2 March 2016
Opening Address - Day Two, ABARES Outlook 2016 conference
Global Agriculture: international policy perspectives
National Convention Centre, Canberra
It's really great to be here at another ABARES Outlook conference and I thank ABARES for their continued commitment to the conference and to providing quality information for the agricultural sector in Australia - information and research that's recognised both here and globally, and very important. I can recall many hours poring over reports, particularly around agricultural trade, so thank you again for the opportunity to be here.
Today, what I'm looking to talk about in my new role - having left the agriculture portfolio in September last year and moved into the Trade and Investment portfolio specifically with responsibility for Tourism and International Education but also the opportunity to represent Australia in a number of forums in the trade and investment perspective - is about positioning Australia, and our deliberate strategy around what I call, and are increasingly being recognised as, Australia's super-growth sectors. Now agriculture is obviously one of those, but so is tourism, international education, gas/energy and wealth management and that's been recognised by a number of key agencies over recent times, in fact some of our best and brightest; Deloittes, McKinseys, BCA, the Future Economy Forum and of course one of our own agencies in Austrade. The size of these five, collectively, match that of mining at its peak.
Together these sectors are predicted to add more than $250 billion over the next twenty years. With the right tail winds there is a very real possibility we could see much more than that added to the economy and there is every reason to believe now is the time to capitalise on Australia's advantage. In fact, in my view, we ought to be capitalising on that right now.
International engagement removes the constraints for growth in a nation with a population of only 24 million and gives us access to more than 600 million people in our neighbouring countries alone.
Of great significance is that this population has age profiles that align to our service strengths, particularly tourism and education, and a growing middle class seeking what we have to offer and that's protein/food, energy and wealth management. The world wants what we have got. And the more we play, the stronger we get.
As well as talking today about the success of agriculture exports, I want to mention the intersection of three of the super-growth sectors; agriculture, tourism and international education.
They intersect as major contributors to the economy, they intersect as demand for Australia's food and wine offerings continue to skyrocket, and also because agriculture is much more than selling produce. It's also about the world wanting to know how we farm, how we produce such great food, wine, and also Australia's education expertise in agricultural production systems. And in that space I believe we have a huge amount to offer and in some cases we actually don't even understand what we have got.
The other intersection point is around international investment. Australian agriculture has performed very solidly in recent years.
This is the result of a strong economy overall, on the back of global food demand that is both growing and, at the same time, becoming more discerning. The increasing middle class of our major trading partners means the demand for protein is increasingly rapidly.
Farm exports are forecast to reach nearly $45 billion in 2015-16. That's a 37 per cent increase since 2010-11. These figures are edging closer to our top export earner in mining - iron ore currently tracking at $49billion and surpassing number 2 on the list - coal at $37billion. And our exports to Asian markets, in particular, are expected to grow even more as a result of the entry into force of FTAs with our three major markets in North Asia, and eventually the TPP.
There have already been major commercial successes as a result of these three North Asian FTAs, which I will come to later. At the same time, there have been success stories in other markets. Our beef exports to the US are a case in point.
Last year US demand for Australian beef was so high that export volumes exceeded the US's WTO beef quota. Our producers had recourse to the special beef quota negotiated under the Australia-US Free Trade Agreement for the first time since it came into force.
Since 2013 the Government - under the able leadership of my good friend and colleague Andrew Robb - has negotiated Free Trade Agreements at a very steady clip and Andrew will go down, deservedly as, I think, based on the numbers, as our most successful Trade Minister in history. When you negotiate Free Trade Agreements that cover 60 per cent of your trade by reach of the numbers no one can do any better.
Bilaterally, we've signed FTAs with Korea, Japan and then China, all of which have entered into force. In addition, the Government has recognised the importance of active implementation and follow-up of these FTAs. It's not simply enough to negotiate a great agreement; we need to explain to producers how to use it.
