6.1
This chapter addresses the role of the Australian government in assisting exporters find new markets for their products and services in the United Kingdom. It examines the Australian Government’s engagement strategies and its preparations for negotiating a Free Trade Agreement with the United Kingdom. It discusses Australia’s diplomatic footprint in the UK and Europe, and what roles the Department of Agriculture and Water Resources, Department of Education and Training, Tourism Australia and the Department of Immigration and Border Protection can play in expanding trade and investment relationships. The chapter concludes with a discussion of the coordination of federal, state and territory trade promotion efforts in the United Kingdom.
Trade policy and the Australia-UK FTA
6.2
The Department of Foreign Affairs and Trade leads a whole-of-government engagement in future trade negotiations with the UK, which will include consultation across all levels of government. State and territory governments will have an opportunity to provide input during stakeholder consultations. The DFAT will pursue opportunities to cooperate with the UK in multilateral and plurilateral forums to open global markets, including improved access to the UK market.
6.3
The Australian Government believe that reducing the cost and complexity of trade and investment will create opportunities for business to grow, increases the competitiveness of the Australian economy and supports job creation.
6.4
The governments of Australia and the UK have both expressed a clear interest in concluding a bilateral FTA, once the UK has exited the EU.
A comprehensive Australia-UK FTA would create incentives for UK business to invest in, or trade with, Australia, including through market opening and other measures that we wish to see included in a comprehensive bilateral free trade agreement.
6.5
As part of this whole-of-government approach, the Department of Industry, Innovation and Science also plays a role in the development, negotiation and implementation of Australia’s trade policy, both in the multilateral trading system and in free trade agreements (FTAs). The Department advises on issues such as varied as tariffs, trade in goods and goods market access, rules of origin, technical barriers to trade, and trade remedies. IP Australia, one of the Department’s portfolio agencies, contributes advice on intellectual property arrangements.
6.6
The Department of Industry, Innovation and Science seeks to achieve a positive outcome for Australian industry in multilateral, regional and bilateral trade agreements, including negotiating reciprocal industrial tariff elimination with appropriate transitional arrangements. It also seeks to deliver consistent product specific rules of origin based on a Change of Tariff Classification or equivalent regional value content, mechanisms to deal with non-tariff and other technical barriers to trade, and commitments on trade remedies which maintains the integrity of Australia’s domestic anti-dumping, countervailing and global safeguard regimes. The Department endeavours to consult broadly with industries impacted by removing barriers to trade to provide considered and appropriate advice.
Purpose of Australia-UK Trade Working Group
6.7
On 7 September 2016, Australia’s Minister for Trade, Tourism and Invest, the Hon Steven Ciobo MP and UK Secretary of State for International Trade, Rt Hon Liam Fox MP, established a joint Australia-UK Trade Working Group to, as a priority, scope out the parameters of a future “…ambitious and comprehensive Australia-UK Free Trade Agreement”.
6.8
The main purpose of the scoping discussions is to prepare the ground and develop capacity and capabilities so that a swift transition to FTA negotiations is possible, once the UK has completed its exit from the EU. The Working Group’s agenda will also include other trade policy issues of mutual interest, including WTO processes and current and prospective plurilateral negotiations.
Going forward, the Working Group will be led by senior trade officials from the Department of Foreign Affairs and Trade and the UK Department of International Trade, in cooperation with other departments and agencies.
6.9
According to DFAT, initial discussions on potential features of a future agreement have been positive and productive, underpinned by both Australia and the UK’s strong ties and likeminded views on the benefits of trade and open markets and transparent and predictable investment regimes, and are subject of ongoing discussions.
The features of a future agreement are subject of ongoing discussions in the Working Group, and will be shaped by future stakeholder consultations and the final terms of the UK’s exit from the EU.
6.10
The Australia–UK Trade Working Group (TWG) had met once at Ministerial level between Australia’s Trade, Tourism and Investment Minister, the Hon Steven Ciobo MP, and the UK’s then Minister of State for Trade Policy, Lord Price, according to the Department of Agriculture and Water Resources, following its establishment in September 2016. The Working Group had met twice at senior officials’ level – in May 2017 and in September 2017.
The Department of Agriculture and Water Resources does not attend the TWG meetings but the Department of Foreign Affairs and Trade (DFAT) consults across agencies where relevant prior to meetings and provides debriefs following meetings. DFAT is the lead agency.
Australia-UK advisory committee
6.11
Professor Philomena Murray and Dr Margherita Matera from the University of Melbourne and Dr Laura Allison-Reumann from the Nanyang Technological University jointly recommend the establishment of an Australia-UK Advisory Committee, comprising academics, specialists, businesses and chambers of commerce would be valuable for lesson learning, sharing of information and networks and developing policy briefings, and strategic agenda-setting.
We would also suggest setting up an annual Australia-UK training and consultation forum for governments at all levels and business on the current state of the relationship, the FTA negotiations, related negotiations and dialogues, as well as the advantages to be explored in this changing relationship.
6.12
In addition to the annual dialogue, Professor Murray, Dr Matera and Dr Allison-Reumann see merit in the government or Australia-UK Advisory Committee holding regular roundtables, exchanges of views and meetings of academics, specialists and government agencies would assist with the dissemination of information and knowledge.
In addition, we also recommend the establishment of a multi-stakeholder forum that would include the participation of non-governmental organisations (NGOs). Such a forum would assist with establishing well-informed policies and inclusive decision-making at all levels of government.
Open air service agreements
6.13
The German Australian Business Council (GABC) warned of the need of governments to prepare for how the UK’s ‘Brexit’ from the EU will impact on air travel to and from the UK over Europe. The GABC described the European air transportation market as one of the “most liberalised air markets in the world”.
Upon Brexit the UK will cease to be part of the Nine Freedoms of the Air within the EU and also within the European Common Aviation Area (unless an agreement is reached). Australia and the EU have entered into a horizontal agreement in 2008 which came into force in 2009 and are discussing a future comprehensive Air Transport Agreement since that time. With Brexit becoming effective, the 1958 Australia United Kingdom Air Services Agreement will no longer be a reference point for the freedoms under the 2008 Australia EU Horizontal Agreement and, in addition, it is likely that Australia and the UK will enter into negotiations to adapt the 1958 Agreement to the requirements of today's market.
6.14
The GABC wants Australia to open negotiations on new air services agreements with the UK and EU post-‘Brexit’.
We would wish Australia to take a coordinated or even unified approach in the triangle Australia, EU and UK to achieve a result which would have been achieved upon conclusion of a comprehensive Air Transport Agreement with the EU on the basis of the UK still being a Member State of the EU.
6.15
The International Airlines Group (IAG), which operates British Airways, praised the economic benefits from the liberalisation of the European air services market between 1993 and 2015 that increased tourism and business travel. IAG wants governments to maintain this liberal approach to air services agreements between the UK, EU and Australia as ‘Brexit’ unfolds.
European travellers benefited from a four-fold increase in domestic routes with more than one carrier. But the biggest competitive change has been in the number of intra-EU routes with more than two carriers increased by 1059 per cent.
…consider the benefits that a liberal approach to air services brings to businesses and consumers and how that can contribute to a mutually beneficial and vibrant trade agreement. In trade terms the more opportunities for travel there are, the more opportunities for growth.
6.16
IAG highlighted the UK Department for Transport’s 2013 statement in its Aviation Policy Framework that: “The opening up of air services to genuine competition has driven down the cost of air transport and greatly improved the range and quality of services.”
These principles apply on short haul and long haul routes equally and we expect the UK government and EU to negotiate an agreement for UK-EU air travel that allows the same freedom to operate that currently exists. The UK will also look to sign separate agreements with other non-EU countries to ensure competitive air services and we would hope that Australia would be a willing partner in the vanguard of this work.
6.17
Before the UK ‘Brexits’ from the EU, IAG recommends the Australian Government reach an early agreement with the UK Government on a “comprehensive, open air service agreement between Australia and the UK to the mutual benefit of both nations”.
Department of Agriculture and Water Resources
6.18
The Department of Agriculture and Water Resources works closely with DFAT, Austrade, state and territory governments and industry to identify, and assist industry to access trade and investment opportunities in the UK and EU. This work is supported by:
The department's overseas counsellor networks.
