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Joint Standing Committee on Foreign Affairs, Defence and Trade
Australia’s trade and investment relationships with countries of the Middle East
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Joint Standing Committee on Foreign Affairs, Defence and Trade
CHAIR (Hon. BC Scott)
Randall, Don, MP
Gambaro, Teresa, MP
O'Neill, Sen Deb
Vamvakinou, Maria, MP
Edwards, Sen Sean
Macdonald, Sen Ian
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Content WindowJoint Standing Committee on Foreign Affairs, Defence and Trade - 25/03/2015 - Australia’s trade and investment relationships with countries of the Middle East
BRENNAN, Mr Karl, Manager, Trade Policy Section, Department of Industry and Science
CHESWORTH, Mr Peter, Head, Sectoral Growth Policy Division, Department of Industry and Science
GRASSIA, Dr Gino, General Manager, Energy Security Branch, Department of Industry and Science
TROTMAN, Mr Paul, General Manager, Trade and International Branch, Department of Industry and Science
Subcommittee met at 11:06
CHAIR ( Hon. BC Scott ): I declare open this public hearing of the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade. The subcommittee is taking evidence for its inquiry into Australia's trade and investment relationship with the countries of the Middle East. I welcome the representatives of the Department of Industry and Science to today's hearing.
These are public proceedings, although the subcommittee may agree to a request to have evidence heard in camera. You may determine that certain information be heard in camera. I remind all witnesses that in giving evidence to the subcommittee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence being given to a committee and such action may be treated by the Senate and the House of Representatives as a contempt. It is also a contempt to give false and misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground of the objection, and the subcommittee will determine whether to insist on an answer. If the subcommittee determines to insist on an answer, a witness may request that it be given in camera. I invite you to make an opening statement to the subcommittee.
Mr Chesworth : Thank you, senators and members for inviting us. The department does not have an opening statement. I trust you have our submission. We are prepared to proceed with questions and will do our very best to answer them. Anything that we cannot we will take on notice and get back as quickly as possible.
CHAIR: Member for Canning, as a Western Australian, and closest to the Middle East, you can be opening batsman.
Mr RANDALL: Basically this inquiry is, as you can see from the terms of reference, looking into any impediments or reasons why we have not been able to get more of a foothold in the Middle East. A number of things have been brought to our attention. For example, the fact that we do not seem to have enough representation in posts and our missions et cetera, or the long-term relationships that need to be fostered in order to get into the Gulf countries, the Arab countries. One of the things that has been also outstanding is that it appears our visa restrictions or complications make it harder for people who want to visit us or want to do business with us. We have had the department of immigration here trying to tell us that they do not believe they are any worse than anyone else, which does not mean to say they are any better than anyone else. Being from Western Australia where we have got a lot of agricultural products, resource products and energy products, that is obviously one of the things I would like to examine. My colleague who has arrived, Senator Sean Edwards, and I were recently able to visit Korea, and I understand that the UAE is building a significant nuclear facility with Korean technology, hopefully using our uranium.
I have just raised a broad cross-section of things with you that you may wish to comment on. Today we are trying to find out if you see the inhibiting factors I have raised with you as being an issue within your own policy areas, and if you have any suggestions for us in terms of this inquiry as to how we go forward with some of those issues.
Mr Chesworth : Thank you, Mr Randall. That is a very broad-ranging question. I will give an umbrella answer to start with and see if any of my colleagues want to make any specific comments. You have got it in one in relation to anything to do with visas and that sort of thing—we will defer to the department of immigration, which takes lead responsibility for those issues.
In relation to broad issues of agriculture products, the department is responsible for leading a policy that has come out of the government's Industry and Innovation Competitiveness Agenda—this has evolved since we lodged our submission. One element of that is the Growth Centres Initiative. One of those five growth centres which are being established is in the food sector. We want to do many things with that, one of which is to try to enhance the ability of SMEs in particular, which form an enormous part of the food sector in Australia, to get into global supply chains. It can be very difficult for them because of information asymmetries that they experience. If you can imagine being an SME and trying to understand what consumer preferences and choices are in the Middle East, it can be very difficult to do.
Mr RANDALL: Before you leave that, obviously there is the issue of live animal exports—cattle and goats—from Western Australia, and I understand South Australia has quite a large foot in this area as well, mainly in terms of sheep. We have had inhibiting factors before—some political, and some where people have tried to allege disease issues. We are trying to expand that industry. Animals Australia do not necessarily agree with the expansion, but we see ourselves as a good, reliable supplier of quality and healthy stock. Do you have any views on how we can further that, or on some of the issues that are outstanding at the moment? Do you want to address any of those?
