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Joint Standing Committee on Foreign Affairs, Defence and Trade
31/07/2018
Access to free trade agreements by small and medium sized businesses

AUSTIN, Ms Leanne Economic Development Officer, Griffith City Council

CALABRIA, Mr Bill, AM, Calabria Family Wines

COLLINS, Mr John, Managing Director, Agricultural Tours Riverina

DAL BROI, Councillor John, Mayor of Griffith City

JAMES, Ms Nicola, Department of Industry Innovation and Science

MANCINI, Mr Vito, Director, Redbelly Citrus

PEARSALL, Mr Paul, Managing Director, Australian Grain Link Pty Ltd

RYAN, Mr Mathew, Managing Director, Murray Cod Australia

SKALIOTIS, Mr Leon, Sales and Marketing Director, Flavourtech

Subcommittee met at 12:02

CHAIR ( Mr Ted O'Brien ): I declare open this public hearing of the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade. This is a public hearing in Griffith in regional New South Wales for the subcommittee's inquiry into access to free trade agreements by small and medium-sized enterprises. These are public proceedings, although the subcommittee may agree to a request to have evidence heard in camera or may determine that certain evidence should be heard in camera. In other words, if there is something confidential that you wish to discuss and not have on record, please just let us know and we'll be able to manage that. I remind witnesses that, in giving evidence to the subcommittee, they are 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 either house of parliament as a contempt. It is also a contempt to give false or misleading evidence to a committee. Those present here today are advised that filming and recording are permitted during the hearing, in accordance with the committee's resolution of 12 October 2016. This hearing will be broadcast on the parliament's website, and the proof and official transcripts of proceedings will be published on the parliament's website.

Welcome. Before I ask everybody to introduce themselves, I want to acknowledge my colleague Sussan Ley, in whose electorate we are today and whose officers have helped put this together, as well as Mayor John Dal Broi: thank you very much, Sir, for your welcome and the use of this chamber. With that, we will introduce ourselves starting with Sussan, and then Deputy Chair Graham Perrett.

Ms LEY: Thank you, Chair. Thank you for coming to Farrer. I am the local member. The subject matter today is highly relevant to everyone involved in agricultural production, including exports. So I'm very excited that we are really going to make some decisions, hopefully, that will affect our future in a positive way. Thank you.

Mr PERRETT: I'm the member for Moreton, which is the southern suburbs of Brisbane, but I come from a region not dissimilar to this, St George in western Queensland, which is an irrigation area as well. We have not quite the same level of grapes as you guys, but we do a bit of cotton.

CHAIR: I'm the chair of the committee and I'm the member for the seat of Fairfax, which is on the Sunshine Coast in Queensland. As Sussan mentioned, this is an important inquiry and it's important for us to come to Griffith to hear evidence today. We are doing this inquiry a little bit differently from the usual one. As some of you may be aware, the usual form inquiries take is to request written submissions and, based on those written submissions, a committee will hear evidence from some of those who have made those submissions. Because the purpose of this inquiry is to look at small and medium businesses, the committee decided not to be requesting only written submissions, though they are very welcome and we are receiving many of them. We are also doing sessions like today, where we haven't asked for written submissions, but we're wanting to get those people who have hands-on experience to provide some input and provide an oral submission, which is what today is all about.

You may have in front of you the terms of reference for this inquiry. By way of background, each of you would know that Australia, through its successive governments of all political colours, has been for many years pro free trade. In more recent years we've successfully concluded negotiations for free trade agreements with the likes of China, Japan and Korea, and more recently with Peru and TPP-11. Negotiations with the EU have now begun, and in recent weeks there's been some media about the prospects of a potential FTA with the UK. These things are big deals and very important to Australia.

The question that this committee has been asking itself, which has led to this inquiry, is whether small and medium businesses in Australia are leveraging these free trade agreements as much as they could be. So we're interested, in discussions like today, in getting some advice, input and views on small and medium business engagement with the free trade agreement process—the negotiation process up until an FTA is signed. Also, once an FTA is in place, views on small and medium businesses accessing those FTAs, and any other opportunities, challenges, barriers and so forth that might be impacting small and medium businesses trying to sell into markets with whom we have free trade agreements. That has led to those terms of reference that you would have in front of you.

What I will now do is hand back over to you with a view to hearing from each of you. What the committee would like to understand is, firstly, your own backgrounds, the companies you represent and their associations with international trade. And then we would like to hear whether you have been engaging with free trade agreements. Looking at those terms of reference, we would welcome any initial points of view. Once we hear from each of you—and please feel free to take a good five minutes each to go through that—my colleagues and I will open up with some questions and have an open dialogue. I now invite you to outline your businesses background in international trade and provide some commentary on the terms of reference.

Mr Collins : Agricultural Tours Riverina is a very small business. In that way, I guess we are the odd man out as well. We have been operating for about four years. We engage in technical tours. We don't deal with honeymooners. We don't deal with recreational tourists. We deal with people who have some serious motive or other for understanding Australian agriculture. In recent times, we have dealt with them from Bundaberg to Horsham and all places south and east of that rough line. We have dealt with groups of farmers who are just curious about how their product is produced in Australia—for instance, Uruguayan wool farmers, Japanese rice farmers and American and Canadian beef farmers. We have dealt with people who are curious from a continuing professional education point of view—for instance, land appraisers from California coming out and looking at our nut industry. We deal with people who are perhaps wanting to understand an industry or a region in order to invest in it or to buy product from that industry. Not always do people confess to their real motives. The land appraisers from California, for instance, said they were on continuing professional education visits. I understand that they later came back for a second tour—a larger group of them—and have bought into land down around Mildura in almond-growing country.

We deal with very few domestic tour groups—more's the pity. We would like to deal with people from metropolitan areas who would like to see the provenance of their food and fibre, but they don't seem all that interested or they don't seem interested in having agents like us organise itineraries for them.

International inbound tourism to Australia is an export industry in itself. More importantly, from the point of view of everybody in this room—every industry represented in this room, including local government—we have brought groups interested in your products and processes in the last three or four years. We lubricate contacts between buyers and sellers—not only for commodity products but, perhaps more importantly, for specialty products that people might not otherwise know exist or that Australia can supply.

Some of the local large corporations, notably Casellas, I have to say, and Pacific Fresh citrus based at Leeton are very mindful of the benefits of marketing that incoming international tour groups offer. We just happened to have some Brazilians at the time Casellas was about to try to break into the Brazilian market a couple of years ago, and they were very anxious to show off their processes, facilities and products to those visitors.

The FTAs themselves generate a lot of curiosity. I don't know when the first FTA with Japan was written. I think it was about 1995 or 1996. In the lead-up to the signing of that free trade agreement, we in the Riverina area hosted up to four coach loads of Japanese farmers and farm organisation executives a day. They were coming into the area to look at our industry, to see these upstart rice farmers who they perhaps felt were now their competitors. But also, incidentally, they noticed the citrus—sumo mandarins and a whole lot of other things they could buy and import into Japan. And, in a couple of instances there were things that they could sell to us—weighing machinery and so on.

So, yes, international tourism is an export industry. It lubricates contacts between buyers and sellers in the host country and the sending country.

Mr Skaliotis : We are in a very interesting situation at Flavourtech in that we are a technology manufacturer in a rural environment out here in Griffith, where most of the production is grain, wine, grapes, food products, cotton et cetera. We make high-tech equipment that is quite unique in the world. We have a very niche market in terms of what we try to achieve. Our technologies recover or capture aromas, flavours. Initially the technology was for the wine industry to remove sulphites from grape juice, but now it is used around the world to remove alcohol from wine and beer—and that is a growing market globally. Most of the flavour companies around the world are using our technology. In the last 20 years, that has been a lot of the coffee companies. We are talking about instant coffee and ready-to-drink tea—iced tea bottles. I would say that six or seven of the largest producers in the US are using our technology. A lot of the canned coffee in Japan is made on our technology. However, here in Australia we are relatively unknown. But in many countries we are in textbooks as a company and with our technology.

In the last eight months we have exported to almost 20 countries. That includes the traditional markets of the US and Europe but also as far as Kenya, the Ukraine, Colombia, New Zealand—not that that is so exotic—France and Germany. We are exporting our technology to all those countries, because there is nobody else making anything quite like it—as I mentioned, we are filling a niche. We have used a very strategic process whereby we have always been a cog inside somebody else's process line. And in the last three or four years we have been focusing on becoming a processing line, so we have been investing in our R&D to produce new technologies to put that processing line together. This year has been a milestone in that we have achieved two sales—one in Colombia and one in India—for an entire processing line, a multi-million dollar processing line. That will allow us to have a customer for the next 20 or 30 years in terms of exporting spare parts, service and technical knowledge to those customers. That is an avenue that we want to pursue further. There are a lot of instant coffee companies that are currently waiting on these first two installations that are happening later this year.

