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Foreign Affairs, Defence and Trade References Committee
29/10/2015
Australia's relationship with Mexico

BARTY, Mr Grame, Executive Director, International Operations, Australian Trade Commission

DEANE, Ms Sally, Assistant General Manager, International Issues Branch, Australian Trade Commission

GORDON, Mr Kenneth, Director, Canada, Mexico, Central America and the Caribbean Section, Department of Foreign Affairs and Trade

HACKET, Mr Brett, Assistant Secretary, Canada and Latin America Branch, Department of Foreign Affairs and Trade

HAMMER, Dr Brendon, First Assistant Secretary, Americas' Division, Department of Foreign Affairs and Trade

[15:51]

Evidence from Mr Barty was taken via teleconference—

CHAIR: Welcome. Would someone from the Australian Trade Commission—Austrade—and someone from the department like to make a brief opening statement?

Dr Hammer : I am happy to kick off. First of all, let me thank you for the opportunity to present to your inquiry. I think it is a great idea and I am very pleased to provide a DFAT perspective. I know you have already heard a great deal about Mexico, today, and you have had a number of written submissions. I thought what I might do is pull the lens back a little bit and talk about where we, in the Department of Foreign Affairs and Trade, see Mexico situated in the wider suite of Australia's geopolitical and economic interests, and this goes directly to one of your reference points—point (a)—in the inquiry. I think that Foreign Affairs and Trade has, I suppose, a unique capability to provide that type of perspective. It will start out fairly simple, but please bear with me.

First of all, Mexico is in the Western Hemisphere—so that includes the North and South American continents. It is the third-largest country, there, by population: the US is 320 million; Brazil is 200 million; Mexico comes in third at 120 million; fourth is Columbia, which is 50 million; and, just for reference, Canada is 35 million. I would just like to say a bit about where I see the Western Hemisphere as fitting into Australia's geopolitical and economic purview. Historically, I think we have overwhelmingly seen the Western Hemisphere as, pretty much, the United States, our most important international partner in every dimension but, of course, we have very deep cultural ties to Canada.

Historically, we have not really looked that how much further, but I think I can say today that we are beginning to. There are some good reasons for that. It is happening largely because we can see the Western Hemisphere as a whole is starting to emerge into what I would characterise as the world's most reliable long-term growth centre. It perhaps does not have the speed and exhilaration you might attach to Asia or the Indo Pacific, but there are certain things about the Western Hemisphere that make it a bit different to anywhere else in the world and very prospective.

Here are the characteristics I ascribe to the Western Hemisphere. I will come to Mexico and where it fits into this. These are the characteristics that make the Western Hemisphere special. The first is that the prospects for interstate war across the entire hemisphere are remote and receding. There is nowhere else in the world that really has that characteristic. Eliminating interstate war reduces the prospect of what can be the biggest economic and political disruptor. In other words, you can look forward to some fairly steady performance across the entire hemisphere. It is also true that internal conflicts are either resolved or are trending towards resolution. One good example is what has been happening in Colombia with the fast but steady movement towards resolving that over the last 10 years or so.

The other thing is that across the hemisphere—and we have heard about Mexico—the demographics for growth are right. That is, youthful populations, a low wages base, a growing middle class and governments, including the Mexican government, placing a very strong emphasis on education as a means over the medium to long term of stopping the wealth disparity challenge which many of the countries in the hemisphere face. There is high net population growth off a base of about one billion people. That is the whole hemisphere. Just to give you a comparator, there are 610 million people in Latin America and there are 615 million people in the ASEAN countries. That gives the context. Spanish is virtually a common language. It is increasingly spoken inside the United States. English is also increasingly spoken. So this assists linkages, particularly including business linkages, across the countries in the hemisphere with Australia.

