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Monday, 2 December 1985
Page: 2670


Senator GARETH EVANS (Minister for Resources and Energy)(4.00) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

AUSTRALIAN TRADE COMMISSION BILL 1985

This Bill establishes a new statutory authority, the Australian Trade Commission, with effect from 1 January 1986, or soon thereafter.

One single statutory authority will replace the Exports Finance and Insurance Corporation (EFIC), the Australian Overseas Projects Corporation (AOPC), the Export Development Grants Board (EDGB), the Trade Commissioner Service and the marketing and promotion areas of the Department of Trade.

The EFIC and AOPC Acts and the administrative provisions of the Export Market Development Grants Act will accordingly be repealed. The Department of Trade in the continuing performance of its trade policy and overseas trade relations roles will administer a modified form of the Trade Commissioners Act.

Under this Bill the Australian Trade Commission is given prime responsibility for the development and implementation of programs for the encouragement, facilitation and promotion of the export of Australian goods and services. To achieve this goal the Bill provides the Commission with the powers of the existing Acts which established EFIC, AOPC and EDGB and with a number of new and expanded powers. I will elaborate on these shortly.

The establishment of the Australian Trade Commission must be viewed in the context of this Government's record of improving the efficiency of public bodies. In the latter half of 1984 it introduced what is believed to be the most significant and wide ranging reforms to the Australian Public Service since Federation. The principles underlying those reforms are being progressively carried into other areas of Government activity to make them more effective. It is essential that in the vital area of promotion and encouragement of exports, government authorities operate at maximum levels of efficiency.

The Government believes that by strengthening and reforming its own institutions it can better pursue its aim of creating a more internationally competitive and export oriented Australian economy, particularly in the manufacturing and service sectors. It considers that the interaction between the public and private sectors is such that the efficiency and effectiveness of one sector is highly dependent on the efficiency and effectiveness of the other. Only by first putting its own house in order can the Government expect a higher performance from the private sector.

In establishing the Commission, the Government is also responding to the evident need for new and constructive moves to meet the major trading challenges which face this country.

In his statement to the House of Representatives on 13 May, the Minister for Trade drew particular attention to the serious deterioration in Australia's trading performance. As a world exporter, Australia's ranking has slipped from 8th to 23rd over the last 30 years. Our share of the world export market has dropped from 2.6 per cent to 1.2 per cent and the international purchasing power of our exports has shown weak growth over the last thirty years by comparison with other major trading nations and actually declined in the decade to 1983. We have also lost ground in most major overseas markets including Japan, the Association of South East Asian Nations and the western Pacific.

The problems facing Australia in its trading situation have been brought into sharp focus this financial year by the general weakening of our current account since the beginning of the 1980's and the related build-up in our international indebtedness. For 1984-85 the current account deficit reached $10.2 billion, almost 40 per cent above its level of $7.4 billion in 1983-84. Overall in the 1980's our current account deficit has averaged around 4.5 per cent of our gross domestic product (GDP), well above the long term average of the 1960's and 1970's of 2.5 per cent. This succession of large current account deficits has been due to a number of complex factors and has contributed to the rapid growth in Australia's net external indebtedness which is estimated to have increased from $7.3 billion in June 1980 (6.3 per cent of GDP) to $52.0 billion (25.1 per cent of GDP) in June 1985. Most of this external debt has been incurred by the private sector. The Treasury estimates that servicing this debt, public and private, absorbed about 34 per cent of the volume of our exports in 1984-85.

The deterioration in Australia's current account position and increasing indebtedness have contributed to the depreciation of the Australian dollar since the beginning of 1985. The change in sentiment towards the currency no doubt reflects, in part, changed international perceptions about Australia's trade performance.

The depreciation of the Australian dollar will help to improve Australia's trade and current account positions over time but it alone will not redress the structural weaknesses in Australia's trading pattern which have become increasingly apparent over recent decades.

Australia's poor performance can be ascribed to many factors. Two stand out-the composition of our exports and the inward looking nature of manufacturing and service industries. Over the past three decades world demand for agricultural and mineral commodities, which account for some 75 per cent of our exports, has grown more slowly than the demand for manufactures and services for a variety of reasons, these include adverse terms of trade, sluggish world demand and escalating protectionism in the major developed countries.