What this is allowing us to do—and we just had our recent board meeting—is increase our staff by 20 per cent this year. It is specialised skills that we are particularly after, as well as factory floor staff—specialised welding skills. Sussan, you were very helpful with our partner ANG Industries in allowing some of our specialised welders to come in from the Philippines on 457 visas to assist with that. We are at capacity at the moment, and we are going to be needing some more people with those specialised skills. But we will also need some people from the technical side—process engineers, mechanical engineers and draughtspeople.

I was recounting a story to Wayne Murphy earlier today. We have advertised for draughtspeople three times so far this year. We get to the successful candidates and although we have told them all along the way, and with the ad in SEEK, that the position is here in Griffith, when we offer them the position they go, 'Griffith?' and they knock back the position—after all that time. So we have to readvertise and go to the next person—and it is too late, they have moved on.

We have over 15 different nationalities in our business. Recent employees are from Brazil, Greece and Zimbabwe. We just employed an electrician who was already here in Australia. They have joined us from Zimbabwe and they are coming to a rural town. It seems that we can only get technical people of the calibre we are after if they are coming from overseas. People in Melbourne and Sydney just don't want to move to a town like Griffith, even though we have so much to offer—right, Bill?

Mr Collins : A lot more!

Mr Skaliotis : Absolutely! That is really where we are finding the most difficulty as a technical producer. We have sold to Japan, China and Korea this year. The FTA assisted with the Korean customer, which was a fairly young company—two or three years old. They took advantage of that FTA. That company in Korea is growing and we expect to be able to sell more to them in the future. In fact, I will be in Korea next week having further discussions with them. They are looking at growth and export out of Korea into neighbouring countries.

A lot of our customers are not just manufacturing for the domestic market; they are also exporters. Large food companies, large alcohol companies—whether they are beer or wine—are using our technology to produce products that they then export out of their market. So they see us as part of their competitive advantage to be able to differentiate their products in the marketplace.

We have exported to over 60 countries in our lifetime. In terms of sales, last year was a record year for us in the company's history. With the orders that are already in this year, we are looking at an even bigger year this year. So we are in a very fortunate position. However, we are reaching issues with skill levels in terms of trying to produce enough products to export—and our lead times to manufacture are getting longer due to this. We can export more, but we just can't get the right people out here fast enough to train them and to be able to export.

Mr Calabria : As you know, I am in the wine industry. The wine industry is a very important part of the Riverina, especially in Griffith and Leeton. We rely very heavily on export. We don't have the population here in Australia to absorb all the product that we have. Free trade has assisted us in growing. We export 65 per cent of our product overseas to 32 countries. There is a question I would like to ask. Where are we at with the UK as far as free trade is concerned? That is something that I think is quite important.

The problem we have as a wine industry is that we are situated so far away from the rest of the world—and I think everyone in export has that issue. We have strong competition from Chile and other countries whose wages are very low. Our manufacturing and production here is a lot more expensive. We rely heavily on the dollar being low to succeed in continuing to grow the industry. There are over 600 grape growers in this region. They rely heavily on wineries. The industry was in a downturn for about 10 years and it is only just starting to pick up now. There are those who went by the wayside; they couldn't survive. Now, with free trade, we'd like to think that our exports can grow. There's a shortage of product because of droughts and everything else all over the world. It's a seasonal thing, so we don't know what happens in Europe and all these other countries and what their vintage is going to be like. That will impact on how we do things. Our biggest problem is that our manufacturing costs are very, very high compared to some of these countries we have to compete with.

Having said all that, I know we've got some disadvantages, but we've got some advantages. We'd just like to continue that growth and give confidence to all the growers and the industry here in Griffith. As you know, the Riverina is the largest wine-producing region in New South Wales and the second largest in Australia. We've got five of the biggest wineries in Australia, out of the top 12, so we have quite a big impact. And we're all family owned in the region, which is completely different to some of the other regions. You've got to understand that you have Constellation and Treasury buying up a lot of other wineries. They have a monopoly, and their cost of production is a lot less than wineries which are not so big. We're quite fortunate in this region in having good growers who can produce; their yields are quite high. That helps us be competitive. The prices are not great, but other regions that are being promoted heavily for quality can ask for higher prices.

We've come a long way in the last 20 years. The region has never had a great name, but, as you can see overseas, we have got a great name for the Riverina. We have an issue with Australia, except in the Riverina, for putting our products on. I think that's probably our own fault, not knowing how to market properly. But we have come a long way. Twenty years ago no-one would write anything about wine in the Riverina, and, if they did, it would be negative. Now at least, if they do write something about it, it's not negative. The quality of wine has improved; technology has improved. So we'd like to see if we could keep going forward. Hopefully the industry will keep growing.

We thank all government departments for pushing hard for free trade. India and Hong Kong are places that we need to look at. We need to spread our wings as far as possible. We can't rely on just one or two countries. What happens if Australia is out of fashion? It's very hard to get support from the US, or anyone else, to give you shelf space. And it's not just for wine; I think it's Australia. When the Olympic Games were on, the publicity we got and the growth that took off from that—we were the flavour of the month. We damaged ourselves by not having enough product, and some of the product we sent was not good. We buggered up our brands by not giving good quality, and that comes back to supply and demand. But, having said that, I think we are moving forward. There's a big positivity in the region at the moment, which we need. We've got water. If you go back six, seven years ago, when there was a debate about the water, negativity was here really bad because there was no confidence and people were too frightened to go out and spend money, especially in our industry, where they were getting paid peanuts. They could not survive. But it's looking good at the moment. We'd like more support from the government departments to continue to help us through this, not just for the Riverina but for Australia. We hope we can keep going forward from here.

Mr Skaliotis : Bill mentioned a couple of countries that would be of interest for his business. Last year India was probably the largest export market for us in terms of not just the process lines but other equipment that we sold to Indian food companies over there. We foresee India and Indonesia becoming two of the largest markets for our products, going forward, and FTAs with those two countries would probably assist.

Mr Pearsall : Thank you for the inquiry coming to Griffith. I think Western Riverina is a pretty amazing spot. Although I'm not a native of this area, I've certainly taken the opportunity to vote with my feet and move across. I think it's pretty incredible. To hear stories like Leon's and Bill's, John's and Matt's, which I certainly know, is the tip of the iceberg. It's an incredible area and it's quite amazing how many people have come up with a diverse range of what I think is value add. What I do is probably not so much as what these guys do, but we're still proud of what efforts we've put together.

We started in 1999 and we very much set up to supply specialty grains to the domestic market. We grew that market during the next 10 years, which were pretty much all drought. It actually gave us above average access to the domestic market because we had continuity of supply due to irrigation water. Once the drought stopped and we started to have a bit more competition for our domestic product, we were forced to look at the export markets and we started on that bandwagon. I think, with the benefit of hindsight, we were too small a business to be trying to do it. And I'll get to a bit more background on my business, but, as much as the free trade agreements and everything else are great, to get to the chase of it, I don't think we can justify putting on a full-time employee and it does need a full-time employee to make it work. We had a trip overseas, myself included, two or three years running, and then I put on a guy to try and do the same. All of those have met with mixed success, probably even reasonable success, but what happens to our business is that we then have a domestic shortfall and then I have the quandary of an additional $15 or $100 a tonne. I'm exaggerating my numbers, but it just demonstrates the point. If the market does move that much, I'm never fortunate enough to pick the very high end of it. The market moves, and the domestic market will end up paying so much more. We are left with the decision to drop our export market, which we do. There is the battle of the mighty dollar and the need to justify to shareholders, banks, all and sundry, wives that goes with that. I shouldn't say that. Excuse me, John.

All of those pressures mean that we take the domestic market and we do drop it. I just saw Wayne Murphy out of the corner of my eye. The Austrade development and the Austrade network that were put together both in Australia and I'll even say overseas, Wayne, if it's not offending you guys, are just incredible. They are of a very high standard. Not that the domestic guys aren't, but I just am really impressed with the standard of the staff and the access and the introductions that we've got. Our battle has been that we always get to the point of where our business is now being repeatable. It's now about to start making good inroads. We came up with another domestic supply tightening or a supply situation where we're advantaged to stay and supply our product at home. Then in two years time when that ends—well, hopefully, it's one year—we start again, although perhaps you're not starting from scratch. We made a decision just prior to this drought that we should stop trying to do it ourselves and work through an intermediary. As much as that adds cost, we think that's a cheaper supply pathway than it would be if we were trying to do it ourselves because the guy that I've got trying to earn his return on investment, which is what his wage, his car and the office time and everything else really is, we end up giving him different jobs to get greater productivity out of him being in the local market.

That's pretty much it in a nutshell. I was going to spin off a little bit here, not that I like being political at all, but we are at the forefront of trying to develop what I call the Western Riverina Intermodal Freight Terminal based at Wumbulgal. It's based midway between Leeton and Griffith. It's much closer to Griffith—I think I can say that today, John—and it's probably much more a Griffith-centric business, but we are trying to service the whole four shires that are out in this neck of the woods. It's a very simple mantra: it's a least cost pathway. We voted with our feet. As much as I don't like to admit it, because I'm very careful with my dollars as are most family businesses in how we get going, we've probably put in the order of $8 or $9 million into establishing that business. I think I've got to be a bit careful here, but it probably is off the record, if I may—

CHAIR: It won't be off the record.

