on the demand for imports). Many economists believe that the desired gains in growth and employment will come, but are worried that unless the government cuts the budget deficit faster than currently planned, both of the feared side effects could be produced by an overheating economy.

2. Exchange Rate Policies

Australian Dollar (A$) exchange rates are determined by international currency markets. Official policy is not to defend any particular exchange rate level. In practice, however, the Reserve Bank has a comfort range in mind when looking at exchange rate movements. It is active in "smoothing and testing" foreign exchange rates in order to provide a generally stable environment for fundamental economic adjustment policies, and intervenes occasionally to combat speculative attacks on the Australian dollar.

Australia does not have major foreign exchange controls beyond requiring Reserve Bank approval if more than A$5,000 (US $3,650) in cash is to be taken out of Australia at one time, or A$50,000 (US $36,500) in any form in one year. The purpose is to control tax evasion and money laundering. If the Reserve Bank is satisfied that there are no liens against the money, authorization to take large sums out of the country is automatic. The regulation does not affect U.S. trade.

3. Structural Policies

Pursuing a goal of a globally competitive economy, the Australian government is continuing a program of economic reform begun in the 1980s that includes an accelerated timetable for the reduction of protection and micro-economic reform. Initially broad in scope, the Australian government's program is now focusing on industryby-industry, micro-economic changes designed to compel businesses to become more competitive.

The strategy has three principal premises: protection must be reduced; the pace of reform needs to be accelerated; and industry must learn to do without high levels of protection.

Towards these ends, a phased program to cut tariffs by an average of about 70 percent was begun July 1, 1988, to be completed on June 30, 1996. Specifically, in approximately equal phases, except for textiles, clothing, footwear and motor vehicles, all tariffs will be reduced to 5 percent. Along with these measures, some of the few manufactured products still receiving bounties (production subsidies) will have those benefits reduced each year until the bounties expire. The Uruguay Round agreements will force faster-than-planned tariff reductions in only a small number

of cases.

As noted in Section five (below), local content requirements on television advertising and programming and certain government procurement practices may have adverse effects on U.S. exporters and service industries.

4. Debt Management Policies

Australia's gross external public debt now exceeds US $67.7 billion, or 23.5 percent of GDP. That figure represents 46 percent of Australia's gross external debt; the remaining 54 percent is owed by the private sector. Gross interest payments on public debt totaled US $4.0 billion in AFY 1993/94, representing 6.7 percent of exports of goods and services. Private sector debt service totaled US $4.0 billion, an amount equal to another 6.7 percent of export earnings. On an overall basis, therefore, Australia's debt service ratio was 13.4 percent, down substantially from AFY 1992/93's 14.9 percent. Falling international interest rates caused the drop in the debt service ratio. Standard and Poor's general credit rating for Australia remained AA during 1994.

5. Significant Barriers to U.S. Exports

The U.S. enjoyed an estimated US $6.2 billion trade surplus with Australia in 1994. There are no longer any significant Australian barriers to U.S. exports. The U.S. is the number one source of imports in Australia, with a 21 percent share of Australia's import market and a substantial share of the imported products purchased by the government. The following Australian trade policies and practices affect U.S. exports to some degree.

Licensing: Import licenses are now required only for certain vehicles, textiles, clothing, and footwear. Licensing applied to these products is for protection, but except for a small market among importers of used automobiles has had little impact on U.S. products.

Service Barriers: The Australian services market is generally open, and many U.S. financial services, legal, and travel firms are established in Australia. In 1992 the Government announced a complete liberalization of the banking sector and new foreign banks will be licensed to operate as either branches (for wholesale banking)

or subsidiaries (for retail operations). The Australian Broadcasting Authority (ABA), which controls broadcast licensing, liberalized rules governing local content in television advertising effective January 1, 1992. Under current rules, up to 20 percent of the time used for paid advertisements can be filled with messages produced by non-Australians. Statistics covering 1992 (the latest available) indicate that approxímately 8 percent of television advertisements broadcast in that year were produced abroad.

