8. 5. Statement: Focus on Exports

– in the Senedd at 4:26 pm on 22 November 2016.

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Photo of Ann Jones Ann Jones Labour 4:26, 22 November 2016

I’m going to move on to item 5, which is a statement by the Cabinet Secretary for Economy and Infrastructure on the focus on exports. I call on the Cabinet Secretary for Economy and Infrastructure, Ken Skates.

Photo of Ken Skates Ken Skates Labour 4:27, 22 November 2016

Thank you, Deputy Presiding Officer. Through this statement, I will demonstrate to the Chamber that this Government is extremely well placed to respond to the unprecedented challenges we now face in the global business environment. Increasing the value of exports and the number of exporters in Wales have been central pillars of our economic strategy for some time. This aligns with the priorities set out in the well-being of future generations agenda to create a prosperous Wales.

We have a comprehensive range of support for existing and would-be exporters that is focused on inspiring them to start or grow their exports, transferring the knowledge and skills to build their capability to export, helping them to connect with potential customers overseas and supporting visits to overseas markets. We assist companies at every stage of their export journey and we have helped Welsh companies to win new export orders. With our support, Welsh companies won more than £72 million in new export business in 2015-16.

I have recently returned from leading a trade mission to one of the most important markets that we have—Japan—and I can confirm to you today that it was a resounding success. We, as a Government, are able to provide comprehensive support to companies before they go to a new market, during their visit and after they return. I saw first-hand how this support was tailored to suit each company and how it was put into practice.

Prior to the mission, Welsh Government officials based here and in Tokyo helped companies to refine their offer, identify opportunities and set up meetings with potential customers and distributors. This ensured that each company had a worthwhile programme and was able to take full advantage of the time they had in market. Companies also benefited from financial support to travel to market on the trade mission, but I believe it is the softer support that money cannot buy that provides the greater benefits.

During the mission, we arranged a lunch with key representatives of the Osaka chamber of commerce and an evening reception with local businesses and with key contacts. Given the extensive membership of the organisation—some 28,000 members—this was an excellent opportunity to raise the profile of Wales. Added to this, there was a pre-opening reception for companies participating in the British fair at the prestigious Hankyu department store. Wales featured as one of the main focal points and, again, this was an excellent opportunity for Welsh companies to network and speak to potential customers face-to-face. Our Tokyo team also spoke at the event to promote Wales as a tourism destination.

I had the opportunity to speak at three events, so was able to reinforce the message that Wales remains firmly open for business following the recent referendum result. The fact that we had 19 companies with us on the trade mission, plus an additional six Welsh companies exhibiting at the Hankyu showcase, also demonstrated the dynamism of our companies and that we have no qualms about being proactive in looking outwards for business in spite of the challenges. As a Government, we cannot do the business for them, but we can add value by raising the profile and opening doors that may otherwise be inaccessible. Undoubtedly, the presence of a Cabinet Minister was vital in gaining access firstly to ministerial colleagues in Japan and secondly to key decision makers on the boards of some of the largest companies in the world, such as Sony and Hitachi. This I was delighted to be able to do. In a wider context, given the concerns expressed recently by the Japanese Government about Brexit, the timing of this trade mission could not have been better. I was able to allay some of these concerns, but also reaffirm the high regard in which Japanese companies are held in Wales.

Alongside the packed programme of meetings and events, my officials ensured that all of this hard work was publicised and the visit maintained a high profile in both Wales and Japan. This included the use of social media and traditional print media. For example, I was interviewed by the highly respected ‘The Nikkei’, owner of the ‘Financial Times’, which enabled me to deliver our message even further to its wide circulation of circa 3 million readers. We also provided our businesses with an advertising platform in the form of a pamphlet, branded under the Wales banner.

It is very soon for companies to have a complete picture on all the deals that will be closed as a result of the mission; such deals often take time to bear fruit. So far, the value of orders received by Welsh companies is around £680,000. Each company had a number of very positive discussions during the mission, which they anticipate will lead to even more exports to Japan. We’ll be following up with companies on all the opportunities identified to ensure their export journey is as complete as possible and that they all see tangible outcomes.