Mr Pearsall : Don't repeat it too much!

CHAIR: If you do, this is all being recorded. We can go off; we have a separate system.

Mr Pearsall : No, it's not that high level.

CHAIR: Your decision then?

Mr Pearsall : It's a bit frustrating.

Mr PERRETT: He's saying he's not going to make it off the record, unless we make a decision.

Mr Pearsall : It never does anyway. When you say these things, you usually want someone to pass the message on. I was just trying to look—

Mr PERRETT: That's not a slight on the local press!

Mr Pearsall : I'm just trying to look a bit naive.

CHAIR: Please continue on the assumption that everything you do say is on the record.

Mr Pearsall : Perhaps I'm not so innocent after all; we'll leave it at that. Thank you for the warning—I was going, 'What's the issue there?' I did combine with the local exporting business, so I won't nag them now that you tell me. That, in some ways, opened the door, and we need that business to bring their combined volumes—the only way you're ever going to get a least-cost pathway is to combine volumes. In reality, what we've done is create a monster in our backyard, because that monster's trying to create a monopoly for their shareholders, which is the obvious thing and what I would do if I was in their shoes. Instead of sitting there and having a group hug, we're now having a wrestle in the sandpit—for want of a better description. Maybe I should ask Griffith, if I can make this even more political for you, John—excuse me, honourable Mayor, if you could help kick them out of town, that would be good. They keep asking for—

Mr PERRETT: Chair, can I suggest we focus on our committee?

Mr Pearsall : It does lead to the point of export, but I take the point. Anyway, there are government funds available. We've put our own hard-earned in, and we'd love to get a bit of a kickstart in the rail area, which I am crossing over into a little bit. However, rail is the next growth and it's where we're going to get the volume and the savings. If we don't have a least-cost pathway, the FTA for our business, which is a volume business, is not going to deliver. Any help we could get in that—and I'll take the point in reason there, thank you. Deputy Chair, I won't push on that.

Mr PERRETT: We've got a big brief, as is, and I'm sure your local member is very aware of these circumstances.

Mr Pearsall : I'll catch up with Sussan a bit later on. I do want to say the FTA for Japan and Korea are good for our size business. We're very much medium in the grain industry—certainly not small and certainly not big—but China is too big for our business. We don't see the same inroads or opportunities for a value-added product or the market willing to pay for it—just to put that in perspective and get back on the subject. Thank you, Deputy Chair.

Mr Ryan : I'll give a bit of background on our business. I founded the business back in 2010-11. I was a dryland farmer for 10 drought years prior to that, hence moving into something with a bit of water. We're a small aquaculture business based here in the Riverina. I did that for five years. Back in 2016, when we had proof of concept, we listed the business as a public company, so we're now listed on the ASX. That's given us the capital and the structure to drive the business forward and try and grow it, given that it's such a capital-intensive business to start up.

From an exporting perspective, currently 90 per cent of our sales, roughly, would be domestic. We started exporting about eight months ago. We now export to Singapore, Macau and Hong Kong. We're actively pursuing markets at the moment in Japan, Europe and the US. We're also about to start on the trail looking at some other stuff throughout Asia.

We're aiming this product as a high-end specialty product, so we're currently the dearest aquaculture fish, or dearest farmed fish, in Australia, if not the world. There are some grouper species that from time to time you see in China pip us on price, and we're not ashamed of that. It's niche. If you look at us, we're currently at 1,000 tonnes of productive capacity. We'd like to grow that to 10,000 tonnes somewhere down the track. With the world aquaculture production at 90 million tonnes, we're still a niche product even at our end game. The fish itself has a lot of attributes that really fit into a lot of Asian markets, but the big one is the high fat content. There's no other white fish in the world that has that fat content that the Murray cod does, and so that gives us a really big marketing advantage overseas.

Currently, we have looked at China. We have done a little bit of work with some guys in China around the free trade agreement side of things. One of the big hassles we've had is Murray cod is currently on the approved export list into China as 'live only' and not as a processed or dead product. That has been a bit of a frustration because, for us, sending life fish from here is extremely difficult. We're freighting big volumes of water, and costs get out of control pretty quickly. The growth for the business, we believe, will be in exports. Currently, exports are a small part of what we're doing; but it's certainly at the forefront of our focus at the moment. We believe that, moving forward, most of our growth in sales will be through the export chain.

We've really only sort of dipped our toe in the water, because we have a two-year lead time from stocking to saleable fish, hence we haven't been able to export. It's a bit like the chicken and the egg until we've had the product around us to be able to start. We're now dipping into our toe in the water. We've got enough product to start getting product into some of these smaller markets. We want to grow that moving forward over the next 12 months.

Ms Austin : I'd just like to thank the inquiry for coming to Griffith. I'm basically representing council to support our local businesses, so we would be very much in support of whatever initiatives can come out of this to help them grow.

Councillor Dal Broi : Thank you, Sussan. I know you had a bit to do with the inquiry coming to Griffith. Just sitting here and listening to these industries, they're all local. They're established locally by local people. That says a lot for this community of ours here. We're not a mob of whingers. We get out there and do it. That's the type of people we have. There's Leon from Flavourtech. I can remember when that very first one came out with Lionel Irving and his crew out there. You went from a few concrete tanks to where you are today. There's Paul with wheat, John with his agricultural tours and Matthew with this fish. The fish should have been a no brainer, really, because we've got the water and we've got the land. Until you came along and made it work, we were more interested in carp than anything else. We won't talk about carp.

This community has the capacity to produce product. As has been mentioned particularly by Bill, there are products here that we're growing that Australians can't consume. We need to look for export and anything, whether it be free trade or any assistance given to these businesses, to be able to get their product overseas at a profit. You don't want to be working for nothing. Whilst that's happening, they've got the support of us, as a council. I generally take the view that governments should get out of the way of business. If they need our assistance, they should come to us and we'll do the best we can to help them.

At the moment, I understand the issue with the lack of employees. Councils copped a fair bit of commentary over not having enough accommodation. Again, the issue there is—as has been mentioned—10 years ago there was a drought and everything just stopped. It only started to turn around in the last three or four years. We just can't suddenly erect homes and residential land. We have started and that is working, but it takes time. All in all, anything that can assist our businesses, whether it be what's here today—I noticed Vito Mancini with his blood oranges is not here today, because he's probably packing for export.

I'm a rural producer. We produce and hand onto processors. They make money; I make money. I'm pleased to see now that all commodity products are on the rise, which is great. The only little cloud in the horizon is water and the Murray-Darling Basin Plan. Sussan spoke about it the other night. You're right, Sussan. Yes, we've managed to grow even with the restriction of the plan. But as I've continually said to Sussan and any politician: can you just imagine if they wouldn't have ripped 30 per cent of our water away, what this place would really be like? We've got to do the best we can to make sure that there are no further setbacks from that plan and we'll work towards that going forward. It's a great community and a great area, and I'm very proud to be the mayor of it. Thank you for the opportunity.

Ms James : I don't actually have permission to speak on behalf of my department. But if you might humour me, I will say a few words, if that's okay. As a bit of background, I'm a regional manager for the Department of Industry, Innovation and Science, or AusIndustry. There are 19 of me around Australia, and we cover quite large regions. Riverina Murray is my region. That's this side of Gundagai to Snowy Valleys to the South Australian border and the Murray River is my patch. We come across many different businesses. Mostly, our remit is to support and help to grow and innovate small to medium enterprises in a number of grow sectors, which include agriculture, agricultural processing and manufacturing.

Most of the programs that we have under the federal government, as I mentioned, are to help to grow and innovate so that our Entrepreneurs' Program can help support those businesses that are looking to export or get into export markets. We mainly focus on operational support and supply chain and distribution. We do have lots of case studies where we've been able to actively support businesses in that area. We do refer the majority of cases to our Austrade representative, Wayne Murphy, who I have to acknowledge is a fantastic asset and resource for businesses in our region. Wayne is very good at helping businesses new to export to navigate the difficulties of that if they have never done that before. He gets them ready for export and even supports mature businesses through that process if there are issues. I really wanted to acknowledge Wayne's continued support of business across our region. We're really grateful to have that and also very supportive of the free trade agreements that have come out. I might end things there, because I don't want to get into too much trouble! Thank you for your time.

CHAIR: Thank you, Ms James. If it makes you feel any better, the department you represent will be appearing before this committee on the 20 August. You're very welcome at this table. I'm maybe even more excited after hearing who we have around the table.Before I opened it up for my colleagues to start asking some questions, we're going to have a discussion just to close off on some issues raised—or at least a query—on the status of FTAs. FTA negotiations are currently underway with India, with Indonesia and with Hong Kong—but not with the UK. The UK is not able to negotiate FTAs, given that it's amidst negotiations with the EU. Nevertheless, a working group has been established to prepare for that. Indeed, this committee has also done a fair bit of work on looking at a FTA with the UK. Basically, that really won't be able to get going until post Brexit. Hopefully that answers that query. Sussan, would you like to start?