To compound these difficulties Australia's manufacturing industry has been ill-equipped to share in the fastest growing area of world trade; while manufactures exports have increased their share of world trade from 53 per cent to 60 per cent over the past twenty years, manufactures share of Australia's export mix has remained relatively static at around 20 per cent. Australia also, so far, has been slow to capitalise on the rapidly expanding trade in services.

It was Australia's deteriorating position in world trade which prompted the previous Minister for Trade, the Hon. Lionel Bowen, to establish the National Export Marketing Strategy Panel, chaired by Mr Bill Ferris, Group Managing Director of Barlow Marine Limited and an active exporter. The Panel considered strategies for improving Australia's export performance in the manufacturing and service sectors and its report, which was presented to the Minister for Trade earlier this year, contained proposals on a range of policies by which manufactures and services exports could be assisted, including export incentives, overseas aid, government purchasing, offsets and export finance. It also supported the efforts by the Government to direct its marketing resources to those industries and markets with the potential to yield the best returns. I take this opportunity to thank Mr Ferris and his fellow panel members for the important contribution they have made.

The Government acknowledges the significant role which primary products have played and will continue to play in Australia's economic development. The Government is also conscious of its responsibility to do its utmost to break down the barriers and distortions which are so disruptive to Australia's commodities trade. However, it is all too evident that any progress in this area will be painfully slow.

These then were the factors which led the Government to undertake a major review of all the resources available in the trade portfolio for promoting and encouraging Australian exports and exporters. Arising from this review the Government concluded that more efficient and vigorous export marketing efforts could be achieved by rationalising and consolidating its various export assistance agencies into one body, the Australian Trade Commission.

In announcing the Government's decision on 23 April, the Minister for Trade indicated that the Commission would act as a `One Stop Trade Shop'-providing exporters with a full range of advice and packages of assistance drawing on all of the Government's resources, including the promotion and publicity activities currently undertaken by the Department of Trade.

This Bill, however, represents a good deal more than simply an administrative streamlining by the Government. By establishing the Australian Trade Commission as a body corporate, the Bill will enable the Commission to have sufficient flexibility and independence of management to respond quickly to changes in international market conditions. It will also be a source of valuable advice for the Government and provide an early warning mechanism on international changes and trends affecting Australia's trade. Since the Commission will have the power to charge for some services at present provided free, it will also more easily be able to identify those services which are of benefit to exporters and those regarded as of little value.

The Government holds strongly to the view that very significant benefits will come from the guidance of a Board of Directors drawn principally from the private sector. Indeed, the Government is heartened by the very favourable reception that the recently announced interim Board of the Commission has received. The business qualities of that Board indicate the seriousness with which the Government is going about this task of putting the activities of the trade portfolio on a more commercially oriented basis.

The Bill provides that the Board seek the overall guidance and direction of the Minister for Trade on major issues but on most matters of policy and day to day matters the board will have a free hand. In this regard, the Minister is specifically excluded from giving the Commission directions as to whether it shall or shall not enter into any particular contract, agreement or arrangement. The appointment of suitably qualified and commercially experienced members of the Board will, therefore, be crucial to the success of the Commission.

The establishment of a new organisation of the size and complexity of the Australian Trade Commission involves a great amount of planning and preparation. The formative stage of the Commission is now being guided by the Interim Board which will have the assistance of a departmental team in drawing up the objectives and an appropriate organisation structure and an operational plan for the Commission. The Board also has been asked to recommend candidates for selection as Managing Director and Deputy Managing Director and advise on the nature and composition of the first Australian Trade Commission Board.

To ensure that the Commission is established in the most professional manner the Minister for Trade has approved the appointment of a number of consultants. In particular, advice is being sought on appropriate financial management information system, organisation structure, corporate planning and legal issue. The advise of professional consultants interacting with a highly competent and experienced Interim Board is, I consider, an essential ingredient for a successful and professional organisation.

