Euro Business Seminars in Australia and New Zealand
"The EURO -Success or Failure"
ANA
HARBOUR GRAND HOTEL, SYDNEY
Transcript:
MR
TIM HARCOURT, AUSTRADE
THURSDAY 15 AUGUST 2002
Mr Harcourt's
powerpoint presentation
TIM
HARCOURT, AUSTRADE: I always tell
foreign investors that in respect to the Australian economy,
it is not the size of your IT sector that matters but how
you use it. Now, I would like to thank the European Commission
for inviting me to be part of a very sophisticated delegation
of speakers today. Between us I have estimated that we speak
around 21 languages. And I speak one of them. And I am still
learning rugby league and rugby union, so, I will get there.
Now, what I want to do is take you through
what the Euro actually means for Australian exporters and
businesses. At Austrade I work with a lot of former management
consultants and they always talk about the "so what"
test. My mother would be very offended if I talked and I
ever said "so what" so, I use my economics and political
training to talk about the "what's in it for me"
test. This is the main theme of my talk, what's in it for
me, or, what's in it for exporters.
I want to talk a little bit about the
importance of the EU relationship and about what it means
practically for exporters and what Austrade, through its extensive
network in Europe, has observed so far with the introduction
of the Euro. Lastly I want to talk about a big challenge.
Certainly the Member States in Europe had a big change when
they put the Euro together. At Austrade we have a big mission,
a big challenge, ourselves, so we are part of the Australian
Government's plan. The Australian Government's plan is to
double the number of Australian exporters. I want to relate
the Euro to Austrade's mission of doubling the number of exporters.
First of all, the importance of the EU
for Australia. We know the EU is the main driver of globalisation
and economic integration in Europe which is very important
for globalisation. Europe is a key market for exports, and
there are no exports without imports. It is a key source of
Australian imports as well, and a very important source of
foreign direct investment.
We know that trade in goods is important
between Australian and the EU but also as mentioned by Minister
Nori, services exports are very important to Europe, heading
the pack. We have a very sophisticated market with links
between trade and investment, those services are very important.
Around140,000 of the 350,000 jobs tied up in Australian exports
to Europe are in services. So services are very important
in terms of employment for Australian workers.
With regard to foreign direct investment, around $A84 billion comes into
Australia from the European Union and equally so outward investment
for Australia to Europe is important.
However, when we look at Europe as a
whole, as large as it is in volume terms, Australia is still
quite small on the radar screen. You can see there that Australia
is relatively small compared to the US and the Japan and other
European countries in terms of export destinations, but also
in terms of import sources. With integration through the
Euro there may be a chance for Australia to lift our share
somewhat. We have a major international currency now in terms
of size, stability and integration.
As Paul Umbrazunas mentioned, Euroland
accounts for some 16% of world GDP and just over 20% of world
trade in goods and services. This is very important in terms
of stability, very important in terms of its ongoing integration
and world capital markets. And this is even before we get
to the accession countries rolling up to join the crowd, join
the party. What does that mean in practical terms for Australian
exporters?
Here are some observations we have gained
through talking to our clients in Europe. The Euro is clearly
reducing transaction costs with managing cash and conversion
in a business sense. It is improving price transparency across
EU borders.
We haven't exported Alan Fels to Europe
yet so it is very important for exporters that we improve
price transparency in Europe. The Euro is providing less
currency risk, there is no need to hedge across borders.
It is allowing more stability and lower inflation across Europe.
There are no longer the large differentials in inflation across
European countries. And of course you have got a much bigger,
more competitive market in Euro land.
Now, a view from Europe. Charles O'Hanlon our man in Frankfurt, our executive
manager, has talked about the Euro making life easier for
exporters getting a foothold in Europe. He often talks about
'Channel fever'. A lot of Australian exporters traditionally
have been a bit like Kylie Minogue and Jason Donovan and the
Easybeats, they have gone straight to London and not looked
at Europe. Charles thinks that the common currency will provide
some reduction in that psychological barrier.