Ms LEY: I have a couple of quick questions before the chair and deputy chair perhaps get stuck into deeper questions, and we'll see where we go from there. Mat, I was interested when you said it's difficult to export killed fish to China. Is that a Chinese protocol? Is there a technology that we're waiting on? It seems to me that that would be a really important step, given its popularity.

Mr Ryan : As far as I know, there is a list of seafood products that are approved for import into China. It's a Chinese list, as such. Murray cod at some point in time was put on there as live only. It never made it as processed. If you think about it, the real biosecurity risk is around live product, not processed and killed product. It seems crazy to me. We have certainly been working with Austrade. Wayne has certainly been instrumental in helping us out with that. We are well on the way to, hopefully, sorting it, but it's not a quick process either.

Ms LEY: One of our terms of reference is how the FTAs could be improved. Obviously small things can be overlooked. That's perhaps an example of where it could have been inserted earlier in the process to make sense. I don't think you were there, but I visited your premises. It was pretty amazing to see what you do. Are you farming out contract growing your murray cod on other people's farms, so they install ponds and you put fish in them?

Mr Ryan : Yes. We currently have seven sites—three are owned by us and four are contract grower sites. Those guys buy their infrastructure off us and buy the fish off us. They grow them and we buy them back. They get the sale price less a commission.

Ms LEY: So you have got a pathway to really ramp up the volume of production if, for example, you got huge demand from China?

Mr Ryan : Yes, definitely. One thing we have started to do to keep our internal capital costs low is lease sites off farmers. We have now got two lease sites. We're negotiating another two at the moment. On those sites the farmer puts in the dams and infrastructure for us. Nearly every farmer has got a piece of land they don't use or is difficult to use. They put in the infrastructure for us. We come along with our cages and fish. We grow the fish and lease the site, as you would lease a block of land or something like that. We have got long-term leases with those guys. We've been flooded with inquiries on that. The biggest thing for us is to ensure that sales drive production, not production drives sales. If we get those orders, the potential for us to ramp up production quickly is there.

Mr Calabria : You're virtually the same as the chickens. The industry does much the same. Again they can't export live as well. I guess you've got to look at that part there and learn from that as well to work out how you can overcome those issues.

Ms LEY: Both Bill and Paul talked about the difference between domestic and export markets. It was interesting, Paul—and this must happen in other sectors as well—that you effectively said that, if you put the export on hold, you will lose those connections, you will lose the networks and your customers might go elsewhere. Your domestic market is the opportunity, given where we are with the drought and grain prices now. You're saying, Bill, that the brand Riverina is great overseas but not so great locally. It does highlight, if you like, the differences between the two and how you as one producer have to manage two effectively quite different markets. Did you both want to comment?

Mr Calabria : We found that for wine the UK was the first market that really opened and we really did well. We did well because there was no perception of Riverina being a bulk region that is irrigated. That is something they had no idea about. They came over and tasted wines. They saw that the wines were very good. They realised it was consistent year in and year out. They got it at a good price. They could value add to it. The bottom line was making them good money. They were making a lot of good money because we were the cheapest in Australia. So they really tapped into this. That's why the region grew quite quickly. I'm talking about 1994, when it really took off in the UK. Now we have found that people are exiting the UK and going to China and other places where they have found it's a little easier to get into. What happened with the UK was that it opened up the eyes of other people from supermarkets that the Riverina was doing well, so it really expanded. But it got to the point where Chile and these other countries could go in at 50 per cent cheaper than we could, and that's why UK is really taken a bit of a nosedive. The figures are probably still growing, but they're growing because bulk wine is being exported, so it's not packaged wine.

CHAIR: Even if it started as packaged wine?

Mr Calabria : Yes. It started with packaged wine originally, and there was hardly any bulk being sold. But in the last few years, probably the last five years, export took off because of bulk wine. China are starting to do that as well, because our competition is bottles—everything else we've got, the price is just too high. Because we don't manufacture, it makes it very difficult for production.

Like Leon said, one of our major problems in the Riverina is getting good staff. Unfortunately, we find it very hard in our industry to get qualified people. What happens is that if we advertise, or another winery advertises, they're shifted from one company to another company, so it's not solving the problem. That's one of the things we find that is a big negative to what we're doing here in the region. Like John said, things have exploded here, so there has been work available for a lot of people, and they can pick and choose. Being honest, when you look back, the Italians were very hard workers when they first came here. The Italians got smart and they started to follow what the Australians did—to go for holidays. The Indians came in, and they woke up quicker than the Italians! The Italians took 40 years to realise that! The Indians have now worked that out to a T! 'We don't want to do all this work either!' That's what is happening. Even if you do have a good worker who comes from out of town, or wherever, the culture in this region, and in other regions of Australia is, 'Hang on, you don't have to work that hard—you're making us look bad.' So they pull back, and this is a problem. I guess it is for no matter who you talk to you. You talked to Baiada, one of the biggest employers here, and they've got the same problem. I think that right across the world we have the problem, and Australia is worse off because we are too expensive. The cost of living is a high and everyone wants to have a good living. They want to go out for dinner. There are no sacrifices made in Australia at the moment, unfortunately. We're just the lucky country. I don't know if that answered your question.

Ms LEY: Thanks for your comments.

Mr Skaliotis : If I can add to that? I've already mentioned that we have issues finding good staff, but one of the things we find is that our staff do want to work. Most of our staff do travel overseas for the commissionings, the trainings and the installations that occur. The housing problem you mentioned. You mentioned that we're doers; I'd like to think that we are still doers here. We have actually rented Flavourtech houses, and when staff come here to start work for us we put them in there free of charge for the first three to six months until they settle down and find their own equipment.

In terms of thinking for the future, we're trying to get engineers here. We've taken up a Grow Your Own Scholarship. We have a scholarship with Deakin University down in Melbourne with the engineering department to try and help first year students who are from the Riverina to settle in their first year. Hopefully, once they are fully trained they will come back to the Riverina and we can offer them a position if they have the right training or the right engineering skills. I'd like to think that most of our staff like to work hard. It's just getting enough of them to join the company and come in. We have had those situations where we've offered the positions and then they've said, 'We're not coming out here.'

One of the things we do is promote the Riverina in our presentation. We have a corporate presentation to customers. The first three slides are about what the Riverina is all about in terms of 40 per cent of grape production, 40 per cent of citrus production and the cotton that we do. We mentioned the large companies that have come here, like Ferrero, which have planted a million hazelnut trees. Olam, which is a very well respected trading company overseas, have started their almond production. We mentioned them. This year we had booths at, I would say, 14 different exhibitions around the world. We really promote ourselves, but on the screen we have the councils. I didn't really get permission, but we have the councils. Griffith have a video playing to tell people about the Riverina. There's yourself, there are pictures of you, there's McWilliam's, and there's even our factory on there, promoting the Riverina. So we are out there trying to get the word out on the Riverina. That's something that every company should be doing from the Riverina. You're not fighting a war on your own. We're all in it together and we should be assisting each other to actually achieve that globally.

Ms LEY: Just quickly, because I don't want to take up too much of the meeting with my questions: Paul, what would your advice be to someone who has to park their export business and come back to domestic? How do they keep the export business alive? That's obviously very much going to be a farm issue for every producer.

Mr Pearsall : We've made some inroads in sourcing the product from other areas where the price is not so high: potentially areas of South Australia, which again gets back to my supply chain, transport and logistics. I know I keep going back to it, but it's for a reason. You can't get containers cost-effectively out of South Australia. You have to bring it back to Melbourne and/or Sydney. We have tried. South Australia is the logical place to go, but we haven't been able to get a supply chain working effectively.

Ms LEY: Thank you, Chair. I just want to introduce Vito, who's straight from the packing shed.

Mr Mancini : Thank you very much for having me.

CHAIR: We'll just continue the conversation and we'll come to you shortly in the hope that you'll explain a little bit about your business and your experience with trade. You may have the terms of reference in front of you.

Mr Mancini : I'll try and keep it all relevant.

CHAIR: Let me go to the deputy chair.

Mr PERRETT: Just before I go to my question, coming from St George, I never got to catch a Murray cod. My understanding is that European carp actually got into the Murray system from the Riverina. So I hold this area responsible—

Mr Ryan : It was well before me!

Mr PERRETT: Yes, back in the sixties and the early seventies, they escaped from tanks in this area and then went all the way through. So I didn't catch any Murray cod because of the Riverina area. So it's great to have you here in front of us.

Mr Calabria : Do you have proof?

Mr PERRETT: No. Wikipedia told me about it! My question is to Mr Skaliotis and Mr Calabria. I think you said you were exporting to 60 different countries.

