House of Representatives Committees

Standing Committee on Primary Industries, Resources and Rural and Regional Affairs

Adjusting to agricultural trade reform: Australia no longer down under

KEY CONCLUSIONS AND RECOMMENDATIONS

CHAPTER TWO: GLOBALISATION AND LIBERALISATION

As an exporter of 70 per cent of its agricultural products and a nation exporting five times more than it imports, Australia is positioned to gain substantially from trade liberalisation in agriculture. The outcomes of liberalisation are already contributing to economic and employment growth for Australia. Government and industry rely on up-to-date information to underpin trade policies. The Committee recommends that:

(1) the Australian Bureau of Agricultural and Resource Economics place high priority on research into the economic impact of trade liberalisation (within Australia and globally) for regional Australia and Australia's primary industries. A major aspect of the research should be aimed at finding direct linkages between trade reform, farm returns and employment. Another major aspect of the research should be to consider the impact of agricultural trade reform on consumer prices.

(Paragraph 2.76)

The Committee recognises that there are industries facing serious challenges to their traditional domestic markets as a result of trade liberalisation. The process for structural adjustment to the new business environments must be properly managed by government and understood by the rural community. A number of options for adjustment assistance are available to industries adversely affected by the impact of trade liberalisation. The Committee recommends that:

(2) the Commonwealth Government acknowledges its responsibilities in providing practical industry adjustment measures designed to improve the international competitiveness of industries adversely affected by trade liberalisation. The government should provide more information to the public on the availability of industry adjustment measures.

(Paragraph 2.84)

CHAPTER THREE: AWARENESS AND ATTITUDE

In 1996-97 rural exports from Australia increased by 7.4 per cent to $21 billion. This rate of export growth of Australian primary industries is encouraging. Support for trade liberalisation is wide spread among industry leaders but a stronger export culture needs to be fostered among grassroots producers. There is some concern about the pace of reform and the need to safeguard industries against the effects of rapid change. The Committee recommends that:

(3) the Departments of Foreign Affairs and Trade and Primary Industries and Energy, in conjunction with peak industry bodies, undertake a study to determine the motivations for change and the resistance to change among primary producers faced with new business environments as a result of trade reform. The aim of the study should be to provide a better understanding of the motivations of primary producers. (Paragraph 3.25)

Australian agribusiness reflects the multiculturalism of the wider society. The agribusiness sector is under-utilising the valuable strengths of its people who have knowledge of languages, customs and the way business is done in other countries. The Committee recommends that:

(4) coordination and linkages between activities within the Foreign Affairs and Trade, Primary Industries and Energy and Immigration and Multicultural Affairs portfolios be strengthened to develop programs that provide Australian primary producers with a better understanding of the business cultures of overseas countries and the potential within our own multicultural agricultural sector for exploiting export opportunities. (Paragraph 3.31)

Developing an export culture requires long term approaches, as well as more immediate strategies. An investment in the education of future key players in agribusiness is important. The Committee recommends that:

(5) the Commonwealth develop scholarship and intern programs to provide opportunities for tertiary agribusiness students, producers and others from rural areas to undertake short term placements in agribusiness trade-related agencies such as Austrade, Research and Development Corporations and Statutory Marketing Corporations. These placements should be incorporated into broader educational and networking programs designed to enhance export skills and awareness.

(Paragraph 3.33)

(6) as a long term educational strategy, the Departments of Foreign Affairs and Trade, Primary Industries and Energy and Employment, Education, Training and Youth Affairs, in conjunction with statutory marketing authorities and industry organisations, develop an export and trade liberalisation package designed for use in schools across Australia. The objective of the package should be to promote awareness of Australia's export objectives, including global trade liberalisation policies.

(Paragraph 3.34)

Awards already exist for achieving excellence in agribusiness exporting, but there is scope to give such achievements greater recognition and raise the public profile of those who are succeeding in agricultural export performance. The Committee recommends that:

(7) the Commonwealth Government promotes export excellence by sponsoring and raising the profile of a program of awards specifically targeted to primary producers recognising superior achievement in exporting and ensuring the program is recognised nationally as Australia's premier awards for excellence in agricultural exporting.

