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STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE
29/05/2007
FOREIGN AFFAIRS AND TRADE PORTFOLIO
Australian Trade Commission

CHAIR —I welcome to the table Mr Peter Yuile, Deputy Chief Executive Officer, officers from Austrade and the minister. The committee will now examine the proposed expenditure for Austrade. When written questions on notice are received the chair will state for the record the name of the senator who submitted the questions. The questions will be forwarded to the department for a response. I would remind senators to provide their written questions on notice to the secretariat as promptly as possible. The committee has resolved that Thursday, 26 July 2007 is the return date of answers to questions which are taken on notice at these hearings.

Under standing order 26 the committee must take all evidence in public session in estimates and this includes answers to questions on notice. Witnesses are reminded that the giving of evidence to the committee is protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. The giving of false or misleading evidence to the committee may also constitute a contempt of the Senate.

The Senate, by resolution in 1999, endorsed the following test of relevance of questions at estimates hearings. Any questions going to the operations or financial positions of the departments or agencies which are seeking funds in the estimates are relevant questions for the purposes of an estimates hearing. The Senate has resolved that there are no areas in connection with the expenditure of public funds where any person has a discretion to withhold details or explanations from the parliament or its committees, unless the parliament has expressly provided otherwise. An officer of a department of the Commonwealth shall not be asked to give opinions on matters of policy. He or she shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies, or factual questions about when and how policies were adopted.

If a witness objects to answering a question, the witness should state the grounds upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. Any claim that it will be contrary to public interest to answer a question must be made by the minister and should be accompanied by a statement setting out the basis for the claim. We will now go to questions.

Senator TROOD —The 2006-07 estimates I think had a program in relation to India—the enhancing Australia’s commercial engagement program—under that budget. I am not exactly sure of the figure that was provided for it, but I do not think the funding has been continued for this year. Could you tell us how that program has unfolded and how it has progressed over the 12 months?

Mr Yuile —The India program I know has been a particular focus for the organisation, particularly obviously in the light of the growth in that market. The minister was there earlier this year with a business delegation. In terms of the unfolding, I know there has been additional effort put into the establishment of new or extended presence in India and a range of program activities in terms of missions there and back here. We had the senior trade commissioner back in Australia and doing some consultations. In terms of the substance of the last little while, my colleague has been in the organisation longer and perhaps can give you a bit more detail in terms of how that is unfolding. My impression, following discussions with the senior trade commissioner and then with the joint committee just a week or so ago, is that it is obviously going very well, and the new advertising and marketing effort is capturing good attention. Ms Bennett can fill that in for you.

Ms Bennett —The program in India had a funding commitment of $2.6 million in the May 2006 budget. We have primarily used it for a number of things. We have put six additional business development managers into India in a variety of locations, including Mumbai, New Delhi and Chennai. We have also used it to further develop specific programs. That means that we have been working with Australian clients onshore to attract them and help them move into India, and we have done work in India essentially to promote the opportunities and the benefits of Australian companies.

Areas of focus include resources and minerals, infrastructure, services, defence, agribusiness, consumer, lifestyle and retail. Some examples would include particular initiatives and a mining exhibition in Kolkata. A delegation of prospective students met government officials during a visit in Chennai, Bangalore, Delhi and Goa. The Business Club Australia was a program that was run in conjunction with the Victorian state government around the Melbourne 2006 Commonwealth Games. Austrade India recruited more than a 1,000 business contacts from India, representing the largest business delegation from any Commonwealth country. So in essence we have used it for activity and also for staff to give us greater presence in the market.

Senator TROOD —I assume this has yet to build into any significant results—that we are looking at a long-term plan. Is that right?

Ms Bennett —It certainly is a long-term plan. We are continuing with the same level of presence in India and with the same level of commitment. The number of clients into India is about the same as it was in the first year of the program. We would anticipate that it generally takes a new exporter 12 months to 18 months from start to finish. So, you are right; it will be an ongoing program for Austrade.

Mr Harcourt —When you look at the statistical numbers around India, growth has been stronger in India in terms of export value this decade than China. When you look at the number of companies going to India, it is about 1,800. It has still a fair way to go to catch north-east Asia, China, Japan and so on. It is growing quite rapidly but, as you said, it takes some time.

Senator TROOD —What are the trade statistics of the two countries at the moment?

Mr Harcourt —I can help you with that. The growth figure I mentioned was average annual growth for this decade—so 2000-2005. Growth at an average annual rate was 28.8 per cent. That compares favourably with China, which was 22.5 per cent. The overall data in terms of direction of trade shows India is the seventh largest export market, so it is moving up the ranks very rapidly. Total goods and services for 2006 rose by 26 per cent—about $10.3 billion. A lot of it has been coal, gold and resources but in addition there has been growth in services. Ms Bennett mentioned education and tourism and some joint ventures in information technology. I was in Chennai two weeks ago. In south India a number of South Australian tool makers are involved in the manufacturing hub of Chennai—the ‘Detroit of Asia’, as it is known—and also telecoms.

Senator TROOD —So it is rather narrowly based at the moment. Is that right? The program seems to be directed towards a widening of the base as well as a deepening of the amount of—

Mr Harcourt —You are right. In many ways, the resource base has a few larger companies getting a presence there so the strategy is to broaden it so you have more small- and medium-sized enterprises in the services sector, as Ms Bennett mentioned, as well as franchises with the growing middle class in India.

Senator TROOD —Are all those funds—the $2.6 million that you mentioned, Ms Bennett—expended now as part of that program?

Ms Bennett —Yes.

Senator TROOD —So the activity that continues in relation to India has been sustained from other funds within Austrade. Is that right?

Ms Bennett —That is correct. As part of our annual planning process, Austrade looks essentially to put its funding where we believe the greatest opportunity is for the Australian exporter. Indeed, Austrade remains committed at the same level to India.

Senator TROOD —So there is for this year about another $2.6 million. Is that right?

Ms Bennett —That is right. We are continuing with the same program and the same staffing levels.

Senator CARR —I draw your attention to page 89 of the DFAT PBS, which shows that the average staffing level for outcome 1 for 2006-07 is estimated to be 996. According to the document, staffing levels for the following year are 986. Have I read that document correctly? Is there a reduction in staff?

Ms Bennett —Essentially you have read it correctly. The point I would make is that the 2006-07 figure is the estimate of the actual for 2006-07 and then there is a budget estimate for 2007-08 which at the moment, as you say, is 10 people lower.

Senator CARR —I am sorry, can you repeat the last part?

Ms Bennett —The budget estimate for 2007-08 is coming in at 986, which is 10 lower than our estimated actual for 2006-07.

Senator CARR —Why are you budgeting for less staff?

Ms Bennett —Mostly it is in response to the reality of what has happened in 2006-07, which is that at any one time Austrade has approximately one in 20 staff vacant as part of just natural recruitment, running off a normal business, and therefore as we have done our planning into 2007-08 we believe that there is a very small headcount reduction. But it is not linked to any particular cut in program; it is just a general tightening and improvement in efficiency across the eight divisions we run.

Senator CARR —So you have 120 vacancies?

Ms Bennett —It can vary, but at any one time the vacancy level can be around one in 20.

Senator CARR —When I go back to the 2005-06 figure, I see that the staffing level then was 1,053. So there appears to be a pattern of declining staff numbers. Would you agree?

Ms Bennett —Yes. There has also been a change in methodology. In 2005-06 we would have been working on a planned position rather than an average actual. Again, planning is always somewhat difficult. As with every entity, we make our best efforts, but it is the difference also between a planned and an actual position.

Senator CARR —My reading across the Public Service is that there has been a growth in staff. Why has there been a reduction in this agency?

Ms Bennett —We would always be looking, as part of our normal planning process, to ensure we are working as optimally and efficiently as possible in order that we can put the best money, the best programs, towards the Australian exporters.

Senator CARR —Presumably everybody else is doing the same, yet they are increasing staff numbers across the Public Service but not in this agency.

Ms Bennett —In our agency one of the things we also have to look at is ensuing that we are delivering the programs to the Australian exporter. One of the ways that we can improve the efficiency of doing that—that is, that we ensure the money goes to the direct benefit of the Australian business community and not just into staffing—is that we make great use of technology. For instance, we make significant use of videoconferencing, and that means our staff can reach a larger number of Australian businesses. So we try and work from our outcomes, and will staff accordingly to get the best.

Senator CARR —So they are working harder and more productively.

Ms Bennett —Certainly, Senator.

Senator CARR —Would you be able to say what the staffing number was in the 2004-05 period?

Ms Bennett —I do not have that to hand. I will just see if we have that information with us. No, we will have to take that particular question on notice.

Senator CARR —But it is a steady decline from that period as well, is it not?

Ms Bennett —I could not comment. Unfortunately, we do not have the 2004-05 figures with us.

Senator CARR —Obviously the staff are working harder and more efficiently, as you say. Can you tell me where they are based? There are nearly 1,000 people. How many of them are based in Australia?

Ms Bennett —If you, for instance, took the column in the PBS statement which is the estimated actual for 2006-07, we can run off that one, which is the 996. We would have 186 staff of that complement in North-East Asia, 161 in South-East Asia and the Pacific region, 110 in the Americas—that is Canada, US and Latin America—and 130 over Europe, the Middle East and Africa. There would then be 401 staff in Australia.

Senator CARR —I take it those figures include the locally engaged staff?

Ms Bennett —Yes.

Mr Yuile —Yes.

Senator CARR —That is the total complement?

Ms Bennett —That is the total complement of staff.

Mr Yuile —Is that FTE or head count?

Ms Bennett —That is estimated actual, which is average staffing level.

Mr Yuile —It is a full-time equivalent level.

Ms Bennett —It is an average staffing level.

Senator CARR —Of the 401, whereabouts are they located? In which cities?

Ms Bennett —We have them across 18 cities. Maybe I can just read the predominant ones.

Senator CARR —Yes, please.

Ms Bennett —For instance, in Brisbane we have 23 staff; in Adelaide, 17; in Melbourne, 58; in Perth, 18; in Sydney, 159; and in Canberra, 149; and then we would be in other locations such as Darwin, Dandenong and Hobart. There is a range of smaller locations with fewer than 10 staff.

Senator CARR —But the bulk of people are in the capitals. I take it the 159 in Sydney is because it is the head office?

Ms Bennett —Yes, but that would have a large number of client-facing staff because we have a significant presence for our EMDG organisation and our Australian based operations.

Senator CARR —Why do you need so many in Canberra?

Ms Bennett —Canberra is where, as an organisation, we run our main finance, IT and obviously our government services, as well as a small presence that is essentially a client-facing office.

Senator CARR —Has there been a change in the staff profile since the signing of the Australia-US Free Trade Agreement?

Ms Bennett —To support the Australia-US Free Trade Agreement there were 30 staff additionally focused on the US market—23 went into the US and seven were to support the work we did with Australian companies onshore in moving them through to the US.

Mr Yuile — That is numbers rather than profile, Senator. I am not sure what you mean by profile in that sense. Did you mean changes in levels?

Senator CARR —I am interested to know whether there has been an increase in the number of staff. Was that 30 extra people?

Ms Bennett —That was additional staff into the US, yes.

Senator CARR —But was there an overall increase in the numbers for Austrade?

Mr Yuile —It is back to 2005, I think.

Ms Bennett —Yes, 2005-06. I do not have the 2004-05 figures to know if there was a change, so I would have to take that on notice. I do not have the 2004-05 figures to compare against 2005-06 when the additional staff were there.

Senator CARR —I am interested to know whether or not those persons were moved from other priorities or recruited.

Ms Bennett —They were certainly recruited. My comment previously was about the total number of Austrade staff in that year. Predominantly those people were recruited. To the best of my memory approximately six had previously worked with Austrade but did take up one of those 30 new positions.

Senator CARR —So there was an additional 25 perhaps?

Ms Bennett —To my memory, about that number were recruited.

Mr Yuile —I think there was also an additional footprint. The footprint in the US was increased in terms of our representation there as well, which I think from reading the Hansard you covered last time.

Senator CARR —Of the five that were within Austrade, are you able to recall what areas they came from?

Ms Bennett —No. As I say, that is to the best of my recall. I recall this being a subject of discussion at Senate estimates previously. I would have to take that on notice to be accurate.

Senator CARR —I am trying to establish whether or not there has been a shift in priorities. Can you comment on that?

Ms Bennett —There has been a shift in priorities in the last few years as Austrade has moved to support the government’s free trade agreements, so we have very specifically received additional money, put in additional staffing and opened new locations in the US. We have moved to change our programs in Thailand and Singapore to also reflect the priorities that were needed and the opportunities that became available through those free trade agreements. We are now increasing offices in China, partly in anticipation of the free trade agreement there. Also India continues to be a market of focus for the government. We would constantly be looking to ensure that our priorities are in alignment with the government policy.

Senator CARR —Can you tell me what has been the increase in the numbers in China.

Ms Bennett —We have put 14 new staff in from 2004-05 to 2005-06—14 additional staff—and we have three new specific points of presence.

Senator CARR —Whereabouts?

Mr Yuile —We have opened up in Xi’an in the last nine months. I am not sure of the other places.

Ms Bennett —I cannot comment specifically; I just have the number, which is three new points of presence.

Senator CARR —The 14 in China—whereabouts have they gone?

Ms Bennett —We are in Beijing, Chengdu, Dalian, Guangzhou, Hangzhou, Hong Kong, Kunming, Macau, Nanjing, Ningbo, Qingdao, Shanghai, Shenzhen, Wuhan and Xi’an.

Senator CARR —They are located in consular offices, are they?

Mr Yuile —They are a mixture mainly of locally engaged staff with local expertise employed by us to pursue trade opportunities in that region and, of course, to match back with Australian companies.

Ms Bennett —In our own locations; in our own offices.

Mr Yuile —They report back to our senior trade commissioners and we have senior people in Beijing, Shanghai and Guangzhou.

Senator CARR —At what levels are these 14 people? You say they are locally engaged.

Ms Bennett —Yes, 11 of the 14 were locally engaged and three were A-based.

Senator CARR —In terms of the aggregates, are you able to tell me how much additional money is being spent in these locations? Are those figures readily available?

Ms Bennett —No.

Mr Yuile —I suspect we have not got that detail here, but we can get it for you.

Senator CARR —Are you able to get it later on?

Mr Yuile —I would prefer not to take it on notice if we can get it—

Senator CARR —I agree entirely.

Ms Bennett —We will try to get it.

Senator CARR —Thank you. I am interested to know what additional resourcing has been provided. As you have said, there is an increased emphasis on the areas in which there are free trade agreements.

Ms Bennett —Yes.

Senator CARR —What has been the additional resourcing in the United States, Thailand and Singapore? You are saying that you are providing additional resourcing in the People’s Republic in anticipation of a free trade agreement.

Ms Bennett —And an acknowledgement that more Australian businesses now want to go to China as well. So it covers the both.

Mr Harcourt —The proportion of small and medium-sized enterprises going to China has doubled in two years. So it is quite strong.

Senator CARR —Are you able to tell me where those additional resources have gone and where they have come from, given that your overall numbers have declined? Has there been a withdrawal of resources from anywhere?

Ms Bennett —There has not been a withdrawal in the sense of a particular post closure, for instance, or a particular location that we have moved Austrade’s presence from. In the annual planning process that we go through, we do quite carefully try to match the numbers of staff and the mix of staff—A-based and locally engaged—to, as Mr Harcourt said, the numbers of Australian exporters that we know are interested in that country, so that we can make the best use of our resources vis-a-vis the opportunities the Australian exporters want. In some instances that does mean that there is an overall decrease in staff. We may lose one out of an office of nine at any particular point in time. We may then move the resource from one location to another in a monetary sense. That is all part of the annual planning that we carry out every year.

Senator CARR —It stands to reason that priorities will change over time.

Ms Bennett —That is right.

Senator CARR —Is it possible to provide me with a table that tells me what that change has been in the last three years? What would be a relevant point to measure the change in priorities—three years?

Mr Yuile —You are talking about regional disposition?

Ms Bennett —Are you talking about this at a regional level?

Senator CARR —Yes, country market based. Obviously, if you are mentioning these, since the signing of the free trade agreements might be a relevant point.

Ms Bennett —And those were the 2005-06 years?

Senator CARR —Yes.

Ms Bennett —Fine.

Senator CARR —Could you indicate the number of locally engaged and centrally employed staff in each of those locations and how that shifted.

Ms Bennett —Yes.

Senator CARR —I want to try to get a feel for how the department is responding to these changing priorities by the placement of its resources. Will that table give me an indication of which countries or markets predominantly rely on locally engaged staff as opposed to centrally employed staff?

Ms Bennett —Yes, although that is a pretty consistent picture. But, yes, what you have requested is, at the regional level, that we give you a table with the number of locally engaged staff, the number of Australian based staff and essentially the financial commitment to the region.

Senator CARR —And how that has changed over the last three years, to give me an indication of the way in which the resources of the department are being deployed.

Ms Bennett —Certainly.

Senator CARR —Could we have a look at that after the break?

Mr Yuile —If we can get that for you, we certainly will try.

Ms Bennett —We will try.

Senator CARR —Thank you very much.

Mr Yuile —Obviously we have the 2005-06 numbers available, but for three years back we will have to get those as quickly as we can.

Senator CARR —Thank you. I understand the ABS has changed the way in which it measures export performance by Australian companies. Do you have a figure of the number of Australian companies that are now exporting?

Mr Harcourt —I can answer that question. In the latest survey that the ABS undertook, they had 42,194 exporters in financial year 2005-06. That is goods exporters and also outbound service exporters, thereby people that are providing services to tourism or education within Australia. They are not counted in that total figure.

Senator CARR —It is actual, that is, outbound?

Mr Harcourt —That is right.

Senator CARR —Of the 42,000, how many are in goods and how many are in services?

Mr Harcourt —There are 40,849 goods exporters and 2,513 service exporters, and then you take away people that do both. There are 1,168 service exporters who also export goods simultaneously.

Senator CARR —What percentage of companies are now exporting?

Mr Harcourt —According to the Austrade/Sensis survey, which is a different survey—it is not ABS—13 per cent of SMEs now export. That was a survey of 1,800 SMEs in Australia.

Senator CARR —Thirteen per cent?

Mr Harcourt —That is right.

Senator CARR —You said SMEs. What is the total number of Australian companies? Do you have a figure for that?

Mr Harcourt —The total number of Australian SMEs—

Senator CARR —No, of all companies.

Mr Harcourt —Total companies?

Senator CARR —Yes. The SMEs are a slightly different categorisation for total companies.

Mr Harcourt —The measures are different now. Let me explain. The count of 42,194 that I gave you is just a count of exporters using Customs. It is not actually a survey of total businesses in Australia. The total survey of businesses in Australia will be done by the Business Longitudinal Database, which is a new survey that is going to be released by the ABS later this year.

Senator CARR —So we should not confuse this with companies. It is not 42,000 companies.

Mr Harcourt —No, it is. It is companies that export. It is a count of exporters. It is not a survey of all the Australian businesses and asking who exports and who does not. That is a different survey. It is actually a count of the number of exporters.

Mr Yuile —Through Customs.

Ms Bennett —Through Customs.

Mr Harcourt —Through Customs; that is right. As it goes through Customs, they get an ABN and they work out whether you are an exporter that way, and they trace it through Tax.

