Introduction
3.1
Australia is the world’s fourth largest exporter of agricultural products, behind Brazil, Argentina, and the Netherlands. In addition to Australia’s 25 million residents, Australian food production feeds approximately 60 million people overseas.
3.2
CSIRO highlighted the opportunity presented to Australia by the projected 2.5-fold increase in Asian food markets by 2050. CSIRO added, however, that ‘we are not alone in observing this opportunity consequently we have competitors, for example, there has been a 3-fold growth in Brazilian agricultural exports since 2000.’
3.3
This chapter will consider the opportunities for expanding Australia’s agricultural exports including looking at the role of free-trade agreements and World Trade Organization processes; the effects of non-tariff barriers; the potential for diversifying export markets; and the role of government support and regulation in facilitating exports. This chapter will also look at how consumer preferences in overseas markets are changing and the role of marketing and branding in supporting Australian exporters.
Review of the Evidence
Market Access and Barriers to Trade
3.4
The Productivity Commission outlined the long-term development of global trade, noting that while agriculture has been one of the areas where progress has been slowest, overall there has been a trend towards reduced barriers to trade. The Productivity Commission added:
As we go into a more uncertain world the question is whether that trend can be continued. It is very important for Australia to continue to advocate the case for free trade globally and avoid the worst of protectionist sentiment.
3.5
The Department of Foreign Affairs and Trade (DFAT) highlighted how Australia is continuing to advocate for free trade, while also noting the particular difficulties faced by the agriculture sector, stating:
Agriculture remains the most protected sector in the global economy and Australia is working hard to remove unfair trade distortions and provide a level playing field for our producers. Australia is also an active contributor to setting and shaping international standards in a way that influences global trading rules and enhances opportunities for Australian exporters.
3.6
Citrus Australia highlighted that the ability to export globally comes with the need to compete with imported products but that, overall, the benefits of trade were significant, stating:
... we only import 30 000 tonnes [of oranges] yet we export 250 000 tonnes. It is a trade-off. It is a world trade situation where we want to be able to export around the world.
World Trade Organisation
3.7
DFAT also drew attention to the work still required to strengthen the World Trade Organization’s (WTO) rules relating to trade in agricultural products, stating:
Agricultural trade reform remains the significant unfinished business of the WTO. While there have been some successful reforms, progress in recent years has been slow and agricultural goods still face significant well‑established barriers.
3.8
DFAT added that it is in Australia’s interest to build on the WTO system of international trading rules and added that Australia coordinated the Cairns Group of agricultural exporting countries that are ‘pushing for a free, fair and market‑oriented agricultural trading system.’
Free Trade Agreements
3.9
Australia currently has 14 free-trade agreements (FTAs) in force. The first, with New Zealand, came into force in 1983, while the FTAs with Hong Kong, Peru, and Indonesia came into force in 2020. In 2019-20, 81 per cent of Australian agricultural exports went to FTA partners.
3.10
In addition, leaders of 16 Indo‑Pacific nations, including Australia, have agreed to sign the Regional Comprehensive Economic Partnership (RCEP) in 2020. The RCEP area covers a third of the world’s population and includes nine of Australia’s top 15 trading partners. DFAT stated that the RCEP would benefit Australian agricultural producers by improving ‘mechanisms to tackle non-tariff barriers including in the areas of customs procedures, quarantine and technical standards.’
3.11
DFAT reported that from when the China FTA came into force (in 2014) to 2019, Australian agricultural exports to China almost doubled from $8.7 billion to $16.8 billion. Over the same period (and following FTA ratifications) agricultural exports to Japan grew by 50 per cent and to Korea by 32 per cent.
3.12
DFAT stated that the Indonesian FTA would enable 99 per cent of Australian exports to enter Indonesia tariff free or under ‘significantly improved preferential arrangements’ and would improve market access for ‘live cattle, red meat, feed grains, citrus products, carrots, and potatoes.’
3.13
Rabobank acknowledged the Australian Government’s prioritisation of FTAs and suggested that ‘this will go a long way to secure the long-term success of the sector.’ Rabobank added, however, that in the global market it is:
... important to ensure that FTA arrangements are equivalent to, if not superior to, our major competitors in those markets and give us access to those markets at the same time or earlier than our competitors.
