Recent research conducted by the Institute shows just how difficult things are. More than 80 percent of respondents said the Australian Dollar is having a negative impact on their export sales. More then 40 percent said international sales had been affected by 10-to-30 percent. Their primary concern though is the impact the dollar is having on margins.

The research goes on to forecast an impact on jobs and the concern exporters have of further cost increases resulting from a price on carbon.

Most employers are taking a wait and see approach on jobs, since uncertainly appears to be the key factor. Most expect jobs to be lost though. The study was conducted prior to the Government’s carbon tax announcement but in saying that, feedback since would indicate that little has changed. Exporters remain very hesitant on the issue, most expecting costs to increase and margins to go even lower.

This research is further supported by feedback from the EMDG consultants who clearly forecast a reduction in the number and value of claims this year. This has been brought about by the obvious reduction in export sales and the lack of confidence in both business prospects and the recent failure of the scheme to meet recipients’ expectations. While the 2010/11 EMDG payments are predicted to be better than the $27,500 first tranche and 56.7 percent second tranche payout in 2009/10, decisions on marketing and business development sadly are made long before this data is available hence confidence is low. The question is how do we remedy this?

In my March column I asked if we were were a tad too comfortable. My view is that we were; things in the land of Oz are, I suggest, not quite as sound as we think. Sales were starting to slip and many exporters were really starting to feel the effects. This has resulted in a massive attitudinal change to business prospects, which sadly has manifested itself into a quite devastating lack of confidence.

In my book, and the economists would probably disagree, the first thing we all need to do is kill the notion and rhetoric that constantly says “resources and resources alone will drive our export earnings into the future”. One reason Australia was able to escape the worst of the GFC was the diversity of its export industries including agriculture, manufacturing, tourism and services, including education, which contributes to over 70 percent of our employment.

Secondly, we should take an all of Government approach to trade. Germany, the United Kingdom and more recently the United States are embracing a range of Government departments to drive their export activities and from what we can see, it’s working. Thirdly, we need to build back confidence in the EMDG scheme by making sure it’s fully funded and actively promoted.

It was encouraging to hear the Minister for Trade comment positively about the effectiveness of EMDG at the recent forum on the China Trade Mission and suggest that some additional funding may be made forthcoming. This comes on the back of the 30 June announcement by the Minister to set the first tranche EMDG payment at $50,000 for 2010/11 claims – much better than the $27,500 for the prior year.

The initiative of the Government to take a trade mission to China led by both the Minister for Foreign Affairs and the Minister for Trade focused on services is a good start. Let’s see the Government talking up the export business for a change, getting involved in more high level missions, building confidence through innovative funding initiatives, increasing investment in our export agencies and starting to embrace industry and allied departments to attack the opportunities as a highly motivated, well briefed team of professionals.

To make this really work there will need to be considerable cooperation between state government agencies as well as the many organisations that provide services to the Australian export community. The money that goes into trade promotion is far too limited to allow for massive levels of duplication and what essentially becomes waste. Austrade has set its direction. It’s clear and unambiguous so it is now up to state governments to reassess their programs so that they complement the federal agency and not compete. Austrade too must embrace the capabilities of the key associations and be prepared to outsource programs to those bodies that possess the capability to deliver them professionally and cost-efficiently.

What I’m saying here has been said many times before, but I really don’t think there has ever been a more important time than now for absolute cooperation and sharing resources to drive our export promotion. The remnants of the Global Financial Crisis and the astronomically high dollar are affecting many businesses, almost to the point where existence is on the line. Clearly working together as “Team Australia” and tackling the challenges collectively makes a whole lot of sense.

So where does it start? Clearly, it begins at the top of Government. Government needs to take the initiative, it needs to embrace industry and listen to the people who are out there at the coalface of export. The Federal Government needs to work with the State Governments to implement programs that will add value to Australia’s export performance and not create even greater waste.

While nothing in this world is perfect, in the United States the Obama Government’s approach may be a good model to look at. Why not form an effective council of business people to advise government of trade policy and promotion? Why not foster cooperation between state governments and federal government departments that have trade on their agenda? Why not encourage the development of powerful industry groups to work together to build their export business and why not take high powered trade missions led by the Minister for Trade to the markets identified by Austrade as having great potential? And finally why not put some real dollars behind “Australia Unlimited”, the umbrella branding that cost us so much to develop?

