Bills Digest no. 91 2015–16
PDF version [569KB]
WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Paul Davidson
Economics Section
26 February 2016
Contents
Purpose
and structure of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions. 5
Date introduced: 10
February 2016
House: House of
Representatives
Portfolio: Trade and
Investment
Commencement: Sections
1 to 3 commence on Royal Assent. Schedule 1 of the Bill will commence on 1 July
2016. Schedule 2 will commence on proclamation or six months after Royal
Assent, whichever is earlier.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the Bill’s
home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the ComLaw
website.
The purpose of the Trade Legislation Amendment Bill (No.
1) 2016 (the Bill) is to amend:
- the
Export Market Development Grants Act 1997 (Cth) (the EMDG Act)[1]
so as to give effect to a number of key recommendations arising out of a review
of the Export Market Development Grants scheme conducted in 2015[2]
(Schedule 1) and
- the
Australian Trade Commission Act 1985[3]
to change the title of the Australian Trade Commission to the Australian Trade
and Investment Commission. Consequential amendments are made to other Acts to
reflect the name change (Schedule 2).
What is the EMDG scheme?
The Export Market Development Grants (EMDG) scheme was
established in 1974 and is administered by Austrade. Since that time the scheme
has had a number of reviews resulting in adjustments to the scheme. Section 3
of the EMDG Act provides that the aim of the EMDG Act is to
deliver benefits to Australia by
encouraging the creation, development and expansion of
foreign markets for Australian goods, services, intellectual property and
know-how. It does so by providing for an assistance scheme under which small
and medium Australian exporters committed to and capable of seeking out and
developing export business are repaid part of their expenses incurred in
promoting those products.
The scheme, which is designed to help overcome information
and knowledge/experience deficiencies[4]
by providing support in a wide range of industry sectors and products
(including inbound tourism) to develop export markets includes:
- reimbursement of up to
50% of eligible export promotion expenses above $5,000 provided that the total
expenses are at least $15,000
- up to eight (8) grants to
each eligible applicant.[5]
Exporters are also provided with a range of services such
as ‘advice on prospective markets and opportunities, on the ground support in
target countries, trade exhibitions and assistance in finding potential
investors’.[6]
Review of the EMDG scheme
Under section 106A of the EMDG Act the Minister for
Trade and Investment was required to have the EMDG scheme reviewed in 2015 by a
person or body (other than the person or body that administers the export market
development grants scheme) for the purpose of making recommendations about the
continuation of the scheme.
The terms of reference for the review focused on examining
three key indicators to determine how effectively the EMDG scheme is:
-
increasing
the number of businesses that develop into new exporters
-
increasing
the number of businesses that achieve sustainability in export markets, and
generate additional exports
-
further
developing an export culture in Australia.[7]
In his report Mr Lee stated that the feedback obtained
indicated that developing new exporting opportunities is important to
individual firms. He also noted that very few submissions and persons spoken to
dealt with the rationale for government supporting export market development
and ‘most discussions focused on how the EMDG scheme operates rather
than why it should.’[8]
This may be because the terms of reference did not seem to explicitly deal with
the issue of whether assistance in the form provided by the EMDG scheme yields
net benefits to the economy as a whole, rather than just to certain exporters.
The review made a number of recommendations and those relevant
to the Bill include:
- that
the sunset provisions in the EMDG Act be removed (recommendation 5.1)
- that
the government augment Austrade’s budget with a new amount equivalent to five
per cent of the EMDG administered funds, thus freeing up the entirety of the
EMDG funding, currently $137.9 million, for export promotion grants
(recommendation 6.1)
- that
the EMDG scheme be reviewed every five years, following similar processes as
previous independent reviews—in particular, updating the econometric studies of
the scheme’s impact on the economy—to determine the ongoing effectiveness and
efficiency of the scheme, including its administration (recommendation 7) and
- that
Austrade continue to update other eligibility criteria to reflect businesses’
experience in overseas markets, including the daily expense rate (currently
$300) (recommendation 7.6.2).[9]
It is unclear as to whether these amendments are also
specifically aimed at improving the targeting of the scheme (that is, achieving
greater increases in marketing expenditure and exports per dollar of
assistance).
The review stated that the EMDG scheme should continue, and
that it should continue to be administered by Austrade.[10]
The review stated that the sunset provisions should be removed from the EMDG
Act, though it did not provide any reasons in reaching this conclusion.