Mr Skaliotis : Over 60 countries.

Mr PERRETT: And to 32 countries?

Mr Calabria : Yes, just over 32.

Mr PERRETT: I'm interested in how Austrade assisted or didn't assist in any of those countries, in terms of making sales.

Mr Calabria : Naturally, when you're beginning to export, you look for help. Where did we go first? Austrade. That was a big part of being able to answer the questions that we were very naive about. That's how the ball started to roll.

Mr PERRETT: Someone told you, 'You should go and talk to—

Mr Calabria : Yes. That's virtually how it started. My first order was from a company called Direct Wines in the UK. They are the biggest mail members in the world. It was through word of mouth that they came to me, and it was not because my product was great; it was because they needed more buyers from Australia. When they did take my first order—

Mr PERRETT: So they knocked on your door?

Mr Calabria : Yes. When they did come to me, they wanted a Chardonnay which was in demand at the time—we're talking about 1993 or 1994—and we were fortunate that they put that wine in a show in the UK and it was award a gold medal and a trophy. That gave them 100 per cent assurance about the Riverina. Others were already supplied. That's where we started to grow.

So we knew that was working, but we had all our eggs in the one basket. That's when we were told to go to Austrade, and they were very, very helpful. Naturally, we do a number of trips overseas and, being a family company, we were overseas for probably three months out of the 12 months knocking on doors. We were introduced to people in that industry who were looking for something, and then it was up to us—

Mr PERRETT: But they'd point out which door to knock on?

Mr Calabria : Yes.

Mr PERRETT: And then you would have to go and put your foot through it.

Mr Calabria : They would take you and introduce you and then you're on your own. That really made it very easy.

Mr PERRETT: Were those pre-FTA and post-FTA?

Mr Calabria : That was pre-FTA. We got introduced to go to Russia and when we went there it was a real eye-opener. The first time I went there they wouldn't let us out of their sight. They put us into the hotel and then we wanted to sneak out to get something to eat, but the guy at the front desk wouldn't let us out, because it was so dangerous to go out. You don't realise that you are in a different part of the world. To give you an example: my son and I were in an escorted car with the person who was taking us to the airport at half past four in the morning—it was still dark and it was drizzling—and we pulled up at a red light and some guy tapped on the window, and the driver just looked straight ahead and didn't even look at him. I thought, 'Why wouldn't you see what he wants?' The next minute—and the light is still red—this guy pulls a gun, and the driver whipped through the red light and kept going, and I thought, 'Jesus Christ; where are we?' You are so naive when you go to these places that you don't realise that you're not in Australia. When you were introduced by Austrade to go somewhere, you knew you were safe. That assistance from Austrade helped us, and Australia, grow.

CHAIR: Thank you.

Mr Skaliotis : I've had a relationship with them Austrade and AusIndustry for the last 10 years that I've been here in Griffith. The grant that helped with my marketing initially was a New South Wales government grant. That assisted with some marketing and taking our exhibition space in various markets that we saw as target markets. In terms of current business with Austrade, we have just finished up business matching and we're looking for an agent for Russia. So I've been talking with Austrade in Russia. Over the next couple of weeks we have some meetings with potential Russian distributors. I'm also currently dealing with Austrade in Colombia, Ecuador, Argentina and Chile looking for agents or distribution channels there.

Last year, also through Austrade and through the business matching, we put on a distributor in Mexico who not only offers sales opportunities but also service technicians for us. We're limited with how many people we can put around the world to support the ongoing maintenance of our equipment. So we're always looking for agents or distributors that can also offer us those added values of not just selling our equipment but also learning how to maintain it and sell our spare parts—so adding to our business that way. So Austrade is playing a large role for us in various countries. In the past, we've also used them for India. I have relationships with Austrade in India, up in Delhi in Hyderabad, Austrade in Thailand and, hopefully, Austrade in Indonesia once I start visiting there in a couple of months.

Mr PERRETT: You mentioned a range of countries developing and the like. I still don't 100 per cent understand your business, but the intellectual property for your business seems to be pivotal. How did you do in terms of protecting and siloing your IP?

Mr Skaliotis : With all of our customers we have NDAs, confidentiality and non-disclosure agreements, that need to be signed for us to provide a quotation or any sort of technical information. The initial presentations that are in the public domain we make freely, but then, if they want to continue and start talking about their particular products, many of the larger companies and multinationals that we're dealing with will have their own NDA that they would like, so we swap it. So we protect ourselves that way. Of course, sometimes it's not worth the paper it's written on, depending on who you're dealing with.

Mr PERRETT: But you haven't had troubles yet?

Mr Skaliotis : No, we haven't had troubles—knock on wood. We've been fairly fortunate. The thing is that many of the companies that we're dealing with are not manufacturers, and to take it and try to develop it themselves is a lot more difficult. It's not just technology; there's a lot of expertise that comes with the technology. It's not just copying it. For a long time people said, 'Oh, don't sell to China; the Chinese will copy it.' Well, it's not the case. We have sold to China. We have some growing customers there, and they realise that their business is the food industry. They don't want to start manufacturing equipment, because to do it for one or two is just not worthwhile. So NDAs help protect us, but we have been dealing with Austrade, AusIndustry and other agencies, like FIAL and also CSIRO. We're working on a couple of development projects with CSIRO and also universities. We have some partnerships with Deakin University and also the University of New South Wales. That's how we continue improving our technology, because if we stand still then somebody will catch up. At the moment we're almost the gold standard in what we do, and we're dealing with companies that have 15,000 staff around the world. I was on the website of one of our main competitors the other week, and they have six times as many open opportunities for new staff as we have staff ourselves. So they're fairly large companies, and they're all looking at what we're doing because we're sort of leading the way there. We're here in Griffith. We're not in Denmark, Germany or other traditional technical powerhouses. We've got the expertise and knowledge centred here.

CHAIR: Mr Mancini, I wonder if you can just enlighten us. I know that my colleague Sussan Ley knows your business well, but could you just explain your business and what experience you have with trade and any views on some of those terms of reference.

Mr Mancini : Thank you for having me here. My history is that I'm a third generation citrus grower and exporter. My grandfather and father started the business back in the sixties. Early on, most of the market was just domestic, but from the eighties onwards we've built export capability. The initial big market for Australian citrus—other than the UK, which was established many, many years ago—was the Japanese market. Japan started in the Riverina around the early eighties, and it grew to a significant proportion of the Valencia crop going to that market. In the nineties, the Japanese market transitioned into the navel variety, which is what we currently see as a table fruit. From Japan we had the expansion into the US market, the Korean market, the Thailand market and then lately the Chinese market.

What we've seen in the negotiations for these market access arrangements is incrementally getting more difficult. When we had the Japanese market, Queensland fruit fly and mealy bug were the first issues. The USA came along. It seems almost like our negotiators are trying to find more ways to try to allow importing nations to have confidence in the Australian product by making it even harder on our growers and our exporters. They make more hurdles. I'll give you an example. In the Japanese arrangement, you have an inspection for fruit fly and mealy bug, which are two very easily controlled pests. The US market added light brown apple moth. The Koreans put on red scale. The Chinese have now added Fuller's rose weevil and 16 other different issues. So instead of just it being put in a box and sent to Japan like we used to be able to do, we have to go through monthly audits, we have to register with DAFF as being an exporter six months before we even start our export season and we have to have those monthly record keepings—we have an audit from DAFF that comes out prior to the season to make sure that we're not telling fibs on how we are filling out our reports—we pack the fruit, we get an inspection again before it leaves the country and then it obviously arrives in the country and they do their final inspection. All those inspections really don't count for anything until the importing country does its inspection. We have so many different levels of rigour in our systems to give the importing countries the confidence that Australia is going be clean and green, but all those levels of rigour add an extra burden to the farmer, the pack house and the exporter. Every time somebody has a look at an orange or we get a qualified inspector to take one of those steps adds cost and takes away money from the growers supplying the fruit. When I first saw this joint committee coming, I was talking about FTAs

CHAIR: I explained at the very beginning when you weren't here that all of these comments are recorded and on Hansard so just be conscious of that. Please continue.

Mr Mancini : I have no problems with that. We're looking at FTAs and understanding if FTAs have had a benefit to the industries, and I think they have. FTAs aren't something exclusive to Australia or to any other countries. All countries are negotiating better access arrangements. But what I see in our space, in the citrus space, is that most of the FTAs are focusing on tariff arrangements more than the nontariff barriers that we have out there. I will highlight one. I've bought a carton of fruit with me, some blood oranges that we packed up yesterday for the Korean market and that's an emerging market for Australian citrus. We have currently got a container on the water and, hopefully, from this year onwards will try and build up the volume. So we have a FTA with Korea but the tariff period goes from the 1 May to 30 September. If I have a boat arrive on 1 October, that fruit is subject to 50 per cent tariff. So we can claim that we do not have tariffs but they are windows of exclusions of tariffs rather than not having any tariffs at all.

