The importance of trade: When your business succeeds offshore, so does Australia

04.09.2017 Tim Michael
The importance of trade: When your business succeeds offshore, so does Australia

There are more overseas opportunities for Australian businesses than ever before, but most SMEs are failing to take advantage, says ECA CEO Lisa McAuley. According to a Department of Industry, Innovation and Science study earlier this year there were more than 2.17 million actively trading businesses in Australia – an increase of 2.4 per cent from June 2015. “But despite this growing number of businesses, in 2014-15 fewer than 52,000 businesses were actively engaged in exporting goods and services,” says Ms McAuley.

“And fewer than 300 businesses export more than $100 million of goods each year. 

“This elite half-of-one-percent of exporters account for 83% of Australia’s exports.

“To put this in context, internationally the top 1% of exporters account for only 53% of goods exports.”

And the story gets worse, she says.

“Between 2006 and 2014 Australian goods exports grew by $105 billion. These elite exporters pocketed $101 billion of that growth.

“Over that period, China’s GDP tripled, and the economies of ASEAN and India doubled. But Australia’s SME exporters missed out.

“We need to achieve greater balance.”

Ms McAuley says growing the number of SME exporters and ensuring their international success is increasingly important to Australia’s future economic growth, and to ensuring quality jobs for future generations of Australians.

“The paradox is that despite the low growth in SME exports, Australian firms enjoy more overseas opportunities than ever before, particularly in the context of international demand for what this country produces and the growing array of liberalising trade agreements.”

Ms McAuley says the key the trade development challenge is to provide the support businesses need to take advantage of new opportunities abroad.

“At the same time, we also need to counter the rise in anti- trade, anti-globalisation rhetoric and protectionist policies internationally. This protectionism is driven by a feeling that only the rich are benefitting from globalisation.

“We must redouble our efforts to ensure all Australians are benefitting from trade. If we do not, then the protectionists will triumph, leading to policies that inevitably dampen economic growth and job creation. If 2016 has taught us one thing, it’s that this is a very real threat.”

Ms McAuley says trade and Investment will be a key driver of jobs, innovation and long-term prosperity for Australia.

The Department of Industry, Innovation and Science study found that SME exporters are generally larger than non-exporters in terms of employment, value-added and capital expenditure. On average, exporters are also more productive and pay higher wages. Exporters demonstrate superior performance even before they begin to export.

As of June 2016 this was primarily driven by growth in small businesses (ie, those with fewer than 20 employees).

“But out of the chaos comes opportunity,” says Ms McAuley. We have a window to position ourselves as a beacon of free and open trade and investment, and therefore attract more business to our shores and open new international opportunities for our companies.

“To capitalise, Australia needs more trade and investment-capable companies to engage with these opportunities.”

Ms McAuley says there are many benefits to taking your products or services to the world, including:
  • Increased sales revenue and profit: Australia is a small market, and expanding overseas allows you to increase your sales potential.
  • Lowering risk: Selling internationally can help you reduce the risk of being exposed to local fluctuations in business cycles.
  • More innovation: International competition can inspire the development of new products and services that keep you ahead of the game.
“And when your business succeeds, so does Australia, as exports are a driver of economic growth, job creation and long-term prosperity.”

Ms McAuley says the ECA’s preference is for trade liberalisation to occur on a multilateral basis.

“However, given that the WTO Doha Round of negotiations has stalled, the ECA sees benefit in continuing to promote greater international trade and investment flows through bilateral, regional and plurilateral free trade agreements.

“The ECA supports international agreements that serve to further liberalise trade between Australia and the rest of the world.”

When it comes to market access, Australian businesses enjoy equal or better access to many of the world’s fastest- growing economies than our competitors in Europe or North America, thanks to our expansive network of Asian FTAs.

“To ensure Australia leverages the benefits from FTAs with its trading partners, the ECA applauds the work undertaken by DFAT and Austrade in educating SMEs on understanding how to use FTAs.

“We believe that continued ongoing practical, user-friendly information to assist individual businesses, especially services companies, utilise these agreements is imperative.

“I often describe FTAs as the cherry on top of the cake. FTAs are only useful where there is market opportunity. So to strain this analogy, it needs to be much easier to make the cake.”

To the non-exporter, exporting is a daunting prospect, Ms McAuley says.

“The ECA had a look at some agricultural exports finding some products needed 24 different documents for one export transaction.

“To break down these knowledge barriers, we need to encourage education and skills development programs for businesses, particularly smaller business.”

SMEs should also develop the management skills needed to enable them to access information and contacts, as well as the legal and commercial intelligence required to navigate regulatory regimes in global markets.

The ECA partnered with ANZ Banking Group to develop a new digital tool has been launched to help Australian businesses plan for international expansion with a one-stop- shop that provides data-driven insights to support export plans.

The Export Council of Australia (ECA) was instrumental in driving the development by ANZ of “Be Trade Ready”.

The online tool gives Australian businesses access to comparative information on Free Trade Agreements in 10 key markets and across 16 industry sectors, and a wealth of market information. The FTA comparisons – not available anywhere else in this form - give unique insights that will enable SME exporters to make strategic decisions about market access.

The tool also contains information about benchmarking, forecasting of revenue, and capital requirements for international expansion.

“ECA’s mission is to help build the capability and capacity of Australian SME exporters,” Ms McAuley says.

“We believe the Be Trade Ready tool will place vital information in the hands of SME exporters, putting them in a better position to make informed decisions about their international business expansion.

“The ECA will continually strive to upskill and prepare Australian exporters to take on the world, through tools like Be Trade Ready, our extensive skills development offering, well-regarded publications, world-class research, and policy initiatives.”

Visit the Be Trade Ready tool to help inform your international business expansion plans:

To facilitate international trade governments should do everything possible to simplify the exporting process, Ms McAuley says.

“We can do some things domestically, but the real gains can be made internationally, through things like simplifying rules of origin and mutual recognition of trusted trader programs.

“Another major impediment to trade is non-tariff measures. These can significantly increase the cost of doing business internationally and are difficult to address in trade agreements.

In-market, there is a fundamental role for posts to understand the NTMs affecting Australian businesses and help resolve them.

“In order to do this, the government can understand which NTMs to address by working with businesses and peak bodies.”

The ECA has long identified the need to address regulatory barriers to trade, and this year will launch a new tool that will act as an online repository of primary information on domestic and international non-tariff measures that impede Australia’s trade.

Ms McAuley offers the following advice for Australian companies looking to expand their business overseas: “Navigating the complexity of doing business globally and maintaining a competitive edge requires up-to-date skills and knowledge.

“SMEs engaged in global trade need to develop the management skills to enable them to access necessary information and contacts, as well as the legal and commercial intelligence to navigate regulatory regimes in global markets.

“The ECA recommends that companies invest upfront in building their capabilities and capacities to grow internationally.

Building a global business requires team work and a global mindset from the very beginning, across your entire organisation.

“Building your internal capacity and identifying key strategies to support your international business are vital to international success.”

*This article was first published on pages 12-14 of Winter 2017 International Business Today Magazine.

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