A strong future for Australias exports

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					A strong future for Australia’s
exports
The Hon Simon Crean MP
Shadow Minister for Trade and Regional Development

ELECTION 2007


Overview
Strong and sustained export growth is essential for Australia’s long term economic prosperity
and for providing well paid, rewarding jobs. Labor believes that the sustained export growth
we need will occur only if Australia’s trade promotion policies, programs and structures are
renewed and reinvigorated.
Export policies and programs that position us to take maximum advantage of the ongoing
resources boom and to grow exports from other sectors of the economy are required.
We need policies that meet the needs and challenges that exporters face today and that are
suited to the needs not only of our traditionally strong exporting sectors but also to small
business and the growing opportunities for the services and financial services sectors.
The current resources boom, the most significant in our history, has masked Australia’s poor
export performance. While the prices of resource commodities have skyrocketed, export
growth has stagnated.
Despite the strong global demand, particularly from China and India, Australia continues to
register a large trade deficit – a deficit that has persisted for more than five years.
The commodity boom alone will not secure Australia’s future prosperity. Fresh ideas are
needed to help all sectors of the economy maximise their export potential.
The business community has recognised that there is a clear need to update and
reinvigorate trade policies and programs and the Business Council of Australia has called for
a review to ensure that policy settings and export facilitation programs meet the current
needs of industry.
Under existing legislation a review of the Export Market Development Grants scheme is due
before the end of 2010-11.




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Labor has listened to business and will bring forward the scheduled review but make it much
broader and far reaching. A Rudd Labor Government will set up an Exports Policy and
Programs Review to ensure that we get the policy and program mix right.
But we will not wait for the review to respond to industry calls for changes in a number of key
areas. The results of the review will guide Labor’s policy response beyond 2008-09 but
reform must start immediately if we are to arrest the slide in export performance.
To help boost Australia’s exports, a Rudd Labor Government will invest $50 million into
Exports Australia. Exports Australia is Labor’s plan to drive export growth across the whole
economy:
1. Exports Policy and Programs Review. This will be a thorough review aimed at
   developing a policy and program mix that will position exporters and the nation to take
   maximum advantage of the ongoing resources boom and to develop our full export
   potential in other sectors.
2. Export Market Development Grants. Labor will revitalise the Export Market
   Development Grants scheme and increase funding by $50 million in 2009-10.
3. Better service from Austrade. Austrade will be revitalised and restructured to provide
   better service for exporters. Austrade will have its own business advisory group.
4. Building Services Exports. Labor will assist the Services Sector to expand its export
   base.
5. Expanding Financial Services Exports. Labor will work with the Financial Services
   Sector to build on its export successes by improving taxation and marketing
   arrangements.
6. Clean Energy Export Strategy. Labor has announced a bold strategy to make Australia
   a hub for the export of clean energy technology.
7. Better Trade Policy. Labor will refocus Australian trade policy to achieve better
   outcomes for Australian businesses and the Australian economy.
Labor will provide Australian businesses, especially small businesses and those in the
services sector and regional areas, with the help they need to take their products and
services to the world and to meet the challenges and competition of the global market place.
Labor sees real potential for increasing exports from the manufacturing sector, particularly in
elaborately transformed manufactures, and from the interface between the manufacturing
and services sectors in areas such as design and the provision of expertise.
In trade negotiations a Rudd Labor Government will focus on achieving the best possible
outcomes for the nation and for Australian business, particularly through multilateral
structures. Labor believes there is an ongoing role for bilateral and regional agreements,
especially where they are consistent with and can contribute to multilateral outcomes.
Austrade and its programs will be reinvigorated, and complemented with a new business
advisory body, to make it more adaptable and responsive to business concerns and to new
export opportunities.




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1.     Introduction
Since 2001, the brakes have been on Australia’s export performance. By contrast, the
outstanding export performance in the 1980s and 1990s shows what can be achieved when
government works with industry to deliver carefully targeted policies that give our exporters a
chance to show that they can compete against the best in the world.
Labor understands that a whole-of-government approach to export promotion is required, in
which departments and Ministers work cooperatively together to meet the needs of our
exporters. Labor is concerned that a silo approach has been allowed to develop, and the
value of effective programs, such as the Export Markets Development Grants (EMDG)
scheme, to decline.
Labor believes that a refocused and reinvigorated Austrade could do much more for
Australian exporters than is currently the case. In particular, a Rudd Labor Government
would coordinate its industry, trade and regional development policies to provide businesses
with better integrated government support.
The Howard Government has also taken its eye off the main game in international trade
negotiations, the Doha Round, and has instead negotiated a number of largely unsatisfactory
bilateral Free Trade Agreements (FTAs). Really big trade gains will only come through
progress in multilateral agreements. Regional and bilateral agreements have their place but
only insofar as they are consistent with, and enhance, multilateral outcomes.
Australia’s exporters face a range of barriers and disincentives that go beyond tariffs and
quotas. Labor believes that more needs to be done to address a range of ‘behind the border’
issues, such as intellectual property recognition, licensing and harmonisation of regulation.
Labor is committed to better focussing and revitalising export policies and programs. A Rudd
Labor Government will work in partnership with businesses to facilitate improvements in their
competitiveness and to grow their export opportunities.
Labor believes more must be done to facilitate both inward and outward direct investment
and more recognition must be given to the fact that Australian companies are increasingly
using direct investment to establish a presence in overseas markets.