Today’s export environment is tougher than it’s been for a long time. The March quarter Gross Domestic Product picture was not entirely unexpected; exports of manufactured products, many of our services and a good number of agribusiness categories have been suffering for some time, not to mention inbound tourism and education. Is it not time to pull together, work more cohesively and drive Australia’s export activity?  Austrade has taken the lead and taken some wise decisions. Now is the time to finish the job and create an atmosphere that encourages business and governments to go out there as a team and take on the world.

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Our recently announced Australian Export Heroes are certainly good examples of people who have taken that challenge and won. On 2 June at Government House in Brisbane the Governor of Queensland Her Excellency Ms Penelope Wensley AC will present Australian Export Heroes Awards to six fine Australians who have worked hard over many years to build their export businesses and “do Australia proud”.

Tasmanian John Muir is an excellent example. John runs Muir Winches, a family business, out of Kingston in Tasmania. Not only does he produce what can only be described as beautifully engineered and manufactured winches for yachts, including the world’s best, he blends this with what his colleagues describe as “relentless perseverance” and “never taking no for an answer”.

Steve Birbeck from WA is another example of somebody who simply never gives up. Steve kicked off his foray into international trade in 1991 when he had the courage to launch the world’s first range of emu oil based products into France. From these small beginnings he built his company, Mount Romance, into a strong exporter of finished cosmetics and a major provider of sandalwood to the world.

In the early 1960s, Jack Hines, well known to Victorians and South Australians alike, joined the family business and got his introduction to trade by becoming the first Australian company to export waste paper for recycling. Not content to stay with waste paper Jack steered his company to become a significant international trader of beef, which became the springboard for diversification into wine and a large range of different food products. Today, his business services clients from Eastern Europe to China and beyond.

Based in Queensland, John Russell is managing director of Russell Mining Equipment. In his nomination he is described as possessing two extremely valuable business talents: “he’s technically savvy and highly entrepreneurial”. John’s vision when he started his business was to halve the time it takes to reline grinding mills, while simultaneously improving safety in what was an extremely dangerous manual task. That vision was met and Russell Mining Equipment has become a major provider to the mining industry across the world.

While in a very different field, Rob Douglas, CEO of Resmed too possesses those unique characteristics of being both technically clever and commercially savvy. A computer scientist and electrical engineer, his skills across a broad range of disciplines have been described as giving “Resmed a huge advantage in international marketing”. The result of course is a well known success story for Australia and a success story in which he has played a pivotal role.

Our final hero or heroes need little introduction: The Wiggles are a household name here, in the US and in many other parts of the world. The Wiggles self-titled first album was released in 1991 and 19 years later and 39 videos/DVD’s releases later, they have been awarded with 17 gold, 12 platinum and 10 multi-platinum awards for sales of 23 million DVDs and 17 million CDs worldwide. But selling DVDs and CDs are not The Wiggles’ only interest. In 2008 they were named UNICEF Goodwill Ambassadors, focusing on numeracy, literacy and the provision of clean water to children.

These very special people not only demonstrate an ability to take on challenges and win against the odds and the best the world can offer, they show us and the world that Australia is much, much more than wheat, wool and minerals. Technically smart, creative and hard working and able to show the world that Australian’s can not only do anything but can do it as well and often better than anybody else. We congratulate our new Australian Export Heroes.

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Press reports in the Sydney Morning Herald about Brown Brothers closing down their office in London, Casella Wines profit reportedly dropping by up to 70 percent and it’s not all good news out there for Australian SME business, particularly those who have taken on the challenge of export. The high Aussie dollar is undoubtedly having a significant negative effect on some sectors of Australian business and not only impacting their overseas sales but hitting domestic sales as well.

This week I was speaking to one of my colleagues who produces world’s best practice fittings for the marine industry. After telling me that he has never seen export so bad he went on to say that competition from United States in Australia was intense, to the point that like products are landed in Australia 45 percent cheaper than the local product. On top of that Australian made product is being sourced on the internet ex USA, with no GST, cheaper than the best wholesale price in Australia.

I was recently asked by the press to do a television interview on the impact of the high Aussie dollar on exports. They wanted a five second grab. After talking to them for about 15 minutes the interviewer said, “I didn’t think it was such broad topic, it’s really quite interesting”. Well, it is a broad topic and, while interesting for some it’s simply devastating for others, particularly SME companies who have limited resources, a house and a family.

What concerns me is that over the last 10 years Australia has invested considerable amounts of money developing our export culture, encouraging more companies to “give it a go” and expanding the export horizons of busineses already engaged in international trade. Many of the results have been outstanding; factories have been build, technologies developed and jobs created. Some of these companies today are struggling simply because the dollar, the GFC and cost of doing business is rapidly reducing their ability to be internationally competitive.

