China, Compliance and Co-opetition

Monday, March 7th, 2016
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Australia has moved quickly in establishing free trade agreements with China and other Asian countries.

It’s important to know how this affects local manufacturing in Australia through export opportunities, and also the implications of imported products used in our own supply chains.

But the rise of cheap substituted products flooding the building and construction market has already resulted in compliance catastrophes, as seen in recent headlines about cladding catching fire. Both the Chinese manufacturing industry and the Australian construction industry are growing increasingly aware of the true cost of cheap substituted products.

This cost is not just an environmental one, with the higher amounts of waste generated through using products that break and require replacing sooner than their higher-quality counterparts, and potentially environmentally-damaging manufacturing processes. There’s also a reputational cost, with risks to members of our general public.

What’s needed is consistent access to high-end, fit-for-purpose products that are ethical, affordable and accessible. Kate Harris, CEO of Good Environmental Choice Australia, says that “ecolabels truly do help navigate the complexity of imports and exports.”

“International organisations such as the Global Ecolabelling Network (GEN) are there to support governments and ecolabel organisations to help transition to best practice manufacturing,” she noted. “Through GEN, ecolabel organisations can come together to share knowledge, which helps foster simplicity, quality and sustainability of imports and exports.”

Ecolabel organisations typically go beyond assessing environmental impacts. Depending on the organisation and the depth of their certification process, an ecolabelled product has also undergone fitness-for-purpose testing to ensure the product performs as it is meant to. Supply chains are also scrutinised to check that workers are fairly and ethically treated and that materials are sourced responsibly.

China is rapidly moving to increase the quality of their manufacturing for reputational, environmental and economic reasons.

“As a region they know they cannot continue doing what they are doing,” said Harris.

Australian manufacturing is well-received in China, with Australian products perceived as being well-made, environmentally-conscious and healthy. Of course, this isn’t always necessarily the case. There are people who try to bend the rules in order to be economically competitive right here in Australia. Despite this, Australia is still leading the way in the Asia-Pacific region in environmentally and ethically produced products for the built environment.

As China makes inroads into Australia, it’s a good time to look at where the co-opportunities lie for you and your business in the Asian region. Whether your business lies in either manufacturing and/or procurement, how will you continue to lead best practice? What are the export and education opportunities? And what are the implications and considerations for future procurement?

Some of Australia’s manufacturers predict that with increased quality from China will come an increase in cost, and therefore a more competitive product for Australian exports. Time will tell, but it’s a good time to reflect on the impacts within your own market and get ready for co-coopetition with China.

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