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2. Australia’s deteriorating export performance
Despite several years of record high global economic growth and a once-in-a-lifetime mining
boom, Australia’s export performance has now stagnated.
Across all major export categories, the growth of both export revenues and export volumes
has fallen significantly below the historical average since the floating of the Australian dollar
in 1983. Particularly concerning has been the noticeable slowdown in the last six years,
during the time that the Reserve Bank of Australia has identified as the beginning of the
global commodity boom.
The reforms carried out by the Hawke and Keating Governments that started with the floating
of the Australian dollar in 1983 and continued through such initiatives as the Accord which
locked in low inflation, compulsory superannuation which boosted the national savings pool,
enterprise bargaining, research and development incentives, and a commitment to education
and training combined to drive productivity growth that translated into export growth right
through the 1990s.
The failure by the Howard Government to continue to drive improvements in productivity has
resulted in export growth stagnating.
For decades, trade flows in the global economy have been increasing faster than global
economic growth. Yet unlike most of our economic competitors, Australia’s share of global
goods and services exports has been declining over the last decade.
Growth in the number of exporting businesses has stalled, with Australia’s exporting
businesses still dominated by a handful of large companies. Australian small businesses
have struggled to gain a foothold in overseas markets.
The Australian economy has now run a trade deficit for more than five consecutive years.
This has contributed to a structural deterioration in Australia’s current account deficit and the
rising burden of foreign debt.

2.1    Ideal conditions for export success: a strong global economy and a
       mining boom
The global economy is currently experiencing its longest period of strong economic growth
for more than thirty years.
The global economy has now grown at around 5 per cent for its fifth consecutive year, and is
expected to continue growing at 5 per cent over the next three years.1 Average annual
global economic growth since 2000 has been almost one percentage point higher than the
average for the previous two decades. Growth in the global economy has averaged
4.3 per cent since 2000, an increase from 3.2 per cent in the 1990s and 3.3 per cent in the
1980s.
The fastest growing economic region is East and South Asia – where most of Australia’s
major trading partners are. The Chinese economy is expected to grow by a further
10.5 per cent in 2007-08,2 its fifth consecutive year of double digit economic growth. China
has gone from producing 3 per cent of the world’s output in 1980 to 15 per cent in 2006.
Similarly, India’s economy is expected to grow by 8.25 per cent next year.3 India has doubled



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its share of the world’s output from 3 per cent in 1980 to 6 per cent in 2006, and this is
expected to double again to 12 per cent by 2020.
As well as placing increased competitive pressures on Australian businesses, the Chinese
and Indian economies have also become important trade partners for Australia. In 2007,
China overtook the United States to become Australia’s second largest goods trading
partner, and India is Australia’s fastest growing trade relationship.
Strong growth in the global economy and the industrialisation of regional giants such as India
and China, have led to a surge in demand for Australia’s major resource exports.
The Reserve Bank’s Index of Commodity Prices, which predominantly reflects price changes
in Australia’s mineral and agricultural goods, has increased by 43 per cent over the last six
years. The key driver of this increase in Australia’s commodity prices are minerals and
metals – whose prices have more than doubled over the past six years.
   “The recent commodity price boom is unusual in several ways. The current upturn has
   been large and rapid, and in this respect is rivalled by only two other periods during the
   last century…
   “Another unique feature of the current price boom is its composition, and particularly the
   exceptional growth in metals prices compared with other commodity prices. At roughly
   150 per cent over the past five years, the recent increase in real metals prices is by far the
   largest of the last century for these commodities, and the level of real metals prices is now
   above its century average.
   “In contrast, the rapid and prolonged nature of the recent growth in base metals prices has
   been met by only a relatively modest supply response to date… The consequent lack of
   new supply capacity and long gestation period for new investment to come on line have
   contributed to the exceptional magnitude of the current price boom.”
                           The Recent Rise in Commodity Prices: A Long Run Perspective
                                                      Reserve Bank Bulletin, April 2007

CHART 1: RBA INDEX OF COMMODITY PRICES (NON-RURAL COMPONENT, US$)




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This combination of strong global growth, the rising prominence of Asia in the global
economy, and the significant increase in commodity prices is the ideal environment for
Australia to be succeeding in global markets and improving its trade performance.

2.2    Export growth has fallen despite the resources boom
Since the beginning of this decade, Australia has experienced a significant slowdown in the
growth of both export revenues and volumes.

Slowdown in export revenues

Australia’s export revenues over the last six years have been growing at a significantly
slower rate than their long-term historical averages:4
  Growth in total export revenues has slowed. Total export revenues grew at an average
  annual rate of 5.9 per cent in the last six years, compared with 10.6 per cent in the 18
  years following the Australian dollar’s float in 1983. Excluding mining, this has occurred
  across most categories.5

  Goods exports growth has fallen. Goods exports grew at an average annual rate of
  6.4 per cent over the last six years, compared with a long term average annual growth
  rate of 10.2 per cent in the 18 years since the Australian dollar’s float in 1983.

