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Australia’s position in the global market, according to trade expert

Posted on September 6th, 2019 in Insights by AUSPACK

The export industry is a huge earner for Australia, from iron ore and coal to wheat, wine and other food products.

Ben Lannan, partner in international trade for PwC Australia, spoke at the 2019 AUSPACK Business and Industry Conference about the global opportunities and challenges for Australian businesses.

The current export situation in Australia

With a population of around 25 million, there’s a limited market for domestic sales in Australia. Exports make up a huge amount of our trade, especially with the market of 1.4 billion or so across in China.

Agreements with other countries, including the US and other Asian nations, make up a lot of the rest of the deals, with free trade agreements (FTAs) making this possible. FTAs allow for reduced/eliminated administration in terms of tariffs and quotas, streamlines trade facilitation and aids co-operation.

Ben said, “In terms of Australia’s current free trade agreements, what Australia has at the moment is some historic agreements dating back a number of years: the Australia-New Zealand closer economic agreement, you also have Singapore and Thailand as early adopters of free trade agreements and then the US.”

“However, since that time, there has been a significant focus in establishing agreements with Japan, Korea, China — key trading locations both in terms of goods and services.”

Challenges posed by Brexit

The UK’s proposition to leave the EU, known as Brexit, is one that’s surrounded by huge confusion. Having been delayed months beyond the initial end date, seeing the back of two prime ministers and cloaked in confusion and uncertainty, knowing what Brexit means for exporters is hard to say because of a lack of definition of what Brexit actually involves.

Ben said, “My starting point with all international trade is that we’re in an era of unprecedented uncertainty and there’s no better example of that than Brexit.”

“Brexit is creating a range of challenges. What it has meant is a sudden reconfiguration of the supply chain in Europe. The need for, particularly when operating out of UK companies, setting up new registrations, new licences and new permits along with 80,000 odd other businesses trying to achieve the same thing in a very short time. Some real challenges on the supply chain side.”

Trade war between US and China

President Donald Trump is heavily involved in a trade war with China which is having a huge impact on those two nations, but had knock-on effects for Australia too. At the moment there are complications for Australian producers both in China and elsewhere.

He said, “From an Australian export perspective, what we’ve seen is an unprecedented anti-dumping claim by China on Australian exports on barley and grain. Australian beef industry has been experiencing a range of issues at the border as well. This isn’t just something that’s happening between the US and China, it’s certainly impacting Aussie imports as well.”

“About 80% of agricultural products within this country are exported, a lot of them go to China. However, our modelling suggests that while we may benefit from a pickup in market share there’s also a proposition that the US would now compete more vigorously in other markets with Australia and we’d have a net detriment.”

Where Australia is headed in the future

While no one can truly predict the future, Ben sees signs that give a few indications:

  • Closer agreements in the Pacific
  • Potential agreements with Hong Kong and Peru
  • New agreement with Indonesia
  • Greater focus on multilateral agreements

As free trade agreements become in play more, Ben hopes there are going to be changes to the way they’re done, particularly with digital updates. This will make things quicker and cheaper, making exporting more lucrative.

He said, “Digitisation opportunities are key. A lot of free trade agreements to export markets as well as product imports require that you still use paper-based certified documentation, which is adding to the cost and also adding to time.”

“In many cases with duty-refund opportunities, a lot of it is situations when goods have been imported, certificate of original wasn’t secured from the supplier in time and as a result the goods have been cleared and duty paid, and no one ever goes back to revert that.”

“Simple issues around timing, because paper-based documentation wasn’t available at the time of importation creates significant cost. Digitisation and accelerating the flow of documents would certainly help.”

Three key takeaways:

  • The fallout of Brexit is still uncertain, but may require lots of paperwork for Australian-based businesses.
  • The US-China trade war may have some benefits but overall losses for Australian exporters.
  • Free trade agreements, particularly multilateral agreements, are likely to grow in the future.

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