10 Sep 2020
Despite more than a year of global pandemic and heightened geopolitical tensions – leading to “unprecedented” being one of the words of the year – what is particularly noteworthy about our latest trade survey is how many issues haven’t changed.
The Australian Chamber of Commerce and Industry (ACCI) has conducted five National Trade Surveys with different respondent cohorts but the results across multiple years and cohorts arrives at similar outcomes - evidence many of the issues and concerns raised are enduring and need to be addressed.
"2020 demonstrated both how reliant exporters are on a narrow range of import trading partners.”
Reflecting the diverse nature and experience of respondents and their ability to adapt, there was a great variety of responses but enduring ones were an inability to compete, poor online services and the impact of industrial relations actions on already stressed supply chains.
In response to these concerns, particularly the more perennial ones, ACCI has made 25 recommendations to enhance the ability of Australian business to engage and thrive internationally.
Top issues impacting trade
International competitiveness was the number one trade issue for firms operating in the categories of both ‘goods’ and ‘goods and services businesses’ while red tape was the greatest issue for the services sector. In fact, over the last six years Australia’s competitiveness has consistently been ranked the most egregious issue.
However, 2020 demonstrated both how reliant exporters are on a narrow range of import trading partners and how quickly firms responded by altering their supply chains, consolidating their position domestically or even taking advantage of lower domestic competition to gain a stronger foothold in domestic markets.
Meanwhile the cost of freight dramatically escalated, hampering competitiveness. Union action too at ports exacerbated already stressed supply chains and had a severe impact on businesses and consumers.
Airfreight was, and continues to be, severely impacted by COVID-19 border closures and the corresponding loss of routes.
As it did with so many businesses, JobKeeper assisted internationally engaged firms impacted by border closures to maintain at least some of their workforce through the pandemic. But businesses reported thresholds for eligibility that didn’t reflect the fact some businesses operate over longer cycles than the by month, quarter or year on year.
Given the continuing disruption to supply chains globally, government support will continue to be necessary for some businesses and these longer-term cycles need to be considered as the support evolves and becomes more nuanced.
China continues to be the most frequently listed trade destination, more so than in the 2018 and 2016 reports. This is followed by the United States, Singapore, New Zealand and Indonesia. The survey has a strong representation of Western Australian firms which have a strong Indonesian presence, particularly large firms in mining and oil. ACCI has included the United Kingdom in the list as an alternative ‘top five’ country.
A lack of engagement with European countries and the complete absence of trade with Latin America, Middle Eastern and African nations in the top five trading partners can be observed. Japan is also absent from the top five.
More businesses, irrespective of size, are seeking information about market opportunities using online sources, irrespective of size. The impact of COVID-19 resulted in the rapid adoption of online systems for engagement as travel was significantly curtailed after February 2020.
A large proportion of companies spent less than $A5000 on private market visits in 2020. Firms report international customers and suppliers are increasingly accepting online communication as the new normal but it is still very problematic, especially for firms wanting to access new markets or expanding their customer base and products into existing markets. Yet surprisingly, participation in trade missions is regarded as the least important area for businesses to gain information regarding trade opportunities.
The China-Australia Free Trade Agreement (CHAFTA) is considered the most important of Australia alliance, reflecting the continued general importance of our trade relationship with China over all others. Despite the current state of government relations with China, businesses were not fearful of the collapse of the agreement and in fact pointed to the juxtaposition of political posturing against the signing of new agreements including China.
However, respondents also indicated a poorer understanding of the most used FTAs relative to the less used agreements.
Firms also pointed out bilateral and regional agreements also cause negative affects when other nations gain preferential access into important markets where Australia doesn’t have an equivalent agreement.
When polled about the prospects of future agreements and with whom these agreements should be pursued, India was regarded as the leading nation of future potential opportunity.
Supporting businesses, expanding trade
By Shayne Elliott, ANZ CEO
This fifth National Trade report is particularly timely, conducted during one of the most unpredictable times for global trade and against a backdrop of COVID-19 that has hampered trade and business growth.
As the Australian bank with the largest international presence, ANZ is actively looking for ways to support business expand trade. We have been a longstanding supporter of many of Australia’s largest export focused industries such as resources and agriculture, which remain priority sectors for the bank.
The COVID-19 pandemic has disrupted many supply chains and highlights the ongoing need for businesses to consider market diversification.
ASEAN is one of Australia’s largest trading partners and our family, education, cultural, security and tourism links are significant and growing. We view the region as fundamental to Australia’s export growth.
Trade between Australia and ASEAN is worth around $A124 billion each year and has grown by $A55 billion in the past decade – now exceeding trade with the US and Japan.
Australia is well placed to benefit from a growing middle class which will increasingly demand the quality products and services Australia is renowned for and is forecast to more than quadruple in size across the region to 161 million households by 2030.
As Australia’s biggest bank in Asia, we regularly take our commercial customers into these markets to help them make new connections and assist with market access and understanding. We’re also working hard to provide digitised trade solutions and supply chain financing to further develop those markets for our customers.
ANZ has engaged the Depart of Home Affairs, the Department of Foreign Affairs and Trade and the Australian Chamber of Commerce and Industry on the benefits of expediting the transition of paper-based trading process to digital.
Digitisation of these processes would bring trade efficiencies: it increases the speed of trade, reduces trade transaction costs, is more secure and creates more efficient financial supply chains.
ANZ’s Trade Information Network - currently in pilot - is a digital platform for buyers and suppliers to enable easy, secure, and authenticated communication of trade information between themselves and permissioned banks.
It is designed to reduce fraud risks as well as enabling banks to better assess risk and provide financing earlier.
We also support many small to medium businesses with trade through access to funding and resources such as our Be Trade Ready application, created in partnership with the Export Council of Australia to help business owners assess their readiness for international growth.
More broadly, free trade agreements continue to broaden market access. Businesses have benefited from the successful completion of free trade agreements. They have provided greater market access and reduced the costs of doing business in some of the most important destinations for Australian goods and services.
This will put Australian businesses in good stead as they seek further market diversification, a trend we are seeing among our customer base.
As trade flows continues to shift with the changes a once in a lifetime pandemic brings, ANZ remains committed to supporting our customers’ growth aspirations in Australia and overseas.
- Shayne Elliott is CEO of ANZ
Having worked through the latest survey, the ICCA makes the following recommendations for government action.
Bilateral trade by country:
Information and opportunities:
Bryan Clark is Director of the International Chamber of Commerce Australia
Click here to read the full National Trade Survey 2021 report
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
10 Sep 2020
31 Aug 2020