3.14
The Cattle Council of Australia (CCA) emphasised the importance of ensuring FTAs are beneficial for agriculture, stating:
I would call on the Parliament not to sign a free trade agreement if it is not a good agreement, particularly with the EU coming up. They keep saying no to livestock and no to agriculture ... you only do one of these [agreements] in your lifetime. Just make sure it’s a good one and don’t sign it if it’s not.
Non-Tariff Barriers
3.15
DFAT explained that while FTAs and WTO processes have been successful in reducing trade tariffs there are a number of other barriers to trade, commonly referred to as non-tariff barriers (NTB). DFAT stated that it has been estimated that NTBs cost industry three times as much as tariffs.
3.16
Citrus Australia outlined the range of NTBs that can restrict exports, stating:
Importing country requirements are in a continual state of change and are seldom liberalised. Plant health (phytosanitary) restrictions, food safety, agrichemical residues, packaging, labelling and a range of other technical barriers represent significant challenges to trade. Pressure is being exerted by both retailers and regulators in importing countries.
Impacts of Non-Tariff Barriers
3.17
CCA suggested that the beef export sector would immediately benefit from any reduction of NTBs, noting that ‘as we sign FTAs non-tariff trade barriers increase, so it’s moving from one space to another.’ The Red Meat Advisory Council (RMAC) estimated that the annual cost of NTBs for the red meat sector is $3.4 billion with the negative impact particularly pronounced in the China, Middle East, and South East Asia markets.
3.18
The Australian Fresh Produce Alliance (AFPA) reported that just 18 per cent of horticultural produce is exported and explained how NTBs pose a particularly onerous challenge for the horticulture sector, stating:
…for each fruit that goes to China there needs to be a new technical market access protocol. It’s a fairly longstanding arrangement under WTO trade agreements covering sanitary and phytosanitary—an individual fruit has a very different pest than a vegetable for instance. This does create a challenge because we need a new technical market access protocol for each additional fruit that we would like to export.’
3.19
Summerfruit Australia stated that there were a number of markets where a lack of access or unworkable protocols were hindering trade including the United States, New Zealand, South Korea, Japan, and Russia.
Government Actions to Reduce Non-Tariff Barriers
3.20
The Department of Agriculture, Water and the Environment (DAWE) explained that the process for deciding which products are prioritised in negotiations with trading partners is an industry led process. This involves industries applying for a product to be prioritised through Horticulture Innovation Australia’s (Hort Innovation) Trade Assessment Panel (TAP). If an application is approved by the TAP it goes into an export market pool and then ‘the department actively considers and commences market access negotiations for that commodity and market.’
3.21
Summerfruit Australia outlined how lengthy this process can be with the example of trying to gain access for stone fruit to the Japanese market. Summerfruit Australia stated it first prepared a submission to the TAP, which was accepted, and so stone fruit will be considered but:
... there are two or three other commodities in front of stone fruit on the list and, because of this situation of negotiating one commodity at a time, we have to wait until we get up the list to be able to even start the process of considering the pest and disease issues of concern. Once we’ve got a list of pest and disease issues we look to see what techniques and processes we have available—cold storage, fumigation, radiation and those source of aspects—and a document is then developed as far as the protocols are concerned. To a large degree, it's about the resources but, as I said, it's also partly dependent on what Japan puts forward as being their priorities at a point in time.
3.22
Citrus Australia commented on the government efforts to overcome NTBs, stating:
Changes to importing country requirements can only be negotiated by [DAWE], and progress is at a snail’s pace. The market access prioritisation process is convoluted and does not always achieve commercially sensible outcomes. For example, market access for persimmons to Thailand via the fruit irradiation pathway was negotiated a number of years ago. Trade data indicates that no trade has taken place. It is unlikely that any trade in persimmons to Thailand will ever take place. Given the opportunity cost (other export industries waiting in the market access queue); Citrus Australia questions how the Department ever determined this to be of priority.
