Export
Market Development Grants Amendment Bill 2004
Date Introduced:
13 May 2004
House:
House of Representatives
Portfolio:
Foreign Affairs and Trade
Commencement:
On Royal Assent
The Bill amends the Export Market
Development Grants Act 1997 (the Act) to introduce a ‘not
fit and proper’ person test to be applied by Austrade in accordance
with Ministerial guidelines when assessing an entitlement to payment
of a grant under the Export Market Development Grants (EMDG) Scheme.
The objective of the EMDG Scheme is set down in the
Export Market Development Grants Act 1997:
3. Object of Act
The object of this Act is to bring benefits to Australia
by encouraging the creation, development and expansion of foreign
markets for Australian goods, services, intellectual property and
know-how. It does so by providing for an assistance scheme under which
small and medium Australian exporters committed to and capable of
seeking out and developing export business are repaid part of their
expenses incurred in promoting those products.
More specifically, the Scheme is intended to encourage
small and medium Australian businesses to develop overseas markets through
the 50 per cent reimbursement of expenditure incurred on export promotional
activities. The Scheme is open to Australian companies which meet an
expenditure threshold of $15,000 over a two-year period and have an
annual turnover of less than $30 million. Funding for the Scheme is
capped at $150 million a year until 2005-06.
In the 2002-03 financial year, $143.9 million in grants
were distributed to 3,843 exporters. For grants relating to the 2001-02
grant year, the average grant was $36,280. The businesses that received
grants during this same period generated $5.5 billion in export income.(1)
According to the Australian Chamber of Commerce and
Industry, the Scheme accounts for more than one-third of the export
income from smaller to medium sized businesses participating in the
program, and without such support these firms would reduce their export
efforts.(2)
Under the current provisions of the Act, an EMDG grant
is not payable if the applicant is not a resident of Australia, does
not have an Australian Business Number, has outstanding disqualifying
convictions, is under insolvency administration, or is the provider
of courses to overseas students and is not a registered provider of
such courses.
As noted in the Minister’s Second Reading Speech, the
changes in the Bill add a further test, namely, whether the applicant
or an associate of the applicant is ‘not fit and proper’ to receive
a grant:
What the legislation does not presently allow for is
the non-payment of a grant to an applicant who may be viewed by the
Australian community as an inappropriate person to represent and promote
the public interest of Australia in relation to trade outside Australia,
whether by reference to his or her trading history or otherwise.
This Government does not condone behaviour considered
by the Australian electorate to be inconsistent with accepted community
standards or commercial or personal propriety. We have a duty to taxpayers
to ensure that grants paid via Government schemes are not paid to
recipients other than those who meet these standards.
Austrade will only be able to make such decisions with
reference to Ministerial guidelines, which I will table shortly. The
consent of an applicant or his or her associates will be required
prior to Austrade undertaking criminal or other relevant checks.
The Minister’s Speech, however, does not indicate whether
the guidelines to be followed by Austrade will be disallowable instruments
and, therefore, subject to parliamentary scrutiny.
On 8 February 2004, Australia’s Trade Minister and
the United States Trade Representative (USTR) announced that agreement
had been reached on the text of a Free Trade Agreement between Australia
and the United States (AUSFTA). In terms of Australia’s merchandise
trade with the US, the AUSFTA allows for the removal of almost all tariffs
on manufactured exports and substantial reductions in tariffs on agricultural
goods (the exception being sugar and dairy where tariff rate quota arrangements
will remain).
This is seen as a major gain by Australian industry
because the volume of trade in manufactured goods is significant and
duty-free access to the US market will be available for a number of
very competitive sectors once the AUSFTA comes into force.
