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CONTENTS - Department of Foreign Affairs and Trade

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					                                                 SECRET AUSTEO

                                                   CONTENTS

Letter from the Secretary ............................................................................. 1
Matters for Immediate Decision .................................................................... 7
    Possible International Engagements ................................................................ 7
    Possible Domestic Commitments ..................................................................... 8
    Urgent Policy Decisions ................................................................................... 9
    Responses to Parliamentary Committee Reports ............................................ 1"1
The Department in Brief ............................................................................. 13
Trade and International Economic Issues .................................................... 15
   Trade and International Economic Overview .......                                         15
                                                                                          1 • • • • • • • • • • • • • II . . . . . . . . . . . . . . . . . . .



    (}~()   .......................................................................................................                                              1~

    World Trade Organization ...................................................................... 19
         Doha Round Negotiations ......................................................................... 21
         WTO Disputes ........................................................................... , ............... 23
    Trade and Environment .......................................................................... 25
    Trade-Related Aspects of Intellectual Property ...................................... 27
    Regional Architecture.                                                                28
                                        II ••••••••• I I ' •••••••••••• I ••••••••••••••••••••••••••••• I •• II •• I •• I I . I ......




        East Asia Summit and other ASEAN Institutions ...................................... 28
        Trans- Pacific Partnership ......................................................................... 3'1
        APEC ....................................................................................................... 33
    Free Trade Agreements .......................................................................... 35
    FTA Overview ................................................................................................ 35
       FTAs Under Negotiation ........................................................................... 36
          Korea ................................................................................................. 36
          China ................................................................................................. 38
          Japan ................................................................................................. 40
          Malaysia ............................................................................................. 41
          PACER Plus ........................................................................................ 42
          Gulf Cooperation Council ................................................................... 43
       FTAs Under Consideration ....................................................................... 45
          Indonesia ........................................................................................... 45  ,
          India .................................................................................................. 46
          European Union ................................................................................. 47
          CER-Mercosur .................................................................................... 48
       FTAs Concluded ....................................................................................... 49
          ASEAN-Australia-New Zealand FTA ............... ~.:.::.~.::: ..GE0lA:&&lf~E-Dl9
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           Australia New Zealand Closer Economic Relations Trade Agreement ... 51
           Australia-United States FTA ............................................................... 52
            Singapore-Australia FTA ..................................................................... 53
           Thailand-Australia FTA ...................................................................... 55
           Australia-Chile FTA ............................................................................ 57
                                      .......................................................................... 58
     Trade Finance ........................................................................................ 59
     International Competitiveness and Export Development........................ 61
     Trade Consultative Mechanisms and Advocacy ...................................... 62
Jl!iia ............................................................................................................                                                                                                 Ei~

     China, Hong Kong and Taiwan ...................... :............................................... 64
     Japan ............................................................................................................ 66
     Korean Peninsula and Mongolia ..................................................................... 68
     Indonesia ...................................................................................................... 70
     Other South East Asia ................................................................................... 72
     India ............................................................................................................. 75
Americas .....                                                                                                   77
                   I I • • I I • • • • • • • I • • • • I . I • • • • • • • I I • • 1 1 . 1 • • • I • • • • • • • • • • • • • • • • • • 10 • • • I I 1 • • • • • • 1 • • • • • • • • • • • I • • • • • • • • • • •




   United States and Canada ............................................................................. 77
 . Latin America ................................................................................................ 79
Pacific ........................................................................................................ 81

~llr()1?~ ..•.....••••••••••..•.......•........•...••••••• •••••.•••.•......••.....•..........•..•.••...•.........• ~~

Middle East ................................................................................................. 85
Mrica ............. o.      0 ••••••••••••••••••••••••••••••••••••••• 0 •••••••••••••••••••••••••••••••••••••••••••••.•••••                                                                                         ~7

International Security ..........................                                                   0 ••••••••••••••••••••••••••••••••••••••••••••••••••••••                                                        ~9

     Regional Security Issues ................................................................................ 89
     Counter-Terrorism ........................... , ............................................................. 92
     Nuclear Non-Proliferation and Disarmament.. ................................................ 94
     Counter-Proliferation and Arms Control.. ....................................................... 96
     Other National Security Issues ...................................................................... 98
M1:J.ltnateral Issues .....................                                                                    100
                                                                                0 0 00 0 • • • 0 . 0 • • • • • 0 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 0 • • • • • • • • • • • • •



   United Nations ............................................................................................ 100
   United Nations Security Council Candidacy ................................................. 101
   Commonwealth and CHOGM ....................................................................... 102
   People Smuggling Issues .............................................................................. 103
   Climate Change ...................................................................... , .................... 106
  • Environment ......................................... · .. ······ .. · .. · .. ··t~~~art~~nl·~f¥-~~~~~~Wi§i~nd-                                                                                                       ···1
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     Whaling ....................................................................................................... 108
     Human Rights ............................................................................................. 110
     International Legal Issues ............................................................................ 112
                                                                                                                      •
Policy Planning ......................................................................................... 115
Consular Services ..................................................................................... 116
     2010 New Delhi Commonwealth Games ....................................................... 116
     Consular Services ........................................................................................ 117
Passport Services ...................................................................................... 119
                                                                                                                      •
Public Diplomacy. ..................................................................................... 121
Australia Awards .~ .................................................... .................................. 123
Corporate Issues .......        0 •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••   125
    Staffing ....................................................................................................... 125
    Budget ........................................................................................................ 127
    Savings ....................................................................................................... 129
    New Policy Proposals ................................................................................... 130
    Security ....................................................................................................... 132
    Property ...................................................................................................... 133
    Litigation and Freedom of Information ......................................................... 135
Background .............................................................................................. 137
    Australia's Trade Profile ...............................................................................       13'7
    Executive Chart ...........................................................................................     139
    Heads of Missions/Posts ..............................................................................          140
    Map of Embassies/Consulates-General .......................................................                     141




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                 Possible International Engagements

You will need to make decisions regarding overseas travel. We would
recommend early visits to major trading partners, especially the United
States, Japan, India and China, and recommend the following in order of
priority:
                                                                                         •
Priority: High

  • An early visit to Washington, including attendance at the Global
    Services Summit on services trade policy in Washington on 22
    September, and making calls at that time on key Administration,
    Congressional and industry figures.

  •   Consider. options for trade ministers' input into G20 leaders'
      discussions on Doha at the Seoul Summit. Depending on officials'
      progress in Geneva, a meeting of trade ministers may be the best
      option, although unlikely before the Brazilian elections on 3 October.

 .• Visit Korea in October to finalise the FTA before the Seoul G20
    Leaders' Summit.

  •   Attend the 22 nd APEC Ministerial Meeting, in Yokohama, Japan,
      from 10-11 November, including a meeting of Trans-Pacific
      Partnership (TPPI ministers in the margins.

Priority: Medium

  •   In your dealings with US Trade Representative Kirk, agree dates for
      the annual Australia-US Ministerial Trade Talks (AUSMINTTI.
      under the auspices of the Australia-United States Free Trade
      Agreement, which the United States is due to host in 2010.

  •   Consider travel to Europe in early 2011 for a second ministerial-level
      Trade Policy Dialogue (TPDI with the European Commission (ECl,
      should EC Trade Commissioner De Gucht not be able to visit
      Australia.

  •   Consider travelling to London for 'Australialive UK 2010' scheduled
      for 10-19 September 2010. Australialive UK is a senior-level private
      sector initiative designed to showcase Australian business and
      investment opportunities in the United Kingdom.




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                     Possible Domestic Commitments

    Priority: High

      •   Confirm with Russian Minister of Agriculture the holding of the Joint
          Commission on Trade and Economic Cooperation in Australia on
          19-20 October.

      •   Consider making a major domestic speech on trade policy in Sydney
          on 10 December, in conjunction with an international roundtable on
          global services trade reform.

      •   Invite China's Minister for Commerce, Chen Deming, to attend the
          biennial Joint Ministerial Economic Commission in Australia in
          2010.

      •   Invite Japan's Minister of Economy, Trade and Industry, Masayuki
          Naoshima, to attend the second Joint Ministerial Economic
          Dialogue in 2010.




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                        Urgent Policy Decisions
You will need to take urgent decisions on the following issue in the flrst
week:

   •   Consider Australia's negotiating position for the next and possibly
       flnal round of the Anti-Counterfeiting Trade Agreement, planned for
       late September.

You will need to take urgent decisions on the following issues in the flrst
month:

   •



   •   Write to India's Commerce Minister Anand Sharma to reaffirm the
       launch of FTA negotiations and propose dates for the Joint
       Ministerial Commission.

   •   Consider options for trade ministers' input into G20 leaders'
       discussions on Doha at the Seoul Summit.

   •   Consider the departmental response to the Productivity
       Commission's draft review of Australia's FTAs (due September).

   •   Consider dates for a bilateral trade ministers' meeting in Indonesia
       by the end of2010.

   •   Seek prime ministerial agreement to pursue the goal of a Single
       Regional Economy as APEC's new vision.

   •   Consider Australia's negotiating position for a meeting of TPP
       ministers in the margins of the APEC Ministerial Meeting in
       November 2010.

  •    Consider a whole-of-government approach to border tax adjustments
       ahead of the next United Nations Framework Convention on Climate
       Change Conference of Parties in Cancun, Mexico, in December 2010.




  •    Consider strategy for Gulf Cooperation Council FTA negotiations.
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      Responses to Parliamentary Committee Reports
                                                                                 •

•   Consider outcomes of the Senate Standing Committee inquiry on
    BSE and implications for our international treaty obligations and
    Australia's export interests. The government's response to the
    Committee's final report is due on 22 September 2010.

•   A revised response to the Senate Rural and Regional Affairs and
    Transport References Committee report 'Iraqi Wheat Debt:                     •
    Repayments for Wheat Growers' (tabled in June 2005) has been
    prepared. We will provide for signature a joint letter to the Prime
    Minister from the Minister for Trade and Minister for Agriculture,
    Fisheries and Forestry enclosing the response.

•   Responses are being prepared for your consideration on Joint
    Standing Committee on Treaties reports on various tabled treaty
    actions (contained in Report 107 tabled on 16 November 2009 and
    Report 110 tabled on 15 March 2010).




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                     The Department in Brief

•   95 posts in 77 countries. Total staff 3,971, of whom 2,385 are
    Australian and 1,586 are locally engaged. Of the Australian staff,
    1,822 are in Australia and 563 are overseas.

•   Budget for 2010-11: A$890 million. Since 2000-01, appropriations for
    APS agencies as a whole have increased by 27 per cent in real terms.
    DFAT's has increased by nine per cent.
                                                                               ,
•   Since 1996

       o total APS employees across all agencies has grown by 12.1 per
         cent. DFAT has declined by 5.4 per cent

             • staff overseas has declined by 17.2 per cent .
•   18 of DFAT's 95 posts now have only two A-based officers and another
    15 of our posts have only three.

•   The number of diplomatic posts operated by Australia is less than any
    other comparable country (Australia is the 14th largest economy in the
    world)

       o of the 30 OEeD members, only Ireland, Luxembourg, the Slovak
         Republic and New Zealand operate fewer posts than Australia

       o all other G20 member states have a bigger diplomatic footprint
         than Australia.

•   It is against this background that there has been commentary about a
    'diplomatic deficit'.




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            Trade and International Economic Overview

Trade and investment are critical to the prosperity and security of all
Australians. More than one in five jobs is related to trade and each year
exports generate around A$250 billion in income that flows through the
economy. Australian investment overseas earns a further A$36 billion for
Australian businesses and investors.

Our trading environment is being shaped by:

   •   The rapidly growing wealth of China, India and other Asian economies,
       which has led to a dramatic increase in demand for our resources.     '
       Asia's growth has helped cushion the Australian economy from the
       global economic crisis. Over the past decade, resource exports almost
       doubled. They now account for more than 40 per cent of total exports;

   •   A more difficult environment for services, manufacturing and
       agricultural export sectors. A high Australian dollar, constrained
       credit market, competition for capital and skilled labour from the
       resources sector, sluggish growth in major tourism markets and
       barriers to agricultural trade are challenges;

   •   A lack of political will internationally for further trade liberalisation,
       especially in the current environment of fragile growth in advanced
       economies;

   •   Efforts to increase economic integration in our region through a range
       of bilateral FTAs and proposals for East Asia and trans-Pacific FTAs.
       Australia has very significant economic and strategic interests in this
       evolving agenda: we can not afford to be locked out of Asian economic
       regionalism.

Australia starts from a position of strength. Low debt, strong regulatory
systems, a flexible labour market and a floating exchange rate have made
Australia one of the most resilient economies in the world. Our region is
growing faster than any other part of the world and will do so for the
foreseeable future. In addition, we are a major supplier of some of the
energy and mineral resources most in demand, possessing 10 per cent of
the world's coal reserves and 15 per cent of iron ore deposits.

A comprehensive trade and economic policy will support and build upon
these strengths:

   •   The establishment of the G20 leaders' process as the premier forum
       for international economic cooperation is a dramatic change in global
       governance. We can use our membership to promote sustainable and
       balanced growth in the global economy and to co~~?:tJ!~o~~c~tion!lllT1' _ _
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        We should work for the gradual expansion of the 020 agenda to
        include broader economic and security issues;

    •   Australia's biggest trade gains would come from a strong outcome in
        the Doha Round. Negotiations are at an impasse. The problem is
        political, not technical, and more ambition is needed in agriculture,
        industrial tariffs and services if the round is to be unstuck. The 020
        Leaders' Summit in Seoul in November 2010 offers the only
        opportunity to position the negotiations for an outcome in 2011.
        Without a breakthrough, we face an extended delay with presidential
        elections in the United States and France in 2012. Australia should
        and will be expected to take a high profile, including through the
        Cairns Group, in efforts to push for a conclusion of the round;

    •   Beyond the immediate challenge of the Doha Round, Australia has a
        major interest in preserving and building upon the multilateral
        rules-based trading system. These rules provide certainty for our
        exporters, greater transparency of trading regimes and mechanisms to
        resolve disputes. Australia will need to work hard to retain its
        influence in the WTO as the big emerging economies flex their muscles
        and our share of global trade falls;

    •   We need to continue to deepen our political and economic
        integration with the fast-growing economies of Asia through our
        participation in APEC and the East Asia Summit and through regional
        trade liberalisation initiatives, including the ASEAN+6 (CEPEAl FTA
        proposal and the Trans-Pacific Partnership;

    •   Bilateral FTAs can deliver important benefits to Australian exporters
        and investors - the elimination of many tariffs and deeper
        commitments on services than is possible multilaterally. We need
        also to ensure that our exporters are not disadvantaged by FTAs
        between third parties. We have an ambitious agenda of FTA
        negotiations. If all these negotiations were to conclude, then almost
        two-thirds of Australia's trade would be covered by FTAs;

    •   Promoting exporters and their products in international markets
        through the Austrade network is important, as is providing exporters
        with trade finance through the Export Finance and Insurance
•       Corporation when the market fails to do so, as is the case now;

    •   Domestic economic reforms that reduce business costs and boost
        productivity help our exporters stay competitive. Maintaining
        community support for an open Australian economy will be critical to
        the success of our trade policy agenda.

 The briefs which follow explore these issues in more detail and set out a
.forward agenda for Australia's trade policy.
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                                    G20
Key Issues

The G20 has now replaced the G8 of industrialised eCl~~~~
pn~m.ier forum for international economic cQ(Jpe:ration.                               •

_ A u s t r a l i a is recognised as a leader in shaping the G20 and its
~tus which presents enormous opportunities to pursue                   .
Australian interests. The immediate challenge is to sustain the G20's ability
to pursue coordinated action in the aftermath of the economic crisis.
Leaders will also discuss the Doha Round at the Seoul Summit. We should
work to expand the G20's economic and, more gradually, non-economic
agenda.

Current Situation

  The establishment of the G20 leaders' process and the group's decisive and
  effective response to the global economic crisis during 2008 and 2009
  represent a huge change in global economic architecture. G20 leaders met
  most recently in Toronto (26-27 June 2010). The next leaders' summit will
  be held in Seoul (11-12 November 2010). Korea is the f"ust non-G8 host
. of the G20. Australia is working with Korea to develop a G20 agenda on
  development and to use the Seoul Summit to generate progress in Doha
  Round negotiations.

At Toronto, G20 leaders agreed to review progress and consider next steps
on the Doha Round when they meet in Seoul. Progressing discussions in
Geneva and determining how best to engage trade ministers in preparation
for the Seoul Summit will be a focus over coming months, given the window
of opportunity in 2011 for an outcome in the round (see separate briefing).

The Toronto Summit referred financial governance issues (f"mancial sector
reform, IMF voice and quota reform and the Framework) to Seoul for
decision or further consideration. This was not unexpected but means
ambitious outcomes must be delivered in Seoul or the credibility of the G20
as an effective forum will suffer. G20 reform momentum slipped in 2010 as
the immediacy of the economic crisis receded and differences began to
emerge between members regarding the timing of fiscal consolidation, and
the type and sequencing of structural reforms needed to rebalance the
global economy. Korea is looking for our help on IMF reform in particular.

Forward Agenda

The G20 will remain focused on the aftermath of the economic crisis for the
next year or so, particularly in dealing with global economic imbalances and s·33·
reducing debt. We should continue to support pHnr1-",
with trade        and climate ~~~

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    Hosting




    Membership

 Tensions around membership of the
~roblematic                  at Seoul.
_ _ Concerns that Europe over-represen
 represented have been dulled by the hosts issuing three to five discretionary
 invitations to each summit, including to the rotating chair of ASEAN. Heads
'of major international organisations, including the UN, World Bank, IMF,
 OECD, WTO and ILO, participate as observers. Criticism from some
 countries that the G20 agenda might encroach on the UN mandate persist.
 Outreach to non-members will continue to be vital for the G20's legitimacy
 and credibility and to containing membership/participation to the current
 practice.

    Proposed Next Steps

      •   Engage with G20 trade ministers to support leaners' discussions at
          Seoul on the Doha Round.

      •   Work closely with Korea to ensure the Seoul Summit delivers on G20
          financial governance commitments and prepares an effective agenda
          on trade and development.




      •   Develop an expanded G20 agenda to be introduced into the forum as
          international circumstances permit.

      •   Maintain the current consensus on membership and participation at
          G20 Leaders' Summits - the status quo is working well - to avoid
•         expansion or a distraction from substantive work.
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                             World Trade Organization                                       •

    Key Issues

    Australia has significant commercial and strategic interests in a strong
    multilateral rules-based trading system. The WTO today is a more complex
    forum reflecting a rapid increase in membership and greater developing
    country participation. Australia continues to have a profile and stature in
    the WTO that goes beyond our relative weight in global trade terms, a                   •
    position we need to protect.

    Current Situation

    Australia has a major interest in preserving and building upon the
    strength of the multilateral rules-based trading system. One hundred
    and fifty-three countries are now bound by WTO rules and a further 29 are
    negotiating their accession to the WTO.

    While the Doha Round (see separate brief) remains a key focus, other
    aspects of the WTO's activities remain of fundamental importance. These
    include: the system of binding international dispute settlement (see separate
    brief); negotiating the accession of new members; monitoring the
    implementation of existing commitments; provision of technical assistance
    to developing countries; and a regular Trade Policy Review of members to
    encourage transparency and further reform (Australia is due to be reviewed
    in April 2011).

    Consensus-based decision making will remain difficult across the WTO
    agenda, reflecting a large and diverse membership. China, India, Brazil and
    other large emerging economies increasingly are flexing their international
    muscle. This could have implications for Australia's influence in the
    organisation which, for now, outweighs our relative size in global trade
    terms.



s                                                                        to
                      our           across           agenda by continuing to
    play an active and constructive role, both at the technical and political level.

    In response to the recent global economic crisis, the WTO has assumed an
    enhanced institutional role, in particular through its monitoring of trade-
    related measures and the risk of protectionist policy responses. Australia's
    interests are served by continuing to support this enhanced role,
    particularly given its direct relationship to anti-protectionism pledges within
    the G20.

    The WTO's trade and development agenda applies acrQllJ> J~lUt.s..activitte_Il,.. .lL ____ _      .   ,
                                                                                                         ,
    is in Australia's interests at the WTO and more broadly to contn'i?tlQfMS&ltiMOD,
                                                                ;Department of Foreign Affairs and
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 aid-for-trade agenda, including through the WTO's Global Trust Fund. We
 should continue to explore opportunities to support targeted aid-far-trade
 assistance provided through trade-focused multilateral institutions.

Negotiations on a revised WTO plurilateral Government Procurement
Agreement (GPA)




'The difficulties experienced in the Doha Round have also given rise to
 concerns that the WTO is too unwieldy to achieve concrete results.
 Questions have been asked about whether large negotiations based on a
 'single undertaking' (in which nothing is agreed until the whole package is
 agreed) are still viable. The last WTO reform process got little traction. We
 should continue to explore avenues to improve the operation of the
WTO, but not at the expense of our efforts to conclude Doha.

-The WTO will also continue to be scrutinised in terms of its response to
 emerging trade-related issues such as the environment, labour standards,
 investment and competition policy. Australia is active in trade and
environment aspects of the Doha Round agenda, including negotiations
on fish subsidy disciplines (see separate Trade and Environment brief).
 For now, there is no systematic discussion of the relationship between WTO
 rules and the United Nations Framework Convention on Climate Change
 negotiations. WTO Director-General Lamy considers that members should
·wait for agreement on a post-Kyoto international climate change agreement
 before exploring whether and how to make adjustments to existing WTO
 rules.

  In relation to core labour standards, the WTO has recognised the
  International Labour Organisation (ILO) as the competent body to negotiate
  labour standards; agreed that such standards should not be used for
  protectionism; and agreed that the WTO and ILO Secretariats should work
. together. Developing countries strongly oppose the WTO working directly on
 labour standards. Australia supports efforts to promote greater
  collaboration between the WTO and ILO on the relationship between trade
  and labour policies.

Efforts to include investment and competition policy on Doha's agenda were
rejected by developing countries and are now rarely discussed in Geneva.

•Proposed Next Steps

   •   See separate Doha Round Negotiations and WTO Disputes briefs .

   • We will bring forward a submission with suggestions_onhQw-besLto____.__ _
     take forward work on WTO reform over the medium term. -DECLASSIFIED-
                                                   iDepartment of Foreign Affairs and
                                   20              ~rade
                             SECRET AUSTEO         IRe leased under the FOI Act 1982,
                                                   [A.ugust 2011
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                        Doha Round Negotiations
Key Issues

Australia's highest trade priority remains the conclusion of the Doha Round.
Significant progress has been made, but negotiations are at an impasse.
The United States, Brazil, India, China and the European Union are the
main players in reaching an end game. Reviving an effective negotiating
process in Geneva, and the forthcoming discussion at the G20 Seoul
Leaders' Summit, will be key to finding a possible solution in 2011.
Politically difficult compromises will be necessary.

Current Situation

The negotiations are at an impasse, with a stocktake in March 2010
highlighting the significant gaps that remain on key issues. The United
States wants improved market access from Brazil, China and India, which in
turn want to preserve much of the package that was almost adopted in July
2008. The European Union and Japan are also wary of greater ambition if it
requires them to do more on agriculture. The United States has indicated
little additional ambition on agriculture.

The stalemate is primarily political, not technical, and resolution will require
members to address both the level of ambition and the balance in
contributions made. Although the precise process remains uncertain,
horizontal negotiations (i.e. discussion across all negotiating issues) will be
important to achieve balance across the Doha mandate. Australia should
remain active in supporting the negotiating process in Geneva.

The international political cycle offers a window of opportunity to conclude
the round in 2011. (It follows Brazilian presidential elections in October
2010 and US mid-term elections in November 2010 and precedes US and
French presidential elections in 2012, a new US Farm Bill in 2012 and EU
Common Agricultural Policy reform in 2013.) G20 leaders have agreed to
review progress and consider next steps on Doha when they meet in Seoul
in November 2010. Australia has advocated a possible trade ministers'
meeting prior to the G20 Leaders' Summit to prepare a full assessment of
the             and a        forward. This       be difficult to acll1ieve.




The so-called 'G5' of Brazil, China, the European Union, India and the
United States has become the key informal grouping in the negotiations.
This reflects the reality that progress among the wider membership is
unlikely without an accommodation among the major players. The G5 has
initiated small group meetings in specific areas in the llecQnd b.alf of 2_0_10.______ __ _
Australia will need to continue to work closely with!the G5, in~~Ij,t1g>SIFIED-
                                                        !Department of Foreign Affairs and
                                     21                 trrade                       '
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                                                        ~ugust 2011
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                      through participation 'n these small -
                               •                -- -----
                                                               u   .   d' b
                                                                   ---------
                                                                                  d      f   -   f


   's 33(a)(iii




Is 33(a)(iii)1



                    Australia has market access ambitions in services, given its significance to
                    the Australian economy, although we also have some defensive concerns (e.g.
                    audiovisual and business mobility). We are developing initiatives to support
                  , the internationalisation of the Australian services sector. In collaboration
                    with the United States, we are adopting a more active role in promoting
                                               ------- ----------------
                                                                                                            a)(iii)!

                   We also have interests in negotiations on: trade remedies, where we are
                   seeking to minimise changes to Australia's current approach; and
                  ,environment-related issues, including fish subsidies (see separate brief).

                      If completion of the round is not possible in the medium term, Australia
                      should work to maintain support for the existing WTO framework and
                      look for other ways to use it. Options might include negotiating a package
                    that includes the main Doha issues with a smaller group of members or
                    negotiations on specific sectors. In the absence of an outcome in the Doha
                    Round, Australian exporters may advocate the pursuit of a more active·
                  · dispute agenda to address trade concerns (see separate brief).

                      Proposed Next Steps

                        •
          s 33(a)@)1

                  •


                        •   Maintain Australia's high profile efforts to push for a conclusion to the
                            Doha Round, possibly in 2011, through preparations for the Seoul
                            G20 Leaders' Summit, including ministerial input.

                         • Announce at an early stage a new initiative on J~~i~~~t~afjl~CLASSII:'1ED~------1
                                                                              IDepartment of Foreign Affairs and
                  •                                        22                 !Trade
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                                                                              !August 2011
                                                                              i
                             SECRET AUSTEO

                             WTO Disputes                                       •

Key Issues

WTO disputes can complement negotiations as a vehicle for opening
markets. Australia has achieved some significant gains in past disputes,
but our quarantine system has proved vulnerable to challenge. A WTO
panel has found Australia's import conditions for apples from New Zealand
inconsistent with our WTO commitments. This ruling could generate               •
further challenges.