Let's look at opportunities. John Azarias is with us today, an expert
on Australian-European relations. Together with Austrade he
has prepared a report for the Minister for Trade, Mark Vaile,
and several key opportunities have been identified for Australian
companies in Europe, Biotech, ICT, education, advanced manufacturing.
Manufacturing is a very important story
in Australia. The research shows very important manufacturing
export orientation. And of course, there is tourism. One
of the case studies used, Daimler-Chrysler, shows the importance
that the European integration process can provide in terms
of opportunities. Daimler‑Chrysler wanted to develop
some technology to provide non‑polluting fuel cells
to Mercedes Benz Buses. They tried in 10 European cities
and through Austrade in WA. The city of Perth offered to be
a pilot city and is now part of the monitoring and research
team.
This gives you an idea of how environmental
technology SMEs can benefit from the integration process.
A second case study, the Big Idea, a London- based marketing
company, helped Sanitarium introduce So Good into Europe.
The managing director, Mr. Dan Koziol has emphasised lower
currency volatility, less currency risk with the Euro. More
stable behaviour is evident as a result of the Euro, with
more standardisation in consumer prices. Dan sees that as
a big help for his company in terms of Europe and has said
that is important for companies in the UK with respect to
the Euro. But of course that is another story.
Now to the challenges. Austrade has a
mission, to double the number of Australian exporters. It
is a mission of the whole of the Australian Government, state,
federal, territory. Austrade is an international network
of trade advisers around the world. We have a very extensive
network in Europe, particularly in Western Europe. We are
developing in the Balkans and Eastern Europe and the accession
countries as well with 105 people all over Europe helping
exporters.
One thing we have noticed is that there
is a very sophisticated SME culture in Europe led by SME exporters.
Small companies export as much as large ones. While it is
true there are benefits of geography, even so a real culture
has developed, not only within Europe but also in exporting
outside Europe.
Austrade research has found
that only 4% of Australian companies export, which is quite
low compared to our European counterparts. We found that
the latest estimate (we are getting an update tomorrow) is
around 25,000 exporters in Australia. As a result, the Minister
for Trade, Mark Vaile, has announced the policy to double
the number of exporters.
And this has stemmed from our knowing
and growing research and it highlights the exporter community
and some of our future potential.
What is the importance of doubling the
number of exporters? We know it will help in terms of export
revenue to the tune of $A40 billion. There are questions
with revenue, you get some very big one-off hits in revenue.
You saw this last week with the Government's success in China
on the provision of Australian natural gas to that country.
But there are economic benefits in getting more companies
involved in exporting on a regular basis.
Austrade research shows that exporters
on average tend to introduce more technology more quickly,
they pick up the Internet more quickly, they are very committed
to training and so on. By having more companies export we
are able to spread that training, technology and knowledge
throughout the economy. This has important productivity benefits
in terms of efficiency.
Secondly, there are important social
benefits as well. One thing we wanted to see is whether exporters
made better bosses. We looked at wages and salaries and occupational
health and safety and found that on average, regardless of
size or industry, exporters paid higher wages, provided better
health and safety, created more full-time jobs and were more
committed to training. So, having more exporters in the economy
is ultimately going to benefit Australian workers and their
families. Next time you are at a dinner party with some anti-globalisation
people and you want to argue the issue, just quote the Austrade
research and you can demonstrate the benefits of exporting
to the economy as a whole.
Now to a couple of trends in the exporter
community. First of all in the Knowing and Growing research,
we identified five aspects that I will go through quickly.
First, micro and small businesses are the new growth sector
in the economy. They are growing much faster than large businesses
and medium-sized businesses. They are very important in terms
of their commitment to export growth.
Knowledge is power, and it is everywhere.
We find that in terms of growth, knowledge-based exporters,
that is those who use IT and highly-skilled workers, are growing
very fast.
The other thing we find is that so called
'old economy' industries such as farming and mining, were
the first to actually develop knowledge themselves to become
exporters of software and services. So, the 'old economy'
is also developing very important 'new economy' elements and
providing very good export potential for Australia.
