I rise to support the Export Market Development Grants Legislation Amendment Bill 2020. In so doing, I move:
That all words after "That" be omitted with a view to substituting the following words:
"whilst not declining to give the bill a second reading, the House:
(a) that the funding allocated for the Export Market Development Grants (EMDG) scheme to support Australian small and medium enterprises (SMEs) is less in actual dollar terms in 2020 than it was 24 years ago under the Keating Government;
(b) Australian SMEs are hampered by a lack of information about Australia's network of free trade agreements;
(c) SMEs account for only 14 per cent of Australia's exports compared to the G7 average of 25 per cent;
(d) the focus of the Government's trade priorities in the short, medium, and long term should be to genuinely diversify Australia's trading relationships in order to balance against further external economic shocks;
(e) the Government has so far failed to implement 19 of the 20 priority recommendations of the India Economic Strategy released in 2018; and
(f) after seven years the Government does not appear to have a plan to repair the mutually beneficial yet deteriorating trade relationship with China, Australia's most significant trading partner; and
(2) calls on the Government to implement the remaining India Economic Strategy recommendations as a matter of priority".
Labor supports this legislation because we understand the enormous benefits that the Export Market Development Grants scheme has brought to Australia and to Australian businesses. The EMDG Act was first instituted by the Whitlam Labor government in 1974 to encourage Australian businesses to seek out new export markets for Australian goods and services. The EMDG Act establishes a grant program, administered by Austrade, providing Australian SME exporters reimbursements of up to 50 per cent of the export related marketing expenses.
In 1996, in response to EMDG reforms then proposed by the Howard government, my friend Stephen Smith, then shadow minister for trade, referred to the original introduction of the scheme by the then minister for overseas trade, who had said the emphasis in a new export incentives scheme should be:
… on market development rather than on perpetuating payments on exports. Under the previous arrangements—the Export Incentive Grants Scheme and the Export Market Development Allowance Scheme—the bulk of the benefits went to a few large companies. Moreover, because the benefits under the schemes took the form of rebates on income tax and payroll tax liability, many small exporting firms and other bodies engaged in export, such as statutory marketing authorities and cooperatives, were disadvantaged.
Stephen Smith and Labor believed then that the EMDG scheme should not involve rebates of taxes and benefits but should be in the form, rather, of grants, with particular encouragement given to small- and medium-sized firms to become involved in exporting. This position remains unchanged. Labor has led the way in creating the Export Market Developments Grants system and in continuing to develop it for the benefit of our exporters.
A report from the independent Review of Financial Assistance to SME Exporters, chaired by Anna Fisher, was released earlier this year, in September. It found that while the policy intent of the act remains relevant, the EMDG scheme would benefit from a streamlined and simplified administrative process as well as mechanisms to better target the Australian SMEs who need the most help. Many businesses were overwhelmingly positive about the scheme, and they value government financial assistance to help them with export promotion.
At the same time, the review found that some recipients were too inexperienced to make the most of the money or too large for the payments to act as an incentive. The review found that the lack of certainty surrounding the reimbursement was a disincentive; that legislation and the application and assessment processes are overly complex and technical; and that promotion of the scheme needs improvement to reach more SMEs. The previous scheme's two-tranche payment system meant that recipients received up to the initial ceiling amount of $40,000 but that the second payment, subject to a cap, was almost impossible to predict, with the 2018-19 figure sitting at just under 25c in the dollar for entitlements over $40,000.
This bill implements a suite of reforms recommended in the review—namely, changing the EMDG scheme from a reimbursement scheme to an up-front grants program to provide funding certainty for exporters. The bill removes previous export performance tests and the requirement that recipients have a prospect of success. Instead, it includes eligibility requirements, such as recipients must be Australian, the products must be of substantially Australian origin and recipients must be either ready to export or already exporting eligible products and seeking to expand their export promotion activity. Further, this bill caps turnover for eligible export-ready ventures at less than $20 million per annum, down from the previous $50 million figure.