3.23
DAWE responded to these comments by stating that when industries apply to the TAP they must ‘demonstrate export readiness, broad industry support, and a clear, evidence-based technical position supporting the preferred trade pathway’. In relation to the negotiation of access for persimmons into Thailand, DAWE stated that persimmons were a test case for the use of irradiation treatment to gain access to the Thai market. DAWE explained that persimmons were chosen as a test case given their ‘limited season and export volumes’ and added that:
It demonstrated to Thailand Australia’s capacity to effectively treat and export irradiated fruit consistent with Thai requirements. Trade [in persimmons] has occurred with all product sold at a premium price. Negotiations are ongoing to expand the irradiation treatment pathway for Thailand to include additional commodities such as strawberries, cherries, and table grapes.
3.24
The Tasmanian Fruit and Vegetable Export Facilitation Group (TFVEFG) stated that there was ‘no question about [DAWE’s] capacity or capability to deliver the work’ but also noted it can be a lengthy process to achieve market access outcomes. As an example, TFVEFG highlighted Tasmanian seed potatoes growers who commenced attempts to enter the Indonesian market in 2016 but still had not gained access.
3.25
DAWE responded by stating that Victorian and South Australian potatoes gained access to the Indonesian market in 2018 but at that time Tasmania ‘was not in a position to provide the required evidence-based technical information to support a market access request.’
3.26
Further, DAWE reported that, in 2018, it provided grant funding to TFVEFG to build up a technical and business case for seed potatoes. Following this an application was made to the TAP, which was approved in December 2019. DAWE added that the export of Tasmanian seed potatoes to Indonesia will now ‘be considered for departmental prioritisation, taking into consideration other application in the Indonesia pool and current negotiating commitments.’
3.27
DFAT reported that it had an NTB Action Plan in place, which includes an online portal for businesses to report barriers affecting their trade, a NTB Coordination Team to build cooperation across agencies, and capacity building actions for government and industry to assist in addressing NTBs.
3.28
DFAT added, however, that resolving NTBs generally relies on the actions of trading partners and therefore can be a protracted process requiring ‘sustained advocacy and technical exchange over many years.’ AFPA supported this sharing of our technical expertise with trading partners as it believed it assists in the development of workable trade protocols.
3.29
AFPA stated Hort Innovation, using funding from grower levies, undertook the technical research required to prove the effectiveness of biosecurity treatments for exported fruit and vegetables. AFPA added, however, that the market access negotiations with trading partners undertaken by the DAWE was still a resource-intensive process.
3.30
Summerfruit Australia called for greater government resourcing for market access negotiations as growers were frustrated by the speed at which access to new markets was gained. For example, gaining access to the Chinese market took the industry 10 years.
3.31
Similarly, RMAC noted that DAWE has an annual budget of $5 million to ‘protect and promote the $17.2 billion meat export market,’ RMAC added that this is ‘not sustainable and Australia will lose ground to better resourced markets, for example, the United States, Brazil, and New Zealand.’ To address this, RMAC called for increased ‘funding of the Department of Agriculture’s technical meat market access team.’
3.32
The Delivering Ag2030 package contains a number of measures aimed at improving access to overseas markets for Australian producers. These include:
$15 million per year to grow agricultural exports and expand market access
$6.8 million over four years for the Agricultural Trade and Market Access Cooperation program which will aim to ‘improve and maintain’ market access for agricultural producers
$11.4 million specifically for market access work focussed on the horticulture industry.
Market Diversification
3.33
Asia is the primary destination for Australian agricultural produce accounting for 76 per cent of all exports. The two main markets are China (29 per cent) and the Association of Southeast East Asian Nations (ASEAN) countries (18 per cent). While China is the largest market for Australian produce, ANZ reported that ‘China is still taking less Australian exports than Japan did in the early 1990s, showing that heavy export concentration is not an unusual situation for Australian exports.’
3.34
Despite this, ANZ suggested that there are several industries which are particularly dependent on the Chinese export market and could therefore be susceptible to trade disruptions. In particular, ANZ, highlighted that China is an especially significant export market for sorghum (94 per cent of all exports), wool (73 per cent), wood (67 per cent), seafood and aquaculture (56 per cent), and barley (45 per cent).
3.35
During 2020, China has increased tariffs or launched investigations into a number of Australian products, these include:
80 per cent tariffs on barley exports
Bans on imports from five meatworks
An anti-dumping investigation into Australian wine.