Current Situation

The WTO's legally-binding dispute settlement system works well, with
members implementing rulings in almost all cases. The number of disputes
Rasbeen· ste~dy ·in reGent~ear-s. Witn01at·the pn,lspectof-an imm.inent ..
conclusion to the Doha Round, more WTO members may seek to litigate             •
outcomes they cannot negotiate.

China has become a more frequent user and target of dispute action in past
years, and we expect this trend to continue. Australia has achieved
significant gains from WTO disputes, including in relation to EU sugar
exports and access for lamb exports to the US market. But we have not
initiated a dispute since 2004.
                                                                                •
Australia's quarantine system has been singled out for challenge by
trading partners. The WTO panel considering import conditions for NZ
apples found Australia's requirements were contrary to the WTO Agreement
on the Application of Sanitary and Phytosanitary Measures. The findings
were made public on 9 August, accompanied by extensive media reporting.

The government agreed to proceed with an appeal. An appeal is limited to
issues of law and legal interpretation, with the outcome to be decided
   late 2010.




             apple:s finding, other WTO members with objections to
                                                                                    II




Australia's policy on the import of beef from BSE-affected countries has also
attracted negative interest. A blanket import ban on countries which had
experienced one or more cases of BSE was removed i~ March 20fWj:.C~SIFIED~
                                                    ,Department of Foreign Affairs and
                                    23              jTrade
                             SECRET AUSTEO          iReleased under the FOI Act 1982,
                                                    ;August 2011
           •

                                             SECRET AUSTEO

            new policy requires both a human health assessment by Food Standards
            Australia New Zealand and a quarantine import risk assessment by   r;:;-;:;;;r;::\7:i:i\l
           .Biosecurity Australia to address risks from beef       from
            ·countries.




               The government's decision to change our BSE policy was referred to the
              .Senate Standing Committee on Rural and Regional Affairs and .
               Transport for inquiry. The Committee issued its first report on 18 March
               2010 and a final report on 23 June 2010. The government decided to
r--c==~.,--.,. respond only to the final report - a response is due on 22 September 2010.




           Australia also participates in disputes as a third party, which accords us
           the right to present views to the panel. We do this where we have systemic
           interests and where circumstances do not justify mounting our own
           challenge. For example, we are participating in a dispute brought by
           Canada and Mexico on the effect of US mandatory country of origin labelling
           rules on imported beef (and other products). We are also participating in the
           US-EU disputes over government support provided to Airbus and Boeing,
          'which engage commercial and policy interests for Australia.

              Proposed Next Steps

                •   Respond to the Senate Standing Committee inquiry on BSE by 22
                    September 2010. We will provide advice on this and implications for
                    our international treaty obiigations and Australia's export interests.




                                                                       .          -DECLASSIFIED-
                                                                       !Department of Foreign Affairs and
                                                    24                 ;Trade
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                                                                       ~ugust 2011
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                              SECRET AUSTEO

                       Trade and Environment

Key Issues

Australia has a strong interest in ensuring that trade and environment
policies are mutually supportive. We need to position ourselves to respond
to the risk of new forms of trade protectionism that might arise in the
absence of an international agreement on climate change. We should also
continue pushing to liberalise trade in environmental goods and services
and for promotion of 'green trade'.

Current Situation

In the absence of a comprehensive international climate change agreement,
there is growing potential for some countries to introduce new forms of
trade protectionism. Developed countries, including the United States and
France, have threatened to apply border tax adjustments (ETAs) to goods
imported from countries that are not 'comparably offsetting' the greenhouse
gases associated with the production of such goods.

The use of ETAs as protectionist or coercive trade measures presents risks
to Australia's economic and trade interests, given our resource-intensive
trade profile and their potential effect on key trading partners. Their
introduction could also place unhelpful pressure on the multilateral trading
system. These issues warrant further analysis and consideration in order to
develop a whole-of-government position on the issue prior to the next
United Nations Framework Convention on Climate Change (UNFCCC)
Conference of Parties (COP) in Cancun, Mexico, in December 2010.

We also continue to pursue Australian interests in relation to the
intersection of other trade and climate change issues in the UNFCCC
context, including: negotiations on a market mechanism on international
bunker fuels (maritime and aviation); discussion of transfer of green
technology to developing countries; and discussions on cooperative sectoral
approaches in agriculture.

Australia remains active in trade and environment elements of the Doha
Round negotiations. Australia seeks to ensure the compatibility and
mutual supportiveness ofWTO and multilateral environment rules, thereby
limiting the scope for protectionist measures to be    iu~;tiliie,il
guise of e.nvironmental objectives.



We have also supported outcomes on the elimination of barriers to trade
in environmental goods and services. Progress in this area has been slow,
with some large developing countries (India, China, Brazil) reluctant to
engage. However, there has been more recent positive,~ng~e_ment bY-9theL~_         _.
                                                     :          -DECLASSIFIED-
                                                     :Department of Foreign Affairs and
                                    25               h-rade
                              SECRET AUSTEO          :Released under the FOI Act 1982,
                                                     ~ugust 2011
                                  SECRET AUSTEO

    developing countries and we are working with a diverse group of members to
    make progress in the Doha negotiations.

 Australia should continue to engage in complementary efforts in other
 forums on liberalisation of trade in environmental goods and services,
 including in APEC (where we are working closely with the United States) and
.the Trans-Pacific Partnership.

   We are also pursuing an ambitious outcome in separate negotiations within
   the Doha Round on disciplines aimed specifically at fisheries subsidies.
   A key area of divergence among WTO members concerns the extent of
   special and differential provisions for developing countries. A joint proposal
   from Brazil, China, India and Mexico (some of the largest fishers) effectively
   would carve out all developing countries from new disciplines. Australia is
.. working with like-minded countries opposed to fisheries subsidies (the
   'Friends of Fish') on broad and ambitious disciplines that ensure a positive
    outcome for sustainable fishing.

    Proposed Next Steps

      •   Develop a whole-of-government position on border tax adjustments and
          intensify ministerial and departmental engagement ahead of the next
          UNFCCC COP in Cancun, Mexico, in December 2010, to ensure
          Australia's trade interests are taken into account.

      •   Continue to work with other WTO members to ensure strong disciplines
          on fish subsidies that support sustainability of global fish stocks.

      •   In the margins of a broader meeting (e.g. in Geneva or at APEC), convene
          a meeting of trade ministers from the 'Friends of Fish' group to highlight
          the importance of a strong outcome on fisheries subsidies as part of the
          Doha Round .




•
                                                          i-----=OECi.ASSjFIED--
                                                          !Department of Foreign Affairs and
                                         26               [rrade
                                  SECRET AUSTEO           iRe leased under the FOI Act 1982,
                                                          !August 2011
                                                          ;
                                                          i
                                                                                 •
                                SECRET AUSTEO

           Trade-Related Aspects of Intellectual Property
Key Issues

Australia plays an active role in discussions on trade-related aspects of        •
intellectual property rights, including at the World Intellectual Property
Organization (WIPO), the WTO and in negotiations for an Anti-Counterfeiting
Trade Agreement (ACTA). We have important defensive interests and seek to
playa moderate or bridge-building role on several issues.

Current Situation

Australia seeks to ensure WIPO remains the pre-eminent forum on global           •
intellectual property, thus quarantining discussions on difficult issues to
the forum with relevant technical and institutional expertise. We support
the efforts of the Director-General, Dr Francis Gurry (the most senior
Australian in the UN system), in reforming WIPO's governance and
improving its effectiveness.

Australia has strong defensive interests in the debate on geographical
indications (GIs) at the WTO (and more widely). The European Union
and Switzerland, supported by other members, have sought higher
protection for agricultural and other goods which might affect our
commercial interests. The Australian dairy industry is concerned about the
loss of the right to use terms




We are participating in negotiations on ACTA, a new intellectual property
enforcement initiative. It is in our interest for the plurilateral agreement
to be attractive to major developing countries. The prospect of an agreement
reflecting our own intellectual property regime has also reassured domestic
stakeholders, including internet user groups.

Australia, together with the United States and others, has resisted attempts
by the European Union to include stronger GI enforcement provisions in
ACTA. The prospects of agreement by the end of 2010 appear to be good if
the politically contentious issue of GIs is resolved.

Proposed Next Step

   •   Consider Australia's position for the next and possibly final round of
       ACTA negotiations, planned for late September 2010.




                                                       I          -DECLASSIFIED-----l
                                                       [Department of Foreign Affairs and
                                                       I

                                      27               rfrade
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                                                       tUgust 2011               " ____   J
                                                                                          I
                  •                               SECRET AUSTEO


                             East Asia Summit and other ASEAN Institutions

                      Key Issues

                   US and Russian membership of the East Asia Summit (EAS) effectively
                  ,achieves the goals of the Asia-Pacific community initiative and creates a
                   significant opportunity to build more effective architecture across the r(>l!;on
                       will        the              with            to            the EAS.




                  Current Situation

                  ASEAN foreign ministers agreed on 19-20 July 2010 to recommend to
                  leaders at the 17th ASEAN Summit in October that they invite the United
                  States and Russia to



Is 33(a)(iiiJl


                                                                        how to strengthen the
                  EAS's role on political and security issues. Secretary of State Clinton's
                  declaration that the United States will work to encourage             of
                  EAS into a "foundational          and PUllllll[;CU
  Is ""I''Wl!\L
                                                           way to a           stronger
                  Current security issues, such as the Korean Peninsula and the South China
                  Sea, have begun to be discussed more vigorously in the ASEAN Regional
                  Forum (ARF), but the ARF does not meet at leaders' level.


                                                                           nevertheless gaining
                    momentum as a vehicle for regional integration, with a focus to date on:
                  • energy security and the environment; finance; education; disaster
                    management; and avian influenza. Important outcomes at the fourth EAS
                    in 2009 included: agreement to a Finance Ministers' Meeting and to elevate
                    both the ASEAN+3 East Asia FTA (EAFTA) and CEPEA FTA studies to
                    consideration 'in parallel' at officials' level.




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 support of CEPEA has focused on the
 ASEAN+l

                                         a meeting of EAS eccmClml.C
 ministers on 26 August agreeing on arrangements that preserve parity in
 taking forward the CEPEA and EAFTA processes.




                     ----
                     EAS
                                   India"




                                                     Chi~
                                                     Peru
                                                     United statesl'....




                                                   '" denotea G20 membershi:'J
                                                   ... denotes :)ros:lective n-en'bershi:l ofihe EAS




_ _ recursor to an Asian Monetary Fund)          .,.~.
Other ASEAN-centred Institutions

ASEAN's agreement to an ASEAN-Australia leaders-level !iummit in the
margins of the fifth EAS in Hanoi in October is positive. We haw)ESi-~@li'gfti1ED­
                                                            Department of Foreign Affairs and
                                       29                    Trade
                               SECRET AUSTEO                'Released under the FOI Act 1982,
                                                            August 2011
                                    SECRET AUSTEO

     a regular summit at this stage                               A summit could
     be used to build our political and strategic relationship with ASEAN in line
     with our economic interests {trade with ASEAN is now                   with
                                 security interests
,s
     The ARF has been energised by US involvement over the past two years.
     The Korean Peninsula and the South China Sea were both discussed at this
     year's ministerial meeting. There is increasing recognition that the ARF
     needs to        to move from its 'confidence                 to nn~ve,ntive
     diplomacy,


     ASEAN agreed this year to expand the existing ASEAN Defence Ministers
     Meeting (ADMM) into an ADMM+8 format which will come           for the
     first time in October


     Proposed Next Steps




       • Work with like-minded EAS countries to     nrr,O'rl'"''




                                                                       -DECLASSIFIED-
                                                             Department of Foreign Affairs and
                                         30                  Trade
                                  SECRET AUSTEO              Released under the FOI Act 1982,
                                                             August 2011
                                      SECRET AUSTEO


                        Trans-Pacific Partnership

 Key Issues

 A comprehensive and high-quality Trans-Pacific Partnership (TPP) will
 deepen regional economic integration               .               lathw'av
 to a Free Trade Area of the Asia-Pacific.




Current Situation                                             .i

The government agreed a general mandate in 2010 but will need to consider
Australia's specific negotiating position on market access before the end of
2010. Current parties to the TPP negotiations are Australia, Brunei, Chile,
New Zealand, Singapore, Peru, the United States and Vietnam (as an
associate member).

The parties have committed to making maximum headway by the time of
the APEC Economic Leaders' Meeting in November 2011. TPP ministers
will next meet in the margins of the APEC Ministerial Meeting in November
2010.

There has been some progress in areas traditionally associated with a
comprehensive FTA. These include goods, services, investment, sanitary
and phytosanitary measures, technical barriers to trade, government
procurement, intellectual property, capacity building and competition policy.
Discussions are also underway on how to include provisions on labour and
environment, as well as '21 st century' approaches to cross-cutting issues
that affect the business environment.

The difficult issue of market access architecture has yet to be resolved.
Australia and most other TPP parties want to negotiate new plurilateral
market access outcomes provided to all other parties on an equal basis. In
contrast, the United States wants only to negotiate market access with those
parties with which it does not have an existing FTA (New Zealand, Brunei
and Vietnam). This approach would allow for different levels of access for
                      .-~-    -       --   -~   ~--   --   -- --      -~---




        · h            d                                       !~},3(?){iiiL:lT~imQl,
A ustral1a as expresse support for membership expansion once the broad
architecture of the agreement is in place, and provided that new entrants
                         .        .



                                                                                     D-
                                                           Department of Foreign Affairs and
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Vietnam has been granted associate membership for three negotiating
rounds, after which commitment to participate as a full member will be
required. Vietnam's participation is an important signal to other developing
countries that TPP membership is attainable and desirable.

Feedback from public consultation so far has been broadly supportive of
Australia's participation in TPP negotiations. Stakeholders have raised
concerns, however, in relation to issues such as investor-state dispute
settlement, foreign investment screening, audio-visual local content rules,
the Pharmaceutical Benefits Scheme and quarantine rules.

Proposed Next Steps

   •   Consider Australia's negotiating position ahead of a meeting of TPP
       ministers in the margins of the APEC Ministerial Meeting in
       Yokohama, Japan, in November 2010.

  • Advance membership expansion discussions with a view to admitting
    one or more new members by the beginning of 20 11.

  •    Prepare for intensive negotiations in 2010-11 in order to make
       maximum headway by the time APEC leaders meet in November 2011,
       but not at the expense of a high-quality outcome.

  •    Cooperate with AusAID and TPP parties to provide appropriate
       technical assistance to Vietnam.




                                                                -DECLASSIFIED-
                                                      Department of Foreign Affairs and
                                    32                Trade
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                                                      August 2011
                                              SECRET AUSTEO

                                                   APEC                                          •

                Key Issues

                APEC continues to produce practical trade facilitation outcomes and helps
                build the capacity of its developing members to implement reform. With
                Japan as host in 2010, APEC is developing a multi-year growth strategy
                and a new long-term vision that will build on the Bogor Goals and drive
                future work towards regional economic integration, trade and investment
                liberalisation and facilitation and human security.

                Current Situation

                In 1994, APEC leaders agreed on the Bogor Goals of free and open trade
                and investment by 2010 for developed economies and 2020 for developing
                economies. APEC's developed economies are well placed to claim
                considerable success, while recognising that more needs to be done. The
                Asia-Pacific is now the world's fastest growing and economically open region.

                As 2010 APEC host, Japan is responsible for preparing APEC's assessment
                of progress towards the Bogor Goals. We are working with the United States
                and New Zealand to ensure Japan presents a balanced and credible report.

                Japan is considering a new vision, post-Bogor, to be announced at the APEC
                Economic Leaders' Meeting in November 2010. We have proposed a Single
                Regional Economy (SRE) as a new vision, with work on domestic structural
                reform, logistics, infrastructure and finance driving closer regional
                integration. The United States favours a Free Trade Area of the Asia-Pacific
                as the basis for a new lorlg-telrm
s 33(a)(iii)1
                our goal of an SRE.

                We are keen to encourage APEC to focus on areas where it can achieve
                tangible results. The United States will host in 2011 and Russia and
                Indonesia in 2012 and 2013 respectively - so APEC will remain important
                despite the development of other regional forums and negotiations.

                In 2010, Australia played a lead role in developing Action Plans covering
                supply chain connectivity (logistics) and services, and has been pushing
                for increased efforts on aid-for-trade to help developing economies profit
                from globalisation and the multilateral trading system. A new A$2 million
                fund, announced by Australia on 6 June 2010, to support capacity building
                in the investment and supply chain sectors of APEC economies utilises the
                existing resources of AusAID's Public Sector Linkages Program. We hope to
                provide a project under this fund as an announceable for APEC Leaders'
                Week in November 2010.




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    submission on this issue shortly.

 A new Australian member of the APEC Business Advisory Council (ABAC)
 will need to be appointed (as current member Mark Johnson will stand
 down at the end of2010). Australia's ABAC members are appointed by the
 Prime Minister, based on a joint recommendation from you and the Foreign
 Minister. We will provide a list of potential candidates for consideration
'shortly.

    Proposed Next Steps

      •   Attend the APEC Ministerial Meeting in November in Yokohama,
          Japan, from 10-11 November 2010, which will be followed by the
          APEC Economic Leaders' Meeting.

      •   Seek early prime ministerial agreement to pursue the goal of a Single
          Regional Economy as APEC's new vision.

      •   Consider possible announceables in November 2010 of new capacity
          building projects in support of logistics and investment flows.

      • Write to the Prime Minister seeking appointment of a new panel
        member for Australia's APEC Business Advisory Council for 2011 .




•




                                                         I           -DECLASSIFIED- - -...
                                                         IDepartment of Foreign Affairs and
•                                       34               rrrade
                                  SECRET AUSTEO           Re leased under the FOI Act 1982,
                                                         irUgUst 2011
                                SECRET AUSTEO


                               FTA Overview

Key Issues

  Australia has an active FTA negotiation agenda, reflecting both uncertainty
  about the conclusion of the Doha Round, and the potential ofFTAs to
  deliver important benefits to Australian exporters and investors. The draft
. Productivity Commission report on the impact of bilateral and regional trade
  agreements was generally supportive of FTAs but found modest commercial
  benefits. The department is preparing a response to the draft report (due in
  September), ahead of the final report in November 2010.
                                                                                 •
Current Situation

Australia has six comprehensive FTAs in place and an active FTA agenda,
with a further six agreements under negotiation and two more in the final
stages of consideration.

Australia's policy is to pursue high-quality FTAs as a single undertaking
covering trade in goods and services, investment and a range of other issues
such as intellectual property rights, government procurement and
competition policy. Provided they are comprehensive, WTO-consistent and
genuinely liberalising, FTAs can have a positive effect on the multilateral
trading system.

The Productivity Commission is currently undertaking a review of the
impact of bilateral and regional trade agreements on trade and
investment barriers and on Australia's trade and economic performance. A
draft report was issued by the Commission on 16 July 2010 to limited media
interest.

The Commission found that Australia's FTAs had delivered modest
commercial benefits. The Commission recommended a more flexible
approach be taken when considering the scope of FTA negotiations. The draft
report also called for enhanced transparency, both prior to commencing
negotiations and throughout the negotiation process.

The Commission will hold further public consultations in August and
September and has requested additional written submissions be provided in
September 2010. The Commission is required to table its final report by 27
November 2010.

Proposed Next Steps

   •   Continue to highlight benefits of FTAs (including that standing still
       while others negotiate does not help our exporters).

   •   Consider the departmental response to the Prod:uetivity·emt'A~95r~-·-·· ...         ··1
       draft report for submission in September 2010. [oepartment of Foreign ~~~r~ and
                                       35             rrrade
                                SECRET AUSTEO         iReleased under the FOI Act 1982,
                                                      iAugust 2011               ..            I

                                                        i                            .... __   1
                                          SECRET AUSTEO

          •
                                   Korea FTA Negotiations
              Key Issues

           We want to announce the conclusion of FTA negotiations with Korea at the
           G20 Leaders' Summit in Seoul in November 2010. Meeting this proposed
           timeline will require Cabinet agreement to a concluding mandate on
          .outstanding issues in the first month or so of the government's term of office.
           Conclusion of the FTA would also likely require your involvement in final
           negotiations (probably in Korea in October 2010) over the most sensitive
           issues.

           Current Situation

          We have made rapid progress over five rounds of negotiations, with well over
kJ~~~~'~h~al~f of the chapter texts effectively concluded. At least one more full
l':'              will be          before conclusion.




           Australia's objective in the goods negotiations is to secure commitments that
           at least match those secured by our competitors in their FTAs with Korea
          .(most notably the United States and European Union). High-value
           Australian exports such as beef (with a 40 per cent tariff and worth A$533
           million in 2009), dairy, wine, crude petroleum, horticulture and seafood
           would be susceptible to the price advantage that FTA partners of Korea's
           have gained, or would gain, through their respective deals. The meat, dairy
           and wine industries support our negotiations with Korea on this basis.

           Korea has been slow to offer Australia the level of tariff concessions we
          .,seek, and has yet to make any offer on the key areas of dairy and beef. We
           are pressing hard for decent offers on these 'core' products, but expect Korea
           to concede only at the last minute.

          Korea in turn is seeking immediate elimination of motor vehicle tariffs
          - its main export interest. We
          transition time will be lelJ Ul.l elJ.




          On services and investment market access, both sides are aiming for an
          ambitious package. Australia is seeking equivalence with the outcomes
          from Korea's FTAs with the United States and European Union in sectors
          such as legal, education, accounting and telecommunications services. We
          have made some further requests based on commercial interests. _
                                                                                  -I.)~C Li~\'~' Sl   IED-
                                                                  0:- _3rt   '?    of     _ 1'"9'     ffairs and
                                                 36               ITrade
               1~33   III~                                        iRe leased under the FOI Act 1982,
                                         SECRET AUSTEO
                                                                  ~ugust 2011
                                                                  !
                               SECRET AUSTEO




Proposed Next Steps                                                                 •

  • To meet the possible goal of announcing the conclusion of FTA
    negotiations at the G20 Leaders' Summit in November 2010, the
    Cabinet will need to agree to a concluding mandate in the first month
    or so of the government's term of office. This mandate will     .
    decisions on sensitive issues
                                                                                    •

  •   Continue intensive officials-level engagement on market access and
      outstanding chapter text issues.

  •   Prepare for the likelihood of travel to Korea in October 2010 for final
      intensive negotiations.
                                                                                    •




                                                       i          ~DECLASSIFIED-     ... - -   1
                                                       IDepartment of Foreign Affairs and
                                     37                jrrade
                               SECRET AUSTEO           'Released under the FOI Act 1982,
                                                       I
                                                       August 2011
                                                        I
                                   SECRET AUSTEO


                            China FTA Negotiations

    Key Issues

 FTA negotiations with China are now making incremental progress, and
 there is high-level political commitment to the negotiations. But wide gaps
,remain in the positions and expectations of the two sides. Officials-level
 work should continue, but concluding an agreement will be difficult and
 require significant political-level compromises on sensitive issues.

    Current Situation

  Negotiations with China have been slow and difficult since their launch by
  former Prime Minister Howard and Premier Wen in April 2005. China has
  not previously concluded an FTA of the sort that Australia has been seeking
'in the areas of agriculture, services and investment, while China has
  ambitious requests of its own on temporary entry of workers, investment by
. state-owned enterprises and industrial goods.

    Given the lack of progress, Australia said in early 2009 that we were not
    willing to continue negotiations until China came to the table with the
    political will to negotiate on our interests. There were no formal negotiating
    rounds between December 2008 and February 2010 .
•
    As an outcome of Executive Vice Premier Li Keqiang's visit in October 2009,
    China agreed to work in a 'positive and practical spirit' to conclude
    negotiations for a 'comprehensive, high quality, balanced and mutually
    beneficial' agreement 'as rapidly as possible'. Negotiating rounds in
    February and June 2010 were conducted in a positive tone, and it appeared
    Chinese negotiators were under some pressure to demonstrate progress.
 Discussions on services and investment chapter text restarted. Market
'access talks on agriculture and industrial goods also resumed on the basis
 of revised requests. The next step is an exchange of revised tariff offers,
 which could take place in late 2010.

    Difficult concessions on both sides would be needed to conclude the FTA




                                                                                          EO-
                                                                             m:;;Jnii   Aff:>j ro   and
                                          38
                                   SECRET AUSTEO              I         under the FOI Act 1982,
                                                                  ust 2011
                                      SECRET AUSTEO

                                                                                            •




                                                                                            •




                                                     Our
                                                 a     priority for Australia.              •
    requiring little regulatory change from China, the requests would improve
    business conditions in a mutually positive way for our service suppliers (e.g.
    financial, legal, education and telecommunications) and mining companies.

    On agriculture, we have made clear that we need at least an equivalent
    outcome to that achieved by New Zealand in its FTA with China, plus
    commercially meaningful outcomes on other products of interest to
    Australia not exported by New Zealand (e.g. wheat, sugar, cotton and                    •
    oilseeds). Australian agricultural exporters, especially in dairy, horticulture,
    seafood and meat, are now facing disadvantage relative to those from New
    Zealand.

    We have tOI.d Chin. a that our. cou. nte.rvailin g dU. ty regime i.S not open to •
         .        China has also                   . . of all             . . tariffs.
~                                                                                           •
    Proposed Next Steps

       •   Consider taking an early submission to Cabinet to canvass broad
           options for the overall nelgoti~


                     required to conclude an agreement.

       •   Cabinet agreement will also be reqlUiI"ed
           China

       •   In contacts with Chinese ministers, encourage China to develop a
           package of market access outcomes in services and agriculture that
           would enable a deal to be reached, and indicate Australia would be
           seeking to do the same on China's requests.    ~
                                                                i          -OECLASSIFIEO~
                                                                ;Oepartment of Foreign Affairs and
                                            39                  rrade
                                      SECRET AUSTEO             IReleased under the FOI Act 1982,
                                                                !August 2011
                                                                ,
                                                                 i
                     •



                                                       SECRET AUSTEO


                                               Japan FTA Negotiations

                 "Key Issues

                     Australia fought hard to secure Japan's agreement to FTA negotiations,
                     which were launched in Apri12007. Japan's highly regulated agricultural
                     import         means liberalisation entails                       's




                 · Current Situation

                     Japan's offensive FTA agenda is driven by manufacturing and
                     investment export interests but constrained by defensive agriculture
                     interests. Japan is aware of the competitive challenges of Australia
                  concluding an FTA with Korea and Trans-Pacific Partnership countries.
                  Japan's DPJ Government, led by Prime Minister Kan and Foreign Minister
                 "Okada, has sought to add political momentum to its FTA negotiations.

