Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 371

We’re number 106, and that’s not good

According to the World Bank’s 2020 Trading Across Borders report, Australia now ranks 106th in trade system productivity, having fallen precipitously from 27th position in 2010. This sounds dramatic, and it is, but why is this global ranking important for Australians?

Falling trade competitiveness

The World Bank has a Doing Business Score that, in the case of trade, measures the competitiveness of the regulatory performance of countries based on border compliance, documentary compliance and domestic transport costs. Organisations, such as the Australian Chamber of Commerce and Industry, believe the cause of Australia’s decline in competitiveness is quite simply that globally countries have digitalised their trade systems whereas Australia has not, and so our compliance costs are uncompetitive.

Trading across Borders in Australia and comparator economies – Ranking and Score

Source: The World Bank

Some readers may remember Australia’s trade battles were traditionally fought on the waterfront, coming to a climax in the 1998 Maritime Union of Australia versus Patrick Corporation stoush. This time the issue isn’t waterfront productivity but rather digital productivity.

Best practices in trade productivity today are supported by what is referred to as a Single Window approach, which is a system that allows traders to file standard information and documents through a single-entry point to fulfill all import, export and transit-related regulatory requirements. Importantly, these processes are digital.

Countries have developed web-based systems allowing traders to submit documents and pay duties online. These systems deliver long-term benefits through saving time and money while streamlining procedures. Further benefits from web-based systems are that they can help governments combat fraud and money-laundering, track statistical information on foreign trade transactions, and share information with key support players in trade such as banks, insurers and logistics companies. The benefits of a Single Window system therefore go beyond trade, to national security. The challenge for all countries wishing to secure these Single Window benefits is the ability to migrate their regulatory framework from paper to digital.

Further example of Australian red tape

The ANZ Bank estimates that a company which processes around 1,000 export documents a year would save close to $250,000 by moving to a digital trade solution. And like many government red tape related issues small- to medium-sized businesses are likely to gain the most from the establishment of a successful Australian Single Window trade system.

This is the state of play today, but the goal posts are moving, and quickly. While in Hong Kong in 2018 a large Australian Bank introduced me to the Hong Kong Monetary Authority (HKMA), the equivalent of our Reserve Bank. The HKMA was leading what they called their eTrade Connect initiative, largely funded by local banks, meant to move Hong Kong’s trade system from digital to a Blockchain enabled system. Singapore is doing the same, and a few months after returning from Hong Kong I met with a Japanese group with the same mission.

Banks globally are particularly interested in Blockchain-enabled trade finance systems as Blockchain technology provides far more security and transactions occur almost instantly. Trade credit providers are exposed to fraudulent trade transactions, and during the GFC trade finance professionals virtually lived at their offices as companies struggled to understand the financial credibility of the counterparties they were trading with. Blockchain-based trade finance significantly reduces those risks. And importantly the Blockchain technology being deployed is not particularly difficult to incorporate into trading systems, the hard part is getting the participants onside.

The World Bank is supporting Blockchain-enabled trade systems as they believe it will rip out further costs in global trade systems. And the World Bank also believes Blockchain-enabled trade systems will support micro exporters operating in developing countries gain access to inexpensive trade systems, including trade finance, which is often the difference between successful growth and merely surviving.

Left behind on trade competitiveness

Upon my return from Hong Kong (when Australia was ranked 95th) I spoke with government agencies such as Treasury, DFAT and ASIC, as well as private sector organisations with a stake in Australia’s trade competitiveness, as to who was responsible for improving our trade regulatory productivity. I was advised that The Department of Home Affairs was charged with delivering Australia’s Single Window; however, Home Affairs had no information on their website (and still do not) in respect to the Single Window initiative, and calls I made to Home Affairs on this issue were not returned.

As a country, we have known about our weaknesses in trade processes for many years, as the Australian government has been involved in stop-start initiatives to deliver a digital trade system since at least 2009 without success. Now the leaders of the trade pack are taking the leap to the next technology platform, Blockchain, to enhance their trade competitiveness.

As a trading nation, Australia cannot afford a ranking of 106, and the costs associated with it, in an area so important to our economic well-being. And a government looking for any opportunity to kick start a COVID-weary economy would do well to finally bring our trade systems into the 21st century.

 

Kevin Cryan is a technology and services investments specialist and Managing Director of Scarborough Partners. He was previously Senior Investment Specialist for Services and Technology at Austrade after spending 16 years at the CSIRO.

 

4 Comments
C
August 22, 2020

I’m glad this article has been written. It needs a wider audience than just firstlinks readers. Digitisation makes sense. There are just so many things our government could ( and should ) be doing. There doesn’t seem to be the political will to do anything much. Covid showed us how quickly decisions could be made and implemented. This Parliament barely sits. The Government aren’t being accountable.

Gerard Cleveland
August 20, 2020

Cryan asks some important questions. Why HAS Australia allowed this trade impediment to continue? Right now- with massive unemployment and a ravaged economy - maybe this is the best time to address the problem? Perhaps our so-called business-focused government can fix this mess by employing some of the thousands currently looking for work in the sector.

Interesting article but what arises from the concerns raised by this author? Does firstlinks have anyone who can ask questions of the relevant Ministers so that we are not even more disadvantaged when we eventually return to our (mediocre) pre Covid trading patterns.

Martha Langford
August 20, 2020

With the significant financial support State and Commonwealth Governments provide to help Australian exporters, and the ongoing encouragement from our politicians to embrace innovation, one would expect that providing innovative digital solutions to support our exporters would be higher priority.

George
August 20, 2020

Who knew this? Who thought we were one of the world's great traders? So we can't even get the paperwork (electronicwork?) right?

 

Leave a Comment:

     

RELATED ARTICLES

China’s new model is a plan for a hostile world

Opening the virtual frontier: Senator Hume’s address to Blockchain Week

Blockchain revolutionises the cyberworld

banner

Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.

Latest Updates

Superannuation

Superannuation: a 30+ year journey but now stop fiddling

Few people have been closer to superannuation policy over the years than Noel Whittaker, especially when he established his eponymous financial planning business. He takes us on a quick guided tour.

Survey: share your retirement experiences

All Baby Boomers are now over 55 and many are either in retirement or thinking about a transition from work. But what is retirement like? Is it the golden years or a drag? Do you have tips for making the most of it?

Interviews

Time for value as ‘promise generators’ fail to deliver

A $28 billion global manager still sees far more potential in value than growth stocks, believes energy stocks are undervalued including an Australian company, and describes the need for resilience in investing.

Superannuation

Paul Keating's long-term plans for super and imputation

Paul Keating not only designed compulsory superannuation but in the 30 years since its introduction, he has maintained the rage. Here are highlights of three articles on SG's origins and two more recent interviews.

Fixed interest

On interest rates and credit, do you feel the need for speed?

Central bank support for credit and equity markets is reversing, which has led to wider spreads and higher rates. But what does that mean and is it time to jump at higher rates or do they have some way to go?

Investment strategies

Death notices for the 60/40 portfolio are premature

Pundits have once again declared the death of the 60% stock/40% bond portfolio amid sharp declines in both stock and bond prices. Based on history, balanced portfolios are apt to prove the naysayers wrong, again.

Exchange traded products

ETFs and the eight biggest worries in index investing

Both passive investing and ETFs have withstood criticism as their popularity has grown. They have been blamed for causing bubbles, distorting the market, and concentrating share ownership. Are any of these criticisms valid?

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.