Senator CARR —Can we compare the number of exporters in, say, 2006 and 2001? Do we have a figure that will tell us that?

Mr Harcourt —I can help you there. As you rightly said in your preface, there have been changes to methodology and definition. In 2001 the ABS provided an estimate of 25,000 exporters. That was their best estimate at the time. Since then, with the change in the tax system and the introduction of ABNs as well as improving the count through Customs, the last figure we have is 42,194. They are not directly comparable, as you rightly point out, but, for what it is worth, that figure was the best available in 2001, and 42,194 is the best estimate we have for 2005-06. We will have a number for 2006-07 at the end of this year from the ABS count.

Mr Yuile —We also know that the count at the moment, for example, does not include companies which are earning export income but doing it onshore, so tourist activity, education—

Mr Harcourt —That is right. It is outbound.

Mr Yuile —It is outbound, so that is another dimension.

Senator CARR —And was the figure in 2001 just outbound?

Mr Harcourt —Yes, it was just outbound.

Senator CARR —So that was like for like.

Mr Harcourt —Yes.

Mr Yuile —Except that that has also been a sector that has grown considerably in those five years.

Mr Harcourt —Mr Yuile is right. From memory, the cut was around 22,000 goods and 3,000 services. But you are right: it was both outbound, and Mr Yuile is right on that.

Senator CARR —Accepting that it is not possible to get a comparable figure, based on the different methodology—

Mr Harcourt —It is not possible to get a comparable time series. That is right.

Senator CARR —We can say that on that basis it is about a 40 per cent increase over that time—maybe a little more. Are you able to tell me the number of exporters who have been assisted by Austrade over that time?

Ms Bennett —From Austrade’s perspective, we have approximately quadrupled the number of exporters that we have assisted in that same time period. In 2001-02, which was the first financial year following the release of the ABS data, Austrade assisted some 1,500 clients. In 2005-06 we have assisted just over 5,000 clients, so Austrade has gone through a trebling to quadrupling of the number of clients it has assisted.

Senator CARR —But as a percentage it has declined, if the total number is 42,000 and you have assisted 5,000 of those. Would that be a fair characterisation?

Ms Bennett —As opposed to assisting 1,500 of 25,000? I do not believe that is a decline in percentage.

Mr Harcourt —Are you talking ratios, Senator?

Ms Bennett —The 5,000 to the 42,000 is approximately one in eight. The 1,500 to the 25,000 would be approximately one in 12.

Senator CARR —There was a government target of doubling the number of exporters by 2006.

Ms Bennett —Yes.

Mr Harcourt —2006-07, I think.

Senator CARR —2006-07 was it?

Ms Bennett —Yes.

Mr Harcourt —Yes. So we have one more year of data to be presented.

Senator CARR —How do we measure in terms of that target? Given that we do not have like-for-like data, it will be an interesting exercise.

Mr Harcourt —I think the best thing you can say is that the best measure that the ABS could do in 2001 was 25,000. Now they have improved their methodology and definitions, and the best figure that they will be able to provide us in 2006-07 is the figure that came out through the count.

Senator CARR —But it is not like for like, is it?

Mr Yuile —It is often difficult comparing like for like from one year to the next, so over a five-year period these things change. But it is an aspiration and, if you were coming from outside in the last few weeks and looking at the data and the effort, you would see that the focus that that has brought and the changed culture has been quite dramatic in terms of the impact in seeking to reach further and to lift the profile of export activity amongst the business community. So it has certainly had that effect.

Senator CARR —How do you measure the doubling figure? What is the target figure for the number of exporters?

Mr Harcourt —The ABS provide their data and we look at the best available data that they can provide to us. In terms of Austrade’s own results, as Mr Yuile was pointing out, we look at numbers of new exporters and the proportion of regular exporters we now service. One thing the data shows us is that, before Australia was an open economy, very few people exported on a regular basis. Now a high proportion do so on a more regular core basis. So our natural rate of exporting has improved.

Senator CARR —Do you have a number?

Mr Harcourt —Sixty-eight per cent on the time series we have so far.

Senator CARR —Is that a 68 per cent increase?

Mr Harcourt —Sixty-eight per cent of exporters in the Australian exporter community export on a regular basis.

Senator CARR —The numbers may not be as great, but you are saying they do it more often.

Mr Harcourt —The share of people who export each year on a regular basis, no matter where the exchange rate is or where commodity prices are, is high.

Mr Yuile —It is sustainability, Senator. As you rightly say, it is not only about growing the number of people who are exposed to the traded sector and who can achieve export sales but also about sustaining that over a period of time and seeing that as an opportunity, obviously, to expand your base and your employment accordingly.

Mr Harcourt —In a way, it means bringing in a new generation of SMEs and then making sure that they are sustainable, not just a flash in the pan.

Senator CARR —What is the number to achieve that target to double the number of companies, not just small companies?

Ms Bennett —How many will we have to assist?

Senator CARR —No. The target was that the number of companies exporting for 2006-07 would double from 2001. How do you measure your achievements against that?

Mr Harcourt —If you had a perfect time series, which we do not, you could look at 25,000 and look at 50,000 for the next year. We do not have a perfect time series, so the best thing we can do is look at all the available data, whether it be census data on SMEs and their proportion of exporting or whether it be Austrade’s own data on new and irregular exporters and sustainability, as well as looking at the natural rate. We just try and use the best information we have.

The ABS is providing a business longitudinal database which looks at all the businesses in the economy and looks at people moving from non-exporting to exporting and development and so on. When we have that survey we will be able to look at the demographics and characteristics of all businesses in Australia. That will also shed some light on the question of sustainability.

Senator CARR —It was also said in 2001 that the number of companies exporting was four per cent. Do I take it that, to double, you would need to go to eight per cent of companies in Australia? Would that be a fair measure?

Mr Harcourt —No. It is a little bit like when you look at the labour market and people say, ‘We want to reduce the unemployment rate,’ so we make a target of 50,000 new jobs. You have to take into account that, with labour force participation, as you know, as employment increases in the economy, more people come into the labour market, so it is harder to get the unemployment target down. I think that, in the same way, when you look at the number of exporters, you have to take into account that there has been huge growth in small businesses in Australia from various changes in the economy. I think the focus has been more on numbers of companies, sustainability and regularity.

Senator CARR —I am pretty simple about this. I just read what the government said at the time. I have here the election statement in 2001 where the claim was made. That statement says:

In 2000-01, a record year for Australian exporters, $153 billion of goods and services was exported by ... 28,000 Australian companies. This ... represents 4% of all Australian companies. ... Our goal is to assist the number of Australian businesses exporting to double from 4% to 8% by 2006.

How far were you away from achieving that stated objective?

Mr Yuile —What Mr Harcourt has already said is a fair representation, as full a representation as we can give you of what has happened and the changes and the nature of the calculations that have been made, and the clearly increased level of activity by both Austrade with our client base and the number of people or companies who are exporting. The aspiration has been quite dramatic in that impact. I do not know whether we can go much further. The story is a very good one. Absolute numbers, as we have already said, can be a bit tricky because of the changes in the methodologies.

Senator CARR —I accept the point you make. That is the ABS. But in terms of the ABS methodology, from 2001 through to 2004, it remained the same. The number of exporters fell from 30,141 to 29,555.

Mr Harcourt —The ABS did say that there was a fair range of statistical significance—room for error—there.

Senator CARR —There certainly is. Then we have got 42,000, which it might be argued actually has inflated the number. In your opinion, what was the percentage of Australian companies—all companies—exporting in 2006?

Mr Harcourt —I rely for the most part on the Austrade-Sensis publication, which put the rate of SMEs exporting at 13 per cent.

Senator CARR —But I want to know about all Australian companies. Do you have a figure for that?

Mr Harcourt —I could calculate one quickly. I can tell you this: the top 100 Australian exporters would contribute about 92 per cent of total export revenue. So most of them would be.

Senator CARR —The big ones do the exporting. I understand how it works.

Mr Harcourt —There are very few that are domestic businesses.

Senator CARR —I want to know what percentage of Australian companies—not just SMEs—are now exporting. I would have thought that Austrade would have that figure.

Mr Harcourt —I can calculate it.

Senator CARR —I do not want you to come back after tea with it. I just want to measure the stated objective versus the reality.

Mr Yuile —Rather than doing it on the run, we ought to make sure we have got the numbers right.

Mr Harcourt —It will be quite simple to calculate.

Senator CARR —I am sure it will. Thank you very much. How do you measure your overall performance? I know there are annual performance targets. Are those the KPIs you operate against?

Ms Bennett —In some sense, yes. We have published in the PBS a set of performance measures that cover our major outcomes and outputs. Within the organisation we also, through our planning process, would have some particular initiatives and objectives across a number of the divisions that are also looked at in terms of the performance of a particular program such as the Business Club Australia or, as you alluded to, how well a China initiative or an India initiative have gone, but the ones in the public record are the ones in the PBS.

Senator CARR —How do you see the performance of Austrade over the last six years in terms of your own key performance indicators?

Ms Bennett —We believe Austrade’s performance has been very strong, through, as Mr Yuile said, our refocusing to support the government’s policy of doubling. In 2001-02, as I said, we were assisting approximately 1,500 clients to achieve export success and in 2005-06 over 5,000 clients were assisted to achieve export success. That is almost a trebling with approximately the same broad base of resources. So Austrade has developed the programs and services that are clearly of benefit to the Australian business community.

Senator CARR —Are you able to tell me what types of rewards are provided to domestic Austrade officers for meeting performance targets? What incentive arrangements do you have for Austrade officers?

Ms Bennett —Can I just ask my colleague the Director of Human Resources to join us for that question? I believe she is outside.

Senator CARR —Yes.

Mr Yuile —I think it is fair to say as an observation that the level of commitment and passion that you see in the staff is quite exemplary—certainly in my short time here and meeting people in state capitals and in Canberra. There is certainly a high degree of commitment to the work and to assistance. In terms of our employment conditions, we have come under the FMA Act and have a collective agreement. In terms of additional incentive rewards, recognition and that kind of thing, I would certainly wait for Ms Kimball to come back if there is more that you want to know there. I think it is pretty much in line and keeping with the kind of employment arrangements you see in other public sector agencies.

Mr Crawford —Could you clarify whether your question is just about staff based in Australia?

Senator CARR —I am going to ask about overseas staff in a moment, but at this point I am seeking advice on the nature of the performance pay scheme that takes place within Austrade.

Ms Bennett —We have been joined by our colleague Marcia Kimball.

Senator CARR —In terms of domestic Austrade offices, can you tell me if there is a performance based pay scheme for the meeting of performance targets?

Ms Kimball —Yes. Under our collective agreement we have a performance management system. Superior performers in our A-based group of staff—our APLs 1-5—can receive five per cent of their base salary; a profile of up to 10 per cent of those staff can potentially receive five per cent of base salary as a performance bonus

Senator CARR —How is that going within the organisation? What percentage of officers receive that bonus?

Ms Kimball —Up to 10 per cent.

Senator CARR —So 10 per cent?

Ms Kimball —Yes.

Senator CARR —How does that compare with other agencies? Do you have a figure?

Ms Kimball —No, I do not have comparative data on that.

Senator CARR —Has there ever been a period when it has been less than 10 per cent?

Ms Kimball —Not that I can recall.

Senator CARR —That does not surprise me. How does that compare with staff offshore? Is there a performance indicator or performance pay scheme for staff offshore?

Ms Kimball —Yes. Our overseas engaged staff have a performance management system where our exceptional performers can receive up to 12 per cent, our superior performers up to seven per cent, and those who achieve and do their job, plus more, four per cent.

Senator CARR —In each of those categories, is it fully subscribed?

Ms Kimball —I think about 30 per cent of our OEE offshore would receive a performance bonus.

Senator CARR —How does that compare year on year? Is it 30 per cent every year?

Ms Kimball —No, it fluctuates depending on our performance as an agency in terms of meeting our KPIs.

Senator CARR —Do you have any figures with you tonight about how that has fluctuated?

Ms Kimball —No, I do not have them at hand, but I can certainly get them.

Senator CARR —If you would, please. Which officers received the performance bonuses? What were the levels of seniority? Did junior officers receive performance bonuses?

Ms Kimball —Yes, it was within all levels of Austrade.

Senator CARR —So what is the percentage in terms of performance based pay? Does it fluctuate between classifications?

Ms Kimball —Generally, the profile is fairly consistent.

Senator CARR —What is that consistency?

Ms Kimball —Around 30 per cent of staff. My recollection is that around five per cent of staff would receive exceptional bonuses.

Senator CARR —Let us take the five per cent exceptional. What is the breakdown of that five per cent between senior officers and junior officers?

Ms Kimball —I do not have that at my fingertips.

Senator CARR —If you could provide that I would be interested, and each of the other categories would be helpful as well. Does it go just to senior executive officers?

Ms Kimball —No, definitely not. It is across all levels.

Senator CARR —I would like to know about the spread across all levels. Is it a performance based system that allows for junior officers to participate in accordance with their performance?

Ms Kimball —Yes, that is the case.

Senator CARR —If I could have that after tea it would be appreciated. Is the incentive arrangement bonus on pay or is it some other form of incentive?

Ms Kimball —It is based on their base salaries. We also have a recognition system whereby people who are performing in an exceptional way are recognised with either a certificate or some form of recognition within the organisation—that they are congratulated and acknowledged by their peers and by management.

Senator CARR —How does it vary between officers offshore and those onshore? Is there any variation in the pattern?

Ms Kimball —No, I do not think so. I think all of our managers are cognisant of the fact to give good feedback to our staff.

Senator CARR —How does it vary between staff locally engaged and those staff employed centrally? Are locally engaged staff entitled to get performance bonuses?

Ms Kimball —Yes, they are. Our onshore staff, A-based staff, are under a collective agreement. A number of years back, we had exactly the same performance system but there was a trade-off. In the collective agreement before last some of the performance based pay was put into the base salaries. So the systems have diverged in that way and staff onshore voted for that change in the way their performance system was administered.

Senator CARR —Do locally engaged staff get lesser pay?

Ms Kimball —They are employed under the local labour laws.

Senator CARR —So it is less pay?

Ms Kimball —It varies in markets. They are a different classification system.

Senator CARR —Is there a performance bonus on their base salary? Is it a percentage of base salary or is it a standard bonus?

Ms Kimball —It is a percentage of their base salary.

Senator CARR —I understand that one of the roles of domestic Austrade officers is the identification of existing exporters. Have I understood that correctly? Are you able to comment? I notice that in your statement on the performance you indicate a difference between new and existing exporters.

Ms Bennett —Yes.

Senator CARR —Is it the role of the Austrade officers to identify those existing exporters?

Ms Bennett —It is a role of Austrade officers to identify companies that are already exporting that we can then assist. For instance, their needs are quite different. They might want to go to another market. They are already in one but they want to find a market where they can essentially springboard from one to another. They might want to go deeper in a market and get a particular network of their own customers. A new exporter often just needs to understand how to export in a very basic sense. So our officers would be very attuned to the difference between a company that has the capability but has yet to export and a company that is already exporting but wishes to do more.

Senator CARR —You refer to 5,000 new and established exporters in the corporate plan. How do you define assisting exporters to achieve export success? It says here ‘both new and established to achieve export success’. What does the term ‘export success’ mean?

Ms Bennett —Export success is essentially that they have achieved an export deal, a contract where—

Senator CARR —They have actually sold something?

Ms Bennett —They have actually sold something. That is right. And Austrade has been part of working with them at some point to assist in that contract.

Senator CARR —How do you measure whether or not you have been of assistance in that sale?

Ms Bennett —We ask the clients themselves to go through a very brief verification. They send us back something in writing that, in their words, acknowledges our support and contribution to that. So it is verified by the clients.

Senator CARR —Is there a difference in the criteria for measuring success for existing exporters and new exporters?

Ms Bennett —There is not a difference in the criteria that, essentially, the client responds to. It would be a difference service, however, that we have delivered, according to the needs of the business. But the criteria—that is, it is an Australian business and they have to determine that we have assisted them—are the same.

Senator CARR —How do you measure your contribution to existing contracts?

Ms Bennett —We do not. We ask the clients to determine our contribution to the work we have done, which is around getting new contracts. For an existing client, an existing exporter, our work is really about potentially getting further contracts. We would be working on the increment that they wish to achieve. We would in no way be working on contracts that they are already working on.

Senator CARR —The figure here of the estimated value of $17.5 billion that you refer to in the corporate plan—is that additional sales of $17.5 billion?

Ms Bennett —Yes. That in essence means that where we have assisted the companies to achieve an export contract, the value of those contracts is $17.5 billion. And for established exporters it is incremental; it is a new contract.

Senator CARR —How do you measure the sustainability of an export venture in that context?

Ms Bennett —Some of the things that we look at include whether the exporter is now going to more than one market. We would look internally to say whether the exporter is working with us. As Mr Harcourt has said, we are working with the ABS to see their next longitudinal data, because we obviously only have insight to those exporters who work with us. In an another instance—particularly if we have done a very good job and we have linked with a group of customers—they may not need Austrade’s assistance for another one or two years, until they have some particular hurdle or want to go to a new country. We can only do, and get visibility with, what the clients wish us to assist with.

Senator CARR —Those figures that Mr Harcourt gave me before were that there were 42,000, of which you say 40,000 were goods exporters, 2,514 were service exporters and 1,168 were both. Why do you think the service sector is so low in terms of its export performance?

Mr Harcourt —I think it is a measurement issue. The fact is, as Mr Yuile and I pointed out, there are a lot of service exporters who do things within Australia who are not measured. Also, as the ABS would tell you, it is a little bit harder to measure service exports relative to goods exports. With the Customs measure, goods go through the ports and it is reasonably easy to clock them up, while services are a little bit different in definition.

Senator CARR —So you are saying that the question is predominantly one of measurement. There is a huge difference: 40,000 to 2,000.

Mr Harcourt —I agree. That is why we are hoping with the ABS, with the Business Longitudinal Database and so on we will be able to get better measures of service exports, because basically that is where a lot of our clients are and that is where a lot of value is being driven for the Australian economy and services.

Senator CARR —How do you think it has changed over time?

Mr Harcourt —In many ways. For instance in education, we would traditionally an open-cut mining view of education, where we would just bring students here. Now, universities and TAFE colleges run joint ventures in Malaysia or in India.

Senator CARR —I am familiar with that particularly.

Mr Harcourt —You would be.

Senator CARR —Not all of them are terribly successful.

Mr Harcourt —I think also in many instances Australian professional services, whether it be architects or lawyers, are quite successful in Asia.

Senator CARR —I appreciate the point you make, but in terms of the empirical data, if it is 2,000 service exporters—or events; I think that is really what we are talking about here and not necessarily companies—and 40,000 goods exporters now, what would it be over time? Do you have any time series figures on that?

Mr Harcourt —The ABS has done some work on the numbers of tertiary institutions and the numbers of tourism businesses, some of which would sell to foreigners, which is how they measure it. Certainly, if you took the exporter community as a whole of the Australian economy that has some form of global transaction or global commitment, you would have strong growth in education and services, partly because we have seen overall growth in services and export numbers.

Senator CARR —I appreciate that, but I am looking for hard numbers. I know the value of education exports has doubled in recent years. What I would like to know is: in terms of your figures, there are 42,195 exporters in 2005-06. It would appear that it may be 28,000 in 2001, based on what the ABS is saying. We can argue the toss about where that is at.

