Why kickstarting small business exports could boost stagnant wages


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Large companies control 88% of the agricultural export market.
Shutterstock

Giovanni Di Lieto, Monash University and David Treisman, Monash University

Prioritising exports by small and medium businesses would boost wages, according to our work for an ongoing parliamentary inquiry.

Smaller Australian businesses have disproportionately low levels of exports. This is despite being more profitable and productive than larger enterprises in most of the sectors we analysed.

Smaller Australian businesses also pay lower-than-average wages. As wages are linked to the price and sales of goods and services, increasing exports should boost the pay packets for those employed by small businesses.

In fact, it is well established that export-oriented industries pay higher average wages.

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This chart shows that in all sectors the average wage of workers in small businesses is below that of the sector averages. Average wages in medium business were closer to the sector average, with a notable differential appearing in retail and agriculture.

The agricultural sector is an egregious example, where if you work for a small business you are likely to earn less than one-third of what you would for a large firm – A$10,000 as opposed to over A$36,000 a year on average.




Read more:
Australia can’t afford to forget smaller businesses when negotiating trade deals


In our analysis we looked at Australia’s bilateral free trade agreements with major trade partners in the Asia-Pacific region (the USA, China, Japan, South Korea, Singapore and New Zealand) across key economic sectors (agriculture, manufacturing, mining, retail trade and transportation) in the past decade.

The data show small businesses largely under-utilise free trade agreements. Large enterprises are responsible for 100% of mining exports, 93% in manufacturing, 88% in agriculture, 81% in transportation and 72% in retail.

However, we found no evidence to support the Productivity Commission’s proposition that to succeed internationally an enterprise must be of a certain scale and scope.

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The intuitive explanation for low exports by small and medium businesses is that they aren’t as productive as larger firms. Among other things, smaller businesses are more labour-intensive.

But this explanation does not gel with how strongly entrenched smaller firms are in the Australian economy.

Between 2012 and 2016 most small enterprises (and several medium-sized enterprises) had greater operating profit margins than their larger competitors in the sectors we assessed.

By looking at the contribution businesses make in their industry, known as “industry value added”, we can also see that small and medium businesses are the lifeblood of certain sectors, particularly agriculture and retail.

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A comparison of the value added by small businesses in these sectors with their exports shows that the exports of small Australian businesses are disproportionately small.

For instance, there were A$50 billion of agricultural exports in the last financial year. Large enterprises captured 88% of this export market despite adding only 4% to the overall industry value.

If smaller Australian agricultural companies could just double their export share this would increase productivity, employment and wages. This would benefit struggling rural communities in particular.




Read more:
Free trade agreements fail to boost Australian agriculture and food manufacturing


As we have shown, smaller Australian businesses are more productive than large firms. But they maintain disproportionately low levels of exports and wages. We found that under-utilisation of free trade agreements, rather than lack of access to them, is the fundamental cause of the lower exports.

This suggests that Australia’s trade policies should prioritise international trade and foreign investment instruments for small businesses to stimulate domestic wages and fairly distribute the gains of global value chains.




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The hidden resource agenda within Australia’s Asian free trade agreements



Public policies should analyse free trade agreements in terms of their contribution to the actual productivity of enterprises by sector, rather than the potential to expand the total market value of exports.

In other words, the best use of international trade is not touting banalities like “this free trade agreement is worth such and such”. Rather, it is by calculating in what sectors, and in what markets, Australian enterprises actually gain or lose from international trade.

The ConversationWith transparent information, based on substantial economic evidence, governments could at last find political legitimacy to implement systemic trade adjustment measures. This would reallocate resources within and between sectors, from large to small and medium export-oriented businesses.

Giovanni Di Lieto, Lecturer of international trade law, Monash Business School, Monash University and David Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

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If Australia wants to boost defence exports, it should start with its natural strength: cyber security



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The government’s Defence Export Strategy aims to make Australia a world leader in arms exports.
Shutterstock

Greg Austin, UNSW

Australia’s “national security” government has found yet another credential to add to its claim that it’s protecting the country’s future. Prime Minister Malcolm Turnbull launched a new Defence Export Strategy this week to catapult Australia into the top 10 defence exporting countries in the world by 2028.

Broadly speaking, the plan’s main premise is that if Australia is going to retool its defence industry over the coming decade to lift the production of Australian-made military equipment and services, then the government and industry itself should take the opportunity to export the same products and services.

Just as importantly, the strategy notes, if domestic producers are to prosper and succeed in playing their part, they will need bigger markets than the Australian armed forces can provide.

Three big questions

There are at least three big questions that can be raised about the plan.

First, we can wonder just how Australia hopes to achieve the 800% growth in sales represented by the “top 10” ambition in a highly competitive market place.

