EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL 2008

I rise to speak in support of the Export Market Development Grants Amendment Bill 2008. This bill forms an important part of the Rudd government’s commitment to a whole-of-government approach to supporting Australian companies in the global economy. This commitment stems from deeper values held by the Australian Labor Party and from its view of Australia and what our nation can be. The Labor Party believes in a prosperous, fair Australia supported by an open, outward-looking economy—an economy where Australian companies that want to invest overseas and export their goods and services are not held back but are instead encouraged and supported.

I rise to speak in support of the Export Market Development Grants Amendment Bill 2008. This bill forms an important part of the Rudd government’s commitment to a whole-of-government approach to supporting Australian companies in the global economy. This commitment stems from deeper values held by the Australian Labor Party and from its view of Australia and what our nation can be. The Labor Party believes in a prosperous, fair Australia supported by an open, outward-looking economy—an economy where Australian companies that want to invest overseas and export their goods and services are not held back but are instead encouraged and supported.

It must never be forgotten that it was the Hawke and Keating governments that transformed the Australian economy. It was the Hawke and Keating governments which laid the foundation for the outward-looking, export oriented economy which this nation has developed. The Labor Party has a proud record on economic reform—the floating of the dollar, trade liberalisation, financial sector deregulation, superannuation reform and national competition policy. It is this record on which we continue to build today. This government understands that Australia’s current and future prosperity depend in part on our ability to compete successfully in global markets. That is why we are committed to a world-class education system, to addressing infrastructure bottlenecks, to fostering innovation and to reforming federal-state relations.

The new National Asian Languages and Studies in Australian Schools program, with funding of $62.4 million over the next three years, forms part of this approach. It is a whole-of-government approach designed to lock in our future prosperity—a prosperity that will depend on strong and sustained export growth that will continue past the current resources boom. This export growth will be driven by smart and innovative Australian companies delivering superior products to overseas markets.

The old-style interventionist policy that was pursued by both sides of politics under the Australian settlement no longer has a place in the modern economy. The industry policies of the 1950s and 1960s were inward looking. They were designed to shelter Australian companies and industries, including poorly managed ones, from the forces of international competition. The result was that Australian economic growth and our living standards fell behind other industrialised nations. The focus of federal government policy must be on enabling and encouraging Australian businesses rather than on sheltering and protecting particular industries. The evolution of the international trading system into a globalised economy provides enormous opportunities for Australian companies and the Australian economy as a whole. Australia requires an active export facilitation strategy that addresses the needs of Australian firms, and the Export Market Development Grants Scheme is an example of this type of policy at work.

The purpose of the act is to encourage small- and medium-sized enterprises to develop export markets through providing grants for export promotion. Under the act, companies can be reimbursed up to 50 per cent of a range of export promotion expenses up to a given cap. Some of the activities for which companies can claim include overseas representatives, marketing consultants, marketing visits, trade fairs, seminars, promotional literature and advertising. The Australian Chamber of Commerce and Industry—and I quote from one of their publications—has recognised these kinds of activities as:

... an integral part of the export promotion strategy of many Australian exporters, especially small to medium sized exporters.

For a small- or medium-sized business, the move into exporting is one of the most difficult decisions that they will take. Expansion into any new market brings with it new challenges. When a new market is located overseas, these challenges are compounded through a lack of capital, regulatory differences, cultural barriers and the need to develop new contacts amongst suppliers and purchasers.

The Export Market Development Grants Scheme has often been critical in determining whether a small- or medium-sized enterprise engages in exporting and the extent of that engagement. The 2005 Austrade review of the scheme found that it ‘plays a key policy role in funding additional export promotion, particularly for smaller sized firms’. It also found that the scheme ‘has considerable influence in assisting small firms achieve sustainability’ in exports and that it has ‘a positive impact on export culture’.

The scheme was estimated in 2000 to result in returns of $12 of exports for every $1 of outlay. Despite these benefits, the scheme was neglected by the Liberal and National parties when they were in government. This government is determined to revitalise the scheme. We announced this during the campaign last year and we are now acting on that commitment. The government, under existing legislation, is required to commence a review of the Export Market Development Grants Scheme before 2010. I commend the minister for bringing forward this review and including it in the review of export policies and programs which is to be chaired by John Mortimer.

Through this bill, which overhauls the Export Market Development Grants Scheme, and through the additional $50 million in funding in 2009-10 for the scheme, this government is taking immediate action to help reinvigorate an export culture amongst Australian companies. This bill amends the Export Markets Development Grants Act to expand eligibility for the scheme. It will bring it into line with the needs of Australian businesses. It will bring it into line with what Australian businesses have been calling for and what the previous Liberal and National Party government ignored.

