Launch of The Diplomat's 'Future Champions' 100
NSW Trade and Investment Centre, 24 October 2008
Introduction
I'd like to thank the NSW Trade and Investment Centre for hosting this event this morning – it's a pleasure to be here.
I'd like to also thank James Pach, Publisher of The Diplomat Magazine, whose timely issue of the Future Champions we're here to launch, and the sponsors of this event, EFIC, Austrade and AusIndustry.
The Diplomat magazine continues to play an important role in deepening the discussion of Australia's role in the world, and I applaud its initiative in publishing the “Future Champions”.
The companies whose performance we're here to celebrate have been identified by researchers for The Diplomat as “Australia's global champions of tomorrow”.
Eligible firms have a maximum market capitalisation of $120 million, and have been ranked by 'foreign earnings', which is made up of both export earnings and earnings from offshore operations.
So I'm very pleased to launch this report for several reasons:
First, it highlights that more Australian companies enjoy commercial success overseas than is recognised;
Second, it shows the increasing diversity of our exporters: in addition to mining and resources, we're seeing service providers; we're seeing manufacturers of high-end machinery and equipment;
And third, in quite a few cases, foreign earnings are the sole or overwhelming source of the company's revenues, underlining the changing nature of trade.
The changing nature of trade
The fact is that the nature of trade is changing. Trade today is more than producing and shipping goods—it's increasingly about trading services, capital flows and positioning in global supply chains.
As at June 2008, direct investment abroad by Australian companies stood at A$311 billion, rivaling foreign direct investment in Australia of A$379 billion. It is these investment flows that are shaping global supply chains and that are driving trade flows.
Services are critical; around 80 per cent of Australia's GDP but accounted for only 22 per cent of our exports. I believe there's great potential to build our services exports. Our services exports include education, consulting, financial services, and construction and design services of the kind I was privileged to witness recently at the Beijing Olympic facilities.
The Rudd Government understands the new terms of trade and we understand why trade matters. If we want to further strengthen the Australian economy, to move it to a more sustainable footing beyond the resources boom, we have to improve our trade performance;
That's why I commissioned the Mortimer Review to advise on our export policies and programs. We've already begun to lay the foundation for improving our export performance through this Government's trade policy and there are signs that things are turning around…
In August, Australia recorded a significant trade surplus of $1.4 billion, the second highest trade surplus on record. Exports rose to a record $24.6 billion and services exports added $4.7 billion to Australia's bottom line. This is a welcome sign of a turnaround after the 74 consecutive trade deficits we inherited from the previous Government.
Twin pillars
Our policy rests on the twin pillars of improving export market access at the border and domestic structural reform behind the border to improve our international competitiveness.
Why pursue greater market access overseas if you're not competitive and productive enough to take advantage of those new opportunities?
We know that trade policy is about much more than trade negotiations.
It's about structural reform that underpins competitiveness. That's why we've taken a whole of governments approach to reform from the outset, and involved business in the process. Labor knows about the need for reform, and about the difficulties involved.
During the 1980s and 90s, Labor Governments took tough economic decisions that laid the framework for the strength of our economy today – a strength that ensures that we are as well placed as any country in the world to withstand the current financial turbulence.
Reform at the border: Doha and FTAs
At this time of global financial turmoil, it's essential we do what we can to strengthen the international trading system. Strong leadership and political will is needed to drive trade reform and prevent a reversion to protectionism.
The G8 statement last week called for conclusion to Doha was a welcome statement. And President Bush on Tuesday night said that he wants to push hard for a successful Doha Round before he leaves office. The G20 Summit next month also provides another opportunity.
That's why Australia continues to press so actively for the Doha Development Round - 80 per cent of whose agenda had been agreed before the talks stalled last July – to be concluded.
We will keep up the fight, because a deal would be a real fillip for the world economy.
It would be especially good for developing countries. They would contribute one third of the savings from tariff reform and receive two thirds of the benefits.
The WTO negotiating machinery can be cumbersome. But we must remember that multilateral trade reform has provided huge benefits.
It's produced a global system of rules and disciplines and has massively reduced the distortions in international trade and increased certainty and stability in international economic relations. That's exactly what's needed at this time.
At the same time as the Government is pursuing more liberal international trade, we also working hard to put in place bilateral, regional and plurilateral FTAs that support our objectives for the wider multilateral trading system (and are consistent with our obligations).
In May we concluded negotiations for an FTA with Chile, the most comprehensive bilateral trade agreement Australia has ever entered into.
The ASEAN Australia Zealand FTA, negotiations for which were recently concluded, is the largest FTA Australia has ever negotiated - ASEAN accounts for 16 per cent of Australia's total trade in goods and services, worth $71 billion in 2007.
We are currently negotiating further FTAs with Japan, China and the Gulf Cooperation Council, and will soon resume FTA talks with Malaysia.
Our officials have begun preparatory talks in Seoul about an FTA with Korea. And we're studying the possibility of entering into negotiations with Indonesia and India.
