Referral of the bill
1.1
On 7 October 2020, the Export Market Development Grants Legislation Amendment Bill 2020 (the bill) was introduced into the House of Representatives by the Hon Dan Tehan MP, Minister for Education.
1.2
On 8 October 2020, through the Selection of Bills Committee report, the provisions of the bill were referred to the Senate Rural and Regional Affairs and Transport Legislation Committee for inquiry and report by 4 November 2020.
1.3
On 4 November 2020, the Senate Rural and Regional Affairs and Transport Legislation Committee wrote to the President of the Senate noting that following the referral:
The committee was subsequently informed that the Minister will seek permission of the Senate at the next available opportunity to refer the provisions of the bill to the Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report.
1.4
On 10 November 2020 the Senate agreed to refer the provisions of the bill to the Senate Foreign Affairs, Defence and Trade Legislation Committee for inquiry and report by 26 November 2020. The committee was able to consider relevant evidence and records from the Rural and Regional Affairs and Transport Legislation Committee which received 40 submissions and 50 in total of one form letter. These are available from the Senate Rural and Regional Affairs and Transport Legislation Committee website.
Conduct of the inquiry
1.5
As per the referral from the Senate chamber, the committee considered the evidence received by the Senate Rural and Regional Affairs and Transport Legislation Committee and decided to prepare its report based on the papers.
1.6
As the Rural and Regional Affairs and Transport Legislation Committee advertised the inquiry and sought submissions the committee did not seek submissions, but it received four submissions which are listed at Appendix 1.
Background to the bill
1.7
On 3 October 2019, the government announced a review into the Export Market Development Grants (EMDG) scheme which is 'the key government financial assistance program to help aspiring and current exporters increase their marketing and promotional activity in international markets'. The review sought to:
examine how the Government can best support Australian exporters or prospective exporters to successfully enter new markets, diversify into existing markets or pursue new export growth strategies.
1.8
The review was undertaken by Ms Anna Fisher, a wine industry exporter and past EMDG recipient. It included broad consultation around Australia to seek the views of exporters 'aspiring, new and established; individuals; industry associations; EMDG consultants; and other interested parties'. Ms Fisher was assisted by Australia Post CEO Ms Christine Holgate and Aspen Medical CEO Mr Bruce Armstrong.
1.9
On 10 September 2020, the Hon Simon Birmingham, Minister for Trade, Tourism and Investment (the Minister) released the report, Review of financial assistance to SME exporters, (the Review) accepting in principle all ten recommendations 'which centred on cutting red tape, increasing awareness of the scheme and giving exporters more funding certainty'.
1.10
The Review recommended that:
the government should continue to provide financial assistance to small and medium enterprises (SMEs) to encourage them to enter and grow export markets;
the principles underpinning the EMDG scheme are valued by exporters and should be retained in a simplified and streamlined scheme;
an SME should be 'export ready' before it receives financial assistance;
Austrade should increase awareness of existing export readiness programs rather than develop additional ones;
financial assistance should be aligned to the stages of an SME's exporter journey. The program should be re-targeted and have two tiers: New to Export; and Expanding Exporters;
the re-targeted program should focus on simplifying the way financial assistance is provided to SME exporters by removing complexity, streamlining and providing more certainty;
training should be included as an eligible expenditure in the New to Export stream;
with work underway across government to improve business awareness and use of all forms of export assistance, the Australian and state and territory governments should maintain momentum to ensure gaps in awareness and use of these resources are addressed;
the Exporter Journey Map is a valuable resource that needs to be updated regularly; and
the government should continue to fund export-focused industry bodies or alliances promoting on behalf of members.
1.11
The Export Council of Australia (ECA) supported the Review:
The EMDG has provided invaluable support to SME exporters for more than four decades. The recent increases in level of funding is further welcomed. However, as the overall trading landscape changes, it is right to revisit its current format to ensure that it is fit for purpose, and functions efficiently and effectively.
Purpose of the bill and key provisions
1.12
The bill seeks to implement the recommendations of the Review by establishing a grant program administered by the Australian Trade and Investment Commission (Austrade). The grant is provided to Australian SME exporters as a reimbursement for up to 50 per cent of their export-related marketing and promotion expenses. Austrade noted that:
While the scheme uses the term ‘grant’ to describe the payments made to eligible applicants, the scheme established by the EMDG Act is actually an entitlement to a reimbursement. An applicant’s eligibility is assessed against the provisions of the EMDG Act, and, if eligible, they are repaid a proportion of their eligible marketing and promotion expenses.
1.13
The Review suggested simplification could be achieved by amending the Export Market Development Grants Act 1997 'to provide a legislative framework that incorporates the key EMDG principles, with operational detail provided under the rules—a disallowable instrument—and with administrative details in the guidelines'. The Review found that the principles of the scheme remain relevant and are valued by exporters. The second reading speech indicated the core principles are retained in the bill which:
will continue to provide financial support for eligible Australian exporters who produce substantially Australian products, whether they be goods or services;
does not prioritise particular industries or export markets;
ensures a wide range of expenditure is eligible, reflecting that businesses approach markets in different ways;
continues to focus assistance on promotional activities;
provides access for SMEs to multi-year entitlements, reflecting the time it takes to build a presence in the market;
ensures SME's have 'skin in the game'— they will be provided with a proportion of their eligible expenditure; and
continues to provide for regular evaluation of the program.
1.14
Schedule 1 of the bill changes the EMDG process from a reimbursement scheme 'to one which will see eligible SMEs entering up-front grant agreements that provide them with funding certainty over multiple years'. The Minister stated that:
By shifting away from a reimbursement model to a grants scheme, eligible exporters will now receive funding closer to when they incur costs, giving more confidence that EMDG funding will genuinely boost their international marketing and promotional activities.
1.15
The Review recommended that EMDG recipients be export-ready. The bill 'removes the export performance test and the requirement that recipients have a prospect of success' replacing it with 'the requirement that recipients be either ready to export or have already exported their products'.
1.16
The Review found that the government should continue to fund export-focused industry bodies or alliances and that the support be expanded to include facilitating education and training of members to become export ready. The second reading speech noted '[t]he bill expands eligible activities to include training, to implement this recommendation'.
1.17
The administration of the scheme was found to be too complex. The bill 'modernises and streamlines the administration of EMDG'. The act will retain policy principles, with program operational rules made through a disallowable legislative instrument and administration of the scheme managed through guidelines. The Minister observed:
At the same time, simplifying application processes and reducing the administrative burden on exporters whilst still maintaining integrity in the scheme will allow recipients to focus on boosting export activities and ensure maximum return on taxpayer’s investment.
1.18
The bill contains rule making powers for the Minister to establish operational details of the programs through these disallowable instruments. The rules will ‘set the under-$20 million turnover threshold for eligible SMEs and the tiers of EMDG support…’.
Financial impact
1.19
The Explanatory Memorandum (EM) states that the bill will have no financial impact 'on the overall Australian Government Budget'. However, 'there will be additional administration costs during the transition years, including information technology changes'.
Consideration by other committees
1.20
The Senate Standing Committee for the Scrutiny of Bills (scrutiny committee) considered the legislation in its Scrutiny Digest 15 of 2020, raising the following issues:
broad delegation of administrative power;
significant matters in delegated legislation; and
1.21
The scrutiny committee requested more detailed information from the Minister on each of these points.