Accordingly, we have invested significant resources in explaining to business the opportunities these agreements have opened up, through FTA information seminars across the country, and through the creation of an FTA Portal which provides easy access to clear technical information on how to use FTAs.
We have made good progress in bilateral negotiations with India and reinvigorated negotiations Indonesia. I have to say these are not easy negotiations, but the important thing is that we have the political will to succeed.
We have started the process toward a comprehensive and high-quality FTA with the EU and officials have already begun work on an FTA scoping exercise.
This is important for the agriculture sector, as the EU is the only one of our top ten export markets with which we have not already negotiated an FTA or with which we do not have FTA negotiations in train.
Regionally, the Trans-Pacific Partnership was signed by Australia and 11 other countries on 4 February and TPP countries are working to achieve ratification so that it can enter into force as soon as possible.
We have also made good progress in the Regional Comprehensive Economic Partnership (RCEP) negotiations. This will build on, and expand, Australia's existing FTA with ASEAN and New Zealand and it complements the TPP, including the involvement of China and India. And I don't think we can underscore enough the importance of having solid, basic frameworks that span across all of these negotiations and agreements that provide similar terms for the management of trade. Those underpinning frameworks, which we are looking at across all our Free Trade Agreements, people understanding a common set of rules make a real difference.
At the multilateral level, we have even been able to rack up some gains in a forum that many thought was moribund, to be friendly, some thought dead, the WTO. In December last year, Australia played a key role in securing agreement to end agricultural export subsidies.
These subsidies have long been recognised as the most trade-distorting form of support. They are a key piece of unfinished business from the Uruguay Round and, importantly, this will help level the playing field for our farmers.
Collectively, these agreements arguably represent the most significant opening of agricultural markets negotiated by any Australian government - and certainly since the Uruguay Round started more than twenty years ago.
Just a little bit on the difference they will make for our rural communities and farming communities.
The Korea-Australia Free Trade Agreement (KAFTA) has already seen three sets of tariff cuts since it entered into force in late 2014.
KAFTA immediately eliminated tariffs on wheat, sugar, wine, fodder and many horticultural products. Tariffs on beef, cheese, lamb and other products will be eliminated over time.
As a result, Australia's beef exports to Korea grew by 30 per cent in 2015. Exports of fresh cherries to Korea have grown ten-fold and the value of bottled wine exports has grown by more than half.
All these things are making a real difference. Tasmanian cherry grower Reid Fruits, and you've probably heard this statistic a number of times, saw its exports to Korea grow from 5 tonnes, before the FTA, to 185 tonnes after the 24 per cent tariff was eliminated under KAFTA. And I can tell you, knowing Tim quite well, it's made a real difference to his business.
Lismore-based Macadamia Marketing International has seen its sales to Korea grow from 100 to 250 tonnes, and expects to see further doubling each year for the next five years. The tariff on macadamias has now been reduced three times from 30 per cent down to 12 per cent, and will be completely phased out by 2018.
The KAFTA outcome was crucial when you consider that competitors from the US, EU and ASEAN already enjoyed preferential access to Korea, and given that Canada's own FTA with Korea entered into force shortly after ours.
When we come to Japan one of the things that really has made a difference, and I was fortunate to see that first hand last year, was the look again effect of negotiating these Free Trade Agreements and the impact that they have in those markets. Where there are changed economic circumstances, it really does make those economies have another look at Australia in the circumstance where we would probably all consider Japan to be quite a mature market and one that we've understood very well.
Under the Japan-Australia Economic Partnership Agreement
tariffs on exports of fresh beef to Japan have already fallen from 38.5 per cent to 31.5 per cent. They will fall again on 1 April this year, to 30.5 per cent. As a result, exports of fresh beef to Japan grew by 22 per cent in 2015.
Queensland-based Australian Agricultural Company, which is the largest vertically-integrated livestock producer in Australia, has doubled the size of its market in Japan in the last couple of years and continues to expect growth as a result of the agreement.