Mexico is at the heart of all of that. It is emerging, I would say, as an economic and political linchpin of the Western Hemisphere. Above all the other Latin countries, it has the proximity and growing supply-and-production chain integration into the United States. The US is obviously still the economic juggernaut of the hemisphere and the world. With the right economic policies, Mexico is positioned to act as a midwife or a gateway to integrate other emerging Latin American economies into the US economy. I think in that respect Mexico is also showing the way for Latin America through its membership in a new group, the Pacific Alliance, which is Chile, Mexico, Peru and Colombia. I believe it is developing a new, economically liberal, free market and free trade oriented political and economic paradigm for Latin America. So I am very optimistic and enthusiastic about what the whole hemisphere has to offer Australia but Mexico in particular in terms of its positioning and policies as part of a dynamic and growing Western Hemisphere.

I would like to conclude by saying what I think this all means a little bit more specifically for Australia at a strategic as well as economic level. Again, I will avoid going through things which we have already gone through in our submission. First of all, it means that we need to grow in a more concerted way our relationship with Mexico. The United States and Mexico are merging economically and culturally. I think the process is irreversible. It is hard to see how far it will go over the next several decades, but I believe it will go a long way. At the same time, the United States is set to remain our biggest and most important strategic partner. If you add those two things together, I think on that basis alone we should be seeking to get closer to Mexico. The US and Mexico are relating to one another increasingly as partners and, if I can be direct, less so as a very big brother and a much smaller brother.

On top of that, I would also add that Mexico and Australia have a lot of common values. We have respect for personal freedoms and democracy, a belief in the rule of law and a commitment to a rules based international order. Increasingly, Mexico is also showing a commitment to free market economics, business-led economic growth and international free trade. So I think that means that, as Mexico grows stronger and emerges to play a greater global role, we should be looking to partner with it to uphold those values in the international arena. I think we should always be looking for partners to uphold a rules based international system, which is the type of system we want to see propagate in the future in the world of international relations.

Finally, for the following reasons I think there is simply a great deal of potential to expand our economic relationship with Mexico. You have been hearing from others on this. Mexico wants to expand its exposure to the tremendous potential of our region—the Indo Pacific region. It wants to hedge its high exposure to the US economy. It has also realised, as many Latin countries have, that the longstanding transatlantic economic opportunities are now being eclipsed by transpacific opportunities. I think that has been kicked along recently, unfortunately, in some ways, by what has been happening in Europe and with the European economy. So I think Mexico's interest in Australia as a regional gateway into the Indo Pacific is going to grow.

The other thing I must mention is the de facto free trade agreement between Australia and Mexico that the Trans-Pacific Partnership is about to deliver. I think it will give us some major opportunities. I noted down a few examples but I do not think I will go through them because I note that the Austrade submission has done a tremendous job of listing many of the opportunities that the TPP will offer Australia in Mexico and Mexico in Australia.

Mr Barty : From an Austrade perspective, we believe that the trade and investment relationship between Australia and Mexico not only has turned the page but has a significant upside. Australia's interest in Mexico has steadily being building in recent years. It has been building thanks to the investments from the Macquarie Group, Amcor, Incitec Pivot and others. The pace of change in the past year has been prolific. We have seen significant and major players—BHP Billiton, WorleyParsons and Woodside, for example—lead the charge into the Mexico economy, affirming not only their interest but that a new era will be anchored by their decade-long investment. We know by experience in other markets that, where those major players enter new markets, they bring with them a whole cluster of smaller companies. So we would expect to see significant spinoffs in that regard.

Across Austrade we are also working on plans around global value chains. We know that 70 per cent of manufactured goods exported are unfinished goods and that means linkages in the global value chains are increasingly important. We know the significance of Mexico and its role in the Americas in advanced manufacturing, particularly in the automobile sector but in other sectors related to advanced manufacturing as well, including the aviation sector. We think we have a significant role to allow our companies to participate in those global value chains.