Engagement and collaboration with RDCs, such as Meat and Livestock Australia and Wine Australia.
The Australian Government Senior Officials Committee Primary Industries Technical Market Access and Trade Development task group.
6.19
The Australian Government Senior Officials Committee Primary Industries Technical Market Access and Trade Development task group provides a forum for regular communication between senior Commonwealth and state and territory government officials regarding agriculture, food, fibre, fisheries and forestry market access issues. The group supports a more collaborative and consistent approach between governments to strengthen the effectiveness of market access efforts on behalf of Australia's agricultural and food sectors.
Building relationships with the UK Government departments
6.20
The Department of Agriculture and Water Resources aims to build on its already close agricultural relationship with the UK Government’s Department for Environment, Food and Rural Affairs, including through increased agricultural cooperation.
As the UK exits the EU it will seek to develop its own agricultural policies and biosecurity frameworks and capability. The department can assist by sharing its expertise and experiences in biosecurity.
6.21
The Department can also share its experiences of the structural adjustment that has occurred in Australian agriculture, including around farm support measures.
This work will support two-way trade and encourage the UK's adoption of least restrictive, science-based technical standards and reduced farm support measures.
6.22
The National Farmers’ Federation Chief Executive Mr Tony Mahar said the NFF would welcome having a Special Agricultural Trade Envoy appointed by the Australian Government, similar to New Zealand’s trade envoy, who can represent the interests of Australian farmers and agricultural exporters on issues such as trade negotiations.
6.23
NFF General Manager, Mr Scott Kompo-Harms, believed the New Zealand envoy was appointed by the Minister for Primary Industries and the Minister for Trade in New Zealand.
…obviously, he has his own private interests and pursues them as his day job, essentially. He also has a role in representing New Zealand industry as part of their—I won't say 'negotiation team', but he has a lot better access to what's going on with negotiations as they're happening in real time.
6.24
Mr Mahar welcomed the New Zealand trade envoy also being a farmer.
But part of his role is more defined and distinct in terms of industry and government working more closely.
6.25
The NFF was happy with its partnership with government but Mr Mahar was “always looking at opportunities to expand that”.
I look at the New Zealand arrangement and say could that help, could that enhance, could that be another step towards a greater partnership. I think it is worth investigating.
Free trade agreements
6.26
The Department of Foreign Affairs and Trade states it strongly supports the conclusion of an ambitious bilateral FTA with the UK that is genuinely trade and investment-creating.
Among other features, deeply liberalising FTAs eliminate tariffs, improve access for service suppliers, promote and protect investments, reduce transaction costs involved in trade, address behind-the-border barriers that unduly impede the flow of goods and services, and enhance cooperation across a range of trade and investment-related areas.
6.27
DFAT believes a comprehensive and ambitious FTA with the UK would deliver significant new opportunities for Australian exporters and investors, by giving them a competitive edge over their competitors from countries without an FTA with the UK. Equally DFAT advises that by not pursuing an FTA with the UK would place at risk the competitive position of Australian businesses.
Without an Australia-UK deal, Australia’s competitive position could erode over time, as other countries secure more favourable access into the UK market.
6.28
Leading Australian investment bank Macquarie Group believes in the merits of free trade agreements and the importance of including financial services in such agreements.
We believe mutual recognition should be a guiding principle underpinning any free trade agreement, to allow for recognition of qualifications and licenses obtained in one country to be recognised in the other. This principle would be of benefit across a range of industries.
6.29
In relation to these priorities, the Australian red meat industry representing the Australian Meat Industry Council, the Red Meat Advisory Council, the Cattle Council of Australia, the Sheepmeat Council of Australia, the Australian Lot Feeders’ Association and the Goat Industry Council of Australia, strongly support the Australian Government’s position of exploring ways to enhance Australia’s current trade ties with the UK.
Although the regulatory environment in the UK (post the Brexit vote) remains opaque, industry has been encouraged by the recent Australia-UK trade dialogue, including the establishment of a bilateral Trade Working Group to scope out the parameters of a future ambitious and comprehensive FTA.
6.30
The Australian red meat industry believed ongoing dialogue with British trade officials must continue and the sector welcomes a partnership with the Australian Government in implementing targeted advocacy.
Industry’s preference is to lead a collaborative discussion and assist the UK in framing their future import regime, by finding solutions which provision the supply of imported beef and sheepmeat as well as satisfying current consumer demand and continuing to support domestic production.
6.31
Australia’s leading wine producer Treasury Wine Estates is urging the Australian Government to prioritise negotiating a free trade agreement with the UK ahead of the EU because the Australian wine industry stands to “gain significantly from a closer trade relationship with the UK, particularly if Australia can negotiate a FTA which secures zero tariff access for wine”.
Given the significant potential upside, it is TWE’s view that, once the UK is in a position to start negotiating, an FTA with the UK should be prioritised over Australia’s negotiation of a FTA with the EU.
6.32
In that regard, Treasury Wine Estates also supported the submissions from the Winemakers’ Federation of Australia and the Australian Grape and Wine Authority stating that the “any tariff elimination should also recognise that the UK acts as a hub for Australian wine trade to continental Europe, and that in any negotiations, Australia should seek to eliminate tariffs of wine packaged in the UK or re-exported from the UK to continental Europe”.
6.33
The Winemakers’ Federation of Australia offered its “strong and enthusiastic support of entering into a free trade agreement with the UK”.
Such an agreement should seek the immediate elimination of all tariffs and seek to eliminate certification and testing requirements through mutual recognition or equivalence of each other’s regulatory systems.
6.34
The Wine Economics Research Centre also recommended in its Wine Policy Brief No. 17 that Australia finalise the Australia-EU FTA before concluding any FTA with the UK.
Australia could begin to seek a bilateral FTA with the UK, but presumably would not want to conclude it before the UK settles new trade commitments at the WTO and with the EU27. Australia may also be better off first completing the Australia-EU FTA process that began in November 2015.
6.35
The Wine Economics Research Centre concluded the benefit of this timeframe was due to Australia trading much more with the EU27 than with the UK: two-way goods and services trade in 2016 with the EU27 was 10.3 per cent of Australia’s total trade, while the UK’s share was just 4.3 per cent.
Australia has an interest in the tariff that will apply to exports of wine from the UK to EU27 countries, since half the value and 80 per cent of the volume of wine shipped from Australia to the UK is in bulk containers and is bottled in the UK, and some of those bottles are then re-exported to other EU countries. The EU27 may well agree to restore a zero tariff on such shipments from the UK, but presumably only if the UK sets a zero tariff on the EU27’s wine exports to the UK – thereby returning to the current intra-EU28 preferential situation.
6.36
In contrast to those in the wine industry calling for the Australian Government to give priority to an FTA with the UK, the Australian red meat industry recommends that “equal priority” be given to progressing bilateral discussions with the EU.
…including the earliest possible commencement of Australia-EU FTA negotiations – where the demand for Australian red meat is similarly stifled by the current import regime.
6.37
The Australian red meat industry stressed the opportunity that ‘Brexit’ and the possibility of a subsequent Australia-UK FTA provide for Australia to work with the UK Government on opening the UK market.
…to transform current import arrangements for Australian beef, sheepmeat, goatmeat and associated products is unprecedented - and one which must be pursued with vigour and accordingly allocated the highest priority.
6.38
The Department of Industry, Innovation and Science also seeks positive outcomes for Australian industry through multilateral, regional and bilateral trade negotiations. The Department is involved in all current FTA negotiations. Recognising that certain sectors of Australian industry are sensitive with respect to trade liberalisation, the Department works to manage these challenges to ensure Australian industry is able to capitalise on the benefits of trade liberalisation.
6.39
The Department of Education and Training (DET) considers that DFAT’s approach to negotiating free trade agreements provides “appropriate scope for it and for its key stakeholders such as Universities Australia to engage in the process”.
6.40
DFAT consults with the Department of Education and Training when developing the negotiating FTA mandates for Cabinet’s consideration. Following the announcement and launching of FTA negotiations by the Minister for Trade, DFAT consults closely with DET during the negotiating process.
These consultations provide the opportunity for DET to provide advice to DFAT about the key stakeholders, such as Universities Australia, that should be consulted with and/or invited to provide written submissions. DET is also consulted when the final FTA is submitted to Cabinet for its approval.
