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Friday, 16 December 1983
Page: 3946

Senator HILL(9.11) —The purpose of the Export Finance and Insurance Corporation, if one takes it from the last annual report, is to encourage Australia's export trade in goods and services by providing a specialised range of insurance guarantee and financing facilities not normally obtainable from the commercial market. It is worth remembering that the Corporation was first set up by a Liberal government to ensure that Australian exporters were not disadvantaged in terms of the facilities available to their overseas competitors. This obviously requires a change from time to time in the powers of the Corporation in response to changing international trading circumstances.

The first paragraph of the second reading speech of the Minister for Industry and Commerce (Senator Button) indicates that the Export Finance and Insurance Corporation Amendment Bill proposes essentially technical amendments. However, as one reads further it becomes apparent that that is very much an understatement. In fact, the Government plans a very different charter for the Corporation. Most importantly, the Government has decided to remove the restrictions which generally limit EFIC services to those not normally available from the private sector. Thus in its export bank and insurance function it can be expected to compete with the private sector in future. Furthermore, as stated by the Minister, exporters will no longer be required to demonstrate a need to meet competition when seeking concessional export finance. Rather the EFIC, subject to Organisation for Economic Co-operation and Development undertakings, will take the initiative in determining appropriate credit terms. In other words , the Corporation will be able to give concessional finance to facilitiate developments of what are described in the Minister's speech as 'worthwhile trade development prospects'.

The Bill therefore raises all the difficult questions concerning the role of government and public money in trade development. The Government claims to have accepted a challenge to revitalise our export sector and clearly sees for itself an important role. Not only do we have this Bill but also we have in mind the Government's intentions in relation to an overseas trading corporation. Furthermore, the Government is placing an emphasis upon the export of manufactured goods, which raises the whole question of past policy and public funding being primarily orientated towards import protection in this sector rather than export development. Therefore, as I indicated at the commencement of my contribution, the Bill is important and raises important decisions.

The structural changes that have taken place in Australia's trade over the last decade are well known. Briefly I remind the Senate that the rural sector currently represents about 42 per cent of total exports compared with 80 per cent in the 1950s. This decline in the share of rural exports has in turn been matched by strong growth in exports of fuel and minerals which has accounted for the bulk of Australia's export growth in the last three decades. In 1980-81 fuel and mineral exports accounted for 40 per cent of Australia's exports, compared with less than one-tenth in the 1950s. Similarly in direction there has been a major change with a significant decline in the importance of the United Kingdom market and the diversification of exports to the expanding markets of the Western Pacific region and to the Middle East.

What is less well known is our relatively poor export performance. First, in both volume and value terms, Australia's trade performance has been below the annual average rate of growth for the world as a whole. Through the 1970s our share of total world trade fell from 1.69 per cent to 1.18 per cent. In fact, of the 33 largest exporters for which data is available, all but three achieved higher export growth rates than Australia. During the 1970s, Australia's international purchasing power increased by only 7.4 per cent. The increases for some countries broadly comparable to Australia were significantly greater: Canada, 66.3 per cent; New Zealand, 27.1 per cent; South Africa, 78.4 per cent; and Brazil, 128.5 per cent. Available International Monetary Fund data indicates that the only country to do worse than Australia during the 1970s in terms of improved purchasing power was Sri Lanka.

Secondly, although export markets have expanded in absolute terms, Australia has fallen back in its market share in many of its principal export markets. For example, Australian import penetration into Japan reached a peak of 9.39 per cent in 1972 but by 1979 it had declined to 5.69 per cent. Australian production as a percentage of all United States imports was 1.53 per cent in 1973, but by 1979 it had fallen back to 1.09 per cent. Over the same period, while Australian exports to China, Italy, the Union of Soviet Socialist Republics, Saudi Arabia, Taiwan and the Association of South East Asian Nations have increased in both volume and value, market pene- tration has fallen. This dissappointing export performance appears to reflect Australia's declining standard of living relative to that of many of our trading partners. Given our small domestic market, an improved export performance would appear to be obviously critical in reversing that trend.