Mr Harcourt —We do not have to.

Senator CARR —It is somewhere in that range. If you could give me these figures after the break, it would be appreciated. What would the numbers of those be for the service sector, going back to 2001?

Mr Harcourt —With that question, as I understand it, you want a time series of the numbers of service exporters in Australia.

Senator CARR —Yes.

Mr Harcourt —Inbound as well as outbound?

Senator CARR —No. I want it on a like-for-like basis so that I can make sense of it. Are you saying it is offshore providers, because that is what the 42,000 relates to?

Mr Harcourt —That is right.

Senator CARR —And 2,514 of those are service providers.

Mr Harcourt —Yes.

Senator CARR —How many of those, going back in the same time series on that offshore outbound delivery, would be services, back to 2001. Do you have that information?

Mr Harcourt —Yes, I do. In the estimate we got for 2001, we were given 25,000 as a benchmark. I can give you the actual data I have from the ABS for 2001-02, 2002-03, 2003-04 and 2004-05.

Mr Yuile —Do you have 2001?

Mr Harcourt —No. The ABS did not do an official count in 2001; they provided us with a benchmark estimate.

Senator CARR —Sure, but it will tell us roughly. Could you give me what figures you have in table format, if that is possible.

Mr Harcourt —I can give you the figures for 2001-02 now.

Senator CARR —I would rather you write it up so that I have the time series in front of me.

Mr Harcourt —Do you want me to read the numbers out?

Senator CARR —No. I will get them after the break. I like it in the old-fashioned way so that I do not make a mistake. If you can get it written up, that will give me a table of the number of services as a percentage of outbound, so that we know between 2,500 and 42,000 what the equivalent figures are, going back to 2001. Is that all right?

Mr Harcourt —Yes. Let me be very clear on two issues. One is that you asked a question about the number of businesses in Australia exporting. I could give you a back-of-the-envelope rough estimate, but I think it would be better to take it on notice and ask the ABS for an exact number.

Senator CARR —Yes. I want it before the next election; that is all.

Mr Harcourt —That is up to the ABS, isn’t it?

Senator CARR —I know, Mr Harcourt, but I would like it really quickly.

CHAIR —Senator Carr, I have been listening carefully to the discussion. There are a number of matters which the officers present have agreed to try and provide information on over the dinner break, which is only an hour after close of business hours. Mr Yuile, I would be interested in your guidance on how much of that you expect to be able to bring back and what we can discuss between 7.30 pm and 8.30 pm in the remaining hour with Austrade—for the committee’s guidance and for your assistance, I hope.

Mr Yuile —Some of the information Senator Carr asked about—performance pay data—is quite complicated. I do not think that is possible. We have certainly got numbers in terms of where people are located, but as to whether we can get A-based and locally based staff in the time frame, I will have to take advice from others. As Mr Harcourt has said, there are some figures he has which we can try to write up in a table. We can do those two things. I am just not sure about the resources against funding. Over the break, I do not think that is possible.

Senator CARR —I appreciate that. I was seeking material that is basically in your briefing papers.

Mr Yuile —That is not true or we would have answered the question.

Senator CARR —Mr Yuile, let me finish. I was seeking that additional information as well, but where you have material readily available that is easy to print out, I would seek access to that if it is possible over the break.

Mr Yuile —We are happy to do that. It was the granular nature of some of your questions which we just could not get.

CHAIR —We can’t do granular in an hour.

Senator CARR —I accept that—especially three years back. I will accept the good intentions.

CHAIR —Thank you, and I thank the officers. I just wanted some guidance on that.

Mr Harcourt —Can I complete my answer. There were three things I think you were interested in, Senator. One was the number of businesses who export in Australia, because you wanted to see whether it went from four per cent to eight per cent.

Senator CARR —Yes.

Mr Harcourt —The answer I gave was that, according to the census survey, 13 per cent of SMEs export according to Austrade census surveying in 2006. With respect to going from four per cent to 13 per cent, I could have a look at the numbers quickly and do an estimate over dinner, but given that the ABS is the custodian of the data, I would prefer to take it on notice and ask the ABS what their estimate is. They keep the information on the number of businesses in the economy. I will let them know it is a matter of urgency. The ABS is a great institution; it tries hard. I will let them know.

Senator CARR —I would appreciate that.

Mr Harcourt —In addition, you wanted to know the number of outbound service exporters.

Senator CARR —Yes.

Mr Harcourt —One thing I was not clear on was the number of companies providing services to foreign students in Australia or foreign tourists in Australia; that is, people who are exporters within Australia. Did you want an estimate of that?

Senator CARR —No, that is a separate category. I was interested to get a comparison on the equivalent figure of the 42,195.

Mr Harcourt —So you can attempt to do a time series on the census.

Senator CARR —I am trying to, to see what the growth in exports has been.

Mr Harcourt —So it is outbound?

Senator CARR —Outbound, please.

Mr Harcourt —Okay, thank you for that clarification, Senator.

Senator CARR —Recently I saw a report done by CEDA showing that over the financial years from 2000-01 to 2005-06 the increase in the volume of exports averaged 2.1 per cent, less than a third of the average growth of 7.3 per cent between 1982 and 1983. We can compare the performance of recent times with that of the previous period. Has Austrade undertaken any analysis of the CEDA report?

Mr Harcourt —Yes. The report you are referring to was by Dr John Edwards, the Chief Economist of HSBC. With respect to the report from CEDA, a number of other pieces of analysis by various economic commentators around Australia have made the same or very similar points, including the Reserve Bank of Australia. For instance the Reserve Bank of Australia in its Statement on monetary policy has repeatedly tracked resource export volumes and total export volumes in this decade relative to the 1990s. Even in the area of resources it found that export volumes were seven per cent all through the nineties and 2.2 per cent this decade.

There are two issues. The first is the extent to which we have been experiencing capacity constraints, or supply side constraints, in labour shortages or in capital restraints on the supply side. Obviously, the demand for exports from Australia is very strong with the growth of China and India.

The second issue is also the lag relationship between investment and export volumes. There has been analysis performed by CEDA, by the Reserve Bank and by an economist at the Commonwealth Treasury, Dr David Gruen, who was also head of research at the Reserve Bank. He has looked at the last resource boom in the 1970s compared to now. He has found a lag in investment. In the 1970s there was a two to three to four-year period before the increase in investment found its way into export volumes. The Reserve Bank, in their last statement on monetary policy, made a similar point about the lag between investment and export volumes. On the rural side there has been the drought, and, in manufacturing and services, we have seen an improvement in export volumes in the past year.

Senator CARR —I am interested in that evaluation. Is that the formal evaluation of Australia or is that your assessment?

Mr Harcourt —Our main focus is on providing services to exporters and helping potential exporters at the margins to get into export markets, but we look carefully at the views of the Reserve Bank and Treasury as well as private sector economists.

Senator CARR —I would have thought it would be entirely appropriate. In fact, I would be very surprised if you were not examining these trends.

Mr Harcourt —Indeed we do. We publish various reports on different aspects of the economy from capacity constraints and the drought to the rise of China and India and the effect of exchange rates.

Senator CARR —Is there any overall study I can go to that will help identify how to address these shortcomings?

Mr Harcourt —Sure.

Senator CARR —What would you direct my attention to.

Mr Harcourt —As well as the CEDA report there is the statement on monetary policy. If you have a look at the last statement, which was May—

Senator CARR —What about Austrade’s publications? Do you have anything?

Mr Harcourt —We do have various papers that we have published ourselves that I can provide to you.

Mr Yuile —We do not try to duplicate the work of the Treasury or the Reserve Bank.

Senator CARR —No, I would not think you would.

Mr Yuile —And we could not. So we are very reliant on that sort of analysis, as you would appreciate.

Senator CARR —I just want to know: has there been any published analysis that I could look to in terms of your view as to how to overcome these impediments to our export performance? We now have a situation where there has been a considerable period of trade deficits, despite the resources boom. We are looking at something like 60 months of trade deficits.

Mr Yuile —There are a whole range of issues that Mr Harcourt has alluded to, as you would know well, in terms of infrastructure issues, skills formation issues, industry competitiveness and productivity issues as well as our trade policy. There are various parts of government that address those—

Senator CARR —I accept that, and I am not asking you to—

Mr Yuile —That is the constellation. That is the holistic picture.

Senator CARR —But is there no document that Austrade has produced dealing with our export performance?

Mr Yuile —I think we have done some past work.

Mr Harcourt —I have published some papers on export performance but also, more importantly, on what the exporters themselves have been saying in surveys about the relative effects of the exchange range, capacity constraints and the labour market. They do not go to policy; they just basically comment on what the data says and what exporters are saying.

Senator CARR —That is what I am saying. It is difficult for me to reconcile the claims that Austrade is making in terms of the success that is argued vis-a-vis our trade performance.

Mr Harcourt —Our task is to help potential exporters get into the export market. Ms Bennett has outlined to you the improvements in new exporters coming in and in sustainability. If you consider that, in terms of export value, the top 10 per cent of Australian companies provide 92 per cent of our export value, I would say that most of our focus is on potential exporters and helping SMEs and basically trying to provide improvements across the board in the economy by having more people exporting.

Ms Bennett —One of the figures that we record every year is the number of new exporters that we assist. In 2002-03 through to 2005-06 that has moved from approximately 400 a year to now nearly 2,000 a year. So on a time series, there are approximately 6,000 exporters that would not have exported without Austrade’s assistance. Austrade has a particular role to assist companies. Part of that population that we assist have not exported before and therefore I think that is why you would get the difference between the macro figures at the Australia level versus us saying that we believe we have been very focused. We have developed programs to assist companies that, quite simply, would not have been exporting without the type of assistance that Austrade can give as a trade development authority.

Senator CARR —Let me look at some specifics then, because we are running out of time. Where do the domestic Austrade officers go if they need overseas market intelligence? What do they call upon?

Ms Bennett —To our offshore offices, essentially—we run networks.

Senator CARR —How often are overseas Austrade posts expected to provide market intelligence back to Australia?

Ms Bennett —They would provide it to the clients as the clients need it. For instance, behind the 5½ thousand clients who in any one year have achieved a particular export deal or contract, we would be working with and servicing approximately 14,000 or 15,000 businesses at any one time. They are in their journey to export so they are not necessarily at the point of doing the deal. I do not have the figures to hand to say which of those 14,000 would have received market intelligence from offshore, but broadly you would say that probably one-third are at the start of their journey, a third are nicely on their way, and there is probably a third at the very sharp end, taking a lot of market intelligence and essentially doing a deal with an international buyer.

Senator CARR —Is it on an ad hoc basis?

Ms Bennett —It is on a client needs basis.

Senator CARR —Individual firms?

Ms Bennett —Individual businesses will come to us and want a particular service and, to the extent that that service requires us to be moving particular generic market information or particular business contact information then we will obviously move that through our network to the benefit of the Australian business.

Senator CARR —Do senior officers have access to an intelligence report for each market or is it an individual, company-by-company arrangement?

Ms Bennett —Some information is publicly available on the austrade.gov website. There would be country reports where we try to share the general information. Where it becomes more specific, obviously, is when a client is seeking a particular subsector, a particular group of customers. But, no, there is generic information that we try to share with the Australian business community.

Senator CARR —What mechanism do officers onshore use to identify potential exporters?

Ms Bennett —A number. We will work with, for instance, industry associations. They obviously have membership lists, and activities and events where we can essentially work with their membership. We run particular seminars. They would be advertised in the local press and on our website where we might talk about India, China or exporting opportunities in a particular industry sector. We use our network onshore. Our own and our TradeStart officers within their local networks would be talking about particular market opportunities offshore.

Senator CARR —I am interested that you have not mentioned the department of industry in any of this survey.

Ms Bennett —Eight of our onshore TradeStart officers are jointly badged with the department of industry—their export hubs—so we work very closely.

Senator CARR —Where are they located? Are they in industry associations?

Ms Bennett —No. They are in our TradeStart offices and so they would be located around Australia. So the export hubs, which is where we are co-located with the department of industry, are in Launceston, Darwin, Ballarat, Carnarvon, Bundaberg, Tweed Heads, Bega and Port Augusta.

Senator CARR —I take it that each of those officers have all had performance bonuses?

Ms Bennett —I would not know that.

Ms Kimball —They are TradeStart officers at the hubs.

Ms Bennett —TradeStart officers would not be under our performance bonus scheme.

Ms Kimball —No, they are not—not that I am aware of.

Senator CARR —Any of them?

Ms Bennett —No. They are all TradeStart officers which is essentially an arm’s length contract.

Senator CARR —They are external? They are not actually departmental officers?

Ms Bennett —TradeStart is a program that Austrade runs. We work with allies. Essentially the ally is an extension of our reach. They use our collateral, they use our networks, but the actual employees are employees of the contracting entity which might be a business association, a particular industry group, a state government.

Senator CARR —Of the 996 staff, how many of them are TradeStart officers?

Ms Bennett —Those 996 are all Austrade employees.

Senator CARR —So on top of that you have an additional number of contractors?

Ms Bennett —There are additional contractors on top of that.

Senator CARR —These are outsourced persons?

Mr Yuile —No, they are contracts with state government authorities or industry associations.

Senator CARR —Would QMI in Queensland be one? Which state government authorities?

Ms Bennett —For example in New South Wales we would have the Department of State and Regional Development. We would have different departments from—

CHAIR —Is that the office you referred to in Bega, Ms Bennett? Is that State and Regional Development?

Ms Bennett —In Bega the TradeStart partner is Australian Business Ltd—ABL. So where I just referred to the Department of State and Regional Development, it is the service provider for the TradeStart office in Bathurst, for example.

Senator CARR —How many were state government offices?

Ms Bennett —I would have to count my list. There are 54 TradeStart offices from 34 different providers, some of which are state government.

Senator CARR —Could I get a table with a breakdown on where those 54 are located. That is probably easier and quicker. Things like the innovation exchange—would you have people with those?

Ms Bennett —No, Senator.

Senator CARR —So it is recognised trade associations, like AiG.

Mr Yuile —That is correct.

Ms Bennett —And some industry associations such as the Australian Electrical and Electronic Manufacturers Association.

Senator CARR —I would appreciate getting a list of those.-

Mr Yuile —Because we are going to try to do what we can over the dinner break I want to be crystal clear about your request. You want a breakdown of regional staff, A-based and locally engaged staff offshore?

Senator CARR —Yes.

Mr Yuile —I do not think we can give you three years, but we will find what we can. Secondly, you want a count of the exporters, both goods as well as services. We will try and prepare that table. As I said, it is not possible over the dinner break to get you the numbers you were after, as I understood it, regarding performance pay arrangements. We will have to check our records and prepare that for you separately. The resource disposition is also one that we will need to work on longer than just over the dinner break.

Senator CARR —I will appreciate whatever you can do.

CHAIR —Thank you for clarifying that, Mr Yuile.

Proceedings suspended from 6.29 pm to 7.30 pm

CHAIR —I call the committee to order. Mr Yuile has some information that Austrade has been able to bring back to us.

Mr Yuile —We have a table showing, for the last three financial years, Austrade operative staff by region, which includes Australian based staff and overseas employed staff. The years are 2003-04, 2004-05 and 2005-06. There is also a list of the TradeStart office locations and the service provider. Finally, there is the number of Australian outbound service exporters, which is the ABS data from 2001-02. We do not have 2000-01. I will table that.

CHAIR —Thank you.

Mr Yuile —My colleagues can speak to them. We have one clarification for the record.

Ms Bennett —I answered a question regarding funding for India and I indicated that we had received an amount of $2.6 million. I would like to clarify that, of that amount, $450,000 was a capital amount. I alluded to the fact that we were maintaining the level of operating funding, which we are, but that is around $2.1 million.

CHAIR —Thank you.

Mr Harcourt —I would like to clarify for Senator Carr the table that has just been handed up by Mr Yuile. The table provides a summary of published estimates by the ABS on outbound service exporters from 2001-02 through to 2005-06. For 2000-01 the ABS provided an estimate of 25,000 for the number of exporters in November 2001. That was published in the Knowing and Growing report by Austrade. It was published in that report but not independently by the ABS.

Senator CARR —Turning to the EMDG scheme, there are a few matters that I would like to clarify about how the scheme works. Is there a cap on the funding that any one business may receive for any year?

Ms Ward —Yes, there is. The maximum grant that is payable in any one year to an applicant is $150,000.

Senator CARR —Has that cap changed over the last 10 years?

Ms Ward —Yes, it has. As part of the changes made by legislation in 2003 the cap was reduced from $200,000 to $150,000.

Senator CARR —That is not indexed in any way? Since 2003 it has been set at that $150,000?

Ms Ward —Correct.

Senator CARR —What is the number of times a company can receive the EMDG support?

Ms Ward —Up to seven annual grants—not necessarily consecutive years, but up to seven annual grants.

Senator CARR —So it does not matter if there is a break in terms of the time lines that a company can receive support under this program?

Ms Ward —No.

Senator CARR —So it is seven years; it does not matter over how many years those seven are spread over?

Ms Ward —That is correct.

Senator CARR —What is the overall cap on the EMDG scheme? Is there a budget amount?

Ms Ward —Yes, an appropriation is provided by the government each year in the budget process. In the current financial year—2006-07—the appropriation that was provided was $160.4 million.

Senator CARR —I take it that appropriation has changed in the last few years, has it not?

Ms Ward —That is correct.

Senator CARR —The last three years funding will be published somewhere, won’t it?

Ms Ward —Yes, it is in the budget papers.

Senator CARR —I will take it straight out of there. Is there any form of modulation arrangement in terms of the expenditure of that $160 million?

Mr Yuile —What do you mean by modulation?

Senator CARR —So that not all the money can be spent in the first half of the year. Is there a form of gradation in terms of when grants are issued?

Ms Ward —Yes, it is a legislative provision that is written into the EMDG Act. Before the commencement of a financial year, the minister will determine an initial payment ceiling amount, which is a dollar amount, which is then used by Austrade in paying grants from 1 July—when we first start processing grants—for the grant year, which is the previous financial year. We pay all grants, where we have determined entitlements up to and including that initial payment ceiling, in a first payment. Those whose assessment shows an entitlement which is provisionally higher than the initial ceiling amount are held in our records until the end of the financial year. With the available funding that is left from the appropriation, Austrade determines a payout rate and pays the remaining entitlements according to that payout rate, which is so many cents in the dollar.

Senator CARR —What is the first payment rate at? Is it half the grant? What is the proportion of the grant?

Ms Ward —That is up to the minister to determine each year. There is no specified percentage. The minister may determine that on a year by year basis.

Senator CARR —Would you be able to give me a figure on what the percentage has been in recent years.

Ms Ward —In the year that we are still processing—2006-07—we have initial payments for the grant year 2005-06, which is the majority of the grants we are processing in the current financial year. That amount is $70,000.

Senator CARR —So there is a maximum of $70,000 per applicant.

Ms Ward —In a first-round payment.

Mr Yuile —For the 2005-06 grant year.

Senator CARR —Given that the maximum any one firm can receive is $150,000, presumably the maximum in the second round is the remainder.

Ms Ward —That is correct.

Senator CARR —Are there only two rounds?

Ms Ward —Yes.

Senator CARR —Therefore, is it right to presume that you can fund all applicants in the first round—at least for half their grant? There is no finite number of grants that you can fund in any one year. Has there ever been an occasion when you have not had sufficient moneys to fund all applicants?