(Paragraph 3.35)

(8) the Commonwealth Government, in association with state governments, local governments and industry, implement public awareness programs to:

(a) clearly showcase successful export enterprises to serve as examples to potential exporters; and

(b) to demonstrate the benefits of trade reforms to regional communities, particularly in terms of job creation and local economies. (Paragraph 3.41)

Industry and government must acknowledge joint responsibility for providing information on trade liberalisation to the public. A partnership approach is required to keep the public informed on trade reform issues. The Committee recommends that:

(9) (a) government departments address the lack of public information on free trade policies by providing information from government and particularly farmer groups, businesses and individuals to demonstrate benefits of trade liberalisation;

(b) the Departments of Foreign Affairs and Trade and Primary Industries and Energy accept responsibility for seeking a partnership with industry bodies to develop community information programs; and

(c) that sources other than printed material are used for this purpose, particularly regional television. (Paragraph 3.61)

CHAPTER FOUR: INFORMATION AND TECHNOLOGY

There is an urgent need for primary producers and the general public to be better informed about trade reform and emerging market opportunities. Neither industry nor government agencies are working effectively in this area. A proactive strategy is urgently needed to deliver public messages in an effective way. The Committee recommends that:

(10) (a) the Departments of Foreign Affairs and Trade and Primary Industries and Energy, in consultation with professional marketing expertise, adopt a strategic approach for disseminating information on trade liberalisation and export market development;

(b) this strategy fully consider the use of written and electronic media as a means of broadcasting information on trade liberalisation and marketing opportunities. (Paragraph 4.34)

The establishment of local groups of exporters and potential exporters should be encouraged as a means of information exchange. The Committee recommends that:

(11) (a) the Commonwealth government encourage facilitation of groups along the lines of Export Clubs focussed on changes to trade and based on the regional export forums of the Supermarket to Asia Council; and

(b) the purpose of these groups be to provide an opportunity for local agrifood exporters and potential exporters to interact with each other, to communicate with government on trade and marketing issues, and to disseminate information to producers.

(Paragraph 4.36)

(12) the Departments of Foreign Affairs and Trade and Primary Industries and Energy involve industry groups and statutory marketing authorities in the development and implementation of information and communication strategies relevant to particular industries on trade liberalisation issues and market development opportunities (as proposed in Recommendation 10). (Paragraph 4.45)

Industry should acknowledge its partnership role with government departments in providing information to primary producers on trade liberalisation. The Committee recommends that:

(14) (a) the Commonwealth Government include in its telecommunications Universal Service Obligations a requirement that all Australians, regardless of location, have access to communications infrastructure of a standard sufficient to enable internet connection and communication at a reasonable cost; and

(b) as part of the information strategy proposed in Recommendation 10, the Commonwealth Government ensures the media is made aware of and encouraged to publicise government grants available to upgrade rural and remote telecommunications infrastructure. (Paragraph 4.70)

(15) the Commonwealth Government's FarmBis program includes provision in its funding arrangements for primary producers living in remote regions to have the costs of participation in training courses subsidised to an equivalent level as those attending from non-isolated regions.

(Paragraph 4.72)

The emerging importance of electronic commerce and the internet is expected to bring significant business opportunities for primary producers. The Committee recommends that:

(16) (a) the Departments of Industry, Science and Tourism, Foreign Affairs and Trade, Primary Industries and Energy and Communications and the Arts, in consultation with industry and statutory marketing authorities, explore the potential benefits to agrifood exporting arising from the development of the United Nations Global Trade Point Network; and

(b) report back to the government on opportunities to promote the electronic trading service to existing and potential exporters. (Paragraph 4.88)

CHAPTER FIVE: TRADE BARRIERS, MARKET ACCESS AND QUARANTINE

While the Uruguay Round succeeded in bringing agricultural trade into the General Agreement on Tariffs and Trade (GATT), the degree of actual progress on reducing and eliminating trade barriers was unsatisfactory. Restrictive barriers continue to prevent Australian exporters gaining access to, or being competitive in, various world markets. Further, there is an increasing reliance on the application of non-tariff barriers to counter the effects of tariff reductions. The European Union remains a highly protected market for Australian agricultural products and the incorporation into the EU of several central and eastern European countries could expand the application of subsidies for agricultural production. The farm policies of the United States, particularly its Export Enhancement Program, also impede Australia's ability to compete on fair terms in world markets. The Committee recommends that:

(17) the Department of Foreign Affairs and Trade take a much more aggressive approach to bringing down the use of subsidised agricultural exports by the European Union (notwithstanding the incorporation of new members into the European Union) and by the United States, and to improving access for Australian produce to those markets.

