Dissenting Report by Senator Nick Xenophon
Independent Senator for South Australia
1.1
There is no question the current Export Market Development Grant (EMDG)
Scheme has served as a valuable tool to enable small Australian exporters to
access opportunities within the global market.
1.2
Modelling indicates that each dollar of EMDG in turn generates between
$13.50 and $27 of exports.[1]
1.3 The 2008 Mortimer Review into the efficacy of the
EMDG scheme highlighted the example of Lightning Protection International Pty.
Ltd., an Australian manufacturer and supplier of direct strike lightning, surge
and transient equipment. Its General Manager, Wayne Temple, indicates:
The cost of air travel, accommodation, the provision of
promotional material and other marketing activities is an expensive undertaking
for a start-up company. The grant has helped us appoint a permanent
representative in Thailand, which links us closer to our main markets. There is
no doubt that without access to the financial benefits afforded to exporters by
the EMDG scheme the ambition of LPI to establish a strong distribution network,
which has been the key to market success to date, would have been difficult to
achieve. With the assistance of the EMDG scheme LPI has exceeded its number of
target markets. We now regularly export to 41 countries.
1.4 At a time where many exporters are competing with
an over-valued Australian dollar and higher overheads than their overseas
competitors, the importance of such a scheme cannot be underestimated.
1.5 With this in mind, I am concerned that a number of
proposed changes to the scheme have been made without adequate consultation
with key industry stakeholders.
Fit and proper person test
1.6 A number of submitters raised concerns regarding
the application of the ‘fit and proper’ person test as outlined in the bill.
1.7 While on the whole a fit and proper person test is
supported in principle by many submitters, concerns of how such a test would be
practically implemented were raised throughout the course of the inquiry.
1.8 As noted in the majority report, Exportise is
concerned that the test would be applied and administered by the same
Government agency responsible for administering the EMDG scheme. As its
submission indicated:
As an analogy, tax agents have a similar test although it is
administered by the Tax Practitioners Board rather than the Australian Taxation
Office.[2]
1.9 While the sizes of each profession vary
significantly, it is concerning that these conflict of interest issues remain
unresolved in this bill.
1.10 Further, the Committee heard evidence highlighting
the Austrade had not previously raised the need for a fit and proper person
test with the Code of Practice Administration Committee, which administers the Code
of Practice for Export Grants Consultants. As Stuart Mitchell, Acting
Chairperson of the Export Consultants Group indicated during the hearing:
We have had a working group—a party called the COPAC, or the
Code of Practice Administration Committee—when Austrade and our own group meet
together. We have not met recently, because Austrade has said there have been
no concerns that they have wanted raised with us.[3]
1.11 In his submission, Mr Mitchell also indicates:
We need a lot more discussion and consultant with Austrade to
bed these proposed changes down and reduce the current level of angst in our
community.
The actual Ministerial Determination criteria to be used by
Austrade to administer the 'fit and proper rules' are yet to be made public.[4]
1.12 Given the concerns regarding the application of a
fit and proper person test, it is critical that the criteria used to determine
the fit and proper test are made public to encourage a robust discussion as to
how EMDG agents will be affected by the test in a practical sense.
Recommendation 1
Austrade release the criteria that will be used to determine
the fit and proper person test, and consult with industry as to the efficacy
and administrative constraints of such criteria before the bill is further
considered.
'Splitting' of the EMDG scheme
1.13 Under the bill, export markets would be split into
two categories to gear the grants program predominantly towards Asian markets.
The maximum number of grants able to be received by exporters targeting markets
in East Asia and other emerging regions would increase from seven to eight,
while the number of grants available to exporters targeting established markets
including the USA, Canada and the European Union would be reduced.
1.14 A number of submitters raised concerns regarding the
proposal to split the world into two regions for the purposes of the EMDG
scheme.
1.15 Mr Mitchell suggests the changes will add an
additional administrative burden for exporters, agents and also Austrade:
It will cause numerous degrees of difficulty and differences
of opinion between an apportionment method between those countries that may be
accepted by the client and us as consultants as opposed to Austrade. So it will
cause more work by the client and, I believe, more areas of dispute with
Austrade in terms of the assessment. Particularly in terms of new ways to
market social media, how do you apportion a social media expense between
particular countries? To a degree it is difficult. We need to work through
those issues. Normally there would be some discussion—I am sure it would happen
in due course with Austrade and we will deal with those. But initially it would
cause more administrative burden to the client and to Austrade and, I believe,
more areas of dispute.[5]
1.16 This view is supported by the Export Council of
Australia in its submission:
Many expenses claimed by exporters cover various countries.
