessel offshore from the harbour for anextended period of time, did anything arise which suggested that there was a particular reasonwhy it went to Haikou?

Mr Oliver —Not that I am aware of. I think there has been a number of suggestions whichsuggest that some people involved in the cargoes of this vessel may have had links with China,but the details of that are not something to which I am privy, nor do I believe is mydepartment.

Senator COOK—Do you know where the vessel is now?Mr Oliver —It has been released from the port of Haikou and it was on its way back to

Singapore, which is where it is owned. It is a Malaysian registered vessel, but it is owned andoperated out of Singapore.

Senator COOK—Has the remaining portion of its cargo been discharged or not?Mr Oliver —No. The remaining portion of the cargo was held by the Chinese government.Senator COOK—Is it still held?Mr Oliver —The cargo was unloaded and has been held by the marine police in Haikou.Senator COOK—Very suspicious oil gas, is it?Mr Oliver —I think in part it may be to do with ongoing investigations that the Chinese

will conduct. The vessel and its crew were released and so was the captain, but I do not thinkthat is the end of the proceedings which the Chinese may wish to pursue. The company maywell be required to return to Haikou to help the Chinese further.

Senator COOK—Who owned the cargo?Mr Oliver —The cargo was owned originally by Petroships, which is the company that took

the cargo on. It was destined for Ho Chi Minh City. I am not sure who the purchaser was.Senator COOK—So the Chinese are holding their cargo until further notice.Mr Oliver —They have the remaining portion of the cargo which was on the vessel when

it arrived in Haikou.Senator COOK—To put it to you bluntly, can you say whether or not kickbacks or bribery

had to be engaged in to encourage or speed the release of Captain Blyth?Mr Oliver —I am not aware of bribery or kickbacks that were required to be paid by the

company to obtain Captain Blyth’s release.Senator COOK—Would you normally be aware of that if it occurred?Mr Oliver —Not usually, no.



Senator COOK—Would it be a matter between whomever and whomever?

Mr Oliver —Indeed. The ship’s owners were present in Haikou. They had discussions withthe marine police and others. We would not have participated in those conversations. Whateverpassed between them passed between them. I am not aware of that, no.

Senator COOK—At the beginning of my series of questions to you I think you said thatthere was nothing strange in the circumstances in which Captain Blyth was held and theinvestigation of the Chinese authorities.

Mr Oliver —Yes, that is right. That is my judgment on the matter.

Senator COOK—Is saying that there was nothing strange in it the same as saying that itwas a routine investigation?

Mr Oliver —I think in similar circumstances here in Australia we may have been morespecific in the nature of the charges applied to the captain, his crew and the owners of thevessel. I think in the circumstances in which the Chinese came about this vessel they felt theyneeded a good deal of time to talk to each member of the crew, the pirates, I suppose, as wellas Captain Blyth. I would not discount the possibility that other Chinese authorities may alsohave had to have been consulted in this process, and that took a little time. I think the reasonwhy Captain Blyth was held on his ship was as much for his own personal safety as anythingelse. It was not a problem from his point of view.

Senator HOGG—I have a few questions for consular services, firstly, in regard to RadioAustralia and the crisis in Indonesia. Has our footprint been weakened into the Indonesianislands—I know it covers a wide range—with the removal of a transmitter on the CoxPeninsula?

Mr Oliver —There are two aspects to your questions. One is the footprint and the other ishow Radio Australia might or might not have affected our consular services. I think Mr Luckmight be able to help you best on the footprint.

Mr Luck —I have to say that I am guided here by what Mr Warner said earlier in the dayabout the footprint. I recall he said at that time that Radio Australia was still received in partsof Indonesia and had some reception in Jakarta. He would probably have the best advice onthat, unless anything came through in the recent emergency there. We convened a departmentaltask force to help with the business of evacuating Australians, which might have revealed moreinformation. Mr Buckley might know of that.

Mr Buckley —We were running the task force on the Indonesian crisis. There was nosuggestion that we had that there was any implication from Radio Australia’s reduction. Peopleseemed to be getting their information from ATV, from the embassy and from the crisis centreitself in Canberra.

Senator HOGG—Was Radio Australia available to them?

Mr Buckley —It never came up as an issue.

Senator HOGG—I have had it raised with me as an issue. That is why I am raising theissue.

Mr Buckley —I can only say that it was not raised with us.

Senator HOGG—Can you check whether Radio Australia was used by DFAT forbroadcasting its travel advice and warnings into Indonesia during the crisis? Is that possible?

Mr Oliver —We can certainly check on that.



Senator HOGG—Can you also check whether any feedback on reaction to the signal wasreceived from Radio Australia during that crisis in Indonesia? Is this the appropriate place toask whether funding is still being given to Radio Australia through DFAT?

Mr Luck —Firstly, Radio Australia and its future is very much a matter for the Departmentof Communications and the Arts.

Senator HOGG—I understand that.

Mr Luck —I understand that there is some funding going to Radio Australia throughAusAID for broadcast to the South Pacific. I think that is of the order of $4 million.

Senator HOGG—The other questions that I have are in relation to the Indonesian crisis.I raised a specific case with the department, but I wanted a broad answer on the registrationprocess of expatriates with the embassy in a place such as Indonesia during a crisis. Whatexactly takes place? More importantly, how does the embassy know if someone who isregistered leaves?

Mr Oliver —I think the short answer is that the embassy in Jakarta has a very large numberof Australians in country to cover. All Australians are encouraged to register with the embassy.A large number do not do so as far as we know. That is because, in part, they are only therefor a short time and, in part, they are living out of Jakarta and do not consider it necessary.The embassy does have a process of registering Australians who register with it. In a crisisof the kind we had a few weeks ago, if an Australian leaves Jakarta or Indonesia, unless theytell us that they have left or are intending to leave, the chances are that we will not know,unless we have access to some kind of landing system here whereby the details of allpassengers coming off all flights are scrutinised and checked. That is really a very large-scaleexercise and one which we did not undertake on that occasion.

Senator HOGG—I accept that. It is possible for someone to have registered earlier, leftthe country, come back and sought to register again, and the embassy is probably scratchingits head wondering what is going on. I am wondering how that affects the ability of theembassy to operate effectively in a crisis situation where people who may well have beenregistered have left the country. It just seems to me that that is a system which needs to belooked at. I put it to you on that basis.

Mr Buckley —Could I make a couple of comments. It is important to understand that weand the embassy were very proactive in this process. Before the crisis the ambassador wentaround to a number of areas in Indonesia and spoke to various groups of Australians. We hada whole series of processes to encourage people to register with the embassy and we sent upa particular person some weeks before to make sure that a warden system was developed. Itis based on a warden system and a telephone tree basically so that you do not have to ringa whole range of people. You ring a small number of people and then they ring other peopleand so you keep up to date that way with the movements of people. So we sent someone upto make sure that that warden system was developed. We also were very active in getting outinto the community and getting them to register.