3.36
Cooperative Bulk Handling Group (CBH) explained that while Australia’s grain producers export grain to ‘250 customers in over 30 countries they are heavily reliant on a few key markets.’ CBH drew attention to the recent trade tensions with China and how this highlighted the implications of this reliance, stating:
Australia has a very long and respected history of selling good-quality malted barley to China, and our barley varieties have been bred specifically for the Chinese market. What seems key now is how we as a country and industry pivot away from China, and critical to that will be retaining and consolidating our business and political relationships with South East Asian countries such as Vietnam, Thailand and the Philippines and developing our relationship with other regions and countries such as India.
3.37
Summerfruit Australia highlighted the potential but also the risks involved in the China export market. Exports to China went from nothing in 2016-17 to around 40 per cent of all summerfruit exports (by volume) just three years later. Summerfruit Australia added, however, that the closure of the market for ten days across Chinese New Year showed the ‘frailty of the market, particularly to comments/actions that might offend the Chinese Government.’
3.38
Australian Grape and Wine (AGW), speaking prior to China’s announcement of the anti-dumping investigation into Australian wine, suggested the wine industry was ‘very exposed’ to changes in the Chinese market. AGW explained that exports of wine to China account for 40 per cent of the wine market and are valued at over $1 billion.
3.39
AGW reported that the markets it was currently targeting for export growth were in the regions of east Asia, South East Asia, and the United States, with east Africa and eastern Europe being potential future markets.
3.40
In particular, AGW highlighted the United States as a key market with significant growth potential stating that it believed additional investment in the US market could ‘unlock growth of half a billion dollars over the next five years.’ AGW explained that there was a:
... tremendous opportunity to re-capture market share in the United States, where Australian wine has underperformed since the Global Financial Crisis due to factors including periods of unfavourable exchange rates, consumer perception issues and falling demand.
3.41
Similarly, Citrus Australia reported that historically the United States market had been the primary export focus but that competition from South Africa and Chile had resulted in a shift in focus to the Asian market. Citrus Australia added that ‘the greatest emphasis has been on servicing Japan and mainland China, a relatively new market for Australian citrus.’ While Australia faces competition from South African and South American producers, our proximity to Asia provides a competitive advantage over these producers.
3.42
WoolProducers Australia (WPA) stated that currently three-quarters of Australian wool exports go to China and so Australia is impacted heavily by price changes in the Chinese market. As an example of this price volatility, WPA reported that in August 2019 wool prices dropped 35 per cent in just four weeks and then was followed in September by a sharp price rise.
3.43
WPA suggested that market diversification could have a beneficial role in reducing wool market price volatility, and therefore:
…we really need to be investigating new markets for wool, whether that’s in a processing capacity or consumer capacity. One of the obvious countries that we see is India, given that they have an existing textile industry.
3.44
The Australian Livestock Exporters Council (ALEC) stated that in addition to significant growth potential in existing markets such as Qatar there was potential for a growth in exports across the Middle East. In particular, ALEC highlighted Saudi Arabia as the biggest opportunity for the sheep trade, while for the cattle trade Vietnam represented a market with significant growth potential.
3.45
On 10 September 2020, the Australian Government announced changes to the Export Market Development Grants program so that small and medium enterprises (SMEs) will be able to access grants of up to $450,000 specifically to expand into new markets.
Government Support and Regulation
Export Support and Facilitation Programs
3.46
Austrade stated that they supported 7,000 to 8,000 agrifood businesses and that this accounts for 29 per cent of Austrade’s overall service. DFAT highlighted the following programs as key for supporting businesses to export their products:
TradeStart Network: This program which is delivered through through partnerships with state, territory, and local governments and chambers of commerce extends Austrade’s export advice available in regional and outer metropolitan regions.
Export Market Development Grant: These grants assist SMEs to undertake marketing and promotion in overseas markets, in 2018-19, $3.4 million was provided to 126 applicants in the agriculture, fisheries, and forestry sectors.
3.47
Austrade explained that in addition to grant schemes the Australian Government also provided tailored support for individual businesses. This advice, often commercial-in-confidence, is offered directly to a single business that has identified a specific need that will help it expand its export operations.
3.48
Toowoomba and Surat Basin Enterprises (TSBE) reported that it offers support services for potential exporters who are not necessarily developed to the point of being eligible for Austrade assistance. TSBE added it contacts small, local businesses and asks them ‘is export right for you?’ and, if so, provides them with early-stage assistance before linking them with Austrade and Trade and Investment Queensland.
