International Trade

Doing business in a new country can be a daunting experience, with new laws, regulations and culture to learn. China is one such intimidating environment. The rewards for doing business there can be great, but success requires knowledge and experience to gain the most from the relationship.

Much of China’s ethical system is derived from Confucianism, which teaches respect for superiors, duty to family, loyalty to friends, humility, sincerity and courtesy. In work and business, age brings with it increased respect and status, and older businesspeople are likely to be treated more seriously than younger ones.

Chinese put more emphasis on groups than on individuals. One person, preferably your group’s senior member, should be designated as your spokesperson.

Business relationships are personal relationships in China. To establish a good business relationship, build a personal relationship that demonstrates your respect and trustworthiness. Written contracts are secondary in China to personal commitments between associates.

Be aware of all favours done for you and gifts given and find a way to reciprocate in kind.

Do not insult or harshly criticise someone in front of others and do not make fun of someone, even as a playful joke.

Humility is valued highly in Confucianism. Chinese are often so polite and humble they appear to be self-effacing.

Punctuality is respected. Be on time for all meetings and appointments.

Business cards are important in initial contact. At first meetings, handshakes are followed by a formal exchange of cards, ideally with Chinese text on one side.

Business dealings are made easier by having a Chinese adviser who speaks English, has expertise in your area of business, has experience in doing business in China and is well regarded by their associates.

After making a good impression, it is then crucial to understand the way government works

China is an enormous bureaucracy. Local bosses and bureaucrats have great power. Getting to know influential local officials as friends can be very advantageous.

When it comes to the crunch of negotiation, be prepared for the tough negotiation skills of the Chinese. Their tactics can be both subtle and aggressive. Often they will wine and dine potential associates, particularly at night, as a way of gaining an advantage.

Negotiating tactics include getting angry as a means of intimidation, flattery to get you off guard, and prolonging negotiations to wear you down. A common tactic is delaying major negotiations until you are about to leave the country, then making unreasonable demands.

Chinese sometimes negotiate with several competing companies at the same time and let it be known they are doing so as a way of applying pressure.

Be prepared to walk away. You will gain more from making it clear that you would rather have no deal at all than a bad deal.

Many Chinese tend to take a long-term view, regarding an agreement as a single element of a bigger, ongoing relationship that is, ultimately, more important than any one venture.

The best way to fully understand the way business is done in China is with first hand experience.

The upcoming CCI Business Mission to China will provide participants with a comprehensive insight into the Chinese market. The mission has a reputation for presenting tour delegates with effective opportunities to develop relationships with key contacts and understand the business opportunities available in China.

For more information phone Keith Seed on (08) 9365 7637.

By Ian Whitaker
CCI Senior Trade Adviser

Minister for Trade Simon Crean visited Shanghai in May to take part in the ‘topping out’ ceremony for Australia’s national pavilion at the Shanghai World Expo 2010.

The ‘topping out’ ceremony is the second milestone in the construction of the Australian pavilion. Australia was the first international participant to complete foundation works in February this year.

The Shanghai Expo, which will take place from 1 May to 31 October 2010, will be the largest world expo ever held. More than 180 countries have confirmed their participation. Organisers are expecting over 70 million visitors, around 90% of whom will be from China. Up to seven million people are expected to visit the Australian pavilion.

“The Australian pavilion is clearly the most advanced of any of the international participants,” Mr Crean said.

“With a total project value of $83 million, this is the largest investment Australia has ever made in a world expo.

“This reflects not only the importance of the Australia-China relationship, but also the Government’s intention to take full advantage of this opportunity to promote increased trade and two-way investment, project contemporary images of modern Australia to millions of people and to strengthen institutional and people-to-people links between our two countries.”

The Government is providing core funding for the project and is seeking up to $22 million in sponsorship from the states and territories and the private sector.

The Australian Trade Commission (Austrade) will connect Australian companies to business opportunities flowing from the expo and will work with the Department of Foreign Affairs and Trade to deliver an extensive series of trade and two-way investment promotion events at the Australian pavilion.

The Expo is an opportunity for Australian companies to showcase themselves and Australia to the world and to expand commercial links with China.

For more information go to www.australianpavilion.com.

By Ian Whitaker
CCI Senior Trade Adviser

The International Chamber of Commerce (ICC) celebrated its 90th anniversary on 5 March at a formal dinner in Paris hosted by French Economy, Industry and Employment Minister Christine Lagarde and attended by more than 120 business leaders.

Founded in 1919, ICC is the peak world business organisation and promotes trade and investment across frontiers. It helps business corporations face the challenges and seize the opportunities of globalisation. Its conviction that trade is a powerful force for peace and prosperity remains as valid today as it was 90 years ago.

At a time of deep worldwide recession, ICC continues to stress the importance of the multilateral trading system and the dangers of the current rise in protectionism. It has also worked actively in recent months to help find a solution to the collapse of trade finance.

The dinner was part of a series of anniversary events around the world that began in Geneva in February and will continue in Kuala Lumpur, New York, Boston and New Delhi until the end of the year. Madame Lagarde was the keynote speaker at the dinner, which was also addressed by Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development (OECD) and ICC chairman Victor K. Fung.