But the point you make is exactly right. If they do not tell us that they are going or that theyare in the process of going, we do not know that they have actually left. We can tell thenumber of people who come back to Australia, but a large number of people also went toSingapore and Kuala Lumpur and a whole range of other places. This is probably more acutein Indonesia than anywhere else because there are a large number of Australians there.

Senator HOGG—And also a number of different ports that they can go to.



Mr Buckley —Yes, and a large number apparently, anecdotally, went from Jakarta and otherplaces in Java to Bali.

Senator HOGG—Yes. I want to give it as high a priority as possible in that I would likeyou to look at the issue to see if there are ways in which it can be refined. It was not meantto be a criticism of the process, but I think it is something that needs to be looked at.

Mr Buckley —Yes.Senator WEST—I want to follow on with a question on that. How well did the warden

system work? I do not have any contacts in Jakarta but I certainly have a contact in PhnomPenh. When the emergency there arose, she not did have the phone on in the flat where shelived. She had been loaned a mobile phone by somebody but, because of the proximity of herflat to one of the ministers, presumably the cell that operated that particular area of the mobilewas knocked out and she was not able to be contacted. She had to actually leave her homeand travel on the streets to get to the hotel to find out what was going on in her sector. Whathappened to the phone communications within Jakarta on the day when there was the rioting,the looting and the burning?

Mr Buckley —As I understand it, the phone system was still working. A large number ofpeople obtained information from the embassy and we have several 24-hour lines into thedepartment. One is the consular services one and we also had the crisis centre set up on a 24-hour basis. We have another 24-hour number for communications. In all, we got a very largenumber of calls not only from people on the ground but also from relatives in Australia. Wegot something in the order of about 10,000 calls in Australia plus whatever they got inIndonesia. So there was a great deal of contact between us on the government side who wereorganising the charters and the people on the ground and their relatives in Australia.

Coming to the specific issue of the warden system, there are some cases where people havesubsequently said to us that they were not contacted or they were not contactable at a particularstage. We heard of some of those as the crisis was developing. What we would do is we wouldpass that information on to the embassy in Jakarta and the embassy contacted quite a largenumber of them. But I am sure there were individual people who were not contacted and whowere not able to be contacted. The feedback we have had is that a large number of people havecome to us and said they were extremely happy with the service that was provided by theembassy, but I am sure there will be people who will be critical because they were not ableto be contacted.

Senator WEST—But you were fortunate that the telecommunications system did not havea major failure. If the rioting and looting had continued on, you did run the risk of losing thetelephone system. If you had Radio Australia, you would at least be able to get broadcasts outthat they would hear on battery operated devices.

Mr Buckley —That is a hypothetical situation. On top of that we sent quite a lot of hand-held radios from here to Jakarta during the crisis which were used for communication. Withsuch a large number of people in Indonesia, we could not be in a position to be able to contacteveryone in the country. I did not hear, in the time we were there over the week or 10 daysor so that the crisis centre was operating, any discussion about Radio Australia. I did hear quitea lot of discussion about ATV where people were getting their information from ATV andfrom ringing people in Australia from a whole series of sources. So, hypothetically, that maywell be the case, but we did not have any evidence of it.

Senator WEST—It is not DFAT’s fault that we do not have Radio Australia. I veryearnestly recognise that, but this is the second international incident in this region that indicates



very clearly why the presence of Radio Australia would have actually aided the work thatDFAT was doing in making sure Australian nationals had information. I think you run the riskof a telephone system falling over and some people, as happened to my friend, being leftwithout information and having to leave the safety and security of their home to get theinformation or to try to get out. So I recognise that DFAT has done a very good job, and itis not your fault there is no Radio Australia.

Senator Hill—That is an interesting little speech, but this assumes of course that everyoneis sitting by short-wave radios, doesn’t it?

Senator WEST—From talking to people who have lived in these sorts of situations, theydo not go too far without their radio stuck in their back pocket. They all own little tiny onesthat they have plenty of batteries for.

Senator Hill—With respect, I think that times have significantly changed. One of the aspectsthat came out of the investigation into the Radio Australia issue is that, these days, so manymore people have access to normal radio.

Senator WEST—Minister, we will not revisit all of that.

Senator Hill—You gave a little speech attacking us.

Senator WEST—You are wanting your quid pro quo.

Senator Hill—It is not the function of the estimates committee, I delicately remind you asthe Deputy President of the Senate.

Senator QUIRKE—All those people who were reliant on radios were the ones who gotstuck, Minister.

Senator Hill—Is that right?

Senator HOGG—I have two further questions in the consular services area. The first is inrespect of the attitude of some staff at some embassies, and I cannot be more specific thanthat, in respect of migrant applications and spouse visas. It has been drawn to my attentionthat some embassy staff have been in the job too long and, as a result, have generally handledtoo many similar inquiries. Naturally and understandably, some have built up a bias or aprejudice when people present themselves and these people are not necessarily being judgedon their merits. What system do we have in place to review the front-line staff who are dealingwith these people who are coming into our foreign embassies to make spouse visa applications,for example?

Mr Oliver —Senator, the short answer to your question is that the front of house people whohandle those inquiries would normally be officers from the Department of Immigration andMulticultural Affairs in those posts where we have them. In other posts obviously they wouldprobably be consular officers.

Senator HOGG—What about the consular officers? Would some of them have been in thejob too long, as has been described to me?

Mr Oliver —I think many officers in the last year or so who have been in the job too longmay well no longer be there. I guess there will always be one or two officers around the postswho may have been in the job too long. Let me say that, from the point of view of our branch,the whole question of officers in consular positions providing a proper service to anyAustralian who is in need of assistance is something to which we attach a very considerableamount of importance. I know the minister does. You can be assured that the training programswhich we run here in Australia and at our posts overseas have, as part of them, a very major



component which is aimed at client service to make sure that the kinds of complaints whichsome of your constituents have made become less and less frequent.

I suppose we will never entirely do away with them, but, to the extent that we can, I thinkyou will find that the quality of service which we are providing overseas is increasinglyprofessional, increasingly compassionate and, I suppose, increasingly effective. But there willinevitably be the odd case where that is probably regrettably not the case.

Senator HOGG—In all these instances, as you would appreciate, you invariably hear aboutthe bad ones; you do not hear about the good ones.