On January 1, 1990, local content regulations regarding commercial television programming entered into force. Beginning with 35 percent for 1990, the local content requirement increased by 5 percent per year until January 1993. From that date forward, 50 percent of a commercial television station's weekly broadcasts between the hours of 6:00 a.m. and midnight must be dedicated to Australian programs. Programs are evaluated on a complex point system based on relevancy to Australia (setting, accent, etc., ranging from no Australian content to a 100 percent Australian production). Trade sources indicate that the content regulation does not have a substantial impact on the amount of U.S. programming sold to Australian broadcasters, as the mix of programming is driven by the market's preference for Australian themes. The latest available statistics bear that out. According to the ABA, in the two years before the local content requirement took effect, an average of 46 percent of commercial stations' broadcasting time was devoted to imported programming. During the 1992 broadcasting year, that figure fell to 44 percent. Regulations governing the development of Australia's pay-TV system require that channels carrying drama programs devote at least 10 percent of broadcast time to new, locally produced programs. The ABA's local content requirements have been opposed actively by the American Embassy and U.S. trade officials. In September 1994 the Embassy reiterated U.S. opposition to quotas in the context of the ABA's review of broadcasting content regulation. That review is expected to conclude in early 1995. State governments restrict development of private hospitals. States' motives are to limit public health expenditures and to balance public/private services to prevent saturation and overuse-major government fiscal concerns given that most medical expenses for private hospital care are paid through government health programs. Standards: In 1992, Australia became a signatory to the GATT Standards Code. However, it still maintains restrictive standards requirements and design rules for automobile parts, electronic and medical equipment, and some machine parts and equipment. Currently, all Australian standards are being rewritten to harmonize them where possible to international standards with the objective of fulfilling all obligations of the GATT Standards Code. State governments agreed in March 1991 to recognize each others' standards. As a result, state standards are being reviewed to harmonize with federal standards.

Labeling: Federal law requires that country of origin be clearly indicated on the front label of some products sold in Australia. Labels must also give the name and address of a person in Australia responsible for the information provided on the label. State rules requiring that mass or volume of packaging contents be expressed on labels to the nearest five milliliters or kilograms are expected to be changed as state standards are harmonized. These and similar regulations are being reconsidered along with other standards in light of compliance with GATT obligations, lack of utility and effect on trade.

Motor Vehicles: Passenger vehicle tariffs, currently 30 percent, will drop to 27.5 percent on January 1, 1995 and will be phased down to 15 percent on January 1, 2000. Under automotive arrangements announced in March 1991, automobile manufacturers may import duty free dutiable imported components up to a maximum value equal to 15 percent of their automobile production in a given year. In addition, under terms of the export facilitation scheme, local manufacturers of vehicles and automotive components can receive an offset on the tariff on finished vehicles they import for sale in Australia in an amount equal to the value of their exports of vehicles/components times the duty rate on the vehicles imported. Under the Motor Vehicle Standards Act of August 1989, the import of used vehicles manufactured after 1973 for personal use is banned, except where the car was purchased and used overseas by the buyer for a minimum of three months. Commercial importers must apply for a "compliance plate" costing A$20,000 (US $14,600) for each make of car imported. Left-hand drive cars must be converted to right hand before they may be driven in Australia. Only approved (licensed) garages are permitted to make these conversions. Because of these requirements, only a small number of used cars are imported into Australia each year.

Foreign Investment: U.S. firms account for the largest single share of the stock of foreign direct investment in Australia. In February 1992 the government announced significant reforms to open the economy even further to foreign investment. In the mining sector (excluding uranium), the 50 percent Australian equity and con

trol guideline for participation in new mining projects, and the economic benefits test for acquisitions of existing mining businesses, were abolished. In almost all sectors of the economy, the thresholds above which foreign investment proposals must be examined by the Foreign Investment Review Board (FIRB) wereincreased. Proposals to acquire 15 percent or more of a company or business with total assets below A$50 million (US $36.5 million), or takeover an off-shore company with Australian subsidiaries or assets valued below A$50 million (US $36.5 million) are no longer examined. Proposals above the threshold will be approved unless found contrary to the national interest. The only sectors in which the reforms do not apply are uranium mining, civil aviation, the media, and urban real estate.

Divestment cannot be forced without due process of law. There is no record of forced disinvestment outside that stemming from investments or mergers which tend to create market dominance, contravene laws on equity participation, or result from unfulfilled contractual obligations.

Government Procurement: Australia is not a member of the GATT government procurement code. However, in June 1994 the government announced an interagency examination of the code and the question of possible adherence. The review is scheduled to be completed in early 1995.

The federal government abandoned the civil offset program in 1992. Three state governments still require offsets in some cases. Nonetheless, in dismantling the offset program, the government removed a major trade irritant between the United States and Australia.

Since 1991, foreign information technology companies with annual sales to the Australian government of A$10-40 million (US $7.3-29.2 million) have been required to enter into fixed term arrangements (FTAs), and those with sales greater than A$40 million (US $29.2 million) into partnerships for development (PFDs). Under FTAs, a foreign company or its subsidiary commits to undertake local industrial development activities worth 15 percent of its projected amount of government sales over a four year period. Under a PFD, the headquarters of the foreign firm agrees to invest 5 percent of its annual local turnover on R and D) in Australia; export goods and services worth 50 percent of imports (for hardware companies) or 20 percent of turnover (for software companies); and achieve 70 percent local content across all exports within the seven year life of the PFD. In 1992 this scheme was extended into the telecommunications customer premises equipment (CPE) sector, replacing, in large measure, the requirement that suppliers of cellular mobile telephones, pabx, small business systems, and first telephones have Industrial Development Arrangements (IDAS) in place before obtaining licenses to connect their equipment to the public switched network. The IDA program now is scheduled to be eliminated in June 1996.