Mr Chesworth : As you say, it is a very complex issue, with many interests in play. Certainly, Australia's red meat exports to the Middle East are increasing quite significantly. You may be aware of the recent report from Meat and Livestock Australia which talks about the Middle East and North Africa region being a long-standing and vital market for the Australian red meat industry. Strong economic growth in that region has meant that there has been significant economic opportunity for this country. The MLA's 2013 red meat market report said that Australian manufactured beef products accounted for 23 per cent of total product shipped to the UAE, for example. That is a really significant part of that market. As well as that, we have the live animal export trade and there is the value-added side of food exports, as well, which is in relation to particularly food that is processed within Australia and then exported, so a lot of the value is retained in this country. In particular, for the Middle East, this is a growing opportunity. We understand this is due largely to the region having scarce arable land and water for domestic food production, alongside rising per capita incomes and affluence and consumer spending. There is also within the Middle East a sudden proliferation of supermarkets and hypermarkets, so the ability to export high value processed food is there—good refrigeration and cold chain supply—which perhaps was not there in the past.
One of the things we struggle with a little bit is that there is some loose language thrown around about Australia becoming the food bowl to the Middle East or the food bowl to wherever. It is not particularly helpful, because food exports are an incredibly competitive area. We think that, as well as with live animal exports, Australia has a real opportunity to focus on niche supply of premium food products. A lot of this depends on attracting investment into the Australian food and agribusiness sector, and that is going to be really important for increasing production for growth opportunities in Asia and the Middle East. Last year, the ANZ Bank and Port Jackson Partners produced a report entitled: 'Greener Pastures', which suggests that to fully capitalise on the broad Asia-led dining boom, Australia's agriculture and agribusiness sectors will need around $600 billion of investment in our economic infrastructure.
Bringing it back to your original question, Mr Randall, we can always talk about things like the trade barriers that all countries claim to experience, but, within Australia, there is probably a bit that we can do in relation to infrastructure. That can be a really complicated thing in itself, apart from things like rail and roads. Anecdotally, we have heard that you can have beef farms where it may be the most efficient beef farm you can possibly have but if the last two kilometres of road can only take a four tonne truck, it is a break in the infrastructure supply chain. So, there is a lot of work to be done and it is not going to happen quickly with something—
Mr RANDALL: Finally, on the opportunities for us to try to grow the mineral resources into the area, and I mentioned the uranium—
Mr Chesworth : I hesitate to speak on that because our resources people are not here at the table, other than to—
Mr RANDALL: You have a policy person, mate.
Mr Chesworth : Well, I guess what I am saying is that in relation to some really good focus on mineral exports we could certainly provide something on that as to the committee.
Mr RANDALL: Okay, that would be good if you could provide something like that.
Ms GAMBARO: We have seen lots of figures being provided to the committee, but what are your most accurate figures for the total two-way trade between Australia and the Middle East. I have noticed you have said $10 billion exported to the Middle East, up from 7.9 in 2012, but to date what would be the closest?
Mr Chesworth : I might ask Mr Brennan to help you out with that question.
Mr Brennan : It is very difficult to—
Ms GAMBARO: I know.
Mr Brennan : Get combined information with all of the necessary countries. What we do know with the GCC is that our merchandise trade, which is non-services and non-investment-related trade, is about $12.3 billion.
Ms GAMBARO: That is non-service?
Mr Brennan : Yes. That is just the merchandise trade, so that would just be in agricultural products.
Ms GAMBARO: Two?
Mr Brennan : Yes. Our exports are primarily around what they unhelpfully term other and confidential materials, which is mostly resource-related activities, but also vehicle and car parts, meat, livestock and animal products, cereals and crops and electrical and machinery goods. With regard to services, we really only have trade figures for the UAE and Saudi Arabia. We exported about $592 million of services to the UAE in 2013-14.
Ms GAMBARO: Are they mainly engineering and education?
Mr Brennan : They are mainly around transport and services, travel services and other business services. With regard to Saudi Arabia, we exported about $352 million worth of services in the 2013-14 year.
Ms GAMBARO: Some of the impediments that have been listed are tariffs on some of our primary and other produce, and food labelling and licensing. Is the food labelling more onerous than we have here in Australia? What are some of the issues that SMEs and others have brought to your attention in terms of the difficulties they face?
