Chapter 7.1
Asian export markets
7.33 Australia exports processed food and beverages to most countries
in the world. However, due to our geographical proximity to Asia that
market is particularly significant to Australia.The economies of South
East Asia are growing on average by 7 per cent per year with some, such
as China's, experiencing growth rates as high as 14 per cent. According
to Dr Bruce Standen of the Australian Meat and Livestock Corporation,
expansion of the manufacturing sectors in Asian economies is pulling labour
away from agriculture which restricts the level of domestic agricultural
supplies. However, at the same time strong population growth, coupled
with higher consumer incomes, have increased the demand for foodstuffs.
[35]The disparity between domestic production
relative to total consumption has increased demand for imports. Dr Standen
stated in February 1996 that the volume of agricultural imports into ASEAN
countries was growing at 10 per cent a year and “demand is expected
to continue in line with the rapid economic development of the region.”
[36]
7.34 The Working Group on Food into Asia convened by Prime Minister Keating
in 1994 estimated that by the year 2000 the Asian food market will exceed
US$685 billion. According to the Secretary of the Department of Primary
Industries and Energy, Mr Greg Taylor, in the year 2000 “the food
market in Asia will be at least 30 per cent larger in real terms than
it was in 1990.” [37] The Committee
understands that it has been estimated that by the turn of the century
Asian food consumers will be spending an additional US$160 billion a year
on food compared with 1990. This US$160 billion figure would be three
times the annual turnover of the Australian food industry, including commodity
production. [38] Over the same period
it has been predicted that Australian consumers would increase their spending
on food by only US$6 billion. [39]
7.37 Ten of Australia's largest fourteen export markets for all food
and beverage exports are located in Asia. Japan constitutes by far the
largest market, valued during 1994-95 at $3.5 billion. [40]
7.38 According to the Agri-Food Industries Branch of the then
Department of Industry, Science and Technology:
While the most rapid growth in food and beverages exports to Asia to
date has been in minimally processed and unprocessed products, there
are signs that the most dynamic growth areas of the future are likely
to be highly processed food and beverages. [41]
The Branch noted that during 1994-95 Japan is now the largest export
market for highly processed Australian food and beverages:
Japan's growth as a market for high value added products has consistently
outpaced the growth of its demand for minimally processed food and beverages.
[42]
7.39 Food imports into Japan, at more than US$30 billion a year exceeds
Australia's total domestic food market, and has been growing at 12 per
cent a year. [43] The average annual
growth of exports between 1988 and 1993 to Malaysia, Indonesia and Thailand
had been about 20 per cent. [44]The then Agri-Food Industries Branch advised
that the most dramatic growth in exports of highly processed food and
beverages had been to China and Hong Kong. Between 1993-94 and 1994-95
exports of such products to China increased from $16.6 million to $33.4
million, or just over 100 per cent. Exports of highly processed food and
beverages to Hong Kong during the same period increased from $134.6 million
to $433.5. [45]
7.40 A variety of factors are increasing the potential market in
Asia for Australia's processed foods, including:
- a rapid increase in the standard of living and disposable incomes
in Asia. It has been estimated that by the year 2000 the number of people
in East and South East Asia with household incomes above $10 000 will
double from 40 million to 80 million; [46]
- changes in tastes and food consumption patterns in Asia; and
- the fall of import barriers on processed foods being imported into
some Asian countries, particularly Japan and South Korea. [47]
7.41 Mr Ray Block of SBC Dominguez Limited, argued that there are
two sources of demand for foodstuffs in Asia, one for low value-added products and the
other for high value-added branded consumer goods. According to Mr Block:
Although Australia has competitive advantage in the former, there was
an almost impossible task of competing with highly subsidised products
from the US, Europe and Canada, and low quality products from other
countries. The other route is the high value-added branded consumer
market, which is likely to be home grown in Asia, rather than on long
term reliance on imports. [48]
7.42 In his submission to the inquiry Mr Geoffrey Quinn of the University
of New England at Armidale, New South Wales, claimed that in its quest
for exports to Asia Australia had to have a two pronged approach. It had
to provide both processed products for Asian markets, while at the same
time continuing to supply raw products to the same markets for further
processing. [49]
7.43 Despite expressed optimism concerning the Asian market for Australian
value-added food products, reservations have been raised concerning the
potential of this market. Mr Bruce Bevan of the Australian Supermarket
Institute told the inquiry that the opportunities for the export of Australian
processed foods into Asia would probably only be available for the “short
or medium term”. [50]It was Mr Bevan's view that countries in
Asia will move towards wanting to value-add themselves to food imports.
