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Monday, 13 May 1985
Page: 1832

Senator VIGOR(5.59) —The statement of the Minister for Trade (Mr Dawkins) which has been tabled is a motherhood statement. Unfortunately, it describes a number of problems but it does not give any real solutions. Since the mid-1970s, under successive governments, Australia's foreign debt has grown alarmingly. In 1974-75 our debt would have been almost $5 billion. It increased to $28 billion by the end of the Fraser Government's term in 1983, in large part through private borrowing for a non-existent mining boom. By late 1984, under the Hawke Government, our foreign debt reached $40 billion. At the same time, although we hold foreign reserves of over $10 billion, our capital inflow is at best sporadic, much of it being of a speculative nature.

In these times when economic issues, particularly employment and, lately, the complexities of international currency movements have become news in Australia, the perilous foreign debt situation has yet to be realised by our people. Yet, unless we can survive this huge debt, our financial situation will become such that our overseas credit rating will fall, interest rates will rise, import restrictions will have to be applied, unemployment will grow and living standards will fall. Few Australians seem yet to understand the social and political implications of Australia's current external financial situation. We have in fact become economic junkies, borrowing more and more abroad to maintain living standards which are not sustainable in the long run. We are living beyond our means. In the face of this situation, the country not only needs to produce more efficiently but above all it must sell abroad more efficiently to lighten its foreign debt burden. We are now in the same situation as Britain was in 1940. We must export or die.

It is ironical that Australia, which owes its great wealth to agricultural and mineral exports-wealth which has spawned its modern complacency-is now neglecting agriculture. It is neglecting the dairy industry and the dried fruit industry. There can be no easy or short term solutions to the economic problems we are confronting. A revitalised export sector is essential and will provide a fillip to economic recovery as a whole.

Australian exporters now need a stable and long term commitment from this Government to allow them to plan for expansion. Since 1961, with the introduction of the export marketing development allowance-the EMDA-and the pay-roll tax rebate-the PTR-there has been a series of changes to what little export incentive was given. This has not been conducive to a stable environment for the export sector. In the 1980s there has been an active discouragement of exports through government's failure to support them. With its distorted and fundamentalist view of the world economy, the Fraser Government did away with one of our most constructive export schemes in 1983. This had a considerable impact on pro- cessed and manufactured exports. I am talking about the export expansion grant-the EEG. These grants provided a real incentive at a low budgetary outlay as they were based most realistically on proven export performance. The schemes supported exports to the extent that payments would be made only if the exporter increased his share of the world market, and then based only on solid evidence. However, all grants under the EEG were taxable. The cost of the scheme, at its highest, was only 0.5 per cent of our budgetary outlay and probably brought back to the country at lot more money through its encouragement of exports.

The abolition of the EEG scheme put Australian exporters at a considerable disadvantage in the competitive world market. Australia cannot afford to continue to be a trading pacifist. If we cannot use our influence to create a new and just world economic order with more stable exchange rates and no dumping, we must at least be prepared to become aggressive traders. The Government's response so far has been to establish the new Australian Trade Commission. This is the only concrete proposal in the paper we are now discussing. It is just simply a band-aid. However, we applaud it. It is a good measure, but it is not the evidence that we are looking for that Australia is prepared to market its products vigorously and aggressively in the face of unfair international competitive practices. We must be prepared to support export industries entering into bilateral trade agreements which include the possibility of bartering our commodities. After all, the major problem for our export sector is that incentives offered to our competitors by their home countries are growing while the support we give our exporters is decreasing. The result is that Australia as a trading nation is disadvantaged in the world market-place.

The EEG scheme was abolished outright because the Fraser Government felt, I presume on Treasury advice, that it contravened the General Agreement on Tariffs and Trade-GATT. In this quixotic gesture to favour economic purity, we managed to cut off our nose to spite our national face. When international pressure against the United States Domestic International Sales Corporation scheme, or DISC scheme, for tax deferrals on export earnings grew because the scheme was said to contravene GATT, the United States simply modified it into the Foreign Sales Corporation scheme, or FSC scheme, which follows the letter, if not the spirit, of GATT. Similarly, New Zealand, our close neighbour, showed realism when it acceded to the Multilateral Trade Negotiations code on subsidies and countervailing duties by expressing the formal reservation that it would 'examine' methods to bring its own export incentives schemes into conformity with the code within 'a reasonable period of time'. The ability of both New Zealand and the United States to get around or to simply ignore GATT places Australian agricultural exports at a disadvantage. The USA can sell its grain and New Zealand can sell its dairy products at our expense.

The former Minister for Trade, Mr Bowen, identified in 1984 more than 2,000 non-tariff measures used by our competitors to the advantage of their exports. The United States and the European Economic Community in particular are both guilty of incentive schemes amounting to subsidies for exports in flagrant contravention of the GATT principles that Australia still takes seriously.