Between 2012 and 2016, according to a report released by Stockholm International Peace Research Institute (SIPRI), countries near the bottom of the list of top 10 exporters (Spain, Italy, Ukraine and Israel) each had eight times more defence exports by value than Australia.


SIPRI

A second question concerns the national innovation strategy that would be needed to achieve such a massive improvement.

One day after the Prime minister’s new push for arms exports, the Chairman of the Board of Innovation and Science Australia, Bill Ferris, released Australia 2030 – a strategic plan for the Australian innovation, science and research system out to 2030 – commissioned by the government.

The report identified five things that need to change urgently: education, industry, government, research and development, and culture and ambition. Without going into detail here, that is quite some agenda for radical and comprehensive change. It is as needed in defence industry as in the economy as a whole.




Read more:
‘Cyber revolution’ in Australian Defence Force demands rethink of staff, training and policy


A third question is the diplomacy of selling weapons into conflict zones or to governments with troubled human rights records. The government dismissed this concern by saying the main recipients of our defence exports are close allies.

However, the 2017 SIPRI Trends in international arms transfers report lists Indonesia and Oman – with their poor human rights records – as the second and third most important military markets for Australia after the United States.

Making defence a cutting edge industry

So, if the aims of the strategy are broadly credible, but there are some questions about pace and ambition, what are we to make of it?

Its success will hinge on whether key stakeholders, especially the government, industry and academia, truly understand the meaning of the main goal: to, as the report says, transform the

Australian defence industry into the high-tech, agile and cutting-edge industry we need to assure our future defence and national security.

The Ferris report singled out the medical sector as the one with most potential for innovation and export growth. In contrast, the Defence Export Strategy is agnostic as to choice of sector or focus. Selling components for weapon systems is painted as the same as selling military vehicles or radars.

Picking winners may not be sensible in a globalised free market sector such as medical services, but there are some choices in the defence sector that the Turnbull government should be making.




Read more:
Cyber peacekeeping is integral in an era of cyberwar – here’s why


Playing to our strengths

Australia has a significant comparative advantage in cyber security knowledge and skills. The country is seen by insiders as being in the top ten in that field already, largely because of its decades of experience working inside the “five eyes” intelligence alliance.

Admittedly, the domestic industry doesn’t yet reflect that strength. But a focus on high-tech military industry development by the defence ministers would play not just to our natural strengths, but also to the need to sell mainly to close allies. (We would only sell such military exports to our closest allies).

More importantly, cyber science is not a sector, it is the essence of all military high technology. Australian universities already export their technology research to the United States through grants from the Pentagon. Several Australian technology startups have been acquired by US military giants. That includes the purchase of Canberra company, M5, by Northrop Grumman. Australian technology company, Atlassian, provides secure web services to the Pentagon.

The government is yet to release its Defence Industrial Capability Plan so maybe it is too soon to tell whether or not Australia’s cyber industry will take a privileged spot. But to date, most key power holders in Australian industrial development have responded only episodically to the challenges and opportunities represented by the information age. Austcyber, the cyber security growth and innovation centre set up by the government, is just one year old.




Read more:
Cyber attacks ten years on: from disruption to disinformation


Australia must build “industries of the future”, according to a multi-year multi-author series of studies led by the Australian Council of Learned Academies (ACOLA), culminating in the book Securing Australia’s Future. This simple message, and many of the fine nuances of the ACOLA work about what makes a national innovation system, find little reflection in the Defence Export Strategy.

Between 2012 and 2014, China decided on its “industries of the future” for defence and security purposes – including for export – and they are all cyber-related. Australia should choose as decisively. We can do it, but we need to first build the critical mass of cyber-educated innovators needed for more rapid takeoff.

The ConversationInvesting very heavily in the military cyber sector may be the only pathway to begin to approach 800% growth in defence exports by 2028.

Greg Austin, Professor, Australian Centre for Cyber Security, UNSW

This article was originally published on The Conversation. Read the original article.

Exporting and Training Father Christmas


It is that time of year for pouring scorn on Santa Clause once again and getting a laugh out of this secular tradition. The best video that I have seen in doing this has to be the one featured below – however, I have now found another from the same people.

The two videos below will give you about 15 minutes of amusement and entertainment – I hope you like them.

 

EGYPT: COURT GIVES CHRISTIAN BOYS TO MUSLIM FATHER


Despite a fatwa from the Grand Mufti, Alexandria judge denies custody for mother.

ISTANBUL, October 2 (Compass Direct News) – Following the Appeal Court of Alexandria on Sept. 24 granting custody of 13-year-old Christian twins to their Muslim father, their mother lives with the fear that police will take away her children at any moment.

Kamilia Gaballah has fought with her ex-husband Medhat Ramses Labib over alimony support and custody of sons Andrew and Mario in 40 different cases since he left her and converted to Islam so that he could remarry in 1999.