  Services exports are now growing at only a third of their long term average. Service
  exports grew at an average annual rate of 4.4 per cent over the last six years, compared
  with a long term average annual growth rate of 12.3 per cent in the 18 years since the
  Australian dollar’s float in 1983. The current growth rate is only one third of the long term
  average. Given that services make up 80 per cent of the economy we should be doing
  very much better.

  Manufacturing export growth has collapsed. Manufacturing exports grew at an
  average annual rate of 1.2 per cent in the last six years, compared to 14.1 per cent in the
  18 years since the Australian dollar’s float in 1983.

  Even with the surge in commodity prices, minerals and metals exports have grown at an
  average annual rate of 11.2 per cent in the last six years, compared to 10.3 in the 18
  years since the Australian dollar’s float in 1983.

Underlying below average growth in export revenues is even slower growth in export
volumes (the quantity of goods exported to the rest of the world, removing price effects).
Australia’s average export volume growth has been less than a quarter of its average since
the float of the Australian dollar.
Imports growth has surged. Import revenues grew at an average annual rate of 7 per cent
over the past six years, and import volumes grew even faster, at an average annual rate of
9 per cent over the same period.
Another feature of Australia’s poor export performance has been its declining share of global
markets for trade in goods and services. While global trade has been growing faster than the
global economy, Australia is actually receiving a smaller piece of the action. This means that
other countries are doing a better job of succeeding in global markets.




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CHART 2: EXPORT GROWTH: 1982-83 TO 2000-01 AND SINCE 2000-01




In a paper prepared for CEDA, Global Chains: Australia’s Challenge in the Evolving Global
Economy, Professor John Houghton found that Australia’s combined export market shares in
both goods and services declined by around 5.2 per cent between 1995 and 2003.6 Between
1995 and 2003, Australia’s share of the global market for exports in goods fell by 3 per cent.
The fall in our share of global markets for services was more pronounced, falling by
13 per cent over the same period.

2.3    Growth in the number of exporting businesses has stagnated
Accompanying the slowdown in the export revenues and volumes has been stagnation in the
growth of Australian exporting businesses.
In October 2001, the then Minister for Trade, Mark Vaile, announced that the Government:
“will aim to double the number of exporting Australian companies by the year 2006.”
He further stated that:
   “28,000 Australian companies exported this year, but only 4 per cent of all Australian
   companies actually export. The Coalition will set Government agencies the ambitious
   goal of doubling the number of exporters.”
At the end of the 2005-06 financial year, there were only 42,000 Australian exporters – well
short of the 56,000 the Government has targeted for 2006.7 Despite the resources boom the
Government has failed to meet its objective by 50 per cent.
Furthermore, despite modest increases in the number of small to medium enterprises that
export, Australia’s export revenues remains biased towards a few major companies, with the
top 10 per cent of exporters earning 90 per cent of export revenues.8 Small businesses, in
contrast, earn only 0.9 per cent of export revenues.9
In its profile of Australian exporting businesses, the Australian Bureau of Statistics (ABS)
found that the 216 goods exporters (out of 40,849 businesses) which had aggregate exports
of greater than $100 million, accounted for 77 per cent of goods export revenues.


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2.4    Trade deficits, current account deficits and foreign debt
While Australia is experiencing ideal conditions for success, the growth of exports by values
and volumes, our share of global markets, and the growth of exporting businesses have all
fallen. Together, these problems have led to trade deficits, a current account deficit and
rising foreign debt.
The deterioration in Australia’s export performance has led to sixty six consecutive monthly
trade deficits – more than five years – the longest stretch on record. Despite enjoying the
best export conditions in half a century, Australia’s balance of trade remains in the red today
– with a $12 billion deficit in 2006-07.
                                 10
CHART 3: BALANCE OF TRADE




A recent paper published by HSBC Chief Economist Dr John Edwards points out that if not
for the high resource prices, “the trade deficit in 2005-06 would have been twice as high – it
would have been 3.6 per cent of GDP instead of 1.8 per cent of GDP (or $35 billion instead
of $17 billion)”.11
If the export growth rates last seen in the 1980s and 1990s had continued Australia would
not have a trade deficit at all. We would be in surplus.
Australia pays a price for the underperformance of our exports sector through lower than
potential economic growth and lost job opportunities. Most directly, however, it contributes to
a higher current account deficit, which is recent years has been around 6 per cent of GDP,
and soaring foreign debt, which in 2006-07 reached a record $544 billion.
In 1995 John Howard promised to reduce Australia’s foreign debt. Instead during his term of
office it has trebled and, partly as a result, Australia’s interest rates are among the highest in
the developed world.
Our situation would be much worse had Labor not dramatically boosted national savings
through the creation of compulsory superannuation.



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3.       Howard Government’s export policy record
Australia’s trade performance, despite record global economic conditions, has been poor.
Growth in both export revenues and volumes have fallen to a fraction of their historical
averages. The Government has failed to meet its own target of doubling the number of
Australian firms that export, and it has misdirected Australia’s trade negotiations towards
unsatisfactory bilateral FTAs.
Australia’s export performance has deteriorated over the past decade because the Howard
Government does not have an overall trade strategy.
Adding to this is the Howard Government’s neglect of export assistance.
Economic policies designed to assist Australia’s exporters have been cut, or faced funding
shortfalls under the Howard Government.
     The Export Market Development Grant scheme – which enjoys significant support among
     Australia’s business community – has been cut in half in real terms since 1995-96. A
     study of the scheme in 2000 concluded that it returns $12 of exports for every $1 of
     outlay.