6.41
The Department of Education and Training is aware when FTA negotiations are launched, that DFAT invites submissions from interested stakeholders, and conducts public hearings around Australia.
This gives interested stakeholders such as Universities Australia the opportunity to provide input. In addition, DET is able to liaise with its key stakeholders, drawing their attention to the launch of FTA negotiations and soliciting their views. At the same time, DFAT and DET’s stakeholder consultation, and the process by which DFAT collects information on stakeholder interests is ongoing, and not limited to a specific FTA negotiation.
6.42
The Department of Education and Training also understands that FTA negotiations with the UK cannot be launched until the UK formally leaves the EU.
6.43
Based on the assessment of economists Dr Di Lieto and Dr Treisman, the Australian Government should not move too hastily towards an FTA and consider four options in the following order of preference from best to worst:
1
UK Unilateralism with EU Bilateralism – Concerting with the UK non-preferential, nonreciprocal and non-binding trade and investment liberalisations in targeted sectors as soon as the Brexit process concludes, and reassess this strategy upon finalisation of the Australia-EU free trade agreement.
2
UK and EU Bilateralism - Reciprocating preferential trade and investment concessions with the UK and the EU separately as soon as practicable in the post-2019 UK-EU arrangements.
3
Australia-UK-EU Trilateralism – Concurrently negotiating Australia-UK and Australia-EU preferential agreements for comprehensive integration with the post-2019 UK-EU agreement.
4
Long-term Multilateralism – Calling off trade agreements with both the UK and the EU to remain in the fold of the WTO system, and keep the 2019 status quo.
6.44
Dr Di Lieto and Dr Treisman also want Australia and the UK to set up a non-preferential and non-binding economic cooperation forum (akin to the APEC for the Asia Pacific nations) that they named AUKEC to be in place shortly after the conclusion of the Brexit process in 2019.
The so called AUKEC Forum should be designed to buy Australia time to see what happens in the UK and between the UK and EU in the medium term, at the same time providing a strong foundation to conclude a mutually beneficial FTA with the UK for the long term.
Australian business in Europe networks
6.45
In light of ‘Brexit’, Australian Business in Europe (France) outlined a role for the Australian Government to better promote opportunities for Australian businesses to get work and establish themselves in Europe and educate them on how to tender for contracts in the EU.
6.46
ABIE France highlighted how it has been approached by Australian companies unsure about their ability to tender for European government contracts under the various EU and WTO procurement rules.
Many companies are not well progressed in their understanding of the opportunities for Australian business in Europe. The FTA process should work to overcome this information barrier. It should specifically consider the case of SMEs and Australian start-ups partnering with European business.
ABIE encourages consideration of the Australian Government’s role in better facilitating Australian businesses to thrive in Europe through language and cultural exchange and visibility on business opportunities and procurement conditions – particularly for SMEs that are not well connected.
6.47
ABIE France detailed how stringent EU laws and bureaucracy in certain sectors such as travel make it difficult for Australian companies to establish local subsidiaries in Europe.
However, with the Brexit and the recent DCNS submarine deal, the timing is good to push for greater advantages for Australian companies in Europe…French infrastructure and defence companies are increasingly privileged in Australia and the Australian Government should consider how better reciprocity can work in France, country to country.
Reciprocity or mutual recognition can be much broader than currently envisaged, looking at a range of business models, as well as including reciprocity for (eg.) tertiary qualifications in sectors such as medicine, law and IT in order to facilitate the exchange of employees.
6.48
The German Australian Business Council explained the challenges ahead for free trade agreements due to how the economies of the UK are so intertwined with the economies of the EU27 that make it difficult to “separate” the two economies.
A simple example to illustrate this point. The German BMW car company has agreed to build its future electric Mini car in Oxford, UK. It would not be beneficial to trade to either the UK, Australia or Germany if BMW were not able to export electric Mini cars to Australia under the provisions of the UK-Australia FTA on the basis that the Mini plant in the UK is beneficially owned by a German company.
Tariff barriers to trade
6.49
Australia does not currently have a trade agreement with the EU which means Australian exporters face tariff barriers when exporting to the UK.
6.50
Preferential market access from an FTA with the UK would be an obvious positive for Australian exporters, particularly if it reduced current barriers for beverage and services sector exports. Australian wine, for example, paid approximately $42 million in UK import duties in 2015.
However, lower duties that would likely accompany any potential FTA would put Australian exporters on a ‘level playing field’ against major European competitors.
6.51
The average applied tariff rate for non-agricultural imports into the EU was 4.3 per cent in 2014. Stakeholders have indicated in submissions to the Australia-EU FTA consultations that the reduction and removal of tariff barriers will be of benefit to industry.
Red meat exports and the EU’s tariff rate quotas
6.52
The International Meat Trade Association (IMTA) in the UK, which represents British importers and exporters of beef, lamb, pork and poultry-meat want continued access for Australian red meat into the UK market at the same quantities during the ‘Brexit’ negotiations.
6.53
Many IMTA members import beef and lamb from Australia and some IMTA exporters send pork to Australia.
UK exporters would welcome more flexible veterinary access for pork exports into Australia. Mutual recognition of veterinary rules leading to reduced checks for both parties would be welcome.
Australian rice exports and the EU’s tariff rate quotas
6.54
In the context of future trade negotiations with the UK, SunRice noted that attempting to limit the importation of Australian Japonica rice through TRQs and/or tariffs of €175/tonne on import above Australia’s quota, as presently undertaken by the EU, merely serves to increase the costs for value-adding food processing businesses operating domestically within the UK.
6.55
SunRice recognised the challenges of including Australian rice in FTAs focused on Asian markets due to cultural and political sensitivities of their own rice growers but those concerns should not apply to UK negotiations.
Such factors should not impact in any way on trade negotiations with the UK as it has no domestic rice industry to protect or support.
6.56
SunRice stated the Australian rice industry is well positioned to benefit from a future FTA with the UK. Australian rice growers are the most efficient in the world and the industry produces quality Japonica varieties, such as short grain Koshihikari and Opus, and medium grain Calrose-type Sherpa and Reiziq, to meet growing UK demand due to the UK’s ‘sushi revolution’. Future potential export volumes of Australian Japonica rice to the UK could be expected to reach 40,000 tonnes per annum and generate revenues approaching $60 million.
6.57
SunRice recommended that any future FTA negotiation by the Australian Government with the UK “ensures unrestricted access and the removal of tariffs for any rice imports from Australia”.
Exports of Australian cane sugar to the UK
6.58
Freeing up the trade in raw cane sugar should be one priority, according to the Australian Sugar Industry Alliance (ASA), in the Australian Government’s efforts to improve the trade and investment relationship between Australia and the UK.
Australia is the second largest exporter of raw cane sugar globally and the UK has a significant raw cane sugar import requirement. A trade agreement between Australia and the UK provides opportunity to reset the relationship.
6.59
For sugar this means the Australian Government negotiating removal of the “prohibitive MFN import duty of €339 per tonne that effectively prohibits any access for Australian sugar to the UK above the very small CXL quota volume”.
Securing duty free access for Australian raw cane sugar in the forthcoming trade discussions with the UK will provide opportunity for UK refiners to access increased quantities of Australian raw sugar on competitive terms. It will also enable Australian exporters to renew and develop commercial trading arrangements with the UK’s sugar refiners.
6.60
The Australian Sugar Industry Alliance stated establishing this environment will create good opportunities to grow Australia’s raw sugar trade with the UK once it has exited the EU.
Achieving a commercially worthwhile increase in access for Australian sugar to the UK is both realistic and achievable in the forthcoming trade discussions.
Non-tariff barriers to trade
6.61
During trade negotiations with the UK, the National Farmers’ Federation will be seeking the Australian Government commitment to a “strong, robust and science based approach to biosecurity that protects Australia’s agriculture from pests and diseases”.
Biosecurity underpins the competitiveness of Australian produce overseas since export markets demand high-quality, safe food.
6.62
The NFF submitted it will be critical that the Australian Government works with the UK Government on ensuring that not only market access is achieved for Australian agricultural producers, but also on “addressing the seemingly ever increasing non-tariff barriers to trade”.
