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Thursday, 27 May 1999
Page: 5577

Senator COOK (1:31 PM) —Trade matters. In the last financial year, Australia's exports amounted to $114 billion, over one-fifth of the value of Australia's gross domestic product. Looking at our top exports and imports, sales of coal, gold, wheat, wool and iron ore allow us to buy cars, computers, computer parts, petroleum and telecommunications equipment—not a very diverse bunch of exports, and that is part of the reason why the Export Market Development Grants Scheme does need to be expanded. But trade matters not only for economic reasons. In the words of the British policy analyst, Geoff Mulgan:

The world can be more easily unified through the peaceful activity of buying and selling than through international treaties or fantasies of world government . . . Trade breeds trust, and trust breeds trade.

Tantalising stuff. At present, however, Australia's trade is in a parlous situation. This government holds two records in the trade area: (1) Australia's highest ever trade deficit of over $10 billion for calendar year 1998 and (2) Australia's highest ever current account deficit, in original terms, of $28.6 billion for calendar year 1998.

The Asian economic crisis has caused particular difficulties for exporters. Extra work is required just to remain a presence in their Asian markets and yet, if they do not keep their foot in the door, they will have additional work to do as the Asian economies inevitably recover. At the same time, exporters need to look for new markets in North America and Europe and to make up for lost sales in Asia. Both of these tasks are made much simpler by a government that understands the needs of exporters and is willing to give them the support they deserve, not the parsimony and the red tape epitomised by the current export market development grants legislation.

But then there is the GST. What impact will it have on exports? If you believe Tim Fischer, exports will go up under a GST. But the experts do not necessarily think so. Take, for example, tourism. Mr Murphy, the government's modeller of choice, says tourism will decline as an employer and as an industry as a consequence of the GST. Secondly, Treasury's analysis also indicates that the GST will lift the exchange rate of the Australian dollar by some 3.5 per cent. The government's preferred modeller, Mr Murphy, says that it could be as much as 4.1 per cent. Either way, it will make our goods and services much more expensive in overseas markets. With a record trade deficit, a record current account deficit, the Asian crisis and a GST looming on the horizon, the Export Market Development Grants Scheme is one of the few bright lights for exporters. Yet what did this government do to the EMDG Scheme when it came to power? Typically, it slashed its funding. As Senators Forshaw, Hogg and I said in our report when the Export Market Development Grants Scheme Act 1997 was considered by the Senate Foreign Affairs, Defence and Trade Legislation Committee:

It is clear from the evidence before this Committee that the significant narrowing of the scheme will disadvantage a great number of Australian exporters.

The Howard government, unfortunately, took no notice of our warning. They brought in extra red tape and capped the scheme at $150 million per annum. $150 million is pretty stingy for a scheme like this when you consider that this is the same Howard government that earlier this year gave $100 million to Comalco to develop a gas pipeline in Queensland.

To see the effect of the 1997 Howard government's slash and burn philosophy you just need to compare Austrade's 1996-97 and 1997-98 annual reports. There are three points: (1) total export market development grants down from $213 million to $147 million, a fall of 31 per cent; (2) total number of grant recipients down from 3,553 to 2,933, a fall of 17 per cent; and (3) total jobs attribu table to the Export Market Development Grants Scheme down from 77,000 to 59,533, a fall of 22 per cent.

The government should remove the cap it has placed on the scheme. During the last financial year, the cap was not met. Grants and administration costs amounted to some $3 million less than the $150 million cap. But next year the cap is likely to bite. In fact, my sources tell me that, in the coming financial year, exporters will get back only 80 per cent of that which they claim. Who will be hurt by this? Our cutting edge exporters, of course.

I now turn to the amendment foreshadowed by Senator Stott Despoja requiring Austrade to undertake a review of the Export Market Development Grants Scheme with a view to placing it on a permanent footing. Labor strongly supports this amendment. The Export Market Development Grants Scheme has operated continuously from 1974—nearly one-quarter of the time since Federation—and yet it is still considered a temporary scheme. It has no firm legislative footing. It requires extension in dribs and drabs. At least for most of its history, it has been extended in four- and five-year blocks. But this time the government proposes to extend it by only two years. You can see the writing on the wall.

Had the Democrats' amendment not been foreshadowed, I would have brought forward one of my own to extend the scheme for another four years, but I prefer the review mechanism to look at placing the scheme on a more permanent footing.