     The successful International Trade Enhancement Scheme and the Innovative Agricultural
     Marketing Program were abolished in 1996. A study of the ITES scheme in 2000
     concluded that it returned $18 of exports for every $1 of outlay by the Government.

These schemes contributed to the success of export growth under Labor when it was last in
government, with overall export revenues more than doubling throughout Labor’s time in
office.
Opportunities have also been lost as the Howard Government has failed to respond to the
needs of services exporters, and especially financial services exporters.
While the global opportunities have continued to grow and change the Howard Government’s
export policies have stagnated.

APEC

The Howard Government failed to take advantage of its role as chair of APEC in 2007 to
advance the interests of Australian exporters.
In particular the government failed to use the opportunity to pursue the following areas of
great considerable importance to Australian exporters:
     Expanding APEC to bring in India and a number of other economies.

     Improving APEC’s governance and procedures, particularly in relation to how it
     implements its decisions.

     Expanding its ‘Pathfinder Process’, under which a small group of members undertakes to
     progress a particular initiative and others may join in at a later date.

     Developing a clear process to drive initiatives at the technical officials’ level.




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  Improving continuity between meetings by establishing a troika arrangement in which the
  host of the current APEC works closely with the chair from the previous year and the chair
  of the year ahead.

  Improving the mechanisms within the Australian Government for providing business input,
  particularly from the services sector, in the development of APEC policy initiatives.

In the lead up to the APEC Sydney meeting Labor called on the Howard Government to
address each of these issues.
The question of expanding APEC’s membership could have been used to kick start debate
on the whole range of governance issues.
Of particular concern to Labor has been the lack of effective mechanisms within the APEC
structure to monitor the implementation of decisions and to ensure continuity between
meetings and progress in achieving medium and longer term goals. Labor has suggested
that these problems could be overcome through the adoption of a “troika” arrangement
whereby the current chair would work closely with the immediate past chair and the next
chair. Unfortunately, the Howard Government ignored Labor’s sensible suggestion.
The Howard Government’s trade policy is starting to look like a tired old tractor – a bit of
fencing wire here, a bit of hay band there, a dab of weld just about everywhere – and it keeps
chugging along, but what it needs is a real overhaul.
It has lacked coherence, has been reactive and politically driven. Its initiatives have proven
less than efficient and effective due, in part, to a lack of coordination between relevant key
agencies.




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4.     International competitiveness: the platform for
       boosting exports
Export growth and productivity improvement go hand in hand. Without rising productivity
Australian industries and businesses cannot remain competitive in the global marketplace.
The strong productivity growth that we saw during the mid 1990s occurred because the
Government of the day was prepared to make the hard decisions needed to drive
productivity growth.
These tough economic decisions included floating the dollar, bringing down tariffs,
deregulating the financial sector, wage restraint through the Accord to rebalance the wage
and profit share of the economy and tackle inflation, retirement income reform, national
competition policy, deep cuts in personal and company tax rates and greater autonomy for
the Reserve Bank.
The Accord locked in low inflation through wage restraint and in return delivered
improvements in areas such as health care, superannuation, family benefits and tax reform.
Labor’s reforms, plus the resources boom, have delivered the prosperity we enjoy today.
But productivity growth has now run out of steam. According to the ABS, in the period
1993-94 to 1998-99 productivity grew, on average, by more than 3.3 per cent annually. Since
2000 productivity growth has stagnated.
Without productivity growth we cannot remain internationally competitive and our exporters,
and the national economy, will suffer.
Strong leadership is needed right now to take productivity growth back to the levels seen in
the mid 1990s. Instead of building on the prosperity the Howard Government has
squandered it. Now is the time to re-engage an agenda to deliver real productivity growth.
Labor has plans for important reforms in five key areas that will boost Australia’s productivity.
Those areas are education and skills development, infrastructure, innovation, tax and
regulatory settings and addressing climate change.

4.1    Education and Skills Development
Over the last decade, other developed countries have been ramping up public investment in
tertiary education, with a 49 per cent increase in the OECD average. In Australia
government investment in higher education has declined by 4 per cent, while year 12
retention rates have stagnated.
In 1995 the Australian Education Council adopted the Finn Targets aimed at ensuring that by
2001 95 per cent of 19 year olds would have completed year 12 or other recognised training
and 60 per cent of 22 year olds would have attained a degree, diploma or other post school
certificate, such as a trade certificate.
Labor’s education policies built a solid platform for a sustainable and prosperous future that
would have provided the highly trained workforce critical to the future of all businesses in
Australia, but especially those seeking to export.




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The Howard Government slashed education funding and eventually abolished ANTA, the
agency responsible for driving the increase in retention rates and improving the overall
qualifications of the workforce.
According to the Government’s own estimates, Australia will need 240,000 more skilled
workers by 2016.
Labor is committed to an Education Revolution to help address Australia’s skills shortage,
boost retention rates and build Australia’s future economic prosperity:

4.2    Addressing Infrastructure Bottlenecks
A range of infrastructure bottlenecks, and especially communications infrastructure
bottlenecks, have been strangling Australia’s exporters.

