Address to Future Trade Opportunities for Australian Agriculture Conference, Canberra

TRANSCRIPT OF SENATOR RICHARD COLBECK ADDRESS TO FUTURE TRADE OPPORTUNITIES FOR AUSTRALIAN AGRICULTURE CONFERENCE, CANBERRA

10 JUNE, 2015

E&OE.......................................................................................................

Thanks very much and the opportunity tonight to talk about some of this year's life experiences I suppose as much as anything else, and what I've had the opportunity to see in and around export opportunity for agriculture since Christmas.

It is a really exciting time for agriculture in this country. It's a time where large chunks of the world are looking at us and looking at us for opportunity from a number of perspectives. The role that we should have as a government is to facilitate the opportunity for industry to take up those opportunities in trade and also working with industry to help them look outwards rather than being very much locally focused, which has been where a lot of the agriculture sector has been looking for a period of time.

So the work that particularly Andrew Robb has done since September 2013 in reinvigorating trade discussions globally and also some work that Barnaby Joyce has done within the agricultural portfolio and picking up markets that had some issues around them and needed reopening and recommencing or re-establishing, particularly some of the markets into the Middle East for beef and lamb. When it comes to the larger opportunities, the work that Andrew's done in completing three free trade agreements is really quite significant and is I think a real game changer for agriculture in this country and the opportunities that exist for the industry.

It's important that we strip the hype away and look at it in the hard light of day when considering the opportunities, but I think they are significant and we can do that. The early discussion was that we would be the food bowl of Asia and that we would be supplying huge and vast amounts of product into all of these markets, but when you look at the numbers it's a very different picture. If we double our food production by 2050 we feed ourselves plus 1.3 percent of all of Asia, so we're not anybody's food bowl in that context. But there is still significant opportunity in the markets where we've opened up with free trade agreements and of course there is additional work being done - the TPP and the discussions that we've had with India.

The opportunity that I've had this year is to be in a number of the countries that we've established free trade agreements with and the opportunity to talk to some of the ministers and industry in those markets to see what might be required and it varies across those different markets. So I'll start with the chance that is one that we don't have a free trade agreement with yet, but Prime Minister Abbott and Prime Minister Modi said last year that they would like to have a free trade agreement with within 12 months and I can tell you having had a glimpse at the bureaucracy in India, that is a big ask. It's a big ask and we say that the poms invented bureaucracy but I think the Indians have perfected it and the experience of that is something to behold.

But nevertheless, it is a huge market and they are a country that we already have strong relationships with, we have similar system of government and we both have our own bureaucracies but there are some real opportunities that perhaps not in the way we traditionally see trade. I think that's the way that we need to look at this market, but we ought to be engaging in that now because it's going to take time for the market to develop.

The opportunity is out in the development stage to build relationships that will then translate into physical trade opportunities that I think at the outset the real opportunity in India is working in the context of services to help them grow productivity of their agricultural sector. They're a huge country, a really huge country and if you look at for example the dairy industry, where there are already I think some quite important things starting to be developed on the back of Australian Business Week in India.

I must say, the delegation I went over there with quite by fortune was very well matched to look at the needs of that Indian dairy sector. They are the largest dairy producers in the world and they are the largest consumers of dairy in the world, but the productivity of their industry really need some work. Their dairy cow productivity is about 5 litres per cow per day and ours is 25. There's not just one element that's going to assist them with that because their farming systems are very different because there's a number of things that they need.

They are looking globally for genetics and we have the genetics here in this country that can help them to grow their industry. They didn't see Australia as a country that could provide that to them, they saw us as a cool climate dairy country, but we've got a dairy industry that expands from Tasmania to far north Queensland so we actually do have a product. Having people there with that experience on the delegation and meeting with the management of the dairy development board actually opened their eyes to that. We have pastures here that span those climatic regions and the fodder and the nutrition that goes into their dairy industry is a really important part of the growth in productivity.

I saw them feeding wheat straw to cows; it was about volume not efficiency. So there's a whole range of offerings that we have in that sector and things that our dairy farmers do by second nature themselves, they don't do for themselves in that country. So, even in farm management skills there is an offering that we have and I don't think the Australian industry really understands what they have in the broader context of what they might offer into some of these developing nations and building a foundation to a relationship that then can go to become a part of a broader trade offering.