We have mentioned already—and I am sure you have heard this many times today—that Mexico and Australia are natural gateways, committed to trade liberalisation and deeply engaged in productivity improvements. Indeed, the Mexican government is even interested in the NBN and the digital transformation agenda. So we have things to offer both economies in terms of productivity as well.

Up until a year or two ago any material trigger for catalysing the relationship was absent. But we now think there are at least three triggers. The first trigger has been the world-beating and brave economic reform by the Pena Nieto administration, particularly in relation to energy. That is what attracted Woodside, WorleyParsons and BHP Billiton to the oil and gas sector. We also expect that that will flow out into the education sector. On this point, Austrade, with the Australian embassy in Mexico, has played a pivotal role in supporting market entry of those major oil and gas companies from Australia.

We also know that an increasing number of analysts have the Mexican economy on a trajectory to be inside the top 10 in little more than a decade and potentially one of the top five or six economies by 2050—and that is very impressive and something that we cannot ignore. It relates to a range of factors. Its commitment to the reform, certainly its demographics, its geographic positioning in relationship to the US market but, as pointed out, also to the South American market, its cost structures and the re-shoring of manufacturing have all combined to create a significant capability that makes it highly competitive as a major force in manufacturing, not only against China but actually against any newcomer in the international markets. Therefore, it is something that we have to pay attention to.

The other potential triggers that have been referred to include the Trans-Pacific Partnership. We think this is significant and, when finalised, will bring Mexico in play, in particular for Australia, in a way that it has never been before. We also agree with DFAT that the relationship with the Pacific Alliance will also have a specific benefit. Previously, we have had an Andean strategy, where we have created a bridgehead in Santiago in Chile and pulled Australian companies through into Peru and then into Colombia. Now, with the Pacific Alliance, we can seamlessly migrate companies into Mexico. We have seen that recently with our first successful mining exhibition, where 15 companies a couple of weeks ago participated in a major Mexican mining industry.

The other point that we would make is that, finally, we believe that there are three major trade routes emerging in the world today that will impact world trade over the next 40 to 50 years. The first is China's one-belt, one-road trade route; the second is the air logistics hub being established in Dubai, Abu Dhabi and Qatar; and the third is the trade route from Mexico's manufacturing and logistics capabilities into the USA and north into Canada. Therefore, we believe that we have to have a role to play in that. We think that Austrade will concentrate now on six key sectors: energy, mining, infrastructure, advanced manufacturing, food and agriculture, and education. There is a clear marriage between Australian capability and Mexican opportunity in these sectors, and we are already making some immediate advances so that we can achieve a broader entrenched position and take advantage of the TPP and the Pacific Alliance gains in particular.

CHAIR: Thank you. I asked the Australian Industry Group about the doingbusiness.org rankings. Mexico came in slightly behind Japan but about 50 places better than China. What is the purpose of these rankings, really? Are they an accurate reflection? I do not mind if Austrade or the department answers this. What do we take out of these rankings? If I had not got this printed out, I would probably have had a negative view, but my view is not negative when I look at the fact that Mexico is three spots behind Japan and 50 spots in front of China.

Dr Hammer : I will defer to my colleagues in Austrade—they probably have a much better grasp on that—but my guess is that there are many factors they take into account when they come up with those numbers.

CHAIR: I know what the factors are. The factors are listed here.

Mr Barty : It simply means that most of the manufacturing that is produced in Mexico is for the North American market. That means that, in order to comply with North American regulations and North American contractual law, there have to be very high degrees of transparency, and also compulsory obligations need to be met. In that context, dealing in an advanced manufacturing capability in a factory in Mexico, for example, would be no different to operating in one in the US or operating in one in Japan.

CHAIR: Exactly, so it is a positive statement.

Mr Barty : Very positive.

CHAIR: It is not always portrayed that way. What do you say about the perceived levels of public sector corruption and Mexico's ranking there, which is 133rd with a score of 35? What does that mean? That is still better than China, I think. I am not criticising China, but China is portrayed as the biggest opportunity in our market at the moment, and yet on these scores it does not rate very highly. What does this mean for Mexico? These are the published documents.