(Paragraph 5.11)

There is concern that the Asian economic crisis may slow or reverse the trade liberalisation process in affected countries. Australia needs to ensure its long term trade objectives in the Asian region are not compromised by reversions to protectionist policies. The Committee recommends that:

(18) as a matter of urgency, the Department of Foreign Affairs and Trade review the likelihood of key Asian markets adopting a more protectionist agricultural trade stance, and that it respond quickly to minimise any adverse impacts on Australian exports. (Paragraph 5.12)

As Australia's exports of food are fivefold over its imports, it is in Australia's interests to see the adoption of international rules for the application of the World Trade Organization (WTO) Sanitary and Phytosanitary Agreement and to ensure that any remaining restrictions on trade are legitimate. The Australian public needs to be reassured that a strong stance is adopted in trade negotiations. The Committee recommends that:

(19) (a) the Commonwealth Government significantly increase its efforts to ensure compliance with the Sanitary and Phytosanitary and Technical Barriers to Trade Agreements amongst Australia's trading partners and pursue the removal of unjustifiable trade restrictions on Australian agricultural and food exports;

(b) the Departments of Foreign Affairs and Trade and Primary Industries and Energy provide public information (including publication on the internet) on Australia's quarantine negotiations as part of the communications strategy referred to in recommendation 10;

(c) the Department of Foreign Affairs and Trade publish, and continue to update, its trade barriers data base on the internet (subject to commercial in confidence limitations); and

(d) the Commonwealth Government and industry ensure that sufficient resources are provided to embark on World Trade Organization dispute settlement procedures as the need arises. (Paragraph 5.28)

Industry and government must adopt a close partnership in the evaluation of market access priorities. It is essential that the objectives of Australian trade negotiators are consistent with the needs of industry. The Committee recommends that:

(20) the Departments of Foreign Affairs and Trade and Primary Industries and Energy expand the Horticultural Market Access Committee model (as described in paragraph 5.31) across all major primary industries to ensure a comprehensive and fully consultative approach is adopted in identifying market access priorities. (Paragraph 5.34)

Australian trade negotiators must be fully equipped with the necessary commercial resources and skills to confidently and aggressively pursue the removal of all trade barriers of significance to Australian interests. The Committee recommends that:

(21) market access specialists with proven commercial and industry experience be appointed to positions within the Departments of Foreign Affairs and Trade and Primary Industries and Energy to have responsibilities in trade negotiations for each major Australian agricultural industry.

(Paragraph 5.39)

(22) as a matter of priority, the Commonwealth Government strengthens all consultative arrangements in place involving Commonwealth and State governments and industry to ensure Australian negotiators enter forthcoming trade negotiations fully informed of industry priorities.

(Paragraph 5.40)

There has been insufficient progress made on gaining access to markets for processed product. Tariff escalation works contrary to objectives for improving Australia's performance in exporting value added product. The Committee recommends that:

(23) tariff escalation be a major focus for Australian trade negotiators in future negotiations in order to reduce and minimise the adverse impact on value-added export products. (Paragraph 5.44)

The lengthy process for market access negotiations can offer an impression to producers that minimal efforts are being made to win access to markets. Improved efforts need to be made to ensure grassroots producers are kept informed of market access developments during the process. The Committee recommends that:

(24) (a) the Department of Primary Industries and Energy improves communication between the various interested parties and grassroots producers to ensure producers are aware of negotiating priorities and progress on issues on a regular basis (this should include use of the database to be published on the internet, referred to in recommendation 19);

(b) the Department be responsible for improving communication arrangements to ensure producers have easy access to negotiators to contribute to the identification of agricultural market access issues; and

(c) that the consultation and communication arrangements not be limited to peak producer organisations, but also involve key regional community groups and other government departments. (Paragraph 5.46)

Given the increasing importance of biosecurity issues in international trade, it is imperative that Australia is well prepared for possible pest and disease incursions and can respond quickly to biosecurity issues affecting trade. Industry and government are not well served by the current fragmented approach and narrow base of expertise. The Committee recommends:

(25) (a) a Minister responsible for biosecurity be appointed, with authority to draw on expertise from both government and non-government organisations as necessary in order to provide a timely response to biosecurity matters;

(b) the role of this Minister be to coordinate and take overall responsibility for the exclusion, eradication or effective management of unwanted pests and diseases in Australia;

(c) a Biosecurity Council, headed by an independent Chairman and comprising representatives of all key stakeholders with biosecurity and trade responsibilities be established to identify biosecurity priorities and to determine responsibilities for newly identified risks; and

(d) the Biosecurity Council report directly to the Minister responsible for biosecurity. (Paragraph 5.66)