The non-tariff barriers are a high priority for Australian farmers as they can be more restrictive than tariffs and quotas and must form part of any trade discussion.
6.63
As the UK exits the EU, the NFF stated it is well placed to provide advice to the UK agricultural industry including its National Farmers Union on a range of areas that have until now been controlled by the EU, for example in areas such as biosecurity arrangements and capability.
6.64
The Department of Industry, Innovation and Science has oversight of Australia’s standards and conformance bodies who undertake much of the technical interactions with their counterparts from the UK. The standards and conformance bodies include: Standards Australia, the National Association of Testing Authorities (NATA), the Joint Accreditation System of Australia and New Zealand (JAS-ANZ), and the National Measurement Institute (NMI).
6.65
Outcomes from the recent decision of the UK to leave the EU are not likely to raise any significant challenges for Australia’s standards and conformance infrastructure, according to the Department of Industry, Innovation and Science. Since Brexit, UK standards and conformance bodies have expressed greater intent to cooperate further with Australia’s standards and conformance infrastructure.
6.66
The Treasury Wine Estates highlighted the importance of the Australian Government negotiating to maintain the Agreement between Australia and the European Community on Trade in Wine (the Wine Agreement) that harmonised winemaking practices; established protection for geographical indications and traditional expressions; and reduced analytical requirements for the European Import Certificate of analysis.
Finally, while a zero tariff treatment in an Australia-UK FTA would be a significant benefit to the Australian wine industry, TWE recognises the fundamental importance of ensuring key elements of the current Agreement between Australia and the European Community on Trade in Wine (the Wine Agreement) is maintained, or improved, for exports to the UK and the EU.
6.67
The Winemakers’ Federation of Australia agreed on the importance of maintaining the Wine Agreement and during any renegotiation seeking to eliminate certification and testing requirements through mutual recognition or equivalence of each other’s regulatory systems.
Although non-tariff measures are not a major problem, any agreement should establish systems to allow the easy approval of new additives and processing aids (ideally through mutual acceptance); minimise testing requirements (eliminate in the case of ‘low risk’ foods such as wine); harmonise or mutually accept labelling requirements and collaborate in international forums to work on reducing non-tariff measures world-wide.
6.68
In this regard, Treasury Wine Estates supported the future negotiation of the Wine Agreement, ensuring the current approach at a minimum is maintained, securing technical market access.
6.69
The Australian Grape and Wine Authority agreed it will be important for government negotiators to ensure that the benefits accruing to Australia from the current Wine Agreement with the EU are retained in relation to shipments of wine to the UK when that treaty no longer applies to such consignments.
Furthermore, the technical problems currently facing wine shipments to the UK due to issues unresolved by that treaty should be addressed through bilateral discussions with UK authorities once they have a mandate to conduct such negotiations.
6.70
Finally the AGWA stressed the importance of the treaty on trade in wine between Australia and the EU providing reciprocal protection of each party’s geographical indications, and other terms, in relation to wine.
It would be necessary to ensure such protection remains in place in the UK following that country’s withdrawal from the EU.
6.71
The Wine Economics Research Centre also recommended in its Wine Policy Brief No. 17 that the Australian Government encourage the UK to join the World Wine Trade Group which aims to facilitate international trade in wine through information sharing, discussion of regulatory issues in wine markets, and joint actions for the removal of trade barriers.
Ultimately, Australia may end up with a better wine trading relationship with the UK than it has currently, but not for several years, during which time Asian wine markets are likely to have become even more important to Australian exporters.
International trade dispute resolution
6.72
The German Australian Business Council submitted the inclusion more recently of non-tariff related provisions in free trade agreements means that many more future disputes will concern such non-tariff related provisions and will be of interest not just to the parties concerned.
It will be important that these decisions become generally known so that businesses are able to gain clarity about the legal framework. In this respect, we note that many of the decisions of the Court of Justice of the European Union concern the interpretation of provisions in EU law which would be typically included in free trade agreements and the Court of Justice of the EU has become a major source of law for companies in the EU or wishing to sell products in the EU.
6.73
The GABC believe that, in the first instance, recourse should be had to domestic courts in Australia, the UK or EU in the event of any disputes arising out of any free trade agreements.
There will always be a perception, however, that there is a degree of bias towards domestic companies in decisions made by domestic courts. We believe therefore that a transnational tribunal will be required to provide guidance on the interpretation of the agreements.
Prohibiting currency manipulation
6.74
Ford Motor Company of Australia submitted that the Australian Government needs to prohibit currency manipulation by the inclusion of clear and enforceable provisions to prevent it and to have these provisions included for consideration during the preliminary negotiating phase of a free trade agreement with the UK Government.
It is clearly in the national interest to ensure future trade agreements incorporate appropriate and enforceable disciplines to deal with any instances of currency manipulation. If left unaddressed, currency manipulation has the ability to seriously compromise the economic benefits and outcomes projected to flow to Australia as a result of concluded trade agreements with other global economies.
6.75
Ford Australia urged the Australian Government take a leadership position on currency manipulation through intervention to ensure “future trade agreements are high quality, forward-looking and comprehensive, and include WTO-compliant provisions to eliminate currency manipulation practices thereby ensuring genuine reciprocity of opportunity for all participants”.
Expanding the Export Market Development Grants scheme
6.76
The Winemakers’ Federation believes there is also potential for the Australian Government to renew and expand the Export Market Development Grants (EMDG) scheme in the UK. The industry collaborative marketing undertaken by the Australian Grape & Wine Authority means that EMDG can maximise the opportunity of small and medium sized enterprises to establish themselves in this market and capitalise on pro-Australian sentiment arising post-Brexit.
As it takes up to five years to grow a market to a sustainable level of profitability, many winemakers by this stage have exhausted EMDG funding opportunities and are unable to capitalize on entry into the new UK market. However, to provide maximum benefit in this environment, it is important that the eligibility of the grants be reviewed, so that all wine exporters can take advantage of the opportunities that are provided by a recovering international economy and a targeted marketing and promotional campaign from industry.
6.77
The Winemakers’ Federation believed re-opening access to the EMDG to wine exporters who have used scheme before will present a renewed opportunity for the Australian Government to assist the wine industry’s expansion into the UK by providing “ongoing support to ensure newly established international brands succeed for several years beyond their entry into the international market”.
We seek the support of the Australian Government for the maintenance or increase in previous Budget funding levels and to amend the criteria for EMDG. We would seek changes in eligibility criteria that would permit those exporters that have been forced out of markets and have exhausted their EMDG grants to receive further grants. This will provide maximum benefit to both exporters and the Australian economy.
6.78
The Restaurant & Catering Association fully supported the ongoing use of the EMDG scheme by tourism and hospitality operators as a means of leveraging international trade opportunities.
The visitor economy is dominated by small to medium sized enterprises, many of whom lack the financial capacity to enter international markets independently. As such, the EMDG provides these operators with the capacity to expand their businesses internationally, and broaden their customer base in major international source markets.
Benefits of FTAs for export credit financing
6.79
According to its submission any measure that boosts export activity is of benefit to the Export Finance and Insurance Corporation (EFIC), the Australian Government’s export credit agency (ECA). EFIC believed stronger Australian exports to the UK would give EFIC the opportunity to help more Australian businesses achieve export success.
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For example, since Australia signed the Australia – United States Free Trade Agreement (AUSFTA) in 2004, EFIC has helped exporters across a wide range of industry sectors enter and increase their operations in the US market. In addition, during the 2015-16 financial year EFIC provided support to 23 Australian companies exporting to the US.
Austrade’s role in trade, investment and tourism
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Austrade contributes to Australia’s economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:
develop international markets and promote international education
win productive foreign direct investment
strengthen Australia’s tourism industry
seek consular and passport services (in limited locations where Austrade provides these services on behalf of DFAT).
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Austrade achieves these objectives by generating market information and insight, promoting Australian capabilities, developing policy, making connections through an extensive global network of contacts, leveraging the badge of government offshore, and providing quality advice and services.
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Austrade is responsible for the promotion, attraction and facilitation of productive FDI into Australia. It is the first national point-of-contact for all investment enquiries. Working in partnership with Australian state and territory governments, Austrade provides investors with the information needed to establish or expand a business in Australia.