The 15 per cent Japanese tariff on bottled wine will be eliminated by 2021 and immediately in the case of larger volumes of bulk wine. Australian bulk wine exports to Japan doubled in 2015.
Burch Family Wines, a family-owned winery in Western Australia, has been receiving rising levels of interest from larger Japanese distributors and partners as a result of that process.
In horticulture, we've seen a ten-fold increase in exports to Japan of fresh table grapes and shelled almonds between 2014 and 2015; along with increases of 53 per cent for rolled oats and 23 per cent for fresh asparagus.
JAEPA was important in a broader sense. As Japan's first real agreement with a major agricultural exporter, it was a key step in the Abe Government's economic reform agenda and helped ease Japan's path to a more ambitious agriculture outcome in the TPP. And I can tell you, having been to Japan in 2005 when we were commencing negotiations on a Free Trade Agreement, the first aim was when we actually had agriculture in the negotiations for the Japan agreement at all. So, in that context, the outcome we got, I think, was very good.
The China-Australia Free Trade Agreement completed the North Asian trifecta. ChAFTA will level the playing field against other agricultural exporters that have FTAs with China and deepen Australian exporters' competitive advantage over key competitors such as the US and Brazil.
Under ChAFTA, tariffs on dairy, beef, wine, all of which range up to between 20 and 25 per cent, will be eliminated by 2026, 2024 and 2019 respectively.
Although it came into force only nine weeks ago, it is already delivering results.
Western Australia's Geraldton Fishermen's Cooperative says it has strengthened its market position as the 15 per cent tariff on live lobster imports to China was cut to 9 per cent for Australian produce and will be completely phased out by 2019.
The Cooperative has established a dedicated warehouse for live lobster at Baiyun Airport near Guangzhou - the first time an Australian seafood company has held its produce on Chinese soil.
The Cooperative has said that ChAFTA has helped them to forge partnerships to supply live lobsters from Australia to their tanks in Guangzhou in less than 16 hours - one of the most efficient live rock lobster supply chains in the world and they are now positioning themselves to be the market leader ahead of tariff-free trade from 2019.
A key outcome of the tariff-cutting commitments we have achieved in these three North Asian FTAs is that they have made Australia a go-to location to invest in, in order to export to North Asia.
No other major economy can provide such extensive preferential access into these important growth markets. This, in turn, makes our economy more attractive to international capital looking for growth opportunities. Not just from North Asia, but from all over the world. The same will be true of the Trans-Pacific Partnership.
So, with the case for our opportunity built, the story now gets more interesting. To grow we need capital. Australia is a small, open and trading economy with thin capital markets. Australian savings are simply not sufficient enough to fund the investment opportunities and the standard of living we expect.
So not only should we welcome foreign investment, we need it.
Between now and 2050, Australia's food industry will need up to $1 trillion in additional capital to increase its size, productivity and global competitiveness.
We must look both onshore and offshore for capital that drives innovation and, in turn, productivity, jobs and growth. The alternate is to boost our savings by spending less. Spending less is not necessarily an attractive proposal in that space.
Recent modelling based on data since 2000 shows that a $1bn increase in international investment would result in the creation of around 1000 jobs.
Historically, I think we all understand most of our capital has come from Europe and United states but as the global economy recalibrates towards Asia we have the opportunity to refocus our attention to regions closer to home.
It is important that Australians are assured and understand that new money coming into our economy drives jobs and growth but equally we must provide clarity, certainty and transparency to investors.
One of the most common questions that I get asked when I'm working internationally talking to major investors in and around our economy and particularly in agriculture, is "are you genuinely interested in investment from us?" We say we are but some of the rhetoric coming out of Australia doesn't necessarily indicate that we welcome it.
That rhetoric does resonate and it's heard. In fact I was in the Middle East only in January and it was put to me in those simple, plain terms; are you genuinely interested in international investment?