Mr Bevan went on to state:
I think it is our ability to continue to sell a good, clean food product,
perhaps just processed food product, into those countries that is probably
still in the long term our best option. [51]
7.44 The Committee understands that at the supermarket trade show
held in October 1994 Asian visitors showed keen interest in obtaining fresh fruits and
vegetables from Australia. The Australian Supermarket Institute informed the Committee
that Woolworths was supplying retailers in Asia with fresh food products by air and sea
transport depending on what the product was. Mr Bevan told the inquiry:
My understanding is that it is not value-added food though, it is simply
taking a crate of oranges and sticking it in a container and sending
it off to a supermarket chain in Jakarta or wherever. [52]
7.45 Mr Denis Gastin of INSTATE Pty Limited considers that a major opportunity
for Australian agricultural based exports to Asia is the provision of
Asian food produced and/or manufactured in Australia. According to Mr
Gastin it has been estimated that western food accounts for only 10 per
cent of total food consumed in Asia and that “this proportion is
not likely to expand greatly in the future”. [53]
7.46 At the inaugural meeting of the Australian Food Council (AFC) [54] held in Canberra on 16 October 1995 a report
titled A Consumer Focus to Food Quality was released. This report resulted
from a survey of some 402 Australian firms. Some of the findings set out
in this report in relation to Australia's future exports to Asia are disturbing.
The report found, that of the firms surveyed, there was:
- an inadequate understanding of international competitors, particularly
inter-Asian competitors and those from South America; [55]
- an overestimation of the quality of Australian product; and
- an overestimation of the rate of improvement taking place in product
quality. [56]
7.47 The report also found that:
Australia consistently ranked third among Asian consumers as a supplier
of quality product on the basis of nutritional value and cleanliness
after Japan and the US, with New Zealand running a close fourth. [57]
Market access
7.48 Despite the appeal of the Asian market, Australia is faced with
significant problems in gaining access for its processed food products.
Market access is largely outside the control of Australian exporters of
value-added agricultural products. The rice industry is one of many Australian
industries that have experienced difficulties in exporting value-added
agricultural products into Asia. The Ricegrowers' Co-operative Limited
advised the Committee that “there are only two countries in the whole
of Asia - Hong Kong and Singapore - that have unimpeded access for branded,
packed Australian rice products made from Australian rice.” [58]
7.49 Industry assistance schemes in may countries act against the import
of processed food because tariff rates are almost invariably higher for
processed food than for unprocessed agricultural commodities. Some countries
follow the practice of increasing the size of the import barrier as the
value of the product increases. This means that while a high tariff may
be imposed upon imports of processed beef the tariff imposed upon feed
grains, an input into processed beef, may be very low. [59]
7.50 The Murray Goulburn Cooperative described tariff and non-tariff
barriers by importing countries as the “biggest impediment to value
adding and the higher level of value adding”. [60]
7.51 Dr Timothy Ryan of the Australian Wheat Board told the inquiry,
in respect to the export of value-added wheat products, that:
The level of protection, as a generalisation, tends to increase as
you go down the value chain. Quite often these countries are trying
to encourage their own value adding flower milling type noodle processing
industries and so they will have a low rate of protection on the raw
product such as wheat. But then as you put in semi-transformed or fully
transformed product the actual rate of duty will rise since it is generally
set as a percentage of the absolute amount of money that you pay. [61]
7.52 An article that appeared in The Australian newspaper in June
1993 summed up the difficulties that Australian food processing companies faced in
attempting to break into, and operate, in the Asian market when it stated:
Australia's main market, Asia, buys its raw materials but baulks at
buying processed products because it wants to protect its own industry
or establish its own infrastructure ... Exporters of processed goods
face an array of high tariffs and invisible trade barriers - and this