Mr Trotman : I cannot properly report on food labelling within the countries that comprise the GCC. More broadly, I can say that Australia has very strong food labelling requirements. We are always advised by our trading partners that our food labelling is always much stronger than the food labelling that they have in their own domestic territories. I guess there are a range of behind-the-border barriers that we try to address as part of our negotiations with free trade agreements. With these particular countries that comprise the Gulf Cooperation Council, we see that the greatest gains would be made in addressing behind-the-border barriers to services trade—things like business registrations and so forth. Coming back your question on country-of-origin labelling, I do not have any evidence in front of me but I am happy to look into that, and if we can provide you with additional information—
Ms GAMBARO: Just one last quick question in relation to franchising. I notice that one of our Queensland companies, Coffee Club, has signed a licensing arrangement with a franchise group over there. Do you have any knowledge of how that franchising industry is going in terms of Australian franchisees—how the market entry is?
Mr Chesworth : Whilst we do not have any knowledge here, there is quite a bit of retained knowledge in the portfolio about franchising. Enforcement currently rests with the ACCC because of the Franchising Code of Conduct. Just to get some clarity: is your question about the operation of that franchise within Australia or the operation of Australian franchises?
Ms GAMBARO: There is a Franchising Code of Conduct that I worked on a long, long time ago. Having worked in the industry, I was more interested in the trade aspect of it, in the availability of Australian franchisees to set up franchises in the Middle East, and whether there are any barriers to their entry from the offshore component side of it.
Mr Chesworth : We could take that on notice. We would probably have to discuss that.
Ms GAMBARO: And any figures you could provide about what the uptake of franchises is, particularly Australian franchise groups.
Mr Chesworth : We will have a look at that. I suspect that the figures available will be only those from the trade association, the Franchise Council of Australia. They tend to keep a pretty close eye on what is going on. Whether they can break it down into Middle East or not, I am not quite sure.
Ms GAMBARO: What fascinates me is that I see the Coffee Club there, and I think to myself, how do you provide a consistently uniform product when there are shortages of dairy products, like the shortages of milk?
I am looking at the practicalities of it. What product do they develop for the Middle East market, which will somehow have to be consistent with what the franchise chain provides but deal with what is available locally?
Mr Chesworth : It is an interesting question. I guess the main benefit of franchises is that the business model issues in a good franchise are worked out. So one would expect that if there is an Australian franchise that is going to start operating in another country they would have a good franchise model established to deal with what could be some really significant supply chain issues. Again, I do not have the information at hand but we would be happy to go and make a few inquiries for you.
CHAIR: I want to ask about the normal trade barriers. If we are going to negotiate with different countries what about the uniformity of labelling laws. I understand from some of the evidence we have been given that country to country there are different labelling laws and use-by dates. I know in the meat industry, one of the use-by date issues is that if you send it frozen there is not much time left before that use-by date where other country labelling laws are concerned, which means it is going to be very difficult to continue that spending in the frozen rather than the chilled as it mainly is now.
Mr Chesworth : It is a really broad and complex issue. My response is quite guarded given that this is a hot topic at the moment and that the government is looking at this issue very closely as you would all be aware. Australia does have some really good technologies in this place, particularly in the meat space, because we track our processing better than most. As well as that there is the issue of what the purpose of the labelling is. We can always look at our colleagues across the Tasman who just got that 100 per cent New Zealand pure. It is like a marketing thing as much as anything else. They use that as an enhancement to the benefit of their food growers. It is really a flag waving exercise rather than consumers at the destination being particularly interested about whether the carrots come from a particular country or another.
As well as that, the Blewett review, which was conducted in the late 2,000s by the former health minister the Hon. Dr Neal Blewett, was a broad-ranging review of food labelling and various things. One of the things that came out of that was the sheer number of issues that can be raised in the context of food labelling. For example, the health community would say that you need to have things in relation to the health of foods and particular ways of doing that. We had other bodies saying that you should indicate whether there are nanoparticles present in the food. By the end of it, if everything was taken on there would not have been enough room on the label to put everything in place. And of course country of origin is just one of those things. So, yes, it is a very complicated issue. Food labelling, I guess, can be used for a number of different purposes.
CHAIR: You suggested that New Zealand model—the 100 per cent pure new Zealand—which to me seemed very effective. Is it a certification of some guarantees that go with it? It is a certification in effect.
