Dissenting Report by Independent Senator Nick
Xenophon & DLP Senator John Madigan
‘Time
to fly the flag for Aussie jobs’
1.1
The
Australian Government’s current procurement rules are stacked against local
manufacturers and suppliers. While the flag currently flying above Parliament
House is currently Australian made, the fact that this is not a requirement for
all flags used by the Commonwealth to be made in Australia is a national
embarrassment.
1.2
The
committee has squandered an important opportunity to support Australian flag
makers at a time when Australian manufacturing is at a crisis point. Since the
Global Financial Crisis in 2008 over 82,000 manufacturing jobs have been lost
in Australia.[1]
Successive governments have taken a literalist approach to free trade and this
is damaging Australia’s manufacturing industry. Rigid and inflexible
international free trade agreements are taking precedence over providing
support for Australian jobs. The decline in Australia’s manufacturing industry
has also been exacerbated by weak anti-dumping laws.
1.3
The
purpose of the Flags Amendment Bill 2014 is to ‘ensure that Australian flags
flown, used or supplied by the Commonwealth are only manufactured in Australia
from Australian materials’.[2]
Similar legislation already exists elsewhere. For example in the United States
all national flags flown over military establishments must be manufactured from
100 per cent US content. It is disappointing that despite the widespread
support for the intention of this bill there remains little desire on the part
of the Commonwealth to take similar steps to strengthen our local manufacturing
industry.
1.4
The
United States’ approach to free trade agreements contrasts sharply with
Australia’s. The US supports local manufacturers and this was discussed at the
committee’s public hearing on 28 April 2014:
Senator
XENOPHON:
...My first question to you goes to the fact that the United States has the Buy
American legislation. There are two pieces of legislation in the US. There is
the Buy American Act, that has been in place since President Hoover in 1933;
there is also more recent legislation that requires flags on US government
buildings and defence establishments to be made in the United States. How do
you say that those key pieces of legislation in the US sit with the US's
interpretation of the free trade agreement that we have with them?
Dr
Seddon:
I have always been puzzled by that. I have never understood how America can
enter into these agreements and have legislation like that at home. It baffles
me.[3]
1.5
What
is really baffling is that Australian does not have similar legislation in
place here. It seems the Americans are prepared to do what is in the national
interest first and foremost – but Australia does not. There is a wide spread
perception amongst many manufacturers and workers that successive Australian
governments have tripped over themselves to get ‘brownie points’ in world trade
forums to the nation’s detriment.
1.6
The
Australian Companies Institute Ltd also expressed concern about Australia’s
approach to local procurement versus that of other countries:
Australia
has few requirements for Australian companies’ participation. The issue of
international obligation does not appear to deter other countries from closing
their doors to support their own, although it is an excuse here to open our
markets to competition.[4]
The Commonwealth Procurement Rules
1.7
As
set out in the committee’s majority report, the Commonwealth Procurement Rules
set out the policies and procedures under which agencies must comply when
making purchasing decisions. All procurements must comply with six sub rules of
value for money, encouraging competition, efficient, effective, economical and
ethical procurement, accountability and transparency, risk management and
procurement methods.
1.8
At
the heart of the issue is the principle that procurement processes must be
non-discriminatory. The CPRs state “all potential suppliers to government must...
not be discriminated against due to their... degree of foreign affiliation or
ownership, location, or the origin of their goods and services”.[5]
1.9
While
provisions exist within the CPRs to encourage the government to consider small
to medium enterprises (‘SMEs’) for procurement contracts, these provisions lack
clarity and are often counterproductive to Australian manufacturing.
1.10
As
noted by Dr Seddon at the committee’s hearing on 28 April 2014:
If
you look very closely at the CPRs, they are not very well drafted on this
particular thing because they say that government agencies, when making
purchasing decisions, must not discriminate against SMEs. That does not answer
the question: can they discriminate in favour of SMEs—that is, give them a bit
of a boost?[6]
1.11
Given
local industry concern that foreign made flags continue to be purchased by the
Australian government, it appears that desirable discrimination in favour of
SMEs does not take place here. As Mr Wayne Gregory of Carroll & Richardson
Flagworld told the committee:
...while
the Commonwealth procurement rules seek to be non-discriminatory, in reality
they offer a free kick to many importers. We do not compete with overseas
suppliers who want to sell here; they sell through local importers. Obviously,
the manufacturer overseas does not have to comply, so it is not a level playing
field with regard to legislative requirements, regulations, standards, fair
work, income tax, payroll tax, superannuation, and occupational health and safety.
Clearly the local importer has to, but the local importer may well be two
people and a little factory out the back.[7]
1.12
In
its majority report the committee outlined statistics provided by the
Department of Finance in relation to the likely level of engagement with
Australian suppliers in terms of procurement. We question the veracity of these
figures, particularly given the only factors used by the Department to identify
Australian suppliers are ABNs and business addresses.[8] The
Department was brought to task on this issue during Senate Estimates in May
2014 in an exchange with Senator Madigan:
Senator
MADIGAN:...