Australia’s main exports to the US are durable manufacturing
products which account for one-third of total exports. Exports of machinery
and equipment, which includes medical instruments and appliances ($1.2
billion), manufactures ($1.2 billion), metals ($1 billion) and automotive
products ($0.9 billion), are among the top six commodities exported
from Australia to the US.(3)
In the past the USTR regarded Australia’s domestic
industry support programs, such as the EMDG Scheme, as little more than
export subsidies and a barrier to freer trade. The 2003 and previous
US National Trade Estimate Reports on Foreign Trade Barriers listed
the following trade barrier:
Export Subsidies
The Australian Government uses the Export Market Development
Grants scheme (EMDG) to encourage Australian exporters to develop
overseas markets for its goods, services, tourism, industrial property
rights and technology. These grants are available only to small-and-medium-sized
Australian firms to reimburse partially (up to 50 per cent) eligible
expenditures (primarily marketing costs) while they are developing
overseas markets. In August 2000, the Australian Government committed
to continue the scheme until 2005. Automotive and textile, clothing
and footwear (TCF) producers benefit from industry specific grants
which replaced schemes that previously provided export-contingent
benefits. Automotive and automotive parts producers benefit from the
Automotive Competitiveness and Investment Scheme (ACIS) which currently
provides around $A600 million per year in the form of import duty
credits designed to promote production, investment, and research and
development. This scheme was originally scheduled to run from January
1, 2001 to December 31, 2005. However, the Australian Government decided
to compensate for planned additional tariff reductions by extending
the program for the ten years after 2005. The grant program that benefits
TCF producers is the TCF Strategic Investment Program (SIP), which
provides funding for research and development, innovation, restructuring
and investment, to assist firms to restructure and achieve efficiency
gains prior to legislated tariff cuts in this sector in 2005. The
U.S. Government is monitoring the WTO consistency of these programs.(4)
Notwithstanding these concerns, the Government’s industry
support programs for the automotive and TCF industries and EMDG scheme
which cost altogether around
$1 billion annually are not affected by the AUSFTA.(5)
According to the study by the Centre for International
Economics (CIE) which examined the impact of the AUSFTA on selected
industries, Australian exports to the US are expected to grow, in particular
exports of light metals and automotive products.(6) The CIE
estimated the percentage increase in manufactured exports: manufactures
(23.6 per cent), transport equipment (16.6 per cent), leather products
(12.9 per cent), and motor vehicle, trucks and parts (7.8 per cent).(7)
Across sectors, manufacturing and construction are the two largest beneficiaries
from the AUSFTA.
Person or associate is not fit and proper
Item 2 of Schedule 1 adds a new subsection
which gives Austrade the power to ask an applicant for consent to seek
information about the applicant or an applicant’s associate in determining
whether the applicant or any associate of the applicant is ‘not fit
and proper’ to receive an EMDG grant. If consent is not given, then
section 73 of the Act empowers Austrade to refuse to consider the application.
Item 4 provides that where Austrade determines
in accordance with the ministerial guidelines that the applicant or
an associate of the applicant is ‘not fit and proper’ to receive an
EMDG grant, a grant is not payable.
Item 5 amends the Act to explicitly provide
that a ‘not fit and proper’ determination is subject to review in the
Administrative Appeals Tribunal.
-
Austrade, Annual
Report 2002-03, Chapter 5: Outcomes and Outputs for 2002-03,
p. 40.
-
Australian Chamber of Commerce and Industry, Export
Market Development Grants Scheme, May 2003, p. 1.
-
Centre for International Economics, Economic
analysis of AUSFTA: Impact of the bilateral free trade agreement
with the United States, April 2004, Australia-United States
Trade, p. 7.
-
United States Trade Representative, 2003 National
Trade Estimate Report on Foreign Trade Barriers: Australia,
p. 10.
-
See Productivity Commission, Trade
& Assistance Review 2002-03, Table A. 3: Australian
Government budgetary assistance to the manufacturing sector, 2000-01
to 2003-04, pp. A.11 to A.16. The Government’s total budgetary assistance
to the manufacturing sector in 2003-04 was $1.75 billion.
-
See Economic
analysis of AUSFTA: Impact of the bilateral free trade agreement
with the United States, Case studies: Light metals, Passenger
motor vehicles and parts, pp. 116-125.
-
See Economic
analysis of AUSFTA: Impact of the bilateral free trade agreement
with the United States, Sectoral effects of AUSFTA, pp.
84-86.
This paper has been prepared for general distribution to Senators and
Members of the Australian Parliament. While great care is taken to ensure
that the paper is accurate and balanced, the paper is written using information
publicly available at the time of production. The views expressed are
those of the author and should not be attributed to the Information and
Research Services (IRS). Advice on legislation or legal policy issues
contained in this paper is provided for use in parliamentary debate and
for related parliamentary purposes. This paper is not professional legal
opinion. Readers are reminded that the paper is not an official parliamentary
or Australian government document.
Published by the Parliamentary Library, 2004.