Ms Ward —No, there has never been an occasion when that has happened.

Senator CARR —In fact, it tends to be the case that it is underspent, doesn’t it?

Ms Ward —No. There have been years where we have determined a payout rate which was not 100c in the dollar. So there have been some years where the mechanism has been used to pay less than the full provisional entitlement for the second round. In other years there has been a 100 per cent payout. So it has varied year by year according to two factors: the demand on the scheme, which has varied from year to year, and the appropriation that is provided.

Senator CARR —In which years were you not able to pay the full amount?

Ms Ward —In the financial year 2001-02, which related to the grant year 2000-01; for the following grant year, which was 2001-02—which we mainly processed in the following financial year; and in the 2002-03 grant year, which was mainly processed in 2003-04.

Senator CARR —What was the reason that you were not able to pay the full amount in those years?

Ms Ward —There are always two factors—the demand on the scheme and the appropriation amount.

Senator CARR —And the quantum.

Ms Ward —But in 2001-02, for example, there was a huge increase in the number of applications on the scheme. I will need to look at another table and then I can tell you the year when there was a huge surge which accounted for a lot of that. In the financial year 2002-03 in relation to the grant year 2001-02, we had an almost 23 per cent increase in applications in that year.

Senator CARR —And that is why there were changes made to the scheme in 2003?

Ms Ward —No. The reasons for the changes to the scheme were to focus the scheme more on small businesses and on less experienced exporters.

Senator CARR —Since the scheme was redesigned in 2003, what has the pattern been? Has the number of applications increased or decreased?

Ms Ward —As a result of the scheme changes, the numbers fell for the next two years, but as I have talked about before, in underlying terms—that is, if you take out of the equation the scheme changes—there has in fact been steady growth. Over the last two years there has been absolute growth. In 2005-06 we had an increase of almost five per cent in applications and in the current year—

Senator CARR —Yes, I recall you gave me a table at the last round, which I am sure we would have somewhere. The payment of the grants in arrears: have there been any complaints to officers concerning whether this has presented companies with financial difficulties?

Ms Ward —Because it is a partial reimbursement scheme—is that the question?

Senator CARR —In terms of the EMDG, have there been any concerns raised with you by companies, successful applicants, that the fact that they are being paid in arrears has presented the company with financial difficulties?

Ms Ward —It is integral to the design of the scheme. It is a partial reimbursement for moneys already expended by businesses. It is well known that a business must spend money to be eligible to apply for a grant in the following financial year. That is just part of the design of the scheme, an accepted part of the scheme.

Senator CARR —Has there been any assessment of the cost in paying the money more quickly? Have you had any study in that regard?

Ms Ward —The answer to that is really that it is an integral part of the design. To pay more quickly would change the whole scheme. It could no longer be a reimbursement scheme if you were to pay the money before the next financial year.

Senator CARR —The review in 2000 noted that for every $1 of expenditure there was a return of $12 on export earnings. Have I understood that correctly? Is that the sort of ratio on which you still operate?

Ms Ward —That is now quite an old study. A more recent economic analysis was done as part of the review held in 2006. Rather than necessarily looking at the dollar grant and the export earnings, in the first instance it is necessary to look at the dollar grant and the amount of additional export promotion that the grant paid is an incentive to firms to spend. That is the aim of the scheme: to encourage applicants—because they know they can be eligible for a grant—to spend more on export promotion than they otherwise would have done. The analysis research in the 2006 review showed that that was the case. How much incentive effect there was varied according to the size of the firm and the ease of access to finance. Smaller firms and those for which finance constraints were very tight were the most receptive and responsive to the incentive effect.

Senator CARR —So is the old figure that I referred to—that is, the $1 expenditure returning $12 in export earnings—still a credible figure?

Ms Ward —It is not one that we use in our publications any longer. That is simply because it dates back to the year 2000 and—

Senator CARR —What is the current figure that you use?

Ms Ward —As I explained, we do not use that type of figure. We are looking very much at the incentive effect to spend more on export promotion. There are some figures in the research, but we are not using them as publicity figures or as promotion figures because they vary so significantly between size of firm.

Senator CARR —If they vary between size of firm, what is the rate of variation? For instance, what do you think the rate of return would be for small firms?

Ms Ward —I am reading from the review report:

For firms constrained by lack of finance, model results showed that the boost to exports per EMDG scheme grant dollar could be between $20 and as high as $220 over the future life of EMDG scheme-supported businesses, depending on the severity of the finance constraint. Alternatively, if all EMDG scheme recipients enjoyed ease of access to finance, the boost in exports per dollar grant could be between $7.50 and $28.

Senator CARR —Thank you. That is very helpful. Which page were you reading from?

Ms Ward —It is page 40 of the review of the Export Market Development Grants Scheme 2005.

Senator CARR —In terms of the financial constraints on exporters, the question I was going to was about the rate of payment of the grant, and you were saying that it is an integral part of the design to pay it a year in arrears. Other industry assistance programs pay on a quarterly basis. Why can this program not be paid on a quarterly basis? As I understand it, the ACIS program pays on a quarterly basis.

Mr Yuile —Do you mean ex post?

Senator CARR —Yes. It is quarterly in arrears, but it pays on a quarterly basis. Have you looked at paying more regularly?

Ms Ward —There are two parts to the response to that. Firstly, under the current design of the scheme, as we have already covered, there is an annual appropriation and a first tranche payment. We then do a balance at the end of the financial year. It would not be possible to be paying grants higher than the initial payment ceiling amount until we did that balance at the end of the year, because we would not know what payout rate to be paying them on.

Senator CARR —But ACIS has a modulated process—

CHAIR —Senator Carr, Ms Ward said she had two matters in response. If you could let her finish then we will go on to your next question.

Ms Ward —The second part is our experience with applicants is that unfortunately they tend to leave applying to the very last minute anyway, which rather mutes the argument. Sometimes one wonders why they do not put them in faster, and we have tried to encourage applicants to do that by promising we will try to turn around their payments more quickly the faster they get them in. We have more resource time to do that. We had more success last year in getting applicants to get them in more quickly.

I understand—and this is going back some years ago to when the design of the scheme was different and before my time in this job—that there was a period in which grants were paid, I think, six-monthly. I believe it was not a well taken up option, because it does mean for an applicant that they have to fill in an application renewal option four times a year instead of just once a year, which is time taken out of their other business activities. So on balance I think the scheme is designed in a way that is appropriate for the current time and the current arrangements.

Senator CARR —In that review in 2006, were these issues canvassed?

Ms Ward —I believe there was a short discussion on that.

Senator CARR —I was making the point before that the ACIS program pays quarterly.

Ms Ward —I do not know the design of the scheme. It must be a different design to the one that I have just—

Senator CARR —But it has a module component as well.

Ms Ward —I cannot comment, because I do not know the design of the scheme. Would you like me to read the bit from the review?

Senator CARR —Just tell me what page it is. I can get someone to provide it for me.

Ms Ward —It is page 77.

Senator CARR —So it was canvassed; is that the point that you are making?

Ms Ward —Yes. There were many issues that were brought up by submissions and by comment to the review. I can see here that it says that around 30 submissions advocated faster claim processing and payment.

Senator CARR —What page is that on?

Ms Ward —Page 77.

Senator CARR —Thank you. I will have a look at that.

Mr Yuile —It is a bit hard to process them faster when they do not submit the applications.

Senator CARR —That is the nature of the culture. I thought that you were in the business of changing the culture with regard to exports. You have 54 offices around the country placed, presumably, in close proximity to the exporters.

Mr Yuile —All I am saying is that they are working on the culture, but in terms of the EMDG scheme the experience has been that exporters, for whatever reason, leave those for later.

Senator CARR —I turn to the portfolio budget statements. Is output 1.4, on page 89 of the current PBS, EMDG funding?

Mr Yuile —Yes. That is the total administered appropriation.

Senator CARR —It is just not clear to me that that is EMDG funding.

Ms Bennett —If you look at page 88, on the bottom of the chart, it says, ‘output 1.4, Austrade administered: Export Market Development Grants’.

Senator CARR —Okay, thank you. There is $159 million for 2007-08.

Ms Bennett —That is correct.

Senator CARR —Is that figure only for EMDG or does it include other expenditure as well?

Ms Ward —No, EMDG is the only administered program that Austrade administers, so it is only EMDG.

Senator CARR —Is the $151 million for 2006-07 an underspend?

Ms Ward —The appropriation for 2006-07 was $160.4 million. We advised at additional estimates that we estimated that we would spend $151.52 million. That is still our current estimate. However, I must stress that we are heavily processing the final returns now and we will do so until mid-June, so the final figure may vary slightly from that.

Senator CARR —And at 30 June you will reconcile the figures. Is that the normal pattern?

Ms Ward —When the next lot of budget documents are available, they will have the final figure in them.

Senator CARR —I understand that. I am just trying to get the process here. I am not making any suggestions. I just want to know if 30 June is the point at which you determine the actual for the end of the financial year.

Ms Ward —In fact, it will be earlier than that. It will be somewhere around mid-June or just a little later, because we determine the amount and we have to go through the audit procedures to ensure that we have correctly accounted for the funding, and then we pay all of the final second-round payments to people. We must do that by 30 June to use that appropriation. So we do not leave it right until 30 June.

Senator CARR —So it is $151,520 actual—that is in the statement. Do you expect that to be revised up?

Ms Ward —It will be very close to that figure—I do not know what the final figure is. What we do know with confidence is that we will not be spending the full appropriation this year and therefore we are already confidently telling people that there will be a 100 per cent payout this year. Everybody will get their full second-tranche payment.

Senator CARR —Is it fair to say that the underspend is roughly the better part of $9 million?

Ms Ward —It was $8.8 million.

Mr Yuile —It was not drawn down.

Senator CARR —Whatever your technical term is—$8.8 million was not drawn down. What was the equivalent figure in the previous three years?

Ms Ward —I think that was in the figures we gave you in the last Senate estimates.

Senator CARR —Yes, I know. You have to refresh my memory; my brief has not drawn that to my attention.

Ms Ward —In the last financial year the amount we did not draw down from the appropriation, which in that year was $170.4 million, was $25.2 million.

Senator CARR —Yes, on $170.4 million.

Ms Ward —The year before that, which was 2004-05, when the appropriation was $150.4 million, we did not draw down $19.3 million.

Senator CARR —I guess that is what I am coming to. Would it be fair to say that there is a pattern? From the last three years you can draw the conclusion that in each of the three years we have not drawn down the full appropriation. Would it be fair to say that now creates a pattern?

Ms Ward —As we touched on earlier, in 2003 there were legislative changes which focused the scheme on small and less experienced exporters. As a result of that, there were some applicants who would previously have been eligible who were no longer eligible. That, as you correctly pointed out earlier, did result in reduced applications to the scheme. Although, as I said, in underlying terms, if you net out for the change in the scheme, each year there have been increasing application numbers. That, combined with more appropriation in most years, largely accounts for not needing to call it all down, with the very beneficial results for the recipients that they did get 100 per cent payouts. We have had 100 per cent payouts in these last three years.

Senator CARR —Yes. It is fair to say, though, that in the last three years they might not have been able to. Do you recall if it was the same sort of figure in the previous three years?

Ms Ward —We touched on this earlier tonight when I said that in the previous three years before that, which in financial years were the years between 2001-02 and 2003-04, the payout rate was not 100 per cent.

Senator CARR —Yes. Has the number of applicants gone up as well in the last three years? Has there been an increase in grant numbers? I think you told me this before as well—

Ms Ward —Yes. In the years 2005-06 there was an increase in applications of 4.9 per cent and in 2006-07 there was an increase in applications of 1.3 per cent.

Senator CARR —Has the size of the grants increased or decreased?

Ms Ward —I may not have historic figures with me; I certainly would have them for the last two years. The average grant, I would say with confidence, has gone up in each year. I am not sure that I have the average grant figure with me for those three years.

Senator CARR —If you have something I will take it now; otherwise I do not think it is particularly vital. I am just trying to get a sense of what the implications will be on the size of the grant for work that has to be done on redesign. There have been recent changes to eligibility—is that the case? Have there been further changes to eligibility?

Ms Ward —Yes, in 2006 there were further legislative changes. Remembering that we are still processing this current year, in the last financial year—which is the grant year 2004-05 but paid in 2005-06—the average grant was $38, 935. In the previous year it was $37,145. To date this year, the average based on entitlements—remembering that we have not yet paid all that money out but we know we will be paying 100 per cent—the average has been $36,458 .

Senator CARR —How do you account for the variations in size? Obviously it is around the $36,000 to $38,000 mark. Does it mean the size of the export contracts have remained roughly the same?

Ms Ward —It is based on export promotion expenditure, not on export deals, so it would be on the amount of eligible expenditure that applicants have incurred. Clearly that has gone up in terms of their claims on the scheme over that period of time. There could be a range of factors to do with that, including good, strong economic factors over that period of time.

Senator CARR —Are you able to provide the committee with any advice on the real value of the grants in terms of the funding levels in real dollar terms on a historic basis? Do you have any advice on that figure?

Ms Ward —I do not have any statistics, and how you would do such a calculation would depend on what deflator you chose to use.

Senator CARR —So you do not have any figures on the amount of increase in valuation? Does your office carry figures on the real growth in the value of the grant? Looking at it from the other side, do you carry any figures on its relative value over time?

Ms Ward —Relative to what?

Senator CARR —Real terms—CPI or—

Ms Ward —No, that is not something I have any figures on.

Senator CARR —I am not going to ask you to do stuff that is not specially for the occasion. Thank you very much for that. If there is anything else we will have to put it on notice. Would you be able to provide us with advice in terms of the last six years on the value, using the CPI as a deflator? Would that be possible?

Mr Yuile —I think it would be a significant job in the middle of trying to process these claims for the end of the financial year.

Senator CARR —Is it not readily available? I do not want to create any extra work for the purpose of it.

Mr Yuile —No.

Senator CARR —Thank you. We will that then. There is one matter that I wanted to go back to. Is there a list of criteria that I could be referred to for the awarding of performance pay? Do you have that? I am sure that there would be something published somewhere that would tell me what the criteria are.

Ms Kimball —Do you mean in terms of how we define—

Senator CARR —How do you calculate the awarding of performance bonuses? Are there objective criteria that establish that?

Ms Kimball —Yes, we have key performance indicators for our staff.

Senator CARR —Do you have a list of those?

Ms Kimball —Yes, we can provide you with those.

Senator CARR —I do not think it is particularly breathtaking but if a list is available—

Ms Kimball —It varies between, obviously, our frontline staff and enabler groups, but for our client-facing and customer-facing staff we have a range of key performance indicators.

Senator CARR —Does that vary from other agencies or is it Public Service wide?

Ms Kimball —It is based on what we need to deliver.

Senator CARR —It is especially for this agency.

Ms Bennett —It may reflect things like the number of clients that the staff have assisted.

Senator CARR —Is that easily provided?

Ms Bennett —Yes. We can provide you with the corporate KPIs, which cascade down for individual staff.

Senator CARR —That would be very helpful, thank you. I turn to the Trade Commission. Mr Yuile, what officers were handling the Global integration statement?

Mr Yuile —The industry statement?

Senator CARR —Yes.

Mr Yuile —I will see if I can help you with your questions.

Senator CARR —I am referring here to the government’s industry statement released on 1 May, which, given its title, Global integration, I trust is something that the department worked on.

Mr Yuile —Yes. We contributed to the discussion with the Department of Industry, Tourism and Resources in the development of that statement.

Senator CARR —What was the form of the contribution?

Mr Yuile —It ranged over a number of things. There were meetings at officer level fairly regularly providing information, providing suggestions for inclusion in that statement for advising in terms of the types of arrangements we have in place and the network we have in place, and so on. I was not here personally so I cannot tell you exactly but that is the kind of thing, I have been told, took place.

Senator CARR —I appreciate that it was before your time.

Mr Yuile —That is the sort of thing you would expect in that context.

Senator CARR —Was there an interdepartmental committee that you were a party to?

Mr Yuile —I think there were formal consultations by the industry department with our colleague departments and related departments and agencies. There was a cabinet process that I am aware of as well.

Senator CARR —So it was at the cabinet level, was it?

Mr Yuile —What I am saying is that something was discussed at cabinet level as well.

Senator CARR —You would expect that.

Mr Yuile —It is the normal process of government.

Senator CARR —Apart from ad hoc meetings between officers, I am trying to establish how involved Austrade was in the production of the industry statement. I am still at a loss to know.

Mr Yuile —I think we were involved in very regular discussions with the task force as they developed the statement. As I say, there were various meetings, interviews and discussions. I believe there were a couple of formal meetings at more senior levels between the deputy secretary of the department of industry and Austrade. So it was not ad hoc. It was regular interaction.

Senator CARR —The Global integration brochure states that Australian exports have increased at a rate of 7.5 per cent over the decade to 2006. Did you provide that figure?

Mr Yuile —I doubt that we would have provided that figure. There were other agencies involved in the discussion. That would be a value figure, presumably.

Senator CARR —I do not know what it is. I want to cover that now.

Mr Harcourt —What were the dates?

Senator CARR —I am just going by what is in the government’s published documents. It says:

Over the decade to 2006 ... Australian exports have soared at an average annual rate of 7.5 per cent.

Mr Yuile —I have just been told that we did not supply that information. You would need to ask the department of industry where they got that figure from.

Mr Harcourt —The ABS data for that period is eight per cent.

Senator CARR —Presumably if you had been consulted you would have tried to increase it.

Mr Yuile —Increase what?

Senator CARR —Increase the figure. You do not agree with the figure of 7.5 per cent, do you?

Mr Yuile —But it is on the data, isn’t it?

Mr Harcourt —Senator, as I understand it you read the statement that said that the average annual rate of growth of Australian exports from 1996 to 2006 was 7.5 per cent.

Senator CARR —Yes.

Mr Harcourt —I am simply reading over the last decade, 1996 to 2006, where the value of Australia’s total goods and services exports has grown by an average annual rate of eight per cent, which is 7.5 per cent rounded up to eight, for no decimal place. That is the data from the ABS.

Senator CARR —Would the ABS normally present it rounded up like that?

Mr Harcourt —Yes, in most of the briefs they provide, or they would take it to one decimal place, depending on how much detail they need.

Senator Carr —What is the increase by volume?

Mr Harcourt —Four per cent.

Senator CARR —Presumably, had you been consulted, you would have pointed out to them that by value you could have increased it to eight per cent but by volume you would have had to indicate that it was only four per cent.

Mr Yuile —I cannot speculate on—

Senator CARR —I just wondered. Given that Austrade is the key agency in this field you would expect—

Mr Harcourt —Value is eight per cent; volume is four per cent.

Senator CARR —To what extent is that eight per cent that you referred to, or the 7.5 per cent that they referred to, a measurement of growth in value associated with the resources pricing?

Mr Yuile —I presume it is a series taken straight from the data.

Senator CARR —Mr Harcourt, do you have a breakdown on that?

Mr Harcourt —I can break that down for you. Again, I am using ABS data, so there is no spin in this; it is just simple straight statistical data. Over that period rural exports grew by an average annual rate of two per cent, minerals by an average annual rate of 11 per cent, fuel by 11 per cent, manufacturing by an average annual rate of 4½ per cent and services by an average annual rate of six per cent.

Senator CARR —What of that value do you think you could attribute to the changes in the exchange rate?