Senator Hill—I must say that the way the question has been framed is a little unfortunate,because it may be seen by very dedicated officers to be a slur upon them. These are difficultjobs, overwhelmingly done well, I think, and in Australia’s best interests. If any senator hasany evidence of any particular officer not working at the standard of either competence orattitude that it is reasonable to expect, then that evidence should be brought to the authoritiesand the matter will be investigated. But just to pick up a line that somewhere in unnamedembassies the staff are clearly demonstrating that they have been on the job too long is reallyquite unfair.

Senator HOGG—I do not think, Minister, with due respect, it was a slur on all people.What I was trying to seek was some explanation as to the review of the postings—how longpeople were left in the postings and the review of their performance.

Senator Hill—I think those questions are perfectly legitimate but they were framed on abackground of a statement of assertions that in some unnamed embassies evidence is beingproduced of unnamed persons that they have been in the job too long.

Ms Hewitt—Just to give you a quick answer, our postings are a standard three-year lengthwith the option for renewal for a further one year if performance is appropriate and theextension is endorsed by the head of mission. We have just introduced a very much morerigorous performance management system, which will apply to every A-based officer in thedepartment. Most of our posts are also implementing performance management systems fortheir locally engaged staff as well. So it is something we do give high priority to.

Senator HOGG—Thank you.[6.15 p.m.]

Program 3—Services for other agenciesSubprogram 3.1—Services to parliament, the media and the public

Senator COOK—You may wish to take this first part of the question on notice. Can youtell me how many federal parliamentarians did DFAT and our overseas missions assist withtravel in the past financial year? How many were members of the government and how manywere opposition members, members of minor parties or Independents?

Mr Luck —Yes, I had better take that question on notice, thanks.Senator COOK—When a member of parliament meets ministers or officials in a foreign

country, is it normal practice for DFAT staff accompanying them to cable a report of anysignificant information obtained in such a meeting back to Canberra? This would be a meetingbetween a member of parliament and a minister, or a member of parliament and a significantofficial in the foreign country.

Mr Luck —It would be quite normal for reports to be sent back to Canberra of the overallresult of a visit of significance—and this would be an official visit, assuming that the member



of parliament was there in some formal capacity—and quite often there would be a cablereporting the main points of interest, as there would be with any Australian official talkingwith an influential member of the host country.

Senator COOK—How are those cables distributed? Do they go to the relevant sectionsof DFAT and are they copied—I guess this is the point of the question—to the offices of theportfolio ministers that might be affected by the nature of the discussion held?

Mr Luck —I would probably have to seek advice on that. We do have standard distributionswhich the communications section would apply to most cables which, as you probably wellremember, includes circulation to ministers’ offices. The normal thing would be for ourcommunications section to apply some sort of pattern or template distribution to such cablesunless they were given a special sort of caveat or protection.

Senator COOK—I might say in my case I have found that usually at the post they ask you,‘Do you mind?’ I always say, ‘No, I don’t.’

Senator Hill—That has been my experience, too. I have always said, ‘If it is useful to you,you go your hardest.’

Senator COOK—That has been my experience.Senator Hill—Are you saying that these reports are sent back without asking the relevant

parliamentarian?Mr Luck —No, I would assume the normal thing would be that, in the course of escorting

the parliamentarian or visitor around, there would be an exchange about these things.Senator COOK—I have no further questions on subprogram 3.1, and I have no questions

on subprograms 3.2 or 3.3.[6.17 p.m.]

Program 4—Secure government communications and security servicesSubprogram 4.1—Australian diplomatic communications network (ADCNET)

Senator HOGG—These questions may well need to be taken on notice and answered. Iam interested in ANAO report No. 44 of 1997-98 entitledPerformance audit—the Australiandiplomatic communications network—project managementon the ADCNET project and inparticular recommendations Nos 7 and 8 towards the end.

Mr Buckley —Can you tell me what page?Senator HOGG—On page 25 the ANAO stated in recommendation No. 7:

The ANAO recommends that DFAT ensure that comprehensive, transparent and accurate financialassessments and reports be maintained for the remainder of the ADCNET project and for future projects.

Leaving aside the future projects and looking at the ADCNET project, has there been a changein the financial management assessments and reporting processes to make them more compre-hensive, transparent and accurate; and, if so, what has been done?

Mr Buckley —We have taken all these recommendations on board. We had a quite lengthydiscussion with ANAO during the preparation of this report. Where we have said, as we doin paragraph 6.4, that DFAT agrees with this recommendation, we are doing that. There isnothing specific I could point to and say, ‘There, that has been a major change.’ We havetaken on board all these recommendations of the ANAO—

Senator HOGG—So there is no specific change to the financial management assessmentsand reporting which will make it more comprehensive, transparent and accurate?



Mr Buckley —It then says ‘be maintained for the remainder of the project’ so that anyreports which come up will be produced in line with paragraph 6.3.

Senator HOGG—Yes, and I am trying to work out what that precisely means.

Mr Buckley —Within the department there will be a clear process that we will seekparticular advice and authorisation from the senior executive for any expenditure we makeunder the ADCNET process. So there will be an audit trail, if you like, of where the decisionwas taken. It relates also to the governance of all these projects. We are currently in theprocess of developing our procedures for the next stage of ADCNET. There is a section withinthat containing 10 or 12 headings that we will need to address, and one of those is the wayin which we report financial matters and progress on the projects as they arise.

Senator HOGG—So that goes to recommendation No. 8 in which the ANAO isrecommending:

. . . that DFAT regularly monitor project costs and expenditure for ADCNET Release 3 against budget

. . .

I presume that was a bit of a weakness in the previous process—

Mr Buckley —We have to cop it sweet, if you like, from the ANAO. We were already doinga lot of these things, but it is just that they did not believe we were doing them to theirsatisfaction. We have taken that on board and we will make sure that, when a similar thingis written in the future, we will be in a position to provide them with that information.

Senator HOGG—So you will be purer than pure?

Mr Buckley —I hope so, but it is always difficult.

Senator HOGG—And, last but not least, further down page 27 it talks about ensuring thatrelease 1 is year 2000 compliant. What is being done there?

Mr Buckley —We have a whole process for year 2000, which I could give you the detailsof later. Essentially we have a process going over a number of years, which we started morethan a year ago, first of all to identify the crucial elements which we need to spend time andenergy on and then secondly to make sure they are year 2000 compliant. We will finish thewhole process by July 1999.

Just to expand on that a bit, it is not only things that we do but, because we have 90 posts,it is what other governments do as well. We are in the process of producing some informationwhich we will send out to posts—the Canadians have done a similar thing in the past so wehave drawn on that and built our own. We want the posts to understand the importance of theyear 2000 processes and where it can affect them, because it can affect them in the buildingsthat they are in, in the telephone systems and in a whole range of things. Essentially, we haveidentified what our crucial elements are, we have processes in train to make sure that they arefixed up and we have this education process for the overseas posts.

