It’s good to be with you for the Australian Grains Industry Conference 2020. If there’s one group of people I have spent time with in 2020, it’s grains.
Introduction – coronavirus a health and economic challenge
This one in a hundred years pandemic is playing havoc with lives and livelihoods.
It has taken a toll on families, farmers and businesses across our country.
As the Treasurer outlined in last week’s economic update, the pandemic has pushed Australia into our most challenging fiscal situation since WWII.
But despite the deficits we now face this year and next, Australia is in a stronger position than many countries.
Our relative economic resilience reflects our early successes in infection control, the Government’s significant economic support packages, a rise in net exports, and, of course, our pre-existing economic strengths.
That said, projections for global economic activity and trade volumes remain highly uncertain.
The IMF is forecasting a 4.9 per cent contraction in global economic activity in 2020, and that trade in goods and services will fall by close to 12 per cent.
The World Trade Organization expects a drop in the trade of goods, for the just concluded second quarter of 2020, to be measure at around 18.5 per cent. Decline in trade and goods. These are massive impacts around the globe.
Impacts on the grains industry – drought and coronavirus
The grains industry is not immune to these pressures.
But the Australian Bureau of Agricultural and Resource Economics and Sciences advises that – to date – Covid-19 has not had a significant impact on the bulk of Australia’s agricultural supply chains.
Demand for Australian exports of food staples has pleasingly remained steady.
It’s true that some higher value exports – such as seafood, wine, horticulture and some higher value livestock and dairy products – have been affected.
Freight options have been impacted by widespread travel bans, and lockdowns in Australia’s export markets have shifted consumption from products that were destined for restaurants and food services industries to products purchased in supermarkets and consumed at home. Just as we are seeing those same trends occurring here in Australia.
For now, growing trends are, we think, less to do with Covid-19 and more to do with production influenced by more favourable weather conditions, thankfully in some key producing areas here in Australia.
The bigger imposts, at least in the grains sector, are weather events and shocks, either here or overseas, as well as challenges thrown up by different markets as they consider how to deal with the pandemic and their own domestic constituencies and some of those disruptions to logistics and transportation.
What we’re doing to improve trade flows
In trade, our first priority is always expanding the opportunities for our exporters by opening up more commercially significant and emerging markets.
You might think that trade negotiations had stalled this year, but the fact is – in some areas – the pace of efforts to drive liberalisation have continued and even hastened, albeit often shifting to virtual, as with the first round of negotiations with the United Kingdom.
We are particularly excited about the entry into force earlier this month of the Indonesia Australia Comprehensive Economic Partnership Agreement, strengthening opportunities with this nation of 260 million people.
Some of the key benefits of IA-CEPA will be in agriculture.
Indonesia will eliminate some outstanding tariffs on most remaining cereals and grains, such as the five per cent tariff on rolled oats and the five per cent tariff on unroasted malt.
And Indonesia with it’s tariff rate quotas, has committed to duty free access to a growing amount of wheat, sorghum and barley.
Wheat is already one of Australia’s top exports to Indonesia, with $311 million of high quality Australian wheat imported into Indonesia in 2019.
There, it is milled into flour and then manufactured into noodles, bakery items and pasta before being exported to many countries – including back to Australia in some cases.
IA-CEPA will support the development of these sorts of supply and value chains, to the benefit of both countries.
Under IA-CEPA Australian feed grains can provide a reliable and high-quality source of nutrition for animals in Indonesia. This will help boost Indonesian production of important protein sources such as beef and chicken.
To complement the tariff outcomes under IA-CEPA, I am announcing today a strategic study into future demand for Australian feed grains in Indonesia, to be led by Australian Export Grains Innovation Centre and Grain Growers Limited.
This will be conducted over the next six months to investigate where Australian feed grains could be used to improve productivity and profitability in the Indonesian cattle, dairy, poultry and possibly aquaculture sectors.
This is another example of the complementarity of Australian and Indonesian industry maximising opportunities and promoting collaboration between the Indonesian and Australian grains, food processing and livestock sectors.
This work is important in realising the benefits of IA-CEPA.
I encourage the industry, who worked so closely with us through the negotiations of this agreement, to continue working with DFAT and the Department of Agriculture, Water and the Environment in developing the Australia-Indonesia Grains Partnership, which will bring together Indonesian and Australian decision-makers from across government and industry to foster enduring relationships to develop the value chains across Asia.
Our new strategic demand study will inform the broader Grains Partnership to be implemented. It will be subject to approval by Indonesia and Australia, through the IA-CEPA Economic Cooperation Program, which is a five-year $40 million official development assistance program running from 2020 – 2025.
At the same time, we remain focused on securing an agreement with the European Union as soon as possible – to their massive, high-income market of almost 450 million people, as well as conclude the aforementioned agreement with the UK.
And in our region, we’re committed to signing the Regional Comprehensive Economic Partnership in November this year.
Supporting the multilateral system
Our second priority in trade is supporting the multilateral trading system.
Greatly sharper strategic competition between the big powers – most obviously between the United States and China – has put intense pressures on the World Trade Organization in particular, and on efforts to address unfair trade distortions.