A number of reasons for our poor trade performance appear obvious. First, the relatively high concentration of exports in primary products. Not only have Australian primary products been one of the slowest growth sectors in world trade over recent years, they have also been concentrated in slow growth areas of North America and Europe. Agricultural trade has, of course, been subject to extensive trade barriers and export subsidies most evident in the common agricultural policy of the European Economic Community countries. Secondly, Australia has not been able to compete with the industrialised nations of South East and East Asia in ensuring exports markets in manufactured commodities. Australia's industrial policy has remained of the same character over the last 30 years, as I said, essentially one of import replacement rather than export orientated. The result has been the development of a broadly based manufacturing sector which, while initially import competitive, has been increasingly unable to withstand import competition. Thirdly, we have seen a declining competitiveness of the Australian trade sector with high domestic labour costs, prohibitive transport costs, and at times poor exchange rate management and inappropriate taxation policies.

Australia retains a high ranking in primary and extractive commodities because of an obvious competitive advantage. That competitive advantage can be undermined by inappropriate policies such as high tariffs on imported plant and equipment and uncompetitive shipping rates. However, a further comparative advantage we have is our location in the Asian-Pacific region. We are located in the most rapidly growing, economically speaking, region of the world and a region of dynamic economies based on outward looking trade orientated industrialisation strategies. We have a clear contrast with some western European economies which have stagnated. Projections of their future have been dominated by a preoccupation with policy directed at the stabilisation of incomes and economic structures, which has resulted in slower gross domestic product growth.

Australia's approach to its economy has been of the industrialised West European mould, and with a similar result. Our reaction to the economic dynamism of our region has been one of despair rather than recognition of the tremendous trade opportunities which that gives us. High growth rates and trade orientated development strategies within our region are expected to continue. By the end of this century, the Asian Pacific region will encompass an immense economy, certainly, far from fully integrated but with high degrees of interdependence in many spheres. Market opportunities for Australia will be great, but it will require different attitudes if we are not only to protect our natural competitive advances in relation to primary products but also to maximise the opportunities presented by this regional economic growth. It will be the manufacturing sector which will face the greatest challenge. Peter Vidler of the economics and commerce group of our Parliamentary Library, in a recent paper, said:

While there will continue to be a demand for Australian mineral resources from Asia, the challenge arising from the growth of Asian countries lies in the implications for manufacturing industry. As countries such as Korea, Taiwan and Hong Kong move to more advanced stages of development, their import demand will also change from predominately natural resources, to include semi processed material and items of capital equipment. Australia's economic opportunities will be maximised if it can reorient its manufacturing sector away from its domestic market orientation to meet this new demand.

It is obvious that the traditional labour intensive Australian manufacturing sector will be incapable of sustaining any significant competitive presence. It must shift away from its concentration on high labour input and low value-added production towards more capital intensive high value-added products, which can find market niches in the expanding Asian economies. We must build on the comparative advantages of our resource and energy endowments.

Senator Harradine —What about work? What about employment?

Senator HILL —That is right, but the question is whether one can create employment by continuing with the policies of the past or whether one has to look in a new direction. I am suggesting that a new direction will be essential. I am saying that we must not disregard the comparative advantages which we have; we must build upon them. Those comparative advantages, obviously, are resource and energy endowments, and to date a relatively well-educated work force. Technology intensive industrial activities offer major opportunities for generating more wealth and increased employment. In the key technology areas, particularly in the fields of electronic technology, communication technology, biotechnology, computer software, lasers for medical technology, to name only a few, opportunities abound. I remind Senator Harradine that we have shown that we can build on our comparative advantages in computer control, mining processes and high technology dry land farming techniques. We may not be able to compete in the manufacture of microchips, but we can compete in the development possibilities spawned by the new technology. These are new, different goods, systems and services which would be not only import competitive but also export seeking. The report of the panel which reviewed the Australian Trade Commissioner Service was released only a few weeks ago and stated in part:

Product and market opportunities in some traditional areas are declining while new opportunities, for example in skills and services, are emerging. Other nations are already responding to these world developments and Australia needs to move quickly if it is to take advantage of new product and market opportunities.

The panel reminded us that such changes are most graphically evident in our major trading partner, Japan. Traditional Australian exports face static or declining markets in Japan. Yet changing industry structures and consumption patterns are creating substantial new and rapidly growing markets in a segment of the Japanese market that Australia has barely broached. To retain Australia's trading status in Japan and generate employment in Australia we must find a way into the growing segments of the Japanese import market, and this will require a more substantial and imaginative commitment to the market than has been mounted to date. For Australia to meet this challenge it will require outward-looking entrepreneurs, a dedicated work force, the production of high quality, imaginitive-

Senator Harradine —You have got a dedicated work force already.