3.49
Australian Grape and Wine (AGW) highlighted the Australian Government’s $50 million Export and Regional Wine Support Package as helping to drive growth in key markets such as the United States and China.
3.50
BGP International, Costa Group, Fresh Produce Group, and Valleyfresh Australia, four major horticulture businesses, suggested that it was critical to think of trade as a reciprocal relationship and that export growth relied on minimising regulatory barriers to imports. The groups suggested there was a need for a review of the DAWE’s trade facilitation functions and stated:
... there is a significant and growing disconnect between the Government’s policy agenda to grow agricultural exports and its service capacity and capability to adequately support reciprocal trade.
3.51
The horticulture groups also criticised the cancellation of the DAWE’s Offshore Pre‑shipment Inspection (OPI) program. The OPI allows fruit and vegetable from countries such as New Zealand and the United States to be certified prior to being exported to Australia. The OPI program protects Australia’s biosecurity by ‘eliminating shipments of concern before they arrive in Australia.’ In addition, these groups suggested the OPI was important to maintaining export market access and its removal ‘risks serious disruption to established trading relationships … in the United States, Australia, and New Zealand.’ The horticulture groups added that businesses like theirs would be willing to pay for fit-for-purpose Government import and export services.
Regulation of Exports
Export Certification
3.52
The Western Australian (WA) Government reported that several SMEs in its state found the ‘costs of export certification prohibitive to their export activities.’ The WA Government suggested that improved sector specific information on export certification would be beneficial. In addition, the WA Government suggested the Commonwealth monitor opportunities to minimise the cost of export certification, potentially including ‘sliding scale fees and longer transition times for small to medium sized businesses.’
3.53
RMAC described Australia’s export inspection and certification program as a self-imposed non-tariff barrier and reported it was costing the red meat sector $90 million per year and this cost was rising.
3.54
Citrus Australia stated that it was easier to import than export citrus due to the ‘excessive regulatory burden’ placed on exporters. Citrus Australia added DAWE’s approach to certification was ‘over-zealous and it is exceedingly difficult for growers to understand and fulfil requirements.’ Citrus Australia outlined its belief that the assessment of whether protocols have been met should take place in the importing country rather than by Australian officials.
3.55
DAWE responded that it takes these concerns seriously and is:
... currently working with the horticulture industry, and Citrus Australia specifically, to look at alternative ways of gaining the necessary assurance that all importing country requirements are met before issuing export certification. The Export Control Act 2020 will provide greater legislative flexibility and further opportunities for the department and industry to innovate and demonstrate compliance through outcomes based management systems, use of novel technology and other mutually beneficial solutions.
3.56
DAWE added that it was government policy to recover the costs of export regulatory activity since it is ‘unreasonable to expect the general taxpayer to fund them’ and added that in recent years export growth had primarily occurred in the Chinese market, which has strict regulatory requirements.
Live Exports
3.57
The livestock export industry is subject to specific regulation concerning the welfare of animals being transported to export markets. ALEC reported that the Australian Standards for the Export of Livestock regulate the conditions of animals during the shipping process. As part of these regulations there is an industry moratorium on live sheep shipping during the northern summer months, additionally in the months shouldering the moratorium period ships operate with a reduced stocking density.
3.58
In addition to regulation of the onboard ship conditions, ALEC reported that the Export Supply Chain Assurance System (ESCAS) is part of the arrangements necessary to gain approvals to export and which ‘monitors the welfare of animals right to the point of slaughter.’ The ESCAS system ensures all parts of the supply chain are monitored and that ‘animals cannot leave that supply chain.’
3.59
The Northern Territory Livestock Exporters Association (NTLEA) outlined the process involved for exporters to comply with the ESCAS system by giving the example of an exporter based in Darwin, stating:
They export to nine countries. They have 38 different importers. They supply 57 different feedlots and 86 different abattoirs. Each of those facilities through the supply chain has to be approved by the federal department of agriculture. They are applied a risk rating. Depending on the risk rating they are given, they need to be audited by a third party once, twice or four times a year, at a cost of around US$1,000 per audit. This is to export 90,000 head of cattle.