The United States provides, under Public Law 480, a scheme tying foreign aid to United States agricultural exports, is offering finance of up to 40 years, with 10 years grace, at 2 to 3 per cent interest to less-developed countries. While the Australian Wheat Board has in 1985 granted three-year credit facilities to certain developing nations of Latin America, there is no way that it can compete with the virtual hand-out credit terms of Public Law 480. It is interesting to note that Australian wheat which has been sold to Latin America from the 1984-85 crop has been handled by multinational corporations and that while the Wheat Board has made the sales the gain to Australia has not been as great as it would have been had the sales been channelled through Australian companies. The role of multinationals in marketing Australian commodities will have to be addressed. It must be addressed by this Government, and soon. The United States also maintains the Commodity Credit Corporation, or CCC, which guarantees finance within the United States financial system for foreign importers of United States agricultural products. That is in addition to the DISC-FSC scheme which provides fantastic fiscal incentives to United States exporters.

The European Economic Community has a system of incentives varying from country to country within the Community. There are value-added tax exemptions on goods for export in all EEC countries. The common agriculture policy export restitutions scheme subsidises EEC exports. Many countries of the Community, for example, France, Belgium, the Netherlands and West Germany-offer taxation provisions by allowing the overseas income of foreign branches and subsidiaries of their own national companies just to be taxed abroad. This incentive will be taken up only if tax is at a lower rate than in their country of origin. This is called 'avoiding double taxation'; it amounts to effective subsidisation of exports. We in Australia have no such schemes. We are pure; we are poor.

The meeting last week of Western leaders in Germany clearly showed that the leading countries in the Organisation for Economic Co-operation and Development-OECD-are not willing to abandon their relative trade advantages in world markets. They will not change. It is Australia that must change. We in Australia must face the realities of international trade and act pragmatically in the national interest. Certain measures must be taken inside Australia. We need a publicity and educational campaign within the country in the form of an export drive, so that the population at large realises that its well-being and living standards depend on Australia's ability to export. We need to support Australian exporters by schemes similar to schemes used by our competitors, based on performance. The support schemes will be continued only for exporters who perform, and such schemes must take into account Australia's inherent geographical disadvantages and the consequent cost of transporting Australian goods overseas. We need government action to reduce the incredibly long time it takes to move goods through Australian ports. Current delays caused by union demarcation disputes have added considerably to the cost of exporting from Australia. We need a comprehensive inquiry into the structure of duties in Australia, with the aim of reducing duties where this directly leads to increased export costs. We must encourage the provision of Australian transport, insurance and other services in order both to increase our invisible credits and to reduce our invisible debits.

No scheme will be easy or produce short term miracles. Yet in the fact of our huge foreign debt, an active and productive export sector can produce the much-needed foreign income to cover the national debt. We are, I believe, now faced with the distinct possibility that tomorrow the Government will reduce the single remaining support to Australian exports, the export market development grants, or EMDG, scheme which has been in place since 1973. The EMDG scheme has never been overly generous. In the 1984-85 Budget its total expense accounts for only 0.25 per cent of the Budget outlay. Had it not been for the EMDG scheme, many small companies would not have been able to meet the promotional expenses involved in opening new markets or in maintaining old markets in the face of increasing and subsidised foreign competition. If the Government cuts its funding for this scheme, it will do enormous harm to the thousands of small exporters who are the basis of our export sector, and it will deliver many Australian exporters into the control of multinational interests.

It is foolish to argue that the decreasing international value of the Australian dollar will prove incentive enough for our exporters. However, it will help them. It is also interesting to note that our major European trading competitors, who have also suffered effective devaluations against the United States dollar, have steadfastly kept their equivalent and invariably more generous schemes intact, and in some cases even increased the benefits to exporters. When the export expansion grants scheme was abolished in 1983, the saving to the Treasury was less than $150m, a minute proportion of our total Budget, against a loss of an estimated $2 billion to $2.5 billion in export earnings. With the present EMDG scheme it is simply less expensive to continue paying the grants as at present than to bridge the gap its removal will create. This is because of the consequent fall in export earnings. It would be more harmful to try to bridge this gap by further overseas borrowings, which would exacerbate our foreign debt burden or guarantee that Australian living standards would start sliding in the very near future. The point is that not only must the export market development grant scheme or similar be held in place but added incentives must be given to our export sector to maintain Australia's economic viability.

The basic problem with this ministerial statement is that it amply describes the problem but offers no solutions. Yet we need to solve this problem if we are to have any hope of maintaining the living standards of Australians. The alternative is for Australia to follow Argentina down the path of poor economic growth and dropping living standards. The problem is that unless Australia exports more, we will become one of the poorer countries in the world. The solution is for the export sector to become a high priority for the Australian Government and for us to reap the benefits of the expanding trade opportunities in the Pacific region through the formation of a south-west Pacific economic community. I believe that it is extremely important for the Government to face these problems now and not just try the band-aid measure of creating a new trade commissioner.

Question resolved in the affirmative.