ECA

The Australian trade response to the COVID-19 Pandemic and issues into the future

14.07.2020 Andrew Hudson

In the Australian context, some of the measures adopted by our Federal and State governments and their agencies are summarised below. The general intent has been to “keep the borders open” but we are now at a stage of planning what additional measures may need to be adopted to assist the recovery of the international supply chain and the position of Australian exporters and importers.

Customs & Trade

One of the fundamental roles of governments during the COVID–19 Pandemic has been to assist the movement of goods through the international and domestic supply chain as well as to support those providing services in that supply chain. While there has been an understandable focus on movement of Personal Protective Equipment (PPE) and related equipment and medication needed to assist in treatment of those affected by the Pandemic, that focus has not excluded the adoption of measures to assist trade in other goods adversely affected by the significant reduction in air and sea cargo options.

In this commentary I have focused on measures affecting the movement of goods in the Australian and international supply chain.
 

Government engagement with industry


Australian governments at all levels have increased their engagement with the general public as well as with the private sector involved in the supply chain. This has included regular briefings of the public by political leaders and senior medical professionals working with government. In our industry there have been more regular meetings of government agencies and the private sector in forums such as the National Committee on Trade Facilitation (NCTF) conducted by the Department of Home Affairs (DHA) and the Australian Border Force (ABF) with other government agencies operating at the border. These meetings have been welcomed, have assisted with sharing of details of new initiatives and have led to some significant developments as well as providing a basis to resolve uncertainties.

Support for Australian exporters

Support for Australian exporters has included the following initiatives from the Federal government. Additional funding for the Export Market Development Grant program (EMDG)1. The EMDG is an Australian program providing limited reimbursement for approved exporters for their export development activities;

Air cargo funding assistance through the International Freight Assistance Mechanism2 to assist exporters of seafood and other primary produce with flights bringing back PPE and other medical equipment. This has provided funding for limited replacement for air cargo space lost with the cessation of international passenger aviation;

The establishment of the new Export Capital Facility3 administered by Export Finance Australia;

The provision of grants to Export Hubs assisting Small to Medium Enterprises (SMEs)4. Again, this is intended to provide financial assistance to SME export hubs developing local, regional and Indigenous brands. The hubs will work with Growth Centres in each sector to take advantage of export opportunities; and

The adoption of new export controls on PPE and related medical equipment5. Many countries have adopted export controls but in the Australian context, the controls have been aimed at stopping opportunistic exporters by allowing exports by “legitimate” exporters already involved in the manufacture of the items and who have previously been involved in the export of the items. The regime has been different to the regime in other countries such as China where the items have needed quality certification of items before export.
 

Support for Australian importers


Support for Australian importers has included the following initiatives from the Federal government.

The Australian Taxation Office increasing the availability of deferral of the Goods and Services Tax (GST) payable on imports6. GST is the Australian equivalent of Value Added Tax and is payable on the import of goods as well as on retail sales of goods and provision of services. The ability to defer payment from the point of import to a later point when it can be set – off against other GST liability (for example on retail sales of goods) assists in cashflow management;

The TGA streamlining some of its approval processes for PPE and medical equipment needed to treat COVID–19. Although this has not reduced standards, the process has been facilitated but with new requirements for post – pandemic review of the equipment which is approved; and

The interim removal of customs duties on PPE and other medical equipment needed to treat COVID–19. Again, this has reflected practices in other jurisdictions and has been initially imposed from the start of the pandemic (allowing refunds) until the end of June 2020. The ABF is currently reviewing the effect of the measures with the potential that the period could be extended or the duties could be removed altogether. However, it is important to note that the new measure does not apply to sanitiser as there is already significant local production of sanitiser.

Additional measures as we move on from the pandemic


Government financial support is only a finite resource and after it is wound back there are likely to be severe adverse economic consequences. This would dictate a review of other measures which could be actioned by the public and private sectors in Australia and overseas to assist those in the international supply chain recover and survive in the new environment.

