State of the Nation: International business and competitiveness

Austrade is very much in the business of enhancing the competitiveness of Australia’s international businesses.

Whether a company is an exporter, an investor, an education or tourism provider, our function is to help them succeed. To do so, they need to be competitive.

So in terms of Austrade’s agenda and the types of problems we go about addressing, enhancing competitiveness is up there as an important aim of the organisation.

The practical challenges

We try, however, not to get bogged down in the theory of competitiveness, important as that is for a broad appreciation of the complexities of the global economy.

Of course we sometimes need to look at competitiveness and its relationship to productivity, innovation, work practices and broader macroeconomic factors such as the real exchange rate.

Factors like the exchange rate are obviously important but what guides our work and our thinking is a more practical understanding of the business world and the long-term trends which can affect competitiveness.

Put simply, Austrade is concerned about the practical challenges that firms can face in international business. When we think of competitiveness, a traditional price versus quality approach is no longer the main game.

Australia is not a low cost country.  We excel on the basis of highly developed human capital and the industry efficiencies we have developed. We only need to look at our mining services sector or medical research to appreciate this.

Today, businesses must continue adapting to both long-term and rapid change, innovating and anticipating emerging opportunities.

This can re-define how they approach their business and respond to market demand.  Government action is also important. The policy settings which allow firms to maximise competitiveness are extremely important.

Competitiveness ranking as defined by organisations such as the World Economic Forum and IMD World Competitiveness Center, can be useful in that such rankings help to benchmark Australia against other economies.

But they don't tell us much about a specific firm’s ability to adapt and compete in the often very competitive world of international business.

Some of the factors which do give us an indication include their ability to leverage free trade agreements (FTAs), global value chains, foreign investment and market intelligence.

Free trade agreements (FTAs)

Australia has nine free trade agreements currently in force: with New Zealand, Singapore, Thailand, the United States, Chile, the Association of South East Asian Nations (ASEAN) (with New Zealand), Malaysia, Korea and Japan.
Korea and Japan, of course, are the most recent.  Together these countries account for 43 per cent of Australia's total trade. When China is factored in, that figure rises to 67 per cent.

The China-Australia FTA was formally signed just last week and both sides are now working hard to have the agreement enter into force as soon as possible – hopefully around the end of this year.

In the case of Japan and Korea, early indications are that exporters are already benefiting from lower tariffs and other provisions contained within the agreements.

This is particularly apparent in beef, wine, cheese, some of our horticulture or speciality seafood areas and resources products such as nickel.

However, despite these promising preliminary outcomes, it’s fair to say more needs to be done to raise awareness of the benefits within the broader business community.

Austrade’s survey, the Australia International Business Survey (AIBS) undertaken in conjunction with the Export Council of Australia, EFIC and the University of Sydney, found businesses were uncertain about how and whether FTAs applied to their business. A smaller number were unaware of the existence of some agreements altogether.

In conjunction with the Department of Foreign Affairs and Trade, EFIC, AusIndustry and Treasury, Austrade is currently conducting outreach seminars across the country, making sure firms understand how they can leverage FTAs to their benefit.

Global value chains

Global value chains will be another major factor determining our competitiveness in the future.

While value chains exist across a variety of industries, they are particularly relevant to sophisticated processes or advanced manufacturing such as that involved in the aviation and defence industries.

Sometimes the commitment to developing a difficult product or component and creating a valuable niche will pay off in the long-term.

The future competitiveness of our firms also relies heavily on our continuing ability to attract foreign investment to particular projects and sectors.  

Foreign investment

Foreign investment can help strengthen our participation in global value chains as well as bringing the more obvious benefits of extra capital, skills and technology.

Austrade does not “pick winners” but its work in investment attraction does focus on five key areas where Australia has a competitive edge which can be enhanced through investment.

These are; agribusiness and food, major infrastructure, tourism infrastructure, resources and energy, advanced manufacturing, services and technology.

Market information and intelligence

Market intelligence is another key area for business competitiveness offshore.  Information barriers created by language, culture and business practice are among the most significant our firms face offshore and overcoming them is central to their competitiveness.

This includes promotional work offshore, communicating Australia’s ability to deliver smart, efficient and high quality goods and services.

Along with strong messaging around clean and green for our agribusiness products, continuing to develop the reputation of Australian companies as a source of innovative products and services will help them to compete. Of course many factors can influence success in the short term but over the longer term, some forces stand out more than others. 

In thinking about competitiveness, it is important to consider the specific practical challenges that firms face, as well as the macro-economic environment that can encourage business.

The opportunities are certainly there, but so are many challenges.

Bruce Gosper participated in CEDA's State of the Nation conference, click here to watch videos.