Why Aus­tralia can't ig­nore its farm­ers

Un­like other de­vel­oped mar­kets, Aus­tralia is likely to main­tain low do­mes­tic pro­tec­tion for its farm­ing sec­tor while push­ing ag­gres­sively for greater agri­cul­tural ac­cess over­seas.

Financial Nigeria Magazine - - Contents -

Agri­cul­ture has ruled the roost in Aus­tralia since the coun­try's in­cep­tion. Main­tain­ing and ex­pand­ing in­ter­na­tional ac­cess for its agri­cul­tural goods has long been a key plank of the coun­try's trade pol­icy, and its agri­cul­tural groups con­tinue to lobby strongly for ex­pan­sive free trade deals to over­come a small do­mes­tic mar­ket, to make in­roads into coun­tries with more prof­itable prod­ucts and to de­feat com­pe­ti­tion from other ex­porters. And though di­ver­si­fi­ca­tion has re­sulted in the emer­gence of other sec­tors in re­cent decades, the farm­ing in­dus­try's con­tin­ued growth in value and em­ploy­ment – as well as its align­ment with the coun­try's broader trade poli­cies – means it will re­main a guid­ing in­flu­ence re­gard­less of who rules Aus­tralia.

Find­ing Hun­gry Mar­kets

Aus­tralia is an agri­cul­tural ex­port pow­er­house for three main rea­sons. First, the coun­try pos­sesses vast tracts of land, yet it has rel­a­tively few peo­ple to feed, mean­ing it has the high­est arable land per capita of any na­tion (2 hectares per per­son). Ex­port­ing agri­cul­tural goods helps to over­come the lim­its of a small do­mes­tic mar­ket – the coun­try is only as pop­u­lous as Shang­hai – while har­ness­ing the fullest ex­tent of the coun­try's vast ge­og­ra­phy.

The sec­ond fac­tor is Aus­tralia's links to hun­gry con­sumer and in­dus­trial mar­kets. Dur­ing the colo­nial pe­riod, ties to Lon­don meant Aus­tralian wool, in ad­di­tion to beef and skins, were in high de­mand as a man­u­fac­tur­ing in­put. To­day, mar­kets that are hun­gry for Aus­tralia's out­put still ex­ist – with the added bonus that they're much closer than Lon­don – be­cause buy­ers in North­east, South­east and South Asia are all ea­ger for its agri­cul­tural goods.

Last, the coun­try's iso­la­tion has left it com­par­a­tively free of the plant pests that have dogged agri­cul­tural pro­duc­tion in sim­i­larly sized pro­duc­ers, mean­ing that farm­ers have lower in­put costs and eas­ier ac­cess to pre­mium, pest-con­scious ex­port mar­kets. Nev­er­the­less, such iso­la­tion and re­liance on ex­port mar­kets obliges Aus­tralia to over­come the costs im­posed by dis­tances by be­com­ing more ef­fi­cient and en­sur­ing that it is able to ac­cess those for­eign mar­kets.

A Sec­tor in Ro­bust Health

Agri­cul­ture plays a vi­tal role in Aus­tralia's econ­omy, es­pe­cially in its ru­ral hin­ter­land. As a re­sult, the sec­tor holds a de­gree of po­lit­i­cal sway over all the coun­try's par­ties, al­though the Na­tional Party is gen­er­ally the strong­est rep­re­sen­ta­tive of agri­cul­tural in­ter­ests. In 2016, Aus­tralian farms yielded $62 bil­lion in farm gate in­come and ac­counted for $36.7 bil­lion in ex­ports, con­tribut­ing 2.2 per­cent to the gross do­mes­tic prod­uct.

In the same year, the sec­tor di­rectly em­ployed nearly 270,000 peo­ple (2.5

per­cent of the to­tal work­force), dwarf­ing the num­ber em­ployed in min­ing (177,649). At the same time, an es­ti­mated 1.6 mil­lion ad­di­tional peo­ple were em­ployed in re­tail, lo­gis­tics and pro­cess­ing sup­ported by agri­cul­ture. And the size of the work­force is only grow­ing: From 2011 to 2016, more than 17,000 peo­ple found new jobs in the sec­tor. In con­trast, the man­u­fac­tur­ing in­dus­try shed 220,000 jobs over the same pe­riod (al­though the sec­tor still em­ployed about 684,000 Aus­tralians in 2016). Agri­cul­ture also dominates the na­tional land­scape. In 2017, a full 394 mil­lion hectares of land were un­der cul­ti­va­tion, or 51 per­cent of the con­ti­nent's to­tal land­mass; the fig­ure was much higher for Queens­land (80 per­cent) and New South Wales (69 per­cent).