In conclusion, the mission was a great success for all involved. The large number of businesses we took showed a strong commitment to the market and each one has indicated to us that they found it highly beneficial. With a healthy mix of experienced and less experienced exporters, we found that, as an added bonus, there was also camaraderie between missioners that gave way to unrivalled peer support via the sharing of information, experiences and contacts. We are determined to support Welsh exporters as much as we can in a post-Brexit Wales.

Photo of Ann Jones Ann Jones Labour 4:33, 22 November 2016

Thank you very much. Russell George.

Photo of Russell George Russell George Conservative

Thank you, Deputy Presiding Officer. I’d like to thank the Cabinet Secretary for his statement this afternoon. It’s very welcome, and I’m certainly keen to have further statements of this sort. I certainly appreciate that we are in uncertain times, following the EU referendum result and the US election, but I also do think that there are exciting opportunities for new and existing UK international deals, which Wales must seize. Now, I’m pleased that, following your trade mission, you have indicated that there will be a step change in approach, which will ensure that Wales reaps the benefits from being part of UK plc, which is now the fastest growing economy in the G8, I think it’s important to point out.

Between 2015 and 2016, there has been a fall in the value of Welsh exports by over £0.5 billion, and a fall in exports to the EU countries by nearly 11 per cent. In contrast, the UK trade statistics have reported that, between quarter 2 and quarter 3 of 2016, overall UK exports of goods to EU countries increased by £2.3 billion. So, I would be grateful if you could outline your views on: if overall exports from the UK to the EU have risen, have Wales’s exports fallen?

I was also concerned to learn that the latest export figures for Wales show that export values to the USA dropped by £203 million during this period. Given the fact that the US market represents Wales’s largest trading partner, followed by Germany, can I ask you, Cabinet Secretary, what specific measures you are putting in place to reverse this, I’d say, concerning trend with our main trading partner?

And finally, I raised with the First Minister on Friday during scrutiny of the First Minister that Nicola Sturgeon, speaking at the SNP conference last month, had said that she was doubling staff in some Scottish Government offices and opening new offices in other parts of the world. When I asked the First Minister whether Welsh Government had similar intentions he did indicate that that would be the case. So, I would be grateful if you could perhaps outline a little bit more about what plans you have for increasing staff in international offices and also to give us more detail generally about what Welsh Government’s international offices do in Europe and in other parts of the world?

Photo of Ken Skates Ken Skates Labour 4:36, 22 November 2016

Can I thank Russell George for his questions and for, indeed, welcoming this statement, which is timely? Further statements of this nature will come forward as additional trade missions take place and there is more information concerning the state of UK and Welsh exports. I do believe there are exciting opportunities, but there is an immediate challenge for us in dealing with some negative perceptions of the UK after the referendum. One issue that I did find out in Japan that had to be dealt with on numerous occasions was a belief that, as a consequence of the referendum, Britain was somehow less tolerant and less outward-looking. This is something that we must address, not just us but colleagues across the United Kingdom.

In terms of the United States, the United States is a very key market and I am concerned, clearly, about some of the rhetoric of the incoming President. That said, we are intensifying activity in the United States, and in the first quarter of next year there will be two trade missions going to New York and San Francisco. There is no doubt there is huge opportunity in the United States, where we also have a very strong diaspora, and I am hoping that our offices in the US will be able to work more closely with UK Trade and Investment and the British embassies and consulates. I found that in Japan, our access to the embassy gave us huge opportunities that we would not otherwise have had. Having a good relationship with our ambassadors abroad is crucially important in attracting key decision makers in market, and I’m very grateful to the co-operation of the UK Government in this regard and our overseas officers.