The establishment of a new international Health Trade Agreement to provide a framework for facilitating trade in times of national or international emergency. This would include priority

movement of medical equipment, food and the necessities of life and the removal of customs duties, value – added taxes and other transaction charges on PPE and related medical equipment as they pass across borders;

Additional focus on the needs for SMEs including assistance with access to the means to transport goods, raise finance and enter the global market. In Australia, this would include significant additional funding for the Australian Trade Corporation (known here as Austrade). The World Trade Organisation has recently released a report9 of the effect of COVID–19 on SMEs and measures which could be taken to assist their survival and help their continued engagement in international trade;

Pursuit of the Australian Free Trade Agreement (FTA) agenda including implementation of the Indonesia Australia Closer Economic Partnership Agreement on 5 July 2020, completion of the terms of the Regional Co – operation and Economic Partnership Agreement and advancing the negotiations of the proposed FTAs with the EU and UK;

Taking steps to “defuse” an apparent escalation with international “Trade Wars”. Putting to one side the US – China agreement, Australia has been concerned on certain developments in its trade relationship with China including new dumping and countervailing duties imposed on Australian barley exports and the suspension of exports approvals for four Australian meat producers;

Expediting the wholesale adoption of electronic communication and verification of trade without the need for physical paperwork through avenues such as the single – window and the broader adoption of secure blockchain technologies to include all of those in the supply chain including government, customs brokers and freight forwarders. That would also have the effect of protecting border revenues and enhancing compliance with relevant regulations;

Agreement from our border agencies to reduce audit activity for compliant traders and not to pursue or penalise inadvertent errors during the term of the pandemic. That does not excuse deliberate or inadvertent breaches of regulation but recognises the unique challenges created by the pandemic;

Revisiting the adoption of a “national interest” test in the Australian trade measures regime so that dumping and countervailing duties would not be imposed on imported goods if it was found that the “national interest” of continuing imports without duties exceeded the interest in removing the injury to Australian producers from those imports. That would recognise the need to balance the needs of local producers against the legitimate needs of those using overseas products as inputs to local manufacture or as end – use items in our markets;

A comprehensive independent review of charges imposed by the private sector on those in the supply chain including detention and demurrage charges on containers and access charges by stevedores and empty container parks. New forms of regulation and control in the wider public interest may be warranted given the increasing concentration of control of these services. While there should be fair recompense for those holding these assets, the current controls appear to have little ability to stem regular price increases or restrictive practices such as capacity limitations;

Harmonising the international standards for PPE and related medical equipment so that they can be sourced in an emergency from other countries without the need for separate verification at each national border;

Exporters, importers and those in the Australian private supply chain should review their own supply chain and the risks of undue focus on limited sources of supply of raw materials, goods or services. For Australian industry, there is a general concern that there has been an over – reliance on China as a source of goods and services and that there should be moves to spread the source across a variety of other countries in the region. Similarly, companies are also looking to secure more reliable providers of supply chains services such as air and sea cargo, having identified those who did not manage the pandemic on good terms;

Reviewing and re – working Business Continuity Plans in the private and public sector to accommodate possible future pandemics and other interruptions to trade and business. Many parties would never have contemplated events such as those which have recently taken place and continue to affect world commerce. That may also give rise to the creation of new types of insurance and would call for adoption of new forms of agreements which specifically address such massive disruptions to trade by way of “force majeure” or “frustration” provisions allowing parties to reasonably terminate those agreements to minimise liabilities for all parties. There has already been much confusion on whether existing general provisions in agreements properly cover events such as the pandemic; and

Improved mechanisms to recognise, report and address non – tariff barriers (NTB) and technical barriers to trade (TBT). NTBs and TBTs can arise and change so quickly, even without a pandemic and many of the current processes to address them do not offer urgent or agile resolution of restrictions or disputes which arise.

These are only a few of many possible initiatives but we do need to learn from recent events and introduce measures to guard against future shocks to international trade. It would be well worth additional investment and collaboration by the public and private sectors in international, regional and domestic forums. Further, we can only hope that governments do not dismantle all of the mechanisms which have been created to support industry and trade during the pandemic but adjust them for long – term use alongside the existing framework to facilitate trade. At the very least, we can also hope that the spirit of co – operation between government and the private sector during the pandemic continues.

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