                     Conversely for Australia, Japan's FTAs to date contain limited market access
                     opening in sectors of interest to Australia and are not with major Australian
                     competitors. However, Japan is a large and lucrative market,
                     particularly for agriculture exports, and industry supports an FTA.

                  Eleven negotiating rounds have been held, most recently in Apri1201O.
                 "Steady progress has been made on less controversial aspects including
                  services and investment. Following the DPJ election victory in 2009, we
                  intensified efforts to progress !;;UlJU~ ~[!f!~ g£9~
                  submitting a                   offer.

                                                    "1"'in1";1>, ftUC:,Li. CU!.CU!   exports   llll;lWUHJI!;;

                     sugar and wheat. We emphasised that Japan needs to provide positive
                     signals on Australian interests to energise negotiations.
                 •

Is 33(a)(iii)1

                                                       ;:"", LCU. L, HOi"!!;; the negotiations to C;U.liUHUIC
                                          long-standing interest in more open Japanese markets.

                     Proposed Next Step
                 •
                         •   In early contact with Japan's ministers, express desire to progress the
                             FTA to deliver mutual benefits on services, investment and agriculture.


                                                                                                     -DECLASSIFIED-
                                                                                          iDepartment of Foreign Affairs and
                                                                  40                      !Trade
                 •
                                                      SECRET AUSTEO                       !Released under the FOI Act 1982,
                                                                                          August 2011
                                           SECRET AUSTEO

                                                                                             •
                                   Malaysia FTA Negotiations

            Key Issues

             Negotiations in the Malaysia-Australia Free Trade Agreement (MAFTA) are
             poised to move into the substantive market access phase. Malaysia is keen
            .to conclude MAFTA by mid-2011 and our strategy is to push hard to
             conclude a quality deal within this timeframe.                                  •

            Current Situation

            MAFTA negotiations are moving into the substantive market access
            phase. Offers on tariffs, services, temporary entry and investment are '
                   tdt b       h   . dah
                                   -       d fh        xt   ..
                                                            - 1'1' -     d    hdldfor

Is 34(3)1                                                                                    •

            The ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which
            entered into force for both Australia and Malaysia on 1 January 2010,
            provides a solid baseline level of commitment on which MAFTA can build.

            Australia's 'AANZFTA-plus' priorities for MAFTA include: early tariff
            elimination on auto tariffs; tariff commitments on wine; improved    .
                                                                                             •
            commitments on financial, education, telecommunications and professional
            services; investment; government procurement; strong intellectual property
            and competition policy provisions; and appropriate labour'and environment
            provisions.

            Malaysia's priorities include faster tariff elimination from Australia on a
            small number of tariff lines (autos, rubber products, wooden furniture and
            some steel lines) and a funded economic cooperation component.

            Achieving our negotiating objectives in MAFTA will be a challenge.
            Malaysia wants to conclude the FTA by mid-20 11 and our strategy is to
            push hard to conclude a quality deal within this timeframe. Malaysia
            delivered AANZFTA-plus outcomes in its 2009 bilateral FTA with New
            Zealand, although these items do not cover all areas of interest to Australia
            (e.g. no commitments on wine or government procurement). Its FTA with
            Chile, concluded in May this year, also contains no commitments on wine.
                                                                                             •
            Proposed Next Step

               •   Reinforce Australia's interest in AANZFTA-plus outcomes in MAFTA
                   negotiations with Malaysia's Minister for International Trade and
                   Industry, Mustapa, as opportunities arise (e.g. at APEC meetings in
                   November 2010).
                                                                            -DECLASSIFIED-
                                                                  Department of Foreign Affairs and
                                                  41              Trade
                                           SECRET AUSTEO          Released under the FOI Act 1982,
                                                                  August 2011
     •

                                       SECRET AUSTEO

                                PACER Plus Negotiations

         Key Issues
 '-
      Forum Island countries' (FICs) wariness about the Pacific Agreement on
      Closer                              Plus has resulted in slow nn~!1T'p'
      date.



      Current Situation
 •
     Pacific Islands Forum (PIF) leaders commenced negotiations in 2009 for a
     regional trade and economic agreement, known as PACER Plus. Priority
     negotiating issues comprise regional labour mobility, rules of origin, trade
     facilitation, development assistance and infrastructure.

  Australia's objectives for the negotiations are to strengthen the FICs'
  economies and ensure Australia receives no less favourable treatment than
 -that given to others, such as the European Union. Australia is providing
  -assistance to support FICs' participation (A$1.9 million in 2009-10),
  including funding for the Office of the Chief Trade Adviser.
~~


 .decided on 5 August 2010 to refer the issue of Fiji's participation to the
  Ministerial Contact Group, of which Australia is a member .




 • Proposed Next Step

           •   Press for substantive progress in PACER Plus negotiations ip.
               discussions with New Zealand and FICs' counterparts .
                                                              ..- -- -----==--:;-;;==:----,
                                                                         -DECLASSIFIED-
                                                              Department of Foreign Affairs and
                                              42              Trade
                                       SECRET AUSTEO          'Released under the FOI Act 1982,
 •                                                            'August 20~ 1
                               SECRET AUSTEO


             Gulf Cooperation Council FTA Negotiations

Key Issues

The Gulf Cooperation Council (GCe) is by far the most important market for
Australian-made passenger motor vehicles (PMV) and a key market for
agriculture. We are seeking terms of access under an FTA with the GCC
that are equal to or better than those of our competitors. There are also
                                                                                 •
broader strategic benefits from concluding an FTA. Achieving an outcome
will be difficult but we are developing a strategy to restart stalled
negotiations.

Current Situation

FTA negotiations with the GCC stalled after the fourth round in Muscat,
Oman (May-June           The GCC is undertaking a review of its wider
approach to FTAs           in relation to sensitive issues such as




                          The GCC is Australia's largest PMV market,
                   per cent of total PMV exports in 2009. Approximately
one-third of Australia's total production of PMV is          to the GCC.
                                                             __
                 __ ____ __-======-l====='--_____ .__________.
This ratio is higher for particular "V'''l-'a.''',,''
                       ~         ~
                  cOlnp'anies have made clear they require a level playing
field in     GCC market - equivalent or better access under GCC tariffs
vis-a-vis other automotive supplying countries. The GCC is also negotiating
FTAs with significant automotive producing nations including the European
Union, Japan, Korea, China, India and Turkey (all of which have been
affected by similar delays in their negotiations). Our agricultural exporters    •
also have similar concerns about maintaining tariff parity.

We should continue to build momentum towards a resumption of
negotiations through further ministerial-level contact. While the GCC has
so far not agreed to our suggestion of int"r"",,,
                              m2lKe progress.




This engagement would also demonstrate that Australia is not solely
interested in automotive trade, but is committed to a genuine economic
partnership addressing issues of interest to both sides.
                                                                -DECLASSIFIED~
                                                      Department of Foreign Affairs and
                                     43               Trade
                              SECRET AUSTEO           Released under the FOI Act 1982,
                                                      August 2011
•



                                   SECRET AUSTEO


    Proposed Next Steps

•     •   Initiate introductory calls or letters to Gee ministers to register
          Australia's desire to resume FTA negotiations at the earliest
          opportunity, including intersessional negotiations.

      • Advocate our interest in an early resumption of negotiations during
        the inaugural Gee-Australia Foreign Ministers' Dialogue (dates yet to
        be agreed) and the proposed visit by Saudi Foreign Minister Prince
        Saud (possibly in October-November 2010).
•
      •




•




•




•




•




                                                                      -DECLASSIFIED-
                                                            Department of Foreign Affairs and
                                          44                Trade
•                                                           Released under the FOI Act 1982,
                                   SECRET AUSTEO
                                                            August 2011
                                 SECRET AUSTEO


            Indonesia Economic Partnership Agreement
Key Issues

We want to announce the launch of Economic Partnership Agreement (EPA)
negotiations with Indonesia as soon as practicable. Indonesia's Trade
Minister, Dr Pangestu, is awaiting final approval from President Yudhoyono.

Current Situation

The Australia-Indonesia Free Trade Agreement joint feasibility study was
accepted by Australia and Indonesia in 2009. The study finds a
comprehensive agreement would deliver worthwhile economic benefits
to both countries and facilitate the integration of the Australian and
Indonesian economies. Australia and Indonesia agreed the FTA would be
called an 'Economic Partnership Agreement' during President Yudhoyono's
visit to Australia in March 2010.

During Mr Smith's visit to Jakarta on 15 July 2010, Dr Pangestu said she
was waiting for approval from the President to announce the launch of
negotiations. Dr Pangestu noted all stakeholders had been consulted and
business and parliament were now supportive of an EPA. Mr Smith and Dr
Pangestu suggested that trade ministers could launch EPA negotiations
when they next met, or within two months if ministers did not meet soon.

An important precursor to the commencement of negotiations is the
resolution of Indonesia's transposed tariff schedule under the ASEAN-
Australia-New Zealand Free Trade Agreement (AANZFTA) (see separate brief).
Indonesia's AANZFTA tariff schedule will provide the baseline level of
commitment for EPA negotiations.

Australia and Indonesia have agreed to establish a facility to assist
Indonesia participate effectively in EPA negotiations. The AusAID-
funded facility (A$1.2 million) will support trade-related capacity building
activities and could include technical assistance and pilot capacity building
projects. Indonesia has identified beef and dairy as priority areas for .
consideration. We are working with Department of Agriculture, Fisheries
and Forestry, AusAID and the Australian Centre for International
Agricultural Research to determine viable EPA projects - with a view to
announcing some initial projects at the same time as the launch of
negotiations.

Proposed Next Step

   •   Consider opportunities to launch EPA negotiations, including the
       Australia-Indonesia Trade Ministers' Meeting, likely to be held in
       Indonesia later this year, or a possible G20 trade ministers' meeting in
       the lead-up to the G20 Leaders' Summit in Seou·I--(November-='2fl-l··flJ---------..- -..
                                                        .
                                                        .
                                                        ,         -DECl.A"SSIFIED-
                                                          iDepartment of Foreign Affairs and
                                       45                 tirade
                                 SECRET AUSTEO            iReleased under the FOI Act 1982.
                                                          August 2011
                               SECRET AUSTEO


                                 India FTA

Key Issues

India needs to complete internal processes prior to launching FTA
negotiations with Australia. We continue to press for progress. Building
FTA                                                             be
important.

Current Situation

A Joint FTA Feasibility Study was completed in May 2010 at India's request.
The study recommended negotiation of a comprehensive bilateral FTA
covering goods, services, investment, other trade and investment facilitation
and cooperation measures as a single undertaking.

In May 2010, Australian and Indian trade ministers publicly endorsed the
recommendation. Australian processes to launch negotiations have been
completed. However India still needs to complete a number of procedural
steps before it can launch FTA negotiations. We continue to press for
progress.




Industry consultations in Australia reveal broad support for the FTA. High
tariff levels and the difficult operating environment in India were identified
   impedirnelClts to              bilateral trade and investment.



Advocacy to build a constituency of proponents for the
and India will be           for a successful outcome.




Proposed Next Step

   •   Press India to finalise its processes to launch FTA negotiations.




                                                                   -DECLASSIFIED-
                                                        IDepartment of Foreign Affairs and
                                       46               rTrade
                                SECRET AUSTEO           IReleased under the FOI Act 1982,
                                                        iAugust 2011
                                SECRET AUSTEO
                                                                                  •

                           European Union FTA

 Key Issues



                                                                                  •


 Current Situation




- Our initial assessment is that the most difficult issues to address with the
  EU would include agricultural market access, Australia's quarantine regime
  and the EU's quest to extend protection for its geographical indications.




 Proposed Next Step

    •




                                                       ,        ---OECLASSIFfEO-:.------1
                                                       IOepartment of Foreign Affairs and I

                                       47              ~rade                               I
                               SECRET AUSTEO           IReleased under the FOI Act 1982,   I
                                                       ~ugust 2011                         I
                                                       I                               _~
                                               SECRET AUSTEO

                                           CER-Mercosur FTA

                Key Issues

            .A comprehensive, high-quality FTA would nrclvicle
               the world's                     bloc.



                Current Situation

             Mercosur, a customs union comprising Brazil, Argentina, Uruguay and
.---c~-,;   .Paraguay, is the world's fourth-largest                        for almost




           A comprehensive, high-quality FTA with Mercosur would provide beneficial
           market access, especiaUy to Brazil. It could also stimulate progress in the
           Doha Round negotiations. It would be consistent with the government's
~=-ccc-c~.clbj,ect:ive of strengthening links with Latin America.



                                                   was re-co:nvc~n(!d
             April 2010 confirmed a much lower level of ambition on Mercosur's part.
             Brazil assumed the Mercosur presidency on 1 August 2010 (for six months),
             and has proposed a further meeting in October this year. A joint Australia-
             New Zealand paper setting out our approach to FTAs is being prepared to
            ,aid discussions.

                An independent study to model the economic benefits of a CER-Mercosur
                FTA would inform discussions, as well as gauging business interest without
                raising expectations. It could perhaps be funded by the Council on
                Australia Latin America Relations.

              On 19 July 2010, in response to a submission on this issue, Mr Smith
            , requested further consideration be given to this matter in the context of
              post-election priorities and allocation of resources.

                Proposed Next Steps

                  • Australia and New Zealand to provide Mercosur with detailed
                    information about our approach to FTAs.

                  •   Officials to meet with Brazilian counterparts (representing Mercosur)
            •
                      later this year.

                  •   Consi.der commissioning preliminary modelling on-rhe-eeo!cf?!efASSIFIED_
                      benefIts of a CER-Mercosur FTA.               IDepartment of Foreign Affairs and
                                                    48              lifrade
                                             SECRET AUSTEO           Released under the FOI Act 1982,
                                                                    I ugust 2011
                                                                                    •


                                SECRET AUSTEO


                  ASEAN-Australia-New Zealand FTA
Key Issues
                                                                                    •
Implementation of the ASEAN-Australia-New Zealand Free Trade Agreement
(AANZFTA) is progressing smoothly overall, although three signatories have
yet to ratifY. We are working with Indonesia and New Zealand to resolve
outstanding tariff transposition issues by the time of the East Asia Summit
(EAS) meeting in October 2010.

Current Situation
                                                                                    •
AANZFTA entered into force on 1 January 2010 for eight parties: Australia,
New Zealand, Brunei, Burma, Malaysia, the Philippines, Singapore and
Vietnam. Thailand implemented the FTA from 12 March 2010. Cambodia
and Laos are aiming to ratify by September/October 2010.

Indonesian ratification is being delayed by differences with Australia and
New Zealand over the conversion of its tariff schedule from the format in
which it was negotiated (HS 2002) to the format currently used by customs
authorities (HS 2007) - a process known as 'tariff transposition'. This is a
complex exercise as Indonesia has significantly simplified its tariff structure,
reducing the number of tariff lines from over 11,000 to less than 9,000.




                                                                                    •




                                                                                    •




                                                                                    •




                                                                   -DECLASSIFIED-
                                                        :Department of Foreign Affairs and
                                      49                Trade
                               SECRET AUSTEO            'Released under the FOI Act 1982,
                                                        ,August 2011                 •
                                  SECRET AUSTEO


'Other aspects of AANZFTA implementation are progressing smoothly.
    The FTA Joint Committee approved a range of projects under the FTA's
    Economic Cooperation Work Programme, to which Australia is contributing
    up to A$20 million over the next five years. We are also assisting the ASEAN
    Secretariat to establish an AusAID (and New Zealand) funded Support Unit
    to support AANZFTA implementation. The next FTA Joint Committee
    meeting will be hosted by Australia in late November 2010.
• Proposed Next Steps

       • We will provide you with an assessment of the next version of
         Indonesia's draft transposed tariff schedule.

      •   We will prepare a ministerial submission seeking your agreement to
          obtain a negotiating mandate from your industry and agriculture
          ministerial colleagues to finalise Indonesia's tariff transposition.
•




•




•




•                                                                   -DECLASSIFIED-
                                                          Department of Foreign Affairs and
                                         50               Trade
                                  SECRET AUSTEO           Released under the FOI Act 1982,
                                                          August 2011
                                SECRET AUSTEO

       Australia New Zealand Closer Economic Relations Trade                       •
                             Agreement
Key Issues

Agreement has been reached with New Zealand on an Investment Protocol to
the Australia New Zealand Closer Economic Relations Trade Agreement
(ANZCERTA).
                                                                                   •
Current Situation

ANZCERTA provides duty-free entry for all goods that meet the rules of
origin requirements. Its coverage of services is also relatively liberal.
ANZCERTA has provided a foundation for a web of complementary
agreements, including on the movement of people, mutual recognition of
standards, taxation, government procurement, aviation and, most recently,
work to reduce regulatory barriers to trans-Tasman business through the
Single Economic Market agenda.

In 2009, the two governments agreed on a further range of initiatives to
advance trans-Tasman economic integration, including an ANZCERTA
Investment Protocol. The Investment Protocol will fill a gap in an otherwise
comprehensive FTA. Australia and New Zealand have now resolved the
outstanding issues in Investment Protocol negotiations. Prime Minister
Key wishes to announce or sign the Protocol when the Prime Ministers
next meet.

A review of the ANZCERTA rules of origin was completed on 31 March
2010. Agreed amendments to the rules now need to be progressed through
both countries' treaty-making processes. In addition to minor
administrative changes to around 700 tariff lines, the amendments will
remove the few remaining regional value content requirements, most notably
for men's suits. This will make it easier for New Zealand-produced suits
made from high quality imported fabric to qualify for duty-free entry.

Proposed Next Steps

   •    Conduct legal verification, complete treaty-making processes and sign
        the Investment Protocol.

   •    Complete treaty-making and domestic implementation processes for
        agreed amendments to ANZCERTA rules of origin.




                                                       I----~~------·-----~··-     .
                                                       i          -DECLASSIFIED-
                                                       !Department of Foreign Affairs and
                                      51               iTrade
                               SECRET AUSTEO           iReleased under the FOI Act 1982,
                                                       iAugust 2011
                                                       I
                                         SECRET AUSTEO

                             Australia-United States FTA

-Key Issues

    We should encourage enhanced US engagement on strategic trade policy
    issues in the annual ministerial trade talks under the Australia-United
    States Free Trade Agreement (AUSFTA). We continue to pursue market
    opening at officials' level, particularly in professional services and
    agriculture, through the mandated regular reviews and negotiations .

. Current Situation

    AUSFTA is a high-quality, comprehensive agreement which, since its entry
    into force in 2005, has underpinned Australia's economic relationship with
    our largest single trade and investment partner.

 While Australia views AUSFTA as a 'living agreement' to be shaped and
 reinforced in order to increase our                               takes a
.more hands-off


 To address this mismatch, we should propose that the next mandated
 annual ministerial talks (AUSMINTT which the US is scheduled to host) be a
 strategic discussion on Asia-Pacific trade architecture. The Obama
 Administration's interest in the Trans-Pacific Partnership (TPP),
 preparations for hosting APEC in 2011 and its FTA with the Republic of
.Korea provide a 'hook' on which to hang this agenda.

    In an otherwise negative US domestic political environment for trade policy,
    an Asia-Pacific focus should better harness US interest and commitment to
    AUSMINTT. It would also serve Australia's ambition to deepen regional
    economic integration through the TPP, which may provide a plausible
    pathway to a Free Trade Area of the Asia-Pacific (see separate brief).
    AUSMINTT should also consider implications for the Doha Round.

    At the same time, we will persevere with those elements of the AUSFTA
    implementation agenda, including chapter reviews and market access
    objectives, which have worked well. We seek to build on modest gains in
    professional services access to the US market and to pursue agricultural
    and sanitary and phytosanitary objectives.

    Proposed Next Steps
•
       •   Secure dates for the next AUSMINTT (hosted by the United States).

       •   Propose to the United States a strategic discussion at AUSMINTT on
           regional trade and economic integration, includi:=n~g,-,t~h~e,-T~P~P~.=:-:--=:-=:-.:::-:::----
                                                                      I          -DECLASSIFIED-
                                                                      IDepartment of Foreign Affairs and
                                                  52                  [Trade
•                                                                     iReleased under the FOI Act 1982,
                                         SECRET AUSTEO
                                                                      rUgUst 2011
                                                                                                                                            •

                                                      SECRET AUSTEO

                                     Singapore-Australia FTA

Key Issues
                                                                                                                                            •
A second review of the Singapore-Australia Free Trade Agreement (SAFTA) in
2009 resulted in modest outcomes, given that remaining market access
barriers are in sensitive areas. We will need to evaluate whether a third
review would deliver further gains at this stage, especially as Australia and
Singapore are also involved in the Trans-Pacific Partnership (TPP)
negotiations.

Current Situation                                                                                                                           •

The substantially liberalised trade and investment regimes in both countries
underpin already high levels of two-way trade and investment (see
separate brief). SAFTA, which entered into force in 2003, is a high-quality
FTA reflecting the openness of both countries' markets.

The agreement requires a review every two years or as otherwise considered
appropriate. The second review of SAFTA was concluded in July 2009.
The main changes arising from the second review relate to investment and
intellectual property. The changes will shortly be submitted to JSCOT for
consideration, prior to entry into force.


                                        Australia'sTradewith Singapore (Goods& Services)
              A$2.Sb   ,----'-'--'---'-------='-'------'--------'--------,


              A$lOb    -\----------------1                                                                 I-----j


              A'lS' -\------------,--.-----.-.----1                                                        I--~
                                                                                                                      III Exports

              A'1O' +---------1 r-- --'-- -                                                                -          1IIImports




              A'"               1-            ~          r-          '-           f---          -          -


                         2002         201)3       2004        200S        21lG6          2001       2008       20D9

                                B3Selion ABS trade c'~1i; on OFAT STARS dltabase & ABScalalogue53GB.0.55.004.




                                                                                                                                                and
                                                                       53
                                                     SECRET AUSTEO                                              iRelea:sed under the FOI Act 1982,
                                                                                                                V"\U\/UOol 2011
                                    SECRET AUSTEO




    Industry consultations to take place in 2010 will test the level of interest in
    a further SAFTA review and whether outstanding issues could more
    effectively be pursued in the TPP context.

    Proposed Next Steps

       •   Officials to undertake consultations with industry and state and
           territory governments, in conjunction with TPP consultations, to
           clarify current Australian priorities in the Singapore market.

       •   Subject to the outcomes of industry consultations and progress on the
           TPP negotiations, we will provide you with advice on possible
           parameters and timing of a third review .




•




•                                                           I         -DECLASSIFIED-
                                                            pepartment of Foreign Affairs and
                                          54                 rade
                                    SECRET AUSTEO           Released under the FOI Act 1982,
                                                             ugust 2011
                                                               SECRET AUSTEO


                                              Thailand-Australia FTA
          Key Issues

            We continue to press Thailand to commence overdue Thailand-Australia
            Free Trade Agreement (TAFTA) inbuilt agenda negotiations. There is a high
S::~~@L~I~e;v~el~O~f~g:OOdS liberalisation under TAFTA and it is
~                       But              non-tariff barriers remain.                                                                                •
                                                  need to push for better outcomes,
            particularly on services, investment and in the agriculture and auto sectors.

          Current Situation

          Negotiations on the inbuilt agenda of TAFTA - covering services,
          investment, government procurement, business mobility and competition
          policy - have been overdue since 2008 as a result of Thai political factors.
          Parliamentary approval to commence negotiations is expected in coming
          months.




          Thai officials have agreed in principle to our proposal for a ministerial-level
          FTA Joint Commission meeting in late 2011, which would include a
          ministerial-level general review ofTAFTA.


                                                 Australia'sTradewith Thailand (Goods & Services)
                         A$1Sb




                         A$lClb                                                                                   1-
                                                                                                                                 ! I Exports

                                                                                                                                 llimports


                                                                              ,-          -           -           l-



                                             I
                                  2002        2003         2004        2005        2006        2007        200S          20119
                                         a~.~d""Aes   Ir;idedata 0lI DFAT STARS database &ABScataloll\le530B.0.5S.004.




          The mandated TAFTA market access working group is intended to be held
          in parallel with inbuilt agenda negotiations. Thailand's motor vehicle excise
          tax disadvantages manufacturers of large engine-capacity vehicles,
          including Australian exporters, and undermines tariffrGoncessions,$!"an.ted--""-,-                                                             "
          by TAFTA. Thailand's responses to Australian representations 6ftt1t~~JED-
                                                                                                                         Department of Foreign Affairs and
                                                                    55                                                   ~rade
                                                              SECRET AUSTEO                                              iReleased under the FOI Act 1982,   I
                                                                                                                         August 2011
                                                                                                                         ,                                   i
                                                                                                                         '----~       __
                                                                                                                                     ~~        _______".J
                                   SECRET AUSTEO


    have been discouraging. We also have dairy market access concerns;
    special agricultural safeguards have not been reviewed,




    Proposed Next Steps

      •   Maintain pressure on the Thai Government to commence TAFTA
          inbuilt agenda ne,gotiat:iOlls,

      •   Work with the Thai Ministry of Commerce to hold a ministerial-level
          FTA Joint Commission meeting in late 2011, including a general
          review ofTAFTA.

      •   Pursue our market access concerns, including in passenger motor
          vehicles, dairy and steel, possibly through the market access working
          group.

      •   Press for a review of agricultural special safeguards, ideally as part of
          a general TAFTA review.




,




•



                                                                     -DECLASSIFIED-
                                                            Department of Foreign Affairs and
                                                            I
                                         56                 ~rade
                                   SECRET AUSTEO            iReleased under the FOI Act 1982,
•                                                           ~Ugust 2011
                                                            ___________________________~
                                                            L
                               SECRET AUSTEO


                           Australia-Chile FTA
Key Issues

As Australia's first FTA in the region, the Australia-Chile Free Trade
Agreement (ACI-FTA) has enhanced our profile and represents a milestone in
our growing ties with Latin America.                                                         •

Current Situation

The ACI-FTA delivers improved market access for Australian investors and
exporters of goods and services, including for coal, meat and dairy products
and in education, mining and financial services. Upon entry into force in
March 2009, the ACI-FTA removed tariffs on 97 per cent of existing
merchandise trade and will eliminate tariffs between the two countries by
2015. The ACI-FTA also supports significant Australian foreign direct
investment in Chile by offering access rights and strong protection for
Australian investments.

