Speaker: Jennifer Westacott, chief executive of the Business Council of Australia
Event: Simplified Trade Summit
I would like to begin by acknowledging the Traditional Owners of the land we are meeting on today, the Wurundjeri people of the Kulin nation and pay my respects to their elders past, present and emerging.
And thank Perry for his generous welcome.
Thanks for having me here today to talk with you about the importance of a modern, streamlined and digitised cross border trading system for government, for business and most importantly for consumers.
It goes without saying – but our past and future prosperity is tied with our integration with the rest of the world.
We are just under 2 per cent of the world economy, so our opportunities lie in connecting with the other 98 per cent.
One in five jobs rely on trade.
One in four regional jobs rely on trade.
The total value, as you heard this morning, of all trade last year as $1.2 trillion.
This doesn’t just matter – it matters a lot.
I want to look at what is happening now.
As the minister said, for a nation heavily reliant on trade, we rank 106th in the world.
Now let’s look at what that ranking looks at.
It looks at the time and cost of border compliance such as port handling, clearing customs, inspection procedures as well as the ease of processing and submitting documents.
So there are a couple of things holding us back.
I want to repeat some of the examples the minister gave, not because the have the same speech writer. But when you actually look at the examples the Taskforce has already highlighted, they tell you the story of what is wrong, and they tell you the story of what has to be fixed.
So, if I go to our boxed beef exporter to the European Union, they have to do this.
They need to go to the Department of Agriculture, Fisheries and Forestry to understand quotas, and find key regulations for importing country requirements.
They need to book inspections.
Then they need to go to the Australian Border Force to make an export declaration and to become an Australian Trusted Trader.
Then they have to go to the Department of Foreign Affairs and Trade to check whether preferential tariff rates are available.
Then they have to go to Austrade to understand market opportunities and whether they are eligible for any assistance.
Then they have to go to the ATO to claim the exporter GST exemption.
All up, that meat exporter can end up dealing with about 22 regulatory touchpoints.
And any mistake along the way – a data problem, issues with paperwork, IT systems not talking to each other – leads to costly delays.
This is not just a story of big business.
Around 90 per cent of exporters – 50,000 businesses – are small, medium and family run businesses.
Now it’s no easier for importers.
A business wishing to import car parts needs to go to the Department of Agriculture, Fisheries and Forestry to understand biosecurity requirements, fees and inspections.
Then they are off to Border Force to understand customs requirements and tariff concessions.
Then they are back up to DFAT to wrap their heads around Free Trade Agreement arrangements and benefits that might apply.
Then they are back to the ATO to claim GST credits and understand additional duties or taxes involved.
Then they’ve got to go to the Department of Industry, Science, Energy and Resources to receive general information about importing and applying for relevant programs.
I think all the examples you have heard this morning show that our system is unnecessarily complex and fragmented.
Many agencies use different systems and don’t communicate effectively with one another.
Business can be asked to provide the same information over and over again, and often in ways that don’t naturally work with their systems.
The regulatory framework lacks coordination, is often not fully digitised, relies on manual processing and as we have heard the technology is outdated.
Now what does this mean for business – well it means more red tape, it means cost and complexity.
All of these friction points drain on our trade competitiveness.
When compared to New Zealand, it costs over twice as much to export in Australia and import costs are one and a half times higher.
What does this all mean for consumers? Well it simply means higher prices.
Let’s not forget the nuisance cost of tariffs that arise from the complexity of the system, lead to higher prices for consumers.
Every dollar of tariff revenue collected costs the economy $1.60.
So let’s face it, simplifying trade regulation, modernising this outdated government IT system isn’t going to grab the front page of any paper.
But in the context of $1.2 trillion worth of trade and a cost-of-living crisis, I can’t think of many actions we can take as a country to shore up this national critical piece of infrastructure and help drive down the cost of goods and services.
So, what is causing this? And this is from the business perspective.
Three main areas that slow us down, all which are costing extra money and also drain our productivity.
The first is the lack of information and transparency.
Small and medium sized businesses in particular find it really hard to understand their regulatory requirements.
When they can’t easily find an explanation, or an expected decision time, or an expected outcome, they will focus on more predictable markets and opportunities.
The second reason for friction are those delays caused by government itself.
Government cargo clearance processes often extend past estimated timeframes.
Many agencies do not process clearances outside of regular business hours.