The second thing is, regardless of tariffs and non-tariffs, Australian citrus is always going to be perhaps the most expensive citrus in the world. We're always going to be more expensive than the Chileans, the South Americans, the South Africans, Egyptians. Their citrus is always going to be a lot more affordable than Australian citrus, so most of our buyers are buying because of the quality. However, what I see, particularly through my interactions with the Chinese AQSIQ, is that the Chinese continually get frustrated that Australia sends over new negotiators every time they try to negotiate a specific deal. As you may know, a negotiation for access arrangement doesn't happen with one meeting; it happens over a period of years. And what I've been told by the Chinese counterparts is that they get frustrated if they had a relationship with a person and were able to get down the road to get to a point on a certain issue, be it Fuller's rose weevil or packaging requirements or labelling requirements, and then suddenly that person changed to somebody who seemed to be coming out of university and they have to start all over again. Particularly for our Asian markets and the respect that goes along with those sort of positions, they really feel undermined if we continually send people who are not educated in the space trying to negotiate those things. So for the China arrangements, as I was saying earlier on, the number of inspections that we have to do pre harvest and post harvest is quite limiting. It excludes a lot of fruit that is able to go to Japan, to China. We have so many growers that get frustrated by how much effort they have to put in that they just throw up their hands and say, 'Well, let's not grow for that market because I'm just not going to put that effort in,' particularly the small landholders out there.

I am going through the dot points here. I'm trying to be brief—I'm really sorry—because I've got to go. I will say what's on my mind and we'll go from there. On products and services, I heard you making a mention of Austrade. I think it's probably one of the best things that I've seen the government do, with the Austrade facilities out there. Our citrus industry lies with the Austrade offices throughout most of the markets, and we generally get good indications of what's happening—market trends, volumes of fruit that are moving, our competitors and so forth.

I've always had a concept myself—I think it's the California model—where we have Austrade seemingly vetting buyers over in export markets. This is something I hope your committee can do a bit of research in. I've been told in the US market they have a similar body, where they actually go out there and vet the importing party, but they also have an insurance component as part of that. They'll say, 'Company XYZ in China is a great company; we vet them for doing $20 million worth of trade per year,' and so forth. They hand that over to their industry, and the industry has got the assurance that there's coverage from their own government saying that this company is going to be able to pay up to this amount of money, and, if anything happens, the government takes over and pays the pack house, if there's an issue of getting the money out of that market.

For us in Australia, particularly our small to medium exporters, we have issues trying to do those sorts of arrangements. As I mentioned, we are quite expensive in this country. A smaller operator is even more so. They can't go out there and actually vet the companies themselves. It's one thing getting Austrade to say that it's a good company, but to get out there yourself and say, 'Definitely I'm going to put all my eggs in this market and get a return'—so what a lot of our exporters and small pack house operators do is they put a margin on the fruit. So, if we know that we need $30 a carton to make the deal work, we quote at $36. What happens in our game is that the fruit will go over to China and Japan—I shouldn't highlight China; it happens in all markets—and we are not confident exactly how well the party is going to distribute the fruit and get the returns. More than likely, we expect to have a claim. Usually we call it—I don't know if it's appropriate to say—a Chinese loss, where the buyer doesn't make as much money as they expect to, so we wear the cost of doing that. We actually have to put a margin to the cost of our fruit to be able to have that buffer. I don't want to be doing that, because it is pricing out of the market. Many a time I will quote somebody and they'll go elsewhere because we can't supply the same as the larger pack houses and the larger exporters in our country, or the other exporters in the other countries supplying that same market. So, to be able to have some sort of a bolt-on to Austrade, be it Efic or something like that, that passes on the assurance that Austrade delivers us, with a component that will also help underwrite the costs of doing the business with that party would be something of value, I feel.

The second dot point is awareness and accessibility of free trade agreements. I think the federal government has done a great job in promoting the efforts of achieving these FTAs. I think our ex-chairlady in Citrus Australia was also in one of your commercials spruiking about how great it is. I think it does add value. I think there has been value. Australian citrus has exported to record highs—over $400 million last year. So we are getting some really good gains. Whether it's solely to FTAs, I can't tell you, but I think that has got a huge part to play.

In the support structures, we've got your extension team, particularly in the Wagga office. Wayne Murphy does a wonderful job getting out there and explaining what's out there and all that. It's really good. I think that's about all I can add for now. Thank you.

CHAIR: Have you dealt with Efic before?

Mr Mancini : I've had a few meetings with a few of the—

CHAIR: How have you found that? Have you gone through the process for the Export Market Development Grants?

Mr Mancini : I have met with a few senior members of Efic in the past. I think Wayne has brought a few members over in the past. I've put forward to them that particular concept of actually underwriting Austrade's efforts in vetting importers and so forth. My understanding of Efic—the way they've explained it to me—is that they help businesses get over the line in terms of export financing. If you've got a deal and it costs you X amount—say you've got a $100 million deal and you've only got $90 million to be able to finance—and you need that little bit extra to be able to get over the line, that's where Efic will step in. That's my understanding. They don't really get into the space of doing that insurance, even though the 'I' means 'insurance' in Efic, I think. That's why I don't really understand. It'd be great to seek more clarification on how they can help. In terms of Austrade, you—

CHAIR: Yes, Export Market Development Grants.

Mr Mancini : I haven't. Every year I look at it and I think I should do it, because I spend roughly the threshold to get into it. I keep waiting for another year where I have a larger amount of expenditure and market development, because you get the first two years at a certain thing and then it tapers off, as I understand, in terms of market development. So I'm just waiting for that time where I'm really getting red hot into China. I know that that's going to be the golden market for our particular product—blood oranges. I know that I'll need to definitely leverage against EDMG at that point, so I might in the next year or the year after. It looks like a really good facility.

CHAIR: Mr Collins, can I bring you back into the discussion? You are hosting and spending time with visitors from other markets, particularly those that are interested in our produce. Are there some common themes that come up that can give us some insight into general reputation and branding issues, whether positive or negative? You mentioned that you've entertained particularly a lot of Japanese who've been interested in the agriculture space. Are there any common themes that they've mention?

Mr Collins : No, not Japanese specifically. Indonesians and people from Myanmar, Myanmarese, are interested. The groups that we've dealt with have been interested in large-scale broadacre farming. I should also say Malaysia. It seems that consolidation of holdings, by one means or another, in those countries is leading them to look for examples or models that they can follow in dealing with say 5,000 hectares or 1,000 hectares at a time, rather than five or 10 hectares at a time. And that's where we have a lot to offer. It's not just losing IP; it's not just showing other people what we do. But if you're going to deal with large acreages then you may well want to deal with agricultural aircraft. I know that some of the groups from Indonesia and Malaysia that we've taken to the agricultural aircraft operators out here at Griffith Airport have been very, very interested. I don't know whether sales have been made, but I wouldn't be surprised. So in some ways it's our intellectual property, if that's the term to use for how to use an aircraft over a broadacre paddock, that is of more interest to them than the actual products.

CHAIR: To follow up on those comments, Mr Pearsall, broad acreage typically leads to large volumes and therefore you export large volumes—bulk by ship versus container, et cetera. Can you just provide some view on the challenges when dealing with smaller lots of exports. A lot of yours goes by container, right?

Mr Pearsall : Yes, it's all by container. I'll just add, on Efic and the other funding, I've found that to qualify for Efic your business had to be virtually non-operational or you had to be so badly off that you weren't in a position to do it, if that makes sense. We tried to use Efic and we didn't make the thresholds, and I don't think we're that special either. I've felt the income insurance for Efic was very good, just as a point back there. Any of the stuff that the guys had put together in those export enhancement areas has been great, and the export marketing grants are good. You'd be surprised what qualifies for it, too, I should say. Mr Mancini, you should get into it.

We've had no problem in getting acceptance of our product. It's been really straightforward. Austrade were bringing this and the overseas staff took us along. We had a full program that introduced us. We haven't had a problem with the product, the pricing or getting the size right. The first time we went to China they wanted 50,000 tonnes, and that was my entire production of soft wheat, which we used for biscuits, and if we did that Arnott's would have no soft wheat for their biscuits, just for example. So once we got over the initial excitement of, 'Wow, we could export 50,000 tonnes of soft wheat!' and went through the logistics capabilities, creditworthiness and our banking capabilities we came back to something we were trying to do in the 1,000 area. We started in the areas of 500, 1,000 to 2,000.

We have great Pacific islands and New Zealand trade, which I say is nearly Australian trade, realistically, particularly in Papua New Guinea. So we've already had that experience, and that's even got ongoing here during the drought. Those markets are still captive to Australia. But the markets we're questioning are able to get the same product from the US or Canada, primarily for a lower cost than what we're able to do it for at this point. I think I've answered the question.

CHAIR: You have, thank you. Just getting back to Efic, has anybody else had experience with Efic?