Mr Chesworth : As far as I know, Mr Scott, they look after it pretty carefully. I reluctantly say that we have a bit to learn from our colleagues across the Tasman. The focus is so much on the efficiency and the scale of food production. They have really got their act together and with the focus on exports as well—
CHAIR: Sure have.
Mr Chesworth : of which their marketing is a significant part.
Senator O'NEILL: I would like to move on from that point. In your submission to us you indicated that competitors are doing much better in terms of creating this sort of visible national coordinated approach. You spoke about a figure of $600 billion from the report of ANZ and—was it?—Port Jackson Partners needed to make the niche food market just in Asia. What are we not doing? What is not happening that is preventing us from actually meeting the standard that those competitors clearly are?
Mr Chesworth : I will probably take this opportunity just to separate those two issues a little. I think that the $600 billion figure, which is a stupendously large figure, was a 'foresighting' figure over the long term to give an indication of what Australia's future infrastructure needs are—to be implemented right across the country to make the most of the export opportunity.
Senator O'NEILL: So that would include things like heavy rail, port facilities and—
Mr Chesworth : I think it includes everything.
Senator O'NEILL: So it is not just about agriculture investment?
Mr Chesworth : That is right. Most infrastructure is used not just for ag but for all other purposes as well.
Senator O'NEILL: Sure.
Mr Chesworth : Probably the people from ANZ would be best placed to do a breakdown of exactly where they got the $600 billion from. But, clearly, they are casting their net broadly.
In relation to the comparison figures that we use in relation to how countries present themselves: it is a difficult issue. We do have a federation—as you all know, better than anyone! We look at other models—New Zealand is the obvious one—where they do not have states and territories. There are the North and South islands, but basically they can put that difference aside to be able to present the one focus.
Canada is an interesting example, because there are some circumstances where the maple leaf is the main brand, but certainly on more than one occasion that I have seen—particularly in areas such as science and biotechnology—Quebec is quite happy to go off and market itself separately to the rest of Canada.
This is probably falling into the area of opinion, but to the extent that we fragment our marketing effort then it can appear confusing to other nations. They may be able to readily identify with Australia, but less so with our more regional areas. But, having said that, our federal system means that if a particular jurisdiction wants to go and promote or market themselves then there is not really much that can be done to do that.
If you look at Queensland and tourism, for example: they do a fantastic job in that—as also, I guess, do Tasmania and the Northern Territory. In the tourism sector you can see each and every one of the states promoting themselves overseas. So I think there is some further work to be done there.
Senator O'NEILL: Are you feeding into the state and federal relations white paper that is under construction? Clearly, this is an issue that relates to that. This committee, at a federal level, is hearing from other countries which seem to want to interact with Australia. Submissions are coming to us about Australia's interaction, rather than state based interactions, and yet we hear about the good work that states are doing in a range of sectors—that there is significant investment going into overseas missions and trade delegations. But, conversely, we hear that this confusion exists because there are so many different delegations from different parts of the country. They say, 'But didn't we just have the Australians last week?'
This looks like it is a complex sort of conversation and, given that significant change may be underway, I would be interested to see what your feed-in to that process is, and if you have a view about the balance between state and federal in this space?
Mr Chesworth : Certainly, the Department of Industry and Science is feeding into the federation white paper process. I could not say, off the top of my head, whether there has been any feed-in in relation to the way in which Australia is represented overseas. Off the top of my head, I think not.
Again, if I could take that on notice? I do not whether I can answer the question; if it falls into the realm of policy advice it may be a bit difficult to answer. But if I can get you something on that I certainly will.
Senator O'NEILL: Some of our comments here might highlight that as an issue from inside the tent anyway. I think it is one that has come up very often. There seem to be incredible inefficiencies—
CHAIR: It comes up all the time, I think.
Senator O'NEILL: It does. Can I go to another question? In your submission you talk about capacity with regard to manufacturing scale being unable to meet demand from large overseas markets, and you have articulated the management skills deficit and international knowledge. There seem to be some problems there, and we are getting feedback such as, 'Australia is a wonderful country but is not promoting and marketing itself' and 'there is a lack of knowledge of other cultures.' The bridging of these gaps is an issue that I would appreciate a comment on, and then I have a question to follow up after that.