A Labor Government would significantly change the way Australia’s infrastructure needs are
assessed, planned and delivered. Labor has committed to establishing Infrastructure
Australia, a Commonwealth Statutory Authority to coordinate the planning, regulation and
development of infrastructure.
Infrastructure Australia will comprise representatives from all levels of government and key
stakeholders. It will ensure that infrastructure financing decisions can be made based on
national priorities.
Labor’s new National Broadband Network will bring fast broadband to 98 per cent of
Australian homes and businesses and improved services for the remaining 2 per cent.
Australian exporters will have world class broadband linkages to customers around the
world.
For small businesses and those in the services and financial services sectors especially,
Labor’s broadband initiative will mean greatly improved export opportunities.

4.3    Fostering Innovation
Labor will provide the national leadership in innovation that has been missing for a decade.
The rate of growth in business R&D under the Howard Government has been less than half
of that achieved under the former Labor Government.12 If the growth rate achieved under
Labor had been maintained over the last 11 years, investment would now be more than
double today’s figure.
Labor has a plan for an innovative Australia and has announced a number of specific
initiatives to underpin the development of a national innovation system, including:
  Restoring the Chief Scientist to a full-time position, in recognition of the fundamental
  contribution science makes to the nation’s economic and social wellbeing.

  Establishing an Enterprise Connect network of innovation centres around Australia to
  connect business people with new ideas and technology, with an investment of up to
  $200 million over four years.

  Establishing Industry Innovation Councils for key sectors, to build partnerships among all
  participants in the supply chain and develop long-term strategic approaches to improving
  productivity.


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4.4    Taxation, regulation and red tape
Business tax, regulation and red tape are major issues for exporters and their industry
groups.
Labor understands that, to give exporters a strong base from which to compete in global
markets, it is imperative that levels of domestic taxation are competitive and that regulations
and red tape are kept to a minimum. An efficient tax system is also critical for driving
productivity and business tax is an area where our international competitors are moving fast.
Labor has already taken steps to realise its vision of an efficient and internationally
competitive business tax system, including simplification of BAS and committing to halve the
withholding tax on distributions from Australian managed funds to non-residents.
Federal Government leadership is required to develop a coordinated national strategy to
radically reduce the regulatory burden on Australian businesses. A Rudd Labor Government
will work with the States to harmonise key regulations imposed on businesses operating
across jurisdictions and will introduce a rigorous Regulation Impact Statement process.
While regulation and tax are unavoidable features of modern markets, Labor is committed to
ensuring they do not unduly burden exporters.

4.5    Adapting to climate change
Labor believes that climate change presents both challenges and opportunities for Australian
exporters, and is committed to working with industry to ensure the opportunities are well
understood.
Labor is committed to a clean energy future and will significantly increase the mandatory
renewable energy target to promote the development of renewable energy technologies until
the emissions trading market matures.
Labor believes Australia can be a world leader in the provision of clean technologies to
global markets.
There are already more than 17,000 Australians employed in renewable energy and related
industries, many of them in regional Australia, but there is great potential to increase this
number.
Labor has already announced as range of initiatives to assist Australian businesses to meet
the challenges presented by climate change and to benefit from the business and export
opportunities that it brings.
Labor’s commitment to introduce a 20 per cent mandatory renewable energy target (MRET)
by 2020 is not just an environmental imperative, it is an economic opportunity for companies
to export both technology and services. Labor’s MRET policy will deliver green jobs,
especially in regional Australia.




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5.       Exports Australia
Labor’s education, skills development, innovation and infrastructure policies will drive
improvements to productivity growth and will create key pre-conditions for export growth.
Australia has the ideas, high quality goods and services, and entrepreneurial talent
necessary to succeed in overseas markets. The difficulties of exporting cannot, however, be
underestimated. Export conditions are always changing. Accessing global supply chains,
and finding opportunities for offshore investments and forming international joint ventures
bring with them further unique and complex challenges.
Australian exporting businesses are concerned about the adequacy of the current mix of
export policies and programs. The Australian Institute of Export has raised serious concerns
about the current operation of the Export Market Development Grants scheme and the
Business Council of Australia has called for a Review of Trade Policy.
Labor has listened to those concerns and will conduct a thorough Review of Export Policy
and Programs.
The will be an important review that will guide Labor in formulating the policies and programs
that Australia needs if we are to improve export growth rates and turn around the expanding
trade deficit.
But we will not stand still while waiting for the Review to be completed. Action is needed
right now to assist business through the barriers and on to the world stage, particularly in
relation to reforming the Export Market Development Grants scheme.
Labor’s programs will have a particular focus on small business, on the services sector and
on elaborately transformed manufactures where there is great potential to further expand our
export effort.
To assist Australian businesses become export ready and more competitive overseas,
Australian Labor will deliver a suite of policies and programs under a strategy, Exports
Australia. This strategy will include the following program components:
     Review of Export Policy and Programs. This will be a thorough review aimed at
     developing a policy and program mix that will position exporters and the nation to take
     maximum advantage of the ongoing resources boom and to develop our full export
     potential in other sectors.

     Export Market Development Grants. Labor will revitalise the Export Market Development
     Grant scheme and increase funding by $50 million in 2009-10.