Mr Ryan : We had a meeting with them and looked at some funding to try to develop the export side of things. But the requirement for basically locked-in contracts to be able to get funding was the big issue for us, because a fair expense goes out before you even get those contracts. We were looking for some assistance along those lines. I don't know what their time lines are like, although having been the receiver of government grants and such before. I know with some of our customers sometimes we'll hear nothing from them and then they ring up and say, 'Can we have some fish tomorrow?' So if you're relying on government-type funding for that, I think it's going to make it challenging.

CHAIR: Has anyone else used Efic? How about any comments we haven't heard yet about Austrade or the Export Market Development Grants? Has anybody had experience there?

Ms LEY: I think Wayne's loaded everyone up.

Mr Ryan : We're working with Austrade at the moment in Japan. In a sort of a roundabout way we did a bit of a market search over there ourselves and came across a company who invited us over there to attend the Tokyo seafood show in August this year, which is coming up. They advised us to send an email to the Australian embassy over there to try and get some assistance around that. They've dealt with the embassy before, so they gave us a contact. We did that, and it found its way all the way back to Wayne. Wayne set us up with an on-the-site person over there to help us out. She'll attend the seafood show with us and help us with interpretation and document—

Ms LEY: When is that?

Mr Ryan : It's 21 to 25 August. It's going to be fantastic for even just the little things. I've haven't travelled a lot overseas. I don't have a lot of experience in overseas countries and with the little things, like the little idiosyncrasies of doing business in other countries. We've already had a conversation with Wayne's contact over there. She's going to meet with us the day before the show and run us through the protocols of doing business in Japan. I think that sort of stuff is extremely useful because it's a different culture.

CHAIR: For those of you who've used Austrade, do you have any feedback on the fee-for-service structure in terms of value for money, whether or not you think it's prohibitive on your own behalf or on behalf of other companies, or whether it hits the mark?

Mr Ryan : I'll tell you in September!

Mr Skaliotis : For us, with the business matching, just recently with Russia, they were able to highlight 10 particular companies that were interested in selling our technology, and, of course, they helped us narrow it down with their own view of those particular companies and what they'd heard locally regarding those companies. The value for money was very good, especially since the report that came in only had two or three companies and, when I mentioned that we really would appreciate if they looked at a wider range of companies, they went back and did that. And I think that was very positive for Nina over there in Russia.

In terms of Austrade in India, who we have regular yearly meetings with, they keep the Flavourtech name at the top of the list when they talk with food companies. They mention us, and they also pass company names back to us with contact details. In terms of working down that avenue to build relationships and introductions to these companies, it definitely helps to say: 'So and so from Austrade passed on your details. Can we come in and see you and have further discussions?' So Austrade definitely helps in all the countries that we're dealing with.

CHAIR: Any other comments on the fee-for-service arrangement?

Mr Pearsall : I felt it was exceptionally good value. If Mat's starting out, it's the best place to start for business matching and getting started. It was—to say the same as Leon—very good value for money.

Mr Calabria : Going way back to when we first started, there was a start-up export grant, which was great. Unfortunately you still can't go out there and do more, which is all at your own expense. It's not just that you're going over there for your own product, you've got growers who rely on you to do this and the economy of Australia relies on you to do this. I don't know if your committee or anyone involved can look at that to see if there is an opportunity to provide some assistance in going over to promote in the new countries and everywhere else where you want to explore and open up new markets. The question is: do you guys have any power to work out how it can assist not only the wine industry but all the stuff that's being produced all over the place?

We find that we are a little bit isolated here in the Riverina. Access to come here is a little bit more difficult. In our industry, if buyers from overseas go to South Australia, it's quite difficult for them to get to Griffith. We have no flights that come direct, which means they've got to fly to Sydney and from Sydney they've got to fly to Griffith, so we're a little bit isolated.

The wine industry body do a good job, but they've only got a certain amount of time—these windows of opportunity—that these people can come over and look at regions. I think we are a little bit neglected in that part, but I don't know any way you guys could look at that and see how it could assist in helping these isolated regions to be able to continue to grow and continue to export. It's not because we want to do export; we have to do export because we're producing more than we can handle here in Australia. If you could sell it all domestically you'd love to do that but, unfortunately, we do need export.

CHAIR: To answer your question, the topic you're talking about is right in the sweet spot of this inquiry, so it's absolutely relevant. Our job is ultimately to table a series of recommendations to the government. Without pre-empting what those recommendations may be, your feedback on that topic is most valued, and that, and the feedback from others, will certainly be used as we try to formulate this committee's view and recommendations. Before we leave that topic, does anyone else have anything to add along that line?

Mr Mancini : I concur. We get a lot of delegations in our industry as well. I don't know why but they seem to understand South Australia as being the premium horticultural producing region of Australia. They end up in South Australia, but then they seem to always either run out of time or run out of methods of getting to the Riverina. I could probably count on my hand how many delegations make it to Griffith compared to how many go down to the Riverland or the Murray valley region. There's a huge differential.

Mr Collins : Are you talking about delegations of buyers?

Mr Mancini : Yes. Potential buyers and buyers.

Mr PERRETT: How many in your business, Mr Collins?

Mr Collins : Myself and a number of part-timers.

Mr PERRETT: So it's enough for two jobs?

Mr Collins : Yes.

Mr PERRETT: There are people coming through but not big delegations, obviously.

Mr Calabria : In our industry you've got well-known wine writers who go back and promote. We miss out a lot on that, because they can only cover so many areas, and naturally they're going to go to the areas that they've heard about or they've got a reputation, like the Hunter Valley. It's so close to the city. Overseas everybody knows the Hunter Valley. As a personal company, we produce more than whole Hunter Valley but, unfortunately, that message doesn't get out. It doesn't mean we want that message to get out but it just shows I don't know if they realise how important this region really is for the industry that we are in and also these other industries. I think these are some of the obstacles we have because of the isolation that we have.

Mr Skaliotis : Is that a state advertising issue or a lobbying of the state government to promote this?

Mr Collins : I think an airline issue. You can't get 10 seats on a Rex aircraft to Griffith or to Narrandera in a hurry.

Mr Calabria : It's a combination of a lot of things, and, unfortunately—

Mr PERRETT: We're geographically closer to Melbourne than Sydney but not transport wise, plane wise I mean.

Mr Skaliotis : There are no planes from Melbourne currently although there was some talk a few months ago.

Councillor Dal Broi : They were meant to be commencing sometime this month.

Ms LEY: That's not Rex is it?

Councillor Dal Broi : No, east-west. It's a gentleman who's bought the east-west logo—

Ms LEY: They'd be leaving from Essendon, I think.

Councillor Dal Broi : Yes.

Ms LEY: Not that that would matter.

Councillor Dal Broi : He was doing a deal with Sharp Airlines in leasing one of their metro liners, which is about a 23 or 25 seater.He told me some of the costings, and I never said anything to him but I don't think it'd work. Anyway, I hope he comes. We, as a council, have offered him free access to the terminal and no landing fees for two years. We've sort of said, 'Go for it. It's there to help with promotion'. But because his cost factor is about $200 one-way—so it's $400 for a ticket—it's all right if there is one person. But if you're a business and you've got three or four you'll say, 'Hang on, if I jump in the car for 4½ hours I'm there.'

This is the conundrum: you're just too close to drive and to close for a—

Mr Calabria : We've been programmed in that way too, John, because we have no option. People are programmed to jump in the car and off they go, whereas if you did have the service running—and it takes time to make a profit, obviously, but as a businessperson you have to look at it as a businessperson, because if you're going to lose money you're not going to go and do it.

CHAIR: Bringing this stuff back to the terms of reference that we're looking at, am I right in saying that due to these reasons—and going back to your point—more regional areas of need more support?

Mr Calabria : Yes.

CHAIR: Is that sort of what we're getting to with this?

Mr Calabria : We are disadvantaged—

Mr Collins : The regions don't just include Byron Bay—

CHAIR: Sorry, Mr Collins?

Mr Collins : The regions aren't Byron Bay and Coffs Harbour. West of the range is the important thing, I think. Dubbo—we have tours that go through Dubbo, for instance. It's very difficult to get people to come far west of Sydney. If they want to see beef, they want to see beef within an hour or two of Sydney. Even the serious buyers are here on very limited time budgets, and we find it very difficult to convince them that there is a lot of beef, for instance, in Narrandera or Wagga or Holbrook.

Mr Ryan : You should try to convince them that there are fish this far inland! It's a point: we see the exact same thing. If you look at a lot of countries, they have big inland aquaculture business. In Australia, we have land. The big issues in the ocean at the moment with aquaculture are about pollution and finding sites. It's tough—a tough gig for the ocean guys. We have all the facilities at our fingertips here to grow a big business and yet we have to make people aware that it's here. That's the important thing.

Mr Mancini : I will probably add to that. As Mr Calabria was saying, the wine writers and so forth seem to favour certain regions and that's where the buyers get exposed to. It's the same thing, too, in our citrus industry. The Riverina produces roughly 30 per cent of Australia's citrus. It's by far the largest growing region in Australia.