Mr Chesworth : I think the issues around the extent to which we need to bridge trade gaps and those sorts of things do fall to the Department of Foreign Affairs and Trade and Austrade in particular. We do work closely with Austrade and we have been doing some work with them to make sure that the programs and service delivery provided by the Department of Industry and Science is aligned with the Austrade offering. I think Austrade are better placed to speak about this than I am and will focus very much on the opportunistic bilateral opportunities that come up in relation to trade. The department of industry has programs in place such as the Entrepreneurs' Infrastructure Program that can focus on things like improving management capability and improving a particular business to make them export ready.
There is not much more that I can say other than it is a job for life for the nation. The markets that we are focusing on now are not the markets that we were focusing on 30 years ago. The world being much closer together now means that you have to be far more switched on as to where those market opportunities may arise. Do you have anything to add, Mr Trotman?
Mr Trotman : No, I do not think I have got much more to add around management capability and those sorts of things. As Mr Chesworth said, some of those things might be better addressed by Austrade and DFAT when they provide evidence to the committee.
Mr Chesworth : On the general issue of management capability, governments over the years have undertaken reports to assess how Australian management capability tracks against other countries, and it does suggest that there is a bit of work to do in relation to that. In around 2009 Professor Roy Green issued a report called Management matters in Australia, which suggested that there were some skills deficits in that area. I think that goes right back to the Karpin review—and perhaps the Mortimer review in the 2000s, as well. It is a significant issue. I am not sure if it is the tyranny of distance or something that highlights these issues a little bit more, but management capability is an issue. It is not just for agriculture and food businesses; it cuts right across all businesses as well.
Senator O'NEILL: Can you recall if one of the skills deficits was cultural competency—or cultural awareness of very, very different contexts in which a product manufactured and delivered in a way in a Western context is inappropriate but possibly translatable to a Middle Eastern context if somebody only knew and it was easy to find out?
Mr Chesworth : I cannot recall. Anecdotally, there is plenty of evidence to suggest that when businesses are entering into a relationship with an overseas market, they have to know who they are dealing with and they have to understand the drivers that at play. With Australia's interactions with China since the early 1980s, we are lucky enough to have had 30-plus years' experience in having closer business engagement with China. But speaking for some of the larger businesses around the place, they have established links and they know how to deal, but for SMEs there is probably a bit of bit of gap there.
Senator O'NEILL: The last question with regard to the new technology area. We have talked a lot about traditional trade exports—live cattle, more processed meat, refrigeration and different markets emerging. Innovation, new technology capacities: these things are advancing in the Middle East. Indeed, I think you articulated the most fruitful area of potential collaboration is widening Australia's engagement with Europe to include the Middle East with regard to innovation and science and also to include Israel in the next iteration of connecting Australian and European science and innovation. We also note that there have been no programs in the Middle East since the international science linkages terminated in 2011. Despite that, Israel keeps seeking bilateral funding with Australia. I know that there is incredible start-up and innovation in the high-tech area going on in Israel. When I was visiting there, I knew that that was advancing. What is the impact of failure to fund these programs in an ongoing way, especially on the back of Catherine Livingstone's comments last night at the science dinner?
Mr Chesworth : I was not at the science dinner last night, Senator, so it is hard for me to—
Senator O'NEILL: She was worried about chopping and changing, things getting a start and then getting a stop.
Mr Chesworth : All I could probably really say in response is that we are aware of the amazing amount of focus that Israel puts on research and development, and I guess that would be in the food sector as well. We have had a visit from representatives. I think Israel has not just one chief scientist; they have about 12. It will be interesting to see how those relationships pan out. There is the establishment of things like the Tachyon in Tel Aviv and that sort of thing, with that really close drive between research and business outcomes. All countries take different approaches, and this is an issue which the government is currently considering.
Ms VAMVAKINOU: My question goes to the nature of impediments and, in particular, the food manufacturing industry. Recently in my neck of the woods in Melbourne, a report was commissioned about Melbourne's northern corridor and the possibilities of developing its already very successful food manufacturing industry, especially around small- and medium-sized industry and niche markets. Given the cultural diversity of that area, input into addressing some of the issues of food requirements seems a natural for our area because of the multicultural diversity of it. It is very successful. I am just noting here that it also seems that small- and medium-sized enterprises are the way to go in terms of the Middle East. Are you aware of marketing costs being an impediment to local Australian small- and middle-sized food manufacturing businesses in terms of them being able to successfully tap into what is potentially a very lucrative market and one that we in this country are probably very well poised to service, if we could.