Dr Hammer : Yes. I have a Transparency International index here, which has Mexico 103. I think China is 100. Vietnam is 119. Australia is 11. Chile is 21. This is essentially telling you—I think they are surveys of businesses—that you do still run a reasonably serious risk of hitting corruption as you attempt to operate in the country. As Grame was pointing out, there are probably areas where you can operate where everything is operating pretty well—the parts that are integrated into first world supply chains going to the United States or what have you—and then there may be some other places which are pretty difficult to operate in.

CHAIR: But they are not seen as 'Don't come here'. Basically, if you follow these rankings all the way down to the end, there are some places where you should not be putting your money.

Dr Hammer : I think that is right, Senator. Absolutely.

CHAIR: What are the other impediments to doing business or having better collaboration or cooperation? All we have heard all day is pretty positive stuff.

Dr Hammer : Grame will probably have a better grasp of this than I do, because of the breadth of what I usually cover. I think corruption is an issue and probably there is a security issue. I have had a bit of a look at those. I do not think we can ignore the security issue, but there are some serious efforts being made by the current government to address that. It is going to take time. The homicide rate is going down—from a pretty high level, I must admit, but it is steadily going down. Some of it is regional so you could probably operate quite safely in certain places, but for other areas you really wouldn't want to go there.

You have to look at what is driving the problem. I think a lot of what is driving the problem is this very big wealth disparity. We have heard about the demographics—a lot of young people—and there are very big wealth disparities. That is positive from the point of view of potential employment and wages and so on and so forth, but it is negative in terms of where a lot of those people are now and what is motivating them. If they cannot get an education, they cannot get a job. They are 25 years old. They are a problem. In the medium to long term, the way that Mexico is heading those problems will gradually be overcome; but they are present. Grame, you must have a view, too.

Mr Barty : I would just make the point that there are a significant amount of investments being made if we think about the $10 billion-odd investment in auto manufacturing that has been put into Mexico in the last year. That is not being put into any other market, and that includes China. So there are major and significant investments being made, which will upgrade the opportunity for white-collar employment, investment in factory employment and therefore income. It will be an important thing that will wash through the system over time.

There is also a significant diaspora in the US that is really wanting to drive that change back into Mexico and is realising that in order to engage further with Mexico there will have to be transparency and there will have to be safety and security. That linkage is particularly with the southern US but increasingly now with the north of the US, and over time I think it will drive those changes. The security issue and the drug issue aside, I think there is too much at stake for the Mexican people and the Mexican economy not to want to go forward over the next 20 to 30 years.

CHAIR: Mr Barty, you mentioned a $10 billion investment. Did you say that was in one year?

Mr Barty : Yes, in the auto sector.

CHAIR: $10 billion in 2014-15 sort of thing?

Mr Barty : Yes. Renault put its brand new one million car run facility in Aguascalientes, for example. General Motors also put its brand new facility in, I think, Puebla city. There have been a number of new deployments from major auto manufacturers into Mexico, and that is over other markets like India and China.

CHAIR: It makes you wonder why Donald Trump wants to build a wall, doesn't it? Anyway, we won't go there.

Senator BACK: In the week of the Melbourne Cup, Aguascalientes was the scene of the last race of the great Phar Lap.

Mr Barty : There you go!

Senator BACK: It has got nothing do with this inquiry. What I hear you saying is: Australian companies can come in on the coat-tails of what are increasing demands on probity and governance as a result of American companies having that influence in Mexico. Is that—

Mr Barty : I believe that is true. Yes.

Senator BACK: In 2007, the Joint Standing Committee on Foreign Affairs, Defence and Trade had an inquiry into Australia's relationship with Mexico. Does anybody know—from the government's response at that time—what recommendations were implemented and what recommendations were not? It is something I have asked the secretary to address as an appendix to this report. Is anybody familiar with any substantial changes that did occur as a result of that inquiry in 2007?

