'UN-Efic-AL': Using an Arm of the Australian Government to Give a Leg up
to Foreign Manufacturing – at the Expense of Aussie Jobs
At a point in time when manufacturing in Australia as a percentage of
GDP has plunged by half in the last decade, and more than 200 000 local
manufacturing jobs lost, this bill seeks to introduce provisions that would see
the Australian Government's Export Finance and Insurance Corporation (Efic)
able to support Australian companies set up manufacturing facilities offshore,
in preference to here at home. This bill seeks to introduce bad law and must be
Whilst the Committee Report fairly draws out both the pros and cons of
the impact that this legislative would have, it has grossly underestimated the
risks of this legislation in the context of an economic sector in a perilous
The first amendment seeks, in the words contained in the explanatory
memorandum, 'to allow Efic to offer its specialist financial capabilities in
the operation and administration of Commonwealth financing programs, where
these is no connection to exports. Following Efic's provision of services to
the Northern Australian Infrastructure Facility (the NAIF), Commonwealth
Departments have expressed interest in leveraging Efic's expertise'.
On the face of it this seems sensible until the points raised by Jubilee
Research and The Australia Institute in their submissions are considered, particularly
those in relation to dilution of focus.
Efic's annual report states that 'Efic's primary purpose is to
facilitate and encourage Australian export trade on a commercial basis. We
provide financial support to Australian-based companies that are exporting,
integral to a global supply chain or seeking to grow internationally'.
The report also points out that the organisation comprises about 100 people.
Any diversion of resource and function in such a small and focused
organisation could only reasonably be expected to distract and prevent the organisation
in respect of encouraging export trade.
In the context of Australia's balance of trade deficit, Efic
should and needs to remain tightly focussed on facilitating export trade, and
the first amendment should be opposed.
Under the current legislation, for a company to receive financial
support from Efic it needs to demonstrate that there is some element (labour,
goods and materials) of Australian content. The level of Australian content in
an export contract is an important factor in determining the amount of
financial that Efic provides – in essence, the higher the level of Australian
content, the more financial support Efic can provide.
The proposed changes to the legislation seek to remove the local content
requirements that invoke Efic's support and replace it with the need only for 'benefit'
flowing back to Australia to be present.
This creates a situation where Efic funding could be used to offshore a
new manufacturing capability – at the cost of Australian jobs.
Indeed this bill could facilitate the absurd scenario that money could
be loaned to an organisation to set up a manufacturing facility overseas that
produces a product that in turn is exported back into Australia to compete
against products produced locally by Australian workers.
Australia's manufacturing sector has been in broad decline since 2008, with
real output have contracted every quarter since September 2011. Over 200 000
manufacturing jobs have disappeared since 2008, and the rate of job loss is
accelerating: employment in manufacturing fell six per cent in 2015 alone.
This is an unacceptable situation. As is known from the experience with the
mining boom, Australia must have a diverse and robust economy. Manufacturing
cannot be ignored; it is the engine room of innovation and export. Manufactured
goods account for over two-thirds of world merchandise trade. A country that
cannot successfully export manufactures will be shut out of most trade.
Whilst other countries are developing and implementing manufacturing
growth policies, successive Australian Governments has been asleep at the 'mining
truck' wheel. This bill is worse than that – it is akin to waking the driver up
and specifically directing him to steer the truck off a cliff.
Some of the submitters made the point that the loosening of the Efic reins
may assist companies set up marketing and promotion facilities offshore. Whilst
these sorts of initiatives must be encouraged and supported by Government,
there are other programs better suited to marketing; programs such as the
Export Marketing Development Grant (EMDG) scheme. To pull the Efic lever to
facilitate promotion is to pull the wrong lever.
The Parliament must reject this bill – it is not in the national
interest to have the Australian Government facilitate loans that set up
manufacturing plants and the like on foreign soil.
Removing the local content requirements attached to Efic support
is not in the national interest and the second amendment should be opposed.
Senator Nick Xenophon
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