In terms of the figures, almost all of the reduction in export values that the Member highlights is accounted for by the reduction in the value of energy exports, including minerals, fuels, lubricants and petroleum. And since 2011, energy exports—the value of those exports—have clearly been adversely affected by the closure of the Murco refinery, the maintenance shutdown at Valero and also by a significant fall in the value of the pound against the US dollar. However, figures for quarter 1 and quarter 2 of this calendar year for non-energy exports do actually show a slight increase on the corresponding period in 2015. It’s my desire to see that trend improve and growth in exports accelerate. Indeed, much of the fall in the value of exports I think can be attributed to issues that are beyond our control, specifically in the fall in commodity prices and exchange rate variations. But that’s why we are focusing on areas where we can make a significant difference. And, again, in terms of Japan, the rate of return on investment to date is 20:1. I would expect, over the coming six months, as more orders are secured, the return on the investment of that trade mission would pass 40:1, which is normal for the value for money ratio for trade missions.

We are working—the Member referred to UK plc—more closely with UKTI and I recently met with Lord Price to discuss how we can ensure that we collaborate where possible and that we also take up opportunities presented by specific regional trade missions as well. For example, we discussed the opportunities that could be presented for businesses within the Northern Powerhouse area of Wales to take part in a specific Northern Powerhouse trade mission or trade missions.

Photo of Adam Price Adam Price Plaid Cymru 4:40, 22 November 2016

I commend the Minister for taking a close personal interest in selling Wales abroad. I think that’s a very, very important role for the Cabinet Secretary. I would think, though, that alongside activity, of course, we need strategy, and I was interested to hear his comments just now drilling down a little bit into the fairly serious decline in our export position overall that we’ve seen consistently since 2013—about a £2.6 billion reduction in the total volume of exports. It would be useful, I think, if he would be willing to share with the Assembly the analysis that he’s alluded to there. I think the energy side of it is certainly absolutely borne out by the figures, but there are other areas—manufactured goods classified chiefly by material and miscellaneous manufactured articles—as well that show a similar trend of decline over the last year, and there are particular countries—the Irish Republic, for instance, were down 30 per cent over the last year. And I think it would be useful if we had a more in-depth analysis of what has driven this fall in our export position.

I would say to him—again, he won’t be surprised by this—that almost every country in the world has a specialist trade promotion body, and, indeed, when it was recently mooted that UKTI—which he has been very complimentary about, I think, and works closely with the Welsh Government—were going to maybe be abolished, merged, downgraded et cetera, then I think the Welsh Government wouldn’t have supported that, because the evidence from across the world is that having a trade promotion body is an important part in the armoury of any nation. Unfortunately, and this isn’t in any way to decry the best efforts of himself or indeed civil servants, all the evidence that shows why Governments have them is that having a specialist trade promotion body with offices right across the world is an important tool in driving forward the exports success that we’d all like to see.

Finally, could I just ask him, seeing as he was in Osaka: did he have the opportunity to see the sight of the world expo of 1970 that was such an important part of the economic development success of that particular region of Japan, so much so, of course, that they’re bidding for it again in 2025, because they see an expo as the best shop window possible for exports, telling the world, as we are oft as politicians to say, ‘We are open for business’? Would he at least consider looking at the possible benefits and costs of a Welsh bid, so that we’re actually competing there with Osaka and all the other cities and regions and nations in the world?

Photo of Ken Skates Ken Skates Labour 4:43, 22 November 2016

Can I thank Adam Price for his questions and say, yes, I would be very open to the prospect of Wales hosting a world expo, and I’ve asked officials to look at the potential of this in future years? Unfortunately, I didn’t see the site of the Osaka world expo. For the most part, my trip consisted of travelling from one office base to another, but I did catch sight of what was an incredible castle in Osaka, and for that one moment I did feel very much at home.

In terms of the work that we’re doing, I’m actually doing some work in mapping growth goods and service areas against the growing markets for the Welsh economy, so that we can identify which products and which services are most likely to grow post Brexit in each of our respective key markets. Some work has already been carried out by UK Government, which they’ve shared with us, in identifying both threats and opportunities in terms of international trade. We’re now working alongside that to identify the markets and the goods and services that are most likely to reap the biggest rewards in terms of growth.

I know that the Member has raised in the past the question of whether there should be a specific body to promote exports. My concern at this moment in time is that we have to ensure that there is close alignment between brand Wales, exporting support, and also the operations right across Welsh Government offices abroad. At the moment, I think we’ve got a very good story to tell about the way that Wales is being promoted as a place, as a destination, not just for tourists, but for investment and how it’s being promoted to the outside world as a place of quality for goods and services to be produced.