3.60
In 2016, the Productivity Commission stated that ESCAS has ‘led to some improvements in welfare outcomes for Australian livestock’ but added that ‘industry is concerned about the administrative burden of the ESCAS.’ The Productivity Commission suggested that the ‘regulatory burden on exporters could be reduced through greater cooperation between exporters, including the sharing of audits, and implementing an industry quality assurance program.’
3.61
RMAC stated that the live export industry was working on an initiative to improve ESCAS, the Livestock Global Assurance Program (LGAP). RMAC reported that initially the Australian Government committed $8.3 million over four years to support LGAP but this has been reduced by $2.2 million. RMAC called for the original commitment to be ‘reinstated and increased to ensure success of the LGAP initiative, it is vital both in terms of regulatory cost savings and increased animal welfare assurance that the LGAP initiative is fully supported by Government.
3.62
Livestock Shipping Services (LSS) stated that it had voluntarily moved to reducing shipping density by between 18 per cent and 33 per cent. LSS suggested that the live exports industry was still ‘overregulated’ and suggested the culture in the regulator needed to ‘return to one of collaboration and trade facilitation.’
3.63
The Kimberley Pilbara Cattlemen’s Association (KPCA) drew attention to the amount of Commonwealth regulation that affected the live export industry and welcomed the appointment of a Commonwealth Inspector-General of Live Animal Exports. The KPCA stated that it hopes this appointment would lead to more ‘streamlined and sensible regulatory arrangements given that social license risks have certainly emerged.’
3.64
The KPCA added that it would it would like to see the ‘decentralisation of Commonwealth [DAWE] resources around live export regulation to where there’s work in live export ports, as opposed to it being Canberra based ... Darwin would certainly be a sensible location, given it’s the largest live animal export working port.’
Delivering Ag2030 Measures
3.65
The Australian Government’s Delivering Ag2030 plan includes a ‘Busting Congestion for Agricultural Exporters package’ valued at $328.4 million over four years. The package aims to ‘slash unnecessary red tape to get products to export markets faster and support jobs in rural and regional Australia.’ In addition, the Government is ‘reviewing and amending the Export Control Act 2020’ with an aim for the revised legislation to come into effect from April 2021.
3.66
The Government is also providing $14.8 million over 6 years for the Dairy Export Assurance Reform program which aims to ‘help the export dairy industry by raising export awareness, reducing red tape and streamlining audit arrangements by 2024-25.
Enhancing Demand for Australian Products
Marketing, Reputation, and Brand Australia
3.67
Austrade reported that it was coordinating the development of a Nation Brand to be used by ‘organisations, industry sectors, government agencies and private sector companies involved in promoting Australia and its capabilities internationally.’ In December 2019, this work resulted in the Nation Brand Advisory Council recommending a wattle-inspired design as the new Nation Brand logo. In August 2020, the Minister for Trade, Tourism and Investment Senator the Hon Simon Birmingham commented on the role of the logo in national branding, stating ‘a careful look will be had before anything else is done with that in the future.’
3.68
As an example of State Government marketing, TFVEFG highlighted the long-existing ‘Brand Tasmania’ that is closely linked to tourism but also used by many agricultural producers to assist develop their export markets.
3.69
CSIRO stated that Australian businesses have ‘a quality advantage over companies in Asian countries due to Australia’s stringent regulatory system, skilled workforce and reputation for producing trusted, high quality ‘clean and green’ products.’
3.70
ALEC highlighted that the animal welfare assurance provided by the ESCAS system ensures that Australian livestock suppliers have a reputational advantage over competitors from other nations. ALEC stated that in many of Australia’s export markets ‘there is increased consumer scrutiny and increased consumer expectations, animal welfare is among those, and that really places us in a strong position.’
3.71
Red Meat Advisory Council (RMAC) stated that the live export industry had been the main focus of the animal welfare debate but this is extending to feedlots and processors. RMAC added that ‘ongoing investments into a national traceability system, with a national mandatory standard for animal welfare is required.’
3.72
AGW suggested that spending on global marketing for the wine industry should be raised from the current level of $8 million to $25 million per year. Speaking prior to the announcement of China’s anti-dumping investigation into Australian wine, AGW stated that the focus of this investment should be on China where there was an opportunity to educate consumers in the growing middle class by ‘improving Australia’s social media presence in current and new channels, and driving our engagement in e-commerce channels.’