This includes travel to more than one country, participation in trade shows
where buyers attend from all over the world, a website targeting all countries,
production of brochures and advertising for many markets .... With expenses such
as travel, trade shows, website, brochures and advertising there will be a
requirement for exporters to apportion the expense between excluded countries.
This is more complex than it appears as exporters would be required to maintain
records to provide other evidence to justify any apportionment.[6]
1.17 The splitting of the market will cause a
disproportionate administrate impact on small to medium enterprises. As Mr
Mitchell contends:
Overall, my viewpoint is that the changes in the scheme in
relation to those markets will damage Austrade's export efforts from the SME
level. It will move people away to markets that may be of some opportunity, but
that will be in the longer term. So there will be a reduction in the number of
people accessing the scheme and a reduction in the number of exports driven by
those people that access the scheme, create more commerciality or more
flexibility for clients. So I can see that there is a trade-off there.[7]
1.18 These concerns are supported by Bryan Clark,
Director of Trade and International Affairs, Australian Chamber of Commerce and
Industry (ACCII):
While Asia is an emerging market, it is not the only emerging
market around the world. We think that the emphasis in the Asian century
approach by the current government is wrong in that it is a global century.
There are no secrets around Asia being an opportunity, but it is not the only
one. Latin America is also an opportunity. Africa is also an opportunity.
Europe, while it is in crisis at the moment, maybe an outstanding opportunity
for us to be building relationships because it will recover and it will buy
things and we will want to be there. The United States is clearly going through
that cycle a little earlier than Europe at the moment. But this realignment in
this way, we think, changes the emphasis and misses a whole heap of opportunity
which might be available through the Pacific, the Indian Ocean Rim, for
example, and other places. To start quarantining it or providing some sort of
discrimination, as is suggested through this legislation, is, we think, a false
approach to dealing with support for export markets.[8]
1.19 Preferential treatment of the Asian market could
prevent some exporters from accessing other overseas markets, irrespective of
the demand for their product abroad.
1.20 As the Canberra Business Council suggests:
For many companies in the ACT, markets such as the US and
Canada are key for their complex government services offerings... we would like
to acknowledge the ongoing importance of mature government procurement markets,
such as Washington, to the exporters of the ACT.[9]
1.21 While there is no question that the importance of
accessing Asian export markets will become increasingly importance as we move
further into the 21st century, expansion in these markets should not come at
the expense of markets outside of Asia that still offer opportunities to SMEs.
EMDG grants should be assessed on their merit, irrespective of their
geographical target market.
Recommendation 2
The bill be amended to prevent the 'splitting' of export
markets.
Austrade modelling
1.22 During the hearing, Austrade contented that as a
result of the passage of this bill would increase overall EMDG claims by 2.6
per cent per annum.
1.23 However, further evidence provided to the committee
indicates that there is considerable uncertainty among EMDG agents as to the
accuracy of these figures:
Senator XENOPHON: Austrade considers that the overall
claim numbers will increase by 2.6 per cent per annum. Is that a view shared by
the panel?
Mr Mitchell: No. I do not believe it will have that
growth. But it is difficult for Austrade to determine the numbers. They have
the statistics and the information. But I am telling you that, at a ground
level, I believe the numbers will continue to drop.
1.24 I am concerned that the modelling used to determine
that the passage of the bill will result in an increase in the number of EMDG
claims has not been made public:
Senator XENOPHON: Has the internal modelling been
released?
Mr Vickers: No.
Senator XENOPHON: Will it be released?
Mr Vickers: We do not have any particular plans to
release it. We have had no particular requests to release it.
1.25 While there may have been no specific requests to
release the modelling, given the evidence received by the Committee regarding
the overarching concern as to the implications of the passage of this bill,
such internal modelling is released.
1.26 Overall, exporters and their agents have expressed
concerned, indeed dismay, at the proposed changes. At a time when policy
frameworks should be encouraging and facilitating greater growth in all exports
markets these proposed measures seem questionable and arguably
counter-productive.
Recommendation 3
Austrade release the modelling used to assert that the
passage of the bill will result in an overall increase in claim numbers of by
2.6 per cent per annum.
Recommendation 4
In the absence of the above recommendations being addressed
adequately, the bill should not be passed.
Senator Nick
Xenophon
Independent Senator
for South Australia
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