Dr Hammer : I am afraid that I was not actually in this job at that time. I was in a similar job in 2003, but—

Mr Barty : Maybe I can advise. I was based in Los Angeles for 3½ years and I had responsibility for Mexico. In 2008 or 2009, Minister Crean signed an air services agreement and an agricultural agreement as an outcome of that review.

Senator BACK: Mr Gordon, were you going to make a comment? It was not an area that you—

Mr Gordon : No. It was not an area that I was directly involved in.

Dr Hammer : Would you like us to investigate that for you, though—take it on notice?

Senator BACK: I think the secretariat can. Obviously, I am particularly keen to know. Everyone puts a lot of effort into these—you have, other submitters have and others who have not appeared today have. I, for one, am always very anxious that when recommendations are made and if the government of the day responds to them positively they actually do get implemented.

My next question goes to our resourcing of the office in Mexico City. I will preface it by saying just how appreciative I was of the ambassador and the senior Austrade officer assisting me in January. I made the observation of how well regarded and respected both the embassy staff and the Austrade staff were. At the time, I learnt, for example, that the UK government had dramatically increased its representation in Mexico. It had a policy led by the Prime Minister of a minister per month visiting Mexico. I know that we cannot commit to a minister a month. I only raise it because it really was a very strong statement by the United Kingdom. In fact, I think, also, that the Mexican President Peña Nieto had been invited to London and was accorded very high diplomacy in that visit. What is being done from Australia's perspective to actually be able to capitalise on these opportunities—TPP and the raising of what we hope will be a trade and investment relationship? If you cannot tell us what the government is doing, you might be able to indicate—well, yes, I suppose you can tell us what the government is doing. You can tell us what the government's policy is.

Dr Hammer : We do have quite a few things in the pipeline. At the moment, unfortunately, they are in the form of policy advice, so I cannot go into them. I can say that at least I know that both of the senior ministers, the foreign affairs minister and the trade and investment minister, are very interested to do more with Mexico. Also, on TPP, there are some pretty exciting prospects. I would imagine, and I am hopeful—but I cannot, obviously, be sure—that the trade and investment minister will take a business mission. Austrade would be part of that, obviously—a very big part of it—to Mexico. I think there are lots of opportunities that he is already aware of. I know that the foreign minister is very interested in Mexico, too, including through the MIKTA organisation which was mentioned earlier—I think by the Mexican Ambassador and others. We want to do more. We are looking to do more. Of course, the kind of analysis that I have given you have reasons for why we should get more engaged with Mexico. It is the analysis which has been circulated by my division within the government.

On TPP, there is going to be quite an important program run by the government. I know quite a bit about the Australian end of it, but, of course, there will be activities out of our embassy in Mexico City to promote Mexican awareness of what the opportunities in Australia might be. But the opportunity is already being highlighted on DFAT's website. There are fact sheets on market access outcomes for goods and services covering sectors such as resources, energy, education services, finance services and investment opportunities, and as the ratification and implementation of the TPP unfolds DFAT and Austrade are going to roll out a comprehensive outreach strategy highlighting the benefits. Mexico is going to be a particular focus when we communicate the outcomes because we have not had any kind of an FTA with Mexico before, so there are lots of opportunities opening out. Where possible we will seek to provide bespoke advice to stakeholders—farmers, manufacturers, investors, service providers. So that is all in train.

Senator BACK: Mr Barty or Ms Deane, this goes to some of the points that Dr Hammer just made. The Export Council recommended that the government create, in their words:

… practical, user-friendly tools to assist SMEs, especially services companies, understand and utilise the TPP …

I am very interested in knowing what those tools might be. Is it intended that there be the establishment of some portal that the small and medium sized companies can access? The bigger companies look after themselves. I am particularly interested in knowing what tools the SMEs will be able to access that might help them make decisions in this direction.