I think we really need to look at those very closely because there are plenty of others close behind us in looking at being a part of those relationships and if we don't get in on the ground floor the reality is we will probably miss out and so there are probably a number of trade offerings that could go straight into India if we get our negotiations working the right way. For example they're looking at a major textiles based industry and there is an opportunity in that context for our cotton and wool industries. The conversation I had with their textiles minister while I was over there was that if you want to have a competitive industry exporting product out of your country, one of the ways that you do that is not impose cost on product coming in. So remove the tariffs on wool and cotton coming into your industry for Australia and that can then become part of the more competitive offering for you on the way out - the cost on the way in is a cost on the way out. And that's part of the broader conversation that I think we have to have.

Andrew Robb put a great statistic on the table when he opened the Australian Business Week in India which was that in 1990 only 17 per cent of global trade was through traded, something that Australia as an import country transform and then trade back out. That number is now 70 per cent of global trade. So a cost on the way in for all of those products is a cost on the way out and a cost on your competitiveness. I think that's one of the real advantages that Australia has, having been through the process in opening these markets because we're already in a situation where we can be competitive with product coming in and we are a competitive country in a lot of areas particularly in agriculture. So this is a real opportunity for us in that space.

In India I think at the beginning it is a service offering in a number of sectors, where they are actually right now looking for that assistance to grow the productivity in the industry. It can be the foundation of the development of a relationship in that space and they are looking globally but they are looking for countries that develop the relationships to assist them with that work. So the dairy industry in that country is quite a fascinating proposition made up of tens of thousands of dairy farmers with two or three cows, milk delivered on bicycles and motorcycles to a central village and chilling station and then into a massive dairy industry which as I said feeds the biggest consumers of dairy in the world. They call it the miracle of the dairy industry and they are looking for the second wave of the dairy miracle, the white miracle, because they're looking to feed growing demand for milk product in their country.

They're very protective of their industry and interestingly when our dairy farmers were receiving about $6 a kg for their product here in Australia the price in India was $9, so that's one of the issues that we've got to deal with but I think that we've got the skills and the services to assist with that. The National Dairy Development Board is coming out here soon to actually interact with some of the people who were there in January and to continue that conversion. It's important I think and there are a number of other offerings I think we can provide into their agricultural sector from cropping and a number of other perspectives, but that's the way that we need to look at that market.

There also is an opportunity I think in the Chinese market where we talk about the opportunities for physical product into the Chinese market because that's what we're producing and that's what we see it as, but one of the huge winners out of the Chinese free trade agreement is service provision. You can go into China and set up an agriculture college, own it, operate it and provide service into that country. They are looking for skills and we are having conversations with the Chinese at the moment about the opportunities to put some of our quality systems and food safety systems into their market. We all know how sensitive that is an issue here in this country and I can tell you it is the same in China.

One of the reasons that the Australian product is so highly valued in the Chinese market is that they trust our food safety systems. So not only can we take our food safety systems but we can take the training and the skills to them to assist them to deal with their problems in the market. I know that they appreciate the offering.

When I was in Turkey recently we provided them with some translated copies of one of our food safety systems so that they could start to look at the opportunities to start to build that relationship and I think we need to be considering that as part of our offering as well and as part of the relationship. As I said, we're not going to be huge suppliers into those markets but we really do have something quite unique in agriculture in this country which is a very strong product sector that knows the industry well and that understands it well.

I was talking to the head of the FAO at the G20 in Turkey and the conversation we were having was around an observation that I made on what our industry did for itself in this country compared to what was done by governments for industry in other countries. I was talking to three vets one night and they said to me, so Senator who controls your genetics? I didn't quite understand the question so I said, well what do you mean who controls the genetics? And they said, well who controls what genetics your farmers use? And I said the farmers of course.

Mick (Mick Keogh, Executive Director, Australian Farm Institute) mentioned my experience on a dairy farm in Tassie and I will admit to being cured of dairy farming pretty quickly and I escaped to town to do a trade. But I observed the transformation in our dairy herd at home where my father looked for genetics from wherever he could get them globally to apply them to his herd to improve the productivity of the cattle and they were seriously one of the biggest bunch of old scrubbers you've ever come across when he moved onto the farm in 75, but when my brother sold the herd in 2000 they averaged over $2,000 a head in a tough market at the time. So the quality of the input and the work that my father and my brother put in in choosing the genetics to build the quality of the productivity of the herd have paid off, but these vets were aghast and said that was their job. So the government controls the genetics that are being used in that Indian dairy industry and where they come from.

So a strong relationship from an Australian perspective in the genetic sector in Australia with the Indian dairy development board gives you complete access to that market. You don't have to actually work through different elements of the market in the way that our dairy farmers do, if you've got the national dairy development board and a relationship with them you've got the entire Indian dairy industry.

At the moment, our key competitors in the market are our good friends from the United States (inaudible). Because they have product that is very valuable to the Indian dairy industry (inaudible). There is an opportunity there which we do have genetic brains (inaudible) but developing a relationship now is important.