Senator HOGG—Excellent, thank you. That is all I have for subprogram 4.1.

[6.25 p.m.]

Subprogram 4.2—Security services

Senator COOK—I understand that the Australian Federal Police officer who was secondedto DFAT to investigate leaks of classified information has had that secondment terminated;is that right?



Ms Hewitt—The secondment has expired, and I think I will have to tell you that we haveactually recruited the individual officer concerned as a member of our staff in DFAT. So heis no longer an AFP officer but a DFAT officer.

Senator Hill—So presumably he was very successful, was he?Ms Hewitt—He was a very effective officer and we were very pleased with his work.Senator Hill—That was not the question I asked. Was he very successful?Ms Hewitt—I think I should defer that question to my colleague.Senator COOK—You can ask him as many questions like this as you like, Minister.Mr Buckley —Prevention was the main objective of what he was doing, and I think in that

he was extremely successful.Senator COOK—How do we describe this new transmogrified officer—what does he do

now? I assume it is a bloke.Ms Pearce—He will be working in the conduct and ethics unit of my division as an

investigator in that unit. We have a number of DFAT departmental investigators.Senator COOK—Will he be doing anything different now than he was before?Ms Pearce—Yes, he will be. He will be working within the framework of the government’s

fraud control policy. He will be dealing with investigating allegations, complaints of fraud andmisconduct under the Public Service Act.

Senator COOK—I see. He has been described as a very successful officer when he wasan Australian Federal Police officer on secondment to you. How do you measure success inthis sense? Do you measure it as the number of classified leaks that you have detected andwhether they have declined or not? What is the performance indicator here?

Mr Buckley —If I could answer briefly. I think you measure it in a number of ways. Duringhis time, the major advantage which we as a department derived from his presence was of aprofessionalism in going about the processes for investigating what is information fraud sothat we could do it in a way which looked at the whole of the problem. We were able to usehis expertise. The second way in which he was very successful was through having the liaisonwith the law enforcement agencies such that it was not only in information fraud which hewas able to help us but also in the case where some stealing had been taking place in thedepartment. The main process which he has improved is in our processes and in liaison. Thatis the measure of his success, I think.

Senator COOK—Did any convictions arise as a consequence of his presence?Mr Buckley —I do not think there have been any convictions, no.Senator COOK—What do we read into the fact that the nature of the work that the now

terminated AFP officer is doing has changed in its character to some extent?Mr Buckley —We do not read anything, I do not think. This is an individual who was

attached to us for a particular period and, during the course of that period, he sought—successfully—to be recruited into the department. So it was an individual decision on his part.There has been no replacement for him at the moment, but that is under review.

Senator COOK—Can you tell me how many leaks occurred during his tenure?Mr Buckley —Traditionally, we have not spoken—it has been a longstanding policy of the

department—about the number of leaks that we have had, for very good security reasons.Senator COOK—I have no further questions.



[6.31 p.m.]

Program 5—Executive and corporate DFAT servicesSubprogram 5.2—DFAT corporate services

Senator COOK—I have a number of questions under subprogram 5.2 but they relate to astandard set of questions that I will place on notice. I do not know whether you want me toread them out now. In view of the hour, it might be better to pass them over.

ACTING CHAIR —That would be helpful.Senator QUIRKE—I understand that subprogram 5.2 is the place to ask about mobile

phones. Are mobile phones given to visiting officials when they go overseas? Are mobilephones provided to ministers of the Crown when they visit overseas countries? If so, can yougive us the details?

Mr Buckley —We have a responsibility to provide mobile phones to the staff of ministers.I am not 100 per cent sure who is responsible for the phone for the minister. I think it isprobably a responsibility of the Department of Finance and Administration. I can check onthat. Certainly the department provides mobile phones for ministerial staff.

Senator QUIRKE—You do provide mobile phones to ministerial staff?Mr Buckley —Yes—I do not mean for all ministers. We do to our two portfolio ministers

and the parliamentary secretaries. We do not provide them for others. If there are ministersvisiting a particular post, there would probably be specific arrangements made for thoseministers in that post. I was talking about the portfolio ministers.

Senator QUIRKE—But you do not supply them to the ministers; you supply them to theirstaff? Is that right?

Mr Buckley —To our portfolio ministers, yes.Senator QUIRKE—I am quite happy to have you take this on notice. Can you give me

some idea of the costs of the provision of this service? Were mobile phones provided toMinister Downer when he visited Canada? Can you tell us whether those mobile phonesworked? The information I have is that they were connected to the wrong net in the wrongcountry.

Mr Buckley —I do not have the specific information.Senator QUIRKE—I am quite happy for it to be taken on notice.Senator Hill—I want to be sure what we are looking for. Are you limiting the question to

a particular visit to Canada?Senator QUIRKE—I understand that it was to Canada in recent times, and mobile phones

were provided.Senator Hill—Otherwise it would be a huge job.Senator QUIRKE—It was a specific visit to Canada by Minister Downer. I understand that

a phone was provided to the Treasurer in his last visit to Canada. But from what your officerhas told me, that would be at the expense of Treasury and not at the expense of thisdepartment. I am quite happy to pursue the matter of the foreign minister’s visit to Canada,which I understand took place in the last few months. What were the costs of the provisionof mobile phones, if they were provided at all? Did they work? Were mobile phones providedto staff members of the minister in the same visit? What was the cost to the taxpayer of thisprovision? I do not think I can be more specific than that.



Ms Pearce—I want to respond to an earlier question asked by Senator Cook that is relevantto program 5. Earlier today, he asked about LES staffing levels. For the last six months of1997, which are the most recent statistics, the number of LES positions increased by 64 inthat period, which represents a 4.2 per cent increase in our locally engaged staff.

Senator COOK—The percentage of increase always fascinates me. I always like to knowfrom what base.

Ms Pearce—At 30 June 1997, the numbers were 1,524. As we indicated earlier today, at31 December 1997, they were 1,588.[6.43 p.m.]

Program 6—Development cooperationSenator WEST—I have some questions in relation to child labour. What information is

AusAID able to give me on what AusAID does in relation to child labour?Ms Beddie—My answer will deal specifically with South Asia, but that is not the only area

in which we do work on child labour. It is identified as one of the regions where child labouris particularly a problem. As an agency we participated in a conference in Oslo in October1997 that talked about issues of child labour. It came up with an agenda for action, whichAustralia has adopted. That agenda for action highlights the importance of education, socialmobilisation and legislation in tackling child labour. We have taken that into account in thesorts of programs that we have put in place.

More specifically, we have been supporting 33 child labour projects in South Asia with anestimated value of $12 million. That is over some years. There have been 13 in India, 10 inBangladesh, six in Sri Lanka, three in Nepal and one in Pakistan. Most of them deal witheducation projects, often focusing on girls. It is trying to get children into the schooling systemand to address the problem of working children who are not involved in any formal schoolprograms.

