He referred concretely to the type of initiatives that lead to a more efficient use of ‘intermediate goods and services — in transport, logistics and, of course, in sourcing — including exploring opportunities for what, these days, is usually referred to as “offshoring”’.

A recent report commissioned by the Australian Business Foundation (ABF) found that successful firms are already engaging in productivity and participation-enhancing initiatives in a wide variety of ways.

This is a positive story in challenging times for businesses beyond the resources sector, and also offers a new perspective for governments.

The old model of exporting is to look for access to foreign markets for domestically produced goods and services. By contrast, the new model is value adding in global supply chains, always working back from what foreign markets want. In the new model high-value services including design and marketing are retained while many components of the supply chain go offshore. This arrangement can take different forms: foreign direct investment, outsourcing, or collaboration/joint ventures.

As successful businesses are not only significant exporters but also importers of foreign products and services into Australia, the distinction between the export and domestic markets becomes increasingly blurred. Some older firms are in a process of transforming by unbundling and ‘carving up’ — that is, serving traditional markets from new locations and retaining the higher value activities, including information and management systems, in Australia. New firms can start up in different forms from inception. But over time they too will have to evolve.

The question is ‘won’t offshoring cost jobs?’ It will in the short term, but without offshoring all participation in the supply chain will most likely be lost and high-paying jobs will not be available. Exporting both influences, and is influenced by, the productivity and performance innovation of Australian firms. Though the direction and significance of these effects is a big talking point in international economics these days, the conclusion is that, overall, exporters are better performers.

For example, some studies have offered evidence that companies that have adopted offshoring as a model have greater productivity and ability to pay higher wages. The ABF report noted above shows that exporters are also fast, agile, engaged with end-users, open to new ideas and highly connected to other businesses.

Despite this positive story, there is a puzzle: only a small proportion of firms are exporters. The Australian Bureau of Statistics data cites figures of 8 per cent, but this varies across sectors.

The costs of getting into the international business are an impediment, and include the set-up required by exporting and the lack of recoverability of those costs should the venture fail. And that is one reason why there is a positive association between productivity and offshoring: it needs both forward planning and investment, and in order to recover their investment, exporters have to be more productive.

The ABF report concludes that restructuring is synonymous with productivity-raising activities. So what are the messages for governments?

First, innovation is not just about technology: it depends on people’s experience and capacity to think critically about ways of doing business.

Second, being able to adjust a business internally is important, so removing unnecessary regulatory restrictions on the way firms go about their business is key to their success.

Third, innovative firms can find their own place in the supply chain: subsidising or protecting specific stages — particularly final assembly — is inefficient.

Fourth, it is valuable to shift focus in trade policy to reduce ‘behind the border’ differences across countries, because these add to the costs of doing business and create uncertainty in export markets.

Fifth, imports matter because the most successful exporters are also importers: they know their place and can shift their location in the value-adding chain.

And, finally, not adding to the costs of exporting unnecessarily is important. This applies to various regulatory processes that are a burden to exporters. It also means reforming policy that raises the costs of all the inputs into trading, including transport and communications.

Christopher Findlay is Executive Dean of the Faculty of the Professions at the University of Adelaide.

Dean Parham is Visiting Research Fellow in the School of Economics at the University of Adelaide.

This is the authors’ view of key points from a research project titled ‘Borders Blurred: The changing nature of trade in a globalised world’ conducted by Christopher Findlay, Narelle Kennedy, Faqin Lin, Dean Parham and Tim Harcourt for the Australian Business Foundation.