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To deliver the greatest value to the Australian economy, Austrade’s investment-related services are focused on promoting Australia as a competitive investment destination and attracting productive FDI that is of strategic importance, builds Australian capabilities and enhances productivity.
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Available assistance to potential international investors includes:
Initial coordination of investment enquiries and assistance
Information on the Australian business and regulatory environment
Market intelligence and investment opportunities
Identification of suitable investment locations and partners in Australia
Advice on Australian government programs and approval processes.
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Leading Australian investment bank Macquarie Group is also supportive of the role played by Australian Government agencies such as DFAT and Austrade.
These organisations play an important role in assisting Australian exporters in the UK and elsewhere internationally, and Macquarie has confidence in their ability to represent the interests of Australian exporters as the UK progresses its exit from the European Union.
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Austrade's role includes the international marketing and promotion of Australian education and training. Austrade support to the education sector is guided by the Framework for the international marketing and promotion of Australian education and training. Austrade delivers branding, international marketing and promotion services on behalf of the Australian education sector. This includes positioning an Australian education internationally through the Future Unlimited international education brand.
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Austrade also supports Australian education and training providers through a range of tailored services to support their international education engagement strategies, including accurate and timely market insights, and opportunities provided through Austrade's Market Information Package.
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The University of Melbourne supported the work of Austrade promoting Australia’s education sector internationally. It noted since 2012, enrolments from UK citizens in Australian universities had grown by 40 per cent.
Austrade’s role and objectives in the UK
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In established markets such as the UK, Austrade’s resources are focused predominantly on inward investment promotion and international education services, with assistance to Australian exporters provided through market briefings and referrals to external service providers.
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Professor Philomena Murray and Dr Margherita Matera from the University of Melbourne and Dr Laura Allison-Reumann from the Nanyang Technological University recommend the government, business groups, NGOs and expert academics develop an up to date guide for Australian businesses and service industries seeking to be based in or work in the UK.
The development of a guide by DFAT for Australian businesses and service industries seeking to be based in or work with the UK, similar to ‘Export EU’ – for example, ‘Export UK’ (2005) would be useful. As would a DFAT guide for UK businesses and service industries seeking to be based in or work with Australia. These guides would benefit from pre- and post-‘Brexit’ information.
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Melbourne academic with expertise on single market effects and the impact of free trade agreements on corporations, Professor Gabriele Suder, stated this communications role is crucial as “firms systematically look for governmental and other support to work through the complexity of FTA arrangements”.
A digital solution, developed together with relevant practitioners, as existent in the EU, would be one useful tool here, also –along the previous ‘EuroInfoCentre’ – model- information and communication policies that help translate FTA provisions into reality for SMEs will be most helpful. Also, broad public communication about access to firms to the FTAs that Australia has signed, and about the benefits to the broader society (a tool for economic and geopolitical stability; benefits in consumer choice, counterbalancing growing populism…)
Tourism Australia
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The Tourism & Transport Forum called upon the Australian Government through Tourism Australia and state tourism authorities to “redouble their efforts to attract UK visitors to Australia through an increase in promotional expenditure, and more targeted destination marketing campaigns, incorporating new product”.
In particular TTF urges Australia's tourism organisations to increase their focus on regional destinations, as part of the growing commitments of governments and the industry to increasing visitor dispersal beyond capital cities.
Australian Grape & Wine Authority
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In recognition of the UK’s important place in the international wine market, the Australian Grape and Wine Authority (AGWA) has its office for Europe, the Middle East and Africa in London, which is AGWA’s base for its extensive marketing activities.
For example, the annual Australia Day Tasting in London is the largest tasting of Australian wine in the UK trade calendar with more than 1200 people immersing themselves in more than 1000 wines.
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The UK-based AGWA team also conducts wine seminars, education and targeted tastings and in-market promotions, and it builds relationships with the wine trade to create opportunities for Australian wine brands.
State and territory governments
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Professor Philomena Murray and Dr Margherita Matera from the University of Melbourne and Dr Laura Allison-Reumann from the Nanyang Technological University recommend that trade issues with the UK be discussed between all governments in Australia ahead of ‘Brexit’ or any FTA with the UK.
Leading up to the UK’s exit from the EU, the role of the Australian governments should be to minimise uncertainty – a major concern of investors and traders - through information and communication. Developing a strategy that is all-of government at the federal level and that involves the active participation of state and territory governments would be advisable.
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The Australian British Chamber of Commerce submitted that the opportunity for Australian governments to be better placed to develop and build on the success of the Australian UK relationship in the future will rely upon the resourcing of their offices in the UK, the interconnectivity and collaboration of each state and territory, with both Austrade and the High Commission and other external agencies including the Australian British Chamber of Commerce (based in Australia) and the Australian United Kingdom Chamber (based at Australia House in London) in building strong support for “Team Australia”.
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The Chief Executive Officer of the Australian Food and Grocery Council, Ms Tanya Barden, said the Council have always been supportive of a national food brand and coordination as a minimum between the state and territory governments.
We see various trade missions from individual states. That will continue but we at least need to have some coordination and cohesion around the messaging. There is some work that industry started to do in that space, as well as following on from some work that Austrade has previously done, trying to get some research to underpin what those common messages are.
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Ms Barden believes having one national brand has a lot of strength and merit and should allow states and territories to still be able to promote themselves.
But it should be a brand within which individual states, industry and individual company brands can sit so that you have consistency between what it is that everyone is seeing. It does not mean you cannot still have individual state or company approaches, but we just need some consistency in what ties it all together… New Zealand's campaign is around 'New Zealand Pure'. What is it that we want Australian food to be seen as? Clean, green and safe is what comes up all the time.
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The Director, Economics and Sustainability, at the AFGC, Mr Peter Keogh, highlighted the importance of marketing to the British wholesalers because that is where a lot of the food-purchasing decisions in the UK are made at the wholesaler level. Mr Keogh said these wholesalers, especially at the premium end such as Harrods, can be more educated about food and beverages than at the retail level so when they make a decision to buy a product from Australia, “that's what ends up on the retail shelf”.
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One of the key messages the Australian British Chamber of Commerce often hear from businesses in the UK on a “regular basis” is the lack of exposure in the regions outside of London to those government and business support services.
To this end, it is our view that an Australia UK Week, where Australian governments’ come together as they do in other markets including the China, India and United States of America for example to reach out to businesses across the UK and engage directly with them to encourage investment and trade with Australia.
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Professor Murray, Dr Matera and Dr Allison-Reumann have anticipated following ‘Brexit’ that state and territory governments will seek to develop deeper relations with the city of London.
These governments will be advised to draw on the expertise of joint UK-Australian companies for models of future cooperation across other businesses. In addition, there are important opportunities for strengthening ties with other key cities in the UK and the EU and not simply focusing on just London – with city-to-city links for example.
Victoria
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Victoria highlighted that it has an enduring and rich relationship with the UK that is built on a long history of migration, trade, investment and long established cultural ties. Critical to the relationship has been Victorian representation in the UK since 1868, by the Agent-General for Victoria.
Today the Agent-General and the Victorian Government Business Office (VGBO) in London continue to play a pivotal role in advancing Victoria’s interests in the UK (and Europe more broadly) and are a clear reflection of Victorian Government commitment to the UK as a trade and investment partner. This commitment will continue post-Brexit.
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The uncertainty about how the transition period will play out and the final terms of the separation necessarily means that is not possible for the Victorian Government to be definitive about how ‘Brexit’ will affect Australia and Victoria’s commercial relationship with the UK. At this early stage of the Brexit process, Victoria welcomed the opportunity to signpost potential issues for Victoria and Australia in its future relationship with the UK and the EU.
Role of Victorian Government Business Offices during ‘Brexit’
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Victoria’s VGBOs in London and Frankfurt are considered important assets for Victoria’s efforts to protect Victoria’s trade and investment interests in the UK and Europe more broadly as ‘Brexit’ takes place. In this regard, the London VGBO will continue to engage with key stakeholders from both the UK and Australian governments, including the UK Department of International Trade and the Australian High Commission in London, to ensure that the post is kept abreast of changing market conditions to help inform decision making in Melbourne.
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A key issue for the London VGBO will be supporting Victorian companies currently exporting to the EU through the UK, and assisting them in navigating the challenges and opportunities presented by ‘Brexit’.