Obviously I see opportunities there in China as well, but that's a huge market and building and developing relationships in that market is one that many of you will all understand. But the key offering there is without question quality, safe food.

One thing that I picked up recently when I was in both China and Japan was also a feature of our conversations in India, is because we have signed free trade agreements (inaudible) and so striking while the iron's hot in all of those markets is going to be quite important because the actual activity of signing a free trade agreement and the obvious opportunities to pick up opportunities that they might not of been looking at before. But I think we really need to be working very quickly to take advantage of those opportunities while that recognition is there.

It was quite interesting in India where because Modi said look to Australia the entire business community were looking to Australia. Traditionally they were looking to the northern hemisphere, but they were looking to us because of the fact that their leader had said that. Because we signed a free trade agreement with Japan they were also looking again at our market and what was available and what they might pick up. I attended a couple of functions while I was in Japan and it was quite clear there were (inaudible) in the opportunities for agricultural product, quality and safe products that existed in that market. And then of course we're very close to finalising the arrangements with China and that will promote a whole new wave of opportunity that comes into those particular markets.

Of course then we've got relationships with TPP and particularly opportunities into South Korea and it's really pleasing to see some good examples of how that relationship is already very different. One of the things that I've already said to the ag sector in Australia and one of the things that I've pushed for within government is that opening up markets provides an alternative to fighting in the Australian market. In the vegetable sector for example I think we produce something like 25 per cent more vegetables that we can actually consume in the Australian market. Of course then we try to sell it in the Australian market and we complain that we can't get a good price for it. Its simple supply and demand market economics.

These free trade agreements give us the opportunity to look out to new markets, markets that are looking for a quality and safe product and take the pressure off the domestic market. One of the best examples that I've seen of that is Reid Fruits out of Tasmania who last year before signing the FTA sold about 5 tonnes of cherries to South Korea, but last season they sold 183 tonnes of cherries to South Korea. One important point in all of that is they did not sell a single cherry to Coles and Woolworths, which meant they were out of that market and there was less pressure in that particular market for the other producers wo didn't have access to those international markets because of phinosanitary conditions. But it actually took the pressure off that 180 tonnes that came out of the market.

So it really does serve to provide the opportunity for better returns by relieving market pressure when you open up those new markets and one of the opportunities and you'll hear Barnaby and me bang on a lot about is trying to improve returns to the farmers - it's about having alternative markets that provides that opportunity. If you're not happy with the returns and conditions you're getting in this market you have the opportunity to go and have a look at another market and that's something that I picked up particularly in a select committee I did four years ago now, into the food processing sector. We talked to some people from the UK and they said there are eight supermarket chains over there but we they have choice where we only have a couple so our options are limited. If you're not happy with the terms and conditions you can go somewhere else, so opening up these new markets opportunities in export is obviously an important way that we can assist with taking some of the market tension out of the Australian market. It has potential implications for our market obviously but that's important.

Of course the other things that they are working on around that are investments in logistics and we're putting an enormous amount of effort into investing into particularly transport infrastructure. For example, the bill that Warren Truss has coming in shortly around coastal shipping, where we have such an expensive coastal trading environment that effectively puts us out of the market. What we really need to understand through the supply chain, it's like the tariff on the front end of a product going through the manufacturing process, is that any cost in the supply chain is a cost through the supply chain and it's an impact on their competitiveness in the market.

I was reading an article recently where the cost of shipping of international grain for example is (inaudible) because of the service in international shipping but that is having an impact in our international grain markets because those countries that have taken advantage of that are much more competitive manufacturing process. Any cost in the supply chain is a cost through the supply chain and it's an impact on their competitiveness in the market.

So we have to continue to work really hard to bring down all of those through supply chain costs so it actually does come back to instant economy and getting those economic fundamentals right for all of our industry players as well as providing the opportunity to export through market and open new markets with free trade agreements and multilateral trade agreements. The TTP will be a part of what we see as core business for the agriculture sector and in a way that we can assist with increasing returns to growers at the farm gate. It's not how much or what your proportion (inaudible) and that's the important thing and that allows us to continue to be innovative and productive and to grow and invest in our R&D system which is important to us and which over the years has kept us at the leading edge of agriculture in terms of productivity.

I hope that's given you a little bit of an insight into where I see the opportunity and I don't think we've seen a time like this for a long period of time. All these new opportunities are opening up and the world is actually looking at us from a number of key market perspectives to provide the opportunity and what we then need to do is to facilitate the chance for industry to take up those market opportunists and to continue to make the agriculture sector in Australia possible.

Thanks very much.

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