Section 105 of the EMDG Act provides that the costs
of administering the Act are to be paid out of the appropriation made by Parliament
for the purpose of meeting payments under the Act and must not exceed five per
cent of that appropriation. That is, the cost of administering the EMDG Act
must be met from program money. The review commented that ‘[m]ost agencies
have their costs for administration of programme budgets provided outside
programme funding, and linked to efficiency dividends that apply to agency
expenditure.’[11]
The review considered that the current funding arrangements of Austrade to
administer the EMDG Act could be improved by separating administration
funding from program funding. The rationale for the recommendation was in part
due to the fact that funding is appropriated annually and since 2008 has
fluctuated from $125 million to $200 million. The level of change in funding
dramatically changes Austrade’s funding envelope for its administration costs
(which as set out above, must not exceed five per cent of total appropriation),
from $6.25 million to $10 million on the above numbers. Given that there
are many fixed or effectively fixed costs (such as property and staffing), such
changes in funding may mean that Austrade cannot adequately service applicants
from year to year.[12]
Ongoing review of EMDG scheme
The review found that ‘[t]here is a need to continue monitoring
changes to any programme’s accessibility and processes, as well as the outcomes
of progressive changes.’[13]
The review did not explicitly state that such assessment should no longer
consider whether the scheme should continue. The review recommended:
- that
the EMDG Act be amended to include a requirement for independent
external reviews of the effectiveness and efficiency of the scheme and
- that
the reviews be presented to the Minister and tabled within 15 sitting days of
being received, and that the government response be tabled within three months
of the report being tabled.[14]
The review received a number of submissions that, among
other things, advocated for changes to the daily expense rate of $300. The
review did not assess the appropriateness of the current expense rate, although
it did recommend that ‘Austrade continue to update other eligibility criteria
to reflect businesses’ experience in overseas markets, for example ... the daily
expense rate (currently $300) ...’[15]
The Senate Standing Committee for the Scrutiny of Bills had
no comment on the Bill.[16]
At the time of writing, the policy position of
non-government parties and independents had not been made publicly available.
Under current arrangements, the EMDG scheme is scheduled to
cease at the end of June 2016. Submissions received as part of the review suggested
that the EMDG scheme should be extended.[17]
A submission from AI Group recommended lifting the daily
travel expense allowance.[18]
At least one submission explicitly stated that the grant of funds relating to
travel were important:
These funds will assist us enormously with travel costs
associated with building relationships with overseas partners as well and Trade
Fair costs involved in attending and exhibiting at Trade Fairs.[19]
Paspa Pharmaceuticals noted that the EMDG scheme ‘... has
greatly assisted us in the substantial increase of our export sales, knowledge
and expertise, as well as our ability to travel and promote our company’s
products.’[20]
The submission notes that much of the eligible expenses were related to travel,
and that the company recorded significant growth in sales after the travel.
As noted in the Explanatory Memorandum, expenditure under
the EMDG Act is set annually via Appropriation Acts. A capping mechanism
ensures that expenditure under the scheme is limited to the amount
appropriated.[21]
The Schedule 1 amendments have relatively minor
financial implications. There are anticipated savings associated with the
removal of communication expenses and domestic travel as eligible expenses; and
capping the amount of eligible expenses for free samples to $15,000 in a grant
year. There are also anticipated savings from the change to the structure of
the daily allowance. The amendments will also reduce some administration costs
associated with processing transport expenses.
The administration costs which amount to five per cent of
the total appropriation will still be paid out of the appropriation for the EMDG
Act. It is unclear whether additional funding (to the extent that any is
required) is to be separately appropriated. Additional administration costs
could potentially be funded by a new appropriation, from anticipated savings
associated with the Bill, from other departmental funding resources or a
combination of these measures. Alternatively, or additionally, the excess administration
costs may be recovered from applicants under the EMDG scheme.
The Schedule 2 amendments are unlikely to have a
significant financial impact. As noted in the Explanatory Memorandum, financial
impacts ‘... are limited to rebranding stationery, official documents and events,
the great majority of which can be changed on line.’[22]
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[23]
The Parliamentary Joint Committee on Human Rights considers
that the Bill does not raise human rights concerns.[24]
Schedule 1—Export Market
Development Grants
Schedule 1 of the Bill proposes to make a number of
amendments to the EMDG Act. Items 1 to 8 amend Part 5 (eligible
expenses), items 9 to 11 amend Part 6 (amount of the grant payable to an
applicant that is entitled to a grant in respect of a grant year), items 12
to 14 amend Part 8 (miscellaneous), and items 15 and 16 amend Part 9
(interpretation – definitions). Item 17 provides that items 1 to 11
apply to grants on or after a grant year commencing on 1 July 2016.
Amendments to Part 5
Part 5 covers eligible expenses under the EMDG Act.
