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Joint Select Committee on Trade and Investment Growth - 28/07/2015 - Experience of business in using Australia’s free trade agreements

TAYLOR, Ms Anna, National Manager, Memberships and Policy, Australian Tourism Export Council

[15:46]

CHAIR: Welcome. These hearings are formal proceedings of the parliament. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of the parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I invite you to make a five-minute opening statement before I open up for questions from the committee.

Ms Taylor : Good afternoon. Thank you for the opportunity to give evidence at this inquiry. By way of introduction, the Australian Tourism Export Council, or ATEC, is the peak industry body that represents the interests of over 800 companies throughout Australia that provide tourism services to foreign visitors. It is important to note that whilst those services are consumed within Australia, they are purchased by foreigners and are as such exports. We are based in Sydney and have eight branches around Australia, and count among our membership over 40 regional tourism organisations, representing thousands of small to medium enterprises.

The Australian tourism export industry is a key driver in the Australian economy and generates some $31 billion annually. Tourism is a labour-intensive industry employing proportionately more people per dollar of GDP than most other industries. For the year ending 2014, tourism generated some 929,000 jobs, accounted for 220 million visitor nights and opened its doors to 6.3 million international visitors. At the outset, I would like to note that tourism as a services sector is less impacted by the various issues that can and may be felt by the agricultural and manufacturing sectors with regard to tariffs and other international trade measures. Whilst we support the efforts of both government and industry in the development of economically driven FTAs that drive Australian export growth and create opportunities for efficiency via net import gains, our focus remains on maximising the opportunities to grow Australia's international competitiveness as a desired destination for all segments of travel.

In today's world, the movement of people is relatively free. It is the view of ATEC that we remain vigilant on our more non-traditional trade barriers and that the development of FTAs support the work being done by governments to foster efficient passenger facilitation and to grow regional Australia. Inbound tourism or tourism exports operates on a complex distribution system. People travel here via many different channels and this is changing and shifting rapidly. In many cases, the businesses that invest and spend money offshore to market Australia internationally are also those that facilitate the travel process. Those businesses are often expected to provide credit to their offshore partners and it is becoming increasingly difficult to recover debt from the burgeoning number of tourism operators and entities in markets that are emerging. With this increasing burden comes a commercial conundrum: Australian operators refuse to offer credit facilities and, therefore, risk losing the business versus the risk of being forced to take measures to recover debt, or attempt to recover debt, often with limited success.

ATEC would like to see government consider building into FTAs somehow a rule of law or a facilitation opportunity where debtors could take action in source markets against creditors. We encourage government to investigate such avenues whether that be payment systems or access to appropriate legal channels in those markets to recover debt. The result would be positive not only for the Australian operator but also for the economy. The reality is that small operators with very skinny margins cannot afford to sustain debt from markets where there is no reasonable opportunity for recourse.

Our other key areas of interest around FTAs include focus on visas, taxes and charges and SME support programs such as EMDGS. The significant benefits that flow from FTAs can be extended by a more regional if not global view on policy settings for barriers such as visas and the passenger movement charge, also known as the departure tax. ATEC support visionary policies such as partnering with our key security countries like the US or the UK on multiple-entry visas. If the checks and balances are met with some of our FTA partners from a visa perspective for a citizen from any of our emerging markets—for example, China or India—perhaps we can share that intelligence and remove much of the process and, therefore, the costs associated with visa issuance for Australia. Further to that, there are opportunities to expand the successful pilot program for various visa initiatives like the Australia New Zealand joint visa for the World Cup cricket and scope could be considered for a trans-Pacific visa under the TPP.

At the G20 ministers meeting in 2012, the World Travel and Tourism Council and the United Nations World Tourism Organisation concluded that cumbersome visa procedures have a direct impact on the intention to travel and, conversely, easy and hassle free availability of visas is one of the basic ingredients for attracting foreign tourists. The joint report presented on the impact of visa facilitation on job creation in the G20 economies found that tourism development in the G20 is limited by visa regulations and reforms in visa facilitation hold the potential to create some 5.1 million additional jobs across G20 countries.