The court ruled in favor of Labib in spite of Egyptian law’s Article 20, which grants custody of children to their mothers until the age of 15, and a fatwa (religious ruling) from Egypt’s most respected Islamic scholar, Grand Mufti Ali Gomaa, giving her custody.

“This decision was dangerous because it was not taken in accordance with Egyptian law but according to sharia [Islamic] law,” said Naguib Gobraiel, Gaballah’s lawyer and president of the Egyptian Union of Human Rights Organizations.

He explained that Egypt’s civic code calls for children under the age of 15 to stay with their mother regardless of their religion. Gobraiel said that sharia tends to favor the Muslim parent in such cases.

“They want to stay with their mother,” said Gobraiel. “They don’t know anything about Islam and sharia. They are Christians and go to church on Sundays.”

The twins have publicly stated their faith, and during a test in a mandatory religious class two years ago they scribbled only, “I am a Christian” on their answer sheets and otherwise turned them in blank. The twins intend to go on a hunger strike if they are forced to live with their Muslim father, whom they hardly know, sources said.

“We only want one thing,” said Gobraiel. “We want the law to be applied in our cases like this one, not the sharia, because the government owes us citizenship. This is a civilized, secular country, not a religious country.”

The decision of the presiding judge, El Sayed El Sherbini, to give the father full custody is not even based on sharia but is purely arbitrary, Gaballah and her eldest son George Medhat Ramses claimed, since the country’s State Mufti had granted custody to the mother in April 2006.

“We don’t want to give them to anyone or comply with the sentence,” Ramses told Compass. “All the legal ways have been wrong to us. We’ve been trying to make it as legal as we can, but the court has not been fair.”

Ramses, 21, who is also a Christian and lives with his mother and two little brothers, said the judged showed bias in favor of his father because he converted to Islam shortly after he left Gaballah.

“The decision was unfair and oppressive,” Gaballah told Compass. “I am treated differently than other Egyptians, as if this is not my own country.”

Gaballah, who has been fighting to keep her sons since the court decided in 2006 that custody of her sons should be given to her ex-husband, fears that her children will grow up without hope and a sense of justice.

“I am so sad and afraid about their psychology,” she said, “because they are facing something that is fundamentally against all the principles I have taught them.”

Gaballah said she is ready to keep fighting with the few means left in her power to keep her sons, even if it means tarnishing her with a criminal record by not handing them over to their father.

“And I’m determined to get justice in my own country, because it is my natural right and my sons’ right,” she said. “I cannot see how I can comply with the people who are taking my rights away from me and taking my children from me to give them to an unworthy father and another woman.”

Labib is now married to his third wife, with whom he has a 4-year-old son. He is a businessman working in exports and travels between Alexandria and Cairo.

Gobraiel said that he intends to send a clear message to Egypt’s President Hosni Mubarak and the international human rights community that judgments like this one are hypocritical on the part of a government that claims to be “civilized.”

“How can they think we live in a civilized and secular country when they are applying sharia law on us?” he asked. “We will send a message to human rights organizations in Egypt and around the world to help us. We are angry and we want to declare it!”

 

Problematic Birth Certificates

Even under their father’s custody, the twins have the legal right to live with whomever they choose in two years, when they turn 15. But Ramses said he doubts the court would let them return to their mother.

“The same law that states that they should stay with mother until the age of 15 is the one that says they can decide where to live after the age of 15,” he explained. “If the court didn’t apply the first part of the law, they won’t apply the second.”

At the age of 16, when Mario and Andrew apply for their identification cards, they will face yet another hurdle, said Ramses. In 2005, Labib went to the population register and changed the twins’ birth certificates from Christian to Muslim, to reflect his own religion.

Now Ramses fears that a Sept. 23 court ruling in the case of Bahia Nagy El-Sisi, sentencing her to prison for three years for “forgery of an official document,” could be what awaits him and his little brothers. Nagy El-Sisi’s father had converted to Islam briefly in 1962, when she was 3 years old, and her documents were never altered to reflect the change as she remained a Christian. She and her sister discovered that their father had temporarily converted to Islam when the sister, Shadia Nagy, tried to issue marriage papers for her son.

Shadia Nagy was sentenced to three years in prison in 2007, also for “forgery.”

“These women are us in the future,” said Ramses.

Over the past few years, as Christians have found out about the twin boys’ case, Ramses said many have called them to give support. Many also have pledged to go on a hunger strike with the boys if they are handed over to their father.

“Christians see them as Coptic heroes and martyrs who stood up in front of all and said they were Christians and held on to it,” said Ramses. “All of them say they see the greatness of their ancestors and Christian heroes of long ago in them … and they carry a lot of respect and love for what they have done.”

Report from Compass Direct News