We are also contributing money to the Rugmark project run by UNICEF. We allocated$65,000 in one year for Nepal. That money goes to rehabilitation programs as well as toraising awareness about child labour in the carpet industry.

Senator WEST—So you are not aware of any problems in the medical instruments industryin Pakistan?

Ms Beddie—No, I am afraid that I am not.Senator WEST—In the manufacture of medical instruments?Ms Beddie—No. I am not aware of that.Senator WEST—You talked about legislation. Was that legislation in country or here in

Australia?Ms Beddie—In country.Senator WEST—Do they have minimum working age laws?Ms Beddie—When I mentioned legislation, I was talking about it being identified within

the agenda for action, which came out of the Oslo conference. That is to encourage a rangeof legislation. I do not think our projects in South Asia address the issue of legislation. Theyare directed more at the issue of basic education, particularly for girls. There would be a rangeof initiatives on legislative issues in South Asia run by both the governments themselves andperhaps by other organisations.



Senator WEST—From your knowledge of the issue, how difficult is it to identify productsmade by child labour or which have a component made by child labour?

Ms Beddie—I cannot answer that as an expert. I expect that it is very difficult. I do notknow.

Senator WEST—Do you know how many of the major multinationals companies areindulging in this practice or are utilising components of their product made by other smallermanufacturers that could be made by child labour?

Ms Beddie—It is not something that the aid program in particular has addressed. TheRugmark campaign has certainly become involved in trying to make sure that it identifiesproducts so that people can identify whether or not child labour has been involved.

Senator WEST—Presumably Rugmark puts some identification on the label of a rug whichstates that the rug has not been manufactured by child labour. How well is the Rugmarkcampaign being promoted in the Western countries, which will predominantly be thepurchasers of those rugs?

Ms Beddie—Again, I am afraid that I do not know the answer to that.

Senator WEST—Who is responsible for that campaign?

Senator Hill—I do not know. I presume that the purchaser is saying that they will purchaserugs that can be identified as not having had child labour input. I presume that it is a voluntaryprogram. We can get further information on it, if you like. It may not be the AusAID peoplewho are responsible.

Senator WEST—Who is responsible for providing the knowledge to people in Australiathat there is such a mark?

Senator Hill—That is starting to move into an area of trade sanction, in effect. Whetherit is these people or somebody else, we can seek to get some information for you on how theRugmark works.

Senator WEST—If somebody else can take that on board, it would be appreciated. I willleave it at that. It is unfortunately not going to go away.

Senator COOK—I have a few questions for DFAT which are similar to the ones that I willask now. These may be questions you would wish to take on notice. Can you provide me withdetails of how big your staff provision is now compared with what it was in the 1995-96budget? What number of those are Australian based? What number of those are posted abroad?If you employ locally engaged staff abroad, what is the comparison of locally based toAustralian based staff? I have got a series of questions relating to campaigns of publicity,consultants, property and vacancies in property which I propose to put on notice. They arethe questions I foreshadowed earlier on.

According to the budget document I have, there have been cuts in environmental aid inAusAID whereby funding for international environment programs has been reduced from $13.6million to $8.2 million for this year. That is the correct comparison—$13.6 million down to$8.2 million—isn’t it?

Senator Hill—Environmental aid?

Mr Davis—The figures that you are quoting are correct. What applies for the internationalenvironment contributions is that we meet the draw down requirements against replenishmentsboth to the GEF and the Montreal protocol in response to commitments that we have made



in previous years. It happens that this year the draw down requirements are reduced. We aremeeting our full obligations to both those facilities. That is the reason for the reduction.

Senator COOK—I see, so it is in relation to, if you like, the tied part of your budget andcontributions to international programs or organisations that has reduced.

Mr Davis—That is right.Senator COOK—The rest of your funds are the same as last year, are they?Mr Davis—The international environment figures that you have quoted really cover those

two elements—support for the global environment facility and for the Montreal protocol. Thatmakes up the total amount.

Senator COOK—I see.Senator Hill—But not the total amount of Australian foreign aid that could be described

as being invested in environment orientated programs.Senator COOK—You are making a statement, Minister?Senator Hill—I am qualifying what the officer has said. He is responding to the figures that

you gave, but that is only a very small part of what might be described as environmental aidin Australia’s vote. You tell us what figure you put on that?

Mr Davis—We put a figure of $165 million overall. The figure you are talking about is justfor those specific international environment conventions.

Senator COOK—One hundred and sixty-five million dollars overall this year?Mr Davis—Yes.Senator COOK—Can you tell me what it was in budget year 1995-96?Mr Davis—I can get that figure for you. I have not got it here. I have got it compared to

1992-93, which was at $120 million. We can get that figure for you.Senator COOK—Okay.Senator Hill—There is a greater emphasis on it now because it is recognised that it is an

integral part of sustainable development. Cleaning up the river is a win-win situation: itimproves the environment and it gives people better quality of life and maybe jobs too.

Senator COOK—With the abolition of DIFF and green DIFF in particular it probablythrows more resources back onto the aid budget as such in this area.

Senator Hill—I do not know if that is quite the way to look at it.Senator COOK—What way could you look at it? They were projects under green DIFF

that you were funding which were about environmental development.Senator Hill—Some were, I certainly concede that. There were, no doubt, some benefits

too in the program in the sense that it drew into the pot money from other sources as well,but that is history now.

Senator COOK—Indeed; for the time being.Senator Hill—Unless you know something I do not know.Senator COOK—I am speculating about future developments, Minister. The last time we

talked food aid had ceased in Papua New Guinea. Is it still the case that there has been noneed to bring back direct food aid to the highlands area—or any other area for that matter—ofPapua New Guinea?



Mr Proctor —That is correct; there is no delivery of food aid in the sense that was involvingBlack Hawk helicopters, et cetera through the ADF. There are some residual problems of foodthat are mainly coped for by the PNG government. There are still some NGOs active in thehighlands delivering some food. Essentially, there have been substantial rains and at themoment the food picture is far better than it was.

Senator COOK—What is the case in Indonesia, particularly eastern Indonesia? Weannounced back in the beginning of May, I think, $30 million extra funding for emergencyaid in that region; did we not?

Ms Gillies—Certainly we have been active in providing humanitarian assistance particularlyfocused on eastern Indonesia. We have got a joint operation going with the Australian defenceforces, as you may be aware, in Irian Jaya. In that the total funds from the Australiangovernment we expect to be around $10 million. That operation should be feeding about90,000 people we think. We have also got activities focusing on health, food for workactivities, et cetera, in some of the eastern islands of Indonesia.