The bill will increase the maximum grant by $50,000 to $200,000, lift the maximum turnover limit from $30 million to $50 million and extend the limit on the number of grants from seven to eight annual grants. These changes, which were advocated by the Australian Industry Group in its submission to the 2005 Austrade review, will ensure that companies can continue to access the scheme. The bill will also allow grant money to cover expenses related to patent protection in international markets. The ability to protect intellectual property rights is an increasingly crucial part of product and market development. This change will encourage innovative Australian companies that are seeking to expand markets overseas.

At present, the Export Market Development Grants Scheme allows only companies and national peak bodies to apply for grants. These amendments enable state and regional trade promotion bodies, including tourism promotion bodies, to access the Export Market Development Grants Scheme. The amendments cut the minimum threshold of expenditure by $5,000 to a $10,000 minimum, again ensuring that small businesses can access the Export Market Development Grants Scheme. It will reinstate a performance test to the act for applicants claiming in their third and later grant years, consistent with Australia’s obligations under World Trade Organisation rules.

Finally, these amendments replace the list of internal and external services with a new non-tourism services category. Critically, this change will help to ensure that companies in the services sector can properly access the Export Market Development Grants Scheme. On top of these changes, the government has delivered on its commitment to increase funding for the scheme by $50 million.

The Rudd government’s commitment to supporting exporters provides a contrast to the failure of the former government. The story of the last decade is indeed a story of a decline in Australia’s trade performance and a neglect of policy on the part of the Howard government. Australia has had ideal conditions for trade success—the most favourable terms of trade in a generation, a strong global economy and a resources boom. A 2005 research paper from the Reserve Bank found that Australia’s terms of trade were likely to have increased by around 50 per cent in the period 1987 to 2005. The Reserve Bank’s index of commodity prices has increased by 43 per cent over the last six years. The booming economies of India and China have become vital trade partners for Australia. But, despite all these favourable factors, export growth rates have fallen. Australia has seen its proportion of global trade in goods and services decline such that between 2001 and 2007 growth in total export revenues slowed to almost half the rate of the period from 1983 to 2001. Goods export growth has slowed. Services exports are now growing at only a third of their long-term average. Manufacturing export growth collapsed to an annual rate of 1.2 per cent between 2001 and 2007, compared to an annual rate of 12.3 per cent between 1983 and 2001.

The former government announced in 2001 that they would aim to double the number of exporting businesses—and they failed dramatically to achieve the target they set for themselves. The former government left Australia with a trade deficit of $6.9 billion in the December 2007 quarter, the worst quarterly trade deficit on record, and a current account deficit of around six per cent of GDP. The resources boom has been masking the failure of Australia’s trade policy over the last decade, and the previous government must take responsibility for their failure on trade policy.

The former government’s neglect of the Export Market Development Grants Scheme was emblematic of their failure on a broader level in the area of trade policy. In 2003, the Australian Chamber of Commerce and Industry declared:

The Federal Government’s decision to run-down the Export Market Development Grants Scheme will only serve to undermine the effectiveness of Australian exporters, especially smaller exporters, in vital overseas markets.

You would think that that warning in 2003 from the Australian Chamber of Commerce and Industry might have been sufficient to prompt some real action in this area and a revision of what the Australian Chamber of Commerce and Industry described as the running down of the Export Market Development Grants Scheme. But nothing of the kind occurred; the running down continued.

We might also recall that on coming to power in 1996 the former Howard government abolished the International Trade Enhancement Scheme and the Innovative Agricultural Marketing Program, programs that had been established by then and had contributed to the improvement in Australia’s trade position that occurred during the Hawke and Keating governments. These two programs, abolished by the Howard government on coming to power in 1996, were part of the attention that had been given to the trade area by the Hawke and Keating governments.

The Howard government seemingly focused on bilateral trade negotiations exclusively to the detriment of multilateral opportunities through the Doha Round and APEC. Like so many areas of the previous government’s record, the approach was incoherent. It was poorly thought out and lacked any sort of strategic vision. By contrast, the Rudd Labor government is committed to an open economy in which Australian companies can take full advantage of the opportunities provided by global demand. Our support for the Export Market Development Grants Scheme accompanies our commitment to further multilateral trade negotiations. The review of export programs and policies currently being undertaken will provide further opportunity to refine and improve trade policy so that the Commonwealth government is doing all that it can to support Australian business in the global marketplace. I commend the bill to the House.