Mr Chesworth : Ms Vamvakinou, marketing is one element. We have already spoken about knowing the market as well. Certainly to have those cultural influences in a particular area can mean that some of those bridges that we were discussing before may be overcome. For SMEs the challenges are significant but the opportunities are significant as well. I mentioned earlier the establishment of growth centres. We know that the Australian food industry is dominated by SMEs. They face higher challenges entering export markets. They often tend to lack the scale to meet demand and have weaker international management capability, and so to have a sustained export relationship can be quite difficult. I have mentioned the export market development grant. It is something that Austrade would be happy to provide advice on—they may already have. It is essentially direct assistance to the marketing efforts of Australian companies overseas, and that does have a real SME focus.
Ms VAMVAKINOU: I am sorry to interrupt and I was not here for your presentation. I guess the question in our minds is: how can we do it better, if necessary? Does it need to be addressed? Is it a question of more funds being made available and a more interventionist approach from the Australian government? I am looking at it from that perspective. If you can reflect on that, and even if there are already inadequacies with the current situation, I would appreciate a response?
Mr Chesworth : There are some industry led mechanisms, such as Food Innovation Australia Limited, Plenty Food Group and Food South Australia.
Ms VAMVAKINOU: The Plenty Food Group is our group in Melbourne.
Mr Chesworth : Indeed. They are all really important in supporting SMEs to reduce their search and transaction costs to allow them to get these opportunities. One other thing that we have found, particular with Food Innovation Australia Limited, is the idea of teaming. The business culture is to compete and compete. It can be quite uncomfortable for businesses to understand that, if you get together and team, it can actually lead to a much better export outcome. So, certainly, Plenty Food Group and FIAL—Food Innovation Australia Limited—have been focusing on that approach, not only in food. If you look back at some of the things in the Defence space that have been done in the past 10 to 15 years and the idea of getting Australian businesses with particular capabilities that can work together to present an export offering, it can work quite well in some circumstances. Would more money help? I am not really sure about that, because the government currently has just rolled out its growth centres initiative—with $108 million over four years—and so we are in the process of implementing that at the moment.
CHAIR: I want to ask you about the automotive side. I think you suggested that, with an FTA with the Gulf Cooperation Council, we can expand this market access to industrial parks for manufactured industrial products: minerals, metals, manufactured goods and automotive parts. With the decline of our automotive industry in Australia and maybe an automotive parts industry establishing, have you got any thoughts on how that might happen or what should be the focus with negotiating a trade agreement?
Mr Chesworth : As everyone is well aware, the automotive sector in Australia is going through significant change at the moment. The three major manufacturers will close at the end of 2017. We have been working closely with the manufacturers and tracking the extent to which the supply chain is keeping in place to support those manufacturers. I think for many of the parts suppliers the opportunity to seek markets outside Australia, rather than just focus on the Australian automotive sector, is really crucial. So there are two things, and all government can do is facilitate. It is business decisions that the businesses themselves have to make. They can either focus on doing different things, which is why we made reference to industrial products more broadly, or they can focus on doing what they are doing and expanding their markets. So it comes back to that issue of seeking opportunity. The Middle East is a significant importer of motor vehicles and, to the extent that Australian parts manufacturers can be involved in that, we have got some initiatives in place to help them do that. So we have a couple of programs in place to help parts manufacturers adjust their businesses and find new opportunities.
CHAIR: One of the focuses of the inquiry also is trade and investment opportunities, which is investment back into Australia as well. There has been some reasonably significant investment in agricultural land from Qatar. Unless the United Arab Emirates have got leisure resorts, is there much of an interest in investing in Australia, and in what particular field, from the GCC particularly?
Mr Chesworth : I am not aware of any particular circumstances but the government obviously is very keen to promote inbound investment where possible. As one example, we have implemented a Tasmanian-focused initiative whereby the Commonwealth and the Tasmanian government are working very closely together to ensure that when there is a proposal for some inbound investment the regulatory barriers that can seem insurmountable to someone wanting to invest are, at least, reduced as much as possible, or the right information is given. For example, if there was a major investor wanting to go and look at the Tasmanian dairy industry, or something like that, both the Commonwealth and state government would work together to ensure that a clear suite of information was provided so that the potential investor would know what they have to do to meet the obligations of investing in that country.
CHAIR: What about on the cultural side? As part of our inquiry into trade and investment we are also trying to understand the cultural issues of exporting to the GCC and the Middle East region generally. Do we do it well? Is there something more we should be doing in relation to the understanding of the cultural needs?
