Australia’s farm sector is being punished by the Chinese Government. As diplomatic relations between Australia and China have deteriorated, China has weaponised trade links and imposed punitive sanctions against Australian agricultural exports.
Since an explosive interview with the national newspaper in April, where Chinese Ambassador Cheng Jingye told The Australian
the Indo-Pacific power would reconsider buying Australian farm products, massive anti-dumping duties were applied to Australian barley in May. The same month also saw the suspension of export licenses for four Queensland abattoirs, which collectively accounted for approximately one-third of Australia’s beef exports to China.
More recently, China announced an anti-dumping investigating into alleged dumping of Australian wine exports. Wine is a billion-dollar export industry for Australia, and a major employer in regional WA. Industry experts and the Australian Government have dismissed the notion there is any dumping occurring, and rejected there being any trade law merit in the previous punitive measures.
So what is the solution for Australia’s agriculture industry? It is unlikely the trade war between China and Australia will recede anytime soon, nor the broader geopolitical tensions driving this farm sector punishment (and other economic and political disputes). In the same way Australian farmers reoriented their trade links to growing Northeast Asia after the United Kingdom entered the European Common Market, our farmers must again look to other major emerging markets for secure, reliable and growing trading partnerships.
No single new market of over-reliance is the solution to Australia’s agricultural export concentration challenge, but export growth with a diverse range of rising consumer markets. Their younger demographic, increasing food demand and broader growth trajectory, the top three target markets for Australian agricultural producers must be India, Indonesia and Vietnam:
With their own border and trade issues with China, India is looking for trusted economic partners. Australia has been building this bilateral partnership over many years, and Prime Ministers Morrison and Modi conducted a virtual summit in the midst of COVID-19. This included recommencing negotiations for a bilateral trade agreement, alongside India’s upcoming Australia Economic Strategy. Notwithstanding its agricultural restrictions, India is still a major agricultural importer, and can be a significant market where Australia’s dairy, meat, grains and horticulture products align with growing middle-class Indian demand. Australian agribusiness should begin to build meaningful relationships with India now, to capitalise on opportunities further unlocked by a future trade agreement.
With the Indonesia-Australia Comprehensive Economic Partnership Agreement in force from 5 July this year, Australia has greater market access opportunities with its nearest neighbour. Agribusiness in particular is at the heart of IA-CEPA, with ratified Tariff Rate Quotas (TRQs) allowing a set volume of products to be exported to Indonesia at reduced duties. For example, IA-CEPA allows for 575,000 live cattle to enter duty-free in the first year of the agreement, with the TRQ increasing by four percent each year for six years. Australia is already a major grains and cattle exporter to Indonesia, but there is significant room for growth in this relationship.
Vietnam’s urbanising economy and growing consumer base requires increasing supplies of high quality foodstuffs. The Australia-NZ ASEAN and Comprehensive and Progressive Agreement for Trans-Pacific Partnership deals are in place between Australia and Vietnam – both of which open up key agricultural product export opportunities for Australian industry. The mega-regional Regional Comprehensive Economic Partnership Agreement is also on the horizon for the two countries, adding a third trade platform for Australia to preferentially trade with Vietnam. These trade deals are the beginning, not the end, of growing the trade relationship, and work to drive the Australia-Vietnam trade relationship must intensify now.
Australia’s significant agricultural trade relationship with China was developed over decades, and the same will be the case to grow and diversify Australia’s agricultural relationships with India, Indonesia and Vietnam. Not only will Australia’s farm producers be able to further tap into the markets of Asia’s next great economic powers, but Australia’s future prosperity and living standards will be supported.
The Perth USAsia Centre has made three substantial contributions in recent months to Australia’s economic diversification and agribusiness development debate.
The first, by Dr Jeffrey Wilson to the Joint Standing Committee on Foreign Affairs, Defence and Trade, forensically details COVID-19’s exacerbation of Australia’s trade and economic concentration challenges.
The second, by Hugo Seymour and Jeffrey Wilson to the Joint Standing Committee on Trade and Investment Growth, argues Australia’s long-term solution to these concentration challenges is to grow Australia’s economic relationships with India, Indonesia and Vietnam.
The third, a focused analysis piece by Dr Jeffrey Wilson and Gemma King on Australia’s agricultural relationship with China, and the risks Australia faces by not diversifying its agricultural trade markets.