ATEC also support the government on its pursuit of FTAs to expand our export potential, of course. It is important that we view FTAs in the context of Australia's ability to incorporate commercial opportunity for our SMEs, many of which are regionally located. We note that the EMDGS is a critical element of business development for Australian SMEs. Previous reviews of EMDGS have shown it to have a net positive benefit to the Australian economy and ATEC actively support the program. It is ATEC's view that EMDGS is a natural supporter of FTAs and should be extended to ensure more operators have the opportunity to penetrate new offshore markets, particularly as Australia grows its FTAs with key emerging markets. Thank you.

CHAIR: Debt recovery is a big issue?

Ms Taylor : It is significant for a lot of operators in the sense that the reality—

CHAIR: Is it the commissions?

Ms Taylor : A lot of it is commissions. In our industry, you have either ground operators or product. It is standard. Ground operators are often agents, not principals, and their client is an offshore wholesaler or an offshore provider of tourism services in the source market. There can be significant challenges in the competing nature of that business to win those contracts, to win that business, to try to generate as much travel to Australia as possible. As a result, there has been a long history of credit being a standard form of business practice. It is becoming increasingly prevalent. But what is increasing in some of our emerging markets is that issue of failure to pay, and it is very costly to protect that debt. There are obviously insurances in the market. Offshore credit risk insurance is very expensive. For major multinational corporations, it is obviously less of an issue, but small, regionally based tourism businesses in Australia find it very difficult. So that is an issue.

CHAIR: And you handle mainly inbound?

Ms Taylor : Yes, 100 per cent inbound.

CHAIR: Who handles the outbound?

Ms Taylor : An organisation called AFTA, the Australian Federation of Travel Agents. But this is in a distribution context. Our members include inbound tour operators as well as what are now generally being coined OTAs—online travel agents. That is an agency that operates without a shopfront, purely on the internet. There are other aggregators and distributors that operate in the market, but the key Australian entities in distribution—bringing the travellers here—are called inbound tour operators. They have a relationship with the product here in Australia. They are avid sellers of the product here in Australia. They obviously have huge amounts of destination awareness and knowledge, both regional and metropolitan focused awareness, and they sell that expertise offshore to their clients, which could be in any market—any number of different clients in different markets. That client then facilitates the travel for citizens of their country to visit, in varying capacities, whether it is groups or what we call FIT—fully independent travel—or corporate travel or incentive travel, which is when large foreign organisations send groups of their executives to a destination as an incentive. There are lots of different segments of travel, but those arrangements, if you like, are handled by the ground operators here in Australia.

CHAIR: What about the cruise line industry? Is that inbound or outbound?

Ms Taylor : It is both. It is a bit like airlines. They are all involved in carriage to and from, so they are heavily driven by load, just like any airline is driven by load, so of course they want full cruise ships going in and out. Some of them are port to port and some of them are return trips. From the purely Australian market there are outbound-only cruise lines that service only the Australian market, and then there are global cruise lines that service markets globally.

CHAIR: Where is the inbound growth in Australia?

Ms Taylor : There is significant growth opportunity from China. There is significant growth opportunity from India. We are seeing strong growth from Latin America. But, having said that, it is always important to recognise the key traditional markets that really are our bread-and-butter business—the UK, Europe and the Americas. It is a global industry, and a lot of my members would put significant energy and investment into those emerging markets because of the opportunity. Yet, at the same time, they will work very hard with their existing partners in traditional markets. New Zealand is a very big market for us, and the student market is becoming increasingly large. That is a really important market for Australia, because it is not only about visiting friends and relatives—people who are studying in Australia and their family and friends come to visit, primarily—but also about having a very rewarding Australian experience. It is broad.

Dr CHALMERS: The Chinese demand pre-dated the signing of the China FTA. Is that right?

Ms Taylor : Yes.

Dr CHALMERS: And you said in your introduction that you see the major beneficiaries from the China FTA to be in some of the other industries, maybe agriculture et cetera. Do you want to clarify that?

Ms Taylor : Certainly. I think what I was suggesting in my introductory remarks was that being a services industry there is less impact on traditional trade arrangements that are generally captured in most FTAs, if not all, around tariffs and the import-export exchange around goods. It does differ. Services are different. Then again, tourism is different from other services sectors, like financial services and even education services. It is different in terms of entity. The consumer, if you like, of the export good comes here to have an experience, and of course they make purchases along the way, but it is different.

Dr CHALMERS: One of the benefits the trade minister was talking about in the course of the announcements around the China free trade agreement was the change in the screening threshold for Chinese investment in Australia. Have you picked up amongst your membership any anecdotal evidence that there is more Chinese investment interest in some of our tourism operators and providers here?