Mr Chesworth : To be completely straight, I have no idea. It is right outside the remit of our portfolio. Certainly as the department of industry we sort of see ourselves as the department of business. To the extent that we are lucky enough in this country to have such ethnic diversity, there is a hard edge to that which is: can we leverage that ethnic diversity to build markets with some key opportunities overseas?
Ms VAMVAKINOU: You thinking about doing that? Sorry, I did not catch what you said. It is not within your scope to analyse or to assess—is that right? It is a difficult thing to analyse and quantify, I understand that. But it is there and it is important. I just wonder how we do it.
Mr Chesworth : I am using the old bureaucrats trick of thinking, 'What portfolio would that fall into?' There is nothing particularly evident, so if that issue came up it is something that we would like to look into broadly and take an interest in. We never really say no to anything.
CHAIR: It is rich country in terms of oil and gas and exports. Do we actually import much directly from the Middle East, or does most of it come through refineries out of Singapore? As part of any agreement, would we be looking at importing directly from the Middle East?
Mr Chesworth : We do import oil. About 15 per cent of the oil that comes into Australian refineries is from the Middle East, and it is mostly from the UAE. That is where the majority of it comes from. It is certainly, probably, one of the bigger import figures that Australia has in that list of countries that encompass the Middle East. We also import some LPG—not a lot. We also export some LPG to the Middle East. There is a little bit of it going both ways because the composition of LPG is slightly different, so our market participants sometimes take the opportunity to send it there and also to buy it. With your question about importing indirectly, about 30 to 35 per cent of what comes into Australia from the Asian refineries in particular has its origins as Middle East crude that has gone into Asian refineries.
CHAIR: Could we be an outlet for refining in Australia? Singapore are obviously making a name for themselves in this space. Parts of Australia are almost in the same time zone. That would require investment, obviously.
Mr Chesworth : My sense is that I do not think we would see ourselves as a huge exporter of refined product to that part of the world. I think some product does go out in the region, but in the end it is a commercial judgement as to whether it is economic for you to send it that distance or whether you look for smaller markets. Most of the refineries here are really geared to deliver to the domestic market, and the market is short in terms of refining capacity here, so the additional amount of demand here is met by imports of refined product.
Senator EDWARDS: Do you do any work on airlines' capacity, which is either underutilised or over capacity and there is demand for more capacity, going in and out of this country?
Mr Chesworth : I think that would fall within the Department of Foreign Affairs and Trade, where tourism policy resides.
Senator EDWARDS: I am talking about freight. I hear that that is the moneymaker for airlines. We had a presentation yesterday by Sydney airports, who said that freight is obviously driving a lot of the activity and growth out of Sydney. I am just wondering whether, if there is any latent demand, you would do any work in this space to identify whether there is empty cargo space that we should be filling and giving to industries that can fill it or whether we should be putting pressure on the airlines to provide more freight for areas that do not get serviced?
Mr Trotman : That is probably not something that is best addressed from within our portfolio. It is probably something, as Mr Chesworth said, that the department of foreign affairs or, alternatively, through the air services agreements are negotiated with the department of infrastructure.
Senator EDWARDS: You are the growth policy guys.
Mr Chesworth : We are.
Senator EDWARDS: You would see it anecdotally, do you?
Mr Trotman : It is not something that has been brought to our attention, necessarily, as part of our growth policies in the various sectors that we have been focused on.
Senator EDWARDS: It is a potential inhibitor of our growth, isn't it?
Mr Trotman : If there is latent capacity for extra resources and extra commodities to be put on empty aircraft, then certainly, yes, that is something that the government should look at, but it is not really something that our portfolio has looked at.
Senator IAN MACDONALD: My apologies for being late. You may well have spoken already about the two per cent to five per cent tariffs in Middle Eastern countries that you mentioned in your submission. Can you tell me whether those tariffs are meant to protect any local industry, or are they just there as a revenue raiser for the recipient countries.
Mr Brennan : Being so low, we would suggest—we have no evidence one way or the other, but knowing the experience of tariff profiles around the world—that they are probably closer to fulfilling some sort of revenue raising rather than an industry protection goal. Given that their size is so small they can potentially be affected by things such as currency movements and so forth. We would not believe that they would necessarily represent a protective element.
Senator IAN MACDONALD: Your department is involved in the free trade negotiations, isn't it?
Mr Brennan : Yes, we are.
Senator IAN MACDONALD: You are not the lead?