3.73
The Cotton Research and Development Corporation (CRDC) highlighted the importance of transparency to maintaining community confidence in an industry. As a means of increasing transparency, CRDC reported that 80 per cent of growers participate in an industry best practice management and the cotton industry publishes a sustainability report which includes measures assessing water efficiency, carbon usage, and biodiversity.
Consumer Preferences
3.74
DAWE noted that the opportunities for export growth will be driven by what ‘consumers overseas are going to be seeking’. CSIRO suggested that overseas consumers are increasingly interested in accessing ‘information about the products that they are using, including their provenance, whether they have been produced ethically and sustainably in addition to their safety, quality and health credentials.’
3.75
CSIRO suggested that changing consumer preferences were leading to increased opportunities for products that emphasised:
Health and wellbeing: products with health benefits beyond basic nutrition including ‘free-from and natural foods, fortified and functional foods, vitamins and supplements, and personal nutrition.’
Sustainable solutions: products using environmentally and socially responsible manufacturing, in particular products making use of ‘organic waste conversion, sustainable packaging, and alternative protein sources.’
Premium interaction: products that yield a premium due to luxury or ease‑of‑use such as convenience meals, luxury products, and agritourism based products.
3.76
CSIRO added that the value of these types of products were projected to grow by approximately 3.6 per cent per year to a value of $30 billion by 2030.
3.77
The University of Sydney (USyd) suggested that significant value could be added to Australian agriculture by a widespread adoption of a decommoditisation policy. USyd explained that:
… Australia is very highly productive, very highly efficient, in agriculture but sells bulk commodities to the world market and therefore takes price. We need to change that to selling high-value products into more segregated markets and make more money. The idea here is to use all the digital disruptive technologies to allow any producer to produce high-value product that’s been segregated in some way and recognised in some way–through its quality, through its provenance–and also recognise how it’s grown and allow that to travel through supply chains to consumers. I believe there is a huge market in East Asia for that kind of product.
Provenance and Traceability
3.78
DAWE stated that it would become increasingly important for producers to attempt to move up the value chain and one of the ways of doing this was by emphasising the provenance of goods to demonstrate how and where they were produced. Hort Innovation, however, stated that currently Australian agriculture has ‘a lack of strategy around provenance and storytelling’.
3.79
The NFF commented on the need for government and industry to jointly promote Australian agricultural products using a provenance framework:
….the provenance claims that we need to make that will really underpin the products that we're selling through that export market, there's a place for government and for industry to really be involved with that.
3.80
Fisheries Research and Development Corporation highlighted that in the wild catch seafood industry shortening supply chains and emphasising provenance has increased the value of the product, particularly in high-end export markets.
3.81
Growcom suggested that traceability systems that provide the ability to track a products path to market provide an:
... opportunity for farmers to increase the value of their products by being better able to track them through convoluted supply chains and prove food provenance. Enhanced traceability will enable farmers to better differentiate their products in both domestic and international markets, where traceability itself will prove to be an important point of difference for Australian goods.
3.82
Cattle Council Australia highlighted the benefits which will arise from further investment in traceability
….we're looking at investing $75 million over the next three years in improving technology and traceability. So we'll have a real-time traceability system from the farm to the end product. It's obviously going to take some time to develop that technology, but that's where the industry's going so that we can trace every piece of meat that lands in any part of the world.
3.83
Humpty Doo Barramundi stated that ‘customers are entitled to know what they’re eating and where it comes from’, to enable this barramundi growers are jointly investing in program to enable fish to be traced back to individual properties. In addition, to emphasise provenance Humpty Doo suggested that the name ‘barramundi’ should be restricted to Australian-grown fish or if that was not possible there should be a ‘national roll-out of country‑of‑origin labelling.’
3.84
The Australian Government’s Delivering Ag2030 package includes the provision of $7 million over four years to support ‘better traceability outcomes through the Modernising Agricultural Trade Initiative.’
Committee Comment
3.85
Australia has consistently promoted the liberalisation of global trade as a goal that benefits all nations. To further this agenda, Australia has chaired the Cairns Group of agricultural exporting countries pushing for a market‑based global trading system.