Beginning on February 1, 1992, the government implemented a Restricted Systems Integration Panel (RSIP) scheme. The RSIP is a panel of 20 to 25 selected private companies through which all Commonwealth information technology requirements involving systems integration activity are to be sourced, except for purchases with an estimated value of less than A$1 million (US $0.7 million). Firms applying for panel membership will be evaluated on "demonstrated competence, commercial viability and potential to contribute to government policy objectives, including expansion into Asian-Pacific markets, particularly those of North and Southeast Asia." The net effect of the panel will be to hinder non-member participation in government systems integration contracts. Technically, panel membership will not be closed. However, access will remain restricted and a new applicant (domestic or foreign) would have to demonstrate eligibility to join or be able to offer expertise not available within the panel. Several U.S. firms were named initial members of the panel. The U.S. Embassy and the Australian Information Industry Association have strongly opposed the panel's establishment.

In December 1992 the Australian government announced an initiative requiring, beginning in AFY 1993/4, Government Business Enterprises (GBEs-central government-owned companies such as the Australian and Overseas Telecommunication Corporation and the Civil Aviation Authority) to, inter alia, give "local companies the maximum opportunity to compete for government business consistent with the commercial objectives of GBES and the need to obtain value for money." The new policy stops well short of directing GBEs to give preference to local suppliers. However, it does bias them towards buying locally and could, therefore, become a significant element determining their procurement choices.

The Australian government's May 1994 employment and industry policy statement strengthens these efforts to use government procurement policy to encourage local industrial development. It requires industry impact statements to be drafted for procurement of US $7.4 million or more, and establishes a two-envelope system for such tenders. Under the latter system, bidders will be required to submit de

tailed information regarding Australian industrial development separately (in “envelope 2"), and bids will be judged both on price/product specifications and industrial development grounds.

Quarantines: Because of its geographic location, Australia is relatively free of many animal diseases (rabies, hoof-and-mouth, etc.) and pests that plague other parts of the world. To preserve its environment, Australia imposes extremely stringent animal and plant quarantine restrictions. Except for horses, livestock imports are limited to reproductive material and a few valuable breeding animals that must undergo long quarantines. Studies are underway which could see the lifting of phytosanitary barriers to the importation of U.S. salmon and cooked chicken.

Tobacco: Local manufacturers are encouraged to use at least 50 percent local leaf in their products through the offer of concessional duties on imported leaf. In practice, an "informal" agreement between growers and cigarette manufacturers extends the local content requirements to 57 percent. This local content rule is to be removed on October 1, 1995. Since October 12, 1989 the government has banned the sale of smokeless tobaccos (chewing tobacco, snuff for oral use) in Australia, leaving the market solely to local products used for oral purposes, but not labeled as such. Fruit Drinks: Noncarbonated fruit drinks containing 20 percent or more local fruit juice are assessed a sales tax of 10 percent, whereas fruit drinks with below 20 percent local fruit juice content are assessed a 20 percent sales tax. This Australian content-based tax rule was due to be rescinded on or before January 1, 1995. In 1993, Australia modified its preferential tariff scheme to equalize, from July 1, 1995, the tariff applied on citrus from developed and developing countries. The tariff will be set at 8 percent effective on that date, and will fall to 5 percent on July 1,

1996.

6. Export Subsidies Policies

Australia signed the GATT Subsidies Code and joined with the U.S. in GATT negotiations to limit export subsidy use.

The Australian government provides export market development-reimbursement grants of up to A$250,000 (US $182,500) for most qualifying domestic firms exporting goods and services. Other mechanisms provide for drawbacks of tariffs, sales, and excise taxes paid on exported finished products or their components. In some cases, government grants and low-cost financing are provided to exporters for bonding, training, research, insurance, shipping costs, fees, market advice, and to meet other costs. "Bounties" (in effect production subsidies) are paid to manufacturers of some textile and yarn products, bed sheets, new ships, some machine tools, and computer and molding equipment to help them export or compete with cheaper foreign-made substitutes. Existing bounties are to be phased down until they expire. Bounties and their expiration dates are: shipbuilding and textiles (June 30, 1995); citric acid (March 31, 1996); machine tools and robots (June 30, 1997); books, computers and circuit boards (December 31, 1997). All bounties will be reviewed before expiration with some possibly extended or converted to tariffs. Dairy market support payments, which were classed as an export subsidy under the Uruguay Round, are to be terminated on June 30, 1995 in accordance with Australia's Uruguay Round implementing legislation.