Extensive consultations have been held with a broad cross-section of business leaders and major industry organisations on the proposed structure and activities of the Commission. The trade union movement, through the ACTU, also has had the opportunity to comment on the proposals on the establishment of the commission including staffing aspects. In addition, officers of the Department of Trade have held discussions with State government officials on the likely implications for the Commonwealth/State trade promotion program and other aspects of Commonwealth/State trade co-operation.

I will now outline in more detail the main provisions of the Bill, particularly as they relate to the structure, functions, management and staffing arrangements of the Commission.

As I indicated earlier, the Bill provides that the Commission will ensure assume the powers, functions and responsibilities of the three statutory bodies in the Trade portfolio-EFIC, AOPC, and EDGB-as well as the Trade Commissioner Service. It will also encompass those areas of the Department of Trade, including the regional offices, which are concerned with the marketing and promotion of Australian exports. Staff positions will total some 1400 of which around 370 are in Canberra, 580 overseas-including both Australia based Trade Commissioners and locally engaged staff-and the remaining 450 include the regional offices of the Department of Trade and the EDGB, and the staff of EFIC and the AOPC.

Final decisions on the organisational structure to incorporate the various elements into the Commission will be the responsibility of the Australian Trade Commission Board. However, based on discussions with the Interim Board and the advice of outside management consultants, it is proposed that initially, the Commission will have a number of operating groups, covering the functions of export finance and insurance, market assistance, overseas projects, export development, operations and corporate services.

The Export Finance and Insurance Group will handle Finance, Insurance and related matters; market assistance group will primarily assume the Functions presently undertaken by the Export Development Grants Board; Overseas Projects Group will be responsible for the former activities of the Australian Overseas projects Corporation augmented by some of the activities undertaken by the Department of Trade in the projects area; Export Development Group will be responsible for the Development and review of programs for encouragement, facilitation and promotion of exports while the Operations Group will be responsible for the implementation of those programs. The Corporate Services Group will provide for common management and co-ordination services.

The Government has decided that the headquarters of the Commission will be in Canberra but the Export Finance and Insurance and Overseas Projects Groups will be located in Sydney-the present location of both EFIC and AOPC. Regional offices will operate in State centres. While the disposition of Commission staff will become a matter primarily for the Board to determine, it is envisaged that the only staff whose location could be affected are about 30 officers of the Trade Publicity Section in Melbourne who will be transferred to Canberra as Part of a Rationalisation of the promotion and publicity functions of the Commission.

Honourable senators will be aware of the value which the Australian exporting community places on the Services available from the Export Finance and Insurance Coporation (EFIC).

Successive Labor governments have been responsible for changes to EFIC's Operations so that Australian exporters might have access to support facilities comparable to their competitors. The 1974 restructuring of the corporation by the Whitlam Labor Government introduced an export financing function to facilitate the provision of finance for medium and long-term credit sales of machinery, capital equipment and services. This facility has proved highly beneficial to the Australian capital goods sector and since its inception over $600m in loans have been signed, supporting contracts valued significantly in excess of this figure. Further improvements to EFIC's Facilities have recently been instituted by this Government. They include foreign currency options for the finance facility, the availability of 100% cover against political risk and a pre-shipment finance guarantee facility.

These evolutionary changes and an increasingly uncertain and competitive trading environment, have seen a rapid increase in the value of Australian exports supported by the Corporation. In the year ended June 1985 the total value of exports supported was a record $3200m, a four-fold increase over the past decade. EFIC has paid substantial claims to, or on behalf of, Exporters over this period, but its income has been sufficient to meet all claims and build adequate reserves. The Government expects this situation to continue within the Australian Trade Commission.

The integration of EFIC's existing functions into the Australian Trade Commission will not diminish in any way the corporation's operation efficiency or the specialist services it provides to Australian exporters. The Commission will retain `Export Finance and Insurance Corporation' as the name under which it may conduct its export finance and insurance business, and separate accounts and reserves will be maintained for the export finance and insurance functions and liabilities.

The expansion and rationalisation of EFIC's existing functions provided for in this Bill, together with the wider commercial environment of the Commission's activities, will provide the Government with a greater ability and flexibility to tailor its assistance in response to the rapidly changing needs of Australian exporters.