The object of the Part provides that ‘[t]he underlying principle is that only
expenses relating to specific promotional activities genuinely incurred by
applicants for the purpose of marketing eligible products in foreign countries
should qualify.’[25]
Items 1 to 3 of the Bill amend the current table in
section 33 of the EMDG Act, which sets out claimable expenses in
relation to promotional activities. Item 1 of the Bill repeals table item
3. Table item 3 currently provides that ‘any communication by the applicant or
its agent with a potential buyer or a distributor, representative or consultant
to the extent to which the communication is made for an approved promotional
purpose’ is an eligible promotional activity. The expenses currently permitted
are ‘all reasonable expenses incurred by the applicant in payments to persons
that, in the opinion of the CEO of Austrade, were not closely related to the
applicant’. Item 1 of the Bill proposes to remove communication from the
list of eligible promotional activities.
Item 2 of the Bill amends table item 4, which
relates to the provision of samples. Currently there is no limit on the value
of free samples which may be provided for an approved promotional purpose to a
person who is not a resident of Australia. The consequence of this has been
that some free samples claimed have had a very high value.[26]
Item 2 amends the amount of claimable expenses, by clarifying that
claimable expenses for free samples are only eligible ‘up to any applicable
limit’ for the applicant in relation to a grant year.
Item 4 of the Bill inserts proposed subsections
33(4) and (5) of the EMDG Act. Proposed subsection 33(4)
provides that the ‘applicable limit’ is $15,000 for a grant year for any
applicant who has previously been the recipient of a grant. Proposed subsection
33(5) provides that if an applicant has not previously received a grant and
the immediately preceding financial year is not the one commencing 1 July 2015,
then the applicable limit is $15,000 for that grant year. The purpose of item
4 is twofold:
1.
to insert a cap of $15,000 for eligible expenses relating to the
provision of free samples
2.
to ensure that those applicants who undertook eligible expenses involving
free samples in the 2015-16 financial year—and who were not previous grant
recipients—are not unduly penalised by being subject to a $15,000 cap that they
(at the time that the eligible expenses were made) were unaware of.
Item 3 of the Bill amends table item 6 to clarify that
spending on promotional literature or advertising material is a claimable
expense, whether the material is in electronic or any other form.
Items 5 and 6 of the Bill amend section 34 of the EMDG
Act which relates to expenses relating to a marketing visit. Item 5
removes transport expenses (other than air fares) as an eligible expense.
Therefore the effect of the amendment is to stop domestic travel expenses from
being an eligible expense. Item 6 amends the assumed general expenses
figure of $300 to $350 for each working day of the marketing visit, and could
be seen as partially compensating for the removal of domestic travel as an
eligible expense.
Items 7 and 8 of the Bill insert a new category of
excluded expense, namely those expenses relating to things that, in the opinion
of the CEO of Austrade, may have, or have had, a detrimental impact on
Australia’s trade reputation.
Amendments to Part 6
Items 9 to 11 of the Bill amend section 63 of the EMDG
Act which relates to the method used to calculate an applicant’s
provisional grant amount. Currently, if an applicant’s eligible expenses do not
include expenses associated with communication, then the applicant is granted
an allowance. The allowance is generally calculated from half the amount of
eligible expenses for the grant year, less $2,500. The allowance is
three per cent of that figure. Pursuant to item 1 of the Bill,
communication expenses are to no longer be considered eligible expenses and
hence items 9 to 11 of the Bill remove references to communication in
calculating the final amount of an applicant’s grant for a grant year.
Amendments to Part 8
Item 12 of the Bill amends section 105 of the EMDG
Act. Section 105 currently provides that the costs of administration of the
EMDG Act are to be paid out of the appropriated funds for the purpose of
meeting payments, and that those costs must not exceed five per cent of the
appropriated amount. Item 12 maintains the original intent of section 105
(namely that 95 per cent of the appropriated amount is to be used as grants to
applicants), and potentially allows Austrade to fund the costs of the
administration of the EMDG Act that exceed five per cent of the appropriation
amount from sources other than the appropriated funds (such as funds allocated
to Austrade as departmental funding). The amendment has the effect of reducing
some of the fiscal discipline that is currently imposed on Austrade where
administration costs cannot exceed five per cent of the total appropriation.
Items 13 and 14 of the Bill amend section 106A
of the EMDG Act which relates to reviewing the EMDG scheme. Item 13
repeals subsection 106A(1) which requires the Minister to cause a review of the
EMDG scheme to be conducted not later than 1 January 2015. As discussed above,
that review has been conducted and some of the recommendations it made are
addressed in the Bill.[27]
Currently, the purpose of the review under section 106A is
to make recommendations about the continuation of the scheme, but this purpose
is not maintained under the proposed amendment. Item 13 provides that an
independent review of the EMDG scheme must be conducted, and that:
- the
next review must be completed and given to the Minister by 31 December 2021 and
- each
later review must be completed and a written report given to the Minister, by a
date to be determined by the Minister.
Item 14 repeals the date for completion of the last
review, which was 30 June 2015.
