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Destination anywhere: Which export markets matter the most?

30 March, 2009

When it comes to trade most of the news is ‘big picture’. We hear about the Doha round in the World Trade Organisation (WTO), APEC summits and in more recent years, bilateral and regional trade pacts.

For instance, Trade Minister Simon Crean has had some big wins recently with the regional pact between the Association of South East Asian Nations (ASEAN) and the Trans-Tasman partners in Australia and New Zealand forming the AANZFTA pact.

However, whilst these big developments are important, the focus is mainly on export revenue and the gains at the top end of town with less focus on the exporting companies themselves – particularly the ‘up and comers’.  So what about the exporting companies then? How many are there and where are they heading?

 Fortunately, courtesy of some new research from the Australian Bureau of Statistics (ABS) and Austrade we now are getting a better handle on some of these questions.

First of all, we now know that there were 45,018 exporting businesses in the ‘exporter community’ in 2007-08.  This tally comprises 43,098 goods exporters and 2,927 service exporters – although the count excludes in-bound services (like tourism and education) that are also important to the national export effort. The number of exporters is up by 1 per cent on the 2006-07 figure of 44,548.

The exporter community can be broken down by market destination for goods as well and the results make some pretty interesting reading.

First of all, our Trans-Tasman cousins, New Zealand were top of the pops, with 17,897 Australian businesses having exported to the shaky isles in 2007-08. This indicates that many exporters actually find exporting ‘across the ditch’ relatively easy and that Kiwiland is a good ‘nursery’ to start with when learning the craft of exporting. The Australian New Zealand Closer Economic Relationship (CER) – now over two decades old – really gave Australian companies – especially small businesses – a kick-start into exporting.

The United States is second, with 9186 exporters.  Many small and medium businesses get their start in the USA as they are attracted by the size of the market.  But the numbers have actually fallen to the USA over the year, even though the data was collected before the onset of the sub-prime crisis.

Singapore is in third place with 6566 exporters and then comes the UK with 5614 and Hong Kong on 4918. ‘Entrepot’ economies like Singapore and Hong Kong tend to have lots of wholesale trading houses and act as a hub port for exporters (and importers). For instance, Singapore has played the role of a gateway port for South East Asia, whilst in the past; Hong Kong has played a similar role in the North East Asia – particularly before China opened up more to international trade and commerce.

In the UK’s case, there is the “Kylie effect” to consider. According to the data, the UK is light years ahead of any other European country, indicating that many Australian exporters (like our pop-starts) head to Britain (because of cultural and historical links etc) and have use the UK as a base to expand into Europe and the rest of the world.

Next is China in seventh place on 4495, a growth of 238 exports and with an 18.5 per cent increase in export revenue. China’s position supports the Austrade/Sensis survey that showed many SMEs looking to the Middle Kingdom as an export destination – joining the larger Australian blue chip corporates such as Rio Tinto, ANZ, Elders, BHP Billiton and Woodside who have been in Beijing for some time.

Then comes, Papua New Guinea on 4233. The data shows the importance of our near neighbours to small business exporters with three Pacific destinations in the top ten. Then comes ASEAN neighbour Malaysia on 3537, Japan on 3424 and Fiji on 3181.

The ‘second top ten’ is still heavily focussed in Asia but includes both mature and emerging markets. Thailand is a big chart buster on 2852; Germany attracts 2690 exporters followed by Indonesia on 2576. Then comes another pacesetter, the UAE on 2382 followed by Korea, India, Taiwan and Australia’s main African destination in South Africa. New Caledonia also continues to hold its place in the top 20.

It should be noted in the analysis that many exporters have multiple destinations, so they may be counted twice in terms of country though not in the region. The analysis of company numbers is also not necessarily a reflection of value. For instance, whilst New Zealand attracts over 17,000 exporters and Japan only around 3,400, the value of the those exports to Japan was over $34 billion, whilst New Zealand’s was worth just over $9 billion.

Does the data change over the years? From the limited data available, the top 20 remains pretty stable with a few countries changing positions. However, if you look at longer term snapshots, you see a bit more movement. For example, a comparison of the 1989-90 rankings with the present shows - you guessed it – China charging up the table.

In conclusion, in terms of exporters, we have an exporter base in Australia that is spread far and wide across the globe but concentrated enough in the bigger markets to get a good bang for their buck. And exporting seems to be delivering to all Australian exporters – both large and small. Austrade research shows that exporters, on average, grow faster, are more profitable, more innovation and pay higher wages than non-exporters. The micro-economic performance of Australian exporters will be very important as they withstand the headwinds confronting them during the Global Financial Crisis (GFC).

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