Another strong indicator is export performance in 2010. Without any argument the positive trade balance that started in April last year is something worth crowing about, particularly the 13.7 percent growth in exports. But sadly when you look at the detail the picture is not quite as pretty. Unprocessed food is down 11.0 percent, processed food about flat, manufacturing while up marginally overall, the elaborately transformed part is flat at best and services exports are also flat. All the growth is coming from the mining sector and a major slice of that is coal. That growth is measured in dollars not volume, which begs the question about how much is in fact in price and not tonnage. I would suggest that most is price.

The other factors that are causing SME exporters difficulty are the GFC, which remains an issue in many markets, especially the more sophisticated ones, and the effect the GFC has had on international competition and international currencies. European countries with a low euro, Germany in particular, and the United Kingdom, are heavily promoting exports to Asia, while Obama’s export led recovery is undoubtedly increasing the level of competition in our own backyard.

In currency terms it was also interesting to note that in a recent article Max Walsh of Dixon Advisory wrote: “Throw in the exchange rate appreciation and you have local manufacturing or processing industries subject to import competition facing the full force effect”. For some Australian exporters it certainly is the full force of soft international markets and added overseas price-driven competition in their local market.

So here we sit, comfortable—or are we just a tad too comfortable? My view is more than likely the latter. Things in the land of Oz are, I suggest, not quite as sound as we perhaps think they are. From an export perspective business, apart from mining, has slowed and one cannot see that changing for some time. Our Asian markets will remain under attack; the dollar is unlikely to drop dramatically unless US interest rates move strongly ahead and minerals sales falter. And international competition in our domestic markets will remain high in many sectors as marketers capitalise on low currencies to offset slow local demand. The result, I fear, is a significant change in the shape of the export pie with dangerously less diversity and a greater reliance on mining. This will affect jobs in the eastern states, the result of which will be felt right across Australian business.

This scenario begs the question: is now the time to cut back on expenditure on export promotion? In my opinion it’s clearly not. A fundamental principle in marketing is when under attack fight back with all you’ve got to maintain market share. Our exports are under attack and we need to fight.

First, the Austrade budget should be increased (not reduced) to provide more support offshore particularly in difficult markets where their support can make a real and measurable difference. Second, the Export Market Development Scheme (EMDG) should be fully funded to encourage exporters to put more marketing dollars behind their export business. Third, every locally inflicted export facilitation cost or hurdle needs to be reviewed and where possible scrapped. And finally the benefits of our Free Trade Agreements need to be better marketed so that Australia’s SME exporters can capitalise on them.

And finally, to top it off, is now the time to introduce an ETS or price on carbon? Clearly this alone will become a major export issue and I trust the Government will not exclude the non minerals export sector from deliberations. The need to be internationally competitive on all fronts is an absolute imperative. Let’s not see yet another impost in what is already a very difficult business environment.

When you are about to launch a new product, nothing is more depressing than having some little guy turn up at the reception desk and say I’d like to see the managing director please’. After some formal pleasantries he says, “I understand that you are about to launch a new product this week, but are you sure you own the trademark?” And then pulls out of his bag a rough-looking homemade product that sure as hell carries your brand name.

The next few words you can probably predict, in a most polite way he says, “It can be yours, of course, if you are prepared to part with US$150,000. Oh by the way, cash will be fine”. A series of telex’s later and sadly, at least for me, the little guy was right, he certainly owned the mark and incidentally a whole range of other trade marks of many high ranking multinational companies spread across the world.

This may not be common, but I fear technology has made it easier. It does happen and it happens not only to the small unsuspecting companies but also to the big guys who, of course, are a much more valuable catch.

In my case and, I suspect, in most cases it was just a matter of money, but it did cost, and it cost in many ways. The first step of course is the solicitors and the argy bargy between his brief and ours. What is different here is that you are in foreign country, all the solicitors know each other, you sadly are the outsider.

Weeks go by and finally an outcome between the solicitors is reached. How the final money was divvied up between the three is anybody’s bet. It cost too, in a delayed launch, lost sales and in reputation, the ‘trade’ was less than forgiving.

The other case was different as it really was just a try-on by a competitor to create doubt and confusion. I simply received a solicitor’s letter suggesting that my product possibly breached the patent of a local manufacturer. Again it resulted in some fairly expensive legal work, occupied my time and the time of my staff. It became known in the ‘trade’, and prompted questions from many who we relied on to drive the business through the distribution network. It was resolved but money was spent unnecessarily and a small amount of the dirt did stick.