CHAPTER SIX: TRADE IMPEDIMENTS WITHIN AUSTRALIA

There is little sense in pursuing intensive market access negotiations to open markets for Australian products if businesses are unable to compete in international markets due to high costs incurred in the supply chain. Australian Quarantine and Inspection Service (AQIS) inspection charges contribute to costs incurred by Australian exporters. Overseas competitors are not always subject to full cost recovery for the equivalent service in their country of origin. The WTO currently does not include inspection charges in the Aggregated Measurement of Support reduction commitment. The Committee recommends that:

(26) Australia puts forward a strong case in trade negotiations:

(a) by establishing the significant market distorting effect of government-subsidised provision of inspection services in other countries and arguing for their transferal to a cost-recovery basis; and

(b) by arguing that the subsidised provision of inspection services be removed from the Agreement on Agriculture "green box" exemptions and be fully accounted for in calculations of the Aggregate Measurement of Support. (Paragraph 6.43)

Producers from labour intensive industries such as horticulture can find it difficult to attract sufficient labour at critical times to harvest highly perishable product. The seasonal nature of harvest work limits the availability of a sufficient labour supply from the local region and growers consequently rely heavily on itinerant workers. The Committee recommends that:

(27) the Department of Employment, Education, Training and Youth Affairs require new employment service providers (Job Network Members) to develop strategies which will improve the ability of primary producers, particularly in horticultural industries, to meet their labour requirements.

(Paragraph 6.52)

The Committee also recommends that:

(28) the Department of Immigration and Multicultural Affairs encourages the uptake of harvest work among Working Holiday Makers and increases the number of young workers to the country under the Working Holiday Maker Scheme by widening the scope of countries participating in the Scheme. (Paragraph 6.53)

Australians are not yet proficient at consolidating containers of fresh product for export to provide cost advantages. The Committee recommends that:

(29) that the Minister for Transport and Regional Development refers the problem of the lack of consolidation of fresh foods into export containers to the sea and air freight export councils, as they are established, for consideration. (Paragraph 6.79)

New technologies are becoming increasingly utilised to prolong the shelf life of harvested horticultural products. Perishable products previously unable to enter certain export markets because of the high costs of airfreight are now able to reach those markets more competitively due to a combination of the technologies and the relatively cheaper costs of sea freight. The Committee recommends that:

(30) the Commonwealth Government liaise with exporting and transport industries to facilitate the commercialisation of research and development into packaging designed to extend the shelf life of perishable products, while maintaining product quality. (Paragraph 6.83)

A number of primary industries were critical of the current taxation arrangements in Australia which adversely impact on industry competitiveness. The Committee notes that the Government is currently reviewing existing taxation arrangements and recommends that:

(31) a major outcome of reforms to the tax system should be a reduced tax burden on export products, thereby improving the competitiveness of Australian primary industries in overseas markets. (Paragraph 6.88)

CHAPTER SEVEN - MARKETING STRATEGIES

Increased exposure to the volatility of world markets has prompted many agribusinesses to review their marketing strategies. Networks are providing an effective vehicle for information exchange between producers. This includes technical research information, market information or general industry information. Networks are also building critical mass through amalgamation, resulting in the potential for lower costs across the supply chain and co-ordination of supply. Co-ordinated marketing strategies from a network of exporters can reduce the number of competitors in a market and reduce marketing costs. The Committee recommends that:

(32) the Department of Primary Industries and Energy, in partnership with industry, increase awareness among primary producers and exporters of the advantages of networks which can aggregate supply and co-ordinate marketing in a strategic way. The Department and industry should encourage primary producers to establish partnerships along the supply chain, nationally and internationally, to improve market information mechanisms. (Paragraph 7.36)

Statutory authorities should improve their efforts in informing producers about the trade reform process. The Committee recommends that:

(33) statutory marketing authorities improve efforts to inform their levy-paying producers of the significance of trade liberalisation and electronic commerce. Statutory marketing authorities should also ensure that they provide producers with information on marketing activities undertaken by the authorities in response to changes in world markets. (Paragraph 7.43)

Feedback from industry indicates an inconsistent performance by Austrade in serving Australian agribusiness. The value of Austrade service is heavily dependent on the individual engaged for the contract. There is also a serious lack of attention to the needs of smaller clients. The Committee recommends that:

(34) the Commonwealth Government review the role and activities of Austrade in the context of providing export marketing services to agribusinesses. The review should examine the perception of Austrade among agribusinesses and identify measures to encourage greater delivery of Austrade services to smaller clients. The review should also examine the role of Austrade in relation to the development of electronic trading facilities for primary industries. (Paragraph 7.59)


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