country's aspirations to become an exporter of high value-added products
are at odds with Asia's own development. [62]
7.53 Despite the obvious access difficulties caused by the
implementation of tariffs by Asian countries on value-added food products Professor
Nicholas Samuel warns that the importance of tariffs in restricting market access for
Australian value-added agricultural products should not be overrated. Professor Samuel
told the inquiry that in respect to the impact of tariffs by Asian countries on Australian
exports:
One would need to ask the question as to how countries like the Netherlands,
France, the UK and the USA are making inroads into those markets. Why
is it that Australia's share has been declining in recent years? [63]
7.54 The West Australian Government suggested that although tariffs are
quite high in Asia on processed imports they may be “less of an obstacle
at the really highly processed end where presumably the tariff in relative
terms is a minor part of the final costs.” [64]
Conclusions
7.55 When looking at the potential of exporting value-added
agricultural products there must be an appreciation that no country wants to import such
products if not absolutely necessary. Countries, if at all possible, want to do their own
value-adding using imported bulk or semi-value added agricultural produce when necessary,
so as to benefit their own economies. Australia wants to do its own value-adding to
products consumed in this country whenever possible and it would be totally illogical to
expect that other countries would not have the same attitude to value-added products sold
in their own countries.
7.56 Although tariffs as a tool to curtail the import of value-added
agricultural products may decline in the future as a result of the General Agreement on
Tariffs and Trade countries may attempt to devise other means to place restrictions on the
import of value-added products.
7.57 During the inquiry evidence was presented by diverse bodies
noting the importance of the Asian market to Australia's value-added production. The
Committee accepts that Asia is, and will continue to be, an important market for Australia
agricultural production including, fresh bulk and value-added. However, the Committee is
concerned that too much emphasis may have been placed on the Asian market. It is important
that Australian value-adding enterprises investigate and exploit all potential markets and
opportunities either in Asia, Europe, Africa or the Americas.
7.58 In the view of the Committee it is essential that Australia be
flexible in marketing its value-added products overseas.
7.59 The Committee supports the views of Mr Denis Gastin that there
is a significant potential market for Australian value-adding agricultural based
industries to produce and export Asian style foods into Asia. It is the hope of the
Committee that relevant Australian producers and manufacturers will investigate the
potential of this particular market.
7.60 Australian agricultural producers and processors must be
willing to export bulk or semi-value-added products into any available overseas market
when the situation calls for such a strategy. It may be appropriate for Australian
companies to enter into agreements with overseas companies to carry out value-adding to
Australian produce in overseas locations. Flexibility must be the key for Australian
agricultural producers and processors to exploit any available opportunities in world
markets.
Footnotes
[35] Dr Bruce Standen, Significance of
APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of papers
delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by
ABARE, p. 47.
[36] Dr Bruce Standen, Significance of
APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of papers
delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by
ABARE, p. 47.
[37] Mr Greg Taylor, Government-industry
Partnership to Underpin Clean Food Exports, Outlook 96, Vol. 2, Agriculture:
collection of papers delivered at the Outlook 96 Conference held in Canberra 6-8 February
1996, organised by ABARE, p. 110.
[38] Mr Greg Taylor, Government-industry
Partnership to Underpin Clean Food Exports, Outlook 96, Vol. 2, Agriculture:
collection of papers delivered at the Outlook 96 Conference held in Canberra 6-8 February
1996, organised by ABARE, p. 110. However, some observers have put the year 2000 figure as
high as $450 billion; see South Australian Development Council, Value-Added Food
Processing in South Australia, Draft 24 May 1995, p. 6; see also Dr Bruce Standen, Significance
of APEC for Australian Agriculture, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p. 47.