Senator COOK—Am I right in believing that the necessity for that aid is not generated bythe economic crisis in Indonesia but by weather or crop problems?

Ms Gillies—I understand that the necessity for that assistance is caused by both weatherproblems and also by the inability of people to actually pay for imported foodstuffs. It is avery complex set of causes, but it certainly is at least in part to do with the weather conditions.In Irian Jaya, for instance, we expect the operation there to wind up probably at the end ofnext month because there have been good rains there and people will again be able to do whathas happened in Papua New Guinea and that is start supplying their own food needs.

Senator COOK—Do you know offhand what tonnage of rice or other food aid has had tobe shipped into this area?

Ms Gillies—I know in Irian Jaya to date nearly 205 tonnes of food has been provided, butI would be happy to give you a proper breakdown of food estimates over the period of thecrisis.

Senator COOK—Taking a wider shot of Indonesia, not just eastern Indonesia now, becauseof the economic crisis and the other difficulties in Indonesia, have we been called upon toprovide aid to Indonesia beyond what we anticipated a year ago?

Mr Huning —The amount of additional assistance to Indonesia in response to the economicand food security crisis totals close to $50 million.

Senator COOK—Per year?Mr Huning —It is spread over the 1997-98 and 1998-99 financial years.Senator COOK—That is aid generated because of the economic circumstances and other

problems in Indonesia?Mr Huning —Yes, Senator. We can provide more details if you wish.Senator COOK—Not necessarily now, but please on notice.Mr Huning —Sure.Senator COOK—Where else in the world are we directly providing food aid at the

moment? Is there anywhere else?Ms Gillies—Food aid is provided in a number of different ways. Some of it is provided

through the World Food Programme and they provide it direct to countries which they identify.At other times Australia actually responds to particular appeals. We provide food aid, for



instance, to countries in Africa which are enduring food deficits. I would be happy to giveyou a complete breakdown of food aid for the past year.

Senator COOK—I would be interested in knowing where else in the world Australia isfeeding people to keep them alive and what the tonnages and costs of that are.

Ms Gillies—Certainly.Senator COOK—In anticipating the call on our aid program for emergency funding that

goes to food aid and other emergency relief, what provision has been made in this budget forthat type of emergency?

Ms Gillies—In this budget we have tripled the allocation for emergency funds. The El Ninophenomenon and the East Asian financial crisis as you have suggested continue to have apretty devastating effect on our region. That combination of events we think is pretty muchunprecedented. That is why the government has in this budget actually increased theemergency aid budget from $11.2 million to $34 million.

Senator COOK—Let us hope we do not need it all, but we have got those sorts of reservesif we do.

Ms Gillies—That is right.Senator COOK—Do you face any problem about hiked up prices when you are having to

purchase, say, rice or a basic staple like that in an emergency situation because of sudden highdemand for aid? Do the prices rise according to your needs?

Ms Gillies—I will be corrected by my expert colleague if I am in error, but I think theAustralian government purchases at market prices and we purchase at the point of time thatthe aid is actually required. I think that emergency assistance requirements would only be avery small part of the total volume and I would not expect that of itself to increase prices todistort the market.

Senator COOK—Thank you. I have got no further questions.Senator LIGHTFOOT —Is any of the $108 million being directed towards Indonesia in

tied grants? If so, how much?Mr Huning —The bulk of Australian aid to Indonesia is tied as a matter of principle, as a

matter of policy, as grant aid.Senator LIGHTFOOT —And of the $108 million?Mr Huning —The bulk of that would be. I would not know the exact percentage. Some of

it is applied through co-financing in relation to activities conducted jointly with multilateralbodies like the various UN agencies and so on. A very high percentage of the annual aid toIndonesia is in the form of tied grants.

Senator LIGHTFOOT —What committee determines what that aid should be spent on?Mr Huning —The main expenditure decisions are ultimately taken by the minister, but the

process is determined jointly between Australia and Indonesia through a series of annualconsultations, including at a very high level.

Senator LIGHTFOOT —Has there been any reassessment of the grants since the furtherdeterioration of the Indonesian economy and the change of leadership?

Mr Huning —Not since the change of leadership, if you are referring to the advent ofPresident Habibie. The most recent high level consultations took place in very late February.At that stage the Indonesian economic crisis, as it is now referred to, was already fairly



substantially underway. The annual high level consultations in late February certainly startedto take into account what would be the areas of adaptation and change in the priorities for thefuture program arising out of that crisis.

Senator LIGHTFOOT —With respect to the very recent announcement by Dr Habibie ofsome measure of autonomy for East Timor along the lines of Yogyakarta, has there been anyreassessment of allocation of tied grants to East Timor?

Mr Huning —Not in any formal sense at this stage. We do have quite a range of projectactivities in East Timor already.

Senator LIGHTFOOT —Government and/or private?Mr Huning —I am not sure how you mean that, Senator.Senator LIGHTFOOT —You said that you have a range of projects already in East Timor.

Are they all government or some private or are they mixed?Mr Huning —They are projects undertaken with government to government agreements and

executed by a variety of contractors and/or NGOs.Senator LIGHTFOOT —With respect to the small measure of autonomy that Dr Habibie

has announced, has there been any reassessment or should there be some reassessment of thatallocation of funds?

Mr Huning —AusAID would be guided by the direction from the minister, and on a broaderportfolio basis that has not taken place yet. A lot of the events in Indonesia are movingextremely quickly. It is our understanding that there will be a further round of high levelconsultations between Australia and Indonesia, certainly at high official levels, over the nextseveral weeks. These are the sorts of issues that would come into those agendas with somepriority.

Senator LIGHTFOOT —What is the allocation in generic figures for East Timor? Whatis it intended to be spent on?

Mr Huning —The total current assistance over the period all the way since 1980 is $37million. The amount intended to be expended during 1997-98, the financial year just aboutto end, will exceed $5 million.

Senator LIGHTFOOT —What is it going to be spent on?Mr Huning —The main areas of expenditure are water supply and sanitation facilities

covering approximately 110,000 people, assistance with agricultural and regional planning andassistance with improving veterinary services.

Senator LIGHTFOOT —What services?Mr Huning —Assistance with improving veterinary services.Senator LIGHTFOOT —What does that mean?Mr Huning —The provision of additional training and facilities in support of veterinary

services in agricultural activities.Senator LIGHTFOOT —Can you be more specific than that?Mr Huning —I would have to take that on notice and provide you with more details. In

addition, in the forthcoming year we are planning to proceed with the development of a $2million rural development project.

Senator LIGHTFOOT —In East Timor?



Mr Huning —Yes.