When the scope of the UK’s withdrawal from the EU becomes clearer, the office will consult with Victorian exporters in key sectors such as professional services, technology, retail and food and agriculture, to understand their evolving business requirements and to continue to support their internationalisation.
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Importantly, the London and Frankfurt VGBO core trade and investment facilitation activities will continue as usual throughout the Brexit process, with an aim to strengthen Victoria’s long standing presence in the UK and Europe region in a time of economic uncertainty.
The soon to be appointed European and UK Defence Representative, to be located in the London VGBO, will strengthen Victoria’s engagement with the defence sector, with a particular focus on identifying trade opportunities for Victorian defence industry.
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The work of the VGBOs in relation to Brexit will complement Melbourne-based efforts to assist companies to understand emerging opportunities and risks associated with the Brexit process.
Queensland
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Trade and Investment Queensland submitted that it wants to work with the Australian Government to support Queensland exporters seek new markets in the UK and also the renewed interest in Commonwealth post ‘Brexit’.
The role of support from governments working together will remain important, particularly assisting Queensland exporters to access new opportunities as they emerge to provide a “first mover” advantage where possible…Because we are hosting the Gold Coast Commonwealth Games in April 2018 (GC2018) and associated Trade 2018 program, Queensland has a unique opportunity to work with other jurisdictions to grow mutually beneficial trade and investment opportunities among Commonwealth nations. By 2020, 40 per cent of the global workforce will be located in the Commonwealth (currently one third of the world’s population, of which 60 per cent is under 30) and will contain over 1 billion middle class consumers.
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Trade and Investment Queensland also saw potential to further leverage Queensland as a gateway to Asia as an investment message in the UK as British businesses look to new export markets post ‘Brexit’.
New South Wales
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In 2013 the NSW Government launched its international engagement strategy, which outlined the state government's priorities for trade, investment, and government-to-government engagement with 10 priority overseas markets overseas, including the UK.
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In 2016, a review of the NSW Government's priority market strategies was completed, resulting in the identification of sectors that NSW Government would focus its trade and investment promotion efforts on. In the UK, these are in the following sectors:
Infrastructure - To attract investment into NSW's $73 billion infrastructure program from UK-based major investors, and encourage participation in these major infrastructure projects by leading UK construction and engineering companies.
Technology Innovation - To attract leading UK-based tech innovators, venture capital funds, accelerators and incubators to enhance the talent, density and capital available in NSW's innovation ecosystem.
Professional Services - To promote NSW as a regional hub for financial, legal and other professional services, to Australia and in Asia; and to support the export of high-quality professional services from NSW to the UK.
Renewable Energy - Attract renewable energy companies in the UK to invest in NSW.
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The NSW Government's trade and investment arm known as NSW Trade & Investment maintains close and mutually-beneficial working relations with DFAT and Austrade.
NSW Trade & Investment is committed to working as ‘Team Australia’. In setting our priority market strategies and implementing our work, we regularly consult DFAT and Austrade. Our export promotion function is facilitated by Austrade (through the export development program), and NSW Trade & Investment has tailored its support functions to minimise unnecessary overlaps with export promotion functions delivered more effectively by Austrade.
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NSW Trade & Investment has also activated a program with Austrade, whereby several of its Trade and Investment Commissioners overseas are embedded with Austrade posts. This is true in London, where the NSW Government's Director of Trade and Investment in the UK is located with Austrade's offices in Australia House (in the High Commission), and works with Austrade officers while advancing both an Australian and a NSW agenda.
This model is a cost-effective, turn-key operational model enabling the NSW Government to leverage Austrade's well-established network, systems and staff knowledge to generate maximum economic outcomes for the State. This co-located model with Austrade provides significant flexibility for the NSW Government to operate and expand its footprint in the UK (and Europe) while also supporting Austrade's efforts at advancing its national trade and investment agenda.
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Working with Austrade and DFAT, the NSW Government submitted provides value to business in identifying and securing business opportunities in the UK.
We will continue highlighting business opportunities from Brexit and will work to promote new opportunities under a future Australia-UK FTA.
Pharmaceutical industry
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Medicines Australia, which represents the research-based pharmaceutical industry in Australia, recommends the Australian Government negotiate a mutually agreed set of principles with the UK Government as a foundation for successful trade agreement as was done previously in the development of the Australian-US Free Trade Agreement (AUSFTA).
The acknowledgement of these principles culminated in the inclusion of a specific chapter on pharmaceuticals in the AUSFTA. Thus for the health sector, the founding principles ensured that the best possible outcome for Australians’ access to health services, was successfully upheld. Hence, it will be important that changes and enhancements to the current trade and investment relationship with the UK should similarly be approached from a principles basis.
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Medicines Australia recommended the inclusion and recognition of the following principles in future free trade agreements such as with the UK:
a.
the important role played by innovative pharmaceutical products in delivering high quality health care;
b.
the importance of research and development in the pharmaceutical industry and of appropriate government support, including through strong intellectual property protection and other policies;
c.
the need to promote timely and affordable access to innovative pharmaceuticals through transparent, expeditious, and accountable procedures, without impeding a party’s ability to apply appropriate standards of quality, safety, and efficacy; and
d.
the need to recognise the value of innovative pharmaceuticals through the operation of competitive markets or by adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical.
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Medicines Australia also supported an option to monitor the trade relationship between Australia and the UK through the formation of a medicines working group in a future trade agreement with the UK.
This will enable the innovative pharmaceutical sector to engage more effectively in the supporting movements towards reducing regulatory burden that limits timely access to new medicines in both countries.
Regulatory harmonisation and clinical trials
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Medicines Australia supported a closer harmonisation of regulatory systems that would be beneficial in promoting closer economic ties, but it should not be to the detriment of displacing investment between the two countries.
Any future trade agreements should look to streamline regulatory approval processes for access to new medicines, including alignment with the current reforms being undertaken by the Therapeutic Goods Administration as part of the Medicines and Medical Devices Review.
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With Australia also currently looking to establish a free trade agreement with the European Union, Medicines Australia warned the exit of the UK could create possible divergence in regulatory systems.
The Australian Government should also consider how to ensure ongoing alignment in regulatory processes across the three jurisdictions, given the close ties between the UK and the EU. This is particularly important for the pharmaceutical industry in Australia, with the current global supply chains of many of Medicines Australia’s members. If regulatory systems were to change, or trade barriers imposed, then this could have a potential impact on the timely access to new medicines for Australian patients. One key area where this could have a resounding impact is on the investment in clinical trials.
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Medicines Australia believed a new free trade agreement would provide the Australian Government with an “ideal opportunity to streamline and harmonise clinical trials regulation to more closely align with” Australia’s key trading partners.
Clinical trial reforms in Australia are much needed and universally supported. However, persistent differences in research governance systems including ethics approvals, and inconsistencies within and between States and Territories in Australia, continue to hamper our potential to attract new clinical trials from key trading partners such as the UK.
Intellectual property
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Medicines Australia hoped the development of a trade agreement with the UK should ensure that there are no further reductions to Australia’s IP system.
This may be achieved by maintaining a commitment to and where appropriate strengthening, well accepted incentives to innovate, such as the period of exclusivity through patents, as well as suitable periods for data protection with regulators. Such systems recognise the important balance between risk and reward, particularly in highly novel areas. Additionally, appropriate patent notification schemes should be enforced. Trade agreements that do not adequately support the important role of a strong IP system, undermine investment and economic growth.
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Medicines Australia believed patent rights are one of a number of factors which influence companies’ investment decision making. Since Australia makes up only around one per cent of the global pharmaceutical market, it is therefore even more important that Australia has globally competitive strengths in such areas as IP, medical research and high regulatory standards to continue to attract pharmaceutical investment.
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Regulatory data protection (RDP), or data exclusivity, is particularly important for biologic therapies.
Where the period of market exclusivity from a patent cannot be assured, which is more likely for biologics, innovators will rely more heavily on data protection to enable them to recoup up-front investment.
Tax incentives for research and development
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Despite significant international competition, Medicines Australia’s member companies invest about $450 million annually in Australia on research and development (R&D) activities, such as clinical trials.