It is too early to assess the trade and investment impact of the FTA.
Two-way merchandise trade was valued at A$831million in 2009, down 19.7
per cent, driven by the effects of the global economic crisis. However,
Australian services exports to Chile grew 9.2 per cent in 2009 to A$190
million. Australian investment fell slightly in 2009 to A$1.8 billion.

The ACI-FTA established a Joint FTA Committee (at officials' level) to oversee
the implementation of the agreement. The first meeting of the Joint FTA
Committee was delayed by the Chilean earthquake in February 2010, but
discussions are underway to reschedule the meeting for later in 2010.
A Cooperation Committee, included at Chile's request, will facilitate closer
engagement with Chile in a range of trade-related areas and is expected to
meet at the same time as the Joint FTA Committee.

Proposed Next Step

   •   Officials to participate in a meeting of the ACI-FTA Joint FTA
       Committee and the FTA's Cooperation Committee towards the end of
       2010.




                                                       r--~-   ~-   .. -- . -..   -----~--   .-.. -. -_.-
                                                       ,          -DECLASSIFIED-
                                                       Ioepartment of Foreign Affairs and
                                                       I
                                     57                rrrade
                               SECRET AUSTEO           iReleased under the FOI Act 1982,
                                                       tUgust 2011
,




•




    RE   ED
•




•




                           of Foreign

          [Released under the FOI Act
          rU\jU'"   2011
•
                               SECRET AUSTEO


                              Trade Finance
                                                                                   •
Key Issues

The Export Finance and Insurance Corporation's (EFIC) small capital base
means it has to refer some transactions to the National Interest Account
(NIA), which involves a lengthy Cabinet process. The government could in
part address the current higher demand by increasing EFIC's capital. There
may be further NIA transactions for Cabinet consideration by the end of the
year, involving a coal seam gas project in Queensland and transactions in
Sri Lanka and Africa.

Current Situation

The Trade Minister is responsible for EFIC, a Commonwealth statutory
authority which provides trade fmance and specialised insurance to
Australian exporters and overseas investors where private financial
providers are unable to provide support for viable transactions (the 'market
gap'). EFIC takes risks on transactions in its name on its Commercial
Account. It also manages the NIA on which the Commonwealth directly
carries the risk where the size or the risks of a transaction are too high for
EFIC's balance sheet, but the government assesses the transaction to be in
the national interest.

Demand for export finance from EFIC is growing as credit remains tight.
As a result of the global economic crisis, the NIA has been used extensively
over the past two years. EFIC has indicated there is a current market gap
for large resource and infrastructure projects that are beyond its balance
sheet. It is likely you will need to consider approval of NIA support to
Santos' coal seam gas project in Gladstone. EFIC may also refer to the NIA
transactions in Sri Lanka and Africa.

You may wish to consider means to reduce the call on the NIA where
transactions are referred as a result of EFIC's small capital base (currently
A$616.4 million). You could consider putting forward a new policy proposal
to increase EFIC's capital by up to A$l billion. This would allow EFIC to
support larger, risk-worthy transactions and thus help increase Australia's
exports.

The EFIC Act is being amended to reduce compliance costs and enhance
EFIC's powers to better support small to medium-sized enterprise exporters.
The Office of Parliamentary Counsel is draftiqg a bill. We expect you will be
able to introduce the bill during the next parliamentary sitting period.

You will need to issue a 2010-11 Statement of Expectations (SoE) to EFIC
as soon as possible. EFIC will then respond with a Statement of Intent. We
propose using the SoE and a new NIA service level agreement with EFIC to
ensure EFIC's ongoing assessment of risks (commercial..,_enviroILmental_and ______ _
social) is robust.                                   :          -DECLASSIFIED-              ---I
                                                       loepartment of Foreign Affairs and
                                     59                ifrade                                  I
                               SECRET AUSTEO           iReleased under the FOI Act 1982,       I
                                                       ,August 2011
                                                       i
                                                       I
                                SECRET AUSTEO



.A position on the EFIC Board (currently held by David Crombie) will
 become vacant on 30 September 2010. Mr Crombie is eligible for
 reappointment. Cabinet processes require that the Trade Minister address
 appointment options. We will provide a list of potential members for your
 consideration shortly.

 Jubilee Australia, a non-government organisation, has become increasingly
 vocal in its criticisms of EFIC. Jubilee has published a report criticising
.EFIC's social and environmental public disclosure and due diligence
 processes in respect of Gold Ridge mine in the Solomon Islands and the PNG
 LNG Project, and initiated a range of Questions on Notice and tabling
 processes via Senator Brown and Senator Ludlam. The response to the
 tabling order seeking assessments of the PNG LNG transaction has yet to be
 submitted and documentation will be provided for your consideration as
 soon as possible.

, Proposed Next Steps
    •   Introduce the EFIC Act Amendment Bill to the Parliament in the next
        sitting period.

    •   Issue a Statement of Expectations to EFIC for 2010-11.

    • Appoint a member to the EFIC Board when a position becomes vacant
      on 30 September 2010.

    •   Provide relevant documents to comply with a Senate tabling order in
        respect of the PNG LNG transaction.

    •   Consider whether to seek an increase to EFIC's capital to reduce the
        increased demand for NIA support.

•
    •   Consider possible Cabinet submissions on prospective NIA
        transactions where these are referred by the EFIC Board.




                                                       I         -DECLASSIFIED-
                                                       !Department of Foreign Affairs and
•                                     60                 rade
                                                       tTl




                                SECRET AUSTEO          Released under the FOI Act 1982,
                                                       rUgUst 2011
                                                                                   ,

                                SECRET AUSTEO


       International Competitiveness and Export Development
Key Issues

Some export sectors could be adversely affected by Australia's resources           •
boom as scarce finance and skills are increasingly absorbed by the
resources and construction sectors and the dollar remains strong.
Improving efficiency and productivity across the economy remains a priority.

Current Situation

Manufacturing will be the sector most affected by the resources boom,
though some services and agricultural industries could also find their             •
competitiveness eroded. This could particularly be the case for regional
companies. Small to medium-sized companies could face continuing
problems in obtaining debt and equity finance.

The government already provides substantial assistance to business through
a wide range of industry programs administered by other portfolios as well
as trade promotion assistance through Austrade and export finance through
the Export Finance Insurance Corporation. Agencies have developed a good
yet disparate understanding of the capabilities and problems facing various
export-oriented industries and companies.

You could support establishment of a cross-portfolio process, in
consultation with business, to pool agency expertise on specific sectors,
examine constraints on export competitiveness, assess the usefulness of
existing programs and look at improving the effectiveness (rather than the
amount) of government assistance.

Support should also be given to broader economic reforms to boost
Australia's international competitiveness. Trade-related priorities would
focus on infrastructure, skills, taxation, the regulatory environment and
climate change.

Consultation with business on the development of recommendations
would be important. Establishing an overarching consultative body on
trade and investment would facilitate the process (see separate brief).

Proposed Next Step

   •    Encourage, as part of the government's broader competitiveness
        agenda, the establishment of whole-of-government taskforces to pool
        expertise, examine constraints on export competitiveness in particular
        sectors and make recommendations for maintaining and expanding
        export markets.

                                                                                            ·1
                                                       [Department of Foreign Affairs and
                                      61               Ifrade
                                                                                             I
                                                       I    .
                                SECRET AUSTEO          IRe leased under the FOI Act 1982,
                                                       rugUst 2011              I
                                                         - - - - - -_ _ _ ---..J
                                  SECRET AUSTEO

           Trade Consultative Mechanisms and Advocacy
 Key Issues

 Communication with trade stakeholders and strong advocacy of the benefits
 of trade and trade liberalisation ensure a transparent and inclusive
,approach to trade issues. There is scope for the government to review the
 mechanisms for consultation and trade advocacy.

 Current Situation

 Stakeholders with a strong interest in trade policy include: peak business
 organisations; industry lobby groups and major corporations; unions; think
 tanks and academic institutions; non-government organisations; state and
 territory governments; and the media. Two-way consultations with
'stakeholders make a valuable contribution to policy deliberations and
 bring to bear a range of perspectives from different sectors of the economy.

  DFAT conducts an extensive range of consultations and calls for public
  submissions on particular trade issues, such as the Doha Round and
  individual FTAs. These consultations tend to concentrate on market access
  issues. There is nevertheless a need for an overarching consultative
 forum with business on trade policy issues hosted by the Trade Minister. A
'high-level business consultative group would be an important mechanism to
  demonstrate that the government's trade agenda is informed by commercial
 realities. The Mortimer Review of September 2008 recommended
  establishing 'a national trade and investment council to provide overarching
 guidance and direction on trade and investment strategy'. We suggest you
  consider forming a new trade and investment business consultative
 mechanism. We will provide you with early advice on possible options and
  suggested participants. (Austrade will advise on a distinct but
',complementary proposal to establish an Austrade Business Board.)

 The Ministerial Council on International Trade (MCIT), which was chaired by
 the Commonwealth Minister for Trade and comprises the ministers
 responsible for trade and state development from each state and territory
 will, from March 2011, cease to be part of the Council of Australian
 Government (COAG) framework as a result of the Hawke review. State and
 territory representatives have indicated a strong desire to re-form as a
'Commonwealth-state/territory trade consultative mechanism. The
 government therefore has the opportunity to reconstitute the MCIT as a
 non-COAG Commonwealth-state/territory forum. The Western
 Australian Government has offered to host a first meeting of the forum.

 A 2010 Newspoll survey conducted by Austrade and DFAT showed that, in
 general, the majority of Australians have a positive attitude to trade.
 However, the global economic crisis dented confidence, prompting a rise in
'popular protectionist sentiments. The department produces a rang~e'c'0,,:f,-;t~r~a~d:,:,eo=-~~~',
                                                         !          -DECLASSIFIED-
                                                            !Department of Foreign Affairs and


                                                            ~
                                        62                      rade
                                  SECRET AUSTEO             Released under the FOI Act 1982,
                                                            rugust 2011                 '
                                                            I
                                                                                   •
                               SECRET AUSTEO


advocacy materials, including hard copy and web-based materials,
highlighting the contribution of trade to growth, employment and prosperity.

Proposed Next Steps

   •   Consider whether to form an overarching trade and investment                ,
       consultative mechanism with business.

  •    Reconstitute the Ministerial Council on International Trade as a non-
       COAG consultative forum.

  •    Continue to advocate the benefits of trade and trade liberalisation.




                                                        r-~----:"bECLAssiFTED:~-       ------1
                                                        iDepartment of Foreign Affairs and
                                     63                 :Trade                               I
                               SECRET AUSTEO            ]Released under the FOI Act 1982,    I
                                                        tust2011I
                                       SECRET AUSTEO
       •

                            China, Hong Kong and Taiwan.

           Key Issues

        China is naw Australia's largest twa-way trading partner. Chinese demand
        far Australia's resaurces and energy and strang Chinese investment interest
       'in Australia has transfarmed the ecanamic relatianship. The next Jaint
        Ministerial Ecanamic Cammissian is due in Australia befare the end af 2010.
        The gavernment cauld pursue claser engagement with Taiwan in suppart af
        significant Australian interests.

        Current Situation

        The bilateral relationship with China is in gaad shape. While underpinned
~~~w::.b~y ecanamic linkages, the relatianship invalves a wide range af interests.
                                    glabal issues af impartance to. Australia,_
                                 As China's pawer and canfidence graws,
        Australia's                                                      strategic and
        security interests

        China's grawing ecanamic pawer and success in weathering the glabal
        ecanamic crisis have baasted its canfidence and underpinned its belief that
       .glabal pawer balances are shifting in its favaur. The gavernment will need to.
        cantinue to. give clase cansideratian to. the challenges that an emerging
        China presents.

        Two-way trade with China in gaads and services was valued at A$85 billian
        in 2009 ar araund 17 per cent af Australia's tatal trade. Exparts to. China
        are daminated by the resaurces and energy sectar. Australian exparts af
        iron are to. China grew by 21 per cent (in value terms) in 2009 and caal
       ,exparts to. China grew by aver 1,000 per cent to. became aur secand largest
        ·expart cammadity, behind iran are. China is alSo. aur largest saurce af
        averseas students and a significant saurce af taurists. China's direct
        investment in Australia rase 151.6 per cent to. A$9.2 billian in 2009, aur
        tenth largest saurce af direct investment.

        We recagnise the impartance af aur resaurces trade, but want to. diversify
        into. new areas: financial and ather services, new and clean energy,
       .sustainable design and canstructian and agribusiness. There are significant
        barriers to. fareign participatian in the Chinese market. We are seeking to.
        address these through an FTA with China (see separate brief). We are alSo.
        warking with Austrade to. apen up appartunities far Australian industry in
        China's rapidly develaping inland pravinces.

        China wants faster and easier investment in Australia and far its state-
        owned enterprises to. be cansidered as private campanies. China is alSo.
       .pushing to. use Chinese labaur and technicians in majar resaurce prajects.
        China is fallawing the prapased Mineral Resaurces Rent Tax c1oseh1=-~=O;-;:C~--~l
                                                               'I         -D~CLASSIFIED-
                                                                Department af Fareign Affairs and
                                             64                [Trade
                                       SECRET AUSTEO           IReleased under the FOI Act 1982,
                                                               fugust 2011
                                                               !
                                                                                                          SECRET AUSTEO


          We are due to host the biennial Joint Ministerial Economic Commission in
          2010, the main ministerial-level meeting in the trade relationship.

      China's interests in climate change have not changed since Copenhagen
      (see separate brief). China sees binding commitments to reduce carbon
      emissions as a threat to continuing high rates of economic growth. At the
      same time, it recognises that climate change could cause China
~~~~_and is                    in measures to lll1UH'VC pn,~ro~r ~~~~                                                                                                                         •




          Hong Kong is our fifth most important source of foreign investment and
          fifth largest destination for Australian direct investment. We have an
          interest in Hong Kong's future under the 'one country, two systems' formula.

          Taiwan is our eighth largest merchandise export market and a major                                                                                                        y~-'=.=LJ
          customer for mineral and energy resources.



                       'on.e-'CbLina' policy allows for unofficial visits by ministers to
          Taiwan in support of significant economic interests. The last such visit was
          in December 2005.

          Proposed Next Steps

                   •      Invite Commerce Minister, Chen Deming, to attend the biennial Joint
                          Ministerial Economic Commission, due to be held in 2010. This
                          would also be an opportunity for ajoint stocktake of the FTA
                          negotiations.




                       AUstralill-China Bilateral Inw5tment·Posjtion 2005-2009                                                 Australla--chlna BllateralTrade 2005-2009
          1o$20b
                                                                                                                   A$5Db

                                                                                                                   A$4sb
                                                                                                                                                                             /

          """                                                                                                      A$4llb
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                                                                                                                   A$3Sb
          A$10b
                                                                                                                   A$30b                              ~

           "'''                                                         1-                  -
                                                                                                                   A$2Sb

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                                                                                                                                       -----~
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          "'''
                       In I ~ I
                        2005                200&                 2007               2008                 200~
                                                                                                                   A$lSb
                                                                                                                            2005       2006       2007           2008        ,,,.
                       I tTot~1 Aust .... lian investment in China      Ilbtol Ch1n:;a itlVi'stment il ALSI",r.~                        TotaleKporU      Totillimports




                                                                                                                                                      c--~----.----.-


                                                                                                                                                      '             -DECLASSIFIED-
                                                                                                                                                                                        .. -.-- - -- ._ ..   --1
                                                                                                                                                      IDepartment of Foreign Affairs and   .
                                                                                                                65                                    rrrade
                                                                                                          SECRET AUSTEO                               IReleased under the FOI Act 1982,
                                                                                                                                                      flugust 2011
                                                                                                                                                      i - - - - _ _ _ _ _ _ _ _ _ _ __ _ _
                                                                                                                                                      L
•

                                  SECRET AUSTEO

                                       Japan

    Key Issues
•
    We are implementing the                          The FTA is our top priority
    but the political situation  apan              conducive to early progress in
    negotiations. The second round of the bilateral Trade and Economic
    Ministerial Dialogue should be held in Australia this year. Japan is our
    second-largest export market and third-largest source of foreign investment.

    Current Situation




 The major trade-related elements in                      are to: accelerate FTA
 negotiations with a view to completing                   12; cooperate in
'infrastructure financing, including in third countries; lift Japanese
 investment in our resources sector; encourage greater access to Japan by
 Australian financial services firms; and arrest the decline in Japanese
 tourism. Ministers also agreed to continued cooperation with Japan in
 APEC (especially during Japan's host year in 2010), the East Asia Summit,
 the WTO and the G20.

 The first Australia-Japan Trade and Economic Ministerial Dialogue was
'held in October 2009 in Tokyo. Our objective is to entrench the dialogue as
 an annual forum for discussing the full range of bilateral, regional and
 global economic issues with the second dialogue in Australia in 2010. We
 recommend you write to Trade Minister Naoshima to invite him to visit.

 Japan was Australia's second-largest export market in 2009 with total
 trade worth A$59.2 billion. Australia's exports to Japan fell by 24 per cent
 from their record levels in 2008 to A$40.4 billion in 2009. Nevertheless,
"trade with Japan in 2009 still delivered our second-largest surplus on
 record, A$21.6 billion. Japan also remains Australia's third-largest foreign
 investor, with total investment growing to A$102 billion in 2009 - 14.3 per
 cent higher than in 2008.

    Japan's economy was hit hard by the global recession because of
  traditional heavy reliance on exports of manufactured goods for its growth.
 The IMF had predicted growth of 2.4 per cent in 2010 and 1.8 per cent in
'.2011. But Japanese data of 16 August 2010 showed lower-than-expected
 growth of 0.1 per cent for the April-June 2010 quarter (0.4 per cent if
  annualised). Japan is running one of the largest structural budget deficits
 in the world at more than 7.2 per cent of GDP every year untiLat least 2015.
  Cutting the deficit will be difficult to reconcile with thd JapaneseOECLASSIFIEO-
                                                          IOepartment of Foreign Affairs and
                                        66                ~rade
                                  SECRET AUSTEO           IReleased under the FOI Act 1982,
•                                                         y\ugusl 2011
                                                     SECRET AUSTEO


Government's stated policy of increasing public welfare spending without                                                                    •
raising taxes.




Beyond trade, the broader relationship with Japan is in strong shape, with
significant growth in cooperation in recent years in defence and security and
on issues such as nuclear disarmament and climate change. We enjoy
vibrant and long-standing people-to-people links. Our differences on
whaling, however, are significant. Our decision to initiate action in the
International Court of Justice and our response to Sea Shepherd's anti-
whaling protests have angered Japan. This issue has not yet affected the
economic relationship, but we will need to manage carefully the case in the
ICJ.

Proposed Next Steps

   •   Write to Japan's Minister of Economy, Trade and Industry, Masayuki
       Naoshima, to invite him to visit Australia for the second Trade and
       Economic Ministerial Dialogue later in 2010.
                                                                                                                                            •
   •   Engage Japan on elements of the                                                                           intended to advance
       our trade and investment in1tprp,::j',::


                                 Australia's Trade Balances with Major Markets



                                                                                                              15%averageannuaJ
                                                                                                              growth in trade
                                                                                                              surplus with Japan




                                                                                                                -Japan



                                                                                                                -IndIa


                                                                                                                -ChIna
                   -A$lob   --..... ---........... ----.-.---................ ---.---.....................

                                                                                                                -UnitedStates.
                   -A$2ob -I------~----=~-~
                        2000                                   zoo,                                    2010




                                                                                                                ,-------DECLASSIFIED:---- - . -!

                                                          67
                                                    SECRET AUSTEO
                                                                                                                IDepartment of Foreign Affairs and
                                                                                                                Trade
                                                                                                                IReleased under the FOI Act 1982,
                                                                                                                IAU9Ust 2011
                                                                                                                                                   J
                                                                                                                                                   .
                                                                                                                                                       II
                                  SECRET AUSTEO

                     Korean Peninsula and Mongolia
 Key Issues

 Ministerial engagement will be necessary to finalise the Australia-Korea Free
 Trade Agreement if leaders are to initial it at the G20 in November. We
 should seek the Republic of Korea's (ROK) agreement to host the Ministerial
 Joint Trade and Economic Commission (MJTEC) meeting in October 2010.
 The ROK is our third-largest goods export market.

 Current Situation

 The past three years have seen consolidation of the ROK as an important
 economic, security and strategic partner in Asia. We can build
 momentum early in the government's second term by concluding FTA
 negotiations and working closely with the ROK to ensure the success of the
 ROK-hosted G20 Summit in November.

 We have agreed with the ROK to aim to have leaders initial the Australia-
'Korea Free Trade Agreement during the G20 meetings in November (see
 separate brief). An MJTEC in October would provide an opportunity to
 finalise the FTA before the G20. The MJTEC is the primary forum for
 engaging the ROK on bilateral, regional and economic issues. We hosted the
 last MJTEC in May 2009.

  In 2009, the ROK invited Australia to participate in the 2010 Yeosu Expo.
  Australia                                                        ~~~~L-~§f!illTIi~1
'.'world expo'
  has not      respolrld(:d


The 2011 'Year of Friendship' between Australia and the ROK marks 50
years of diplomatic relations and has the potential to provide significant
trade benefits to both countries, particularly in tourism .

. In 2009, the ROK was Australia's third-largest goods export market and
  fourth-largest overall trading partner. Two-way trade totalled A$24,4 billion.
Resources and energy accounted for 80 per cent of our goods exports,
 led by coal (A$4.9 billion), iron ore (A$2,4 billion), crude petroleum (A$1.9
 billion) and aluminium (A$866 million). Recovery in the ROK economy
 (particularly steel, shipbuilding and motor vehicles) will underpin further
 demand for our raw materials. Services exports are significant (A$1.8 billion
 in 2009) with the ROK being Australia's third-largest source of international
.student enrolments and sixth most valuable tourism market.

  Australia is an important trade partner for the ROK. We supply 62 per cent
  of its iron ore and 46 per cent of its coal. Significant potential exists to
  further expand trade and investment, including in LNG, uran,,-,,;iu~m~,~-::o-;==:o- ___
  services (particularly financial and legal) and green te[hnologies:DECLASSIFIED-            -,
                                                           IDepartment of Foreign Affairs and
                                          68               Irrade
                                   SECRET AUSTEO           IReleased under the FOI Act 1982,
•
                                                           f-ugust 2011
                                              SECRET AUSTEO


Two-way investment is relatively small. In 2009, the stock of Australian
investment in the ROK totalled A$6.3 billion (ranked 19 th). Macquarie Bank
has a significant presence in the ROK and the ANZ is also active. The stock
of ROK investment in Australia totalled A$8.7 billion in 2009. ROK
investors in Australia are predominantly engaged in resource development
(including in NSW coal mines) and in import and distribution (Hyundai,
Daewoo, Kia, LG and Samsung).

Our relationship with the Democratic People's Republic of Korea (DPRK)                                                 •
is circumscribed by our concerns about its nuclear and missiles programs.
Trade is negligible and unlikely to grow. Australia has fully implemented
United Nations Security Council sanctions against the DPRK, which ban all
trade related to missile, WMD and nuclear technologies, impose an arms
embargo and ban the supply of lUXUry goods. Australia also has strong
autonomous sanctions against the DPRK, including financial sanctions
applied to 12 entities and an individual associated with the DPRK's WMD
and missile programs, a general visa ban and a ban on the entry into
Australian ports of DPRK-flagged vessels.

Bilateral two-way trade with Mongolia is modest (A$10 million in 2009).
There is significant potential for the expansion of services exports and
investment in Mongolia's minerals and energy sector.

Proposed Next Steps

   •   Finalise the FTA with ROK ahead of the November G20 Summit.

   •   Seek the ROK's agreement to host the next MJTEC in October 2010.

   •   Respond to the ROK's invitation to participate in the 2012 Yeosu
       Expo.

                        Australia's Top Five Merchandise Exports to the Republic of Korea (2009)
              $20b




              $15b
                                                                                         • Beef



                                                                                         _Aluminium

              SlOb

                                                                                         • Crude Petroleum



              A$Sb                                                                       • Iron Ore



                                                                                         • Coal

              1'$0
                 2005             2006            2007            200.            2009



                                                                                                      -DECLASSIFIED-
                                                                                           !Department of Foreign Affairs and
                                                   69                                      rrrade                       .
                                             SECRET AUSTEO                                 IReleased under the FOI Act 1982,
                                                                                           rUgUst 2011
                                                                                           L _ _ _ _ _ __
                                   SECRET AUSTEO


                                     Indonesia

    Key Issues

    Australia's trade and investment relationship with Indonesia has
    underperformed. Our priority is announcing negotiations for an Economic
    Partnership Agreement (EPA). Ongoing irritants include: access for
                                   dairy products; Indonesia's new mining law;
                                Indonesia's concerns include market access for
                            packaging of tobacco products.

    Current Situation

    There is significant potential in the trade relationship which could be tapped
    via an EPA (see separate brief). Indonesia is scheduled to host the Trade
    Ministers' Meeting by the end of 20 10.

"Two-way trade with Indonesia has decreased as a share of our trade with
    ASEAN from 25 per cent in 1997 to 15 per cent in 2009. This is partly due
    to increasing protectionist sentiment, infrastructure constraints, poor
    corporate governance, burdensome regulatory restrictions, legal uncertainty
    and corruption. But Australian business is beginning to look to a relatively
    fast-growing Indonesia as an opportunity.

 Our two-way trade with Indonesia was valued at A$11.3 billion in 2009
'making Indonesia our 12th largest trading partner. Australian investment in
 2009 totalled A$4.7 billion. Indonesia ranks as the 20 th largest market for
 Australian investment abroad. Indonesian investment in Australia in 2008
 totalled A$624 million but declined to A$339 million in 2009.

 The Trade Ministers' Meeting is the peak mechanism for trade discussions
 and was last held in February 2009. Australia and Indonesia agreed that
 the next meeting be held in Indonesia by the end of 20 10 .
•
Indonesia recently has restricted live cattle imports. As Australia's
second largest merchandise export to Indonesia (A$476 million in 2009), we
seek certainty for these exports. Indonesian officials are also considering
restricting beef import permits. Australia exported A$178 million of
boxed beef to Indonesia in 2009 and we are                   on these
                                                                        ~
-Indonesia's new mining law obliges mining service companies to use 'local'
 and/or 'national' companies where available. As a result, Australian mining
 services companies, classified as 'other', assess they could be disadvantaged.
 We continue to support Australian resource companies in clarifying the
 impact on their interests.