And we're also beginning preliminary work on possibly joining the Trans Pacific Partnership Initiative, comprising Chile, Singapore, New Zealand, Brunei and potentially the United States.
Why do we do this? The answer is simple: to enable companies like yours, and many others, to better compete overseas. But, as I said earlier, we know that this only half the equation. Without getting the domestic settings right, our companies won't be as competitive as they can be.
That's why – from the time we first took office – the Government embarked on a concerted and coordinated approach to trade reform.
It links trade policy much more closely with other activities such as market development and trade promotion, as well as the necessary economic reforms within Australia; and it promotes greater coordination between Federal and State governments, and between Government and business.
At the strategic level, the Government has made early down payments on its policy commitments.
Our first budget established Infrastructure Australia, Skills Australia, the Education Investment Fund and the Building Australia Fund.
The Government has for the first time established a COAG Ministerial Council on International Trade, to coordinate efforts to improve our trade performance. I chaired its inaugural meeting in August.
And we're absolutely committed to listen to business.
The Mortimer Report that I published last month reflects significant and valuable business input.
The authors recommend concerted efforts to strengthen coordination and delivery of trade policies and services, and a strong voice for business in developing trade and investment priorities and programs.
The Report notes the declining proportion of Commonwealth Government assistance directed to trade and investment facilitation, relative to other forms of business assistance. From 2000-01 to 2006-07, the proportion declined from a total of 42 per cent to a mere 13 per cent.
And it endorses Austrade's role and the viability of the EMDG scheme, and reinforces the need to re-engage with business. As I said, we'll respond formally to these recommendations later in the year. But in the mean time, many of the policy measures we've taken are fully consistent with the Report's findings.
For example, the Government has already integrated domestic and overseas investment promotion functions into Austrade, reflecting the changing nature of trade and the needs of Australian firms.
We have already begun to modernise and strengthen the EMDG scheme which is administered by Austrade. Our first budget added $50 million to fund commitments in 2009-10.
We understand what exporters need. I recall that when, earlier this year, The Diplomat launched its Global 100 edition, EFIC research showed there are two important steps to build on the success of Australia's global firms.
The first is increasing local market knowledge. The second is unlocking additional sources of finance for growing SMEs.
As these new publications make clear, that is what our export promotion schemes are striving to do.
If you're an established exporter, and want to expand your business, you can turn to Austrade's network of Export Advisers in 110 locations in over 60 countries around the world.
They're equipped with extensive sector and country knowledge. They can assist with selecting new markets and market entry strategies, and help you forge new overseas buyers and export solutions.
If by contrast you are an SME that is new to, or inexperienced in, exporting, the New Exporter Development Program (NEDP) is designed specifically for you. The program helps you develop the skills and knowledge needed to seek out and maximise export opportunities.
For many SME's, procuring finance, particularly for its export activities, can be a problem. In this instance, EFIC may be able to assist with the provision of financing and solutions to help mitigate common business risks encountered by many SME exporters.
These risks include that of non-payment by the purchaser of your export goods or services and the excessive drain on your working capital.
For example, EFIC offers export payments insurance for contracts of over two years. This cover is designed to reduce your risk of loss in an export contract arising from defined events, such as the insolvency of your buyer.
In some circumstances, EFIC can also provide a loan facility directly to your overseas buyer, or provide guarantees for such loans, if the export contract is worth A$5 million or more.
EFIC's Headway product also provides a guarantee from EFIC to a bank. It provides security to a bank to enable it to lend additional funds to SMEs, without requiring additional security from you. The product has been specially designed to meet your needs when facing a working capital shortage while growing your business.
EFIC Headway is available as an extension to facilities from your existing bank and supports general export funding rather than a specific export transaction or contract.
In addition, EFIC's bonding facilities are available for export contracts where your buyer requires a contract bond as financial assurance that you, as an SME exporter, will honour your contractual obligations. EFIC can provide bonds for contracts if your financier is unable to assist you and where you meet EFIC's eligibility requirements.
Conclusion
Together with Austrade and AusIndustry, EFIC has produced a brochure which maps key Federal Govt programmes against exporters lifecycle and business needs.
It is intended to make it easier for exporters to navigate the various support programmes available to assist growth and globalisation of Australian exporters as well as demonstrate an integrated approach across government.
I welcome this guide, and very much hope it will better enable companies to tap into the Government's network of support, here and overseas. It demonstrates our commitment to a genuinely whole of government approach to trade promotion and facilitation.
And I welcome The Diplomat 's continuing efforts to remind the Australian public of the importance of international economic integration to Australia's economic growth and prosperity.
The Government committed to trade, and to helping companies like you sustain the kind of performance that has helped secure those impressive trade figures I mentioned earlier.
Ultimately, it's our trade performance which will help sustain this country's prosperity beyond the resources boom.
We've seen a welcome upswing in exports, but we – like you – can't afford to rest on our laurels. We need to ensure a sustainable, long term contribution by exports to our bottom line.
I congratulate you all, for your continuing efforts, for your innovation, and for your contribution to the prosperity of this country.
That's what we're all working for.
Thank you.