At the event in Geneva, the ICC Research Foundation (ICCRF) was launched, established to reinforce ICC’s role of providing global intellectual leadership on public policy issues of major concern to business and peoples in all parts of the world. It will commission research to demonstrate the public benefits that flow from an expansion of international trade and investment.

Since its founding, ICC has expanded to become a truly global organisation with hundreds of thousands of member companies, chambers of commerce and associations in some 130 countries. The Chamber of Commerce and Industry of Western Australia is an active member of ICC through ICC Australia, based in Melbourne, and also through the World Chambers Federation, the Paris-based Chambers of Commerce division of ICC that administers the ATA Carnet system and hosts the biennial World Chambers Congress.

ICC activities cover a broad spectrum, from arbitration and dispute resolution to making the case for open trade and the market economy system, business self-regulation, fighting corruption or combating commercial crime. ICC speaks for world business whenever governments make decisions that crucially affect corporate strategies and the bottom line.

ICC has direct access to national governments all over the world through its national committees, including ICC Australia. The organisation's Paris-based international secretariat feeds business views into intergovernmental organisations on issues that directly affect business operations.

Arbitration under the rules of the ICC International Court of Arbitration is on the increase. Since 1999, the court has received new cases at a rate of more than 500 a year.

ICC's Uniform Customs and Practice for Documentary Credits (UCP 600) are the rules that banks apply to finance billions of dollars worth of world trade every year.

ICC Incoterms are standard international trade definitions used every day in countless thousands of contracts. ICC model contracts make life easier for small companies that cannot afford big legal departments.

ICC is a pioneer in business self-regulation of ecommerce. ICC codes on advertising and marketing are frequently reflected in national legislation and the codes of professional associations.

ICC is building a stronger presence in Asia, Africa, Latin America, the Middle East and the emerging economies of eastern and central Europe.

Sixteen ICC commissions of experts from the private sector cover every specialised field of concern to international business, including banking techniques, financial services and taxation, competition law and intellectual property rights, telecommunications and information technology, air and maritime transport, international investment regimes and trade policy.

For more information visit www.iccwbo.org or contact CCI's Ian Whitaker on (08) 9365 7684
or ian.whitaker@cciwa.com.

By Ian Whitaker

CCI Senior Trade Adviser

Given the current uncertain and highly competitive marketplace, it has never been more important to understand and effectively manage the risks associated with importing or exporting.

In late July US Dollar (USD) buyers were refusing rates of 98 US cents, saying that parity was only a few days away. By October, the Australian Dollar (AUD) had shed 39% of its value to a low of 60.04 US cents.

In recent weeks the AUD has suffered from extreme international risk aversion. As a higher-yielding currency, international investors view the Australian Dollar as a risky asset in these tumultuous times. Unfortunately, the global safe-haven scramble has exposed the AUD and we are reminded of this daily in the media. However, is the AUD really in such bad shape or have headlines such as "the failure of capitalism" scared some investors?

The fundamentals of the Australian Dollar seem to have been forgotten. Australia is yet to be technically declared in recession. While times may feel tough, we have not seen a negative quarter of growth and the Reserve Bank's forecasts are yet to show a negative number. The Australian government and the RBA have moved very quickly to cushion the Australian economy. Their interest rate cuts have been passed on relatively quickly and December's fiscal stimulus proved positive to retail activity. The next planned stimulus should boost spending again and free up access to the housing market. Further underlying inflation will move back within the RBA’s target range as early as next year.

The volatility and uncertainty of the Australian Dollar against other currencies will have a major impact on the profit and loss of many Australian companies. Managing this risk has become an essential part of successful importing or exporting. When deciding on a strategy the following factors must be considered:

• What is the size and nature of my risk?
• How much risk am I prepared to undertake?
• What is the lowest currency level I am prepared to tolerate?
• How much flexibility do I need to incorporate?

A successful strategy can incorporate any or all of the following tools and methods.

A forward contract is an agreement between you and your currency provider in which the institute agrees to buy or sell to you a pre-agreed amount of money at a fixed exchange rate on a pre-determined date in the future. A FEC is used to negate exposure to currency market movements between now and the date at which you will need to pay or receive a foreign currency.

A spot transaction is the standard form of foreign exchange transaction. With any spot transaction there is a value date when the cash flow occurs and a contract date when the transaction is contracted (usually two days before). Choosing to simply buy spot is still considered to be a strategy however it does involve the maximum risk with the greatest exposure to market movements and the greatest potential losses or gains.

Rolling hedging is the most common form of risk management and usually consists of a combination of forward and spot.

Standing Orders (Overnight Market Orders) take advantage of Australia's unusual situation - over 70% of all the movements involving the AUD occur outside of Australian trading hours. By using the 24 hour trading capabilities of currency specialists you can access the tools to capitalise on these movements. A standing order authorises your currency provider to automatically purchase the desired amount of currency at a pre-selected rate.

A consignment or holding account is a non-interest bearing account used by companies to temporarily store foreign denominated funds. These accounts are an ideal facility to be used in conjunction with standing orders or incoming foreign currency. A target rate can be set and funds can be bought at the desired target rate even when there isn't actually a bill to be paid. The funds are simply stored on a short-term basis until they are needed.

