Hear the latest observations on the free trade negotiations and the importance of trust between government and business from Andrew, our political and economic pundit from across the last month.
free trade with EU stumbles
Prosecco and Feta may be attracting the headlines when it comes to the “faltering” EU – Australia Free Trade Agreement negotiations but it is worth noting that this process started back in July 2018 and after more than 15 rounds of negotiations it really is in the final stretch. Waiting for August is not really that big a deal.
Certainly, there’s some positioning still going on, primarily around agriculture quotas, which is sensitive for both parties' constituents, but if you look at the history of the negotiations you’ll see more boxes ticked than issues outstanding.
Naturally the Australian Government generally positions these agreements as a positive for Australian exports and growth opportunities for Australian businesses. But with a ratio of $70B – $27B in imports of the others goods and services last year in the European’s favour it’s easy to see why you may want to grow the Australian share. But equally the $70B comes with strings attached and so making it easier for the multinational companies operating from Europe to grow their presence in the Australian market makes sense.
In addition to changes in tariffs there are other benefits that encourage FDI as well as agreements on IP, data protections, skills recognition and professional licensing that should help drive the flow and growth of opportunities for European companies looking to grow their Australian presence.
So, whether we’ll be forced to drink Sparkling White or some other form of bubbles it’s still going to be worth raising a glass when the deal does eventually get done.
the importance of trust
Watching the PwC revelations unfold has been extraordinary and a salient reminder that it’s not necessarily the crime that causes the primary damage but the attempt to cover it up that can be fraught and inflict the most damage.
Sure, PwC’s reputation was going to take a hit when it was exposed that one of their partners had breached confidentiality agreements, taken unscrupulous advantage of a trusted position with the government and gamed the system in about the most egregious manner possible. Bad enough you might think?
Yet it only got more incredulous as those involved attempted to obfuscate, cauterize and attempt what they obviously thought was damage control but was instead further self-inflicted reputational and credibility carnage.
One of the sad things about this is that if PwC had owned the initial revelations and been more forthcoming about what had occurred, how they misused the information and been genuinely contrite it may have pretty much ended there, bit of slap and some minor public humiliation with a path to redemption.
Instead, the reputation of the entire firm has been tarnished, thousands of employees who probably have no idea what MAAL or BEPS are, have been affected.
Which comes to the other side of the revelations, the, reportedly, 14 firms who were the beneficiaries of this advice and were able to restructure their operations to minimise any impact the new laws would have on the profitability of their Australian operations.
It appears the 14 firms are going to be ok, the ATO seems not to be interested in picking a public fight and using these current shenanigans as leverage, perhaps they already have done this behind closed doors. Instead, what we hear is the improved behaviour, increase in MNC contribution to the tax revenue and minor tweaks around the edges.
my random observations this month
I was in New York at the beginning of the month at a wedding where a large contingent had flown in from Italy and elsewhere outside the US. Some quick observations, life was returning to normal in the city, the foreigners were all complaining about the price of air travel and interestingly a number commented on their post covid lifestyle changes, not just jumping on plane “because” … they’d realised that you could work effectively remotely, and the hassle of travel did not always justify the destination.
It was also the tail end of Pride month and it was amazing how the city had embraced diversity and turned it into a celebration. My 21-year-old daughter was initially questioning about some of the business efforts to “co-brand” and co-opt, but after a couple of weeks that dissipated to accept that whether the motive may have been slightly flawed, the enthusiasm was highly engaging and contributed to the overall positive mood.
And through pure chance, our AA flight got disrupted, we ended up flying on the inaugural QF3 via Auckland and on to JFK. Amazing how smoothly things seem to go when the airline CEO is onboard with television crews. It was the first time a Qantas tail had been to Kennedy since 2020 and was actually a great way to get there.
Email me with your feedback or thoughts on what you'd like to hear more of from the political and economic front for MNs doing business in Australia.