Whilst the research based pharmaceutical industry is, by nature, research intensive, decisions on where and when to place R&D activities are made globally and will be influenced by a number of factors against which Australia needs to introduce and maintain a competitive edge.
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Medicines Australia claimed research partnerships between hospitals, research institutions and medicines companies currently support thousands of jobs for Australian scientists and researchers.
However, with the right incentives, Australia can become an even stronger international innovation and investment destination. Future trade agreements between the UK and Australia could leverage this investment and ensure that incentives to support investment in R&D are strengthened and retained.
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As biotechnology and medical technology are global industries, Medicines Australia stated it was important to maintain a stable, supportive and consistent policy environment in Australia to encourage life sciences businesses to make strategic decisions around R&D activity and bring additional investment into Australia.
A key incentive is the R&D Tax Incentive. This incentive is a key foundation for the innovation that is the life blood of pharmaceutical and medical technology sector in Australia.
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According to Medicines Australia, the current R&D Tax Incentive:
provides significant support to businesses in pharmaceuticals sector to undertake, develop and extend their R&D activities that would not be otherwise possible or that would be significantly delayed; and
plays a significant role in maintaining Australia’s competitiveness as a preferred location for R&D activities, including pre-clinical testing and clinical trials.
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Medicines Australia recommends that entrenched support for the clinical trial environment in Australia should be considered a core component in developing free trade agreements, especially as pharmaceutical companies compete internally with other regions for investment in trials.
Incentives such as the R&D tax incentive should be retained and acknowledged in free trade agreements, to ensure that investment in R&D activities in Australia is not unintentionally hampered. It also provides as an incentive for foreign direct investment in Australian clinical trials and advanced manufacturing of pharmaceuticals that can then be exported to the Asia Pacific region.
Investment
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Austrade leads a national, whole of government strategy for the promotion, attraction and facilitation of foreign direct investment into Australia. Working in partnership with other Federal agencies and state and territory governments, Austrade focuses on attracting investment into five nationally-agreed priority sectors (major infrastructure, tourism infrastructure, agribusiness and food, resources and energy, and advanced manufacturing, services and technology), and proactively targets potential investors in these sectors.
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While the impact of Brexit on UK investment flows is still unclear, and is likely to remain so until negotiation of the terms for Britain’s withdrawal are closer to finalisation, the UK is expected to continue to be an important source of FDI for Australia in each of these priority sectors. For example, for infrastructure and agribusiness, the strength of the UK as a global financial centre presents opportunities for investment in large-scale projects. In advanced services, the position of the UK as a major IT and technology centre presents opportunities within a range of sub-sectors including cyber security, fintech and e-health, and the UK’s science and innovation base has relevance across each of the priority sectors, including in agri-tech.
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In addition to working with UK headquartered firms, given the UK’s position as a global financial centre, it is also often the investment decision centre for organisations from other countries, including major pension and sovereign wealth funds. As such, Austrade UK works closely with other Austrade Posts in promoting Australian investment to these international groups. In addition, Austrade UK will work jointly with onshore colleagues and other Posts to develop and execute engagement plans for key investment accounts, including key account aftercare; and to support MNC integrated engagement activity as part of the global value chain strategy.
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As such, Austrade is continuing to implement its existing multi-year initiatives in the UK in each of these priority sectors, with a focus on:
continuing to develop priority sector investment pipelines;
contributing to the entry of new investors in the priority sectors;
supporting additional re-investment from existing UK investors;
contributing to the Government’s innovation agenda through innovation-enhancing investment across the priority sectors; and
supporting the Northern Australia development agenda, particularly in relation to infrastructure, agri-business and tropical medicine investment and collaboration.
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Austrade is also considering expansion of proactive investment promotion activity into the medical research and technology sector and in renewable energy. There is a growing appetite among UK institutional investors, funds and asset managers in energy-related infrastructure including renewables, coinciding with the new Renewable Energy Target (RET) in Australia and Infrastructure Australia’s 15 Year Plan which highlights specific opportunities in renewable energy infrastructure.
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Longer term, a rebalancing of resources across priorities may be required as the impact of Brexit becomes clearer. To this end, Austrade is engaging with British investors, officials and other stakeholders to gather their insights into the implications of Brexit on future UK investment flows, and will pass these insights on to business and government stakeholders in Australia.
Education, science and research collaboration
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The UK is Australia’s leading market for higher education in Europe, according to DFAT and Austrade. The fastest growing area of demand is for short courses and non-degree programs. The UK 2016-17 Education market plan is aligned with the Australian International Education 2025 Strategy. Austrade UK will continue to engage in a limited range of targeted higher education promotion, including through social media. Austrade is also undertaking market scoping to explore opportunities for:
collaboration among UK and Australian providers on projects in third countries;
curriculum linkages among UK and Australian providers in areas of particular need (e.g. healthcare, engineering);
working with DFAT to engage young and influential British alumni of Australian universities in key sectors (law, health, sciences).
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Professor Philomena Murray and Dr Margherita Matera from the University of Melbourne and Dr Laura Allison-Reumann from the Nanyang Technological University recommend development of an UK-specific education strategy to attract UK students possibly excluded from the EU along with a road map for research and development cooperation between Australia and the UK.
The two governments will need to seek increased mutual access for Australians to work and study and have short term visas in the UK and vice versa.
Given that there may be restrictions on UK students studying in the EU, a strategy for the Australian Government and Universities Australia to attract UK students to Australian universities for undergraduate, graduate and research higher degrees should be developed.
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The Department of Education and Training has established an international network of counsellors to manage the Australian Government’s engagement with partner countries across the world on matters related to education. According to the Department, the network plays a valuable role in exchanging information and advice with host governments and in-country institutions and organisations and is uniquely placed through several offices world-wide to build strong education partnerships internationally.
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The Department of Education and Training does not have a Counsellor (Education and Science) based in the UK with the currently counsellor covering the UK based at the Australian Embassy and Permanent Mission to the European Union in Brussels, Belgium. The role of the counsellor in Belgium is to manage the relationship between Australia and European countries in relation to innovation, industry, science, research, education and resources matters, advance the portfolio’s interests across Europe and facilitate bilateral relationships and dialogue between Australia and European countries.
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The Department has an Education Manager based at the Australian Embassy, Paris, France representing the Australian Government, Department of Education and Training at the OECD and UNESCO. In this position, the manager covers a broad range of education policy matters, including early childhood education, schools, vocational education and training, higher and international education.
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The University of Melbourne admitted there are some immediate challenges to Australian universities including “rising international competition and rapid expansion of domestic higher education systems in our major export markets” and the Australian Government plays an important role in supporting Australia’s place in this market.
The Commonwealth’s international network of counsellors has been an important mechanism to build collaboration and market standing in-country.
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The University of Melbourne noted it has become more common for students to select their university on a global basis.
Australia is well positioned to continue to offer high quality education at a competitive price for internationally-recognised qualifications. As a destination for study, Australia offers high quality education, an English-speaking environment and great lifestyle that has contributed to building a strong ‘brand Australia’ in the international market.
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To continue to realise the widespread benefits of the international higher education market there is an important role for government in providing supportive policy settings for the international educational sector, according to the University of Melbourne.
A sustainable sector needs appropriate regulation which can ensure quality offerings that meet student expectations while enabling educational innovation by experienced providers. Maintaining Australia’s excellent reputation as a destination for international students is critical for the health of the whole sector.
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The University of Melbourne claimed Australian universities have the advantage of statutory quality assurance regulation through TEQSA and the ESOS framework.
For its part, the University of Melbourne remains committed to rigorous entry standards and verification of entry credentials. The University has robust processes to ensure prospective students are correctly credentialed, particularly with regards to academic transcripts and completion statements.
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The University of Melbourne stated its overseas agents meet all the requirements set by the Australian government's streamlined visa processing standards and these “same standards should be required of all higher education providers”.
Universities need stable and predictable financial support for teaching and research as well as some targeted programs to drive international collaboration. Government has a role to ensure policy settings for employment, housing and immigration and border control align with the country’s goals for a thriving international education sector.
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DFAT submitted that it constantly monitors the UK education system.
Outreach to prospective students involves mainly digital platforms and targeted speaking slots at multiplier forums. Developments in UK education are also monitored and market insights are shared with Australian providers.