Ms Taylor : Yes, I would say that, definitely. That would be anecdotal comment. I have not done any formal polling on that among my stakeholders, but certainly in conversation I can report positively in that context. I was speaking just two days ago with a member who is doing some work in a consultative capacity for one of the ski based resorts here in Australia, and they have a significant amount of interest from the Chinese in an investment context. So certainly, yes.

Dr CHALMERS: What do you expect to see, then, in the near term? Do you expect to see providers who might be marginal and who might be able to continue with that Chinese investments but would not otherwise be able to? What are the tangible impacts of the change in that screening threshold?

Ms Taylor : I think it is probably twofold, from the way my stakeholders would see it. I believe that they would see that, provided that the quality of the product and the experience is maintained, that is paramount to servicing the needs of the visitor who is using that particular product or service. I think that the tangible benefits are clear: increased investment, opportunity upgrade and all those different things that happen. There is a lot of Australian product that is certainly ready for upgrade. You cannot do that without capital investment. But I think that there would certainly be operators who would like to see the product that caters to markets other than China still being preserved to ensure that the delivery of that product is going to meet the needs of markets from other parts of the world, from an Australian tourism perspective. But I cannot comment heavily, with great engagement, on the investment side of things. It is certainly not something that ATEC puts a lot of focus onto. We are very much geared towards making sure Australia is internationally competitive from a tourism perspective, so investment is certainly not something I can comment too much on.

Dr CHALMERS: Yes. The reason I ask is that you go through the agreement and, in terms of inbound tourism, it seems to be the main if not the only advantage.

Ms Taylor : Yes.

Dr CHALMERS: This is not your membership, but when you think about the Australian providers in China the main thing seems to be around liberalising some of the ability to build and maintain hotels and things like that.

Ms Taylor : That is right.

Dr CHALMERS: So how much of your members' strategy is to have some sort of Chinese based chain arrangement, travel agents or whatever? Do you need to be on the ground in China to source tourists for some of our Australian businesses?

Ms Taylor : It is a good question. I think a lot of people are investing quite heavily in China know-how programs, often delivered by the private sector in a consultative capacity. There are a lot of businesses investing in organisations that do not so much prepare them—I think you probably hear 'export ready', in a China context, a little bit more because a lot of people have embraced that component of it. It is more being China active and China aware. So I think there is significant investment by people in ensuring their digital presence is China relevant, and of course that requires energy and investment from people who know how to deliver that. A lot of people, I think, perhaps assume that if they have a website—maybe with a little bit of language capability—then that is ready to go, with zero consideration for the social media networks that fly in China and how the search engines work in China. It is quite different. So I see there is a lot of that happening with our stakeholders. I am not sure about some of the more global chains. I know that some of the American chains that are present here in Australia are investing in China to develop hotel investment opportunities there. I think a lot of the other multinationals—large hotel corporations that have presences all over the world—have probably had a presence there for a long time.

Senator BULLOCK: How realistic do you think it is to campaign for relaxed visa requirements at a time when the government is focused on security issues? I would have thought it would be better to keep your powder dry.

Ms Taylor : It is a very good question. Certainly, from a China perspective—and I was going to make reference to this as well—Dr Chalmers made a reference to the free trade agreement in relation to its focus on tourism. Part of that, of course, is the 10-year visa that has been announced, which is wonderful news from a tourism perspective, and we are very pleased with that development. We were equally pleased when it was a three-year multi-entry, so we are certainly very aware and we appreciate the progress that has been made in visa policy development in recent times, particularly for our emerging markets. There remains work to be done.

You are absolutely correct, Senator: there is indeed a very fine line to tread between border security and the relaxing of visa policy. I met recently with Senator Cash's office to make some remarks on policy settings around this rather than necessary reform. I think that is probably ATEC's official position: it is the settings rather than reform. The example I gave—and this is a very tourism-specific example—is that we have lots of opportunity emerging from the Latin American market and there have been some recent incidents where there were actually quite high-end, luxury-looking travel agents from Mexico who were very keen to come to Australia on a famil. A famil is a familiarisation: effectively someone pays for this group to come and visit, they learn more about the product and the destination, and then they take it home and sell in their own country. There were significant visa issuance issues with that particular group at that particular time. There have been others. What we learned as a result of investigating this is that, for a region like Latin America, there are obviously significant border security concerns from certain countries in that region and not for others, and it is very difficult to set policy around that when there are such varying degrees of risk in a visa context. What we did learn is that the post is in Ottawa for Mexico and, I believe, for other Latin American countries as well. It is still quite an archaic, if not old-fashioned, process where the paperwork and the passport are being sent to the post in Ottawa, in Canada, and the wait is 37 days. It is declared as being 37 days on the application information, but in this day and age that is a long time to wait for a visa, and when you are coming here to do business we would certainly, from an ATEC perspective—

Senator BULLOCK: That number again?