There are a number of techniques that allow a company to actively take control of its financial risk. Becoming aware of exactly where these risks lie then developing a comprehensive strategy for alleviating these risks is a necessity for any company involved in international commerce.

For more information contact AFEX at dcunneen@afex.com. 

By Daniel Cunneen

Associated Foreign Exchange
Corporate Account Manager

Recent initiatives announced by the Federal Government will channel prospective skilled migrants to rural and regional areas of Australia.

Some of the changes will institute more stringent settlement criteria to the skilled migration program and come amidst rising demand for migration to Australia.

Commencing 14 April, prospective skilled migrants seeking permanent residence under the skilled independent category are required to meet a higher pass mark (120 points) for permanent entry to Australia.

Predominantly, those applicants who are successful in passing the new threshold will be aged 30 years or less, university degree or trade qualified and will have worked in their chosen field for three of the past four years.

Applicants older than 35 are likely to face considerable difficulty in reaching the new threshold.

While the pass mark has been increased for the skilled migration program, a lower pass mark will apply to those who commit to settling in regional Australia.

In the absence of further details, information gleaned from government media statements indicate that suitably qualified individuals intending to migrate to Australia will obtain a three-year temporary residence visa if they commit to living and working in regional Australia.

After two years these skilled individuals will then be able to apply for permanent residency. The timing gap between the media announcement of the new rules from 1 July and the changes to existing rules from 14 April is highly questionable and has created some uncertainty. It is likely to lead to considerable concern for many prospective applicants.

In a further initiative to encourage migration to the regions, it is understood that self-funded retirees from overseas will be given four-year residential visas if they agree to live in rural Australia and invest at least $500,000 in state or territory bonds.

The ultimate impact on rural and regional population development centres of these changes is unknown and will not be measurable for many years - if at all.

These changes also do not address, to any substantial extent, the skills gap arising from the disparity in the skills being attracted to regional Australia and the type of skills that may be required by employers in specific regional areas.

CCI is concerned that the development policies for rural and regional Australia are conflicting with the Federal Government’s skilled migration policy objectives.

The outcome of specific initiatives, particularly in relation to employment and skill shortages, could be more effectively achieved through other means and closer consultation with industry.

For more information contact Ivan Hoe at CCI Migration Services on 9365 7555 or e-mail: visas@cciwa.com

There are a number of avenues for entry to Australia depending on the length of time people intend to remain in the country.

Short-term stay

The business (short stay) visa
This visa may be issued for single or multiple entry. Holders of a multiple entry visa may make any number of journeys to Australia for up to three months on each occasion.

Multiple entry visas may be valid for up to five years, or the life of the passport (to a maximum of 10 years). Applicants must apply for this visa outside Australia.

The Electronic Travel Authority
The ETA allows tourists and business visitors to obtain visas for Australia at the time they make their travel arrangements. The ETA system is accessible through travel agencies and airlines in the United States, Japan, Singapore, Malaysia, Korea, United Kingdom and many other Asian and European countries.

The APEC Business Travel Card
This card provides business people with simplified entry to a number of economies of the Asia-Pacific Economic Co-operation (APEC) forum. Holders must be passport-holders of one of the participating countries, currently Australia, Chile, Chinese Taipei, Hong Kong SAR, Korea, Malaysia, New Zealand and the Philippines.

Brunei, Darussalam, China, Indonesia, Peru and Thailand have also joined the scheme and will commence issuing cards in the near future.

Cardholders enjoy express immigration clearance and pre-cleared entry to participating economies.

Long-term stay

Longer terms are available for business people allowing up to four years temporary residence in Australia. A number of visas facilitate the entry of a long- term visitor to Australia.

Labour agreements
A labour agreement is a formal arrangement negotiated between the Commonwealth Government, represented by the Department of Immigration and Multicultural and Indigenous Affairs (DIMIA) and the Department of Employment and Workplace Relations (DEWR), and an employer or industry association.

Labour agreements enable Australian employers to recruit a specified number of workers from overseas in response to identified or emerging skill shortages in the Australian labour market. Agreements are normally negotiated for a period of two to three years.

Regional Headquarters Agreements
RHQs are a form of labour agreement negotiated between the Department of Industry, Tourism and Resources (Invest Australia), DIMIA and an employer who wishes to locate their regional headquarters in Australia. These agreements offer both permanent and temporary entry to key executive and specialist personnel who are essential to the establishment and management of the Australian-based regional operations.

Immigration arrangements for those entering Australia under an RHO are streamlined and given priority processing over standard labour agreements.

Business Temporary Entry visa
These arrangements cater for employers wishing to sponsor the temporary entry of highly skilled personnel to Australia. Under the current arrangements employers are able to sponsor a range of occupations including professionals, para-professionals and skilled trades people who have employment in Australia.

CCI Migration Services is available to provide advice and guidance to employers seeking to sponsor an employee from offshore.

For more information contact CCI Migration Services on 9365 7618 or e-mail: visas@cciwa.com