Senator LIGHTFOOT —What practical steps has the Australian government insisted betaken with the spending of money on the southerly coast of Java? I understand that is andalways has been, notwithstanding the breadth of affluence of Indonesia in recent times, adeprived area. Has any attention been paid to that?

Mr Huning —The geographic focus of our Indonesia aid program is the eastern islands,eastern Indonesia.

Senator LIGHTFOOT —Eastern in terms of the archipelago?

Mr Huning —Particularly the key larger islands but stretching all the way to include IrianJaya.

Senator LIGHTFOOT —As to my question, has there been any attention paid specificallyto the southerly coast of Java?

Mr Huning —At this stage in terms of project activities, we do not have direct involvementsin the south Java area.

Senator LIGHTFOOT —And Irian Jaya?

Mr Huning —We have a number of project activities particularly involving NGO assistance.We mentioned a little earlier the current humanitarian relief operation as well.

Senator LIGHTFOOT —What form does that take? Why should there be humanitarian aidto Irian Jaya? It is a relatively rich area. It has diverse potential at least.

Ms Gillies—If I may answer that, Senator. Irian Jaya, like Papua New Guinea, has beensuffering from the effects of the El Nino phenomenon. There has been quite a severe droughtthere, with a very large number of people being quite seriously affected by failure of theircrops and by lack of water. That situation, as I was saying earlier, has started to improve,but Australia is undertaking a joint operation of AusAID and Australian Defence Forcepersonnel to the value of around $10 million, which will fly food into remote areas aroundthe Jomena area to feed about 90,000 people who are affected. While Irian Jaya may havemany resources under the ground, it is the ones that are growing out of the ground that arenot enough at the moment, and that is where we are trying to help.

Senator LIGHTFOOT —Is that $10 million in addition to the $107.9 million allocated foraid?

Ms Gillies—I think it is included within that.

Mr Huning —The $10 million is comprised of joint funding between the Australian defenceforces and the aid program. The aid program component of that is $1.5 million and that iswithin the overall $107 million.

Senator LIGHTFOOT —With the meltdown, if I could use that popular journalistic phrase,of the Indonesian economy, does that present itself with any further concern that the amountbudgeted may have to be increased? For instance, some staples have increased quitedramatically as a result of the drastic devaluation of the rupiah.

Mr Huning —I think Australian thinking on that would be guided in part by the kinds ofassessments available from bodies like the World Bank, the World Food Programme and/orthe Food and Agricultural Organisation of the overall food situation in Indonesia. At this stage,the essence of most recent assessments is that Indonesia has self-sufficiency, taking intoaccount both its domestic production and imports, over the next several months. The issue



certainly would not be one, therefore, in the very short term of outright food supply shortages.It is more a question of purchasing power and affordability.

We are helping Indonesia address that within the $30 million special humanitarian initiativealready taken, partly by the provision of some 40,000 tonnes of Australian wheat to Indonesiathrough the World Food Programme, which within Indonesia will, on arrival, be swapped forthe local variations of rice to be distributed to the most needy and devastated areas. In addition,part of the $30 million will go into food for work schemes and employment generationschemes throughout the various target areas in the eastern Indonesian group, again throughthe agency of the World Food Programme.

So there are a variety of ways in which our response to date is tackling that question ofpeople coping with the price increases. On the other hand, at the broader level, many otherdonor countries are also supplying various forms of similar assistance—either grains or cashor other kinds of assistance—direct to the government of Indonesia. At the present stage thatwould seem to be in a sort of balance, unless in the El Nino and its aftermath circumstancessignificantly worsen food production and food distribution and therefore prices later in calendar1998 and 1999.

Senator COOK—Can I interrupt for a moment. I would like to withdraw now. Can I thankthe minister for his cooperation today and apologise to AusAID for not seeing through theirestimates.

Senator Hill—Thank you for that courtesy. It makes the whole process feel much better.This is the end of five days for me.

Senator LIGHTFOOT —I am not going to be much longer.Senator Hill—That is not a hint.Senator LIGHTFOOT —I do not know whether you can answer this, but I am going to

ask it any way. I thought that was very sporting of me to preface my question with thatstatement. It seems to me, as a Western Australian, with 200 million people along thatarchipelago of almost countless islands, that of a budget of almost $1½ billion in foreign aidit is relatively modest. I am referring to the $108 million that goes to Indonesia. Would youagree?

Senator Hill—I do not think he should agree with that.Senator LIGHTFOOT —He would not agree with that?Senator Hill—He should not agree with that. That sounds a little like a policy decision to

me, but it is interesting to note your point of view. You are arguing that more of the Australianaid vote should go to Indonesia.

Senator LIGHTFOOT —I was not arguing that, Minister, but perhaps you would care toanswer that question. Is it a reasonable divvy up of the foreign aid catch?

Senator Hill—Obviously the government has determined in all the circumstances that it is.Perhaps Mr McCawley would like to add to my answer. He wants to provide some substanceto my answer.

Senator LIGHTFOOT —Mr McCawley, perhaps you have had time to catch the football.Mr McCawley —In addition to the direct bilateral program which my colleague Mr Huning

was referring to, the Australian government provides support to Indonesia through themultilateral institutions—through the World Bank, through the Asian Development Bank andindirectly through its work with the International Monetary Fund. As well as the bilateral



program the government has recently committed itself to support for the much publicised IMFsupport program to Indonesia, the Australian government has pledged support of $US1 billionto the overall IMF program. The total IMF program is in excess of $US40 billion.

Senator LIGHTFOOT —How much of that has been drawn down?Mr McCawley —A lot of that has not yet been disbursed, but Australia, like a range of other

countries as well as the multilateral institutions—the World Bank, the ADB and so on—standready behind that program. We have our bilateral program, we have the multilateral effort andbehind that is a more vague form of support but, arguably, more important support, which isthrough support for policy changes. I think it is widely agreed that, for Indonesia and otherdeveloping countries, the way out of their problems is not bilateral aid, it is not multilateralaid but correct policies. We are trying to work on a number of fronts—the bilateral effort, themultilateral effort and other activities in the policy area.

Senator LIGHTFOOT —Export guarantees, for instance.Mr McCawley —All of that sort of thing. When you put them altogether, it is quite a

cocktail of activities. You are quite right in pointing to the trade activities as well. One reallyhas to see the basket as a whole from Australia. One has to see the Australian basket in thecontext of the international basket of international assistance. I know it is complicated. I amsorry; I am not deliberately trying to do that, but it is a complicated mix. We try to pitch ouractivities within a much wider playing field. Whether we get it right or not, it is for theparliament to decide. But that is the approach that under instructions from the government theAustralian aid program is designed to do. In short, the bilateral program is merely a smallerpart of a much wider effort.

Senator Hill—If I could just add—now that we are starting to get a feel for this—it is stillour second largest aid recipient by far after New Guinea but a third again as high as the nextaid recipients.