The government provides support and research and development grants to Australian industry for trials and development of internationally competitive products and services for which the Federal or state government are the primary purchasers. Electricity production is within the purview of state governments, some of which subsidize the industry and/or selected users of electricity. States also control railroads and rates; some use rail charges as a form of indirect taxation to overcome their legal inability to levy income and some sales taxes. New South Wales and Queensland charge high freight rates for coal partly for that reason. Other states charge high prices to move wheat by rail, a factor which hurts Australian wheat's competitiveness on world markets. In competing for investment, states offer a wide range of negotiable concessions on land, utilities, and labor training, some of which amount to subsidies.

7. Protection of U.S. Intellectual Property

Patents, trademarks, designs and integrated circuit copyrights are protected by Australian law. Australia is a member of the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention, the Geneva Phonograms Convention, the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, and the Patent Cooperation Treaty. Australian law is broad and protects new technology, including genetic engineering.

Patents: Patents are available for inventions in all fields of technology (except for human beings and biological processes for their production). They are protected by the Patents Act, which offers coverage for 16 years, subject to renewal. However, patents for pharmaceutical substances may have the term of protection extended to 20 years. Trade secrets are protected by common law, such as by contract. Designs can be initially protected by registration under the Designs Act for one year, which may be extended for six years and for further periods of five and five years respectively, upon application.

Trademarks: Trade names and marks may be protected for seven years and renewed at will by registration under the Trademark Act. Once used, trade names and marks may also, without registration, be protected by common law. Some protection also extends to parallel importing; that is, imports of legally manufactured products ordered by someone other than a person or firm having exclusive distribution rights in Australia.Parallel importation is allowed, however, for books, and has been proposed for sound recordings (legislation which would have allowed such imports died when Parliament was dissolved for the March 1993 national election). In September 1993 the Australian Copyright Law Review Committee recommended that parallel importation of computer software be allowed under strict limitations.

Copyrights: Copyrights are protected under the Copyright Act. Works do not require registration and copyright automatically subsists in original literary, artistic, musical and dramatic works, film and sound recordings. Computer programs are legally considered to be literary works. Copyright protection is for the life of the author plus 50 years.

The Australian Copyright Act provides protection regarding public performances in hotels and clubs, and against video piracy and unauthorized third-country imports. Australia's Uruguay Round implementing legislation extends protection against the commercial rental of sound recordings and computer programs. The Attorney General's Department monitors the effectiveness of industry bodies and enforcement agencies in curbing the illegal use of copyrighted material.

New Technologies: Illegal infringement of technology does not appear to be a significant problem. Australia has its own software industry and accords protection to foreign and domestic production. Australia manufactures only basic integrated circuits and semiconductor chips. Its geographic isolation precludes most U.S. satellite signal piracy. Australian networks, which pay for the rights to U.S. television programs, jealously guard against infringement. Cable television is not yet established in Australia.

8. Worker Rights

a. Right of Association.-Workers in Australia fully enjoy and practice the rights to associate, to organize and to bargain collectively; these rights are enshrined in the Arbitration Act of 1904. Legislation which went into effect on March 30, 1994 formally legalized the right to strike, which already had been well-established in practice. In general, industrial disputes are resolved either through direct employerunion negotiations or under the auspices of the various state and federal industrial relations commissions whose mandate includes resolution of disputes through conciliation and arbitration. Australia has ratified the major International Labor Organization conventions regarding worker rights.

b. Right to Organize and Bargain Collectively. Slightly less than 40 percent of the Australian work force belongs to a union. The industrial relations system operates through independent federal and state tribunals; unions are fully integrated into that process, having explicitly stated legal rights and responsibilities.

c. Prohibition of Forced or Compulsory Labor.-Compulsory and forced labor are prohibited by ILO conventions which Australia has ratified, and are not practiced in Australia.

d. Minimum Age for Employment of Children.-The minimum age for the employment of children varies in Australia according to industry apprenticeship programs, but the enforced requirement in every state that children attend school until age 15 maintains an effective floor on the age at which children may be employed full time.

e. Acceptable Conditions of Work.-There is no legislatively-determined minimum wage. An administratively-determined minimum wage exists, but is now largely outmoded, although some minimum wage clauses still remain in several federal awards and some state awards. Instead, various minimum wages in individual industries are specified in industry "awards" approved by state or federal tribunals.

Workers in Australian industries, including the petroleum, food, chemicals, metals, machinery, electrical, transportation equipment, wholesale trade, and general manufacturing sectors, enjoy hours, conditions, health, safety standards and wages that are among the best and highest in the world.