Specifically, this Bill will allow the Commission to assume greater capabilities in the area of financing, bonding and financial advice and also provide for the Commission to play a greater role in the commercial application of aid funds. It will be easier for the Commission to introduce new or modified facilities as the need arises. I should add that such facilities have been, and continue to be, designed to complement the extensive range of service offered by other institutions, such as Banks and Insurance Houses, which assist the exporting community.

In 1978 the then Government established the Australian overseas projects corporation and the Bill provides for the Commission to assume the AOPC's existing functions to assist Australian industry compete for overseas development project contracts.

Against the background of only limited success and losses of some of $2m accumulated over the past seven years the Government has looked closely at the future role of an AOPC type operation. In so doing it has had the benefit of a review undertaken by the AOPC board. While AOPC has not been a profitable undertaking it has provided assistance to Australian organisations to gain business, totalling around $270m, which would, in all likelihood, not have occurred without its support. Clearly AOPC has fulfilled a useful trade promotion role and industry has indicated that there is a continuing need for this type of government support.

Since its establishment the AOPC has operated under various contraints that have hindered its activities. These contraints will now be removed and the commission will in consequence be able to take a more active role assisting Australian firms and organisations to secure overseas contracts. The decision-making authority on individual contracts will rest with the commission.

The opportunity also is being taken to make practical modifications in relation to acquiring and selling goods associated with overseas development projects and to the nature of business relationships which the Commission may need to form when undertaking such projects. The thrust of the changes is in accord with the considered views of the present board of the AOPC.

These changes are intended to enhance the Commission's ability to improve Australia's performance in relation to participation in overseas development projects. I would stress that the Commission's involvement in overseas projects will be solely in conjunction with, and in support of, Australian firms.

Beyond the area of overseas projects, the Commission will be able to acquire and dispose of goods only in relation to its own needs or in association with Australian organisations. The Board will make its own assessment of any needs which may arise and ensure that any decision made is a commercial one. This recognises the Commission's potential to mobilise its overseas and other resources in securing trading opportunities on behalf of Australian businesses.

The Commission will also administer export market development assistance schemes. This will involve responsibility for the administration of the export market development grants (EMDG) scheme, a role which has been performed by the Export Development Grants Board since June 1974. The Government has decided that the existing Export Market Development Grants Act should be retained with only the administrative section being repealed to transfer the function to the Australian Trade Commission. Honourable senators will recall that legislation to amend the scheme to make it more cost-effective, eliminate abuse, and to restrain government spending in this area was passed by parliament earlier in this session.

In addition, the Commission will monitor the effectiveness of the EMDG scheme, or any future scheme, and recommend such measures as may be required to meet the trade facilitation objectives of the Commission, including the introduction of new schemes, consistent with Australia's international obligations, to encourage Australian exporters to investigate and develop overseas markets.

In this context the Minister for Trade will be requesting the Australian Trade Commission to develop proposals for export market development schemes tailored specifically to assisting small new exporters and exporters of high technology products. The Government will consider sympathetically schemes which are cost effective and offer real assistance. Whilst it will not be possible to implement any schemes in this financial year, depending upon the advice I receive from the Commission it may be possible to have new arrangements in place in the 1986-87 financial year.

The Commission will be responsible for the role currently undertaken by the Department of Trade in overseas marketing, promotion and publicity. Trade Commission officers serving in overseas posts will represent and service the wider activities of the Commission. The Commission will build on the work already commenced by the Department of Trade in identifying those industries in Australia which have export capability or export potential and also those markets requiring and justifying special efforts.

The Government is conscious of the low level of export orientation of Australia's service industries, particularly in the light of the large invis- ibles deficit in the balance of payments. In this respect, it is the Government's intention to develop services as an important export earner and significant steps have already been taken in areas such as tourism and education.

The Commission will continue to develop marketing strategies aimed at improving the performance of the services sector in the broadest sense. Apart from reinforcing the activity which assists the export of professional consulting and contracting services, particular attention will be given to finance, insurance, entertainment and information industries. These initiatives will have a positive impact on our invisibles account.