Mr Brennan : No. The Department of Foreign Affairs and Trade leads; we provide technical advice.
Senator IAN MACDONALD: If the free trade agreement were to come to pass, would that two per cent to five per cent go?
Mr Brennan : A goal of the free trade agreement would be to eliminate the tariffs on both sides. That has been the nature of the agreements we have tried to fulfil as much as possible.
Senator IAN MACDONALD: Do you know whether those tariffs apply to everybody or just to Australia?
Mr Brennan : It will be their most-favoured nation tariff, so they should apply to all countries unless they have a free trade agreement or some similar arrangement with particular countries. For instance, some countries have agreements with the United States, so they would have a lower tariff profile, if not a fully eliminated profile.
Senator IAN MACDONALD: Does the two per cent to five per cent impact much on Australia's exports as a disincentive?
Mr Brennan : Anything that helps you be more competitive with other countries in a market is of assistance. Certainly Australian industry tells us that even five per cent or slightly lower tariffs can be the difference between them being competitive in a particular market with some competing countries. We would see them as being a significant target in any trade agreement, should negotiations restart.
Senator IAN MACDONALD: Just on another subject—I thought Senator Edwards might have raised this—do you see any prospect at any time in the future of Middle Eastern countries being interested in uranium?
Senator EDWARDS: It was raised earlier.
Senator IAN MACDONALD: It was raised by Senator Edwards?
Senator EDWARDS: No. It was raised by Don Randall, reliably.
Senator IAN MACDONALD: All right. I will not pursue that.
Mr Chesworth : The end of that discussion was that I undertook to take on notice the potential for minerals exports to countries of the Middle East. Does that potentially cover off your issue?
Senator IAN MACDONALD: Some of the Middle Eastern countries are rapidly running out of oil, or have never had it, and of course they do get oil from their bigger Arab neighbours—I guess at favourable arrangements. I was just wondering whether any of them were seeking to be a little bit independent of oil.
CHAIR: The Senate bells are ringing.
Senator IAN MACDONALD: Anyhow.
CHAIR: We are really out of time, but a quick question: what is actually driving the growth in opportunity for Australia's fresh food and baby foods and all of those things? What is driving it?
Mr Chesworth : It is just increased demand.
CHAIR: And it is all domestic? It is not re-exported?
Mr Chesworth : In general, Australia has a mature domestic market, and so the real growth opportunities are to emerging nations overseas and the burgeoning middle class of our near neighbours.
Ms VAMVAKINOU: Just on that, it is probably important to note an attitudinal thing towards the quality of our food and the safety. Quality control of Australian food is really important. How do we compare with some other like-minded nations?
Mr Chesworth : I do not know the answer to that question, only to reiterate that food quality is very important. We have seen some front-page stories in the Fin in the past four or five months of milk producers in Australia exporting directly to China, and it appears on the shelves in Shanghai at $8 a litre, and the reason for that is the quality.
CHAIR: Why do we ban people—high-wealth individuals from the Middle-East, from the Emirates—bringing their sports cars to Australia when they travel out here, and putting them in the hold of their plane? They can apparently take them to the UK and elsewhere, but they cannot bring them to Australia. Is there a reason?
Mr Chesworth : I defer to my colleagues in the Department of Immigration and Border Protection on that issue.
CHAIR: Should we put that on notice to them?
Ms VAMVAKINOU: We do not have any visas for sports cars!
Mr Chesworth : Put it on notice to them, certainly.
CHAIR: I have just been advised it may well be a car protection thing. Anyway, we will direct it to where it should go—I just had a little note passed to me. We are out of time—and we will be out of members in a moment too. Yes, please?
Mr Chesworth : Could I just add one comment for the record. Senator O'Neill raised an earlier question about strengthening export preparedness and overcoming some difficulties for SMEs entering export markets. I should just like to place on the record the work of—I have mentioned them—Innovation Australia Limited. They currently run export training programs, they have inward buy emissions and they also have a marketing e-catalogue. I just wanted to mention those three things as some practical things that are actually happening.
CHAIR: Thank you very much. That concludes the day's hearing. Thank you for making yourselves available, and for your evidence to the subcommittee. If you have been asked to provide any additional material, which I know you have, or there is any further information which you would like to provide, please forward that to the secretariat. You will be sent a copy of the transcript of your evidence, to which you may suggest corrections.
Resolved that these proceedings be published.
Subc ommittee adjourned at 12:03