As Australian farmers know well, ours is one of the least subsidised industries in the world.
ABARES estimates that current levels of global subsidies and trade barriers are costing Australian agriculture between $8 billion and $10 billion a year.
We estimate that global entitlements to provide trade and production-distorting support could increase to US$2 trillion a year by 2030, if left unchecked. That’s why as a Government we will redouble our efforts to tackle these distortions.
That is why in January this year we, as leader of the Cairns Group, launched a proposal through the WTO to cap and reduce by at least half global trade-distorting domestic support entitlements by 2030.
I am very aware of the strong support from the grain industry for the Australian Government’s efforts to address agricultural subsidies and trade protectionist measures around the world.
As countries around the world look to new measures to support their agriculture sectors through this pandemic, we have concerningly seen subsidy levels on the rise.
We estimate at least 50 countries have implemented new subsidy programs in response to the pandemic.
Our goal is to do the opposite – that is to promote measures that support or enhance trade, not those that support protectionism.
That is why, in June, I was pleased to launch another initiative with Cairns Group members – the Covid-19 Food Security Through Open Trade Initiative.
This important initiative aims to make WTO members accountable for the agriculture support measures they are putting in place in response to the pandemic.
To ensure that the measures are temporary, that they do not distort markets, and that they are consistent with the multilateral trade obligations we’ve all agreed to.
Commitments on export restrictions, food aid, and transparency will help ensure that global food supply chains are not distorted or face undue strain and that agricultural reform remains firmly on the WTO agenda.
Crucially, we need any measures applied at present to be temporary and to be removed as quickly as they can be to then get back on with business.
Non-tariff barriers to trade
Non-tariff barriers as many of you appreciate are a particular, and in some markets, growing challenge for Australian farmers, and a growing concern for our exporters.
For that reason we’ve set up a Non-Tariff Barriers Action Plan with Australian business to allow closer analysis and reporting of what they are encountering in other markets and to get that information in real time.
Since the Action Plan’s launch, up until the end of June 2020, more than 300 potential NTBs have been identified – and coordinated efforts across government have seen some of these barriers either completely removed or partially reduced.
Inside my department, we’ve established an NTB Coordination Team – bringing together the agencies of government – to monitor pandemic related NTBs as they arise.
Challenges and progress in specific markets
Even as that work continues, there’s no question that these are challenging times for grains exporters.
Our Government is very much aware of how difficult decisions made by China have been for some of our barley growers.
I know it’s frustrating – seeing relationships built up over the last 50 or 60 years with Chinese brewers and others being threatened. Trade is about mutual benefit; it’s not about altruism. This is only a lose-lose situation, that’s been created by China. It benefits no-one.
We’ve been consistent with China – Australian farmers sell their barley and other grains into markets like China free of subsidies and at market prices.
I have – over these many months – appreciated your resilience as a sector, your stoicism and your pragmatism; attributes for which Australian farmers are world renown. I know this is your livelihood and I don’t take that lightly.
I also value the understanding shown by Australian farmers and businesses. The vast majority know that we must hold true to our Australian values and protect our long-term security and interests. Those values include our commitments to open trade, which we continue to see as important to recovering economic growth across the world, in our region and with all countries, including our major trading partners.
We understand from industry that diversifying exports and building new markets is not easy, that it requires considerable lead times and major investment.
But in these uncertain times, with all the cross-currents of political and economic interests at play, we believe trade expansion remains one of our most important pieces of work.
With India, we’ve made some good progress.
At the end of April, India gazetted new biosecurity requirements for Australian malting barley that will allow our industry to use phosphine fumigation instead of methyl bromide in treating barley exports for India.
I know the Australian grains industry worked closely with the Australian government over many years to secure this outcome and we hope India’s move will support a broader acceptance of phosphine as a treatment for other grains, pulses and nuts.
That said, we still have work to do with India – such as on the volume restrictions for imports of our pulses and India’s restrictions on weed seeds in grain, something I will again be pursuing with my Indian counterpart in discussions scheduled for later this afternoon.
We continue to raise our concerns about India’s trade restrictive practices on pulses imports at every opportunity – both bilaterally and through our work at the WTO.
We have made clear that we want to support India’s food security and supply pulses when demand for imports increase, but to do so our producers and exporters need a more predictable pulses import regime to be put in place.
Conclusion
As I said at the outset, these are difficult times for everyone.
But today I wanted to reassure you that despite the huge effort involved in managing Australia’s health response to coronavirus, and despite the severe economic damage it is doing to our nation, and to parts of my portfolio like the tourism sector – that our Government and me personally remain focused on improving conditions for the agricultural industry at large, including for grains growers, producers and traders in terms of their export conditions.
We produce the best quality agricultural produce anywhere in the world. We do so safely, reliably and efficiently. That’s why consumers want to buy it.
You are not strangers to tough times but these times are about as tough as they get for many. I know you will come through the other side as you always have as an industry.
I thank you again for the collaborative approach in which you work with us and I wish you, your workers and your families all the very best for what we hope and trust will be better times ahead.
Thank you once again.