                                                           I          -DECLASSIFIED-
                                                           !Department of Foreign Affairs and
•                                         70               Ifrade
                                   SECRET AUSTEO           IReleased under the FOI Act 1982,
                                                           ~ugust 2011

                                                           I
                                                                                                                        ,

                                                 SECRET AUSTEO




                                                                                                                        •

The government's policy to outlaw illegally harvested timber imports should
not become an irritant as Indonesia is adjusting to similar EU and US
standards.

Indonesia's trade interests include access for mangosteens. Indonesia also
has concerns about Australia's intention to require plain packaging for
tobacco products given its clove cigarette exports. We are working to ensure
these measures are WTO-consistent. Indonesia is also interested in the
proposed food standards amendment (truth in labelling - palm oil) private
member's bill which was referred to the Senate Standing Committee for
Community Affairs in November 2009.

Australia and Indonesia rnnnpr"tp
lesser extent in the WTO.


Proposed Next Steps

  •   Following President Yudhoyono's agreement to EPA negotiations,
      agree timing for a joint announcement.

  •   Consider dates for a Trade Ministers' Meeting in 2010.

  •   Continue to support Australian access to the Indonesian market, with
      an immediate focus on the live cattle and meat trade.


                               Australia's Total Two·wayTrade with Indonesia and ASEAN
             $90b


             SBOb

             $70b                                                                                -           f-
             $60b                                                                                -           f-
                                                                                     -           -           f-
             ,...
             $5Db


                                                         -             -             -           -           -
             $30b   -          -            r--          -             -             -           -           -
             SlOb   -          -            r--          -             -             -           -           -
             Slob   -          -            r--          -             -             -           -           -
              'Ob              ".           ""           n'            "'"           ""          ""          "
                        1997         1999         2001          2003           "OS        2007        2009

                                                   Ilindonesiil IIOtherASEAN




                                                                                             i          -DECLASSIFIED---
                                                                                             jDepartment of Foreign Affairs and
                                                                                                                                ---l
                                                       71                                    Trade
                                                 SECRET AUSTEO                               iReleased under the FOI Act 1982,         I
                                                                                             \August 2011                              '1


                                                                                             I                              .          I
                                                                                             I                                    __ ,_I
                                SECRET AUSTEO

•
                          Other South East Asia
    Key Issues

 Total two-way trade with ASEAN in 2009 was A$77 billion or 15.1 per cent
 of Australia's total trade. This compares with A$85 billion (16.8 per cent) for
 China and A$59 billion (12 per cent) for Japan. The entry into force of the
.ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) on 1
 January 2010 for the majority of signatories (see separate brief) will enhance
 commercial relations still further. There is scope to build on AANZFTA,
 including by maximising gains under existing FTAs with our two biggest
 ASEAN trading partners - Singapore and Thailand - and pressing forward
 with negotiations on the Malaysia-Australia Free Trade Agreement (MAFTA).

Current Situation

 The Singapore market is dynamic and open. We continue to build on the
 Singapore-Australia FTA (2003) through its inbuilt review mechanism (see
 separate brief). Singapore is our fifth-largest two-way merchandise trading
 partner (A$16.5 billion in 2009), fourth-largest two-way services trading
 partner (A$6.4 billion in 2009) and the sixth-largest investor in Australia
 (with total investment valued at around A$40.2 billion in 2009). There are
 over 2,000 Australian companies operating in Singapore. Ministerial
,bilateral trade discussions are handled primarily within the Singapore-
 Australia Joint Ministerial Commission, the next meeting of which is due to
 take place in Australia in 2011.

 Our FTA with Thailand (TAFTA) has led to a dramatic increase in total two-
 way trade, although Australia has made modest gains in comparison to
 Thailand. We need to keep pressing Thailand on market access issues, non-
 tariff barriers and other TAFTA implementation issues. Bilateral trade grew
•to A$19.2 billion in 2009, making Thailand our ninth-largest trading partner.
 Commencing negotiations on the TAFTA in-built agenda is a key objective
 (see separate brief).

 Malaysia is our 11th largest partner in two-way goods and services trade.
 While Malaysia has been resistant to liberalisation in some key sectors to
 date, including automotive and government procurement, Prime Minister
 Najib has indicated he is keen to make economic reforms. We will test
,Malaysia's willingness to make such reforms in our ongoing MAFTA
 negotiations (see separate brief). The last Joint Trade Committee (JTC)
 discussions with Malaysia were held in August 2009. Malaysia is keen to
 hold the next JTC soon.

 Continued strong growth of Vietnam's economy (forecast at six per cent in
 2010) offers good prospects for Australian companies. Australian
 merchandise (A$1.4 billion in 2009) and services exports (A$900 million in
 2009) and investment (A$500 million in 2009) are set to grow as Vietnam
'undertakes further liberalisation in line with WTO andAANZFTADECLASSIFIED-


                                                        ~
                                                          epartment of Foreign Affairs and
                                      72                  rade
                                SECRET AUSTEO           Released under the FOI Act 1982,
                                                        fA-ugust 2011
                                                        I
                                                        ,
                                               SECRET AUSTEO
                                                                                                •

               commitments. Two-way trade stood at A$6 billion in 2009. Prospects for
 .---c-=-C-~7  new exports of coal and LNG are encouraging. In public and private
 ~~\""tl.'!:£1 messaging, we should encourage further economic reform and opening,




                                            annual Joint Trade and Economic Cooperation         •
                           m~:eting   provides a good engagement mechanism.

                There is room to increase Australia's two-way trade with the Philippines,
                valued at A$2.5 billion in 2009. Mining is a particular focus. Our
                quarantine regime is the subject of two dormant WTO challenges by the
                Philippines (relating to bananas and pineapples). Early engagement with
                the Philippines will include the third Philippines-Australia Ministerial
                Meeting (PAMM), which involves participation by ministers for foreign affairs
                and trade. It is Australia's turn to host and we recommend we do so in early
                2011. Australia will continue to explore assisting the Philippines with
                upgrading qualifications of its nurses to meet Australian standards, a
                commitment made at PAMM 2008.

        Two-way trade with East Timor is very small (A$48 million in 2009), but
        Australia has a large economic stake in Timor Sea oil and gas resources
        from which we currently earn around A$130 million per year. Development
        of Greater Sunrise remains contentious. The commercial operator has
        proposed a floating platform to process gas, which is estimated would earn
        Australia more than A$20 billion over the 30-year life of the project. East
        Timor continues to insist it will not                               that does
~~~@l-inot include a           to East Timor.



                Although Brunei is a very small market, Australia has commercial interests
                in its rich oil and gas sector. Brunei also has investment interests in
                Australia. It played a constructive role as ASEAN lead in the AANZFfA
                negotiations and continues to do so as co-chair of the FfA Joint Committee.

                Australia is a prominent investor in mining in Laos. Australian mining
                companies calIon our aid from time to time to take up their concerns at
                senior levels of the Lao Government. Laos commenced a WTO accession
                process in 1998.

                Australia neither encourages nor discourages trade and investment relations
                with Burma, which in any case are very limited. There are periodic political
                and activist calls to ban Australian trade and investment with Burma. In
                particular, the WA-based firm Twinza has significant oil and gas interests.
                We impose targeted financial sanctions on individuals in or associated with
                the military regime. However, we need to maintain capacity to interact with
                Burma as a member of ASEAN and within AANZFfA.
                                                                                                    ---l
                                                                      ~
                                                                                 -DECLASSIFIED-       .

                                                     73
                                               SECRET AUSTEO
                                                                     I
                                                                      Department of Foreign Affairs and
                                                                     I rade
                                                                      Re leased under the FOI Act 1982,
                                                                         9
                                                                     ru ust2_0_1_1______________
                                                                                                          J
                                                                                                          i
                                                                                                          I
•
                                     SECRET AUSTEO


 ASEAN countries are progressing development of an ASEAN Economic
 Community (AEC) as a part of their broader plan for an ASEAN Community
 (also including political-security and socio-cultural pillars) by 2015. It is
 intended that the AEC will transform ASEAN into a single market and
 production base in which there is a free flow of goods, services, investment
'and skilled labour. ASEAN countries are also focused on developing their
 'connectivity' agenda for better transport and communications linkages
 across the region.

    Proposed Next Steps

      •   Develop strategies to capitalise on development of ASEAN Economic
          Community and regional connectivity proposals.

      •   Consolidate our growing trading relationship with Vietnam, including
          by encouraging larger scale resource exports.


                           Australia'sTatal Goods and Services Trade with ASEAN (2009)
                                                 otherASEAN




                                                   Singapore
                                                     30.0%




•




•

                                                                             !           -DECLASSIFIED-
                                                                             IDepartment of Foreign Affairs and
                                                 74                          rrrade
                                     SECRET AUSTEO                           IReleased under the FOI Act 1982,
                                                                             fA-ugust 2011

•                                                                            I
                                            SECRET AUSTEO


                                                  India                                              •

            Key Issues



                      .
            ----------ill1i!l!W!fIII.I'l'lrr:.jJ"---.,I'I'II'I'l!ft'l!Ir--- ••••
              .....                                     pursue
                         inv'esltmc~nt in parallel with an FTA, including through the
            Australia-India CEO Forum and Australia-India Joint Ministerial
                                                                                 •             ••

            Commission.                                                                              •


            Current Situation

            India was Australia's third-largest export market (goods plus services) in
            2009. It was Australia's fastest-growing major trading partner over the past
            five years, with two-way trade growing at an average of 22.6 per cent to over
            A$20 billion in 2009. The Australia-India economic relationship has                      •
            considerable potential to grow further as India's economic development
            continues. Australia is well-placed to supply India with the raw materials
            and energy necessary to fuel its future growth. Financial services,
~::::\~~~   infrastructure and agriculture are important potential growth areas.


                                          Building FTA support among Australian and
            Indian business leaders will be an early priority (see separate brief).

            Other opportunities for enhanced trade and investment should be pursued
            in parallel to achieving FTA outcomes. The Australia-India CEO Forum
            was proposed by India in 2008 to gather the relevant major business leaders
 ,--==~     together. India has not yet advised its
                              19 Australian cOl:np,anie~
                                                                We recommend
                           CEO Forum concept and hosting the inaugural forum.

            The Australia-India Joint Ministerial Commission (JMC) gives trade
            ministers the opportunity to review the economic relationship annUally. The
            JMC is held in conjunction with a Business Council meeting led by the
            Australia India Business Council and the Federation of Indian Chambers of
            Commerce and Industry. It will be Australia's turn to host the JMC in 2011.
            An early visit by you to India should also be a priority.




                                                                      ., ...
                                                                     IU        ..    ." -. ... . ~r~
                                                                                    -OE{~LP,SSi,-1
                                                                                                         and    I
                                                  75
                                            SECRET AUSTEO
                                                                     i
                                                                        rade
                                                                      Released under the FOI Act 1982,
                                                                      fA,ugust 2011
                                                                                                               J'
                                                                                                                I'




                                                                     1------__----------
                                    SECRET AUSTEO




    Negotiation of an updated bilateral Double Taxation Agreement (led by
    Treasury) and a Social Security Agreement (led by the Department of
    Families, Housing, Community Services and Indigenous Affairs) should be
    finalised to enhance commercial engagement.




       •   Contact Indian Commerce Minister Sharma to propose dates for the
           Joint Ministerial Commission.

       • Take forward CEO Forum arrangements including proposing that
         Australia host the inaugural forum.

       •   Consider an early visit to India.




•




                                                                    -DECLASSIFIED-
                                                        IDepartment of Foreign Affairs and
                                          76            rrrade
•                                   SECRET AUSTEO
                                                        c
                                                        1~~leased under the FOI Act 1982,
                                                            gust
                                                                 2011                        J
                                                                                   •

                               SECRET AUSTEO


                       United States and Canada
Key Issues
                                                                                   •
Our trade and investment relationship with the United States is our largest
globally. We should continue to use it to further our goals across the
broader regional and international trade agenda, particularly in negotiating
the Trans-Pacific Partnership (TPP), in APEC (which the United States hosts
in 2011) and in concluding the Doha Round. New trade policy talks with
Canada provide an opportunity to pursue a more active and forward-looking
work agenda. Canadian Trade Minister Van Loan has sought early talks.
                                                                                   •
Current Situation

The United States was Australia's third-largest two-way trading partner in
2009, with total goods and services trade worth A$50.1 billion. Australia's
merchandise exports to the United States fell to A$9.6 billion in 2009, a
20.9 per cent decrease over the previous year, owing to the global downturn.
In 2009, the deficit in bilateral goods and services trade stood at A$19.7
billion.

The United States is a major investor country, accounting for around a
quarter (A$514 billion) of total foreign investment stock in Australia as of
December 2009. The United States is by far Australia's most important
destination for investment, with stock valued at A$404 billion.

Trade policy is at the margins of the Obama Administration's domestic
economic agenda. Trade policy is pitched at boosting exports to create jobs,
enforcing existing trade agreements, and 'rebalancing' pending agreements
to obtain congressional support in the current political environment.

US leadership and ambition remains essential to making progress on the
global and regional trade agenda, particularly in the Doha Round
negotiations. Australia is collaborating with the United States to progress
services negotiations, through our respective 'clustering' initiatives. This
cooperation advances our own ambitions for services outcomes in the Doha
Round. It may also strengthen our ability to influence the United States in
other priority areas, notably better Doha Round market access outcomes.

The Administration places a high priority on the TPP negotiations (see
separate brief). The Administration is also preparing for US hosting of APEC
in 2011. These two important Asia-Pacific initiatives are also central to
Australia's ambitions for deepening bilateral, regional and global economic
relationships. We should exploit US interest to more effectively advocate
ambitious outcomes for us on market access, services and regulatory/
supply chain connectivity issues. We can use the AUSFTA mechanism,
AUSMINTT, to fUrther these wider aims (see separate brief).
                                                       I         -OECLASSIFIEO-
                                                       iOepartment of Foreign Affairs and
                                      77               ~rade
                               SECRET AUSTEO           !Released under the FOI Act 1982,
                                                       tUgust 2011·                "
                                    SECRET AUSTEO

.US concerns with Australian trade policy centre on long-held perceptions
 that our quarantine and sanitary and phytosanitary (SPS) regime is unduly
 restrictive. This concern has been reinforced since Australia's change of
 policy on ESE in early 2010. Additionally, the United States has long-
 standing access complaints related to specific fresh food and horticultural
 products.

 Australian concerns with US trade policy centre on potentially trade-
.distorting American production support, such as farm subsidies and
 labelling and regulatory requirements. Australia also holds concerns about
 implementation of US SPS measures which               affect our exporters'
 access to the US market. In view of                                sentiment
 in the US Congress, we need to be alert to any                      US
 legislation with the United States' international obligations.

 Trade links with Canada are broad. Two-way merchandise trade totalled
.some A$3.3 billion in 2009 and two-way investment is A$54.5 billion. Policy
 cooperation is generally good in the WTO, Cairns Group, OECD, G20 and
 APEC. Canada has offered to host the next Cairns Group Ministerial
 Meeting in 2011 and is interested in joining the TPP negotiations.

We need to address occasional bilateral sensitivities. Canada ,,,,nne".'t>(I




Canada has responded positively to our informal proposal for annual senior
officials' trade policy talks. These talks would provide a structured
mechanism to pursue a more active and forward-looking work agenda.

.A one-and-a-half-trackSydney in November. The Canadian Prime Ministeris
       .

 planned to be held in
                             Australia-Canada Economic Leadership Forum
                               .

and Trade Minister have been invited. Trade Minister Van Loan is keen to
have early talks on bilateral issues.

Proposed Next Steps

   •       Continue to cooperate with the United States on the trade
           liberalisation agenda in the WTO, TPP negotiations and APEC.

   •       Propose to the United States a strategic discussion at AUSMINTT on
           regional trade and economic integration, including the TPP.

   •       Consider early contact with Canadian Trade Minister Van Loan, and
           attendance at the Australia-Canada Economic Leadership Forum.

   •       Give shape to the annual trade policy talks wit~ Canada. -DECLASSIFIE~­
                                                           !Department of Foreign AffairS and
                                          78               ITrade
                                  SECRET AUSTEO            :Released under the FOI Act 1982,
                                                           ~ugust 2011
                                                             I
                                SECRET AUSTEO                                        •


                               Latin America
Key Issues

We should continue to build and consolidate growing trade and economic
links with Latin America, including through multilateral cooperation and             ,
ministerial contact. Increased engagement has lifted our reach but we need
to maintain the momentum. Early signature of the Memorandum of
Understanding (MOU) for an Enhanced Partnership with Brazil will give a
boost to the trade and investment relationship with the region's biggest
economy.

Current Situation

Trade with Latin America has continued to grow over the past decade. In
2009, merchandise trade was valued at A$5.7 billion (a growth of more than
12 per cent annually over the past 10 years). Australian companies have
invested heavily in the region, especially in Brazil, Mexico and Chile,
primarily in mining and related activities. Australian education services
have become an important sector.

We share membership of many trade groupings with Latin American
countries (WTO, Cairns Group, APEC, OECD and G20) and work with
partners in the region to pursue our economic and trade objectives. We
have an FTA with Chile, are negotiating the Trans-Pacific Partnership (TPP)
with Chile and Peru, and are assessing the benefits of a possible FTA with
Mercosur and New Zealand (see separate briefings).

Market access irritants remain, especially over Australia's sanitary and
phytosanitary arrangements, and are frequently raised including at
ministerial level. An example is Mexico's request to export avocados and
melons (still to be resolved after 10 years).

Immediate objectives with Latin American trading partners are:

   •   Brazil: Australia has negotiated an MOU for an Enhanced
       Partnership with Brazil, which will establish regular ministerial-level
       talks on foreign and trade policy. It will also create a Trade and
       Investment Facilitation and Promotion Group which will boost trade
       relations. We should look for an early opportunity to sign the MOU;

  •    Mexico: It will be important to capitalise on the increased momentum
       in the bilateral trade relationship generated by former Trade Minister
       Simon Crean's visit to Mexico in April 2010, where he co-hosted a
       Joint Trade and Investment Commission (JTIC) meeting. You should
       consider making early contact with Mexico's new economy minister,
       Bruno Ferrari, and invite him to attend the next JTIC meeting in
       Australia in 2011;
                                                        !~--      ---.:oECLASSIFIED-=-- ---
                                                        lI:)epartment of Foreign Affairs and
                                       79               ITrade
                                SECRET AUSTEO           !Released under the FOI Act 1982.
                                                        lo\ugust 2011
                                                        ,
                                                        L__________
                                   SECRET AUSTEO

      •   Chile: Our high-quality FTA with Chile has expanded our profile in



                                                    -=
          Latin America and opened up new opportunities for bilateral trade and
          investment (see separate brief). You should consider an early
          opportunity to meet with Chile's trade minister, Alfredo Moreno,
          possibly at APEC in November;
•
      •   Argentina: The Argentine Government's                 policies do not
          make it as conducive as others to expanding commercial links. To
          progress our Doha, G20 and Cairns Group objectives you should
          consider meeting with Argentina's new trade minister, Hector
          Timerman, possibly at the G20 Summit in October;

      •   Peru: Although Peru would like to negotiate a bilateral FTA with
          Australia, our priority is to progress negotiations on the TPP with Peru
          and other negotiating partners. Australia is re-opening an embassy in
          Lima in September 2010;

      •   Colombia: There is strong and increasing commercial engagement
          with Colombia, particularly in the mining sector, however the
          relationship is held back by a lack of resident diplomatic
          representation on our part;

      •   Cuba: Cuba's debt to Australia (approximately $A9.7 million plus tens
          of millions in                                                 trade
          and investment.




•



    Proposed Next Steps

      •   Look for an early opportunity to sign the MOU for an Enhanced
          Partnership with Brazil.
•
      •   Consider ministerial engagement with your counterparts, particularly
          the economy minister of Mexico and the trade ministers of Chile and
          Argentina.




                                                                     -DECLASSIFIED-
                                                           Department of Foreign Affairs and
                                          80                rade
                                  SECRET AUSTEO            Released under the FOI Act 1982,
                                                            ugust 2011

•
                                       SECRET AUSTEO
                                                                                              •
                                           Pacific
    Key Issues

    Australia has a major stake in the success of Papua New Guinea's massive
    LNG project. New Caledonia is an untapped market but tariff barriers are
    high. The South Pacific Regional Trade and Economic Cooperation
    Agreement                              access to Australia for Pacific Islands            •
    Forum
~


    Current Situation

    Australia is supporting the US$18.3 billion (A$20 billion) ExxonMobU-led
    LNG project in Papua New Guinea through an EFIC loan of up to US$500
    million (US$100 million on the commercial account and the remainder on
    the national interest account). Under a Joint Understanding signed in
    October 2009, the loan has opened the way for collaboration with Papua
    New Guinea on the design of sovereign wealth funds to manage project
    revenues transparently and sustainably. We are also working with Papua
    New Guinea to determine other areas in which assistance may be needed,
    particularly in the project's construction phase. This could include technical
    and vocational skills development, regulatory issues and licensing and
    border controls.

    Despite its proximity, a per-capita GDP greater than New Zealand's, and an
    economy bigger than Papua New Guinea's, New Caledonia lags as an
    Australian trading partner. President Gomes wants to intensify integration
    with Australia and the region. His visit to Canberra in March 2010 saw
    agreement to hold officials' talks          from October 2010. The talks will
           trade


    Samoa's wire harnesses - produced as inputs for Australia's auto industry
    - are vital to its economy. The manufacturer, Yazaki EDS, is the country's
    largest private sector employer. To export to Australia free of duty, Yazaki
    depends on a derogation from SPARTECA's rules of origin. Samoa has
    received four derogations since December 2001. The current derogation
    expires in October 2010. Samoa applied in July 2010 for a further
    derogation. We have advised Customs that the department supports
    Samoa's application.

    Under an AusAID-funded Australian scheme called SPARTECA-TCF, Forum
    island countries can 'boost' the local content of any textiles, clothing and
    footwear (TCF) export using 'excess local area content' from other products
                                                                               _____ .____ ..________ .
    to qualify for duty-free entry to Australia. Only Fiji ta,kes J>JJbs.tantial
    advantage of the scheme. Its TCF industry recently r~quested aill~~~itISIED':
                                                                 !Department of Foreign Affairs and
                                              81                 Ifrade
                                      SECRET AUSTEO              iRe leased under the FOI Act 1982.
                                                                 ~ugust 2011                        -
                                                                 I
•

                                  SECRET AUSTEO

    to SPARTECA-TCF and an extension of the scheme to 2020, or until a
    suitable alternative trade agreement (e.g. PACER Plus) takes effect.
    SPARTECA-TCF is currently due to cease on 31 December 2011.

"Fiji is currently excluded from participation in the PACER Plus
 negotiations. Forum leaders decided on 5 August 2010 to refer the issue to
    the Ministerial Contact Group (MCG), of which Australia is a member.

 The US$l1 billion US Guam military build-up offers opportunities for
 Australian firms in: infrastructure development; building and construction;
 food and beverage supply; and the service industry. US tenderers enjoy a
 20 per cent price preference in bidding for primary contracts. Austrade is
"pursuing the sub-contracting opportunities that are available to Australian
 companies. Cairns has a particular interest in the build-up because of its
 direct air links. Inwards tourism by US service personnel has grown in
 recent years.

    Island governments have raised concerns at senior levels
    restrictions                                    .




    Proposed Next Steps

      •   Develop an additional assistance package to address PNG Government
          capacity gaps in implementing the LNG project.
•     •   If necessary, we will recommend that you also write to express
          support for Samoa's application for a derogation for its wire harnesses.

      •   Consider Fiji industry's requests on SPARTECA-TCF.




•




                                                          I"         -DECLASSIFIED-
                                                          [Department of Foreign Affairs and
                                         82               rrrade
                                  SECRET AUSTEO           IReleased under the FOI Act 1982,
•                                                         lAugust 2011
                                 SECRET AUSTEO

                                   Europe

Key Issues

We should seek to promote services trade and investment opportunities in
the European Union (EU), including through the Australia-European
Commission (EC) Trade Policy Dialogue (TPD). We should continue to
pursue a better deal for Australian agricultural exports through improved
market access, Doha Round outcomes and encouraging continuing reform of
the EU's Common Agricultural Policy (CAP).                                •

Current Situation

The EU, as a bloc, is Australia's second largest trading partner and largest
foreign investor. Trade policy competence for all EU member states is vested
in central EU institutions.

The EU is a major contributor to the development of global rules, regulations
and standards. We are seeking a more consultative EU approach in this
area under the Trade and Investment Objective of the Australia-EU
Partnership Framework (launched in October 2008 and due for its second
update in early 2011). We should also aim to expand renewable energy and
clean technology investment, and identify opportunities to enhance
government-business linkages.

Although European Trade Commissioner De Gucht has been invited to
Australia in 2010 for a second ministerial-level Trade Policy Dialogue
(TPD), we judge that he will not come. We should look at opportunities for
the TPD to be held no later than early 2011 in Brussels.

To expand bilateral trade in services, we will need to maintain pressure on
the EC to establish a joint working group on professional services as a step
towards the negotiation of Mutual Recognition Agreements.

While Australia-EU trade and investment links are strong, access to the EU
for Australia's agricultural exports remains very restricted. An ambitious
outcome to the Doha Round remains the best prospect for substantial
improvement in agricultural market access. We will need to continue to
press the case for further CAP reform with EU decision-makers, including
the newly-powerful European Parliament. The EU is currently debating
future CAP arrangements (to apply from 2014).

Negotiations on a bilateral
       with the EU are stalled




                                      83
                                 SECRET AUSTEO        iRelea'sed under the FOI Act 1982,
                                                      r u,Ju",2011


                                                               --.--~~---.~-    •.. - - - - - - -
                                   SECRET AUSTEO

    EU member states

'With trade policy responsibilities vested in Brussels, trade and investment
 promotion is our primary focus in EU member states. Our healthy trade and
 investment links with the EU are skewed towards the United Kingdom,
 which accounts for around one-third of our trade with the EU and we need
 to do more to expand trade cooperation with continental Europe.

 France will host the G20 Leaders' Summit in 2011 and has signalled a wide-
 ranging agenda for the year. The United Kingdom and Germany are both
·proponents of a strong outcome in the Doha Round. However, in response
 to budgetary pressures, both the United Kingdom and Germany are
 developing new aviation taxes which may adversely impact on bilateral
 tourism and people-to-people links. We need to continue to engage both
 countries to try and ensure that long-haul carriers do not suffer unfair
 discrimination, and to combat 'green protectionism' more generally in
 Europe.

'Australia's relations with Russia have largely been trade-based, with meat
 exports forming a significant component. A ministerial-level meeting of the
 Joint Commission on Trade and Economic Cooperation (scheduled for
 October in Australia) will allow us to discuss: market access for our meat;
 bilateral aspects of Russia's WTO accession; and Moscow's repeated request
 for us to grant it market economy status.

    Proposed Next Steps

      •   Consideration of a revised text on Objective II (dealing with trade and
          investment) of the Australia-EU Partnership Framework.

      •   Continue to encourage EC Trade Commissioner De Gucht to visit
          Australia for a second ministerial-level TPD, but otherwise be
          prepared to go Brussels for this purpose by early 2011.

      •   Pursue the establishment of ajoint working group on professional
          services as a step towards the negotiation of Mutual Recognition
          Agreements.

      •   Promote further CAP reform, including through the Doha Round.

      •   Continue advocacy efforts to address the possible adverse impact on
          Australia of new aviation taxes in the UK and Germany and 'green
,
          protectionism' more generally.




                                                           1-        -DECLASSIFIED-------

•                                         84
                                  SECRET AUSTEO            ~~::::~~:~~:~:i~:::::
                                                           rUgUst 2011
                                                                                    : :,
                                                           I
                                        SECRET AUSTEO

                                         Middle East
        Key Issues
                                                                                            •
        We should continue to press for the resumption of FTA negotiations with the
        Gulf Cooperation Council (GCC) and negotiate bilateral investment
        agreements with Kuwait, Oman, Qatar and Bahrain. We should also
        commence negotiations with the United Arab Emirates (UAE) on a taxation
        agreement and consider proposing a Joint Ministerial Commission meeting
        with Saudi Arabia. Sanctions constrain trade with Iran. Live animal trade
        with the Middle East is substantial but sensitive.
                                                                                            "
        Current Situation

        Total two-way merchandise trade with the countries of the GCC was worth
        A$8.8 billion in 2009, with the UAE and Saudi Arabia being Australia's
        largest trading partners in the Middle East. Services trade in the Gulf has
        grown rapidly, in particular for education (12,500 Saudi students were
        enrolled in Australia in 2009), financial, health and construction-related
        services. We should continue to press for the recommencement of FTA
        negotiations with the GCC (see separate brief).

        Gulf countries are an increasingly important source of investment in
        Australia and we should encourage this, induding through negotiating
        bilateral investment promotion and protection agreements (IPPAs) with
        Kuwait, Oman, Qatar and Bahrain. We should also deliver on our
        commitment to the UAE to commence negotiations on a taxation agreement.
        You could visit Saudi Arabia in 2011 for a meeting of the Joint Ministerial,
        Commission, which has not met since 2006.

        Israel was our largest trading partner outside the Gulf in 2009, but the
        trade balance is heavily in its favour. Australia should continue to
        encourage Israeli companies to view Australia as a base for outreach to Asia-
        Pacific markets and as a source of sophisticated goods and services.
        Engagement with organisations such as the Australia-Israel Chamber of
        Commerce will be important to promote commercial ties.

        Under the Olmert Government, Israel raised the prospect of an Australia-
        Israel FTA. The report of the 2009 Australia-Israel Leadership Forum also
        recommended that an FTA          be undertaken.

is
I .,'

        Trade with the rest of the Middle East is limited. Total two-way
        merchandise trade with Iran and Iraq was about A$830 million in 2009 -
        overwhelmingly in our favour - and was mostly wheat. New UN Security
        Council and autonomous sanctions will further constr~n l1Ild~QillpliG.ate __
        trade with Iran, induding in relation to the export of ~gricultur~~~tBFIED-                "
                                                                iDepartment of Foreign Affairs and   I
                                                85
                                        SECRET AUSTEO
                                                                 ITrade
                                                                 [Released under the FOI Act 1982,
                                                                 f<\ugust 2011               .
                                                                                                     J
                                                                                                     I


                                                                 i
                                  SECRET AUSTEO
,
    because of sanctions targeting shipping and banks. Concerns about
    security and lack of infrastructure have impeded Australian trade and
    investment in Iraq, but significant commercial opportunities exist in the
    energy, construction, agricultural and finance sectors. The Iraqi
    Government continues to actively encourage Australian involvement. Within
    the constraints of our travel advice we should assist Australian companies
    to take advantage of opportunities in Iraq .
•
    Australia has signed Memoranda of Understanding with ten countries in the
    Middle East and North Africa region to facilitate the live animal trade in
    line with our legislative requirements. We should continue to support this
    trade and look for new opportunities (such as Iraq), however there will
    continue to be sensitivities in Australia arising from concerns about animal
    welfare issues.

'The department and Austrade work closely with relevant business
 organisations promoting trade between Australia and the Arab countries. In
 November 2010 the newly-established Australia Gulf Council (AGC) will
 conduct a high-level business mission to GCC member states, led by Bob
 Hawke and Peter Costello, and diplomatic posts in the region will support
 this initiative. The inaugural Australia Arab Chamber of Commerce and
 Industry (AACCI) Business Forum and Expo, originally scheduled for
 October, has been postponed to early 2011. We are hopeful that a number
'of Arab trade ministers will attend.

    Proposed Next Steps

      •   Continue to press for the resumption of FTA negotiations with the
          GCC, as noted in separate brief.

      •   Commence negotiations on a bilateral taxation agreement with the
          UAE.

      •   Consider proposing a meeting of the Joint Ministerial Commission
          with Saudi Arabia.




,
                                                         i---:DECLASSIFIED-


                                                         ~
                                                           epartment of Foreign Affairs and
                                        86                 rade
                                  SECRET AUSTEO          Released under the FOI Act 1982,
                                                         rUgUst 2011
                                SECRET AUSTEO


                                    Africa

Key Issues

Australia has significant and growing economic interests in Africa,
particularly in the resources sector. There are no major trade irritants in
Africa and no FTAs in prospect. South Africa is by far our major economic         ,
partner and we should take opportunities to encourage a higher level of
South African ambition in the WTO. Aid-for-trade and our advocacy of
agricultural trade liberalisation are worth highlighting to African countries.

Current Situation

Australia has significant and growing economic interests in Africa. In
particular, Australian mining and oil companies have current and
prospective investments worth around US$20 billion.

This stake in Africa's resources sector has grown very strongly in the past
five years: the number of companies with assets in Africa has more than
doubled since 2005, from 70 to nearly 190, spread across more than 500
projects in 39 countries. About 40 per cent of all mining projects overseas
in which Australian companies have an interest are in Africa. Mining
services and equipment suppliers are also finding Africa an increasingly
valuable market.

Merchandise trade with Africa was valued at A$5.8 billion in 2009-10,
having grown by six per cent annually over the preceding decade. Trade
comprised A$3.4 billion in exports, with imports worth A$2.4 billion.
Exports to Africa were higher than exports to Latin America and Central
Europe combined. Services exports totalled $1.4 billion in 2009.

There are good prospects for continued growth in resources and other
sectors thanks to Asian demand for commodities and if Africa continues to
make gains in political stability, governance and economic performance.

Australia has a limited trade policy agenda with Africa. Many markets
remain difficult to operate in. The need for government support for
economic interests will remain greater in Africa than in less difficult
commercial environments. At the same time, institutional weakness limits
the potential for growth in Australia's exports to Africa outside the resources
sector.

African countries or economic groupings and the Australian private sector
have shown virtually no interest in initiating FTAs. There are no serious
trade irritants with African countries. Goods from most African countries
enter Australia either duty-free or at very low rates of duty.

As a proponent of agricultural trade liberalisation and an advQcate offfi~=- ___'"---_____ _
for-trade, Austraiia has a trade policy that resonates WI' ith many-Jll~SIFIED-            1
                                                        Department of Foreign Affairs and   I
                                      87                !rrade                           ,
                                SECRET AUSTEO           teleased under the FOI Act 1982. I
                                                        rUgUst 2011                  ~
   •
                                      SECRET AUSTEO


       countries. To advance our interests in the WTO you should highlight our
       agricultural credentials with African countries that are heavily dependent on
       agricultural exports .

   •Expanding aid-for-trade activity with Africa would help maintain and
    enhance our credentials with African countries in WTO negotiations. A
    continuing focus in the Africa aid program on capacity building in resource
    sector governance would help signal that Australia is willing to make a
    contribution in the sector of greatest interest to us.

    South Mrica is by far Australia's most important economic partner in Africa.
    It takes approximately half of our merchandise exports to the continent and
   .accounts for 50 per cent of Africa's exports to Australia. It is a significant
    services trading partner (A$755 million in 2009) and two-way investment
    has also expanded significantly since the late 1990s. South Africa is also
    Africa's only member of the G20 and is influential in the WTO.
~~~~