The grants will be administered at two tiers, with tier 1 focused on SMEs that are new to export and tier 2 targeted at expanding exporters, targeting SMEs that are moving along the stages of their export journey. Very importantly, the bill also supports the scheme continuing to provide funding to industry bodies and alliances. That will enable their grant funding to extend trading for members in marketing and promotion. The bill maintains the current evaluation mechanism, requiring independent review of the scheme every five years, and that's an entirely sensible thing.
As the government drafts the very important rules around this very important reform, it has to ensure that all kinds of Australian exports are considered, such as intellectual property and tech startups. For example, Cross Lawyers have pointed out to me and some of my Labor colleagues that global startup company Atlassian credited export grant support as being vital to its early international success. Notably, Atlassian applied at a time when the level of rebate was known—which is not the case now—before these reforms come into place. The Fisher review of the scheme found that the lion's share of recipients applied by using consultants and that consultants had a slightly higher success rate than exporters who made their own applications.
One of the specific concerns raised by the Export Consultants Association, which is a peak body for these consultants, relates to the lowered cap for payments. While previously exporters could apply for $1.2 million in total, that figure is now capped at $770,000. The association has said that there may be decreased access for Australian exporters and a reduction in the number of years exporters will be able to derive benefits from the scheme. They were also concerned that Austrade may struggle to process a flood of new EMDG funding applications as well as maintain the existing claims that are in process. They were concerned that there was a lack of proposals from the government's response to the COVID-19 crisis and a lack of support for consultants in the proposed legislation.
To allow consultants and other stakeholders an opportunity to raise these concerns further, Labor last month recommended that the bill go to the Senate Foreign Affairs, Defence and Trade Legislation Committee. That committee has now tabled its report and also stresses the need for consultation and stakeholder input in the drafting of rules and administrative guidelines alongside the framework legislation. With this important point in mind, Labor supports the bill through the parliament.
I will note that the minister has reassured my office that the government will consult extensively with industry, including with consultants, as the rules attached to this legislation are drafted. I again urge this government, in this place and on the record, to follow through with this promise. Essential and transparent consultation with exporters on the rules of the scheme will be essential to the ongoing success of the EMDG. As I understand it, the draft rules are live on Austrade's website right now, and I implore all interested parties to have a look and engage with that consultation process in the coming months.
Labor supports strengthening the EMDG, because Labor supports building capacity among Australia's small and medium enterprises in order to boost exports and create more trade related jobs for Australians. Why is it important for the government to support businesses to export? It is because, by exporting overseas, Australian businesses compete with companies around the world and are driven to be innovative and to use modern technology practices and structures. It's important because international studies suggest that exporters are about 40 per cent more productive than non-internationalised businesses and have an increased chance of survival. It's important to support businesses that are exporting because exporting Aussie businesses are better performers than businesses that do not export. Exporters, on average, employ more people, pay higher wages and achieve higher Labor productivity than their non-exporting counterparts.
So growing export capacity for SMEs means more jobs and higher wages for more Australians. However, SMEs account for only 14 per cent of Australian exports, whereas in G7 countries they account for 25 per cent, and the European average is over 35 per cent. Further, according to the ABS, around two per cent of the 2.2 million businesses in Australia are goods exporters. In comparison, the equivalent share for UK and US companies is higher, at 4.8 and 4.9 per cent, respectively. Australia can do better. Australia should do more to help SMEs export and to export more things, because they are the job creators in this country. Lifting SME exports to 25 per cent of Australia's exports would in turn increase our GDP by an estimated $36 billion. It's a very important objective. That is why Labor has publicly called on the government to address Australia's lack of export complexity.
The recent Harvard Growth Lab Atlas of Economic Complexity ranked Australia 93rd in the world for complexity of its exports; we lagged behind Kazakhstan, Uganda and Senegal. This narrowly concentrated industrial export base and dependence on a small number of trade and investment markets increases Australia's risk exposure in this deteriorating economic environment. This bill, by seeking to encourage more businesses in Australia to export, makes a positive contribution to diversifying Australia's export products, but there is no doubt that more must be done.