3.86
Additionally, Australia has pursued an ambitious program of signing free‑trade agreements (FTAs) with its trading partners. The benefits of these FTAs for the agricultural sector have been significant. For example, in the five years following FTA ratifications agricultural exports to China doubled and exports to Japan grew by 50 per cent.
3.87
Nevertheless, probably more than in any other sector, protectionism is still rife in the global agricultural trade. In some cases this can take the form of tariffs, but it is the technical barriers to trade, commonly referred to as non‑tariff barriers (NTBs), that are the biggest impediment to Australian exports.
3.88
In the agricultural sphere, NTBs often revolve around the pests and diseases that can potentially be carried by produce. Overcoming these NTBs requires negotiating with trading partners on each product to develop mutually acceptable treatment and risk reduction protocols. Until these protocols are agreed access to a market, even in an FTA-partner nation, can be completely blocked.
3.89
The Committee heard that many industries are frustrated at the speed with which market access negotiations are taking place. There are examples in the horticulture sector of it taking ten years to gain access to a new market, and in the red meat sector NTBs are estimated to cost industry more than $3 billion per year.
3.90
Expanding market access will always be partly dependent on the actions of Australia’s trading partners and the requirement to negotiate with each nation over each commodity makes it a resource intensive process. Nevertheless, the potential benefits of gaining access to a new market are significant for producers. Expanding and diversifying Australian producers export market opportunities is an essential component of reaching the $100 billion by 2030 target.
3.91
The Committee welcomes the market access focussed programs within the Government’s recently released Delivering Ag2030 package. The Committee believes that a key element of these programs should be the provision of additional resources to the Department of Agriculture, Water and the Environment’s market access team so that it can significantly increase the number of concurrent negotiations it can undertake.
3.92
The Committee also heard concerns that complying with export regulations is a significant burden for some agricultural businesses. The horticulture sector has concerns regarding export certification processes; hopefully the recent introduction of the Export Control Act 2020 will help to alleviate these issues. The live export sector is developing a new Livestock Global Assurance Program that aims to maintain animal welfare standards while streamlining compliance.
3.93
The Committee notes that the Government is providing $328 million over four years aimed at reducing unnecessary regulation of agricultural exports. The Committee believes that this work could be supported by a review of these regulatory arrangements by the Productivity Commission.
3.94
In 2014, the Productivity Commission undertook a broad inquiry into regulation in the agriculture sector. The Committee believes it may be time for the Commission to revisit the issue but with a more targeted focus on the regulation of agricultural exports. In addition, the Committee encourages the Government to continue to work with industry to ensure that regulations meet their objectives efficiently and with as minimal disruption to business as possible.
3.95
In recent years, Australian producers have greatly benefitted from the expansion of trade with China, and it is likely the Chinese market will remain a key driver of growth in the coming decade. Yet, recent decisions by China are likely to significantly impact the barley, red meat, and wine sectors. The speed with which conditions have changed for these industries illustrates the inherent risk of heavily concentrating exports in a single market.
3.96
Accelerating the removal of technical barriers to trade and the opening of new markets will help drive export market diversification. Nevertheless, for individual businesses the imperative remains to sell to whichever buyer offers the best price and conditions. If this results in concentration of exports in a single market this will continue to form a strategic economic risk.
The Committee welcomes the Government’s recent changes to the Export Market Development Grant scheme to encourage exporters to expand into new markets. The Committee suggests that the Government should carefully monitor whether these changes provide sufficient support to agricultural producers to diversify their markets or whether additional dedicated support is needed.
3.97
Australian agricultural producers are perfectly placed to benefit from the opportunity to supply the rapidly increasing middle-class across Asia. Demand from this growing demographic is likely to be increasingly focussed on high‑quality products. Australian products rightly have a strong reputation for quality, health, safety, and sustainability. The advantages this reputation provides should be built upon by continuing to develop niche, high‑value products. Emphasising the Australian brand and focussing on the provenance of Australian goods are likely to be increasingly beneficial strategies for producers exporting to Asia.
Recommendations
3.98
The Committee recommends additional resources be allocated by the Department of Agriculture, Water and the Environment to significantly increase the number of concurrent market access negotiations that can take place with trading partners.
3.99
The Committee recommends that the Productivity Commission undertakes an inquiry into the regulation of agricultural exports to determine whether export regulations are operating as effectively and efficiently as possible.