Thirdly, in terms of youth, Generation
X is becoming Generation Export. We identified a very high
proportion of younger firms, particularly in knowledge-based
services. The growth of the Internet is helping in terms of
being able to market yourself to the world.
Fourthly, regional Australia. It is a
very important source of growth. It is growing at a very strong
rate, particularly in services. It is picking up opportunities
from a variety of sources. One company, Starena, up in Gosford,
is providing seating to the Athens Olympic Games.
Finally, small businesses and medium-sized
businesses are getting involved in the whole gamut of internationalised
- internationalisation processes. It is not just exporting,
it is not just putting stuff on ships and shipping it off,
there are also joint ventures, strategic alliances, FDI and
global supply chains. With globalisation there are many opportunities
for smaller companies to take advantage of outsourcing, contracting
out, and actually attaching themselves to larger manufacturing
firms. So, the new generation is making its presence felt
in a range of trends. And this is very good news.
But there are still important
reasons why we need to find more export potential. Here are
five areas where we're focussing our effort at Austrade.
First, we've found that there's a very
low intention to export. When we survey companies, only around
2% of non-exporters say they're going to export next year.
That's a very low intention rate. We want to provide the
sources and information on exporting to explain the benefits
in terms of profitability, productivity etc.
Secondly, we find that 50% of new exporters
are accidental. We ask, "Well, are you going to export?"
They say no, but they turn up as exporters the next year.
So, there's a high proportion of companies that suddenly decide
to export. There might be a random event that galvanises
them, like sitting next to a supplier on a plane, coming to
a Euro seminar, an event like this one. It's a bit like comparing
Russell Crowe and Paul Hogan. You know Russell Crowe is always
going to be a Hollywood star, but Paul Hogan was working on
the Sydney Harbour Bridge and got discovered and now he's
a big star too. So, you can get stars of the future from
a range of sources.
Thirdly, we want to increase the success
rate of intenders in terms of finance, in terms of their sources,
in terms of helping human capital and training. We want to
boost the number of 'born-globals'. They're very important
in terms of manufacturing, particularly in Sydney and Melbourne.
So, we want to do more to help out start-ups.
And finally, we want to help boost them
on to regular exporters. There's quite a large number of
regular exporters that fly in and fly out. They tend to export
only when the economy is quite slow back in Australia. What
we're trying to do is assist them to gain the benefits of
exporting on a sustainable basis.
So, these are the five areas. We've
taken this research to develop four strategies of Austrade.
One is for our existing exporters - our existing client base,
to look after them. Secondly, to develop more exporter development
programs to pick up these growing new exporters, particularly
among micro and small businesses. Thirdly, to focus on the
young knowledge-based exporters, we're putting a lot of work
into biotechnology, ICT and services.
And finally, with respect to community
awareness, we're helping to develop the export culture by
putting out information on the benefits of trading and investment
that you can use at your dinner parties.
Now, the Euro Zone. How is it going
to help? It's going to help in terms of market size and stability
as we see growth coming through. With the sophistication
of the European market, the Euro is going to help knowledge-based
services and manufacturing. I think the demonstration at
Daimler Chrysler and the city of Perth shows that regulatory
and research projects will provide opportunities to SMEs in
areas like environmental technologies and other knowledge-based
industries. I've been asked not to mention the war, but reform
of the Common Agricultural Policy by the EU is very important
for our primary producers. Any questions you can ask the
Ambassador. He's just down here.
Now, secondly, just as an example of
our work with the ICT sector. We've conducted a number of
Euro high-tech tours. We had a very successful one last year
to Silicon Valley and there'll be another one to Italy and
France.
To conclude - the implementation of the
Euro. The EU has created a major international currency and
it's going to add to dynamism across Europe. The Australian-European
economic relationship matters and there are very important
benefits to be gained by both parties. Like the Europeans,
we've launched an important mission. It's an important challenge
to double the number of exporters. It's clear from what we
see so far in the data and in some of the economic growth
and in our observations through the Austrade network that
the Euro is going to provide a very important ingredient in
us reaching our target. Thank you very much.
ENDS
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