For an open trading nation like Australia, the COVID-19 pandemic is an unparalleled crisis. The nation is facing its worst downturn since the Great Depression, along with recessions in key trading partners, severe disruptions to global supply chains and a rising tide of protectionism around the world, which is why growing Australia's export opportunities in terms of markets in products is more important than ever. But you have to admit it's much harder to grow the relationships that permit genuine diversification in the midst of a global pandemic that restricts where we travel to.
Today we are behind Hong Kong as the most China dependent major economy in the world. China bought about five per cent of Australia's goods exports 20 years ago. That's now almost 50 per cent, despite the deteriorating political relationship. Our trading relationship with China is entirely welcome. China continues to buy iron ore, LNG and other products in record volumes, and this has cushioned the pandemic related shock to our economy, which was in severe trouble under this government even before the COVID-19 pandemic, with record wage stagnation and low productivity. Aside from any current tensions, Chinese demand for our commodities is forecast to plateau in coming decades. And, for some China exposed sectors, including meat exporters, winemakers and barley growers, it's become painfully apparent China is willing to limit imports from us for reasons that can be unclear. The benefits of this trading relationship over many years should be celebrated, but Australia should also seek to avoid exposure to economic shocks that can result from an over-reliance on any single market. Australia cannot snap its fingers and find a replacement for a huge market such as China. Our economies are uniquely complementary, and that is something we should all note.
Unfortunately, this government seems to think that it's the responsibility of Australian companies to open up new markets. It's evident from our history little will happen unless the Commonwealth takes the lead. Political will is a prerequisite for trade prosperity. Diversification is hard and will take decades to realise, and nothing will happen unless the Commonwealth makes it a priority. Australian exporters need a government that delivers. This government loves making announcements but never delivers. They're always there for the photo op, never there for the follow-up. The Liberal-National coalition government loves the signing ceremonies that come along with the photo ops for free trade agreements, but then they scurry away to their offices and put their feet up—job done! Well, it takes more than a signing ceremony to truly open up a market. For established trade relationships, it should be a priority of each minister in government to seek to maintain relationships. But this government fails to work at these critical international relationships.
Take the Minister for Education, Dan Tehan, for example. Last week, Minister Tehan declared in a radio interview that he had not had a conversation with his Chinese counterpart since he became the Minister for Education. And when did he take up that job? That was on 28 August 2018, more than two years ago. Did the minister think to speak to his counterpart in China when he first got the job? That's not clear. If he did not, he should have. It's staggering that an Australian Minister for Education appears not to have contacted his counterpart in the nation that entrusts hundreds of thousands of young students to our care and which is the backbone of this nation's highest services export industry: higher education. This is a $30 billion industry. The question to be asked is: has Minister Tehan contacted his counterparts in other nations that send their young students to Australia—his Indian counterpart, his Malaysian counterpart, his Vietnamese counterpart, his Singaporean counterpart? Perhaps he has. It would be staggering if the current Minister for Education had not spoken to his counterparts in these nations that send their young people to Australia, especially if he is to become the minister for trade. The lobbying for that job must be the worst kept secret in this building! And now it's been reported in the Australian Financial Review. Well, it's taken them a bit of time to get onto that.
It would be interesting to know what Minister Tehan thinks of his government abandoning the 2018 Varghese report on the India Economic Strategy, which clearly sets education as a flagship industry for developing that relationship. As Peter Varghese said in that report, of Australia and India's trade relationship, 'The opportunities will not fall into our lap.' But I want to test the comprehension skills on the other side, because I don't think they're very good. This was a warning to the government. It wasn't a recommendation to sit back, look at the report and then wait for the opportunities to fall into your lap. It was a warning: if you don't do the work, there will be no increased trade and no increased relationship with India. Given the Prime Minister has known since July that a cabinet reshuffle was required, it is astounding that Australian exporters still do not know who their minister will be. They only know that it will not be Senator Birmingham. We know Minister Birmingham, as the minister for everything, has done a stunning job, and they rely on him a lot over there, but it's time for him to have a rest and for them to decide who their trade minister is going to be—and we look forward to the further lobbying that we'll see in question time from the Minister for Education.
