How worried should our farmers be about the future of the industry as China throws doubts on trade options ahead of National Agriculture Day on Friday 20 November? According to a Charles Sturt expert, not very worried at all.
By Charles Sturt University’s Professor of Food Sustainability the Hon. Niall Blair (former NSW Minister for Primary Industries and Trade and Industry).
As we prepare to celebrate National Agriculture Day on Friday 20 November, our farmers are working hard to finally get a decent winter crop harvested, their summer crops into the ground, and restock or get livestock off to market.
Unlike the past few years, conditions this year have been favourable, and with feed on the ground, water flowing into our dams, and a productive summer predicted, our food and fibre producers are finally feeling positive for the year ahead.
This has been a welcome change from the challenges of drought, bushfires, and the COVID-19 pandemic, which have pushed many of our farmers and regional communities to the brink over the last four years.
As always though, our farmers have picked themselves up, dusted themselves off and got back to doing what they do best.
But just when it looked like things were working in their favour again, China closed the door on many of our exported commodities.
The door was abruptly shut to Australian exporters of barley, beef, and lobsters, and a cloud of threats hangs over producers of wine, wool, sugar, and timber, creating uncertainty for our farmers.
So, where should our farmers turn when our number one export market closes up shop? The answer lies in our closest neighbours of the ASEAN nations.
The 10 ASEAN nations of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam provide a market roughly the same size as China, with twice the number of businesses. This offers an opportunity for our farmers to spread their risk and seek an alternative as China looks to freeze them out.
For a long time, the collective of ASEAN nations were a larger export market for Australian farmers than China. As some of these nations develop and grow, history will repeat itself.
The growth that we are seeing in the population and economy of countries like Indonesia and Vietnam provides a viable alternative for our farmers to not fear the downturn in Chinese trade.
As the former NSW Trade Minister, I focused on the role ASEAN nations have and will continue to play for our producers. I saw firsthand the opportunities, goodwill and enthusiasm that countries like Indonesia, Vietnam and Malaysia present for Australian commodities.
Quite simply, Indonesia is a no-brainer. As our closest neighbour with a booming population, the opportunities are endless. You only have to stand on the footpath in Jakarta for a few moments to be overwhelmed by the number of green motorbikes scooting past and delivering goods that have been ordered online using smart phones.
To me though, it’s Vietnam that provides some of the best opportunities for our exporters as they seek to diversify away from China. Vietnam is hungry for our imported food products, as its young and expanding population look for business opportunities to take our commodities, add value and export to other markets.
The beauty of Vietnam is that it has the support of the capitalist and communist markets at the same time. As a ‘communist lite’ and developing country, Vietnam provides extensive market opportunities to countries like Russia. It has been very successful in accessing low tariff free trade agreements across the globe and in doing so helped its economy to grow.
Normally agreements between these ASEAN nations were done country by country and were dictated by the terms of trade that we have in place.
That was until this week when the Australian Government signed-up to the Regional Comprehensive Economic Partnership (R-CEP). This agreement, which includes the 10 ASEAN nations along with the six countries with which ASEAN has free trade agreements, including Japan and China, is a game changer for our farmers.
This will give our exporters access to a third of the global population and economy, consolidating all the existing agreements into a standard set of rules.
It will provide better access to these markets, and it is also hoped that having China included in R-CEP will go some way to thawing out the current relationship with Australia and our commodities.
Having access to the market is only part of the solution and converting access into firm orders is not easy. We must know what will provide the best return for our farmers’ efforts and the current data is showing a very clear trend.
According to DFAT in June 2020, there is a clear bias towards value-added food exports. Exports of processed food are worth $30.4 billion compared to $13.8 billion unprocessed. Over 2018-19, the export value of unprocessed food fell by 6.2 per cent compared to an 11.6 per cent increase in the value of processed food exports.
This trend will hopefully provide confidence into the market to try and continue expanding our value-add and processing sector domestically, in order to get a better farm gate price for our farmers.
So, as we take time this week to celebrate our farmers, be thankful for their contribution and marvel at their resilience, we need not worry about China turning its back on them. China is booming and has plenty of capital to burn, but its neighbours are catching up quickly, providing a clear alternative and, with the signing of R-CEP, a reason for all players to stay calm.