And that comes down to those who criticise the Governments approval decisions for international investment as a 'betrayal' - they should realise that the real betrayal would be foregone jobs and growth, and having Australia's potential growth stymied.
We have grown up as a nation that competes internationally and that is what has actually positioned us so strongly. The fact that we are an open economy drives innovation and it drives productivity, and that's why I will back us in any international trade competition because we are such an innovative nation that has benefitted from the fact that we have had to work hard and continue to innovate to be amongst the leaders in the world and that's why I indicated earlier that our knowledge and understanding is such a valuable asset internationally.
A couple of different sorts of agriculture opportunities feature in my work in tourism and international education portfolio; two of the other five super-growth sectors.
Farm, food and wine tourism figures released today show some amazing trajectories. In addition to almost half of all tourism dollars being spent in regional Australia, 44 per cent, visits to farms increased by 14per cent last year and to wineries, there was a remarkable increase of 37 per cent. So again quality of our food and agricultural offering is actually being demonstrated in the visitation numbers.
In my discussions with trading partners during recent Business Week trips overseas what is quite clear is that the new luxury is not about star ratings, it's about experiences - genuine experiences surrounded by natural beauty and unsurpassed quality food and wine.
Australia and Australian farming has this in spades, we all know that, we all understand that. And talking to the high-end providers, tour operators and guides - they are the features that are being talked about.
When Tourism Australia started its Restaurant Australia campaign a few years ago we were ranked number 10 in the world for the recognition of our high quality food offering. That is now number six and talking to some of the leading players in tourism in the United States last week the thing that they talked about was our food. I don't know how many of you might have seen it but Conde Nast, one of the major international tourism magazines based out of the US did a feature on Australian tourism, naming us as the single destination to attend in 2016 and talking to them last week they said it has been their most successful campaign ever.
Interestingly, at the Australian Tourism Awards just a few weeks ago, four of the 26 categories were taken out by food and wine and farm stay businesses. So Curringa Farm Tours in Tasmania, Green Olive at Red Hill, Pizzini Wine Cellar Door in Victoria and Wine and Food Farmgate all featured highly in those national tourism awards. So a huge opportunity, I think, to continue the growth in that space and I've had a number of people talking to me over recent times about their proposed developments for tourism in and around the agriculture space from around the country.
The other opportunity that I see for agriculture is in the international education space -Australia's offerings in agriculture education are world renowned. Not only do we already educate close to half a million students onshore here in Australia but the potential to extend our reach offshore through provision of online learning and consortia approaches, particularly in vocational education, is outstanding. Our closest trading partners have identified the need to train millions of people - many in primary production systems. I'm not sure if I spoke about it last year but certainly when I was in India last year talking to their dairy industry in particular, when you consider that their dairy sectors productivity rate is five litres per cow, per day and ours is 25 litres per cow, per day, there are so many things that our farmers, that our industry do by way of everyday business that are done for them in India by government or some other provider. There is a huge opportunity, in my view, to develop an offering there and that's what I mean when I say I don't think we actually really understand what we have.
So, in conclusion, we, I believe, have achieved a great deal for agriculture through our trade negotiations so far.
There has already been a significant impact, but as the figures show, this impact will grow as agreements achieve full implementation and we continue to do the work with additional resources we've allocated towards some of those particular market access issues that we've still got to resolve.
We have a very, very proud history of energy and activity, and achievement in trade diplomacy. We have been a leader in many of those settings and we will continue to play a significant role.
Given that agriculture is such as key part of our economy and is one of those five super-growth sectors, obviously it will be foremost in our minds as we continue those international trade negotiations.
What we are looking to do is to provide the basis and the frameworks for the agricultural sector in this country to continue to prosper and to grow. We can't achieve success for you but what we can and should do is put the settings in place that provide for you as a sector to be able to do it and that will be the focus of our continuing negotiations and work.
Thank you for the opportunity to be here and thank you for your attention this morning.