And this leaves cargo that arrives outside business hours sitting idle.
Inspections can be delayed by system glitches and data errors, particularly where processes continue to rely on paper forms.
And while some aspects of cross border trade are automated – those that are not lead to significant delays.
In turn, this impacts cash flow, competitiveness and makes imports more expensive for consumers.
And the third obstacle, that others have talked about is duplicability of processes and inconsistent interpretations.
Most government agencies use separate regulatory systems to process trade declarations, licences and permits.
Again, unnecessary duplication.
In a country where our aim is to be a top digital economy – we have agencies that have processes that don’t support basic files like Excel.
And then there are others where data then needs to be manually entered.
There are previous examples of products such as woodchips being exported from different regions that are then subjected to different rules because of differing regional interpretations of those rules.
We have a system which is a quagmire of duplicative regulations and a sea red tape.
Australia is not the only country to have developed responses to this unnecessary complexity.
And that’s why – as we all know – other nations have developed a solution known as the Trade Single Window.
Unfortunately, we’ve stood still while other countries such as Singapore, Sweden, the USA, and New Zealand have moved ahead.
As I’ve said many times relating to other matters of our competitiveness, by standing still we actually move backwards.
So let me step through what simplification looks like.
Well firstly it begins with a mindset change.
Governments tend to think of things as programs, legislation and rules.
Companies used to think of things in terms of products and product lines.
Now, their systems, their mindset, their orientation, and everything they do is focused around the consumer.
As a result of that, they've made complex things seamless by looking through the lens of the customer and thinking about the customer’s physical and digital journey.
With the Trade Single Window, the temptation is to think about the digital journey of products as opposed to the digital journey of businesses and customers.
Instead, this single one-stop-shop approach for Australian exporters needs that whole-of-government experience.
It needs to start with a ‘customer first, digital first’ approach that drives a whole-of-business way of looking at trade and adopts the mantra of ‘tell us once’ as a guiding principle.
Businesses can do everything they need to – from lodging forms for export certificates to paying customs – in one digital location.
For companies it becomes a single touch point for all their trade related regulatory requirements.
It’s the one place they can go online to get all the information they need.
It is also a national data harmonisation platform that different government agencies can use to share and obtain information.
Moving to a single digital platform makes cross border trade:
- more transparent, and
- it minimises compliance, delays and costs for business – and ultimately saving consumers money.
It works by having specific IT and regulatory enhancements that include:
- consolidated case-management systems
- eliminating duplication of user portals, and
- enhanced interoperability across systems.
Business could also be able to access real-time data through the customs system – giving them a bird’s eye view of any risks and disruptions.
That would allow them to streamline their operations and put in place mitigation plans.
So, if a business knows when a shipment is about to be cleared through customs, they can better schedule transport for the next route of the journey.
A move to digital and removing paper from the trading system would simply delver huge benefits.
For example, businesses often experience delays in getting the right documentation – particularly Certificates of Origin relating to Free Trade Agreements.
These are often slow to be produced by the origin countries and often contain discrepancies or errors in the tariff code.
As a result, this causes more work for brokers to follow up with the shipper.
But all this could be improved through electronic and systemised documentation.
But there’s a catch.
We need to ensure this is adopted end-to-end across the entire trade process – from the exporter’s warehouse to the importer’s warehouse.
For example, we cannot allow a situation where we remove paper at the international border, only to put paper across state borders.
We need one single standard, no more Federation-era multiple rail gauges across the nation.
A good starting point may be to focus on products, such as agricultural and pharmaceutical goods, impacted by multiple regulators which may have greater duplication around reporting requirements.
But again – we have to start with the consumer lens first.
This is going to deliver huge long-term cost savings and benefits.
Let’s take Singapore, we know we have people from Singapore here today.
Their National Trade Platform cost over A$100 million – but it has delivered more than $650 million in cost savings to Singaporean businesses.
And when Singapore adopted this model, it significantly reduced the time taken to process trade documents from four days to 15 minutes.
New Zealand estimated that its trade single window platform would deliver more than $400 million in cost savings to business over a decade.
The gains from widespread supply chain modernisation in Australia would increase our GDP by 1.4 per cent – that is $35 billion by 2030.
So, how do we drive these reforms?
They are urgent – otherwise we risk falling behind – and it is great to see the government getting behind this.
The first starting point is obviously the role of the Taskforce.