Having an ABN does not mean the product is made in this country. It means you
are a registered business, but that does not mean that a product is
manufactured on our shores.
Ms
Mason:
That is correct. It is an indicator.
Senator
MADIGAN:
So saying 'ABN' is a misleading comment to infer that the product is Australian
made.
Ms
Mason:
It is an indicator, and it is the information that we hold.
Senator
MADIGAN:
It is not an indicator, Ms Mason. It does not mean that a product is Australian
made. Just because a company has an ABN does not mean it is made with
Australian hands or Australian labour.[9]
1.13
The
Department of Finance must improve their gathering and recording of information
pertaining to the origin of goods procured by the Government. Relying on ABNs
and registered business addresses is a lame, flimsy and lazy approach to record
management which must be improved.
The impact of the CPRs on local suppliers
1.14
Carroll
& Richardson Flagworld Pty Ltd told the committee of the difficulties they
face as a local supplier competing with overseas companies:
In
recent times we have seen a shift in purchasing emphasis by the Australian
Government that places at risk the ability of companies such as ours the
opportunity to compete fairly with overseas sourced flags. Local importers can
easily bring in container loads of flags and swamp our market with cheap and
inferior products. The manufacturing plants they source these imported products
do not have the meet the stringent conditions placed on local companies to meet
a host of legislative and regulatory requirements.[10]
1.15
Carroll
& Richardson Flagworld continued:
We
have seen the most difficult customer to convince of the need to support and
buy Australian Made Flags is the Commonwealth Government itself through its
departments. The reason offered by public servants is that their hands are tied
because of the requirement they have under the present Commonwealth Procurement
Procedures and our WTO obligations. I cannot think of any other country in the
world that would allow its National Flags to be made in another country and
then imported to the detriment of local companies who are willing and capable
of making the flag.[11]
The case for a ‘national pride’ category
1.16
The
Australian Made Campaign argued the case for a national pride category within
the procurement rules:
The
procurement guidelines should also recognise the need to treat certain
purchases as being in a special category of ‘national pride’. This would
include defence materiel as well as items used at official venues or ceremonial
occasions where the context needs to reflect all things ‘Australian’. Examples
are: Australian flags, particularly those being used in an official or
ceremonial context...[12]
1.17
This
proposition has strong support from flag producers in Australia:
We
particularly endorse the position that the Australian Made Campaign put in
their submission to your inquiry that suggests that the CPR needs to treat
certain purchases as being in a special category of national pride or national
interest. It is not something that you usually see in a tender document, where
they ask things such as, 'Is there a national interest issue here? Is there
something of national pride that needs to be recognised in the procurement?'
Certainly that would be the case, for example, for the flag that flies over
this house.[13]
Public perception and expectations
regarding Australian flags
1.18
The
committee heard from Mr Umit Erturk, Manager of Spear of Fame regarding the
public attitude towards Australian flags flown at government buildings:
Senator
MADIGAN:
...Mr Erturk, do you believe there is a perception within the Australian
community that Australian flags should be manufactured in Australia—that
Australians assume that the flags that are on our government buildings and used
by our defence forces should be Australian made and are Australian made?
Mr
Erturk:
Yes. I believe that that is quite clear from the general public. But when I was
invited to address this Senate committee, I gathered my staff... I said to
them: 'Have a look. This is the situation. I am going to address a committee
regarding what we are doing here. What do you think about the Australian flag,
not any other flag but the Australian national flag? Should it be made in
Australia?' You would not believe the reaction I got, saying: 'Of course it
should be. That's our national pride.'[14]
Remedying the criticism of the bill
1.19
Australian
flag makers quite rightly pointed out that requiring Australian flags to be
made from materials manufactured in Australia would be very difficult to
achieve. As Bainbridge International Pty Ltd pointed out:
There
is no textile manufacturing capacity in Australia at the moment available or
prepared to invest in the manufacture of flag base fabric to supply a small %
(Commonwealth demand) of a relatively modest total national demand.[15]
1.20
The
Australian Flag Company advised the committee that the “lack of competitive
local input materials” is a further challenge faced by flag makers,
particularly when trying to keep the cost of the product down.[16]
1.21
The
Government and Opposition appear to be scrounging for lame excuses not to
support a common sense initiative already adopted by some of our free trade partners.
The bill should be amended to remove reference to the requirement that flags be
manufactured from Australian materials. We believe this will make the bill
easier to implement from the point of view of Australian flag producers while
simultaneously allowing the government to support local jobs and the Australian
manufacturing industry.
1.22
The
fact the committee did not even consider supporting the bill in an amended form
is greatly disappointing. It is indicative that successive Australian
governments have lost their way with both free trade agreements and local
procurement rules.
Recommendation 1
The bill is passed with appropriate amendments as set
out in this report.
NICK XENOPHON JOHN
MADIGAN
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