I would be hesitant about departing from what we have created at the moment—an aligned structure where we have Business Wales offering advice and guidance to businesses, working with Welsh Government officials in terms of opportunities that there are for exporting and identifying new markets, and then, thirdly, working with Visit Wales in the promotion of brand Wales. I am conscious of the need to make sure that we have alignment and consistency. At this moment in time, I’d be very, very reticent about moving away from what is an operation that works well to one that, perhaps, could not have a clear, strong brand in its initial years.

Photo of Jeremy Miles Jeremy Miles Labour 4:46, 22 November 2016

Can I congratulate the Cabinet Secretary on a successful visit to Japan? It’s obviously important to keep these markets open for Welsh exports. Can I ask him to address the particular challenges faced by small and medium-sized businesses in exporting, half of which depend heavily on the internet to drive export sales? He mentioned that he’d had some concerns in Japan around Brexit. As the EU moves, albeit slowly, towards a digital single market, I hope that we’ll find ways of taking advantage of the harmonisation that that will bring and the lower costs that that will bring for those that remain members. But that aside, what steps is the Government taking to encourage e-exporting, to explain the scale of the opportunity and how to go about it?

Photo of Ken Skates Ken Skates Labour 4:47, 22 November 2016

Well, the vast majority of businesses that take part in trade missions are SMEs and just to demonstrate how we are intensifying our activities abroad, in the last two months, we’ve taken more than 110 different businesses on trade missions and to exhibitions overseas. In addition to Japan, we’ve been to India, Ireland, Germany and Belgium, to name but a few.

In terms of e-exporting services, well, we offer advice and guidance to businesses large and small, but primarily to microbusinesses and small-sized enterprises. We also connect businesses with the e-exporting service offered by the Department for International Trade, and this service, which has recently been enhanced, provides companies with access to preferential rates on some of the world’s largest online marketplaces, such as Amazon China and Harper’s Bazaar. I think it’s worth saying that, insofar as an SME is concerned, where a product or a service is deemed to be suitable for selling online, we will help companies in a number of ways, from advising on the optimisation of their websites through to helping them to understand issues such as taxes and VAT. This is a service that is provided on a dedicated one-to-one basis by Business Wales, and is proving successful in increasing the number of small and medium-sized enterprises that are exporting. But it is something that I wish to see grow and wish to enhance. It’s absolutely vital, in a post-Brexit Wales, that we encourage more and more businesses to export. For that reason, we’ll be hosting a number of summits in the new year, bringing together experienced exporters with small and medium-sized enterprises that are yet to export.

Photo of David Rowlands David Rowlands UKIP 4:49, 22 November 2016

I thank the Cabinet Secretary for his statement that contained many encouraging comments with regard to his visit to Japan. However, turning to exports in general, would the Cabinet Secretary confirm to Members that Wales’s exports to the EU have been in sharp decline over the last decade, falling, as my colleague pointed out earlier, from 60 per cent to less than 40 per cent during that period, and that perhaps Brexit was not only a timely wake-up call, but it would rather seem to be a necessary intervention if Wales was not to slide deeper into the economic doldrums with regard to its export achievements?

Photo of Ken Skates Ken Skates Labour 4:50, 22 November 2016

I think one thing we can be sure of with Brexit is that if businesses in Wales have to pay tariffs, or if tariffs have to be paid, rather, on their goods and services, it will inhibit their ability to export. It will not be a benefit. I’ve already outlined the reasons for the fall in the value of exports, largely being attributed to energy products, but in other areas, there has been a significant increase in the value of exports, notably in food and drink. As I outlined to Adam Price, I’m looking carefully at both the potential growth markets and the potential growth products and services to ensure that we are optimising the spend that we have invested in opening up new markets and introducing businesses to would-be buyers, but also in terms of making sure that we are not selling or trying to sell in areas where there is not predicted growth or where there is not predicted growth in the value of exported goods.

Photo of Ann Jones Ann Jones Labour 4:51, 22 November 2016

Thank you very much, Cabinet Secretary.