[39] Dr John S Keniry, Food into Asia -
the Scope for Clean and Green, Outlook 96, Vol. 2, Agriculture: collection of papers
delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by
ABARE, p.131.
[40] Department of Industry, Science and
Technology, Food Australia: Processed Food and Beverages Industry -5th edition,
prepared by the Agri-Food Industries Branch , Canberra, ACT, December 1995, p. 5.
[41] Department of Industry, Science and
Technology, Food Australia: Processed Food and Beverages Industry -5th edition,
prepared by the Agri-Food Industries Branch , Canberra, ACT, December 1995, p. 5.
[42] Department of Industry, Science and
Technology, Food Australia: Processed Food and Beverages Industry -5th edition,
prepared by the Agri-Food Industries Branch , Canberra, ACT, December 1995, p. 5; see also
South Australian Development Council, Value-Added Food Processing in South Australia,
Draft 24 May 1995, p. 6 and Department of Industry, Technology and Regional Development, Food
Australia: Processed Food and Beverages Industry - 4th edition, prepared by the
Agri-food Council Secretariat, Canberra, ACT, December 1994, p. 18.
[43] Dr John S Keniry, Food into Asia -
the Scope for Clean and Green, Outlook 96, Vol. 2, Agriculture: collection of papers
delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996, organised by
ABARE, p.131.
[44] Department of Industry, Technology
and Regional Development, Food Australia: Processed Food and Beverages Industry - 4th
edition, prepared by the Agri-food Council Secretariat, Canberra, ACT, December 1994,
p. 16.
[45] Department of Industry, Science and
Technology, Food Australia: Processed Food and Beverages Industry -5th edition,
prepared by the Agri-Food Industries Branch , Canberra, ACT, December 1995, p. 5.
[46] Evidence, Mr Geoffrey Quinn,
p. 490 and Ray Block, Creating Value-added Industries, AIESEC Forecasting the
Australian Economy 1993, p.12.3.
[47] Evidence, Mr Geoffrey Quinn,
pp. 490-491; see also Mr Greg Taylor, Government-industry Partnership to Underpin Clean
Food Exports, Outlook 96, Vol. 2, Agriculture: collection of papers delivered at the
Outlook 96 Conference held in Canberra 6-8 February 1996, organised by ABARE, p. 110.
[48] Ray Block, Creating Value-added
Industries, AIESEC Forecasting the Australian Economy 1993, p.12.4.
[49] Evidence, Mr Geoffrey Quinn,
p. 478.
[50] Evidence, Australian
Supermarket Institute, p. 358.
[51] Evidence, Australian
Supermarket Institute, p. 358.
[52] Evidence, Australian
Supermarket Institute, p. 360.
[53] Denis Gastin, Agribusiness - What
Do We Need To Do To Compete In Asia?, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p.154.
[54] The AFC was established to set an
agenda for the food processing and beverage industry's future growth and “to present
a single, cohesive voice to government and consumer.” AAP news story dated 16 October
1995.
[55] For more information on competition
from South American countries see Evidence, RIRDC, p. 1007 and Evidence,
NFF, p. 1011.
[56] David Shires, “Food Report Finds
Us Wanting”, Australian Financial Review, 17 October 1995.
[57] David Shires, “Food Report Finds
Us Wanting”, Australian Financial Review, 17 October 1995
[58] Evidence, Ricegrowers'
Co-operative Ltd, p. 963
[59] John W. Longworth and Paul C
Riethmuller, Exploding Some Myths About the Rural Sector in Australia, Current
Affairs Bulletin, Vol. 70, No. 1, June 1993, p. 21.
[60] Evidence, Murray Goulburn
Cooperative Company Limited, p. 251.
[61] Evidence, AWB, p. 71.
[62] Florence Chong, Trading Policies:
Trading Costs of Value-adding, the Australian newspaper, 16 June 1993, p. 29.
[63] Evidence, Professor Nicholas
Samuel, p. 630.
[64] Evidence, West Australian
Government, p. 709.