This is the best opportunity that we’ve had in 20 years to get this right.
This doesn’t have to be a ‘big bang’ reform and given the complexity and scope of changes it is going to take some time.
There are four key steps, we believe, are needed to drive these reforms.
One – a comprehensive review of the system today, the system we want to get to, and a plan to get there.
Two - high-level and bipartisan political commitment to ensure momentum, resources and interagency support so that we can sustain that throughout implementation.
Three – a phased approach to implementation with continuous investment, quick wins and pilot programs to show the tangible benefits and test, learn and scale – building to more substantive change over time.
Four – a governance structure led by an overarching agency such as the STS Taskforce as a permanent body in government and that involves industry:
- can help show tangible benefits along the way
- ensure momentum can continue
- hold agencies to account
- receive continuous feedback from business, and
- instil confidence to show that progress is being made
And it is crucial that we have that permanent and continues structure. As everyone has said this morning. Lots of stop start approaches, we need to get one government structure, keep going with it and make incremental change along the way. And then we have to underpin all of that with a philosophy of ‘tell us once’ and ‘digital first’ in every single thing we do.
It needs to lean into existing business systems which means a better experience for business and better assurance for government.
This can also address areas such as the improved traceability of products to help ensure their:
- quality, and
As Minister O’Neil said there is not just a trade part of this there is a border security side of this ad the challenge is to integrate them. This will allow us to realise the benefits of our Free Trade Agreements.
Paperless trading alone could lift GDP up to $1.7 billion a year – equal to the projected benefits from the China, Japan and South Korea FTAs.
We’ve already seen many important steps:
- funding for a one-stop digital shop for trade clearances
- harmonising traceability standards and data for agricultural producers and exporters
- booking and managing biosecurity inspections online, and
- looking to remove paper documents from cross border trade.
We believe these are just crucial changes for the country. And they are big changes for business and consumers.
For consumers, modernising, digitising and streamlining our cross-border trade system means:
- Convenience – they will be able to get the goods they’ve ordered sooner
- And of course it means lower costs.
Cost savings for business mean they can invest more in their employees through higher wages and improved conditions, investing in their equipment and machinery growing innovation, growing their operations, and being more productive.
This is a world where consumers are empowered.
Their shopping behaviours are increasingly digitised, they are dictating innovations, and if we do not move with that digital movement Australian consumers will simply go somewhere else.
If we get this right consumers are the winners. But the nation is also the winner.
Our economy is five per cent larger today thanks to trade liberalisation we undertook in the 1980s.
Reducing those regulatory bottlenecks in our current system is a certain way of increasing Australia’s disastrous productivity rate – now the lowest on record.
If we can export and import more effectively – adopting new ways of doing things through technology this will translate into material gains for every single Australian.
And remember increasing productivity is the principal ticket to driving higher wages and improving living standards.
And that’s why the conversation we are having today is so important because it goes to the heart of Australia’s future prosperity.
This is a conversation about whether we can reach world’s best practice on the global frontier.
Our cross border trading system, as Randall said, has to be seen as critical infrastructure.
The stakes are high.
Australia’s economic expansion, growth and prosperity will be governed by our capacity to trade effectively in the world’s biggest supply chains.
If we want to be connected to the rest of the world and be an internationally facing country, we must participate in the new supply chains that will dominate the world economy.
Minister Farrell and his colleagues before him, including Craig Emmerson and obviously we acknowledge the late Simon Crean, all magnificent Trade Ministers who have done a fantastic job getting us these free trade agreements.
But what is the point in having those FTAs if we actually can’t bring goods and services into the country.
This is a vital accompaniment of the hard work of many people in getting Australia those free trade agreements.
Our existing FTAs and those under negotiation cover almost 90 per cent of trade.
But it is a free trade agreement effectively with ourselves that is possibly the hardest one to negotiate.
Eliminating nuisance tariffs should be a ‘no regrets’ next cab off the rank.
Everything I’ve discussed today is about removing the self-imposed roadblocks that make trading with, and within, Australia harder than frankly it should be.
We cannot be known as the country where it’s just too hard to do business.
And if we don’t remove the friction in the system – we cannot get into those global supply chains and that means our prosperity is under threat.
So, this is a national priority.
This is national infrastructure.
It needs big, national, permanent investment.
It needs bipartisan support because nothing short of our future prosperity depends on it.