The coun­try's farm­ers are keen to main­tain and ex­pand their ac­cess to world mar­kets. The sec­tor sup­plies about 93 per­cent of Aus­tralia's do­mes­tic food sup­ply, while the coun­try's small pop­u­la­tion leaves it with a large agri­cul­tural sur­plus for ex­port. From 2014 to 2017, farm­ers ex­ported an av­er­age of 70 per­cent of their pro­duce by value – up from 60 per­cent in 2012. With­out ques­tion, its ru­ral agri­cul­tural ex­ports have be­come less vi­tal to its ex­port pro­file due to eco­nomic di­ver­si­fi­ca­tion (the fig­ures have slipped from over 75 per­cent in the early 1960s to 25 per­cent in 1990), yet they still make up over 15 per­cent of to­tal ex­ports. In terms of value, how­ever, Aus­tralia's agri­cul­tural ex­ports have al­most tripled since the 1960s, ris­ing at about 3.5 per­cent per year. Aus­tralian farm­ers have also broad­ened their ex­ports be­yond tra­di­tional com­modi­ties such as wool and beef to sell wine, cheese and pro­cessed foods around the world. To­day, Aus­tralia's largest ex­ports are ores, hy­dro­car­bon, pre­cious stones and beef – the last of which to­tals 4.36 per­cent of GDP, or $8.3 bil­lion. At present, Aus­tralia is the world's third largest beef ex­porter, sup­ply­ing about 3 per­cent of the globe's to­tal, par­tic­u­larly to coun­tries such as Ja­pan, South Korea and the United States. A full 55 per­cent of Aus­tralian farms are de­voted to cat­tle pro­duc­tion, while there are an es­ti­mated 25 mil­lion head of cat­tle na­tion­wide.

In terms of agri­cul­tural ex­ports, beef is fol­lowed by wheat and wool – all of which ac­count for about half of agri­cul­tural ex­ports. Grain pro­duc­tion em­ploys 170,000 peo­ple – a full 64 per­cent of the agri­cul­tural work­force. The coun­try ex­ports 65 per­cent of its grain to Asia-Pa­cific neigh­bours such as In­done­sia, China, Viet­nam, South Korea and Ja­pan. Aus­tralia's ven­er­a­ble wool sec­tor has deep roots; the econ­omy was said to "ride on the sheep's back" be­fore the mid20th cen­tury. To­day, wool pro­duc­ers op­er­ate ev­ery­where in the coun­try be­sides the North­ern Ter­ri­tory, while New South Wales alone pro­duces nearly 40 per­cent of the coun­try's 324,900 tons of out­put for places such as China, In­dia and Italy.

The story is sim­i­lar with other farm­ing prod­ucts. Aus­tralia sends 98 per­cent of its cot­ton pro­duc­tion abroad, mak­ing it the world's fifth largest ex­porter. It is also the fourth largest ex­porter of dairy prod­ucts, be­hind New Zealand, the Euro­pean Union and the United States – with most of its out­put go­ing to Asia. Sim­i­larly, the coun­try is the globe's largest ex­porter of sheep meat (ac­count­ing for 8 per­cent of world pro­duc­tion), the third largest ex­porter of sugar (trail­ing only Brazil and Thai­land) and the fourth largest ex­porter of wine (only France, Italy and Spain sell more).

Driv­ing Deals on Trade

Be­cause Aus­tralia boasts such a broad ar­ray of farm­ing prod­ucts, the gov­ern­ment in Can­berra nat­u­rally pushes for greater ac­cess for the coun­try's agri­cul­tural goods when ne­go­ti­at­ing trade deals. The main um­brella or­ga­ni­za­tion rep­re­sent­ing Aus­tralian farm­ers is the Na­tional Farm­ers' Fed­er­a­tion (NFF), a 31-mem­ber or­ga­ni­za­tion fea­tur­ing state- and ter­ri­to­rial-level agri­cul­ture groups, as well as or­ga­ni­za­tions that rep­re­sent var­i­ous agri­cul­tural com­modi­ties.

The NFF ag­gres­sively pro­motes free trade agree­ments, driv­ing Can­berra to com­plete them quickly while also push­ing for a stronger role for its rep­re­sen­ta­tives in pol­i­cy­mak­ing. The main NFF trade pol­icy fo­cus is to ben­e­fit from the strong global agri­cul­tural de­mand, es­pe­cially in Asia, by knock­ing down trade bar­ri­ers. For ex­am­ple,

From 2014 to 2017, farm­ers ex­ported an av­er­age of 70 per­cent of their pro­duce by value – up from 60 per­cent in 2012.

the NFF crit­i­cized the 2014 Ja­pan-Aus­tralia Eco­nomic Part­ner­ship Agree­ment be­cause it did not go far enough in break­ing down eco­nomic bar­ri­ers. In­deed, many NFF mem­bers wel­comed Prime Min­is­ter Tony Ab­bott's ouster in 2015 be­cause his ad­min­is­tra­tion was slow on free trade.

Most re­cently, the NFF hailed the bi­par­ti­san con­sen­sus to sup­port the rat­i­fi­ca­tion of the 11-coun­try Com­pre­hen­sive and Pro­gres­sive Tran­sPa­cific Part­ner­ship (CPTPP) in Au­gust. Do­mes­ti­cally, the NFF fo­cuses on mak­ing the sec­tor more ef­fi­cient while de­mand­ing greater ac­cess to cap­i­tal, in­fra­struc­ture up­grades and a bet­ter so­cial safety net – par­tic­u­larly be­cause Aus­tralia has fallen be­hind its peers in the de­vel­oped world on na­tional agri­cul­tural sup­port mech­a­nisms, ac­cord­ing to the fed­er­a­tion.