Mr Barty : I could answer that. With DFAT we have created a number of tools for the Northeast Asian free trade agreements. DFAT are currently building an FTA portal, and that portal has all of the specific information about each and every one of those free trade agreements and a tariff finder. Other agencies like Export Council and some of the banks and the big six consulting companies have also created guides on how to determine what is relevant to your industry and your sector for specific agreements. We have also provided case studies. We have provided points of contact and also referrals of where people can go to get relevant information very specific to their industry or their particular company. For the Northeast Asian free trade agreements there is also an FTA outreach program where Minister Robb is keen that we touch nearly 200 different locations across Australia to talk about the FTAs. Of course, in the Northeast Asian free trade agreements there is also a grants program where agencies or groups that do not actually currently already have or provide programs around exports can actually create a capability to deliver that information around the free trade agreements. It is a government decision to decide whether they would extend that to other free trade agreements such as the TPP or the Indian free trade agreement. If they did so, then we would provide that capability, and agency partners like the Export Council of Australia can also participate in that.

Senator BACK: Have you had any feedback from industry, and I am including the services sector here. We have been told of the potential for the services sector with the China free trade agreement. You have now given us an impressive list of services under the TPP on your page 8. Is there any apprehension or concern within Australian industry that we are not going to be able to gear up to provide this level of service should these export opportunities actually materialise?

Mr Barty : I cannot speak for industry, but there are clearly opportunities. I think the health services one is particularly interesting, and one where Australian services companies can provide significant input. Of course, education is another. In oil and gas and mining equipment services and technology we are already seeing strong response from industry to meet that and, of course, there are changes in the mining markets around the world. Coming into new markets like Mexico, which are largely unexplored both from a mining point of view and from an oil and gas point of view, really means almost that it is a greenfields rather than a brownfields market, so we would expect there would be strong take-up. The 15 METS companies going to the mining exhibition a couple of weeks ago, I think, is a really good example of that. In those areas, and perhaps in some of the professional and other technical areas like, for example, broadband communications and other things, we may well be able to find an opportunity. Of course there is also strong interest in Australia's experience in water management and sustainability, both from an urban point of view and from an agricultural point of view. So there are opportunities there and clearly interest in Australian policy and how they might implement that. That would be another consulting opportunity.

The real issue here, I think, is Mexico turning the page. These opportunities now exist, and we are going to match Australian capacity and capability with the market opportunities. But in order to do that effectively we have to educate the markets, and we educate the markets in two ways: we bring the Mexican customers and those with the opportunity to Australia, to understand Australian capability, and/or we run business missions into Mexico to educate Australian clients about the opportunities in Mexico itself. Hopefully we do that with minister-led missions. Those have not really existed to date because we have not had these market triggers. Energy reform is really important, and the TPP plus the Pacific Alliance were really important triggers for us. I think it is about creating that awareness now that will create new opportunities.

Senator BACK: It is my understanding that the reforms introduced by the government in Mexico had bilateral support and there have been constitutional changes. I understand some of them were the subject of challenge in their highest court and that they were sustained. One would then hope that the reform process is likely to continue, whoever is in the government. So all that is very encouraging. The last point you made, Mr Barty, in your submission regarding services and the TPP related to government procurement. I just wonder if you or somebody at the table can expand a little bit on where it is seen that Australia may be of some value to Mexico in terms of the fields of corporate governance, government procurement, taxation services and management consulting. Also, in the goods sector—I have spent some time in the last few days with the seafood industry in WA and nationally, relating to the work of the Marine Stewardship Council in terms of certifying the integrity of the fishing industries around Australia and I wonder whether such governance procedures might have application to Mexico as well.