       You should consider attending the Mining Indaba conference, in Cape
       Town in February 2011. This is the largest international conference on
       mining in Africa and would provide an opportunity to meet a range of
       African mining ministers as well as supporting Australian mining companies.
   "
       Proposed Next Steps

          •   Consider attending the Mining Indaba conference to promote
              Australia~s mining interests in Africa.


          •   Make early contact with South African Trade Minister Davies to
              encourage a higher level of South African ambition in the WTO, while
   •          noting bilateral trade issues should best be pursued in the margins of
              multilateral meetings.




                                                             I         -DECLASSIFIED-
                                                             [Department of Foreign Affairs and


                                                             ~
                                            88                   rade

                                      SECRET AUSTEO          Released under the FOI Act 1982,
                                                             rUgUst 2011
                                                                                                 •


                                               SECRET AUSTEO


                                       Regional Security Issues
                Key Issues
                                                                                                 •




                                                                                                 •



                Current Situation

                Regional stability and prosperity are underpinned by US strategic
                engagement, anchored by existing US alliances and partnerships. The
                Obama Administration has signalled a welcome, renewed commitment to the
                Asia-Pacific, including engagement in regional architecture - reflected most




                Our bilateral links with the United States
                the Trilateral St:rat:e


~ 33(a)(iii)i




                                                                                                 •




                                                                                               0-

                                                     89
                                              SECRET AUSTEO          iRe leased under the FOI Act.1982,
                                                                           us! 2011
                                                 SECRET AUSTEO




                •The sinking of the Republic of Korea (RO K) navy ship Cheonan by the
                 'Democratic People's Republic of Korea (DPRK) is
                                 'l!I!}Jl"(:ciiI~ble nature ofthat regime,
                                                ,gOILng through a      -!e€tcleFSl:tip-transitio:l!-'::~~~~~J




Is 33(a)(iiOI




                  Maritime security - particularly in the South China Sea, the Sulu and
                •
                 Celebes Seas, the Strait of Malacca and the Indian Ocean - remains critical
                  to a     of vital Australian int:en~st:s.




                                                                                                  IED-
                ,
                                                        90
                                                 SECRET AUSTEO            IRelea:sed under the FOI Act 1982,
                                                                          l"u;ju"l2011
                                                                   ,
                      SECRET AUSTEO



Proposed Next Steps



                                                                   •




                                                                   •




                                      ;          -DECLASSIFIED-
                                      !Department of Foreign Affairs and
                            91        rrrade
                      SECRET AUSTEO   !Released under the FOI Act 1982
                                      ~ugust 2011                        '
                                  SECRET AUSTEO
•

                               Counter-Terrorism

    Key Issues

 Our international counter-terrorism (CT) cooperation efforts should continue
 to focus on locations where Australians have been attacked and where our
'consular or strategic interests are engaged. We should remain active in
 shaping the broader international CT effort and be responsive to the
 increasing numbers of Australians connected with or engaged in violent
 extremism abroad,

    Current Situation

 Australia's counter-terrorism settings - reflected in the 2010 Counter-
.Terrorism White Paper - are effective and underpinned by extensive,
    cooperative activity across the Commonwealth Government and with the
    states and territories. There has been a bipartisan approach to Australia's
    external CT priorities, activities and funding (coordinated through the CT
    Ambassador). CT efforts have focused on locations where Australians
    been attacked                            and where our consular
_or

•




    Globally, Al-Qa'ida and its 'franchise' partners pose an ongoing threat.


        on                                                            groups in
 South Asia, the Middle East and Africa increasingly subscribe to global
 violent extremist ideology and threaten Australian interests. Terrorist
 financing and training networks are of particular concern. Opportunistic
,attacks, by small cells or self-radicalised individuals, are likely to increase.
 Internet radicalisation and autonomous activity are growing concerns.

There is evidence of a small but growing number of Australians making
    contact, training and engaging with violent extremists overseas,
    particularly in the Middle East and Somalia. The increased terrorist
    involvement of Australians underscores the need to align our international
    approach with domestic activities, especially in


                                                                                   FIED-
                                                                         i=7ii'Ai7iiR Affai rs and
                                        92
                                  SECRET AUSTEO           !Relea:sed under the FOI Act 1982,
                                                          V"u~ju"l2011
                              SECRET AUSTEO

                                                                                •



            Our current work with international partners addresses gaps in
regional capabilities in areas such as law enforcement and intelligence
training, regional airport security and prison management. Cooperation
with global and regional frameworks (such as the Trilateral Strategic
Dialogue, the G8 Counter-Terrorism Action Group and the proposed South
                                                                                •
Asia Centre for Law Enforcement Training) multiplies the impact of
Australia's relatively limited resources.

Proposed Next Step




                                                     ,--      -DECLASSIFIED·---- --I
                                                     bepartment of Foreign Affairs and   'I


                                   93                ~rade
                             SECRET AUSTEO           !Released under the FOI Act 1982,   I

                                                     iUgust 2011                _~
                               SECRET AUSTEO

            Nuclear Non-Proliferation and Disarmament
.Key Issues

The actions of countries such as Iran, DPRK and Syria threaten to



 Despite      shortcomings, the Nuclear Non-Proliferation Treaty (NPT),
 nuclear safeguards and export controls remain the best means for "tn,nnin
_ hes read of nuclear we a ons.
                             -kls433<>:i(;;a)ln(jji iljl
Current Situation

Iran's pursuit of an ambitious nuclear program, which could soon give it a
 nuclear weapons break-out capability, poses the most serious current threat
 to the international non-proliferation regime. Australia firmly supports UN
,sanctions and has imposed additional autonomous sanctions against Iran.
 The DPRK's claimed withdrawal from the NPT in 2003, its nuclear weapons
 program and its prominent role in proliferation, including WMD, threaten
 international security. Syria's refusal to cooperate with the International
 Atomic Energy Agency (IAEA) undermines confidence in nuclear safeguards.




                                                                                  I
'The Indian Government continues to                        us to lift the ban on uranium
sales to~~~




 Australia and Russia are ready to exchange diplomatic notes to bring into
 force the nuclear cooperation agreement signed in 2007. The new nuclear
'cooperation agreement with the United States, signed in April, must be
brought into force by mid-January 2011 when the current agreement
expires. A new nuclear cooperation agreement with the European
Commission
pVT,;r,'" in 2012.
                                                                                               D-

                                              94
                              SECRET AUSTEO                           iReleased under the FOI Act 1982,
                                                                      r U \,ju",2011
                               SECRET AUSTEO


                                                                                            •

Australia and Japan have formed a cross-regional group on nuclear non-
proliferation and disarmament to take f"'~""rrl n1l1~"nrnp
Review Conference.          Chile                                                               iI

A first mijnisterial-·le
the margins of UNGA.

Most states in the Conference on Disarmament (CD)
ne,got:iatiorls for a Fissile Material Cut-off Treaty (FMCT)


Secretmy-General Ban on 24 September in New York.

The International Commission on Nuclear Non-Proliferation and
Disarmament (ICNND), established by Australia and Japan, was wound up                       •
on 31 July. Commissioners at their final meeting recommended the creation
of a Global Centre to monitor progress on nuclear non-proliferation and
disarmament. However,            the residual of ICNND's        allocation
    1.3 million in 2010-1
                                             a
The department does not have the capacity to fund the Centre.

Proposed Next Steps                                                                         •




  •   Exchange diplomatic notes with Russia to bring the new nuclear
      cooperation agreement into force.

  •   Support consideration by the Joint Standing Committee on Treaties of
      the new nuclear agreement with the United States, to enable entry
      into force by mid-Janumy 2011.

  •   Confirm Australia's participation in the proposed inaugural
      ministerial-level meeting of the Australia-Japan cross-regional group
      on nuclear non-proliferation and disarmament in New York on 23
      September.




                                                                 -DECLASSIFIED-
                                                       :Department of Foreign Affairs and
                                      95               Trade                        •
                              SECRET AUSTEO            Released under the FOI Act 1982,
                                                       August 2011
                                                         ~   ..   ~~-_.~~   _ _ _ _ _ _ _ _ _------1
                                      SECRET AUSTEO


    •               Counter-Proliferation and Arms Control
     Key Issues

     Conventional weapons issues are assuming greater prominence
     internationally, with the illicit transfer of arms having a de stabilising effect
     on weak and failing states, including in the Pacific. Negotiations on an
     Arms Trade Treaty are scheduled to conclude in mid-2012. Australia will
    .attend the first meeting of states parties to the Cluster Munitions
     Convention in Laos in November as an observer. Australia will host an air
     interdiction exercise and regional meeting of experts of the Proliferation
     Security Initiative in Cairns in September. Our role as permanent chair of
     the Australia Group gives us influence in WMD export control circles.

    Current Situation

.Reflecting the destabilising effect illicit transfers of arms can have on weak
 and failing states, including in the Pacific, Australia has pushed for an Arms
 Trade Treaty (ATT).                                         to conclude in 2012.


    Negotiations with the states      territories continue with a view to ratifying
    the Protocol against lllicit Manufacturing and Trafficking of Firearms.

•Although we were among the first countries to sign the Convention on
 Cluster Munitions (CCM) we will attend the first meeting of states parties in
 Laos in November as an observer because implementing legislation has yet
 to be tabled in parliament. We recommend that you - or a Parliamentary
 Secretary responsible for aid matters - attend the high-level segment. UN
 negotiations on a Protocol to the Convention on Certain Conventional
 Weapons (CCW) to cover cluster munitions are progressing at a slow pace.
 The Protocol negotiations involve some major producers and stockpilers of
.cluster munitions that remained outside the CCM negotiations - including,
 importantly, the United States, Brazil, Russia, Israel, India and Pakistan.

    Australia will host a Proliferation Security Initiative (PSI) air-interdiction
    exercise and Regional Operational Experts Group meeting in Cairns in
    September. There remains scope for improving take-up of the PSI by major
    regional countries as well as enhancing interoperability and information
    sharing with regional PSI partners (United States, Japan, Republic of Korea
    and Singapore) .
•
    Australia has made a significant contribution to global efforts towards a
    world free from landmines and other explosive remnants of war by providing
    more than A$175 million to mine action since 1997. In November 2009, the
    Australian Government announced a new five-year, A$lOO million Mine
    Action Strategy.

,                                                                        ·DECLASSIFIED·
                                                               Department of Foreign Affairs and
                                           96                  Trade
                                     SECRET AUSTEO             Released under the FOI Act 1982,
                                                               August 2011
                                                                                    •
                                SECRET AUSTEO


You have the power under the Migration Act to refuse visas on
proliferation risk grounds, which you can delegate, in routine cases, to the
First Assistant Secretary, International Security Division. The department
coordinates policy and practice relating to such visa applicants. Your views
are also sought periodically on sensitive defence export applications,              •
including possible application of the WMD Act. The Minister for Defence
exercises the decision-making power, but Defence seeks the department's
advice on possible foreign policy sensitivities.

A legislative review of our national export controls has identified gaps in
Australian export controls in the areas of intangible technology transfer and
brokering. The department will work with Defence, Customs and other
agencies on new legislation to address these gaps and improve Australia's           •
performance.

Proposed Next Steps

   •   Give priority to Australia's ratification of the Convention on Cluster
       Munitions (CCM) and the Protocol against Illicit Manufacturing and
       Trafficking of Firearms.

   •   Consider Australia's attendance at the first meeting of states parties to
       the CCM in Laos in November.

   •   Encourage universal adherence to the Mine Ban Convention.

   •   Continue to engage in the Arms Trade Treaty negotiations.

   •   Together with Defence, Customs and other agencies, address
       legislative gaps in Australian export controls.




                                                        i          -DECLASSIFIED-        - - -,
                                                        Ioepartment of Foreign Affairs and
                                      97                iTrade
                                SECRET AUSTEO           jReleaSed under the FOI Act 1982,
                                                        August 2011
                                                        ,
                                                        i
                                SECRET AUSTEO
•
                     Other National Security Issues
    Key Issues

 The government may wish to take stock of national security reforms put in
 place over its first term and pursue enhancements in relation to leadership
 and coordination on policy issues and defining more proactively the
'department's role in these arrangements. Challenges such as cyber-security,
 space, missile defence and enhancing Australian stabilisation and
 reconstruction contributions would benefit from substantially more input
 from the department and better inter-agency coordination. The portfolio's
 approach to the proposed 2011 intelligence review will require early
 ministerial attention.

Current Situation

 Under the current national security framework, the National Security
 Adviser (NSA) provides leadership and coordination of the national security
 community through an annual cycle of priority setting, development of a
 coordinated national security budget and performance evaluation. While
 2010-11 is only the first year of the framework, to date some elements of the
 framework have not worked very well and there is a need to revisit
 fundamentals including the broad definition of national security which has
"been adopted.

 The Department of the Prime Minister and Cabinet (PM&C) has
 acknowledged teething problems with the framework and is undertaking a
 detailed review, which we have provided input into. Changes to the
 framework are expected to be held over until the 2012-13 budget cycle. The
 NSA will seek confirmation of the national security framework from the
 government. It is envisaged that the second full national security cycle will
'get underway soon after the election. The NSA's expanding international
 role also requires clarification to ensure that the foreign minister's portfolio
 prerogatives are preserved.

 The department will be asked to make a significant contribution to the
 proposed 2011 review of Australian intelligence agencies, including by
 making a formal submission and providing staff. Early agreement on the
 scope and terms of reference of the review, and the role of the department
·and other agencies is required.




                                                                                    0-

                                      98
                                SECRET AUSTEO            jReilea:3ed under the FOI Act 1982,
                                                         V"'U,lU:Sl 2011
                                SECRET AUSTEO


                                             challenge for the department and
                                                  Our government, economy,
                                                            on space-based
                                                      gaining momentum • • •
                                                     The Department of
  Innovation, Industry, Science and Research (DIISR) has been given whole-of-
  government responsibility for developing a National Space Policy




  Improving stabilisation and reconstruction operations in fragile, post-
  conflict or failed states is a major Australian, ~d wider international
  foreign, security and development policy chaliffige~will provide early
  advice on how we might do better in this area, notably on~~
  department could take a greater leadership role.                   ~...... ;
                                                                      i~_§Hiii)i
  Proposed Next Steps

    •   Reach early agreement on the scope and terms of reference of the
        2011 review of Australian intelligence agencies.



:S?M~----
    •   Prepare a ministerial statement on our whole-of-government approach
        to stabilisation and reconstruction.




                                                                -DECLASSIFIED-
                                                      Department of Foreign Affairs and
                                      99              Trade
                               SECRET AUSTEO          Released under the FOI Act 1982.
                                                      August 2011
                                                SECRET AUSTEO


                                               United Nations

         Key Issues

        The UN agenda is broader and busier than ever and Australia is
        contributing             and           .   to it. We should focus on the



        Current Situation

        Australia's strong engagement with the UN since November 2007 has firmly
        registered with UN member states: on climate change; indigenous issues
        (the National Apology); disarmament; increased aid, including in Africa;
        other humanitarian issues (refugees, human rights, disaster relief]; and
                          a current member of the UN Peace building Commission).


        To strengthen further our multilateral credentials, we recommend sustained
        and strategic engagement in key areas: peacekeeping and peacebuilding;
        sustainable development including climate change;                  and
        disarmament; and                and humanitarian assistance.
~)~(~

        We should remain active, too, on other UN issues that affect our national
        interests and international profile, including human rights, international
        legal issues, sanctions and counter-terrorism. Continued advocacy of UN
        Security Council reform will                                              but



        Ministerial engagement remains essential to maintain and strengthen
        Australia's multilateral profile and achieve results. We recommend your
        active participation, and that of the Prime Minister, in the larger-than-usual
        number of high-level meetings at this year's UN General Assembly. These
        include summits on important development and sustainability issues
        (Millennium Development Goals, biodiversity, the
        island


               we are   llUMlllg ""u.'-',~'"
        the Commonwealth meetings in the margins of UNGA 65.

        We will revert to you for decisions on UNGA resolutions.

        Proposed Next Step

           •   Attend UNGA 65 Leaders' Week in New York (20-27 SepterfiJJ§'ti4-.ASSIFIED-
                                                           Department of Foreign Affairs and
                                          100              Trade
                                    SECRET AUSTEO          Released under the FOI Act 1982.
                                                           August 2011
                                            SECRET AUSTEO


                        United Nations Security Council Candidacy                               •

          Key Issues

          Ifwe are to win a Security Council seat in October 2012 for the 2013-14
          term, we need to prosecute an                      dynamic and well-
          resourced             We will
                                                               (including prime
          ministerial) attendance at multilateral meetings and an active program of
          visits by Special Envoys. Whole-of-government efforts to address bilateral
          issues remain essential.

          Current Situation




                   revert to ministers soon on              resources needed
          final stages of the campaign and our prospective term on the Council, most
          notably in New York.

          Proposed Next Steps




Is 33(a)(iii)1 •
              •    Consider a high-level travel plan for you and a   set-QLSpecial-En"Q~¥.S_-~ ~         -l
                                                                     i         -DECLASSIFIED-




                                                                     ~
                                                                      epartment of Foreign Affairs and    I
                                                101                   rade                                i
                                           SECRET AUSTEO             Released under the FOI Act 1982,
                                                                      ugust 2011
                                                                     I
                                  SECRET AUSTEO

                         Commonwealth and CHOGM
.Key Issues

    Australia will host the Co:mnll()!~~th
    "r1U'LT1\'1I in Perth in 2011.



                                    pnJm.oIl.ng democracy,    governance
 and the rule of law in Commonwealth member states and press for reform of
 Commonwealth institutions. Our membership of the Commonwealth
,Ministerial Action Group (CMAG) can be used to influence CMAG's
 enforcement of Commonwealth democratic values.