Amendments to Part 9
Items 15 and 16 amend the definitions section of the EMDG
Act. Item 15 inserts a signpost definition of ‘applicable limit’, which
refers to the substantive definition in proposed subsections 34(4)–(5)
(item 4). The definition of ‘grant year’ currently generally applies to
financial years from 1 July 1996 to 30 June 2016. Item 16 repeals that
definition and provides that a grant year means a financial year commencing on
1 July 1996 or a later financial year. Under the current definition, there was
in effect, a sunset clause applying to the permissible grant years (that is, no
later than 30 June 2016), whereas the proposed amendment will allow the scheme
to continue indefinitely.
Other amendments
Item 17 of the Bill provides that items 1 to 11 apply
to grants in respect of a grant year commencing on or after 1 July 2016.
Schedule 2—Changing the name of the
Australian Trade Commission
Items 1 to 10 of the Bill propose to amend the Australian
Trade Commission Act 1985 (Cth)[28]
to change the name of the Australian Trade Commission to the Australian Trade
and Investment Commission.
Items 11 to 21 of the Bill propose to make the same
name change to a series of other Acts which refer to the current Australian
Trade Commission.
Members, Senators and Parliamentary staff can obtain
further information from the Parliamentary Library on (02) 6277 2500.
[1]. Export Market
Development Grants Act 1997, accessed 17 February 2016.
[2]. M
Lee, Certainty
and confidence—exports and jobs for a changing global economy: Review of the
Export Market Development Grants scheme, report prepared for the
Australian Trade Commission, Austrade, Canberra, June 2015, accessed 16
February 2016.
[3]. Australian Trade
Commission Act 1985, accessed 25 February 2016.
[4]. M
Lee, Certainty
and confidence—exports and jobs for a changing global economy: Review of the
Export Market Development Grants scheme, op. cit., p. 11.
[5]. Australian
Trade Commission, ‘Export
Market Development Grants (EMDG)’, Australian Trade Commission website,
accessed 18 February 2016.
[6]. J
Prentice, ‘Second
reading speech: Export Market Development Grants Amendment Bill 2014’, House of
Representatives, Debates, 19 March 2014, p. 2486, accessed 17
February 2016.
[7]. Review
of the Export Market Development Grants schemes, op. cit., p.21.
[8]. Ibid.,
p. 11.
[9]. Ibid.,
pp. 3–4.
[10]. Ibid.,
p. 54.
[11]. Ibid.,
p. 45.
[12]. Ibid.,
p. 46.
[13]. Ibid.,
p. 54.
[14]. Ibid.,
pp. 54–55.
[15]. Ibid.,
p. 55.
[16]. Senate
Standing Committee for the Scrutiny of Bills, Alert
digest, 2, 2016, The Senate, Canberra, 24 February 2016, p. 85,
accessed 25 February 2016.
[17]. See,
for example, Activ International Pty Ltd, Submission
to Australian Trade Commission, Certainty and confidence—exports and
jobs for a changing global economy: Review of the Export Market Development
Grants scheme, March 2015, p. 1, and Affinity Bio, Submission
to Certainty and confidence—exports and jobs for a changing global economy:
Review of the Export Market Development Grants scheme, February 2015, p. 1,
both accessed 16 February 2016.
[18]. AI
Group, Submission
to Australian Trade Commission, Certainty and confidence—exports and jobs
for a changing global economy: Review of the Export Market Development Grants
scheme, February 2015, p. 16, accessed 16 February 2016.
[19]. Micador
Group, Submission
to Australian Trade Commission, Certainty and confidence—exports and jobs
for a changing global economy: Review of the Export Market Development Grants
scheme, February 2015, p. 1, accessed 16 February 2016.
[20]. Paspa
Pharmaceuticals, Submission
to Australian Trade Commission, Certainty and confidence—exports and jobs
for a changing global economy: Review of the Export Market Development Grants
scheme, February 2015, p. 1, accessed 16 February 2016.
[21]. Explanatory
Memorandum, Trade Legislation Amendment Bill (No. 1) 2016, p. 2, accessed
16 February 2016.
[22]. Ibid.
[23]. The
Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory
Memorandum to the Bill.
[24]. Parliamentary
Joint Committee on Human Rights, Thirty-fourth
report of the 44th Parliament, The Senate, Canberra, 23 February 2016,
p. 2, accessed 25 February 2016.
[25]. Export Market
Development Grants Act 1997, section 28(2), accessed 16 February 2016.
[26]. Explanatory
Memorandum, op. cit., p.4.
[27]. Review
of the Export Market Development Grants scheme, op. cit.
[28]. Australian Trade
Commission Act 1985
(Cth), accessed 16 February 2016.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Entry Point for referral.