     Better service from Austrade. Labor will revitalise and restructure Austrade to provide
     better service for exporters and investors. Labor recognises the importance of both inward
     and outward direct investment. We will re-establish an Austrade Business Board.

     Building Services Exports will work with the Services Sector to grow its export base and
     will explore ways to assist the sector build the data and information base it needs to plan
     for the future and by better targeting Austrade programs and services to the needs of the
     sector.




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   Expanding Financial Services Exports will improve taxation and marketing arrangements
   and will work towards bringing down regulatory barriers.

   Clean Energy Export Strategy. Labor will promote Clean Energy exports, in which
   Australia enjoys a clear comparative advantage.

   Better Trade Policy. Labor will refocus Australian trade policy on delivering multilateral
   outcomes and on ensuring that regional and bilateral agreements are compatible with,
   and enhance, multilateral outcomes. All departments and agencies will be required to
   work more closely together in meeting the concerns of exporters. DFAT’s research
   capacity will be boosted. Labor will commission independent research to determine the
   effectiveness of existing FTAs and Regional Trade Agreements in delivering net benefits
   for Australia and to set benchmarks for future agreements.

In implementing our strategy, Labor will apply a whole-of-government approach to the
development and implementation of trade policy, and will strengthen the current framework
of support for exporters.
Australia needs to have the right policy framework and program support to provide the
assistance firms need to break into world markets. Labor will work with businesses,
especially small businesses and those in the regions, to deliver the stronger export
performance for Australia needs.

5.1    Review of Export Policy and Programs
This will be a comprehensive review of all existing trade policies and programs aimed at
positioning exporters and the nation to take maximum advantage of the ongoing resources
boom and to develop the full export potential of other sectors.
Areas the review will canvass will include:
   Improving the EMDG scheme to encourage more companies into exporting and existing
   exporters to expand their export base.

   Exploring the need for a concessional loans scheme for companies that have exhausted
   their entitlement to EMDG.

   Finding better ways to encourage and support more small businesses to begin exporting
   or to expand their export operations.

   Supporting the Services Sector in significantly expanding exports.

   Examining all export policies and programs to determine how they can be improved to
   maximise exports and to meet the needs of exporters.

The review will provide the basis for Labor’s future trade policies and funding commitments.

5.2    Revitalise and expand the Export Market and Development Grant
       Scheme
Labor will not wait for the review before making a number of important improvements to the
EMDG scheme.
The arrangement that grants are paid in the financial year after the expenditure has been
incurred will still apply.

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Exporters who incur expenditure during 2008-09 in the expectation of receiving assistance
through EMDG in the early part of 2009-10 can do so knowing that Labor’s new criteria and
increased resources will be in place.
Many Australian businesses have been able to use the EMDG to give them a leg up onto the
world stage but the program has been allowed to run down and it no longer meets the needs
of our businesses:
   The real value of maximum grants has been cut.

   Growing Australian businesses are being excluded from access to export market grants
   because of a restrictive cap on business turnover.

   Government support is being cut-off just as businesses start to develop their overseas
   market expertise.

   Smaller businesses are turned away because the minimum expenditure threshold is too
   high.

   The real export potential of Australian product development is not recognised.

   Regional not-for-profit bodies such as local trade and tourism promotion organisations are
   restricted from participating in the EMDG program.

   Large parts of the ‘new economy’ in the service sector have difficulty meeting criteria
   designed originally for exporters of goods.

   “The chamber movement firmly believes that a diminished EMDGS Program has resulted
   in less-than-otherwise (that is relative to a better resourced program) outcomes in
   exporting, innovation, employment and investment, an assessment borne out by
   implication in the analysis by PriceWaterhouseCoopers (PWC) of exporting and non-
   exporting firms.”
                                          Australian Chamber of Commerce and Industry
                 “Export Market Development Grants Scheme”, ACCI Review 99, May 2003

To boost Australia’s export performance and address these problems, Australian Labor will
commit an additional $50 million in 2009-10 to revitalise EMDG.
This will increase funds available in 2009-10 to $200 million.
Funding levels beyond 2009-10 will be determined in the light of Labor’s Review of Export
Policy and Programs.
The Export Markets Development Grants scheme will be revitalised by:
   Increasing the maximum grant by $50,000 to $200,000.

   Allowing the costs of patenting products in the international marketplace to be treated as
   an eligible export marketing activity.

   Allowing approved regional not-for-profit economic development bodies, including tourism
   bodies, which promote Australian exporters to access the scheme.

   Lifting the maximum turnover limit from $30 million to $50 million.



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   Cutting the minimum threshold of expenditure by $5,000 – to a $10,000 minimum.

   Extending the limit on the number of grants from seven to eight annual grants.

   Replacing the list of eligible services provided in Australia with a negative list, which
   means all services will be considered eligible unless otherwise specified.

These sensible changes will revitalise and update the EMDG and will assist businesses,
especially small businesses, to break into the export market. The program will be more
accessible, especially to businesses in the services sector and those based in regional
areas.