    Current Situation

    Australia's hosting of the Commonwealth Heads of G~'vE'rD.m,eny
    Meeting (CHOGM) meeting in Perth,                           nn,~tr"tf>




 A policy taskforce has been set up in our department to support the policy
 process in the lead-up to CHOGM and develop meeting objectives and
,outcomes, in close consultation with the Department of the Prime Minister
 and Cabinet (PM&C). A taskforce has also been established in PM&C to
 handle logistical arrangements. ,

  We can use our membership of CMAG to influence its reform agenda to
  improve the group's ability to respond swiftly to breaches of core
  Commonwealth values. The Hon Michael Kirby AC CMG has been
  appointed to the Eminent Persons Group, which is also examining options
, for 'nuts and bolts' reform of the Commonwealth's institutions.

    The next Commonwealth Foreign Ministers Meeting and the CMAG will be
    held in the margins of UNGA 65 in New York.

    Proposed Next Step

      •   Promote Australia's Commonwealth interests, including reform, by
,         attending Foreign Ministers' Meeting and Ministerial Action Group in
          New York.




                                                                                        :J'
                                                         I          -DECLASSIFIED-
                                                         !Department of Foreign Affairs and

•
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                                                         I
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                                                    People Smuggling Issues
                             Key Issues

                             Irregular maritime arrivals continue to increase notwithstanding extensive
                             disruption activity. The government has proposed development of a regional
                             protection framework to address irregular people movements. A regional
                             processing centre located in a          Convention
                                             of this "nnn~'
,s 33(a)(iii)\
,-   --.----."---~---j




                             Current Situation

                             Notwithstanding good cooperation                          and interdiction
                             activities with key transit countries                        maritime
                             arrivals in Australian waters have continued to grow strongly (some 4,420
                             arrivals in the calendar year to 30 August 2010 -     rata more than double
                             the number of arrivals in calendar



                             On 6 July, Prime Minister Gillard announced a proposal for the development
                             of a regional protection framework including a regional processing centre.

                         The objective of a sustainable regional protection framework is to
                         undermine the market for people smuggling and irregular movement within
                         the region by implementing more orderly protection mechanisms. The
                         framework would provide for a comprehensive, consistent regional approach
                         to the management of mixed migratory flows through cooperation among
                         countries of origin, transit and destination and be endorsed by the United
                         Nations High Commissioner for Refugees (UNHCR). Management of a centre
                         could be undertaken in cooperation with the International Organization for
                         Migration (10M).

                         Initial discussions have been held with regional nartller




                         resettlement
                         engagement by all of
                         framework proposal.

                     A regional processing centre located in a Refugee Convention party country
                     would be a key element of the
                         .                     .

                                                                                                                   and
                                                                103
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For particular caseloads of regional interest, processing in a centralised
location would provide a stronger basis for consistency of outcomes thereby
reducing the incentive for irregular movement and use of smugglers.
Offshore processing may also deter those asylum seekers seeking to reach
Australia.




The Bali Process on People Smuggling, Trafficking in Persons and Related
Transnational Crime, co-hosted by Australia and Indonesia, is the pre-            ······'33(1:>2




The East Timor Government has said it is willing to consider the idea of a
regional processing centre and that it would welcome further details on it.
President Horta has               for direct            with Australia ~" •._.....




UNHCR and 10M have long supported a more consistent regional approach
to protection issues and have       interest in the         Australian
approach.


An effective regional processing centre will
resettlement and repatriation pathways.
                                      Finalisation of return



                                                                     ~"'A'b'blr EO-
                                                        Department of Foreign Affairs and
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                                                                                 •
Proposed Next Steps

  •   Set out for the East Timor Government a concrete proposal for a
      regional processing centre including details of relevant legal
      requirements, possible management arrangements, identification of
      possible caseloads, funding support, refugee status determination
      processes and return/resettlement arrangements.
                                                                                 •
  •   Agree with the East Timor Government a work plan and negotiating
      agenda to advance the regional processing centre proposal .

  •
                     .
      Seek Indonesian agreement to dates for a Bali Process Ministerial
      Meeting to secure regiopal endorsement to work towards developing a
      regional protection framework.

  •   Undertake concerted advocacy at ministerial and officials' levels to
      build support for the concept of a regional protection framework.
      Ministerial meetings in the margins of the United Nations General
      Assembly provide opportunities for this.

  •   Finalise as quickly as possible with Afghanistan a returns
      arrangement for failed asylum seekers.

                                                                                 •




                                                                 -DECLASSIFIED,
                                                      Department of Foreign Affairs and
                                   105                Trade
                              SECRET AUSTEO           ,Released under the FOI Act 1982,
                                                      August 2011
    •

                                    SECRET AUSTEO

                                  Climate Change

,Key Issues



       government          to      a nego·tiatiIl.g "'''~';';n,;''
    Framework Convention on Climate Change (UNFCCC) conference.

    Current Situation
,                                         . .
 The UNFCCC Conference of the Parties (COP16) in Cancun (26 November
  to 10 December 2010) is expected to be a     .
  midVli'av nnint in the



 A strong package of COP16 decisions would help build the trust and
 confidence parties need to sign up to an ambitious and legally-binding
'agreement. Major developed and              countries             on the




 Australia's recently announced A$599 million 'fast-start' contribution has
 been well received by developing countries. Your attendance at the UN
 General Assembly in September would provide a good opportunity to
 announce the allocation of some of this funding to specific countries or
 projects. We will continue to support Mr McMullan's participation (in his
 personal capacity) in the UN Secretary-General's High-Level Advisory Group
'on Climate Change Financing, which will issue a final report in November.

    To date, the Department of Climate Change and Energy Efficiency (DCCEE)
    has led on the international climate change negotiations. The department
    has worked closely with DCCEE and AusAID on climate change issues.

    Proposed Next Steps
,



        •   Consider potential announcement opportunities for the allocation of
            Australia's fast-start funding, such as at UNGA6S .. _
                                                                     -DECLASSIFIED-
                                                          'Department of Foreign Affairs and
                                          106             :Trade
•                                  SECRET AUSTEO           Released under the FOI Act 1982,
                                                          August 2011
                               SECRET AUSTEO
                                                                                              •

                               Environment
Key Issues

A whole-of-government approach to the 2012 UN Conference on Sustainable
Development (Rio+20) is required. Negotiations on an international regime
on access and benefit-sharing (ABS) of genetic resources and associated
                                    ~~~cillar~efUllY • • • • • • • •

Current Situation

Rio+20, to be held in Rio de Janeiro in 2012, will be a high-level event
attracting considerable international attention. The Conference themes are:
a green economy in the context of sustainable development and poverty
eradication; and an institutional framework for sustainable development.
Preparatory committee meetings will take place in 2011 and 2012. The
department shares leadership on the Rio+20 preparations with the
Department of the Environment, Water, Heritage and the Arts. Sustainable
development is a high priority for African, Latin and small island developing
states. Given the broad nature of the conii!renc;.e.
sustained      -level inl:er·-ag~en."


Australia is Vice Chair of the UN Commission on Sustainable
Development (CSD) for its 19th Session (29 February-4 March 2011). CSD
is the major high-level forum for sustainable development issues at the UN.
Key issues are chemicals, mining, sustainable consumption and production.

Mr Rudd has been appointed in his personal capacity to the UN Secretary-
General's Panel on Global SustainabUity (GSP). The first meeting is on 19
September. The GSP's objective is to formulate a new vision and
mechanisms for sustainable growth and prosperity. The Panel will report in
December 2011.

Negotiations on an international ABS regime are due to be finalised by the
10th Conference of the Parties to the Convention on Biological Diversity
(CBD COPI0) in Nagoya, Japan (18-29 October). A high-level meeting on
biodiversity to take place on 22 September in the margins of the UN
General Assembly Leaders' Week will provide guidance to COPlO. DFAT is
the lead agency in the ABS negotiations.

Proposed Next Steps




                                                                   -DC::!...,~, '33: F I c-
                                                       .:.......
                                                       '....           '   ~
                                                                               '--
                                                                                        ,~




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•
                                  SECRET AUSTEO


                                     Whaling




'Current Situation

    Written pleadings in the ICJ legal proceedings against .. apall
         2011 with           defence due in March




    The ICJ case cannot be divorced from developments in the International
    Whaling Commission (IWCI negotiations. Negotiations are currently
    'paused' until June 2011, making our legal action the




                                                                           nrp,inn Atf,.ir"   and
                                         108
                                  SECRET AUSTEO           iRelea:sed under the F0 I Act 1982,
                                                          ,,",u~ju"l2011
•
                                                                                   •


                              SECRET AUSTEO




Proposed Next Steps



  •   Decide how we want other countries to support the ICJ case.

  •   Review options for taking action against Sea Shepherd.




                                                                  -DECLASSIFIED-
                                                      lDepartf]1ent of Foreign Affairs and
                                  109                 Trade
                             SECRET AUSTEO          . Released under the FOI Act'1982,
                                                      August 2011
                                 SECRET AUSTEO

•
                                Human Rights

    Key Issues

  There are op:pOJ1l,lgi1~
  agenda
  Australia's                   Review appearance
, at the High-Level Segment of the Human Rights Council.

 Current Situation

 The UN High Commissioner for Human Rights, Navanethem Pillay,
 postponed her guest-of-government visit to Australia due to the proximity of
 the proposed visit dates (24-30 August) to the federal election. A visit by
 Pillay presents an opportunity to pursue closer engagement with her Office
 (OHCHR), including through the establishment of a regular dialogue.
'Australia is a supporter of the OHCHR and has a particular interest in its
 work in the Asia-Pacific region. A Pillay visit would allow the Government to
 highlight domestic advances in human rights. We recommend making early
 contact with Pillay to identify new dates in the first half <?!_201 !:___ ~_.. _ .._.___   .. _..... .
 Australia's inaugural Universal Periodic Review (UPR) on 27 January
 2011 will generate considerable domestic and international interest in
 Australia's human rights record. We will work closely with the Attorney-
'.General's Department (as lead agency) to ensure a successful UPR hearing.

 A formal review of the Human Rights Council (HRC) will commence in
 Geneva on 25 October. The performance of the HRC has been mixed. The
 UPR process and the work of Special Procedures mandate-holders and the
 OHCHR are positive aspects of the Council's work. As the positions of key
 players become clearer in the lead-up to the review, we will look for
 opportunities for Australia to work with like-minded countries to defend the
'positive aspects of the Council's work.

 Maintaining Australia's active participation in the HRC and the UNGA
 Third Committee will underline Australia's ongoing commitment to the
 multilateral system. You may wish to consider attending the High-Level
 Segment of the main HRC session of the year in March 2011, which would
 reinforce this commitment and present an opportunity to update the
 international community on domestic developments, including the Human
'Rights Framework.

We recommend continuing to engage constructively on indigenous
issues internationally. The National Apology, the announcement of
 support for the Declaration on the Rights of Indigenous Peoples and 'Close
 the Gap' initiatives have all been very positively received. We should
 continue to highlight positive                            while  to defend the
 government's interests
'as focus shifts to lllJ'1l"1:1lJ1t:lJ.LClllU.U-,W--1d1.1:
                                                           Department of Foreign Affairs and
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                               SECRET AUSTEO


Congress of Australia's First Peoples may seek to develop a role for itself at
the international level. We should support this, and the ongoing work of the
Australian Human Rights Commission's Social Justice Commissioner.
                                                                                 •
Australia is well-positioned to take a leading role in advancing the
international corporate social responsibility agenda. We will advise you
of opportunities to work with business to take this agenda forward.

Proposed Next Steps

   •   Write to the UN High Commissioner for Human Rights confirming her
       invitation to visit Australia as a guest of government.

   •   Consider Australia's approach to the 15th regular session of the
       HUl!lan Rights Council (HRC) (15 September-l October 2010).

   •   Work with like-mindeds to defend our interests in the HRC review.

   •   Consider attending the High-Level Segment of the HRC in Geneva in
       March 2011.




                                                       I           -DECLASSIFIEO':-'-'-1
                                                       IDepartment of Foreign Affairs and
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                                                       \August 2011                 .     i
                                                       I                                    I
                                                       ~                                 _",J
                               SECRET AUSTEO

                       International Legal Issues
 Key Issues

 There are opportunities to further strengthen our support for international
 courts and tribunals and the effectiveness of our sanctions regime. The
 government will need to consider re-introducing into parliament the
'Autonomous Sanctions Bill 2010. We should also consider ratitying
 amendments to the International Criminal Court Statute on the crime of
 aggression and war crimes.

Current Situation

 In June 2010, the International Criminal Court (ICC) Review Conference
 adopted by consensus two substantive amendments to the Rome Statute of
-the ICC, on the crime of aggression and war crimes relating to the use of
 certain weapons. Early ratification of the amendments would reinforce
 Australia's role in promoting international peace and security and the rule of
 law.

 Australia's strong support for the ICC and the International Committee
 of the Red Cross (ICRC) would be underlined by our prompt ratification of
 the ICC Privileges and Immunities Agreement and the ICRC Headquarters
,Agreement.

 On 26 May 2010, the then Minister for Foreign Affairs tabled in Parliament
 the Autonomous Sanctions Bill 2010, which is intended to allow greater
 scope and flexibility in the imposition of autonomous sanctions measures in
 Australia, to ensure such sanctions can be equal in effect to those of like-
 minded states such as the United States and European Union, as well as to
 those imposed by the United Nations Security Council (UNSC). Parliament
,did not complete the second reading debate or Senate Inquiry into the Bill
 before the election was called and you will therefore need to reintroduce
 the Bill following the election. The second reading debate on the
 Autonomous Sanctions Bill demonstrated clear bipartisan support for the
 Bill.

 Breaches of controls on trade in sanctioned goods and services, or dealings
 with sanctions-designated individuals and entities, are serious criminal
.offences under DFAT-administered legislation implementing UNSC sanctions
 (the Charter of the United Nations Act 1945). The Autonomous Sanctions Bill
 provides for similar penalties. International best practice (including as
 exercised by other Australian permit-issuing agencies such as AQIS) is to
 balance criminal penalties with civil and administrative penalties for non-
 culpable or inadvertent breaches. We are developing proposals to adopt
 administrative penalties for both Australia's UN sanction enforcement laws
 and autonomous sanctions laws and will revert to you with these proposals
,in due course.
                                                                  -DECLASSIFIED-
                                                       Department of Foreign Affairs and
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                               SECRET AUSTEO           Released under the FOI Act 1982,
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 Australia will host the 35 th Antarctic Treaty Consultative Meeting in
 Hobart in 2012 (4-i5 June). The meeting will be attended by more than
 300 delegates from 48 treaty parties and is the primary international
 Antarctic policy forum. It will be an opportunity to highlight Australia's
 Antarctic credentials, reinforce Australia's Antarctic claim and focus debate
 on issues of importance to Australia. Participation by the Prime Minister
 and ministers will be desirable .                                                 •

. Proposed Next Steps




    •   Reintroduce the Autonomous Sanctions Bill to parliament.




                                                                                   •




                                                                                   ,




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    SECRET AUSTEO




•




•




•




•




•




•

                              -DECLASSIFIED-
                    Department of Foreign Affairs and
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                               SECRET AUSTEO

                             Policy Planning
                                                                                   «

 Key Issues

Policy planning papers identify emerging challenges for Australia and
practical policy options for addressing them. Papers under development
address, inter alia, globalised mining and our interests in the Persian Gulf
states.
                                                                                   «
Current Situation

. Re-established in February 2010, the Policy Planning Branch (PLB) has
  strengthened the Department's strategic policy capability and links with
  academic institutions, think tanks and private sector experts.

Policy papers produced by PLB identify emerging challenges for Australia's
international political, trade and strategic interests and practical policy
response options. Occasionally, the papers offer alternative policy options
when existing policy looks unlikely to achieve its aims. The papers go to
ministers for consideration only, although the papers may form the basis of
subsequent policy submissions from divisions that seek formal ministerial
approval.

You will be provided with a regular stream of strategic policy papers-
several within the next two months. We will periodically advise you of our
work program for                  and seek




PLB also has responsibility for preparing speeches for ministers,
parliamentary secretaries and the department's executive. This includes
lectures on Australian diplomacy (the Tange Lecture) and Australian trade
policy (the Westerman Lecture) delivered in alternate years. The Westerman
Lecture is due in the second half of 20 10.

Proposed Next Steps




   •   Seek your agreement to a date for the Westerman Lecture (we will
       then confirm the lecture's scope, themes and key messages).
                                                                                ----- - - ---   -- I
                                                                   -DECLASSIFIED-                  I
                                                       iDepartment of Foreign Affairs and
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                               SECRET AUSTEO           iRe leased under the FOI Act 1982,       Ji
                                                       rugust 2011
                                                       , - - - - - I_    _        ~
     •



                                      SECRET AUSTEO


                       2010 New Delhi Commonwealth Games
     '.Key Issues

         An estimated 5,500 Australians will be in New Delhi for the 2010
         Commonwealth Games from 3-14 October. If a terrorist attack were to take
         place, the Australian Government response would be an early test for a new
         government and could influence our future relationship with India.

         Current Situation

         There remains a high level of overall security risk for Australians in New
         Delhi during the 2010 Commonwealth Games. A terrorist attack could
         occur at any time, anywhere, in India with little or no warning.

      As host, India is responsible for security arrangements at the
       Commonwealth Games. The department leads government-wide security
      and contingency planning for Australians in New Delhi during the games
     '.and is working closely with Indian authorities on security arrangements.

      The decision to attend the Commonwealth Games is ultimately one for the
      Australian Commonwealth Games Association (ACGA) and individuals
      involved. The ACGA has at times been reluctant to accept assistance on
      security matters. It has, however, contracted an independent security
      adviser at the government's suggestion and recently agreed to the
      deployment of AFP liaison officers in the athletes' village. We are working to
     "strengthen this relationship so that the ACGA is aware of the risks and the
      security and consular support we can provide.




:s


         Proposed Next Step

           •   Provide an update to the National Security Committee of Cabinet on
               whole-of-government security preparations for the 2010
               Commonwealth Games in New Delhi, India (3-14 October) .


     •




                                                                       -DECLASSIFIED-
                                                             Department of Foreign Affairs and
                                           116                rade
     •
                                      SECRET AUSTEO          Released under the FOI Act 1982,
                                                             rUgUst 2011
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                             Consular Services

 Key Issues

 More Australians are travelling overseas each year and demand for consular
 services is increasing in parallel. The complexity of consular cases is
 increasing, as are expectations of the consular service we should provide.
 Providing effective, prompt consular services to individuals and in response
 to crises is resource-intensive. We need additional resources to ensure
 sustainable delivery of high-quality consular services.

Current Situation

Delivery of world-class consular services is the most public feature of the
department's work. More Australians ,are travelling and more Australians
are seeking our assistance overseas, whether individually or as a result of a
crisis or major incident. We now have about 1,600 active consular cases on
any given day, although this figure balloons when a major incident occurs
overseas.

The 2010 Commonwealth Games, to be held in New Delhi from 3-14
October, will be a major consular focus, with an estimated 5,500
Australians in the unpredictable environment of New Delhi during the
Games (see separate briefing).

Growing case complexity reflects increased    (;()JJ:!l1~tli1:
eXjJec;tatlons of the services to be


A four-year, A$74 million consular enhancement program announced in
2006-07 helped us improve and scale up our consular services. But the
continuing growth in expectations of and demand for our services is now
pushing strongly against our capacity limits. We will need further resources
to increase consular staff.1evels in ""UllJQ




                                                                          continue to
require                            as                            uc;,uu   penalty cases
in Indonesia, China, Vietnam and Afghanistan.

Informing the travelling public of threats to their safety and welfare is a
priority. We maintain travel advisories for 167 destinations. Wherever
possible, we translate credible threat information into travel advice. Interest
in travel advisories by the media and the    blic is very     - they are also a
bilateral irritant for some coun

                                                                     ·DECLASSIF.IED·
                                                           Department of Foreign Affairs and
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Demands on our crisis management systems continue to grow as
expectations of whole-of-government responses to international crises and
natural disasters increase. We are strengthening internal crisis
management systems and processes, including through better training of
dedicated staff for crisis response work. We will also enhance IT
interoperability with other agencies, including the new Parliament House
Briefing Room and the Crisis Coordination Centre in the Attorney-General's
Department.

Smartraveller, our public consular outreach program, is well-established
and has high public recognition. We will use market research to guide
phase III of the smartraveller campaign, which will be rolled out this
financial year.

Proposed Next Steps

   •   Develop a proposal for increased resources for consular staffing levels
       in Canberra and overseas to enable us to meet rising demand for
       consular services.

  •    Refine departmental crisis management systems to support our role
       leading whole-of-government crisis management.




                                                                 -DECLASSIFIED-
                                                       Oepartmenl of Foreign Affairs and
                                    118                Trade
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                                                       August 2011
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                               Passport Services

Key Issues

2009-10 was a record year for passports issued. Demand for passports has
doubled since 2002-03 and is expected to exceed two million per year by
2011-12. New funding provided iIi the 2010-11 budget will be used to                      •
develop a new passport system capable of handling the increased workload
and improving the security and integrity of the process. Greater emphasis
will be given to fraud prevention and detection and an operational
intelligence capability - designed to detect and combat fraud-related trends -
will be developed. Further work will also be undertaken to improve online
services and interview arrangements.

Current Situation

A passport is issued every four seconds of every working day. Almost 50
percent of the Australian population has a passport and demand is
continuing to trend upwards. A total of 1.77 million passports was issued in
2009-10 and the number of valid passports in cirCUlation rose to 10.4
million. A total of 1.9 million is expected to be issued in 2010-11. We
have maintained client service standards by employing more staff and
improving our processes. We are currently achieving an average turnaround
time of just over four days (excluding postal time).

                          Number of travel documents issued
                   2.2
               ~     2
               ~   1.8
               i 1.6
               ~ 1.4                           -      r-
               E 1.2                           -      r-
               ~
               o
                     1   I--                   -      r-
               ~ 0.8      -                    --,-   r-
               o
               t 0.6      -                    -      r-
               E 0.4      -                    -      r-
               i   0.2    -                    -      r-
                    o




                                  Financial Year


The continuing growth in demand will put increasing pressure on our
resources. We have already centralised some passport processing functions
to reduce workloads at our offices around Australia and are establishing a
production centre in Sydney to supplement the existing facility in Canberra.
We are also developing improved online application and interview
arrangements in consultation with our front-end service providers, Australia
Post and Centrelink.
                                                              c~         -DECLASSIFIE-D= ----- ---
                                                              Department of Foreign Affairs and
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                                SECRET AUSTEO


 The 2010-11 budget provided A$100.8 million for a new passport issuing
 system which will improve the security and efficiency of our rapidly
 expanding passport operations. Incidents of abuse of Australian passports,
 including in relation to the assassination of a Hamas leader in Dubai in
 February 2010, have underscored the necessity of continually improving
'passport security. Resources dedicated to fraud prevention and detection
 have been increased and the number of fraud cases detected has risen
 (from 525 last year to 644 in 2009-10). The Australian Passports Act 2005
 (the Act) provided tougher penalties for fraud and clearly codified the
 Minister's powers to cancel passports. In 2009-10, 118 passports were
 cancelled using these powers.

 Although passport holders still lose around 35,000 passports per annum,
·penalties in the Act have been effective in bringing down the percentage of
 total passports on issue which are reported lost or stolen. Almost 140,000
 (1.3 per cent of all valid passports) have been recorded lost or stolen. Within
 the coming term, we will develop a new version of the ePassport, which
 will keep us at the forefront of passport security and technology. We issued
 our first biometrically-enabled passport (ePassport) in 2005 and remain the
 only country undertaking comprehensive electronic facial recognition
 matching.

The passport business is managed under a separate funding agreement with
the Department of Finance and Deregulation. This agreement is based on
the real cost of providing the service, with the level of funding determined by
the number of passports issued. In 2009-10, providing passport services
cost A$192 million. Passport fees returned to Consolidated Revenue
amounted to A$324 million. (See separate brief on 'Savings' for discussion of
proposed automatic increase in passport fees in line with CPI)
•
DFAT has almost 500 people (including contractors) located in nine passport
offices around Australia. Passport applications can also be lodged at 1,700
Australia Post outlets across the country. Passport booklets are produced
by Note Printing Australia and call centre services are provided by
Centrelink. Passport services are also provided by Australia's missions
overseas.

,Proposed Next Steps

    •   Develop and implement a new passport issuing system, including an
        operational intelligence capability.

    •   Develop new and improved online application and interview
        arrangements with Australia Post and Centrelink.

•   •   Design a new version of the ePassport with Note Printing Australia.


                                                                   -DECLASSIFIED-
                                                        Department of Foreign Affairs and
                                     120                  rade
                                SECRET AUSTEO           ,Released under the FOI Act 1982,
                                                        rUgUst 2011
•
                               SECRET AUSTEO


                            Public Diplomacy                                      •

Key Issues



image abroad is generally positive but we need to continue to address some
outdated perceptions. We propose to use a wider range of techniques and
technologies to achieve positive public diplomacy outcomes. Deciding the
future of the Australia Network contract is a high priority.

Current Situation




                                                                                  •
The department's five-year, A$94.2 million contract with the ABC to operate
the Australia Network television service in the Asia-Pacific region expires in
August 2011. A decision on the future of the contract was due in August
2010 but we have agreed with the ABC that a decision will be made by
8 November 2010. We conducted a mid-term performance review in June
2010 and also requested industry submissions on the future of the contract.
The outcomes of these will assist decision-making. Assisting Australia
Network to secure distribution rights in China will be a priority.

We will work closely with Football Federation Australia to support its
promotional and lobbying efforts to secure the 2022 World Cup.

Australia and South Africa have been short-listed as acceptable sites for the
Square Kilometre Array (SKA) radio telescope. A decision on site selection
is expected in early 2012. DFAT, DIISR, CSIRO and the Western Australian
and New Zealand governments are implementing an international advocacy
strategy to promote Australia as the superior site. Our posts are supporting
this effort and will be stepping up lobbying in the coming year.

Support for major cultural programs in China (2010) and Korea (2011)
through the Australia International Cultural Council (AlCC) are priorities.
The AICC, which you co-chair with the Minister for the Arts, is the peak
consultative group for the promotion of Australian cuLture-over-seas.--We-and-.------.-__
some Council members have reservations about the efrectivenesiP~SSIFIED-
                    .                                  pepartment of Foreign Affairs and
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                                    SECRET AUSTEO


    high-level Council framework overseeing these important programs. Early
    in this term, we will set out for you different options on the future direction
    of the AICC.
•
 At a cost of A$83 million, the Australian pavilion at the Shanghai World
 Expo is Australia's biggest ever investment in an Expo. With a daily average
 of 48,000 visitors, the pavilion is on target to receive more than seven
 million visitors by the time the Expo ends on 31 October 2010. We will
 explore opportunities to build on this success in our public diplomacy work
 in China. Australia has been invited to participate in the three-month Expo
 in Yeosu, Republic of Korea in 2012 (see separate brief).
•
    The department manages an active Aboriginal and Torres Strait Islander
    program. Reconciliation Week and NAIDOC Week activities are an
    important part of this program.