The thing is competition in some parts of the world can be dirty. There are people, ‘ambulance chasers’, who grab trade marks for their country as soon they appear and others who will go to any length to disrupt your normal trading pattern. These two cases are relatively minor in the context of things and the outcomes were on the right side of the ledger. But they did cost time and money.

My recommendation to anybody is to do your homework first. In a recent article written by Kelly Allison from IP Australia she says, “Before embarking on an export strategy, businesses typically go through a series of crucial steps, obtaining credit, identifying desirable markets and estimating demand; but many fail to think about intellectual property (IP),” and from my experience Kelly is right.

She goes on to say that “during a recent survey conducted by IP Australia 41 percent of exporters did not address the topic of IP ownership and confidentiality with their employees, which is one area of risk that would be identified in an IP audit. Before you consider exporting, conducting an IP audit should be top of your list, in order to guard against copycats and protect your brands and profit”, a recommendation I fully endorse.

One place to start is to log in to Intellectual Property Explorer (www.intellectualpropertyexplorer.com) which is a free, fast and easy online tool to help identify and protect your IP assets. IP Australia also produces a range of Exporting Fact Sheets on major markets which are freely available on its website www.ipaustralia.gov.au.

Having worked in various parts of the world, nothing surprises me in terms of the range of copycat products seen on the supermarket shelves, how quickly top movies are available on DVD and how posters bearing photos taken here last week are on the streets in India, China or Indonesia today.

Doing your homework is mandatory, and so too is having the right legal team on your side if things do go wrong. Australian legal firms have relationships with many firms that operate in foreign markets, it really is in your best interest to make sure you get the right advice upfront and have the advisors in place for if and when you need them. Having people turn up at your reception with a demand or receiving letters from solicitors from places outside of Australia is no fun.

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I was recently at a meeting in Adelaide with the SA Minister for Trade Tom Koutsantonis and this very subject came up. The question was asked: “How do we ensure in the future our support continues to be relevant to assist this new breed in their export pursuits?”

It’s a very good question because some of the traditional export assistance programs don’t always fit with their dynamic business model and more often than not the world is their market from day one. What differentiates them though in terms of their competitive advantage is technology, the application of that technology and their drive to build a modern international business in many cases from the start. Being limited to the domestic market is simply not a consideration.
So what sort of companies are these new age exporters? Let me give you some examples of companies that I’ve come into contact with through the export awards program that I find simply fascinating.

The first is Atlassian Corporation. This very successful company didn’t exist 10 years ago. Today it employs 225 people and markets to 20 thousand customers across 134 countries. Atlassian was founded in 2001 by university colleagues Mike Cannon-Brooks and Scott Farquhar, both aged 22. They make development and collaboration tools that enable customer companies to deliver quality software products faster, from concept to launch. Atlassian describes themselves as different kind of software company, one that has rewritten the rules of enterprise software development and sales. What also makes them different is the fact that they encourage customers to download products from their website with a credit card at a fraction of the cost of competitors’ products. And it works, in 2010 their revenue is forecast to be $59 milllion.

Another example is the SMARTS Company. The SMARTS products began life in the research labs of the University of Sydney at a time when the Australian Securities market became one of the first in the world to automate and integrate six regional stock exchanges into one national trading platform. SMARTS market surveillance software is the unrivalled market leader with over 30 national exchange and regulatory customers as well as 50 national and multinational broking clients across 30 markets. As I understand it, in the world of stockbroking there are five major software providers. Three of them came out of Australia, and SMARTS is of course one of them.

Nuix also falls into the category of a new age exporter. Created in 2000, Nuix’s focus has always been on developing the world’s most advanced eDiscovery and electronic investigation software. The core of Nuix is an advanced processing engine which interrogates virtually any data set (emails, hard disks and disk images), indexing the results and making them available for immediate analysis. Nuix commenced actively commercialising its software in Australia in 2006 and over the next 12 months quickly expanded its Australian customer base to include a large number of major corporate and government, forensic and security, law enforcement, legal and regulatory organisations.

In 2007 Nuix began to participate in other markets and now has customers in over 26 countries, including the United States, the European Union, the United Kingdom, Canada, Hong Kong, China and Japan, and offices in the UK, Europe and USA.

These three companies are but examples of what an increasing number of our exporters look like. They don’t put things in boxes and ship them around the world, they use technology, they are often young well qualified people who don’t see borders as a challenge. All of us involved in export, including government, need to sit up and take note of this changing picture. I’m certainly not promoting interference but what I am promoting is doing research to understand them better so that programs can be put in place to build this capability and get more Atlassian, SMARTS and Nuixes across the export line.