Mr Harcourt —Two things have happened. One has been the appreciation of the exchange rate, and that is being discussed in terms of the impact on export volumes and export values, and also the terms of trade effect. For instance, the Reserve Bank actually discusses the appreciation of the Australian dollar with the real exchange rate above its post-float average of around 21 per cent putting a restraint on growth but at the same time we have also had an increase in terms of trade which has counterbalanced some of the effect of the appreciation in the exchange rate.

Senator CARR —What do you think the counterbalancing effect is?

Mr Harcourt —Partially because with a terms of trade increase you get an increase in the price of what we export around the world, particularly commodities, for instance, and a decrease in the price of what we import. For the same amount of what we export we can obviously buy more imports. You mentioned the trade deficit before. One point to make is the fact that you import a lot of capital goods when you have a commodities boom because you have to import tractors from the states, capital and so on—

Senator CARR —Yes, and you do not make the stuff here.

Mr Harcourt —In some cases you make some of the stuff, but in terms of scale Australia traditionally has been, as a small country, a capital importer. You use that in turn to fund production and output growth in your commodity sector, where you are getting good prices.

Senator CARR —So you have no sense of what the discount would be on that 21 per cent for the terms of trade?

Mr Harcourt —I do not understand the question.

Senator CARR —I thought you were saying before that the 21 per cent increase in terms of exchange rate should be discounted against the terms of trade effect.

Mr Harcourt —I understand your question. The Reserve Bank have estimated that the real exchange rate has been 21 per cent above its post-float average. They have also said to counterbalance the effects of the high exchange rate has been the boost to national income from the high terms of trade, which at the end of 2006 were 42 per cent above the post-float average.

Senator CARR —You mentioned a figure of a real exchange rate.

Mr Harcourt —That is right.

Senator CARR —What effect would that be? Obviously less than 21 per cent.

Mr Harcourt —We are not talking nominal, so we are not talking US82c. We are actually talking about the real exchange rate as an index. Basically what they are saying is that on the exchange rate side that has been something that manufacturing export had to come up against, but at the same time there has been a boost to national income through the terms of trade.

Senator CARR —So you cannot give me an aggregate number on that?

Mr Yuile —I do not think so. I think that is the answer.

Mr Harcourt —You wanted to know the counterbalancing effect, and that is what the answer is.

Senator CARR —As I read it, the industry department’s statement reflects an allocation of $254 million over 10 years for the Global Opportunities program. Is that correct?

Mr Yuile —I believe so.

Senator CARR —When did you find out it was going to be a 10-year program?

Mr Yuile —When the government announced its policy decision.

Senator CARR —Yes, that is what I figured. You have seen the estimates here of the outlays calculated for the $254 million, and there is a flat line outlay of $26.4 million in the out years beyond the forward estimates. Were you consulted about that figure?

Mr Yuile —Again, that is a policy decision of the government as to how it establishes—

Senator CARR —I just wondered whether the department was consulted, that is all. There are figures here of $17.7 million, $26.9 million, $25.5 million and $25.9 million in the estimates period, but then we have a flat line $26.4 million for the next six years. I am always fascinated to see how these costings are done on a 10-year cycle, particularly when they are on a flat line basis like that.

Mr Yuile —We are not privy to the decisions of the department.

Senator CARR —I take it that Austrade will be a major player in this Global Opportunities program, won’t it?

Mr Yuile —Yes. We are in active consultation with the department of industry about the composition and structure and how that program will be delivered, and, as you say, there are a range of areas in that program. There is the whole gamut of things, as you know, in the statement covering R&D expenditure and productivity centres and the like, but in terms of the Global Opportunities program, yes, that is one that is very much where we are involved in consultation with the department as we move to put that program into place.

Senator CARR —Can you outline to the committee precisely what role you will play in the delivery of that program?

Mr Yuile —They are the things we are discussing at the moment in terms of the design and implementation, because there is clearly a range of potential roles around, both in terms of identifying clusters of firms in Australia and identifying the opportunities offshore. Our network offshore will be involved in that, scoping how you go about the sort of strategy that you might employ to best access those opportunities. They will be the kinds of things which we will be involved in with the department of industry and, indeed, with other agencies. It is a whole-of-government statement about effort in that area.

Senator CARR —Yes. So it is yet to be worked out.

Mr Yuile —It has just been announced in terms of the final policy parameters of the government. As you say, the Global Opportunities program will commence in earnest on 1 July. We are involved with the department of industry at this moment in discussing the detail of how that will be structured—engagement with our export panels, panels of industries that potentially will be participating in this, together with scoping work from our posts. But, yes, it is being worked through at the moment.

Senator CARR —Given that you say it is about to start and you say that you have been closely involved in the development of the program, I would have thought there would be more detail on how it was going to work.

Mr Yuile —As I think I said, we were closely involved in contributing in terms of ideas, suggestions and so on in the preparation of the statement.

Senator CARR —I take it you will be using the existing channels you have—the networks that are there within the organisation. Is that right?

Mr Yuile —We will be doing that and we will be talking with the department and industry about, obviously, how these resources will be disposed to get the maximum impact.

Senator CARR —What precise resources will Austrade be putting into the program?

Mr Yuile —It will depend on that discussion and the shaping of that program for the future. Clearly it will involve our export services areas and our overseas posts. It depends on where the major opportunities or global supply chain possibilities are identified. This is the kind of thing which certainly in the past this organisation and other departments have been involved in—major World Bank projects and things of that kind, where we have brought together the various resources of government to work with industry to seek to maximise our participation in those projects.

Senator CARR —I take it that there is considerable potential here for overlap with existing programs.

Mr Yuile —I think there is considerable potential for complementarity between the programs we have and the work that the government wants us and the department of industry—and indeed other agencies, depending on the projects—to pursue under the Global Opportunities Program. I have not been involved, but I believe the industry department has been heavily involved with the Defence department in pursuing defence projects.

Senator CARR —Yes, that is true. There are some procurement issues. I just would have thought, though, that, given that the fact sheets associated with the government’s announcement stated the program would identify and assess the feasibility of Australian firms bidding for work on major projects and provide market intelligence on emerging opportunities, these are things you already do. That is your standard business.

Mr Yuile —Some of the things we do, yes. But it depends on whether there is an expansion of that activity and a particular emphasis, perhaps, in particular areas. As I think other colleagues mentioned earlier, we clearly do work in market. Some of that is of a more general kind. Some of it is much more granular and focused in particular segments, depending on the nature of the businesses involved and the sorts of interests that they have. It will be utilising those sorts of resources in the context of a new program.

Senator CARR —But it is bread and butter for you, surely?

Mr Yuile —It is certainly work that our posts do. There will be an expansion of that activity.

Senator CARR —How much of the $254 million will be coming across to Austrade?

Mr Yuile —That is obviously subject to discussions and decisions which will be made in the future.

Senator CARR —How much work has been done with the industry department to develop these highly honed program designs? Did you say it started in a month’s time?

Mr Yuile —I think I said to you earlier that there have been contributions from the organisation over the time that the statement has been developed.

Senator CARR —The department of industry has the Supplier Access to Major Projects Global Program, which targets overseas projects, like, as you said, the Joint Strike Fighter project and the Commonwealth Games. Do you have a role in that program?

Mr Yuile —I am not sure, to tell you the truth.

Mr Crawford —I am not sure that the question is absolutely clear. Could you clarify?

Senator CARR —I am trying to explore the level of cooperation between the department of trade and the department of industry.

Mr Crawford —As a resolution to this question, I think you are asking us to provide you with information that we are currently providing ministers, and ministers need to take our advice on—

Senator CARR —Oh, of course, it is advice to ministers.

CHAIR —Can you let Mr Crawford finish, please, Senator Carr?

Mr Crawford —The agency is in the process of working with other agencies to implement the government’s policy outlines—

Senator CARR —I see; that is the problem.

Mr Crawford —and that will be revealed in due course.

Senator CARR —This was an announcement on 1 May about a program that was to commence on 1 July.

Mr Crawford —That is correct.

Senator CARR —That was about the design of the Global Opportunities program. I asked you about an existing program which has been around for quite a while—the Supplier Access to Major Projects global program.

Mr Yuile —I believe there is involvement between this agency and the department of industry.

Senator CARR —What is the nature of that involvement?

Mr Yuile —I do not have that information with me. I am happy to come back to you with an answer on that.

Senator CARR —In terms of the advice the department has already tendered, can you can you tell me how Austrade factored in the existence of the Global Opportunities program to existing programs? You have these programs. There are bread-and-butter issues you are currently undertaking and have been undertaking for some years. The government has come along and announced a new program of $254 million which seems to overlap what you do. You have already told me that there has been extensive consultation. I would now like to know what consultations you have had within the department about how you are going to fit into these things.

Ms Bennett —As my colleagues have said, we are still working through with the department of industry how we work together in delivering this program. In that discussion we are obviously fully aware of what we currently do; therefore any changes will be made in due course, as my colleagues have said, when it becomes clear who needs to take responsibility for what.

Senator CARR —I am surprised that it is not clearer now. That is what troubles me about this discussion. For instance, the statements that have been made about the Global Opportunities program say that it is to target small and medium sized enterprises to be exporters. We have had a discussion here tonight for over an hour about the EMDG program. I am wondering how it relates to your existing operations.

Ms Bennett —It goes beyond export. The piece I am reading about the program says it is for businesses to become globally orientated and to provide opportunities to bid for work on projects and access international supply chains. They are emerging areas. They are areas that we cover already and they are areas that we will continue to develop, not only ourselves but also, as the statement has said, clearly involving Invest Australia industry associations. There are a number of other entities that all need to come together to give the best outcome, and this is happening.

Senator CARR —So you will now be changing the way in which you collect market intelligence, given what we have discussed tonight?

Ms Bennett —It is all to be determined, but I would suggest that the way in which we collect and develop market intelligence will probably remain the same. What I can see, as Mr Yuile has said, given the complementary nature of some of these programs, is that potentially that information might be used differently by our clients or it might be shared amongst different partners. But information gathering will probably by nature remain somewhat the same.

Senator CARR —I have got the picture. I have a simple question: what is the cost of the Business Club program?

Mr Crawford —Could you clarify which one you are referring to in particular?

Senator CARR —How many are there?

Mr Crawford —The first Business Club was run in association with the Sydney 2000 Olympics, the second was in association with the 2003 Rugby World Cup held in Australia and the third was in association with the 2006 Commonwealth Games. We are currently in the process of transforming the Business Club into an ongoing promotional program. Obviously there are no events on that scale to be held in Australia in the foreseeable future so we are focusing on opportunities in association with the Beijing Olympic Games and the 2012 Olympic Games.

Senator CARR —You are going international.

Mr Harcourt —We are exporting it.

Senator CARR —Yes, exporting the program—that is a very good idea. Is there a performance bonus on this one as well?

Mr Crawford —A performance bonus for whom?

Senator CARR —Participation in the Business Club.

Mr Crawford —The Business Club is a core part of the business.

Senator CARR —So tell me this: how many Austrade staff are engaged in the Business Club?

Mr Crawford —Currently the core staff that could be attributed to the Business Club as it stands would be five directly, with two senior managers having some oversight.

Senator CARR —The two senior managers supervise the five, do they?

Mr Crawford —One of the senior managers is me. I have oversight of the entire program. I have an SES officer who is responsible for a team called Major Program Promotion, which runs the Business Club and the Australian Export Awards.

Senator CARR —Why do you need two senior officers to supervise five in this particular project?

Mr Crawford —I think my remit is slightly broader than just supervising that one senior officer.

Senator CARR —You supervise the one?

Mr Crawford —I have a number of officers that I supervise.

Senator CARR —Is this a hardship post as well?

CHAIR —I am not sure that that is a question that Mr Crawford can answer, Senator Carr, and you know that.

Senator CARR —I think it is a reasonable question.

Mr Crawford —Let me say to you that implementing, designing and successfully carrying out the business clubs has been a very significant and rewarding challenge and has delivered great results for the Australian business community.

CHAIR —Thank you, Mr Crawford.

Senator CARR —Yes. So did anyone participate in the Cricket World Cup? Was that an opportunity that was—

Mr Crawford —Did anyone from Australia go across to the World Cup?

Senator CARR —Yes.

Mr Crawford —No.

Senator CARR —And the soccer?

CHAIR —Which soccer, Senator?

Senator CARR —World Cup soccer last year.

Mr Crawford —Did anyone from Austrade in Australia go to that?

Senator CARR —No, I presume that was for local—

Mr Yuile —Do you mean: did we have a Business Club event associated with that?

Senator CARR —Yes.

Mr Crawford —No, we did not—not in association with the soccer or the cricket.

Senator CARR —And the Rugby World Cup? Is there anyone participating in that?

Mr Crawford —We are running a very small business club in association with the Rugby World Cup in France later this year. That will involve three to four networking events in regions such as Montpellier and Bordeaux and also in Wales. They are being held in association with local chambers of commerce or business development organisations.

Senator CARR —And that is a small event. How many officers will be involved with that?

Mr Crawford —The main carriage of that is being done out of the Paris post, with support from the Business Club Australia team here. We have currently seconded a junior officer to Paris for six months to work on the program. That is an APL3 officer, so relatively junior, to support the post in regard to that.

Senator CARR —I see. And you say there was no-one at the West Indies and the Cricket World Cup?

Mr Crawford —I will say no-one, with the caveat that it is possibly the case that one of the staff in the region may have been there. But I am not aware of anyone being there. But there was a business club which the Jamaicans ran, based on our own model, run by what is called JAMPRO, which is the Jamaican trade promotion organisation.

CHAIR —Imitation as a form of flattery, Mr Crawford.

Mr Crawford —Indeed.

Senator CARR —In regard to the Beijing Olympics, how many people do you think will be engaged in the Business Club program for Beijing?

Mr Crawford —How many Austrade people?

Senator CARR —Yes.

Mr Crawford —I would expect that, at the actual time of the Olympic Games, you would have most of the staff at the Beijing post involved in some way or another.

CHAIR —Most of the Austrade staff, Mr Crawford?

Mr Crawford —Yes, most of the Austrade staff. Whether we send any staff from Australia up to support the program we are yet to determine, but I would expect that there may be a couple of relatively junior staff sent up as well.

Senator CARR —I see.

Mr Crawford —As for more senior representation, that is yet to be determined.

Senator CARR —How do they support the program?

Mr Crawford —How does who support the program?

Senator CARR —When they go and participate, what sorts of things do they do to support the program?

Mr Crawford —Historically, the hub of the Business Club concept is business matching and business networking. We are quite forensic in getting Australian companies together with the relevant international business representatives. Generally, we will use an Austrade officer and an officer from another department, or in some cases we have used ministers, to facilitate the business networking and matching at various events, including sporting events.

Senator CARR —What is the cost of the program?

Mr Crawford —The program cost is varied. From memory—and I was not involved—the Sydney 2000 Olympics program was in the order of $6.5 million. The program in association with the Rugby World Cup was in the order of $2.4 million. The Commonwealth Games last year, once again, was in the order of $2.4 million. However, close to 50 per cent of that funding was—it was a shared funding program with the Victorian government. They contributed $1 million plus.

Senator CARR —Do you have a budget for Beijing yet?

Mr Crawford —We are currently working on that, but we expect it to be approximately $2.4 million as well. But that is subject to a number of factors and budget items which we are yet to resolve.

Senator CARR —And the Rugby World Cup?

Mr Crawford —The budget for that?

Senator CARR —Yes.

Mr Crawford —I think it is in total about $65,000.

Senator CARR —Thank you very much. I just have one final question on the free trade negotiations. Are officers here able to handle that?

Ms Bennett —Negotiations—

Mr Yuile —Negotiations are the responsibility of the department of foreign affairs itself.

Senator CARR —Yes, I will do it somewhere else. No worries. Thank you.

CHAIR —Does that conclude questions for Austrade, Senator Carr?

Senator CARR —Just one final thing. You mentioned that ministers are helping you out with the Business Club program. How often has that occurred?

Mr Crawford —We have had very good support from ministers, particularly during their international travel, in promoting the program in the international market, and domestically we have had ministers who have provided very strong support for the various business networking events—for example, the senator may correct me, but I believe Senator Coonan supported us in Melbourne last year at an ICT business networking function which was held.

Senator SANDY MACDONALD —You got very good support from your parliamentary secretaries too, Mr Crawford.

Mr Crawford —Indeed, Senator Macdonald: very good support from the parliamentary secretaries.

Senator CARR —I see; it is a very popular program!

Mr Crawford —It is a very successful program too.

CHAIR —It is very good business, Senator Carr.

Senator CARR —Were any other members of parliament invited to facilitate this important international engagement?

Senator Coonan —Yes, Marsha Thomson was one—

Mr Crawford —Yes, Ms Thomson was there.

Senator CARR —I was thinking more of the Commonwealth parliament.

Mr Crawford —I could not tell you off the top of my head, but I am fairly certain that other members of parliament have been involved.

Senator CARR —Was it just government members?

Mr Crawford —In which particular aspect?

Senator CARR —Just go through them. Let us—

Mr Crawford —Sorry, in terms of—

Senator CARR —You can tell me the answer pretty clear—I don’t have to go through each of these blow by blow, but I think the answer is pretty straightforward, isn’t it?

Mr Crawford —But not necessarily as straightforward as you may think.

Senator CARR —It is not straightforward?

Mr Crawford —I think you need to accept (a) that this is a government program and hence is supported by the ministers of the government of the day.

Senator CARR —Right.

Mr Crawford —However, it is my recollection that there have been other members of parliament involved, certainly in the Olympic Games club and the Rugby World Cup business club. And, as Senator Coonan has pointed out, there was substantial involvement of the Victorian state government, up to Premier level, with the Commonwealth Games.

Senator CARR —Of course. And this would be a bipartisan thing, wouldn’t it, so you would invite the shadow minister?

Mr Crawford —To what?

Senator CARR —To the World Cup, the Sydney Olympics, the Commonwealth Games—they are part of the program. Were they invited?

Mr Crawford —If we are running a targeted networking function which has limited numbers, obviously the government of the day has priority.

Senator CARR —So it is a space problem; is that the reason?

Mr Yuile —It is a government decision.

Mr Crawford —It is a government program.

Senator CARR —Thank you very much.

CHAIR —Senator Carr, does that bring us to the end of the consideration of budget estimates for Austrade?

Senator CARR —Thank you very much.

CHAIR —Thank you. I thank you, Mr Yuile, and your colleagues for attending, particularly for providing that information to the committee over the dinner break.

Senator CARR —It is much appreciated. Thank you very much.

CHAIR —We are grateful for that additional work. Thank you very much. I think there are a number of matters that you have taken on notice as well. The return date for those is 26 July. Now we will return to the department’s outputs.

 [8.47 pm]

CHAIR —We are dealing with trade issues 1.1.7, Bilateral, regional and multilateral trade negotiations and 1.1.8, Trade development/policy coordination and Asia-Pacific Economic Cooperation.

Senator CARR —In Budget Paper No. 2, on pages 209 and 210, additional funding has been allocated to support the Australia-China FTA and the Australia-Japan FTA negotiations. Also listed there are the names of the following organisations: Attorney-General’s, Treasury, DFAT, Customs and IP Australia. How much of that allocation will your department receive?