 We are examining ways of using new technologies such as social media
 and Sharepoint to ensure departmental and ministerial website content is
 current and relevant. We will explore opportunities presented by Twitter
"and Facebook to enhance our consular and public diplomacy tools.

    Proposed Next Steps

       •

•      •   Decide on the future of the Australia Network contract.

       •   Seek your views on an intensified international SKA strategy.

       •   Optimise public diplomacy opportunities presented by appropriate
           application of new technology.

       •   Bring forward proposals on future directions for the AICC.




•




                                                            i            -DECLASSIFIED-
                                                            IDepartment of Foreign Affairs and
                                         122                [rrade
•                                   SECRET AUSTEO           iReleased under the FOI Act 1982,
                                                            I\l\Ugust 2011
                               SECRET AUSTEO


                            Australia Awards

Key Issues

The Australia Awards initiative was established to ensure that the
international scholarship programs administered by the Department of
Education, Employment and Workplace Relations (DEEWR) and Au sAID are
delivered coherently and maximise benefits to Australia's long term interests.
The mandate and governance structures, however, require strengthening.

Current Situation

Since the announcement of the initiative in November 2009, implementation
has centred on forming the proposed Australia Awards Board comprising
eminent Australians. The proposed role of the board is to provide strategic-
level advice to the ministers for foreign affairs and education on how best to
achieve the initiative's goals (including better branding and alumni
engagement). Progress to date has been mixed:




•                    have
    strategic and policy objectives of the Australia Awards;
•   Re-branding of the scholarship programs is in progress under the
    Australia Unlimited initiative, launched in late May 2010.

The department considers that in order to advance the policy goals more
directly and expeditiously, there would be benefits in strengthening
institutional arrangements.

Proposed Next Step

    • The department (with AusAID) to provide a submission to the Minister
      for Foreign Affairs on the future of the Australia Awards focused on
      better governance options and a clear mandate that can realise the
      goals of the Australia Awards.




                                                                -DECLASSIFIED-
                                                      Department of Foreign Affairs and
                                   123                Trade
                              SECRET AUSTEO           Released under the FOI Act 1982.
                                                      August 2011
SECRET AUSTEO




                          -DECLASSIFIED-
                Department of Foreign Affairs and
     124        Trade
SECRET AUSTEO   Released under the FOI Act 1982.
                August 2011
                                       SECRET AUSTEO                                                  •

                                            Staffing
Key Issues

Although the range and intensity of the department's activities have risen
over recent years in response to government priorities, we have 5.4 per cent                           •
fewer staff than in 1996. The increased demands on the department's
human resources have been dealt with through flexible deployment of staff
and strategic use of Task Forces. We are devoting more resources to
training and career development, with an emphasis on increasing the
language proficiency of staff, especially in Asian languages.

Current Situation

The department has 3,971 staff, of whom 2,385 are Australian employees
(based in Australia and at overseas posts) and 1,586 are locally engaged
staff employed exclusively at our overseas posts (down 5.4 and 1.3 per cent
respectively on 1996 figures). Of the Australian staff, 1,822 are in Australia
and 563 are overseas (the latter is 17.2 per cent lower than in 1996). Since
1996, total APS employment has grown by 12.1 per cent compared to the
department's decline of 5.4 per cent.

              Disposition of Australian staff at 30 June 2010

             Canberra                                                  1009
             Overseas                                                  563
                                                      At post            547
                                            Language Trahring             16
             State and Territory Offices                                 40
             Australian Passports Office                                391
                                                     Canberra            136
                                             States/Territories          255
             Training *                                                  141
                                                    Canberra             93
                                                      Cadets              7
                                            Language Trahring            41
             Unattached     **                                          241
             Grand Total                                               2385
              ,. Includes staff on Administrative Development Program,
              Consular and Finance Management Trainees, Indigenous
              Cadets and language training programs in Australia.
              H Includes staff on long senJiee leave, maternity leave, leave

              without pay, secondment, in transit, invalidity and worker's
              compensation


The department has 1,238 line staff in Canberra. These are divided into
the following areas: policy (620), corporate (432), consular (50) and
passports (136). The number of staff in Canberra working on consular
services for the public has increased by 117.4 per cent and on passport
services by 183.3 per cent since 1996. Commensuratfly, the·numrer~SIFIED-                                  ----1
                                                                           iDepartment of Foreign Affairs and
                                                                           I
                                           125                             ITrade
                                      SECRET AUSTEO                        IReleased under the FOI Act 19(32,
                                                                           ~ugust 2011
                                                                           i
                                                                           I
                                  SECRET AUSTEO
•

    staff working on policy and corporate issues is fewer than in 1996. The
    department has 220 SES staff.

    Locally engaged staff now comprise the majority of DFAT staff working at
 DFAT-managed overseas posts. The proportion oflocally engaged staff at
 posts has increased from 69.8 per cent in 1990 to its current level of 73.8
-per cent. The scope for further localisation of positions is constrained
 because the remaining positions at post can only be performed by security-
 cleared Australia-based staff.

 The department has a good record on recruitment and retention of staff.
 Each year about 2,400 people apply to join the department as graduate
 trainees. In 2010 we employed 39 policy and eight corporate staff in this
 category. Women make up 53 per cent of the department (compared to 43
_per cent in 1996). Women make up 26 per cent of the SES (more than
 double the number in 1996). We employ 40 Aboriginal and Torres Strait
 Islander employees. We currently employ 28 employees with disabilities.
 Our attrition rate, at around five per cent annually, is one ofthe lowest in
 the APS.

 In 2009-10, we spent A$5.9 million on general training and another A$3.99
 million on language training. We are committed to increasing the
.effectiveness of our training and ensuring that all staff avail themselves of
 opportunities to enhance their career and personal development. Languages
 are a high priority and our proficiency in languages, especially Asian
 languages, is growing.

                             Staff Language Proficiency of
                                     S3R3 or above
                                            1994     2010
                             Arabic            11       23
                             French           149      119
                             Indonesian        36       72
                             Japanese          24       41
                             Korean             5       11
                             Malay              7       12
                             Mandarin          31       73
                             Spanish           47       60
•                            Thai               9       18
                             Vietnamese         5       13

    In the medium term, major challenges will include recruiting and retaining
    quality staff in a competitive labour market. We will also need to find ways
    to increase the productivity of staff to meet growing demands. But limited
    gains are achievable after more than a decade of having to offset the eroding
    effects of the 1.25 per cent cumulative efficiency dividend.
"         .
                                                             '        -DECLASSIFIED- ~
                                                             Department of Foreign Affairs and
                                                             I

                                                             ~
                                       126                       rade
                                  SECRET AUSTEO              Released under the FOI Act 1982,
                                                              ugust 2011
                                                SECRET AUSTEO


                                                       Budget                                                       "

Key Issues

The department's discretionary budget faces increasing pressure with
growing government and public demands. Having exhausted opportunities
for reprioritisation and efficiency gains, meeting the challenge of a more
complex diplomatic world will require additional funding, with a particular
focus on growing the overseas network.                                                                              •
Current Situation

The departmental appropriation (i.e. discretionary funds) is A$890 million
for 2010-11 - staff and property costs amount to 63 per cent.


                              2009-10 Actual Operating Expenditure
                                                  Property


                                                    ""
                                                                                           Depreciation,
                                                                                           Amortisation
                                                                                        & other Asset Costs
                                                                                                  ."
                                                                                          Information
                                                                                          Technology

      Staff &
Staff Related Costs
                                                                                               '"
       47%                                                                               Travel

                                                                                          '"
                                                                             Security
                                                Professional Services   4%

                                                        '"                     '"
           * Note: Passport expenditure includes only the direct production costs and does not include staff,
           property, depreciation, IT, travel or security costs associated with passport production.



Since 2000-01, appropriations for all APS agencies have increased by 27 per
cent in real terms. DFAT's has increased by nine per cent. New funding
received by the department has generally been tied to specific activities. A
significant portion of the new funding has been provided to upgrade security
at overseas missions in response to a deteriorating overseas security
environment. Other specific activities funded include Australian support for
RAMSI (Solomon Islands), combating people-smuggling and supporting our
representation in Afghanistan.

In recognition of the funding pressures faced by the department arising from
the significant increase in overall demand by the government and public for
DFAT's range of services, we have twice been provided with supplementation
to our base budget (in 2007-08 and 2009-10). However, much ofth~is~=
funding has subsequently been reversed through savipgs requir~SSIF(EDc                                                  -'--l
                                                                                        !Department of Foreign Affairs and
                                                     127                                Irrade                               I
                                                SECRET AUSTEO                           ,.Released under the FOI Act 1982,   I
                                                                                        f"'ugust 2011                    -.--J
                                          SECRET AUSTEO


                               Total DFAT Base Appropriations in Real Terms
                                       (expressed in 2000-01 prices)




                                                                 --
                  700

                                                                                               ....
•


           E
                  650
                  600
                  550
                  500
                         ...                            ......            "'-
                                                                                V
                                                                                    /
                                                                                        ;...



           <Il-
                  450
                  400
                  350
                  300
•                       00-01 01-02 02-03 03..Q4 04--05 05-06    06-07 07-08 08-09 09-10       10-11
                                                Financial Year



 For more than a decade, we have made significant savings from improved
 work practices, from information and communications technology and from
 outsourcing. We believe there is little scope for significant additional
 savings in these areas. Meeting savings requirements such as the 1.25 per
,cent efficiency dividend is, therefore, challenging. Moreover, because the
 department has already harvested potential productivity savings, further
 significant cuts or offsets would require post closures, ceasing functions in
 Canberra or a combination of these measures. For every A$l million
 savings that the department needs to identitY, we would need to cut
 approximately 10 jobs in Canberra or three jobs overseas.

 The department is responsible for A$295 million in administered
,appropriations (i.e. non discretionary funds, for activities we deliver on
 behalf of the government). Key administered funded activities include
 Australia's membership contributions to the UN and payments under the
 Australia Network television contract. The department is also responsible
 for the management of the Commonwealth-owned overseas property estate,
 which is funded through a special account from rental earnings (not
 through appropriations).

,The department has a strong reputation for robust financial management.
 The department achieved an unqualified financial statement audit for 2008-
 09, thus continuing a strong record over the past ten years.




•




                                                                                          -DECLASSIFIED-
                                                                                Department of Foreign Affairs and
                                               128                               rade
•                                         SECRET AUSTEO                         Released under the FOI Act 1982,
                                                                                 ugust 2011
                                                                                  •

                                SECRET AUSTEO

                                   Savings
Key Issues
                                                                                  •
The government has indicated it will review the diplomatic representation
and spending of the Foreign Affairs and Trade portfolio with a view to
achieving A$45.5 million in savings from across the portfolio over the
forward estimates. It also intends to achieve savings across all government
agencies by retaining the efficiency dividend at 1.25 per cent. On the
revenue side, the government has announced it will raise additional revenue
through an increase to passport application fees and a freeing up of the
Business-As-Usual Reinvestment Fund.                                              •
Current Situation

The proposed diplomatic resources review savings measure is to deliver a
total of A$45.5 million across the portfolio over the forward estimates (A$15
million in each of 2011-12 and 2012-13 and A$15.5 million in 2013-14). On
a pro rata basis, the department's share would be A$10.6 million in 2011-12,
A$10.5 million in 2012-13 and A$1O.8 million in 2013-14 (total of A$32
million over the forward estimates). Au sAID and AClAR are assumed to be
excluded as the entirety of their budgets are Overseas Development
Assistance eligible, meaning that any savings harvested would need to be
returned to the aDA budget to meet the target GNP ratio.

The 1.25 per cent efficiency dividend had been scheduled to scale back to
one per cent from 2011-12 onwards. At one per cent, a total of A$99 million
of savings would have be harvested from the department's budget over four
years from 2010-11. Continuation of the efficiency dividend at the current
1.25 per cent rate will have a cumulative impact on the department's budget
of an further A$13.1 million reduction over the same period.

The government has indicated it will increase passport fees automatically
each year in line with the CPr. The first increase, effective 1 January 2011,
will raise fees by an amount equivalent to the movement in consumer prices
over the period since passport fees were last increased in 2008. These
changes will deliver increased funds of A$193 million over four years. The
increase will not affect the department's budget, as it does not retain
passport fees. However, it does remove the scope to put forward passport
fee increases as an offset for future new policy proposals.

The incoming government has also announced that it will remove funding
currently unallocated in the Business-As-Usual Reinvestment Fund (BRF).
The department received A$40 million of capital funding over three years
from the BRF toward funding the 2010-11 budget measure Improved
Passport Integrity and Strengthened Issuance Systems, which is to upgrade
the passport production system. The department understands that the
funding will not be affected by this savings measure as it has alre.ady be~ __ .. _______ _
allocated from the BRF contingency reserve.           i          -DECLASSIFIED-
                                                      !Department of Foreign Affairs and

                                                        ~
                                      129                   rade
                               SECRET AUSTEO            Released under the FOI Act 1982,
                                                        August 2011                ,
                                                        I
                                                        ,
                                 SECRET AUSTEO

•
                            New Policy Proposals
    Key Issues

    The department is developing for your consideration a limited number of
    possible New Policy Proposals (NPPs) for the 2011-12 Budget. Three are
    critical to enable us to




    Current Situation


                                 following the termination of their funding in




      •   People smuggling - to continue the work of the Ambassador for
          People Smuggling Issues and increased focus on this issue both in
•         Canberra and overseas; and




 There are other areas where we have new demands:




      •   Response to the changed global environment - to engage effectively
          in a more complex and demanding trade and investment environment
          and to maximise the opportunities from G20 membership, we need to
          increase our representation at a number of critical posts as well as
          increase staff in Canberra; and

•

                                      130
                                                                   -DECLASSIFIED-
                                                         Department of Foreign Affairs and
                                                          rade
                                                                                             l
                                 SECRET AUSTEO           Released under the FOI Act 1982,
                                                          ugust 2011
                            SECRET AUSTEO


  •


Proposed Next Step

  • The department will bring forward a separate submission shortly,
    seeking your views on which NPPs you wish to bring forward in the
    first stage of the 2011-12 Budget process.




                                                            -DECLASSIFIED-
                                                  Department of Foreign Affairs and
                               131                Trade
                          SECRET AUSTEO           Released under the FOI Act 1982,
                                                  August 2011
                                    SECRET AUSTEO


                                       Security

     Key Issues

     The uncertain international security environment is heightening the cost for
     Australia of doing business overseas, particularly in high-threat locations-
     such as Baghdad and Kabul. The department's security budget for 2010-11
     is some A$91 million, covering the security and protection of personnel and
     premises overseas.

     Current Situation

     The security fit-out and rebuild of the chancery in Kabul should be ready by
     December 2010. We expect to have accommodation in place by September
     to meet an expanded official presence scheduled for later this year.

     We are in the process of assuming primary responsibility for Baghdad
     embassy security from Defence. This will involve utilising private security
     contractors rather than ADF personnel. This transition was agreed to in
     December 2009 by the Ministers for Foreign Affairs and Defence, and will
     reach its final transitional phase in May 2011. For the present, ADF
                               to provide Close Personal Protection (CPP)_
:s




     Cyber security is a growing concern. The department is strengthening
     counter-surveillance measures against technical threats to its classified
     communication systems.

     Proposed Next Step

        •   Obtain future funding for Baghdad and Kabul security as current
            funding commitments for their security arrangements will expire in
            2011-12.




                                                                     -DECLASSIFIED-
                                                           Department of Foreign Affairs and
                                        132                Trade
                                   SECRET AUSTEO           Released under the FOI Act 1982,
                                                           August 2011
                                                                                     •



                                SECRET AUSTEO


                                   Property
                                                                                     •
Key Issues

The department is responsible, through the Overseas Property Office (OPO),
for management on a whole-of-government basis of the overseas property
estate. OPO's operation within the department has allowed seamless
integration: of security features into long-term planning in the overseas
estate. This is critical in protecting overseas missions, staff and visitors. It
will be important that recommendations flowing from a current joint
DFAT /Finance Review of OPO do not threaten DFAT's continuing                        •
responsibility for the overseas property function.

Current Situation

The most significant current projects are construction of new secure
chanceries and other facilities in Baghdad, Jakarta and Bangkok. Chancery
relocations in Seoul, Stockholm, Nicosia and The Holy See have been
completed. In the coming term, we are planning a number of reconstruction
and relocation works for security and other operational reasons, including
delivery of property facilities in new posts in Addis Ababa, Mumbai, Chennai
and Lima.

An approved forward program of refurbishment of owned residential
property is being implemented to ensure maintenance of property value, to
upgrade ageing facilities and to ensure compliance with contemporary safety
requirements and technology.




OPO operates a special account to manage the overseas owned estate,
which is separate from the department's budget appropriations. Revenue
into the account is derived from commercially-based rents paid by agencies
that occupy government-owned property overseas. The department pays an
annual dividend to the government from the operation of the special account.
Long-term funding arrangements for the overseas owned property estate are
the subject of ajoint o FAT /Finance review which is currently underway.
We want the review to reaffirm the department's responsibility for overseas
property management and the role of the special account in that process.

OPO took over management of the DFAT domestic property estate in May
2010.

The lease on the RG Casey Building, DFAT's Canberra headquarters,
expires in 2012 and we are discussing with the Motor Traders Association of     ______ _
Australia (the building owners) possible new lease arrll1lgementsPiNl.~SSIFIED-
                                                         !Department of Foreign Affairs and
                                                                                              l
                                     133                 Irrade                       ,
                                SECRET AUSTEO            IReleased under the FOI Act 1982,    I
                                                         V'\ugust 2011
                                                         !                               ~
                                 SECRET AUSTEO

 current leases on the DFAT state offices in Sydney and Brisbane are due to
,end in 2011 and 2012 respectively and we are considering future office
 accommodation options.

    Proposed Next Steps

      •   Continue the program of overseas property works to meet the
          government's security and operational objectives.

•     •   Ensure that recommendations from the joint DFATjFinance review of
          the Overseas Property Office do not threaten DFAT's continuing
          responsibility for the overseas property function.

      •   Negotiate new long term lease arrangements for the RG Casey building.




•




•




                                                        L          -DECLASSIFIED-
,                                                       IDepartment of Foreign Affairs and
                                       134                rade
                                 SECRET AUSTEO          Released under the FOI Act 1982,
                                                          ugust 2011
                                                                                                        •
                                  SECRET AUSTEO


                    Litigation and Freedom of Information
Key Issues

The department is involved in a range of high-profile litigation, including
cases brought by Mamdouh Habib against the Commonwealth and several
brought by Falun Gong practitioners against senior Chinese officials. The
department needs to manage increased demands flowing from changes to
Freedom of Information (FOI) laws and ensure proposed changes to Privacy
laws take account of our overseas operational needs.

Current Situation
                                                                                                        •
The department is involved in a range of matters before Australian and
foreign courts and tribunals. Most cases overseas are employment-related,
involving locally engaged staff. High profile cases in Australia include
appeals against the cancellation of, or refusal to issue, Australian passports
on national security (e.g. terrorism) or law enforcement (e.g. child sex
tourism) grounds.

Former Guantanamo Bay inmate Mamdouh Habib has two high-profile and
long-running cases. The first is an Administrative Appeals Tribunal (AAT)
review of former Foreign Minister Downer's refusal to issue Habib a passport.
On 25 August Mr Smith as Minister for Foreign Affairs refused a further
passport application from Habib on similar national security grounds.
Habib is likely to seek a review of this further decision and both reviews are
likely to be brought together into a single AAT case. The second case is a
Federal Court claim against the Commonwealth seeking compensation for
illegal complicity with the governments of Pakistan, Egypt and United States
in his alleged wrongful arrest, rendition and torture. The compensation case
will be heard in June 201l.

The department is involved in NSW Supreme Court cases brought by Falun
Gong practitioners against senior
l1pr"f'('l1   tion and   imprisonment.
                        the Australian Government has had to intervene to
argue China's immunity and to prevent default judgments.

Decisions on the release of documents under the FOI Act are made by
senior departmental officers. Ministers are informed in advance of the
release of sensitive documents but do not make the decisions. We received
110 requests in the 2009-10 financial year, a 30 per cent increase from last
year. We expect the trend to continue.

Current sensitive FOI applications include requests relating to: the
detention of Hicks and Habib; the deaths of Australians Scott and Dean at
the hands of the Khmer Rouge; handling of the asylum seekers on the
Oceanic Viking; and issues involving Sea Shepherd's fjJlti-whaling activitie.s....... _. __ _


53                                     135
                                                              ..
                                                             I~
                                                             ,,~~~,
                                                                   ",...



                                                            jTrade .
                                                                                - Eel""·:>::; FIED-
                                                                           ~,..-'   • .(.r--,-,...,-"
                                                                                   Affairs and
                                                                                    .,...:..


                                                            ;IReleased under the FOI Act 1982,
                                                                                                            l
                                  SECRET AUSTEO
                                                            August 2011
                                                             I                                              I
                                     SECRET AUSTEO
•




                   ~~J]lge,s   to FOI laws included the abolition of Conclusive


                   pUDll.catIOn on our         of aU documents released to FOI
    applicants, as well as a range of operational documents.

    Amendments to the Privacy Act introduced to the previous parliament
 could have unhelpfully extended privacy obligations to our overseas
 activities, with significant unintended consequences for our core diplomatic
 reporting and our consuiar work. To address this, we were able to have a
 diplomatic and consular exception included in revised drafts but will need to
.ensure its retention, should the legislative reforms be taken up in the new
 parliament. We will also continue working with the Privacy Commissioner
 towards a revised Public Interest Determination that would authorise
 consular staff to work around current privacy law constraints, such as those
 preventing us informing families of missing persons in some cases.

    Proposed Next Steps

       •   Provide an early update on major or sensitive litigation and FOI
           matters.

       •   Retain the diplomatic and consular exception in future privacy law
           amendments .




•




•
                                                             I           -DECLASSIFIED-



                                                             ~
                                                                 epartmentof Foreign Affairs and
                                          136                  rade
                                     SECRET AUSTEO           Released under the FOI Act 1982,
                                                             rUgUst 2011
                                  SECRET AUSTEO
                                                                                                                     •

                            Australia's Trade Profile

              Australia's trade in goods and services by region, 2009


Australia's top 10 export                                        Exports
     markets (A$m)                                                                                                   •
China              47,881
Japan              40,401
India              18,173
Republic of
Korea              17,469
United
States             15,238
United
Kingdom            13,250
New
Zealand            11,138
Singapore           8,293
Taiwan              7,085
                                      Other ASEAN,                    Malaysia, 2%
Indonesia           5,339
Total                                                             Asia: 70.1%
exports           249,888          Based onABStrade data on DFAT STARS database, ABScata!ogue5368.0.SS.009 and
                                                              unpublishedABSdata




Australia's top 10 import                                        Imports
     sources (A$m)                              Africa (incl Egypt)
                                                       1%
China              37,253
United
States             34,896
Japan              18,820
Singapore          14,666
Thailand           13,910
Germany            11,719
United
Kingdom            11,095
New
Zealand             9,460
Malaysia            8,549
Republic of
Korea               6,947
                                                                      Asia: 50.6%
Total                                  Based onABS trade data on OFATSTARS database,ABScatalogue 5368.0.55.009 and
imports           256,949                                             unpublishedABSdata




                                                                                 :--~~      -DECLASSIFIED----l
                                                                                 iDepartment of Foreign Affairs and
                                      137                                        jTrade
                                 SECRET AUSTEO                                    Released under the FOI Act 1982,
                                                                                 I
                                                                                 August 2011
                                                                                 I
 •
                                          SECRET AUSTEO


                     Australia's imports and exports by sector, 2009


                                               Australia's exports by broad sector, 2009

 •


Exports          I ASm
Resources            102,556
 Minerals            45,983
 Fuels               56,573
Services             52,998
Manufactures         38,815
Rural)               27,110
Gold                 15,603
Other goods I'       12,806
Total            1249,888


                               (a) Other goods includes Other non-rural goods, Goods procured in port, Net exports of goods
                               under merchanting and confidential items. Based on ASS catalogue 5302.0 (March2010).
 •




                                                   Au,tralia', import, by broad ,ectnr,2009



 •                                                     SeNices
                                                                                            Consumption

Imports          I A$m
                                                          21"                                  23"
                                   "Gotd •
Intermediate &                      4% .••.
other goods          85,725
Consumption          60,379
Services             53,777
Capital              48,074
 •
Gold                 8,994
Total            1   256,949



                                                       Based onABScatabgue 53:12.0 (March 2010)




 •


                                                                                     i          -DECLASSIFIED-
                                                                                     lDepartment of Foreign Affairs and
                                               138                                   I'rrade
                                          SECRET AUSTEO                               Released under the FOI Act 1982,
                                                                                     I
                                                                                     rUgUst 2011
 •
                                                                                                                                                                        SECRET AUSTEO
                •
                   ~.~~,.
                      ,.
                                '\USl1.. lliull    GO\\'I"UflH.'l1t                                                                                                                 _",tary
                   ,-
                    .r ",                                                                                                                                                       Dennis Richardson
                                                                                                                                                                                                                                                                                                                                  Executive Structure
                                1>...·jlill·lll1 ... nt nfl,'tlrd:':lIl\frajl'~ 1\1111 Tntd('
                                                                                                                                                                                                                                                                                                                                   September 2010
                                           T                                                                             T                                                                           T                                                                       T                                                                          l
                                                                                                                                                                                       Depuly Secretary                                                        Deputy Secretary
                              Deputy Steretery                                                           Deputy Secretary                                                                                                                                                                                                                    Deputy Secretary
                                                                                                                                                                                        Ric Wells                                                                       Gillian Bird
                               Paul Grig.oR                                                                 Bruce Go&pllr                                                                                                                                                                                                                      Heath.rSmith
                                                                                                                                                                                     APEC Ambassador                                                         ASEAN Ambassador


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                                                                                                                                                                                                  139                                                                                                      .jTrade                •
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                                                                                                                                                                           SECRET AUSTEO
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•             140
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                              !'"'UidU:;1 2011
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                                                                                                                                                                                                                                                                             -DECLASSIFIED·
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                                                                                                                                                                                         141
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