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Research recently conducted by the Australian Institute of Export on the effect of the exchange rate on export sales can leave us in no doubt that exporters are hurting and that if the rate remains above parity they will hurt a lot more.

The study conducted in the last week of October found that 60 percent of those surveyed believe the high Australian dollar has had a negative impact on sales, with over 50 percent saying that the impact is between 10 percent and 30 percent. Twenty five percent believed the current impact is more than 30 percent.

A reduction in sales, of course, is one thing but equally or even more important is the effect the high dollar is having on margins which have probably already been under pressure from the Global Financial Crisis (GFC).

That may have softened here but certainly hasn’t softened for Aussie companies doing business in the USA or Europe. The margins too of exporters who are selling into Asia or the Middle East are under pressure as many of the customers they deal with will only do business in US dollars.

I fully accept that for many exporters there is an upside and this clearly came out in the study. If you are importing a significant amount of raw materials as components for export products, if you are purchasing equipment from overseas or for that matter setting up manufacturing facilities offshore, there has never been a better time than now.

But sadly not everybody is in that position. For exporters in agriculture, especially wine, this certainly doesn’t apply, for companies involved in film production or repair and maintenance in Australia we have become very expensive. Education, Australia’s third biggest export, is getting more expensive every day and inbound tourism is certainly less attractive to US visitors than it has been for over 30 years.

On top of the rising dollar and the GFC there is that other little matter of rising interest rates. One of the greatest concerns shown by respondents was simply that. To them, a high dollar and high interest rates would result in cut-backs in investment and staff in an attempt to maintain a margin that will keep them in business.

Cutting back is often the immediate reaction. Others reported that consideration of moving operations overseas was now high on their agenda, and there were those who simply said that the rising dollar is the catalyst for getting out of export altogether. None of these options is good for Australia, for employment, for investment or for adding to the nation’s wealth. And if cutting back means losing hard fought market share, that’s really not good for anybody either.
Clearly this research supports the strongly held view of many in trade that Australia is on the cusp of experiencing a significant change to the make-up of what denotes its exports portfolio. Government needs to ask itself if it wants exports almost entirely driven by minerals or if it wants a balanced portfolio where agriculture, education, manufacturing and services continue to play a role.

In my book the answer is simple. Australia, for a raft of reasons, like any well managed business needs to have a healthy export sector rich in diversity, strong in confidence and willing to invest in its future.

While the situation today is not desperate, it is serious. The study shows clearly that confidence is not strong, investment is slowing and cut-backs are occurring.

The Government needs to collaborate with industry through the various representative bodies to establish the mechanisms needed to address the immediate issues, implement tactical programs that will breathe confidence back into businesses and work with industry to set long-term strategic priorities.

Treasury has been quoted as saying that current approaches to preferential free-trade agreements “are not meeting Australia’s needs” and cites the Productivity Commission in saying it “has found that potential benefits of the FTAs under negotiation have been oversold and the negatives largely ignored”.

At the same time the new trade minister Dr Craig Emerson when speaking at a recent export services function said, “Call me a traditionalist—or call me an economist—but it’s my view that the biggest potential gains from trade liberalisation arise from non-discriminatory multinational arrangements.”

Dr Emerson goes on to say, however, “If a regional or bilateral deal genuinely contributes to multilateral trade liberalisation then it can be a deal worth having.”

Clearly almost everyone you speak to agrees with the Minister, and probably questions some of the agreements already in place and some of those currently under negotiation. But let’s not underestimate what’s been achieved. The CER agreement between Australia and New Zealand has stood the test of time and has often been described as the purest of agreements ever struck.

The AUSFTA, with the exception of sugar, is without question an excellent example of what can be achieved and it can be argued that NAFTA played a significant role in pushing the US into greater trade liberalisation and, most importantly, contributed positively to the successful conclusion of the Uruguay Round.

Dr Emerson went on to say, “But if a bilateral or regional deal inhibits global liberalisation by shutting non-members out of markets, then it can easily be against the interests not only of the world but of the parties to the agreement by increasing the cost of goods and services in those countries beyond those available through full international specialisation.”

And that’s true, buts let’s not underestimate two key facts. The first is that the average tariff rate in Australia is only about 1.7 percent—not exactly high like those of the past—and that most agreements are with high-cost countries, not those competing with low-cost emerging nations.