Senator COOK (Deputy Leader of the Opposition in the Senate) (12:28 PM) —The Export Finance and Insurance Corporation is, I think, a very important government commercially established entity. It performs a role that hitherto the private sector has been loath to commit themselves to. Its role is to insure Australian exporters against commercial risk when they are exporting goods or services, or commodities, to markets in which payment for their exports might be questionable. When you are dealing with some of those countries—some of which are in the Middle East, perhaps in some commodity areas currently in Russia or in some of the former Soviet republics—where you are selling to the state or to some commercial providers, if you are delivering over time there is a question mark over whether always you will be paid in full.

Yet they are important markets. One does not expect these economies to remain poor economies forever; one expects them to grow. If Australia can nurture those markets and develop a `conactivity' between our exporters and their purchasers, then as those economies expand greater opportunity for Australian exports ought to arise. So that there is no commercial loss and exporters have some protection, it is very important that they have a forum to which they can go which can expertly assess what the country risk is and help them insure against loss in the event of under or non-payment.

That is an important function, because Australia has 1.7 million of its work force employed in industries which earn their livelihood from export. It is important because 21.3 per cent of our GDP is derived from export and the future of this nation in terms of being able to deliver better living standards to its community is dependent upon us being more aggressive in the international marketplace and expanding Australian exports. If we have saturated the domestic market, the only other markets open to us are those elsewhere in the world. If we can win a bigger share of those markets, quite clearly more Australians will get jobs in this country. If one looks at jobs in the export sector, these jobs tend on average to pay more than jobs in the domestic sector. They are better paid jobs. If those jobs are at the top end of our exports in the form of elaborately transformed goods—which is the statistical definition of complex and sophisticated manufacturing goods—then they are brain based jobs which go to Labor's vision for the future of this nation as an intelligent island and a country committed to a high paid, high skilled and highly educated work force.

In the context of all of that, EFIC plays an important role. In considering any proposed legislation pertaining to EFIC or trade, it is important to put the agency in the context of what it does. It is also important to put the agency and our trade aspirations in the context of this government's performance. It is important to recall three records that the Howard government now hold. Amidst all of the talk about fireproofing the Australian economy from the Asian downturn, they do not like us pointing out three basic and fundamental facts about Australia's export record under them. Australia now has the largest ever trade deficit in its history; a deficit of over $16 billion for the calendar year 1999. We have the largest ever current account deficit in our history; over $33 billion for the 1998-99 financial year or, if you want to take the calendar year concluded in the September quarter 1999, it went up another $1 billion to $34 billion for the 12 months to the end of the September quarter last year. We now have the highest level of net foreign liabilities, that is to say, we have borrowed more from the rest of the world than ever before. We are in greater debt than we have ever been. That is now figured at $358 billion to the end of September on a calendar basis last year.

Put simply, regardless of what Australia's internal position might be or the strength of our domestic economy, our position with respect to the rest of the world has never been worse. Whilst we are buying and borrowing more from other countries, we are selling and repaying our loans at a lower level. A table produced by the Parliamentary Library explicitly sets out the trend. The line is relentlessly down in terms of trade deficit, current account deficit and net foreign liabilities. It is not just the broad statistics that are ugly; some of the detail does not make particularly pleasant reading, either. Consider the markets that we sell to. Our two largest Asian trading partners are Japan and South Korea. They are steadily pulling themselves out of recession, although there has been a bit of a blip downwards in Japan over recent months. Yet our exports to Japan as they have continued to come out of recession—and it is the same with Korea—remain flat, and those to South Korea recently dropped by a whopping 23 per cent. In other words, as their economies got bigger, we have sold them less and this is our prime market.

If senators think that is bad, try to imagine how the Howard doctrine is likely to affect our exports to Asia. As Griffith University's Professor Nancy Viviani put it back in September last year, John Howard has taken Australian foreign policy back to the 1950s and that is grim news for our exporters. The job of government in export industries is to open doors for exporters, not close them. A studied lack of interest in the region by this government, particularly from the Prime Minister, talk about Australia being a deputy sheriff to the US in Asia, and overweening hubris from Mr Howard strike a sour note among many of our Asian trading partners.