I was fortunate enough to be part of an Australia-China Agricultural Cooperation Agreement tour to China back in 2005. We met up with 14 buyers, and not one of those 14 buyers recognised New South Wales as being a citrus-producing region, let alone the Riverina. But they all knew Queensland grew the best mandarins in the world and they knew that South Australia grew the best navels in the world, and a few of them knew that the Murray Valley had navels as well. I don't know if that was a failure of our federal government in explaining the regions where produce can be sourced, if it was a failure in our particular state at the time or if it was the benefit of other states doing a better job. I don't know, but some states or regions were way more advanced than others in actually getting to the buyers or explaining to the buyers that they produce a certain commodity. I think that's what we're seeing around the table.

Mr Collins : Probably 30 or 40 per cent of farmer tours that come here are interested in the rice industry: Japanese, Indonesians and South-East Asians, but also the Italians and Spanish. For some reason this region is well known for rice but not for wine, citrus or others. It has occurred to me often that we need a Riverina badge to capture the variety of products—and fish of course! It's too difficult to talk about all of the individual industries in this area. People do think in terms of regions, I think, and if we were marketing our wine under 'Riverina' rather than 'Product of south-east Australia', and if Matt's fish also had a Riverina badge on them, then I think it would be much easier for us to sell and to cross-sell products in this area to people from overseas, and to people domestically as well.

CHAIR: Thanks, Mr Collins.

Mr PERRETT: I think this is only to Mr Skaliotis: are the certificates of origin something that your business has to—

Mr Skaliotis : Yes, that's something that we do.

Mr PERRETT: Could you comment on that and your views on navigating that and other trade red tape to become an exporter, and maybe your different experience with other countries that we have FTAs with—and obviously you deal with some where we don't.

Mr Skaliotis : A certificate of origin is something that we have to complete with every piece of equipment that we export.

Mr PERRETT: And there's no local input if you go into Colombia or India or whatever? Is it all Australian?

Mr Skaliotis : It is all Australian. We do source instruments or components from Europe that become part of the assembly of the equipment that we put together, but there is a certificate of origin that goes out with our equipment. I don't really know enough about it. I know that for particular countries we have to meet other mechanical standards—CE standards for equipment that's going into Europe, for example. If we're producing something that has hazardous area requirements because it's going in for removal of alcohol from wine or beer, we have to meet the particular standards and regulations of those countries, and they vary from country to country. But that's more something that admin handles for us, unfortunately.

Mr PERRETT: In house, effectively?

Mr Skaliotis : In house, yes.

Mr PERRETT: I don't think anyone else would have country of origin requirements.

Mr Ryan : Yes, we have to provide country of origin certificates for fish into the few countries we export to.

Mr PERRETT: Yes, but I imagine it's not complicated for Murray cod.

Mr Ryan : Yes. At the moment we use a third party.

Mr PERRETT: They're 100 per cent Australian made.

Mr Ryan : Yes, that's right.

Mr PERRETT: Thank you.

CHAIR: To close off, I wonder if we could just go around the table again and ask you to answer a question: if this committee is to recommend one thing to government so that small and medium businesses can better leverage free trade agreements, what would that be? Who wishes to start? Why don't we start with the mayor? Then we'll go around that side of the table.

Councillor Dal Broi : For me, just from listening this morning—and I'm not an exporter—better communication to exporters themselves. From listening to Vito and the guys in there, I think we need better cooperation and communication from government with the industries involved.

Ms Austin : I think there are some good support services in place. There's been some good talk about what Australia does. I think we possibly need to look at transport options to make that an easier and more cost-effective option, and also promoting the area.

Mr Ryan : I think the level and the cost of red tape and getting initial approvals and getting a start are probably not a big impost on bigger companies, but they are for smaller companies. At the moment we're looking at moving all of our processing from a third-party processor to here. We've got the site already, and we're going through our export approvals. But, by the time we do it, we'll tear up 50 grand, probably, in approved arrangements and food safety stuff. It's all documentation that, rightly, we probably should have. I don't disagree with having it, but it does become quite expensive just to get. If we wanted to dip our toe in the water with small volumes, it makes it pretty tough. Then there is the flow-on. If you use a third-party processor, they've paid for all of that, but they pass that back. So all of a sudden, as Vito said, you're adding these costs onto your product, which makes you look less competitive into an export market. So I guess we need some control around the cost of setting up and being able to establish those export markets and the levels of different documentation that have to be ticked off to get through.

Mr Collins : My business isn't old enough or big enough to thump the table, but one of the ways in which I could make my business much more noticeable to people in countries with which we have free trade agreements is some way of quickly financing translations of prospectuses and brochures suddenly into Cantonese or suddenly into Korean. I recently had one page translated into 10 different European and Asian languages, and it cost me about $5,000. That's one page—that's not the website—and it's not focusing on or targeting a particular opportunity that I've suddenly noticed.

Mr Pearsall : I'd like to see better resourcing, if not greater resourcing, of the Austrade officers. Perhaps I haven't had much contact outside of Wayne, but I think that's the best area that I could leave the question with. I will make one last comment. For the western marine, which includes the MIA, we are the biggest grain-producing region in New South Wales. Everyone thinks it's Moree or wherever else—they've got a drought every third year and no water security. In finishing, for my industry, we're the biggest grain region in New South Wales and barely get any recognition for it. I'm not sure why we don't get the recognition.

Mr Calabria : Because of where we're situated, and it's no fault of anyone—we chose to start our business up here—and because we have the added costs, I feel that, if there could be some consideration given because of where we are, and the government knows we have problems in the major cities where they're overcrowded and they want to move people out, it's a good opportunity for the government to try and assist these people who are putting their hard-earned into these regions, which are a little bit isolated. There should be some assistance in that part to help continue the growth that is here. We've got the land, and we've got the opportunity to do a lot more than what we're already doing. All we need is a bit of support, which helps it grow and encourages people to come here.

Like we said before, we have trouble with getting workers to this region for a number of reasons, but it doesn't take much to turn it around. We don't expect government to come out and give us bucketloads of money. We just want some support so that we can continue to do what we're doing as family companies. We'd like to think that we can even entice corporate companies to come to these regions. They're corporate, and they don't have a breeding ground coming from the region. They're business people, and they've got to look at the bottom line. But once we can show that we're strong enough and we have support from government, then I think this is what will happen. My thing is: there should be some stronger assistance in regional areas like the Riverina.

Mr Skaliotis : Thank you for letting me go last, because it's given me a little bit of time to think!

Mr PERRETT: I think you went first at the beginning of the day, so we're—

Mr Skaliotis : Yes, you've handed it over! I like to think of issues and solutions to issues as things that we can control and things we can't control. We can't control when customers will buy, and we can't control other markets or the markets that we sell to. For me, the things we can control are communication and education. It's certainly something that we try and do with all our customers. In this particular case, there are free trade agreements. I think one of the things that needs to be done for all exporters is: communication of those free trade agreements and what it means to us and how we can use it in our negotiations and our discussions with our customers. We quite often get asked for discounts. They say, 'I'm buying this much; give me a price,' or: 'What if I buy that much? Give me a price.' Well, if we understand the free trade agreements and what that means to our end customers and how we can use that, we can actually provide these discounts or use these in our negotiation agreements and say: 'If you purchase this year, this is what's happening. If you purchase next year, and if you want to hang on—you can give us a deposit or say that you're coming on and give us the contract—you can have it at the price that you're after.' So that is something that the government can control in terms of providing the education that's required by us as exporters to improve on our capabilities to negotiate better agreements with the countries that we're going into.

CHAIR: Does anyone else want to make any final comments?

Mr Skaliotis : Welcome to Griffith! Thanks for coming down.

Ms James : This is anecdotal. The people who I speak to across the region say that the barriers to export are quite high and that the risk factor is very high, particularly when you're just dipping your toe into the market. If there was a way for the government to try and help with those risks to make it a little bit more easier in that regard, I think you might see a lot more people take that initial step. They're the factors that I get a lot, but, of course, Wayne might have a different story to me. A lot of those first-time exporters are just very nervous about those risks, and there are a lot of risks, particularly in that fresh market. You obviously want to know that your product is getting to market in as good a fashion as when it left. Confidence in the supply chain, I think, would be helpful. Thank you.

CHAIR: Ladies and gentlemen, that concludes this afternoon's hearing. Thank you for making yourselves available and for your evidence to the subcommittee. If you have been asked to provide any additional material, and I don't think any of you have, or if any of you stumble across or think of additional material that you think we should consider, please forward that to us through the secretariat. You will be sent a copy of the transcript from today's discussion. Please do review that and, again, advise the secretariat if you wish to make any corrections or adjustments. Finally, I want to thank the Honourable Sussan Ley and her office for helping organise today and also the mayor for not only the chambers here but also your personal participation today—it's much appreciated. Otherwise, I give big thanks to each and every one of you for taking time out and providing input. With that, I declare this public hearing closed. Thank you.

Subcommittee adjourned at 14:03