Mr Chester —In relation to the Australia-China FTA and the $17 million that has been allocated over the next two years—2007-08 and 2008-09—the Department of Foreign Affairs and Trade will receive $8.212 million. The other funding goes to another nine government agencies. In relation to the Australia-Japan FTA, again, $17 million is committed over the two financial years. The department asks for no funding in relation to that FTA negotiation. The funding will go to other government agencies.

Senator CARR —Where do we stand in relation to the negotiations with China?

Mr Chester —I will ask Mr Wells to answer that.

Mr Wells —We have another negotiating round with the Chinese beginning in a few weeks time. To tell the truth, I cannot report much change since you asked this question at the last estimates session.

Senator CARR —We talked about the glacial progress. Do you think it is still appropriate to use that word?

Mr Wells —I would say that progress is still very slow indeed and that, in some areas—particularly tariffs—the negotiations are on hold until the Chinese come forward with a better offer.

Senator CARR —Do you anticipate much movement this year?

Mr Wells —I cannot say. That really does depend on the Chinese. However, the Chinese have indicated that they would like to use possible high-level visits this year to achieve breakthroughs in some areas. We are discussing with the Chinese how we can achieve such breakthroughs. But, from our point of view, it is very much incumbent on the Chinese to move on some important areas.

—Australia’s position has not changed in terms of its negotiations, has it? It is still taking an across-the-board approach?

Mr Wells —We are still looking for comprehensive, high-quality, liberalising outcomes in a range of areas.

Senator CARR —Issues that have been regarded as sensitive in the past have not changed?

Mr Wells —No. Certainly our sensitivities have not changed.

Senator CARR —When are these high-level visits expected?

Mr Wells —There is no confirmation of high-level visits, but it is possible that there will be high-level visits later in the year. The Chinese have said to us that they would like to ensure that there are some breakthroughs at that time.

Senator CARR —Are you able to indicate who it is that is anticipated to be coming later this year?

CHAIR —In terms of visits?

Senator CARR —Visits by the Chinese. You talk about high-level visits. What do you mean?

Mr Wells —I am not sure that anything public has been said, but perhaps my colleague can help.

Mr Baxter —As you are aware, Australia will be hosting the APEC leaders meeting later this year. We expect the Chinese President to be in Australia for the APEC leaders meeting, and there will be ministerial meetings leading into the APEC leaders meeting, which we expect the senior Chinese ministers to attend as well.

Senator CARR —That is in September.

Mr Baxter —Yes.

Senator CARR —I understand that the Japanese Prime Minister is coming to Canberra on the 11th.

Mr Baxter —That is right. It was announced by the Prime Minister yesterday.

Senator CARR —And the American President will be here as well on the 10th.

Mr Baxter —As you know, 21 heads of government or heads of states will be coming here and some of those will be doing bilateral programs.

Senator CARR —I am just wondering what scope there is for breakthroughs in such a crowded calendar.

Mr Wells —In the China FTA, as I said, that will depend on the Chinese. The Chinese have made the proposal that we announce breakthroughs, and we will work with them conscientiously to ensure that we can announce breakthroughs. But, from Australia’s point of view, they will have to be substantive and there will have to be something in it for us as well as for the Chinese. Whether we can achieve that remains to be seen.

Senator CARR —Perhaps I will come back to that. With regard to the multilateral negotiations, can I get some advice on the agricultural negotiations? Minister Truss recently chaired a meeting of trade ministers in Paris on 16 May.

Mr Chester —I will ask Mr Yeend and Mr Langman to answer those questions.

Mr Langman —You mentioned the meeting of trade ministers that Mr Truss chaired in Paris on 16 May, which 18 ministers and the Director-General of the WTO, Pascal Lamy, attended to discuss where we were in the Doha negotiations. You would be aware that it is a difficult negotiation, a very large-scale negotiation, covering not just agriculture but also industrial products, services and rules issues.

Negotiations have been continuing over a number of years. There was a period in which things were moving very slowly, in the latter half of last year, after a group of six countries, including Australia, failed to reach a breakthrough on some key agricultural issues and industrial products issues in July last year. Since then we have managed to get the negotiations going again, particularly after the Davos ministerial meeting which Mr Truss attended agreed that the negotiations should start up again at full pace in late January this year.

Since then there have been a number of meetings, including in Geneva, where the negotiating groups are meeting again. There have also been a series of bilateral meetings, a series of meetings of small groups of key countries, to try to find a way forward. These include the informal ministerial meeting in Paris that you referred to. They include two meetings of the Group of Six countries that Australia participates in; one in New Delhi in April and then another one in Paris on the same day as the meeting that you mentioned.

Key ministers have agreed that we should try and complete this negotiation by the end of this year. Clearly, we have a long way to go. In many ways the issues are very familiar now. We are still stuck on key issues to do with agriculture and key issues to do with industrial products. There is a hope, though, that a very intense period of effort ahead of the summer break in the Northern Hemisphere will allow us to make progress on those key threshold issues. If that can be done—and that is still very much a question—then I think it is certainly possible that we can complete the greater part of the Doha Round negotiation by the end of this year. But, as I say, there are still some very significant hurdles.

Senator CARR —So you expect to be able to complete it by the end of this year?

Mr Langman —If we can make a breakthrough in the next few months, it is possible that we will be able to do that. It is not clear to me that we will be able to reach agreement, though, on these threshold issues that have indeed been at the core of the current stalemate now for some considerable period. Essentially they are on agriculture. It is clear that to get a deal here we need all the key players—the US, the EC, Japan and the key developing countries—to contribute on agriculture, industrial products and also services beyond the contributions that they have been willing to make at this point.

Senator CARR —If we can be a little bit more specific, in terms of agriculture are we likely to see any movement on the question of market access, the level of tariff reduction, sensitive products, export subsidies, those sorts of things?

Mr Yeend —As Mr Langman has pointed out, all of these issues are under discussion. It is hard to make an assessment of whether or not we will get the kinds of breakthroughs we need to be able to conclude the negotiations this year. The discussions that are taking place in Geneva and in small groups bilaterally are focused on these key issues, including the ones that you have mentioned. There is a sense that in some of these issues, starting with domestic support or farm subsidies, there is some progress being made.

The main issue there revolves around the extent to which the US will be able to agree to further cuts. At this point in time, while there has been some discussion of the kinds of disciplines that will apply overall, what we do not have from the US is an indication of the specific extent to which they will be able to cut from their current proposal, which is a proposal of an overall trade-distorting support limit of $22 billion. Most people would see that they need to move down to a figure of somewhere between $15 billion and $17 billion to be in the ballpark of what other WTO members will agree to.

On market access, the question of tariff cuts and sensitive products, which particularly relates to developed countries and, in particular, places like Europe and Japan, is an issue again where there is ongoing discussion. The Europeans at the moment have an offer on the table that would amount to around a 50 per cent average cut. They have indicated informally that they could go higher than that, but we need a lot more specificity on that, particularly in terms of the kinds of tariff cuts we would be getting for products that have high tariffs. At the moment, what the Europeans are offering there is no more than a 60 per cent cut. That is certainly not anywhere near the kind of cut that we have been arguing for. Australia, the Cairns Group, the G20 group of countries and the US are all looking for a higher figure than that. So there is still work to be done there.

Another key issue for Australia and many exporting countries is this issue of sensitive products, which relates primarily to the expansion of quotas. It is particularly important to us in markets like Europe. What the Europeans have proposed would not give us the kinds of improvements in market access that we would like to see. Their proposals would offer something around two to three per cent expansion of those existing quotas, whereas we and most other WTO members, certainly the rest of the Cairns Group, the G20 countries and the US, are looking for something much more in the order of, say, six to eight per cent. So again there is work to be done. There has been some narrowing of positions and better understanding of where the respective sides lie, but there is still a lot of work to be done—as you can see from the differences in the numbers I have given you—in terms of getting a breakthrough in the next couple of months.

Senator CARR —I really appreciate that answer. Given the US electoral cycle, is it realistic to expect a narrowing of these issues? Going from $22 billion to $15 billion to $17 billion in terms of programs strikes me as unlikely in an election period.

Mr Yeend —It is a question to which we do not really know the answer at the moment. I can certainly say that the US administration—USTR Schwab and Agriculture Secretary Johanns—are very committed to getting some progress and they have been putting a lot of time into the negotiations. They have been giving indications that they are able to potentially move in the direction that everyone would like, but what the US needs to be able to do that—and it is something that Australia also needs—is a very good market access outcome. That is how these issues are all linked. If the Europeans, the Japanese et cetera—the other protectionist countries—were able to improve their market access offer, then it would certainly be something that would help the US to get the cuts to the subsidies that they need, to get congress to approve the overall deal.

Senator CARR —My reading of it, though, is that the protectionist tendencies of the United States are actually growing. Reports from the United States congress suggest that. The recent disputes with the Chinese on currency and the quite aggressive signals that have been sent from the United States administration in response to the changes in the United States congress suggest to me that the problems are becoming more entrenched, not less so. I am just wondering, given what is on the public record, why you have any sense of confidence that there can be any movement this year.

Mr Langman —I might try to respond to that point. I think we are all aware that there are a range of views in the US Congress on trade issues, and have been as long as I can remember—and, I am sure, further than that. There were concerns raised at the time of the recent congressional elections. It is also true to say that in the negotiations WTO members are very aware of the fact that the United States goes into a presidential election next year and, given that, there is a question mark about whether it will be possible to continue work on the round if we need to into next year. I think it is worth noting recent public comments by Susan Schwab, US trade representative, following the agreement reached between the leaders of the Democratic Party in the House and the administration in relation to a number of free trade agreements that are before the Congress and for which the administration would like to bring forward implementing legislation.

Schwab has said that this agreement is a very positive sign that key Democrats are willing to work in a positive way on trade issues. There are many countervailing pressures and great complexity in relation to the politics in the United States on trade issues. As you mentioned, there is no doubt that concerns have been expressed about the high levels of trade with China and the great competitiveness of China as a manufacturing exporter. Those are some of the complexities that feed into this picture. As Mr Yeend said, we cannot be certain how this will play out, but we can say that senior US administration officials, ministers, have indicated that they believe they can work with the Congress on these trade issues.

An issue we have not referred to but which is very relevant to the point you have raised is the question of the Trade Promotion Authority, which the United States will need to complete the Doha Round. The Trade Promotion Authority expires as legislation at the end of June. In practice, it has already expired in the sense that the administration cannot bring forward new legislation in relation to trade under the existing authority, so it will need to be renewed. To do that, the administration has indicated that it needs progress in the negotiations. So there are many interlocking issues here.

If I might I will just go back to the negotiations for one moment. As Mr Yeend indicated, not only are the issues that relate to agriculture interconnected; the other issues that I mentioned are connected to each other as well. The United States and the European Union, in broad terms, have made it clear that they are willing to do some reform of agriculture. But to do that they need to see progress on industrial products, removing tariffs, which are very high and mostly in the developing world, and they also need to see quite considerably more movement on services issues. With that, they will be able to do more on agriculture. So the challenge we face in the negotiations is creating enough confidence amongst all the players that the issues they are more interested in—whether it be agriculture, industrials or services—will deliver something meaningful, something commercially worthwhile from their perspectives.

Senator CARR —I noticed the press reports covering the paper presented by the chair of the agriculture negotiations, Crawford Falconer—the so-called ‘Challenge paper’. As I understand it, he has presented that in two instalments, the first of which is publicly available. I am told it got a mixed reaction from WTO members. There was some media coverage that said that Falconer’s paper claimed that Australia and other countries like Australia—so-called free-trading countries—would have to settle for far less in these negotiations. What is your response to those claims? Have you seen them? Are you familiar with what I am speaking of?

Mr Yeend —Yes. You are quite correct that the chair of the agriculture negotiations has recently issued two papers. The second one came out on Friday and is publicly available as well. The purpose of these papers, following the resumption of the negotiations earlier this year, is that the chair wanted to try and set out clearly for WTO members where the discussions are up to on the various issues under negotiation. In doing that he has attempted to suggest what he calls a centre of gravity on most of the issues. As you could imagine, with a centre of gravity you have views on either side of that centre of gravity. We think that it is very useful to the negotiating process to have the issues set out in this way, which will facilitate discussion over the next month or two. The plan of the chair is to move from these papers into more of a legal text. On some of those issues it is quite right that Australia, given that we seek a certain level of ambition across the board—as do most if not all Cairns Group members; indeed, most WTO members when it comes to agriculture—would like to see a higher level of ambition than has been set out by the chair. In the last couple of weeks there have been a series of meetings in Geneva setting out where we would like to see a higher level of ambition. That relates to the issues I was speaking about earlier, amongst many others, where we would like to see more substantial cuts to domestic support and farm subsidies from the US and the EU. On market access we would like greater certainty in terms of what kinds of additional market access we will get from the negotiations. This is part of an ongoing process. Certainly Australia is continuing to push very hard, particularly with our Cairns Group colleagues, to make sure that we can do everything possible to get the best possible outcome, if there is to be a breakthrough in the next couple of months.

Senator CARR —It just strikes me that this concept of lowering ambitions does raise some concerns about the positions that have been taken to date. Are you detecting much support amongst the Cairns Group for Australia’s position or has that deteriorated?

Mr Yeend —No, I think there is very strong support for Australia’s position, not only within the Cairns group but from a number of other WTO members, including the G20 countries in particular. On the issue of market access we have very strong support from the United States as well. On the issue of cuts to farm subsidies even the Europeans are saying that they are able to put a reasonable offer on the table, and it is actually the US that needs to do more. There certainly has been no diminution of support for the kinds of positions that Australia has. Indeed, in the Cairns Group this year we have put forward a number of proposals across various issues in the negotiations, including on sensitive products. Just last week there were two proposals put forward on the issue of food aid and export credits. In each of these proposals they have reflected a high degree of ambition on those issues. So there is certainly still strong support for that kind of approach in the Cairns Group.

Senator CARR —Mr Vaile, the former trade minister, used to speak of achieving meaningful new access. It has been put to me that Mr Truss does not use this description anymore. Does that reflect a lowering of the sights?

Mr Yeend —No, I wouldn’t agree that Mr Truss does not use that kind of language. I think that the kind of language we are always using is that we need meaningful new commercial opportunities. I have not detected any difference between Mr Vaile and Mr Truss on that issue.

Senator CARR —Crawford Falconer’s paper spoke of the need for countries to abolish export monopolies such as the AWB’s single desk. It is reported that Mr Truss claims that this is now off the negotiating table. There seems to be quite a sharp contrast in the positions that have been taken. Can you advise this committee how Australia is dealing with the question of the single desk?

Mr Yeend —Yes, certainly. Mr Falconer, in his paper, did not say that there would be a need to; it was his assessment that, as an outcome of the negotiations, this would be required. We have disagreed with his assessment. We do not accept that export monopoly powers have ever been part of the negotiations. If you look at the history of the negotiations on this issue the Doha declaration—followed by a number of other clarifying statements, including the Hong Kong ministerial meeting—has reaffirmed, in our view, that monopoly powers, per se, and the elimination of those monopoly powers is not part of the negotiations. The negotiations are about the export subsidy component of how state trading enterprises operate. There we have already agreed that in areas like underwriting of losses, government guarantees and other forms of export subsidies, we are prepared to discipline those.

It is worth mentioning that STEs is one of a number of issues in this ‘export competition pillar’, as it is called. There are also issues like food aid and export credits, and the more direct export subsidies of the kind the Europeans have delivered for many years. It has been agreed to eliminate the trade distorting aspects of all of those mechanisms. So STEs are one of a number. But we have never accepted that monopoly powers per se are part of the negotiation. What Mr Truss has said recently is simply a reflection of a position that we have held since day one of these negotiations.

Senator CARR —Does the United States share that view?

Mr Yeend —No, the United States and some other members have a different view, and continue to suggest that the elimination of monopoly powers is something that would be required from these negotiations. That is a view that we strongly disagree with.

Senator CARR —Putting aside the rights or wrongs of the domestic argument on the single desk, are you able to give the committee an assessment of the sustainability of Australia’s formal position if the United States maintains its opposition?

Mr Yeend —I think that our position is entirely sustainable through this negotiation. Since we launched the negotiations, as I have said, we have agreed to take on some disciplines related to how state trading enterprises operate. Just as there will be progress in some of these other areas of the export competition pillar that I have mentioned, on food aid and credits, there is already enough on the table, on all of these issues, to reach a comprehensive agreement across this pillar of the negotiations. That would fit with the kind of outcomes we are looking at for the market access and the domestic support areas of the negotiations.

Senator CARR —We have canvassed a number of political developments with regard to the effects they are likely to have on this current round. Are you able to advise the committee on what impact the recent French elections will have on the round?

Mr Langman —We do not have a lot of information on that question. Many of us saw in the press some comments by the newly elected French president when he visited Brussels. The tone of those comments was certainly not to suggest that France would be changing its general position in the negotiations, which I am sure you are aware has been very conservative in relation to the reform of agriculture.

Senator CARR —So you think it is status quo?

Mr Langman —I do not expect that France will, in the near term, change its position significantly.

Senator CARR —Is there a point at which you will be able to assess that the current momentum is not sufficient to sustain serious progress in this current round?

Mr Langman —It is a difficult question in the sense that I think these sorts of very large negotiations in which many issues are brought together in a single undertaking—that is, at the end of the day everything is added together—are very hard to assess. We, as I said at the beginning, reached a point in the middle of last year where it was judged it was useful to take a break, and we did that. In the same way, the Uruguay Round, which went for around about two years more than we had been negotiating the Doha Round—a bit more than two years more—had reached a point at which there was an impasse. Eventually it was brought back together. Observers have different views, I think, about this. Certainly our hope is that we can drive these negotiations to some form of resolution in the next two or three months—even one to two months—and that that breakthrough would allow us to then build the rest of the details around that core, essentially by the end of this year, with perhaps some technical issues spilling into next year. That is an optimistic sort of scenario, of course, and there are lots of uncertainties here. But I think that there is a chance that could happen.

If we do not manage to do that, then there is a great deal of uncertainty and, again, some speculation about how it might play out. Would it be possible to continue work next year during a US presidential election? It is a question mark, I think. Would it be better to wait until after the most intense period of the presidential election was over and come back or would WTO members decide the time was not right and it was better to leave it for a longer period? I think these are great uncertainties. The best thing for us to do is to do absolutely everything we can now to try to deliver a good outcome—an outcome, as we said, that delivers useful, meaningful, commercially valuable outcomes for Australian exporters—and that is what we intend to do.

Senator CARR —It strikes me that it is likely there will be an election called in this country in about 16 weeks time. What are the consequences of an election—

CHAIR —Your prescience is impressive.

Senator CARR —It is within that range. In mid-September, after APEC, it is likely there will be an election called here. What impact does that have on the progress of your work?

Mr Langman —If there is an election called then there are certain protocols that we follow that are well known. We will need to do what we can to manage our negotiating efforts in that period, but I think that our positions are very well known on a wide range of issues in this negotiation. I think, in principle, people know where we are coming from. They understand our positions. Where there are questions that might be of a political nature then we would need to look at those in light of the appropriate ways of proceeding during the period around an election.

Senator CARR —Does it mean your work stops or not?

Mr Langman —My memory of the last election—

Mr Chester —No, it does not. There were a number of times when elections in Australia coincided with important periods in the Uruguay Round and there was a standard convention that was followed during that period, depending on the particular events within the negotiation. Similarly, during the Doha Round, and related elements of the Doha Round, we have gone through election processes. So there are established conventions. This is not something that just Australia faces given the period that these rounds go on for; many countries deal with these issues in a similar way.