The industry—that is, the exporters of Australia—are strongly in favour of a longer horizon for the Export Market Development Grants Scheme. They require long, strong signals from the government that this is a stable scheme and that they can plan their corporate vision and their corporate strategy to lift exports knowing that the scheme will be there and can be relied on.

In a recent letter, the Export Consultants Association wrote to me of the value to them of being able to plan with more certainty and make long-term commitments for export marketing activities. In that letter, they said:

In the current economic situation in Asia, exporters should maintain a presence in markets which have provided good opportunities in recent years but are currently suffering a decline. Many Asian buyers have been critical of Australian exporters in the past for disappearing when times were not so good and, if this is repeated, long term damage would be caused to Australia's prospects in those markets when they recover.

The ACTING DEPUTY PRESIDENT (Senator Ferguson) —Order! Senator Cook, I understand you are speaking to an amendment that is not currently before the chair. I understand the amendment will be moved in the committee stage of the bill. There is no amendment before the chair, and you are speaking to the amendment now. It should be debated in the committee stage.

Senator COOK —I am speaking broadly to the bill and the foreshadowed amendment. What I say now will save me having to repeat it later.

The ACTING DEPUTY PRESIDENT —I understand, but there is no amendment before the chair.

Senator COOK —No. But I am fully expectant—and I note for the record the affirmative head-nodding of Senator Stott Despoja—that there will be one. If I could complete my remarks, that would save us some time. Let me resume the quote from the Export Consultants Association's letter. After emphasising the importance of Australian exporters maintaining a presence in the Asian market, they go on to say:

It is therefore critical that the government encourage Australia's exporters to maintain their presence in these markets and the EMDG program can assist in achieving this goal.

We must also remember what this government hope will be the situation in mid-2001 when their extension to the Export Market Development Grants Scheme is due to run out. Under their plans, Australia will have had a GST for a year. Let me quote from another letter—from the Inbound Tourism Organisation of Australia—representing an industry which earned the nation over $16 billion last year. The letter states:

The prime purpose [of the Bill] is to extend the life of the Scheme by a further two years. We do not consider this provides adequate certainty to our industry. If for some reason the government is able to get its ANTS legislation through the Senate the inbound tourism industry will be dealt a serious blow. Having achieved this then we can expect the Treasurer to move to terminate the EMDG scheme . . . This would be a double whammy for the tourism industry.

I emphasise that it is this industry that offers mostly young people—and particularly job seekers—their first taste of employment, that it is this industry that is the strongest growth industry in creating jobs in Australia; and that organisation, the Inbound Tourism Organisation, speaks for a large part of it.

Labor strongly supports the proposed review. We will be putting to it our view that the Export Market Development Grants Scheme should operate on a permanent basis. It should still be subject to periodic review, but the onus should be on those who seek to do away with the scheme, not on those who wish to see it continued. I understand the government is also supporting the Democrats' amendment. I sincerely thank Minister Fischer's staff and Senator Brownhill—who is in the chamber—for the thoughtful and constructive way in which they have approached discussions on this legislation. We did not reach agreement on every point, but there was broad consensus that the Export Market Development Grants Scheme is a good scheme. I hope that, when it comes to the review next year, there will be bipartisan consensus to put export market development grants on a permanent footing. I move:

At the end of the motion, add:

"but that the Senate is of the opinion that:

(a) in view of Australia's record current account deficit (over $28 billion in 1998) and record trade deficit (over $10 billion in 1998), there is an urgent need to increase exports;

(b) the Government's 1997 imposition of an annual funding limit at the same time as the introduction of more red tape for small exporters has had the effects of:

(i) reducing funding for exporters under the EMDG scheme from $213 million to $147 million—a fall of 31 per cent; and

(ii) cutting the total number of EMDG grant recipients from 3,553 to 2,933—a fall of 17 per cent; and

(iii) slashing the number of jobs created by the EMDG scheme from 77,000 to 59,533—a fall of 22 per cent.

(c) the Asian economic crisis has increased ongoing costs for small exporters in maintaining a crucial foothold in Asia, while imposing new costs as they search for other markets to replace lost sales;

(d) the Government should remove the $150 million annual funding limit applying to the Export Market Development Grants scheme".