Australia’s competitive advantage in some sectors of the economy will offset the inevitable losses that will occur when local firms are competing against low cost imports under the Free Trade Agreements (FTA) that are now in place or under negotiation, according to the Minister for Trade and Investment, Martin Hamilton-Smith.

Participating in a forum of business and academic commentators last week, Hamilton-Smith conceded that some firms would be vulnerable under FTAs with countries like China, Korea, Japan and India.

“If you look at what our trading partners do well compared to us – they have cheap labour, capital is plentiful, and their industrial and regulatory arrangements are nowhere near as stringent as ours,” Hamilton-Smith said.

“Look at all the things in which they have as a competitive advantage and if you are in an industry that is vulnerable to those then a free trade agreement – and even without a free trade agreement – market forces will have an impact on you,” he said.

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“If you look at Australia (it has) a highly educated workforce, high levels of intellectual property, and is able to produce value-added, high end products – these are the things that we are good at, minerals, gas, food. This is the natural direction that markets will take us and a free trade agreement will just reinforce that.”

Hamilton-Smith cited the clothing and footwear industries where Australian firms could not make thongs and T-shirts but high end products like RM Williams boots were successful. While Australia had in the order of 53 flour mills in the past, there were now three or four producing a high value added, premium product for export markets.

He said China and India appeared to be transitioning from investment in ‘hard infrastructure’ like roads, ports and railways to ‘soft’ infrastructure like health care and education and there were opportunities for Australians in a growing services sector in next 10-20 years.

China Services Group Lead Director at Deloitte, Simon Olesen, told the AmCham forum that operating in countries like China came with particular challenges like language and culture, including the way in which business people engaged with translators.

Olesen said it was important to use language correctly and encouraged individuals to spend time with translators explaining what scenarios or ideas were being discussed in pending meetings with Chinese contacts before the discussions occurred.

“There have been numerous examples of garbled messages getting through,” Olesen said.

The need for effective preparation ahead of export efforts in countries like China and India has also been an issue advanced by Business SA.

In a submission to the Agricultural Competitiveness Taskforce, Business SA said the Federal Government “has been outstanding in securing trade agreements with Korea, Japan and China and now is the time to ensure that arrangements are in place for businesses, particularly small businesses, to access the plethora of opportunities; a key aspect being appropriate access to export readiness training”.

Business SA’s major 2014 policy document, Charter for a More Prosperous South Australia, recommends “the establishment of an Export Ready Program to bridge the services gap between setting up a business and transitioning it into a position where it is ready to export”.

It says the program “should be workshop focused so that businesses receive practical knowledge and tools, rather than just theory based education,” adding “small businesses should have access to a coaching/mentoring program to provide support from experienced and successful business people and to assist with operational issues associated with exporting”.