Senator CARR —How many staff have you dedicated to this round?

Mr Chester —I am not sure that it is easy to give an answer to that. There are staff in the Office of Trade Negotiations dedicated to it. The primary work of that division of the department is the Doha Round. There are a number of other staff within the central office in Canberra who provide direct or indirect support to those doing the Doha Round work. There are staff in all of our embassies around the world who have responsibilities for reporting on it and doing advocacy work in relation to the round. There are also staff, particularly in Geneva, who prosecute it. I am not sure it is possible to add all that up and come up with a number.

Senator CARR —How does it compare with the number of staff you have devoted to the FTA work?

Mr Chester —In general, it is probably much of a muchness across the whole organisation.

Senator CARR —You think it is about equal?

Mr Chester —Yes. It is impossible to add up the numbers, but it is probably about the same. When you look at resources and—

Senator CARR —You think it has equivalent status?

Mr Chester —I do not know if it is equivalent. It may be equivalent status as far as the number of staff who are involved in it, but in some posts there are more staff prosecuting Doha Round issues than there are prosecuting bilateral issues and in other posts there will be the reverse.

Senator CARR —I have some questions about Australia’s credibility with the WTO relating to quarantine. It was reported on the ABC Rural program on 24 May this year that WTO senior counsel, Ms Stanton, said at the Quarantine and Market Access Conference in Canberra that Australia is facing the risk of potential WTO disputes. Are there any current disputes with the WTO involving Australia relating to quarantine?

Mr Langman —Two processes have been started by the Philippines. One relates to pineapples. That is still formally on the books, but since the Philippines raised the issue Australia has completed work on quarantine measures and trade is now taking place. So I think that is a matter of formality rather than something else. There is another case that the Philippines has raised in relation to bananas which has been in the system for some years. The Philippines has not taken the next step required in the WTO dispute settlement process, which is to ask for members of a panel to be appointed to consider the merits or otherwise of the case. You may be aware that a draft import risk assessment has been prepared and is currently under consideration. That is the answer to the question in relation to quarantine.

Senator CARR —I am told there is something on prawns. Is there an issue outstanding on prawns?

Mr Langman —There is no WTO action in relation to prawns. Consideration is currently being given to an import risk assessment, which is a domestic process.

Senator CARR —It is domestic; I see. Apart from Biosecurity Australia’s import risk assessment, have any representations been made to Australia in relation to bananas and pineapples by foreign governments or foreign stakeholders?

Mr Langman —Quarantine issues are regularly subject to requests for clarification and requests for consideration of a proposal to export product to Australia. Concerns are sometimes raised bilaterally and sometimes in other contexts by our trading partners in the same way that Australia asks questions, makes requests and, on occasions, expresses concern about the import policies of some of our trading partners.

Senator CARR —Are you able to be more specific? What representations have we had on pineapples and bananas?

Mr Langman —The ones made on those two were requests of a formal nature in the context of a WTO dispute settlement process. Other requests are more general and can be bilateral, and there are many of them over a long period of time, both from our trading partners to us and from us to our trading partners. There are many such requests. That is part of routine business.

Senator CARR —That is a standard negotiating tactic, is it?

Mr Langman —I am not sure that I understand—

Senator CARR —You said there are many requests. Is it a commonly used device to raise concerns about Australian products?

Mr Langman —It happens on occasion. Sometimes it is an expression of concern, but many times it is simply a request for some action to be taken in order to facilitate trade in a particular product.

Senator CARR —How long does it take Biosecurity Australia to complete an import market access request?

Mr Langman —I cannot answer that directly. I can say that the government has announced some reforms to our IRA process in recent times. One of the objectives of those reforms was to regulate the time frames within which IRAs would be completed. With respect, Senator, I am not the right person and perhaps this department is not the place to give you expert advice on that.

Senator CARR —I understand that the Australian government, in the recent WTO trade policy review, made the point that they would have new quarantine import risk assessment processes in place by early 2007. Are you familiar with those?

Mr Langman —As I mentioned, the government recently made some reforms to the IRA process. I presume that is the reference that was made during the trade policy review.

Senator CARR —Is there a change to regulations required?

Mr Langman —Again, Senator, that is an issue for the agriculture portfolio.

Senator CARR —On 15 may there was an article on the FarmOnline website about the Australian Beef Association’s concerns regarding BSE and imports of United States beef to Australia. Have you had representations on this matter? Is the department aware of these concerns?

Mr Langman —I saw press articles by the Australian Beef Association.

Senator CARR —Is there a current prohibition on United States beef in Australia?

Mr Langman —I do not believe there is a prohibition on the importation of United States beef, but there is a policy in relation to BSE.

Senator CARR —Can you help me with the policy? What is the impact in terms of the import of United States beef as a result of this policy? I think that is the nub of the question.

Mr Langman —The policy is that, in relation to imports of beef and beef products from countries where there has been a case of BSE reported, we do not import product.

Senator CARR —We do not import it? So it is true that we have a prohibition on the import of US beef?

Mr Langman —I put it differently, Senator.

Senator CARR —I know. I am just relying on these reports. I want to know whether Australia is importing US beef? Can you tell me that?

Mr Langman —Could you repeat the question?

Senator CARR —Could you tell me how much beef Australia is importing from the United States at the moment?

Mr Langman —I am sorry but I do not have that information.

Senator CARR —Do I have the right department?

Mr Chester —I think we will need to take that on notice to give you an answer.

Senator CARR —If you cannot tell me how much, can you tell me that we are importing some US beef?

Mr Chester —Again, we will have to take that on notice.

Senator CARR —How long would it take to find that out?

Mr Chester —At 9.40 at night, probably a while—tomorrow morning, I would say.

CHAIR —Thanks, Mr Chester.

Senator CARR —Perhaps you can tell me this. In terms of the US free trade agreement, is there any obligation on Australia to ensure that Australia follows international standards with regard to BSE?

Mr Chester —Could you repeat that question?

Senator CARR —In regard to what might be World Trade Organisation criteria or what might be free trade terms and conditions with the United States, is there any requirement or any special standards set for Australia with regard to the question of BSE when it comes to the import of United States beef?

Mr Langman —No. Australia is able to determine its own import policies, so long as these are consistent with our international trade obligations.

Senator CARR —So what is the requirement under those trade obligations with regard to BSE?

Mr Langman —We are able to set our own import policy, so long as it is consistent with our obligations.

Senator CARR —I am obviously a bit slow here. You are going to have to explain to me what that means. Since we cannot actually work out whether or not we are stopping US beef coming in here at the moment, what are our obligations under those treaties with regard to imports of beef from countries affected by BSE?

Mr Langman —The WTO allows countries to set their own import policies so long as they are in line with the broad disciplines in the SPS agreement, the sanitary and phytosanitary agreement. These include that countries have the right to set their own level of risk, that measures should be taken in a way that does not unnecessarily restrict trade and that does not discriminate between other WTO members, and that it is based on a risk assessment and science.

Senator CARR —Has there been any discussion with United States officials about banning Australian exports of beef in the context of this dispute?

Mr Langman —You asked about a dispute. I am not aware of a dispute.

Senator CARR —That is what I am surprised by because there are press reports in Australia from the Australian Beef Association expressing concerns regarding mad cow disease and imports of US beef to Australia. Has this matter not been brought to your attention through any other source other than what you have read in the paper?

Mr Langman —I am aware of those reports. I was puzzled by the suggestions made by the Australian Beef Association. As I recall, they related to the free trade agreement with the United States. As I recall, they did not appear to reflect an accurate understanding of the relevant side letter to the free trade agreement.

Senator CARR —These are reports from 15 May this year. You have had a fair time to work out what the impact of these side letters are.

Mr Luck —In the press reports you are referring to—I do not have the exact date but it was only a couple of weeks ago—a number of claims were made by the Australian Beef Association about the effect of the BSE side letter to the Australia-US free trade agreement to the effect that those understandings resulted in a lowering of BSE standards in the international market and that that precipitated a free fall in Australian beef exports to Korea and Japan. Does that accord with the reports that you are referring to?

Senator CARR —Yes, it does. I am also referring to the report I have here from 15 May from Brad Bellinger, the chairman of the Australian Beef Association.

Mr Luck —If I could go on, Senator, there are a couple of things to say. One is that the government does not share those views. Any suggestion that the BSE side letter to the free trade agreement has undermined Australian beef exports to key North Asian markets is completely false. The side letter simply commits Australia and the United States to cooperating in international forums such as the Codex Alimentarius, which is a joint body of the WHO and FAO, and the World Organisation for Animal Health. It also commits the two sides to securing science based standards for food safety and animal health related BSE risks, as my colleague Mr Langman has already said.

Australia and the United States already cooperate on these forums in BSE matters and have done for some years prior to AUSFTA. Australia promotes the use of science based standards because around two-thirds of Australian agricultural products are exported. We believe that science based and rules based standards assist this trade.

The second thing to say is that the Cattle Council of Australia responded quite soon after that press report and it strongly backed the government’s position.

Proceedings suspended from 9.48 pm to 9.59 pm

Senator CARR —I would like to return to the free trade agreements.

Mr Chester —Which ones, Senator?

Senator CARR —I am going to go through all of them.

Mr Chester —There are different people for each one.

Senator CARR —I thank the officers for their answers. They were very helpful. I do not suppose I am supposed to do that.

Mr Chester —It is always appreciated.

Senator CARR —There is an old Sir Humphrey Appleby expression: ‘I’m glad you thought so.’ That is the normal refrain from a public servant here. Mr Chester, how are you structuring your negotiating teams? Are there any general comments you can give me?

Mr Chester —On the FTA negotiating teams?

Senator CARR —Yes.

Mr Chester —I will get Mr Wells to deal with that.

Mr Wells —There is no general rule for the structure of the negotiating teams but, if you want, I can take you through each of them.

Senator CARR —We will come to that. So each of them vary in nature?

Mr Wells —Some of them are done largely by dedicated task forces, particularly the China, Japan and ASEAN FTAs. Others are done by using people in the department who also work on other issues—so, if you like, a virtual task force.

Senator CARR —So are experts brought together for chapters for each of these agreements?

Mr Wells —Not necessarily. Some of the people in the negotiating teams will work on a range of chapters.

Senator CARR —When negotiations are held overseas, do you have other departments travel with the DFAT team?

Mr Wells —It varies according to the FTA. Certainly there would always be representatives from some other agencies. In the case of major rounds of negotiations, there would probably be as many representatives from other agencies as there are DFAT officers.

Senator CARR —Are the DFAT officers encouraged to develop an expertise in one particular area or do they have expertise across a range of agreements being negotiated at any one time?

Mr Wells —It is not possible to have one or even two officers who are responsible for the same chapter in all of our FTAs. That would be an inhuman task. They would just have to travel too much. We do try to ensure that an officer is responsible for the same area in, say, two or three FTAs. It depends on how much work is involved in the particular issue.

Senator CARR —Are you able to give me an indication of the number of staff or the teams working on each of the FTAs?

Mr Wells —Yes, I can do that. It is approximate. In the case of the China FTA, we would have I think about a dozen DFAT officers. In the case of the Japan FTA, we are looking for about the same number of officers. You will appreciate that that negotiation has only just begun, so we are still building up the Japan team. I should also say that a lot of the officers who work on China also work on Japan and vice versa. So you are really talking about one negotiating team that is responsible for China and Japan. In the case of ASEAN, I think we would have about 10 officers—some from the dedicated task force but some from other areas of the department. Some of those officers would also work on the Malaysia FTA. In the case of the Gulf Co-operation Council FTA, we do not have any officers who are dedicated in the sense of working full time on that negotiation. We draw on the expertise of several of the department’s divisions. When the negotiations get seriously under way we expect to have about 10 or 12 officers working on that FTA. Depending on whether we go ahead and begin negotiations on an FTA with Chile, there would be roughly the same number officers.

Senator CARR —With respect to the Gulf, when do you expect negotiations to commence?

Mr Wells —With the GCC, we have already had one meeting, which could be described as introductory. We have had a preliminary negotiating session and we have in-principle agreement that the first formal negotiating round will begin in July, but that date might slip.

Senator CARR —How long do you think the Gulf talks will take? What is your expectation?

Mr Wells —It is always impossible to estimate how long a negotiation will take, but certainly the government is keen to wrap up the GCC FTA as quickly as possible—partly because of significant commercial threats to some of our exports. I should add, just as a caution, that the European Union has been negotiating with the GCC for, I think, 12 or 13 years. I do not think that our FTA will fall into that category. We are hoping to negotiate this agreement quickly. ‘Quickly’ is, of course, a relative term when you are talking about FTAs.

Senator CARR —Yes. The automotive industry in Australia is particularly concerned about the progress with regard to the GCC. What is the level of consultation with the automotive industry?

Mr Wells —I would need to go back to the records and check, but I think we have had about three or four meetings with the automotive industry so far this year. The message from the industry is, as you have indicated, a fairly straightforward one. They want us to get on with this and negotiate a removal of the five per cent tariff as soon as possible. We certainly share the concern of the auto industry about the possibility that other countries negotiating with the GCC might obtain that tariff preference earlier. It is a very serious issue and it is certainly one of the main reasons for the decision to commence negotiations.

Senator CARR —Is it possible to move on that issue outside of a general FTA?

Mr Wells —It is possible but highly unlikely. The GCC will want to obtain something in return for that, and the only way it can really do that is through an FTA. The GCC could choose, unilaterally, to abolish its five per cent tariff on car imports, but again I think that is very unlikely. Realistically, I think the FTA is probably the only way to ensure that we do not suffer disadvantage in terms of our auto exports to the Gulf.

Senator CARR —Given the importance of those exports, I can appreciate the anxiety about getting this—

Mr Wells —They are extremely important. In fact, earlier in the evening I was trying to do some sums in my mind, and I think 40 per cent of Australia’s auto production is exported, and three-quarters of those exports go to the Gulf.

Senator CARR —Particularly for Toyota.

Mr Wells —Toyota but also Holden, which is a substantial exporter to the Gulf—not in the same league as Toyota, but nevertheless it is a substantial exporter.

Senator CARR —Would an agreement such as this open up opportunities in other parts of the region?

Mr Wells —Pretty well all of our auto exports would be covered by the countries that are members of the GCC. There is a very small number to Middle Eastern markets outside of the GCC. So the GCC should cover pretty well all of our exports.

Senator CARR —Which countries are covered by the GCC?

Mr Wells —Saudi Arabia, Kuwait, the United Arab Emirates, Oman, Bahrain and Qatar.

Senator CARR —Are there any discussions with other countries outside of the GCC?

Mr Wells —In the Middle East on an FTA?

Senator CARR —No, in terms of other bilateral discussions, particularly in regard to automotive.

Mr Wells —Not to my recollection, but I would need to check. As I said, I do not have the figures in my head, but the GCC would account for practically all of our auto exports to the Middle East.

Senator CARR —There were significant markets in Iraq once, were there not?

Mr Wells —For autos? I would be surprised, Senator.

Senator CARR —There is an interest in Iran.

Mr Wells —I am not aware that we export significant numbers of autos to Iran, nor are we likely to.

Senator CARR —I think some companies here would like to.

Mr Wells —Because the companies manufacturing cars in Australia are all multinationals, the decisions are all taken in corporate headquarters. That is often for reasons beyond any control of ours. Headquarters can also switch production very quickly, which again is one of the reasons why we are very keen to wrap up the GCC negotiation as soon as possible, so that there is less incentive for headquarters to take decisions like those.

Senator CARR —How many other officers from other departments would be working on China, do you think?

Mr Wells —I could not put a number on it, it depends partly on the issues that are being discussed at any negotiating round. You do not find the same representatives from other departments attending, but in general at least as many officers from other departments attend the negotiating rounds as do officers from DFAT, sometimes more.

Senator CARR —Are the major costs of the negotiations salaries and travel?

Mr Wells —Certainly salaries and travel.

Senator CARR —I notice in the budget papers you are providing an additional $12 million for two years for China and only $4.3 for Japan. Why is there such a large discrepancy in the amounts allocated?

Mr Wells —The funding for China was a reflection of the fact that this was a whole new large FTA on top of an already existing substantial trade negotiating agenda. Neither DFAT nor other agencies felt that they could provide the resources necessary for that negotiation without extra funding. In the case of DFAT, as I have said, the China team is also able to do much of the Japan FTA negotiations. Largely for that reason, DFAT did not feel that it was necessary to seek additional funding for the Japan FTA negotiations. Other agencies, as you would appreciate, have a smaller pool of trade negotiating resources to draw on, so they felt that they did need supplementation for the Japan FTA negotiations.

Senator CARR —I am told that Japan wants an inclusion of energy clause within any agreement.

Mr Wells —Japan has proposed the inclusion of chapters on energy and food security.

Senator CARR —What is the Australian reaction to that?

Mr Wells —Japan is free to make any proposal it chooses in the negotiations. We have not agreed that there will be chapters on energy and food security, but we are ready to listen to whatever proposals the Japanese make and arguments they have for that.

Senator CARR —Has Japan sought any exclusions for rice and dairy, for instance?

Mr Wells —We have not got to the stage of the negotiations where the Japanese have been able to, but I am sure that they will, and that would not come as any surprise to you or anybody else.

Senator CARR —Are you expecting any other issues which might be regarded as sensitive in any other sectors?

Mr Wells —In terms of Japan or Australia?

Senator CARR —Japan.

Mr Wells —Pretty much the whole of agriculture is going to be sensitive for Japan—beef, dairy, rice and even wheat, of which the Japanese do not produce a very large amount. That is going to be one very large area of sensitivity. Apart from that, on the services side there could be some areas of sensitivity depending on exactly what our industries want us to take up. We are still in the process of consulting extensively with the various services industries.

Senator CARR —What are the sensitive industries from Australia’s point of view?

Mr Wells —From Australia’s point of view, not many. The auto sector has indicated some concern about the FTA and said that it would not want to see existing tariff protection lowered for Japan.

Senator CARR —Is that the only one you are aware of?

Mr Wells —That is the only one I am aware of. Even the textiles, clothing and footwear industry has said that it is not particularly concerned about competition from Japan given the very high cost structure of that industry in Japan. So as far as I know it is only autos.

Senator CARR —Turning to China, what is the $4 million allocated to 2007-08 and the $4 million allocated to 2008-09 to be used for?

Mr Wells —That is to be used for salaries and for the officers working on the China FTA. It will also be used for travel costs to the negotiating rounds in Beijing. At the moment we tend to have about two out of every three negotiating rounds in Beijing, so that is quite a large cost. It will also be used for the extensive program of advocacy that we run on the China FTA, which takes the form of visits to Australia by journalists who can, hopefully, on their return to China, write that the FTA is not a threat to China. We have had some reasonable results.

Senator CARR —Are we paying journalists to do this?

Mr Wells —We are paying Chinese journalists to come to Australia. We are arranging programs for them in various areas of interest to us—whether that is agriculture or services—and we are expecting them, on their return, to write articles in favour of the FTA, which they have done. We are also looking at programs of visits to Australia by influential Chinese in government and academia whom we can influence so that they can build a more receptive mood in China for the FTA.

Senator CARR —How much money is being spent on this?

Mr Wells —I would need to check on the exact figures that we have devoted to advocacy. It is probably a few hundred thousand for the last two years but I would need to get back to you with the precise figures.