Mr Barty : You were obviously at Seafood Directions, and you will know that Australia's capability in sustainable fisheries management is highly regarded throughout the world. We have not had any direct engagement with the Mexico parties around seafood, either ocean or fish farming, so we are not sure on what that would be yet, but we would expect that there would be interest in our capability. In relation to the other areas, if we are able to bid in a free and unfettered way for government services contracts, then I think it is around areas where Australian capability has a leadership. That might be around things like aged care or broadband communications or specific superannuation and taxation initiatives or something like that. It is really in areas where we have a policy or a government capability that the Mexican government is seeking to deploy where we would be attractive over and above either local Mexican providers or US providers.

Senator BACK: My final question goes back to your report, Dr Hammer. In terms of bilateral trade between Australia and Mexico, we seem to be about even stevens at the moment—about $2½ billion in two-way trade. Imports from Mexico were $2 billion in 2014. What were our exports? Five hundred million—so we are not in balance. There is more potential for us to export, is there?

Dr Hammer : I might ask one of my colleagues to come in on that.

Senator BACK: I am quoting from page 6 of your submission: 'Trade and investment: a cornerstone of the bilateral relationship'.

Dr Hammer : Sorry, Senator, what was the question?

Senator BACK: I guess the potential for us to redress that balance of trade. We seem to be importing more from Mexico than they are importing from us.

Dr Hammer : I guess the direction we might take—and I would also be interested in Grame's view on this—is that, as Mexico increasingly industrialises, I assume it would be wanting raw materials, so I guess there is an opportunity to provide those things and to grow that. Also, depending on whether we can get a comparative advantage into some of those supply chains which are going up into North America and get, say, some auto parts—I think that was raised earlier—into those supply chains, I think that is a possibility.

Another way to look at it is that I would like to see a big improvement—I think the potential is there—in what you might call education exports. I would like to see students coming from Mexico to Australia. I think we have a chance of increasing those numbers. We have some very big numbers from some other countries in Latin America—Brazil and, in particular, Colombia. We have 13,000 or 14,000 students coming from Colombia; that is only 50,000 people. I think it is a matter of marketing and getting ourselves more in front of the Mexicans and offering an alternative. Of course, the value of our dollar at the moment is going to help us a lot, so I think that should create opportunities.

The other thing to mention—it does not come up in balance-of-trade numbers—is the capacity for, I guess, almost repatriation of profits through activities of some of our really big companies in the liberalising energy market and also in infrastructure. There are big reforms going on. There is a big infrastructure program in Mexico. I think we can make gains there.

Mr Barty : I pretty well agree with that. The other point that I would make is that in the oil and gas sector we think that there is the potential for Mexico to become a bridgehead for the rest of the oil and gas opportunities that exist in South America and the Caribbean, including Colombia, Peru and Brazil. So we would like to think that, if there is a cluster of services and capability created in Mexico City, that could spin out into other areas in the region and therefore create a bigger base, but with revenue being attributed to the Mexican market.

Then, as mentioned, there is the advanced manufacturing capability across the board. It is direct access to the North American market and potentially also the global market, not just the Mexican market. Therefore we have a really important role to play in some of the new areas around advanced composite materials, special paints and aftermarket capability in that market, which I think could lead to more exports. I would not know at what level, but it would certainly be a positive move forward.

Senator BACK: Thank you for that.

CHAIR: I have just googled the list of countries whose citizens can obtain Electronic Travel Authority. Why is there a problem with Mexico achieving that status?

Dr Hammer : Thanks for the question. I have a general knowledge of how these problems arise. I do not think there is anything specific in relation to Mexico. I think it is the rolling out of the system that allows those electronic visa processes to operate.

Mr Hacket : Perhaps I could add to what Dr Hammer said. The Electronic Travel Authority would be, in my view, the solution to almost all of the complaints that are raised, not just by Mexico but by other countries in Latin America. We have undertaken significant outreach to the department of immigration specifically on securing access for Latin America to the ETA and have been told that the ETA is an antiquated product which is being replaced by the electronic visa system. Consequently, even though that is the solution in our view, there have not been countries added to that ETA list for upwards of a decade. We are reliably told by Immigration officials that it is an antiquated product and that they are in fact trying to not replace but overtake it with better products.