Aus­tralia's do­mes­tic tar­iffs are rel­a­tively low, ly­ing be­tween zero and 5 per­cent for most goods. In terms of ex­ports, Aus­tralia has ac­tively pur­sued deep and sub­stan­tive trade agree­ments – with 13 com­pleted and more in the works. At the World Trade Or­ga­ni­za­tion, Aus­tralia rou­tinely ex­presses con­cern (al­beit to lit­tle ef­fect so far) about agri­cul­tural bar­ri­ers, sub­si­dies or price con­trols in the Euro­pean Union, In­dia, Canada and the United States.

Ul­ti­mately, how­ever, the main fo­cus of its agri­cul­tural trade pol­icy is open­ing greater ac­cess to Asian mar­kets, which con­sume about 60 per­cent of the coun­try's agri­cul­tural ex­ports. At 20 per­cent of the to­tal, China – which is ex­pected to ac­count for 43 per­cent of global growth in agri­cul­tural de­mand by 2050 – is by far the great­est cus­tomer for Aus­tralian pro­duce, al­though Ja­pan ac­counts for 10 per­cent and South Korea nearly 8 per­cent. Viet­nam, In­dia, Hong Kong and Sin­ga­pore are also im­por­tant mar­kets. Aus­tralian free trade pro­po­nents scored a ma­jor vic­tory in 2015 when Bei­jing and Can­berra signed the China-Aus­tralia Free Trade Agree­ment (ChAFTA), which helped raise Aus­tralian agri­cul­tural ex­ports to $7.2 bil­lion in 2016-17.

Be­fore the sign­ing of ChAFTA, Aus­tralian farm­ers en­coun­tered steep tar­iffs that made them less com­pet­i­tive when com­pared with New Zealand, Chile and the As­so­ci­a­tion of South­east Asian Na­tions (ASEAN), all of whom had free trade agree­ments with China. ChAFTA has evened the play­ing field, giv­ing Aus­tralia a greater ad­van­tage over larger play­ers such as the United States, the Euro­pean Union Canada. The deal stip­u­lates the steady draw­down of many tar­iffs on beef, dairy, sheep meat, wool, wine and grains.

And as a re­sult of the mas­sive CPTPP agree­ment, Aus­tralia im­me­di­ately elim­i­nated most of its agri­cul­ture tar­iffs on the other mem­ber coun­tries (one sin­gle tar­iff will be phased out in four years). The deal elim­i­nated 98 per­cent of agri­cul­tural tar­iffs for three of Aus­tralia's top 10 mar­kets – Ja­pan, Viet­nam and New Zealand, which to­gether ac­counted for 23 per­cent of its agri­cul­tural ex­ports. The CPTPP has al­lowed Aus­tralian farm­ers to im­prove upon its agree­ment with Ja­pan, es­pe­cially on beef, sugar and rice. In the CPTPP, Aus­tralia also suc­ceeded in main­tain­ing its strict reg­u­la­tions to re­main pest- and dis­ease-free – while es­tab­lish­ing a com­mit­tee to end the use of sim­i­lar nonand tar­iff bar­ri­ers in other coun­tries. And while South Korea is al­ready a ma­jor mar­ket for its agri­cul­tural prod­ucts, the CPTPP will open the East Asian coun­try to even more of Aus­tralian goods.

Aus­tralia's on­go­ing agri­cul­tural trade push, how­ever, has hit bar­ri­ers. In its slow­go­ing talks with In­done­sia, it has se­cured Jakarta's agree­ment about low­er­ing – but not elim­i­nat­ing – tar­iff bar­ri­ers. In­dia, mean­while, has proved even more re­cal­ci­trant. New Delhi's av­er­age, most­favoured na­tion tar­iff on agri­cul­tural goods stands at 36 per­cent, mean­ing its hard-line stance on main­tain­ing pro­tec­tions has stalled free trade talks with Can­berra.

To date, Aus­tralia’s agri­cul­tural in­ter­ests have man­aged to open up many key mar­kets, al­though they still seek to deepen such ac­cess. While U.S. pro­tec­tion­ism could com­pli­cate Amer­i­can agri­cul­tural ex­porters' ac­cess to Asian mar­kets, the path is open for Aus­tralia to con­tinue its surge to its north­ern neigh­bours. As a re­sult, the agri­cul­tural sec­tor will con­tinue to loom large over Aus­tralia's trade poli­cies – as well as the po­lit­i­cal movers and shak­ers in Can­berra. “Why Aus­tralia Can't Ig­nore Its Farm­ers” is re­pub­lished un­der con­tent con­fed­er­a­tion be­tween Fi­nan­cial Nige­ria and Strat­for.

Be­cause Aus­tralia boasts such a broad ar­ray of farm­ing prod­ucts, the gov­ern­ment in Can­berra nat­u­rally pushes for greater ac­cess for the coun­try's agri­cul­tural goods when ne­go­ti­at­ing trade deals.

An Aus­tralian cot­ton farm

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.