Senator CARR —Does the Chinese government pay our journalists to travel there and write good stories about them?

Mr Wells —The Chinese government does not want the FTA; they have no interest in doing that. We do want the FTA so we do have an interest in doing it.

CHAIR —Are the invitations to those journalists and other influential people to whom you refer part of the normal media visits program or special visitors program, or are they over and above those?

Mr Wells —They are over and above those but they are closely related to the media visits and the special visits programs. They are very similar to what we did in our negotiations with the United States for the US FTA where we ran a very extensive program of visits to Australia to try to influence opinion in favour of the outcomes.

Senator CARR —Is this accepted practice?

Mr Wells —It is what we do when we want to secure an atmosphere that will help the negotiations.

Mr Chester —It is a long-standing normal practice of the department to have an international media visits program and to invite journalists from all parts of the world to Australia so they become more acquainted with Australia and portray a positive view of Australia when they go back home. Similarly, with the so-called special visitors program, which is for key policy makers and decision makers in various countries—to visit Australia and meet with our decision makers and others in Australia.

Senator CARR —It is basically hosted visits, is it?

Mr Chester —Yes, it is. This one is particularly focused on the FTA, but there is a general program that has been running for many years.

CHAIR —There is a gentleman called Dr Strahan in the department, Senator, who could burden you with a great deal more information about these programs at some length.

Mr Chester —Exactly. There will be a parliamentary report on this shortly.

CHAIR —We are hoping, Mr Chester.

Mr Chester —I would recommend it to all of you.

Senator CARR —Is the extra money that is being provided essentially to take into account that this negotiation process is taking longer than anticipated?

Mr Wells —Yes. The original funding was for two years. The extra money takes into account the fact that the negotiations are taking longer than was expected.

Senator CARR —I understood you to say, ‘We want this agreement.’ I am surprised that you put it in those terms. I thought we had a slightly different negotiating position from that.

Mr Wells —The Australian government wants a high-quality, liberalising outcome from the China FTA negotiations. Australia was very much the proponent of the FTA with China. The government remain committed to pursuing the negotiations actively on the basis that we obtain commercially meaningful results in all sectors. On that basis we are exerting ourselves to obtain that outcome.

Senator CARR —So that is what you mean by: ‘We want this agreement.’ I would be surprised if Australian manufacturers would see it in quite the same terms as you have expressed it.

Mr Wells —It is true to say that many elements in the Australian manufacturing sector are not in favour of the FTA, but I would argue that, even among the manufacturers, many of them would recognise that the FTA itself is going to make very little difference to the competitive pressures they face from China. The automotive and the textile, clothing and footwear sectors are in a slightly different position because they enjoy tariff protection of more than five per cent. But they are the only elements of the Australian manufacturing sector that do enjoy that protection.

Senator CARR —They employ 120,000 Australians?

Mr Wells —They employ a substantial number of Australians. The Australian government has no intention of changing the current industry plans either for PMV or TCF in the context of the China FTA negotiations.

Senator CARR —Which parts of Australian manufacturing would benefit from such an agreement?

Mr Wells —Probably the parts of the manufacturing sector that make more use of high technology and that produce niche products that are not being produced significantly in Australia. I would need to check the particular sectors.

Senator CARR —Yes, particularly in terms of the current export performance of those sectors. It would be interesting to compare that as well.

Mr Wells —We export a significant amount of what we call elaborately transformed manufactures to China.

Senator CARR —Our automotive sector is still our largest component of that sector, isn’t it?

Mr Wells —Of our exports to China?

Senator CARR —It requires a domestic base to do that.

Mr Wells —I did not quite understand. Are you saying that the automotive sector is the largest component of our elaborately transformed manufactures?

Senator CARR —Yes.

Mr Wells —Of our production in Australia or our exports to China?

Senator CARR —No, our exports of elaborately transformed manufactures. The largest component of that comes from the automotive industry.

Mr Wells —Yes. By a long way that is true, although I would point out that other products such as medicines, medicaments and scientific and controlling instruments are growing very rapidly.

Senator CARR —They would have to grow awfully fast.

Mr Wells —I would need to look at that.

Senator CARR —Or the other sectors would have to contract awfully quickly.

Mr Wells —Our auto exports have been largely static, I think, over the last few years for a variety of reasons, but other ETM sectors have been growing reasonably fast.

Senator CARR —I understand the Chinese are having reservations about the need for separate chapters on education, telecommunications and financial services. Is that the case?

Mr Wells —Yes, and on a whole lot of other chapters as well, but certainly on those.

Senator CARR —What others? Can we have a list of those? Do we have enough time tonight?

Mr Wells —The Chinese also have reservations on including a chapter on competition policy. They have reservations on including the sort of chapter that we want on investment. They have reservations on including a chapter on electronic commerce. They have reservations on including a chapter on government procurement. It is quite a long list, although I think those and the ones you mentioned probably cover the areas that the Chinese continue to say that they do not want included in the agreement.

Senator CARR —With regard to quarantine issues and the SPS measures, they also appear to be quite significant in the reports that I noticed.

Mr Wells —The Chinese have agreed that there will be a chapter on SPS, but both we and the Chinese have agreed that it would be inappropriate for that chapter to address specific quarantine standards, which we both agree should be based on science.

Senator CARR —Does China have any intention to export any products that Australia had expressed concerns about?

Mr Wells —China has a range of requests that are with Biosecurity Australia, and some of those are the subject of work at the moment—just as we have a long list of products that are being examined by the counterpart Chinese agency.

Senator CARR —Is it possible to get a list of those?

Mr Wells —It is possible, but it really would be within the competence of DAFF and Biosecurity Australia. They are the agencies who have prime carriage of this.

Senator CARR —Have China requested any reprioritisation of their requests during these negotiations?

Mr Wells —Of quarantine?

Senator CARR —Yes.

Mr Wells —No, not in the context of the negotiations, because, as I said, both countries have agreed that it would not be appropriate to deal with specific quarantine standards as part of a trade negotiation. Whether the Chinese have requested a reprioritisation of their existing requests with BA I do not know. I think that question would be best addressed to them. I should just say in general that it is not unusual for countries to do this, because the requests were what we describe as technical market access—that is to say, quarantine—are to a large extent driven by commercial interests. It might well be that a request that you put in several years ago is no longer as important as it was once.

Senator CARR —At our previous discussions there was mention made of labour market questions. What is the situation?

Mr Wells —It is unchanged since your last question.

Senator CARR —So it remains the case that the Chinese are seeking to have temporary entry issues as part of this negotiation?

Mr Wells —So is Australia, but in different areas. The Chinese are in general interested in better access to the Australian labour market. We are exploring with them in exactly which areas they are seeking that better access, particularly whether the Chinese are talking about skilled professions or unskilled.

Senator CARR —It is not just a question of a free trade in goods then; it is a free trade in labour as well.

Mr Wells —No. It is highly unlikely to be a free trade in labour as well. No FTA, no trade agreement, has resulted in free trade in labour. Countries retain their right to set their own migration policies. That is recognised in all trade agreements, including in the WTO. That is a fundamental aspect of sovereignty.

Senator CARR —So, in these discussions, what has been the Chinese position with regard to the type of access they are seeking to the Australian labour market?

Mr Wells —With respect, I would rather not go into the detail of that because that would be to divulge the detail of China’s negotiating requests to Australia, and these are government-to-government in-confidence negotiations. We have asked the Chinese not to divulge the detail of our requests, so we are obliged to do the same for China.

Senator CARR —What progress has been made with the ASEAN discussions?

Mr Wells —On the ASEAN FTA, which we are conducting with New Zealand, we are making, we think, reasonable progress. The negotiating team is at the moment in Palembang in Indonesia, negotiating with the ASEANs. The ASEANs continue to push very strongly for the agreement to be concluded by the end of the year, which we think is ambitious, but we are working conscientiously with them to see if we can achieve that goal. At the moment, we are focusing very much on agreeing on what we call the modalities that will enable good outcomes on tariffs, but we will have to wait and see what the negotiators bring back from Indonesia.

Senator CARR —Has the question of the SPS been raised in the context of the ASEAN FTA?

Mr Wells —Yes, it has. Again, as I discussed in the case of China, there will be an SPS chapter. It will probably focus largely on cooperation and it will not address specific quarantine standards.

Senator CARR —Are you able to indicate when you will start to negotiate the actual text of an agreement with ASEAN?

Mr Wells —Much of the text has already been negotiated. At the moment, the focus is very much on the market access negotiations. I have mentioned goods, but we are also spending a lot of time talking to the ASEANs about how we can obtain good outcomes on services, which is a sensitive area for the ASEANs. There are some areas of the ASEAN FTA negotiations where we still have not obtained the ASEANs’ agreement to include them. Obviously those parts of the agreement have not been drafted yet.

Senator CARR —With regard to Chile, you have not actually started that process—is that right?

Mr Wells —No. The government has not agreed that the FTA negotiations with Chile will begin, but we have had several discussions with the Chileans about how we might conduct an FTA if the government did agree that the negotiations were to begin, looking in particular at any similarities between our respective free trade agreements with the United States and discussing whether those similarities could perhaps form the basis of an FTA negotiation. But there has not been an agreement by the government to commence negotiations.

Senator CARR —And Malaysia?

Mr Wells —The Malaysian negotiations have moved fairly slowly over probably the last six months or so, for several reasons—the Malaysians have a very active FTA negotiating agenda and not all that many resources to service it with, and they also are very much focusing on their negotiations with the United States.

Senator CARR —So they are not ready?

Mr Wells —We think they are not ready to resume intensive negotiations with us, and in fact it could work to our interest if they do focus on their negotiations with the United States.

Senator CARR —So they can realise what a great deal they will get?

Mr Wells —No. The United States, not unsurprisingly, is probably going to be able to achieve more with the Malaysians than we will be able to do, so it could make sense for us to use what the United States manages to achieve with the Malaysians and try and build on that.

Senator CARR —In regard to the United States, is there a review process, and when is it set for?

Mr Wells —Do you mean a review of our FTA with the United States?

Senator CARR —Yes.

Mr Luck —There is a joint committee established under the FTA which meets regularly to review implementation of the FTA. It had its first meeting last year in March, and we are expecting its second meeting, held at ministerial level, to be held in the middle of this year—probably in July.

Senator CARR —Are you able to tell me what issues are under discussion?

Mr Luck —It will be a review of implementation. A lot has been achieved since the FTA was concluded in what I think is fairly technical follow-up. That has involved a lot of work, but it has proceeded fairly smoothly. We are expecting this joint committee meeting to have a fairly forward-looking agenda to consolidate the progress that has already been made and pursue some of the remaining market access issues. Generally it will be fairly positive, there having been, as I said, a number of issues settled since the FTA was completed.

Senator CARR —Let us have a look at the market access issues. What sectors are we talking about?

Mr Luck —We still have more to do for some agricultural products. We are interested in making further progress on market access for a range of horticultural products, for example.

Senator CARR —Can you name those?

Mr Luck —Cherries, mangoes, lychees and citrus.

Senator CARR —No sugar?

Mr Luck —Sugar is not included in the FTA. It remains our wish to have it dealt with at some stage, but that is not a near-term prospect. In addition, we continue to work hard to pursue what we would call a built-in agenda—for example, by extending the coverage of professional and financial services and government procurement. We have already made a lot of progress on those things but there is further ground to be made with financial services and so on.

Senator CARR —What about pharmaceuticals, from the Americans’ point of view? I take it Australians are not the only side that raises issues.

Mr Luck —Those issues have been settled in the FTA. The American side retains a strong interest, given the importance of the pharmaceutical industry in the US, in the effective implementation of the understandings reached in the FTA, but they are effectively settled.

Senator CARR —When you say ‘settled’, do you mean the Americans have given up on their request regarding evergreening?

Mr Langman —You will be aware that the Americans have raised concerns about the evergreening amendments—the ALP amendments, as they were referred to—and they continue to do that occasionally and we continue to respond in the same way.

Senator CARR —So there has been no change in the position?

Mr Langman —No.

Senator CARR —Are the Americans seeking any reviews other than on pharmaceuticals?

Mr Luck —I think it is fair to say that the answer to that is no. At least, they have not advised us of their intention to do so. The joint committee in July that I referred to will be an opportunity for them to pursue any issues, but so far they have not drawn our attention to particular points.

Senator CARR —In terms of the Australian electoral cycle, what impact will that have on the development of any or all of these negotiations, Mr Chester?

Mr Langman —The FTA negotiations that are ongoing?

Senator CARR —Yes.

Mr Langman —I am not sure. I will probably need to take that on notice. The situation is probably somewhat different to the impact that an election would have on a multilateral negotiation. I am not aware of precedents.

Mr Wells —It would be fair to say that, to some extent, what we do as a department will depend on what the parties say about the FTAs. Clearly the convention is that officials will not engage in negotiations that are a political issue between the two parties. In the case of some of the FTAs—I am speculating because the elections are not upon us yet—it might well be that some of those are not an issue of contention. It might be that others are. In that case officials would need to consult at the time and work out what would be a prudent thing to do.

Senator CARR —Consult with whom?

Mr Wells —The decision will be taken to some extent by officials, given that the government will be in caretaker mode. What usually happens is that officials are very careful not to engage in negotiations unless it is absolutely necessary where those negotiations are on issues of policy difference between the two parties.

Senator CARR —But that is only during the caretaker period.

Mr Wells —After a new government is in place officials will be—

Senator CARR —I would expect that that would be the case. I do not presume that you would continue the policies of the old minister, whoever that was. I would hope not. However, I am interested to know: does that attitude in terms of consulting go to a period outside of the caretaker period?

Mr Wells —I do not quite understand the question. When a new government is in place, it will have instructions—

Senator CARR —No, I know. That is clear. Once the government is in place, it is clear.

Mr Wells —Pre-election?

Senator CARR —Yes.

Mr Wells —I think officials will follow the instructions of the government about how to conduct the negotiations.

Senator CARR —And during the caretaker period?

Mr Wells —Yes.

Senator CARR —Thank you. In regard to the APEC meeting, is there any advice that can be tendered to the committee as to the likely outcomes of that meeting?

Mr Wells —We cannot comment in any detail on what the outcome of the leaders’ meeting will be, but certainly there is a range of significant areas where we are looking for outcomes. The Prime Minister has identified already, as you know, key priorities for the leaders’ meeting. Those include clean development and climate change, as well as achieving an ambitious outcome from the WTO negotiations. APEC leaders traditionally do give support for outcomes from multilateral rounds. There is also the question of how to promote regional economic integration, including the proposal that has been raised by some of a free trade area of the Asia-Pacific.

Australia will also be hoping that leaders agree on a structural reform agenda within APEC which will focus on what we call ‘behind the border’ barriers to economic growth and trade. APEC also has a human security agenda, which will presumably be discussed by leaders. Australia is also pursuing steps to reform and strengthen the institutions of APEC. We are hopeful that there will be solid outcomes in all of those areas.

Senator CARR —I do not expect you to go much beyond that because of the nature of these discussions. In regard to the APEC secretariat, I have a question which goes to an administrative matter rather than a policy question. Are there proposals there to strengthen the secretariat, to appoint a permanent CEO of the APEC secretariat?

Mr Wells —Australia has made a proposal that what we call the executive director of the APEC secretariat be appointed for a fixed term. The current practice is that the executive director comes from the country that is hosting APEC that year, so there is a fairly rapid turnover. We think that the secretariat would be considerably strengthened with some continuity at the top. We are also proposing a modest increase in the resourcing of the secretariat and some additional staff, particularly economic analysts.

Senator CARR —To provide some research capacity?

Mr Wells —Yes.

Senator CARR —Would that make it more of an OECD type model?

Mr Wells —I think it would be a long way from being an OECD. The OECD is a very large organisation indeed—in fact, much larger than the WTO secretariat. The APEC secretariat will, for the foreseeable future, be a much more modest operation, in line with what APEC members want.

Senator CARR —The Australian Financial Review has made a number of comments on the agenda for APEC. There was an editorial last Friday which put the view ‘APEC leaders must chart how to deal with the noodle bowl of overlapping trade agreements spreading across the region’, which has been taken to be a comment with regard to the growth of these bilateral agreements, which as you know—a point we made just a moment ago—are quite controversial. There is not general agreement in Australian policy circles about these bilaterals, as distinct from the multilateral approach. Is there a proposal that the government is taking in seeking to deal with the issue of the spread of these trade agreements?

Mr Wells —First of all, I make the point that this famous ‘noodle bowl’ effect that people talk about is in fact very much exaggerated. It is much more of a technical discussion than people think. It usually refers to overlapping rules of origin that result from various FTAs. Those rules of origin can create uncertainty for traders. Beyond that, I do not know that what you describe as ‘overlapping’ FTAs are a negative feature. However, APEC does have under way some work which aims to set high and clear standards on a voluntary basis that APEC members can follow when they negotiate FTAs.

Essentially, you are talking about model FTAs. A lot of work has been done by a range of APEC members, trying to come up with what you could call state-of-the-art FTA chapters covering the full range of issues that you find in many FTAs. Those tests would be a resource, and we would certainly hope that APEC members would make use of that resource as they negotiate FTAs. But it would be voluntary.

Senator CARR —Do you believe that there will be a discussion on the future of APEC within the region in terms of ensuring that APEC remains the pre-eminent forum within the region?

Mr Wells —There will be a discussion of regional economic integration and how APEC can contribute to that. That was agreed by APEC leaders at their last meeting in Hanoi. So we assume that APEC leaders will be discussing how APEC can remain at the forefront of the regional economic integration agenda.

Senator CARR —But you have the ASEAN Plus Three and the East Asian summit. It has been suggested that there is a range of competing organisations now being established. To what extent is that development likely to undermine the concept of the pre-eminence of APEC?

Mr Wells —APEC leaders will, as I said, be discussing what practical steps they can take to advance regional economic integration, which is ultimately what all of these proposals are designed to achieve—or should be designed to achieved. It is our hope that they will be making a practical contribution to ensuring APEC’s relevance in the region.

Senator CARR —Is the United States expressing a desire to remain engaged with APEC?

Mr Wells —Yes. The United States remains fully engaged in APEC. President Bush will be attending this APEC meeting.

Senator CARR —Is the government pursuing a position on a moratorium on membership?

Mr Wells —There is, as you know, a moratorium on an increase of APEC’s membership. A substantial number of countries have been proposed for APEC membership. So a decision will have to be taken by APEC leaders on whether or not to maintain the moratorium and, if not, which countries will become members of APEC.

Senator CARR —Is that likely to be resolved at this meeting?

Mr Wells —It will have to be resolved one way or the other, because the moratorium will be maintained or it will not be maintained. The only way it will not be maintained is if leaders agree on who the new members will be.

Senator CARR —It will not be resolved by default—by simply adjourning it?

Mr Wells —If it is by default then the moratorium will be maintained.

Senator CARR —India is seeking membership. Is that correct?

Mr Wells —India is certainly seeking membership.

Senator CARR —Is Australia supporting India’s entry?

Mr Wells —That is the Prime Minister’s decision. I cannot speculate on that.

CHAIR —Mr Chester, I thank you and your officers very much for your assistance over the last two days. You have taken a number of matters on notice. We would appreciate return of those as soon as possible. I will encourage senators to get any further questions on notice to you expeditiously.

Committee adjourned at 10.53 pm