As I say, we cannot snap our fingers and find a replacement for a huge market such as China, but we really must make the effort. Every minister who holds a relevant portfolio, whether it be in resources, industry, manufacturing policy, science, agriculture or education, should ask themselves every single day, 'What am I doing to help our economy and our trade diversity?' This is exactly the approach and the effort that was taken in the sixties, when Sir Charles Court and other Australian leaders sought tirelessly to build a resources industry to export to Japan, Korea and later China. Think of leaders like Sir David Brand, after whom my seat in Western Australia is named. He had to work very hard to convince the federal Liberal government of the day, under Robert Menzies, to lift the embargo on the sale of iron ore—something, I might add, that the agrarian socialists on the other side are seeking to raise again, and I note Senator Canavan's recent implications that an embargo on iron ore is something the government should look at. Well, I dare you. Iron ore exports have undoubtedly saved this nation and will continue to do so through the rest of this COVID pandemic.
This is a government with no plan to diversify Australia's export opportunities. I return again to our trade and investment relationship with India. Two years ago, Peter Varghese delivered that landmark report, and he said that no single market over the next 20 years would offer Australia more growth opportunities. So far, the government has done next to nothing in response to the report's 90 recommendations. In fact, at Senate estimates in October the government confirmed that it had failed to implement 19 of the 20 priority recommendations. And, when the Prime Minister held a virtual summit with Indian Prime Minister Narendra Modi in June, little attention was given to the trade and economic relationship. It's not surprising, therefore, that trade figures this month showed that India's share of Australian exports had dropped to below two per cent, the lowest level in 17 years.
While the Prime Minister announced in-principle support for Varghese's recommendations, two years later here we are in a trade crisis and we know the government has delivered next to nothing. It has failed the industry Varghese identified as the cornerstone of the future India-Australia economic relationship: higher education. Again, it would be good to know what the prospective Minister for Trade and the current Minister for Education thinks about how this government has abandoned the Varghese report into diversifying our export relationship with India. The government has gone out of its way to cut down the higher education industry that could underpin a game-changing relationship with India and other emerging economies in the region. Blocking Australian workers at universities from accessing JobKeeper and failing to help international students trapped in Australia during the pandemic will reverberate for years to come in the markets where we seek to encourage their students to come to this country. While experts were advocating for a competitive Australian higher education export industry as the key driver of growth, the Prime Minister was telling international students to go home. It's an absolute shame. What a lost opportunity.
But this is a government that is happy to just set and forget—with the Varghese report, with free trade agreements. They will get the report, put it on a shelf, maybe have a squiz at the recommendations and then put their feet up. In fact, their own Fisher review has found that only five per cent of respondents said free trade agreements were factors motivating them to export. This may reflect SMEs not appreciating the potential of FTAs and how to take advantage of them. Well, there is some work to be done there, isn't there? Stop doing nothing once you sign the free trade agreements and start actually working on how to implement them.
To conclude—noting that there are a number of people who want to speak on this bill in the other chamber—Labor is supporting this bill and will continue to engage with stakeholders to ensure that all interested parties, especially Australian small- and medium-size enterprise exporters, get to have their say on the rules which will govern the scheme. On this side, Labor also very much looks forward to hearing from the government about its strategic plan—or any kind of plan, actually—to diversify its markets and to diversify the things that we produce that the rest of the world does or might want. So far there's no plan, and I urge the government to get a plan.
DEPUTY SPEAKER ROB MITCHELL : Is the amendment seconded?
HON JASON CLARE MP: The amendment is seconded and I reserve my right to speak.