In view of the nature of most of the functions of the Commission which I have outlined, it will be neither feasible nor appropriate outside the insurance area, to recover a significant proportion of the Commission's costs. An annual appropriation will, therefore, be required from the Budget. In 1985-86 the amount will essentially represent a transfer of funds from the Department of Trade. For 1986-87 and subsequent years in respect of property and overseas common services, funds from the Department of Foreign Affairs and the Department of Local Government and Administrative Services will be transferred to the Commission. Apart from the cost of purchasing commercial insurance the establishment of the Commission will be achieved with no increase in net government outlays.

The estimated net expenditure for the Department of Trade in 1985-86 is $229.7m and of that amount an estimated $130.7m will be allocated to the Australian Trade Commission for the six months period January-June 1986. The estimated net expenditure for the Commission in a full financial year will be of the order of $200 million.

The budgeted revenue from the sale of the Commission's services has been set at $2.5m for the period ending 30 June 1986. Monies so recovered will be credited to the Commission's account. Future options for cost recovery are being assessed. Without previous experience in this area it is difficult to forecast what these levels will be, and the extent to which cost recovery will be an effective market test of the quality of the Commission's services to exporters. The Government is not seeking, through cost recovery, to reduce its commitment to the exporting community.

The Commission's commercial obligations will be backed by an unqualified government guarantee.

In addition to the normal requirement for statutory authorities to report annually to the Parliament, the Australian Trade Commission will be required each year to prepare a three year corporate plan setting out details of its objectives, policies and strategies. An essential aspect of the corporate plan will be the identification of staff and other resource implications of the Commission's proposed objectives and strategies. The corporate plan and any variations to it, will require the approval of the Minister.

As mentioned earlier, the Australian Trade Commission will be managed by a board of a commercial character and which will comprise a chairperson, a deputy chairperson, a managing director, a government member and not fewer than five nor more than seven other members. The members of the board will be appointed by the Minister for Trade. The managing director and deputy managing director will be appointed by the Minister for Trade, having regard to the views of the board. The remuneration and allowances for these appointments will be determined by the Remuneration Tribunal.

Staff of the Commission will be employed under terms and conditions determined by the Commission with the approval of the Public Service Board. The Minister for Trade will be directing the Commission to ensure that terms and conditions of employment will be no less favourable than those currently in force in the Australian Public Service. The Long Service Leave and Compensation Acts will apply and the necessary regulations made in respect of the application of the CE (RR), Maternity Leave and Superannuation Acts.

The Principles of Industry Democracy will be followed by the Commission. The Minister for Trade will be instructing the Board of the Commission to commence discussions with Commission staff with the view to implementing agreed and appropriate industrial democracy practices. Similarly, the Commission will be expected to follow an equal employment opportunity program.

Consequent upon the establishment of the Commission the Department of Trade will be left with a staff of about 490 positions and an annual appropriation of about $22 million. The Department will concentrate its resources on matters of trade policy and broad strategic issues, including those relating to market access, export support policies, multilateral and bilateral negotiations and government to government trade relations. It will also play an important coordinating role in relation to the activities of various Commonwealth departments and authorities which impinge on our external trade with the object of developing a more cohesive approach to our international trade negotiations.

The Government has decided that the Trade Commissioners Act will be retained to, among other things, provide a basis for some 20 overseas trade policy positions that will remain with the Department of Trade. The Act will, however, be amended so as to become the `Trade Representatives Act'.

In the performance of its functions the Department will have a close and continuing working relationship with the Commission. This will particularly be the case overseas where Trade Commission officers will continue to undertake a Trade Policy role in countries where the Department has no representation. The Department will, of course, advise the Minister on policy issues arising from the operation of the Commission.

Work is presently proceeding on a new structure for the Department of Trade and the Minister for Trade will announce the revised arrangements when that work is complete.

The Government recognises that Australia's export performance will not be lifted by a single measure but by the integration of all its trade, industry and economic policies in support of the private and public sectors. Since coming to office this Government has moved decisively to develop a more cohesive set of policies, aimed at creating an environment which is conducive to the development of internationally competitive and export oriented Australian industries.