Senator Ian Campbell —Is that you or Viviani speaking?

Senator COOK —That is me speaking. But Viviani made the point that the Howard doctrine and the stance by this government on foreign policy harks back to the 1950s. It does not look forward to this new century but is anchored somewhere in the middle of last century. It means commercial disadvantage for our exporters in the marketplaces so dear to us and so important to the growth of our external economy.

Senator Ian Campbell —The place you fly over on your way to Paris—that sort of approach, is it?

Senator COOK —They are the places I go to more often than anywhere else outside this nation. Take the composition of our exports as well. I have talked about markets. Let us look at composition. Recently released statistics show that our exports of manufactured goods fell over the past year. Not only did they fall overall, but the fall was greatest in elaborately transformed manufactures, the exports of which dropped by five per cent. That is, the goods that are the most complex manufactured goods involving the most intelligent input and the highest skill in Australia that we sell to the world, the ones that we want to make our mark on in the globe, actually declined. That is the legacy of this government.

We want an intelligent Australia. The export market declined because the underpinnings that government brings to support the concept of a knowledge nation—the aspiration that Labor aspires to—have been removed by this government successively over time. The elaborately transformed manufactures sector, which we should be promoting if we are to realise the goal of creating a high skilled, high wage Australia, has been in decline and our exports of these goods have been shrinking. As I have said, Labor wants Australia to be the knowledge nation, to be a leader in the new economy and in the IT and information based economy of this century. But the Howard government is looking backwards to the past through a glass darkly, believing that educational opportunity will trickle down if you privatise our school system and that equality of opportunity will somehow emerge out of a harsh application of rational economic theory. That is not true. In order to lift our economic and trade performance in this area, we need to support our education system more strongly.

It is necessary to remember this background when we turn to the EFIC Amendment Bill. This bill applies the principles of competitive neutrality to EFIC, ensuring that as a government business it does not have competitive advantages over its private sector competitors simply by virtue of public ownership. Labor support the principle of applying competitive neutrality to Commonwealth statutory authorities. We support it so that competition in the marketplace is fair. We supported it in government under the Keating government. The notion of furthering the development of the private sector export insurance industry is, in our view, a goal worth striving for.

Let us not make any mistake about this either. This bill, in some respects, bears the possibility of hurting Australian exporters at a time when our export performance is less than desirable. With respect to EFIC's short-term business, it imposes on them a new guarantee fee, a new debt neutrality charge and a tax equivalence payment to the government. Taken together, it is hard to estimate what effects these additional charges will have on EFIC, since the bill gives no clue as to how large they will be. The levels of those charges are left to be determined by the minister. But we do not have guidance as to what he will do about them.

The general effect is clear. The Parliamentary Library said in its analysis of the bill:

I find it hard to see why, at a time when Australia's trade deficit is at an all-time high, the government would be introducing a bill which may increase costs on exporters. This is all the more incredible when you consider that the explanatory memorandum to the bill states proudly:

Those considerations have to be borne firmly in mind. But in giving a rounded consideration to this bill, it must be said that, on the other hand, private sector competition in the field of export insurance can bring the advantage of more competitive fees for our exporters, greater private sector knowledge of international markets and help build an export culture in Australian industry that should be encouraged to develop further. Having said that, we are concerned, however, that private sector interest in this new market which will be opened by the imposition of competitive neutrality to EFIC will focus only on the most profitable sectors of the market, leaving EFIC to mop up in the less profitable sectors in the national interest and take a national interest responsibility for financial markets, driving EFIC into marginal or unprofitable activity.

I remind the Senate that EFIC is a commercial agency that is required to operate commercially. If it is driven to marginality or unprofitability, that affects its commercial viability quite profoundly. If that occurs, I want to put on the record now that the Labor Party would not support any attempts by the government to further undermine EFIC in whatever form, particularly if they attempt to point to its commercial performance, driven by the nature of this legislation, and argue, therefore, that EFIC is not commercially viable or competitive. If that were to be raised, the Labor Party would not support this legislation. We would seek to entreat the government to return EFIC to a more viable format.

The ACTING DEPUTY PRESIDENT (Senator George Campbell) —Order! The time being 12.45 p.m., we will proceed to government business.