5.3    Better service from Austrade
Labor will revitalise Austrade to make it a genuine one stop shop for exporters and to ensure
that Australian businesses get better outcomes from its programs.
Labor will ensure that Austrade is responsive to the needs of industry. A Rudd Labor
Government will re-establish an Austrade Business Board which will include representatives
from a broad cross section of industry, including the services industries, regional business
and small business.
The new Austrade Business Board will play a key role in determining the future structure of
Austrade.
Austrade will be restructured to:
   Make it more responsive to clients and new export challenges such as accessing supply-
   chains and working with the services sector.

   Ensure its network of representation both domestically and overseas accurately reflects
   the needs of Australian business.

   Ensure that its priorities match those of Australian business.

   Build and improve its processes of identifying new exports and new markets.

   Build new approaches to trade promotion, including for new technologies and services.

Labor recognises the fact that the level of direct inbound investment into Australia is now
matched by the level of outward investment by Australian companies. In 2006 inbound
investment totalled $312 billion, while outward investment stood at $286 billion.
For a number of Australian companies, direct investment has been a means of gaining a
toehold in new overseas markets.
Austrade will work closely with other government agencies to facilitate both inbound and
outbound investment.
As part of the restructure Labor will look for opportunities to work cooperatively and
productively with State Governments, especially those that have overseas trade missions to
end unnecessary duplication and strengthen Australia’s trade representation in key export
markets.




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5.4    Clean Energy Export Strategy
Responding to climate change and global warming is not just an environmental imperative; it
is an important economic opportunity.
Both carbon trading and renewable energy technology provide opportunities for the export of
goods and services.
By ratifying the Kyoto Protocol, a Rudd Labor Government will gain a seat at the table as the
global markets in carbon trading, green energy and renewables are further developed.
Under a Rudd Labor Government, Australia will become the clean energy hub of the Asia-
Pacific, making clean energy central to Australia’s economic and environmental future.
Specific initiatives to help Australian businesses take a larger slice of the renewable energy
market will include a $15 million Clean Energy Export Strategy and up to $20 million Clean
Energy Innovation Centre.
The Intergovernmental Panel on Climate Change reports that to avoid dangerous climate
change, global emissions of greenhouse gases need to peak in the next 10 to 15 years and
then drop to very low levels, well below half of levels in 2000 by mid-century.
Clean technologies will be critical in meeting this challenge. The global market for renewable
energy is set to be worth US$750 billion a year by 2016, and more than 17,000 Australians
are already employed in renewable energy and related industries, most of them in regional
Australia.
Labor will harness clean energy research, innovation and enterprise, so that Australia can
build a low carbon economy and export climate change solutions to the world.
This is a win win situation where greenhouse gases will be reduced and economic
opportunity created.
The Clean Energy Export Strategy will provide critical capacity in Austrade to promote
Australian clean energy exports of products, technologies and services. Austrade liaison
officers will work with individual clean energy firms to match their strengths with opportunities
in clean energy growth markets such as China, India, Japan and the United States.
Labor’s strategy will build on international efforts to foster clean energy technologies, most
notably the $7 billion dollar Clean Development Mechanism of the Kyoto Protocol.
These policies will help Australian business make the most of business opportunities –
especially with emerging regional economies like China and India looking to low emission
technologies to protect future economic growth.
Labor’s commitment to a 20 per cent MRET by 2020 will not only be good for the
environment it will produce economic opportunities for Australian renewable energy
companies to export their technologies and services.
The Clean Energy Export Strategy will include:
1. Building capacity within Austrade to promote Australian clean energy exports.
2. Appointing Austrade liaison officers to work with individual clean energy firms to become
   export ready.
3. Appointing specialist Austrade staff in clean energy growth markets in China, India,
   Japan and the United States to facilitate export opportunities.


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5.5    Expanding Services Exports
The services sector accounts for 78 per cent of Australia’s GDP and employs 85 per cent of
Australians, but while 82 per cent of Australian firms operate in the services sector only
3 per cent of these are exporters.
With such a strong domestic base to build on the export potential of the services sector is
huge. However, the Howard Government has failed to work effectively with the services
sector to help it achieve its potential.
Federal Labor’s reforms to trade policy and to Austrade will put the services sector at the
centre of the export action.
ABS data reveals that services comprise around 20 per cent of exports but, as a result of
deficiencies in the data collection process, this is likely to be a significant under-
representation.
For example, exports of legal services in 2004-05 have been estimated to total $543 million;
more that double the ABS figure of $256 million. 13
Labor will work with the services industry towards making a more accurate assessment of its
contribution to Australian exports and to the economy in general.
Businesses in the services industry are often small and medium sized and would benefit from
better networking.
Austrade will be tasked with facilitating networks of smaller services firms to:
   Share market intelligence and experience.

   Explore the potential to share a physical presence in key markets.

   Identify opportunities for a shared presence in key markets.

   Create opportunities for smaller firms to be partnered with major local and national
   businesses.

Export support services within Austrade will better target the needs of the services sector
especially in relation to:
   Advice services, including advice about regulatory challenges in key markets.

   Information resources and market intelligence.

   Buyer-seller matching.

   Successful case studies.

   Diagnostic assessment of export readiness.

   Appropriate training.

   Exhibition participation.

Under Labor the true value to the Australian economy of the services sector, and especially
the financial and education sectors, will at last be given the recognition it deserves.