The Government's record speaks for itself; in less than three years it has turned the Australian economy around from deep recession to a rate of growth which is one of the highest in the Western World. The Prices and Incomes Accord which the Government negotiated with the Unions in 1983 has played a key part by contributing to the decline in the inflation rate, rapid growth, and consequently the dramatic decrease in real unit labour costs. The recent historic renewal of the Accord has laid the basis for sustained economic growth and the preservation of the competitive advantage which our exporters have gained through the depreciation of the Australian dollar.

In this climate the Government has created some 487,000 new jobs. Corporate profitability has been restored to historically normal levels and there has been a strong increase in investment. Industrial disputes are at their lowest levels for 17 years, considerably enhancing our reputation for reliability of supply.

In industry policy the Government has, in close consultation with industry and unions, implemented a range of measures designed to assist and rejuvenate Australian industry. The Government's successful deregulation of important sectors has given a boost to the efficiency and dynamism of the economy and has provided a necessary stimulus to the export sector.

There is still much to be done to meet the challenges ahead. I believe however that the measures taken by the Government over the past two and a half years, together with those in train such as the establishment of the Australian Trade Commission, have firmly placed Australia on course to an improved export performance, continued economic growth and an enhancement in the living standards for all Australians.

I commend the Bill to honourable senators.

AUSTRALIAN TRADE COMMISSION (TRANSITIONAL PROVISIONS AND CONSEQUENTIAL AMENDMENTS) BILL 1985

This Bill is complementary to the Australian Trade Commission Bill 1985 which I introduced earlier. Its purposes are essentially threefold:

Firstly, to repeal the existing legislation relating to the Export Finance and Insurance Corporation and the Australian Overseas Projects Corporation;

Secondly, to effect consequential amendments to a number of Acts, principally the Export Market Development Grants Act 1974, and the Trade Commissioners Act 1933; and

Thirdly, to provide for transitional arrangements.

I have already outlined in some detail the reasons behind the Government's decision to establish the Australian Trade Comission and the consequent need to repeal and amend existing legislation. I propose, therefore, to limit myself on this occasion to a few brief comments.

The Australian Trade Commission will initially be staffed by members of the organisations now carrying out the functions to be transferred to the Commission. Of some 1400 staff positions being transferred to the Commission, approximately 17% will come from the Department of Trade in Canberra, 20% from the Department's regional offices, 13% from Australian overseas office staff including Trade Commissioner staff and 29% from overseas locally engaged staff. The Export Finance and Insurance Corporation (EFIC), the Export Development Grants Board (EDGB) and the Australian Overseas Projects Corporation (AOPC), will provide some 97, 76 and 19 staff respectively.

The transitional legislation provides that the terms and conditions of staff being transferred to the Commission will be those existing at the time of transfer, so providing continuity pending determination of terms and conditions to apply in the Commission. I have already indicated that the Minister for Trade will be directing the Commission to ensure that the terms and conditions of employment will be no less favourable than those currently in force in the Australian Public Service.

The Bill provides for the special appropriation of $142.2m from consolidated revenue to enable the Commission to operate for the January-June 1986 period. This amount includes $88.5m for the purposes of making grants under the Export Market Development Grants Act and $14.3m for the export finance facility.

This provision of funds to the Commission was not anticipated in the annual appropriations. It essentially represents a transfer of funds from the Department of Trade to the Commission and, of course, involves no further expenditure. The Bill provides for the Minister for Finance to withdraw from the Department of Trade such amounts as have been appropriated in Appropriation Acts numbers 1 and 2, in respect of those activities transferred to the Commission. This is estimated at $130.7m.

The balance of the $142m is essentially `Budget Neutral' and will not add to net government outlays. It covers those costs relating to fees for services provided by departments of state, such as payroll services and the provision of common services overseas. These funds will be appropriated to the Commision and will be offset exactly by an equivalent payment to a Department of State for the services provided.

Finally, I wish to clarify, honourable senators, that the amendments to the Export Development Grants Act in this Bill are essentially to transfer the authority for administering the Act from the Export Development Grants Board to the Commission. Honourable senators will recall that substantial changes were recently passed by Parliament to make the export market development grants (EMDG) scheme more efficient and cost effective. No further changes to the EMDG scheme are proposed in this Bill.

I commend the Bill to honourable senators.

Debate (on motion by Senator Sheil) adjourned.