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The University of Melbourne submitted that all government departments needed to assist with Australia’s international education system.
The success of the Australian Government’s International Education Strategy will rest heavily on a shared understanding across government departments of the importance of international education as a key export market for Australia - its international standing as a high quality offering, ranked in the top three in the world. Higher education institutions and government must work together in the recruitment of international staff and students in a seamless, efficient and cost-effective manner. To achieve this, the National Strategy should be integrated within the activity and policy settings of other relevant areas of government, in particular that of Austrade and the Department of Immigration and Border Protection.
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The University of Melbourne recommended the Council for International Education, which is supported by the Department of Education and Training, take a lead role in improving communications between departments.
The Council for International Education is one channel through which inter-governmental communication, coordination and collaboration can be advanced across government and, in particular, between the Education, Trade, and Immigration and Border Protection portfolios.
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Australian students and researchers benefit from close cooperation between Department of Education and Training and relevant portfolio agencies such as the Australian Research Council (ARC), the Australian Skills Quality Authority (ASQA) and the Tertiary Education Quality and Standards Agency (TEQSA).
DET’s strong education and research engagement with the UK is underpinned by close collaboration at the government-to-government level including through the Australia-United Kingdom Education Dialogue (AUKED). AUKED provides a formal framework for senior officials to progress cooperation on a range of issues including student debt recovery, higher education reforms, research cooperation and research-industry linkages.
Despite not having formal agreements with the UK, ASQA collaborated with the UK’s Office for Standards in Education, Children’s Services and Skills (Ofsted) to review and analyse Ofsted’s approach to quality assurance.
The ARC does not enter into country-specific agreements and memorandums of understanding, but is committed to creating and enhancing international collaboration opportunities under the National Competitive Grants Program (NCGP). In 2017, the ARC is funding 910 new and ongoing research projects by Australian researchers that have indicated an intention to collaborate with the UK, with a total funding allocation of over $258 million.
TEQSA renewed its Memorandum of Cooperation with the UK Quality Assurance Agency in June 2016 and also collaborates with the UK through the Quality Beyond Boundaries Group (QBBG), a network of international quality assurance agencies.
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The Australia Government, according to DFAT, also intend to discuss opportunities to deepen collaboration on clean energy, negotiate independent access to significant EU science research funds, and attract further UK investment into Australia (UK businesses currently have $76 billion in direct investments in Australia).
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Through its international science engagement function, the Department of Industry, Innovation and Science and its portfolio agencies are responsible for leading intergovernmental relationships across the whole spectrum of science and research.
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Australia and the UK have a longstanding and productive science and research relationship.
While Australia does not have a science and technology treaty with the UK, the UK remains Australia’s second highest science and technology collaborator and is Australia’s main collaborator in Europe. In the period from 2011 to 2015 there were over 31,000 joint Australia-UK science and technology publications, with 6 per cent of these being in the top 1 per cent globally in their field by citation impact.
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In 2016 the Department of Industry, Innovation and Science launched the Global Connections Fund programme, an initiative of the Global Innovation Strategy that provides funding to help Australian businesses and researchers to collaborate with international partners, including researchers from the UK, on research and development projects. The programme is supported by the Department through the National Innovation and Science Agenda and administered by the Australian Academy of Technology and Engineering (ATSE). The programme comprises $4.9 million to support global SME-to-researcher collaborations to enable viable projects to grow and test commercialisation in industries of strategic growth in Australia.
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Under the National Innovation and Science Agenda, the Department of Industry, Innovation and Science is also supporting the Global Innovation Linkages programme. This $16.5 million programme supports Australian industry and research organisations with grants, up to $1 million per grant over a maximum period of four years, to engage with international partners, including the UK, to undertake research and development projects.
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Also under the National Innovation and Science Agenda, the Government’s Global Innovation Strategy outlines existing and new initiatives and support for international innovation and science engagement. The programmes under the strategy will link Australian industry to major Australian and international projects. Through the Global Innovation Strategy, the Department is funding initiatives that will assist Australian companies to gain access to international science and research partnerships and to regional supply chain opportunities in overseas markets.
Indexation of UK pensions for Australian residents
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The Australian Government will also examine opportunities in a number of other areas, including in our people-to-people links. For example, DFAT states it will re-engage the UK on its refusal to index the pensions of UK pensioners residing in Australia. This adversely affects about a quarter of a million UK pensioners in Australia.
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A British pensioner who lives in Australia, Mr Harold Archer, claims the UK Government has been discriminating against retirees in certain countries, predominantly Commonwealth countries such as Australia, by not uprating their pensions each year.
This saves the UK Exchequer about half a billion pounds a year. While they do this, of course, there are many retirees living abroad, and you have thousands of them in Australia who are suffering quite badly because their pensions are not being uprated.
The pension system in the UK is different from Australia. In Australia it is means tested. In the UK it is contributory and mandatory. You have to pay it for so many years to obtain a pension. In our case—that of my wife and I—it was 40 years that we had to pay a pension. From our point of view, had we not moved to Australia, we would be living in the UK now. We would have been receiving a pension and it would be indexed every year. I think you have heard of 'triple lock', which is consumer prices, wages or 2½ per cent—whichever is greater—when the pension gets uprated.
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Mr Archer said coming to Australia was already costing him and his wife the equivalent of about $5,000 this year.
That is just us. If you take the quarter of a million retirees in Australia from the UK who are not having their pensions uprated, the Australian government is having to make that up because these people are suffering financial hardship.
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The British High Commissioner, HE Menna Rawlings CMG admitted the refusal of the UK Government to index the pensions of more than 250,000 British pensioners, who are now living in Australia, was regularly raised with her by Australian Government ministers and officials.
But our answer is consistently that we are not proposing to change the current system. In fact, outside of the EU, it's only a small number of countries with whom we have an arrangement whereby pensions can be uprated, and we're not proposing to change that. This is a long running issue, which Australia continues to raise, but we have consistently said it's not something we are proposing to change for the time being… The one I think that people latch onto, understandably, is the United States, and that is definitely the biggest and most significant. I think that's the one, to be honest, that rankles with British pensioners living here.
Chapter summary
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The main purpose of the Australian Government’s Joint Australia-UK Trade Working Group discussions with the UK Government is to prepare the ground and develop capacity and capabilities so that a swift transition to FTA negotiations is possible, once the UK has completed its exit from the EU.
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The Department of Agriculture and Water Resources works closely with DFAT, Austrade, state and territory governments and industry to identify, and assist industry to access trade and investment opportunities in the UK and EU. The department aims to build on its already close agricultural relationship with the UK Government’s Department for Environment, Food and Rural Affairs, including through increased agricultural cooperation.
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The National Farmers’ Federation would welcome consideration of Australia having a Special Agricultural Trade Envoy appointed by the Australian Government, similar to New Zealand’s trade envoy, who can represent the interests of Australian farmers and agricultural exporters on a range of issues.
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The NFF stressed that Australia’s high biosecurity standards must be maintained to underpin the competitiveness of Australian produce overseas since export markets demand high-quality, safe food.
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Academics recommended the government agencies such as Austrade, business groups, NGOs and experts develop together an up to date guide for Australian businesses and service industries seeking to be based in or work in the UK.
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The Australian Food and Grocery Council is supportive of a national food brand and improved coordination between the state and territory governments. The Government of Victoria outlined the role of its Victorian Government Business Office to promote its trade and investment interests in the UK and Europe more broadly as ‘Brexit’ takes place. Trade and Investment Queensland submitted that it wants to work with the Australian Government to support Queensland exporters seek new markets in the UK. The NSW Government's will focus its trade and investment promotion efforts in the UK on priority areas of infrastructure, technology innovation, professional services and renewables.
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Academics have recommended the Australia Government develop a UK-specific education strategy to attract UK students possibly excluded from the EU along with a road map for research and development cooperation between Australia and the UK.
Conclusion
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The Committee notes the divergent range of issues on this section and that the future report from the inquiry, as indicated from the outset of this interim report, will consider these issues in more detail as the shape of the United Kingdom’s withdrawal from the European Union becomes clearer.
Senator Bridget McKenzieSenator David Fawcett
ChairChairman
Trade Sub-CommitteeJoint Standing Committee on
Foreign Affairs, Defence and Trade
19 October 201719 October 2017