Senator HILL —If Senator Harradine does not think a dedicated work force will be necessary, I am surprised.

Senator Harradine —I do. We have got it already.

Senator HILL —We will need the production of quality, imaginative, yet practical products and aggressive export marketing.

Senator Georges —You should apply the Standing Orders. You will always get trouble when senators read their speeches.

Senator HILL —Mr President, I know some people think it would be better if we spent all day debating the Sex Discrimination Bill. There are some in this chamber who think there are other subjects that are at least as important. However, this will require the right policies from government. These will include not only the right macro-economic policies affecting the competitiveness of Australia's exports, for example exchange rate, fiscal and monetary policy, but also specific policies, for example export credit to which this Bill relates and export market development grants, which we debated last year. The panel identified a number of specific areas in which government policy can make a positive contribution to an improved trade performance. The first area related to offsets. The panel mentioned the fact that offset opportunities amounting to some $1.5 billion are currently outstanding against existing contracts.

Senator Elstob —Can't you incorporate it?

Senator HILL —I know that some honourable senators are in a hurry to get home. They have all day to debate four Bills, one of which has already been dealt with .

Senator Coleman —Stop reading your speech and give it to us from the heart.

Senator HILL —It would take longer if I did that. I was about to refer to a number of specific suggested areas in which government policy can make a positive contribution to an improved trade performance. The first I mentioned related to offsets. I reminded the Senate that offset opportunities amounting to some $1.5 billion are currently outstanding against existing contracts at a time of underemployment in the Australian economy. I should have thought that that would be of particular interest to the Senate. The panel supports a greater focus of attention being placed on non-defence offsets and a correspondingly closer role for the Minister for Trade in the development and implementation of the offsets program.

Secondly, the panel believed that greater emphasis should be placed on the utilisation of Australian goods and services in support of the Australian aid program. Thirdly, the panel noted the value of government purchasing and the promotion of industries with export potential, particularly in areas such as high technology and consultancy contracting. Fourthly, the panel noted the number of companies in Australia-some 900-which are subject to export franchise restrictions covering some 5,400 exportable profit areas and suggested that perhaps a policy of incentives should be provided to encourage multinationals to liberalise franchise restrictions. I should have thought that that would be particularly important to those on the other side. Fifthly, the panel felt that greater emphasis should be given to Australian investment overseas which would allow the investor to take advantage of expected growth in the host country market, overcome tariffs and other import barriers and gain access to markets adjacent to the host country. Sixthly, the panel raised the problem of State- Commonwealth relations and stated:

The competition among States in areas of promotion of exports, state government purchasing and offsets programs is costly, has resulted in fragmentation of industry development in Australia and has created confusion in the minds of overseas governments and business as to the respective roles of the Commonwealth and States in external trade.

Seventhly, the panel raised the interesting subject of the marketing of public sector skills. It said that in areas such as health, education, power generation , and agriculture there are skills and expertise within Australia which have the potential to be marketed overseas. These are the different directions for which I presume Senator Harradine was searching. However, what comes out most clearly from the report is the lack of a long term, external commercial strategy for Australia, a lesson that should be learned from the Government-determined goals of Japan. I gather from the agitation in the chamber that the Senate is very anxious to proceed with the Sex Discrimination Bill. If I might return to the Bill before us and the expanded role that it gives the Government in relation to trade credit, the Minister used a number of times, in his second reading speech, the word 'aggressive'. I think there is a need for Australia to become more aggressive in its export performance. For too long we have followed rather than led. Therefore, I support the extension of favourable credit terms to allow new market opportunities to be seized, rather than simply to combat the competition of others.

With regard to the extension of services that may be otherwise obtainable from the commercial market, I remind the Senate that the support of the Campbell Committee for the Corporation seems to be based largely on the fact that it fills what is at present a market gap. For the Corporation to go further and duplicate services that are offered by the commercial sector would appear to offer nothing further, or better, than currently exists. There are sufficient challenges for the Government in the area of trade development without duplicating what already exists. However, in general I welcome the updating of the Corporation, the recognition by the Government of the importance of an export manufacturing sector and the contribution that it claims to be willing to make towards more aggressive marketing. I trust that it will give further attention to the deficiencies identified by the panel to review the Australian Trade Commissioner Service, and recognise the urgent need for an export policy that is based on the challenges of the future, not of the past.

The PRESIDENT —Before I call Senator Harradine, I draw the attention of Senator Hill to standing order 406.