CHAIR: I just looked at it. It says you can apply for your visa online if you meet the right conditions and come from certain countries. Are you saying that no-one has been added to that list for a while?

Mr Hacket : For over a decade is what we have been told.

CHAIR: So how do people from South America get on now? Do they have to do a paper visa which takes four weeks? We had the same discussion at estimates about people in China having a problem getting their visas. What is going on in this space? Is it a bureaucratic issue?

Mr Hacket : The electronic visa system, as it was designed, is meant for people to be able to lodge applications electronically and get the rapid benefit of an automatic grant, if you like, unless there are certain red flags that are highlighted in the electronic process. I can attest probably more to the issues in relation to Brazil because I was in Brazil to witness the rollout of the electronic visa process. It has not been smooth sailing as the parameters for auto-grant are refined. For Mexico, not only is there an issue with the speed with which an Australian visa can be obtained but, of course, there is the additional complication of the speed with which a US visa can be obtained, particularly if Mexican travellers are transiting the United States.

CHAIR: They have a double problem. Is there any evidence that people come to Australia and overstay or do the wrong thing?

Mr Hacket : The Department of Immigration and Border Protection obviously collects statistics on the rate of overstays that are evident across all passport holders. I am not aware that Mexican passport holders are a statistically poorer-performing group than many other countries.

CHAIR: If there are significant opportunities, this would appear to be an area that needs a bit more examination.

Dr Hammer : I think that is right. We spend quite a bit of time trying to find ways to make it easier for Australians to travel into Latin American countries, and vice versa. We talk to embassy representatives here quite a bit about what their issues are with visas and all the rest of it. We are conscious that it would be great if we had better air linkages as well. We are rolling out air services agreements and creating the opportunity for airlines, if they wish, to make a commercial decision to fly and be able to do it. We spend quite a bit of time talking with the Department of Immigration Border and Protection about trying to make things easier, but they have limited resources and they have prioritisation lists, so it can be difficult to get an answer.

CHAIR: Don't we have a declaration when we come back to Australia that says: 'Have you been to South America?' What is all that about?

Dr Hammer : I think that is for quarantine.

CHAIR: A biosecurity—

Dr Hammer : Yes, that is a biosecurity matter.

Mr Hacket : There are also health issues. In much of Latin America, particularly in Northern South America, there is a yellow fever zone.

CHAIR: So it is compounded by these other quarantine—

Mr Hacket : Yes. Often, if you have been in Northern South America, they will ask you to demonstrate through your World Health Organization that you have been inoculated against yellow fever. If you have not been, you are just hauled out to a room, given a stern talking to and handed a list of symptoms which you are to keep an eye on.

CHAIR: That is obviously an area where we might need to take some advice. I think you were in the room what we asked the preceding witnesses to highlight what they think would be a fitting action for the 50th anniversary. Without going to your advice to government, are there any general issues that you think are worked on, up to speed and could be beneficial in this 50th year?

Dr Hammer : Yes. Looking forward to next year and the following year, we are thinking of doing quite a few things which, though not necessarily themed around the anniversary, will be quite important in expanding the relationship. Certainly, in terms of celebrating that anniversary, we will do things but not necessarily major events. We just had a 75th anniversary of diplomatic relations the United States, and that relationship is obviously a big deal. There was a very nice function at the ambassador's residence in Washington just recently for that. In a way, we do not tend to overstate that side of things. Diplomatic relations are important but not quite as important as other kinds of milestones, really.

Senator BACK: Thank you very much. The submissions were fantastic.

CHAIR: Thank you very much for your submissions, your appearance here today and for answering questions. Thank you very much, Hansard, and our hardworking secretariat staff.

Committee adjourned at 16:41