Ms Taylor : Thirty-seven days.

Senator BULLOCK: Good luck! I think we had better work on it.

Ms Taylor : Anyway, to your point, Senator: the issue we see is that perhaps some settings can be changed. I have had some stakeholders comment to me that if we can get it right for China—which, 10 years ago, was a high-risk market where there were lots of concerns with overstay and absconders and all of those sorts of things from a market the size of China—then it would certainly be of the—

Senator BULLOCK: The immigration department remains absolutely consumed by overstay risks from China. My wife is Chinese. Visas are so difficult.

Ms Taylor : I think the progress, in that context, has been remarkable. I think the Australian government has certainly seen the opportunity. I think there has been pace setting by some of our key global competitors as well, and it is important that we keep up with that pace. But I think there are settings in other situations in a visa context, and I believe this is where free trade agreements can play a critical role in almost negotiating visa situations that work for both countries and can act in mitigating any perceived risk that there may or may not be in that context. Yes, it is a fine line.

Senator WANG: You mentioned, quite extensively, the EMDGS. With the upcoming FTA, especially the one with China, what do you think about the risk or possibility of the Chinese viewing the scheme as a subsidy for your industry, and therefore undesirable, at least from their perspective?

Ms Taylor : It is certainly something that I did consider. EMDGS has been around for some time—a long time. As I said in my introductory remarks, it is a net positive gain on terms of trade, from an economy point of view. I take your point. Certainly my regionally located, small to medium enterprise operators would have concern if an FTA were to remove that opportunity. I know that the EMDG scheme is under review at the moment. If it were not to continue, I know that it would be very difficult for those small, regionally located tourism businesses to penetrate that market as a new market for them. For organisations or enterprises that have had some experience or some prior infiltration of a market—whether it be China or any other market—it gives them a step up. There are a lot of tiny 'Ma and Pa Kettle' operators in the regions. We put a lot of energy into driving tourism to those regions. It is good for the local economy; it is good for the tourism experience in general. Without EMDG, I know that a lot of operators would struggle. It would probably mean the difference between investing in that market and not.

Senator WANG: Are you aware of any similar schemes which are operated by our trading partners and which are helping their SMEs or even their large corporations?

Ms Taylor : No. That is a good question. I am not aware of other schemes similar to the EMDG. I know that there are, obviously, other arrangements for local business that they may have. Like in any country, there are varying forms of support and grants schemes. With the existing FTA partners, I think that America has some grant schemes available. I am not sure about Singapore; I am fairly sure that they do not. I think the key thing that we need to remember, if EMDG is to be discussed in an FTA context, is that it is not anything more than a marketing rebate. It is quite specific. It is a grant associated with justifying how much you have spent on marketing, and there is an element of that that comes back to you. It is an incentive as well as a grants scheme, if you like, to encourage people to actively promote Australia. To me, FTAs and EMDG are a marriage made in heaven. They are such complementary partners in that space. Without the EMDG, I think that the ability for regional Australia to penetrate markets would be at risk. It is not protectionism; it is a marketing incentive.

Senator WANG: We can probably go further and argue that, by paying for our costs to knock on their doors, they are benefiting from it as well?

Ms Taylor : That is right.

Senator WANG: Thank you.

CHAIR: Thank you for coming today, Anna.

Ms Taylor : Thank you for having me.

CHAIR: It is appreciated. If you have been asked to provide additional information, could you please forward it to us through the secretariat by 11 August?

Ms Taylor : Certainly.

CHAIR: Alternatively, if the committee has any further questions to ask you, we will put those in writing and send them to you through the secretariat. Thanks once again for your time. You may now go out into the cold again.

Ms Taylor : Thank you very much.

CHAIR: I would like to thank my colleagues and all the witnesses for their time today. I declare this public hearing closed.

Committee adjourned at 16:13