Senator LIGHTFOOT —There are statistics and damn lies.Senator Hill—If you are saying that the mix between aid recipients is wrong, you have to

take it from somewhere else, unless you are arguing that we should be increasing the aid vote.The other point is that, whilst aid still has a critical role to play, certainly the emphasis inrecent times has been to look to the development of the economies in the private sector,investment flows, breaking down trade barriers and so forth, which I would suggest at the nextstage beyond the aid level is the way to start reducing poverty and lifting living standards.

Senator LIGHTFOOT —I would like to put a hypothetical question and perhaps answerit. If the Indonesian archipelago were north-east to the east coast of Australia as opposed tonorth-west of Australia, there would not be any difference in aid to Indonesia, would there.

Senator Hill—That is correct. There would not be any difference.Senator LIGHTFOOT —There would be no difference in aid.Senator Hill—If you are hinting that in some ways Indonesia is prejudiced because it is

closer to Western Australia than eastern Australia, I would say that is the most paranoidWestern Australian viewpoint I have ever heard.

Senator LIGHTFOOT —I would have thought it was more than a hint, Minister. I haveone more question in regard to Java because again it impinges upon, not a proliferation, butthe continuing presence of Indonesian fishermen coming into the north-west waters of WesternAustralia, or indeed Australia. Is there anything that has been done or is focused upon thateconomically deprived area of Java on the southerly coast that would prevent fishermen from



Indonesia coming into Australian territorial waters? I particularly think of the expertise thatAustralia has built up internationally in aquiculture that has been suggested to me from fairlyhigh levels in the former Indonesian bureaucracy to look at measures other than punitive onesthat have been initiated by Australia to prevent those fishermen coming here.

Mr Huning —As I indicated a little earlier, the geographic focus by agreement betweenIndonesia and Australia of our aid program is the eastern islands, not in a practical sense theJava area that you are referring to. On the other hand, in relation to the problem of fishingcommunities in the eastern Indonesian coastal areas and low incomes in those areas, we havequite a range of practical activities that have been funded for some time by the aid programand that will continue into the future.

Senator LIGHTFOOT —Could you describe those practical moves that you have justmentioned?

Mr Huning —I can give you a sample now and provide you with more details later. I amreferring to the provision of fishing equipment, assistance for fishery communities througheconomic development activities targeting women, the establishment of small fishingbusinesses, including micro-credit support, and the actual development of fisheries in all ofthe practical senses.

Senator LIGHTFOOT —It sounds as though you are encouraging boats to come toAustralia.

Mr Huning —No, no—sea cucumber culture, and so on, the development of fishingcooperatives. These are just a sample.

Senator LIGHTFOOT —But beche-de-mer or sea cucumbers are harvested largely fromthe continental shelf of Australia, and that is my point.

Mr Huning —The general assumption is that, if we can help establish viable incomes fromthese various forms of fishery activities on the Indonesian side, that is the best way tocontribute to the problem of illegal fishing. There are a whole range of other factors that, ofcourse, have been causing that problem of illegal fishing, many of which lie outside of theprovince of the aid program to deal with. They are not purely driven by questions of income.

Senator LIGHTFOOT —It does sound to me, with respect, that you are encouragingfishermen with some of those measures you have mentioned to come on to the Australiancontinental shelf. I know that that is not intended, but it sounds like it.

Mr Huning —As I offered, Senator, we can provide considerably more details of the kindsof activities and their objectives on notice, if you wish.

Senator LIGHTFOOT —I would appreciate that very much. I thank you, Minister, and Ithank you, gentlemen and madam, for your answers.

Senator COONEY—I ask these questions with all the enthusiasm of someone who has justcome from a particular group of countries, with Australia having a relationship with that groupof countries—I have just been to Southern Africa. AusAID has had a couple of projects there.One was the making of artificial limbs and feet in Angola. What are we going do about that?I want to go on the record of having raised that.

Then I would ask you about mine clearing in Mozambique. It was Major Peter McIntoshwho was doing great work there. Have we got plans still to go ahead with the mine clearingand with the limb making?

Ms Gillies—With respect to the first part of your question about the prosthetics project inAngola, my understanding is that we have funded that project over a number of years and that



our funding for that is coming to an end. But I am happy to provide you with furtherinformation about that.

As far as our activities in de-mining in Mozambique are concerned, I am happy to adviseyou that just recently Australia announced a further $1 million contribution to the UNDPAccelerated De-mining Program. Certainly we are very pleased with the operation and thework that has been going on in Mozambique. The two Australian Defence Force personnel,including Major McIntosh, are doing excellent work with their Kiwi colleagues.

Senator COONEY—Who decides about the prosthetics project in Angola?Ms Gillies—That is within my area.Senator COONEY—Who makes that decision? Is it a matter for government?Ms Gillies—I think that is a decision small enough for me to be able to look at.Senator COONEY—And you would look at it?Ms Gillies—I have not, actually; no, not following on from your visit. But I know that that

project has come to an end, and I am happy to look at it again.Senator COONEY—As a country, do we have any plans to feed in ideas to Southern

Africa? Apropos of my visit there, I thought we have all sorts of advice—if they are willingto take it—that we could give them about human rights structures, such as the AAT. I do notknow whether they have any social security over there, but they did have the SSAT and thingslike that. Do we do anything about that?

Ms Gillies—Certainly, the most significant of the activities we have with South Africa isa capacity building program, which is designed to provide expert Australian advice into thevarious levels of government—most particularly at the national level of government. Duringour high level consultations that I attended earlier this year just before your visit, I can adviseyou that I think 21 different departments talked to us about their views on the aid, and I thinkit was almost uniformly very positive sort of feedback.

Certainly, Australia is providing expert advice into at least two of the human rights HREOCequivalent. There are four separate institutions which look at different aspects of human rightsin South Africa, and that is certainly one of the priority areas.

Senator COONEY—I would express my appreciation of the way I was looked after inSouth Africa by Ian Porter and particularly by Jessica Lucas and Matthew Anderson. CouldI put that on board?

Senator Hill—I am sure they will learn about it, Senator; thank you very much.Senator COONEY—I thought the way the department looked after us throughout was good.

It does seem as though we could do a lot, and I would be very interested to get someinformation about feeding in that human rights material and other material into South Africa.

Ms Gillies—Certainly. We will be happy to provide it, Senator.ACTING CHAIR —As there are no further questions, I indicate that the committee has

received written questions on notice from Senator Cook, and copies of those have been passedto the Department of Foreign Affairs and Trade for answer.

I thank both the minister and officers from the Department of Foreign Affairs and Trade,from Austrade and from AusAID for their attendance today.

Committee adjourned at 7.25 p.m.


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