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5.6    Expanding Financial Services Exports
Australia already has one of the largest pools of managed investments of any country in the
world. At $68 billion, the sector is already the 3rd largest in the Australian economy and
represents 7.2 per cent of GDP.
The experience of running such a large base is an important advantage and holds Australia’s
financial services industry in good stead as it looks to further expand into the region.
The sector already employs 380,000 Australians who are part of a sophisticated, well
developed financial asset service sector with considerable expertise in areas such as funds
management, investment, delivering a range of products, investment consulting, platform
delivery systems, custodial services, information technology and software, legal and
accounting, compliance and risk management, and education and training. Australia can
offer a stable political system, robust governance, a significant second language population,
as well as being located in a time zone convenient to others in our region.
Despite these advantages, exporters in the financial services sector face a number of
barriers and impediments as they seek to expand their businesses.
Labor appreciates the contribution that financial services can make to our overall export
effort and will work closely with the financial services industry to expand its export
performance.
Labor will make Australian managed investment funds even more attractive to non-resident
investors by relieving the tax burden.
Labor’s initiative will see the current 30 per cent withholding tax on distributions from
Australian managed funds to non-resident investors halved to 15 per cent.
Labor will respond to other concerns raised by the financial services sector by:
   Working to address cross border, behind border and licensing issues, and the
   harmonisation of regulation relating to market access and market conduct. This is a key
   challenge that will be aggressively pursued at the multilateral, regional and bilateral levels.

   Working to improve data collection on the export of financial services to provide the timely
   information that industry needs to make the investment decisions that will grow the
   financial services sector in both domestic and export markets.

   Ensuring that the contribution and importance of funds management services to the
   Australian economy should be front and centre in the minds of those negotiating
   multilateral, regional and bilateral trade agreements.

   Ensuring that departments and agencies are better focussed and structured to support the
   development and promotion of outbound trade opportunities in financial services.

5.7    Better Trade Policy
Labor will refocus Australian trade policy on delivering multilateral outcomes and on ensuring
regional and bilateral agreements are compatible with, and enhance, multilateral outcomes.
The Howard Government has produced a spaghetti bowl of bilateral agreements with little
regard for their compatibility with multilateral outcomes and little understanding of what
constitutes a good deal for Australia.


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Labor will commission independent research to determine the effectiveness of existing FTAs
and Regional Trade Agreements in delivering net benefits for Australia and to set
benchmarks for future agreements.
Labor will investigate the possible use of ‘open membership’ FTAs which would start off as
bilateral agreements but could be expanded to include other countries at a later date,
provided defined criteria can be met.
Discussions have already been held with representatives of a number of countries including
next year’s APEC chair, Peru, and the chairs for 2009 and 2010, Japan and Singapore,
about driving improvements to APEC’s processes and delivering better outcomes from
APEC.
Labor understands exporters are busy people and that they cannot afford the time to speak
to half a dozen different government departments and agencies only to get a dozen different
answers. A Rudd Labor Government will ensure that the Federal Government will speak
with one voice when it comes to export policy by better coordinating the work of all
departments and agencies that provide services to our exporters.
Labor will establish a high level consultative inter-agency group, (including from the
Department of Foreign Affairs and Trade, Austrade, Department of Industry, AusIndustry,
and Department of Agriculture) to ensure that initiatives are coordinated and that a ‘team
Australia’ approach is applied to supporting Australian exporters.
These initiatives will be funded from current budget allocations to the Department of Foreign
Affairs and Trade, and other relevant agencies.
Labor understands the importance of taking a strategic approach to trade negotiations. In
the past Labor used Australia’s leadership position within the Cairns group to play a key role
in delivering an outcome to the Uruguay round and then to enhance that outcome though the
Bogor declaration.
Labor sees an important role for regional agreements and FTAs as mechanisms for
improving multilateral outcomes.




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Election 07 Policy Document                                                    A strong future for Australia’s exports



Financial implications
Labor’s plan to build a strong future for Australia’s exports is fully costed and funded.
FINANCIAL IMPLICATIONS – IMPACT ON UNDERLYING CASH BALANCE ($M):

                             2007-08              2008-09              2009-10              2010-11                 Total
Expand EMDG                        0.0                  0.0                50.0                  0.0                 50.0

Net impact                        0.0                  0.0               50.0                   0.0               50.0




Endnotes


1. IMF, World Economic Outlook 2007
2. Treasury, 2007-08 Federal Budget Statement 1: Global economic outlook
3. Treasury, 2007-08 Federal Budget Statement 1: Global economic outlook
4. John Edwards, Export weakness, investment strength, CEDA Competing from Australia Project, 2007
5. Rural exports have been excluded from this analysis, as these have been affected by the impact of prolonged drought in
   recent years.
6. Hougton, John, Global Chains: Australia’s challenge in the evolving world economy, CEDA Competing from Australia
   Project Paper 1, p. 16
7. ABS 5368.0.55.006
8. Fred Brenchley, Canberra, We have a problem, The Diplomat Global 100 edition, April/May 2007
9. ABS 5368.0.55.006
10. ABS 5206.0, June 2007
11. Competing from Australia, a report for CEDA 2007
12. ABS, Research and Experimental Development, Businesses, Australia, 8104.0
13. Attorney General, the Hon Philip Ruddock, press release 20 September 2007.




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