Trade and Dairy Screen

silvermullet

Trade and Dairy Screen

Trade and the

Australian Dairy Industry

and the Australian dairy industry

August 2013


Dairy Australia was commissioned by the Australian Dairy Industry Council (ADIC) to

prepare this report.

ADIC – The ADIC is the dairy industry's peak policy body coordinating industry policy.

Comprising farmers (via Australian Dairy Farmers Ltd) and manufacturers (through the

Australian Dairy Products Federation Inc.), the ADIC represents the whole industry on

national and international issues. Visit www.australiandairyfarmers.com.au.

Dairy Australia – Dairy Australia is the national services body for dairy farmers and the

industry. Our role is to help farmers adapt to a changing operating environment, and

achieve a profi table, sustainable dairy industry. Visit www.dairyaustralia.com.au.


Contents

Executive summary 4

Introduction 5

Australia as a dairy supplier 6

International trade is important to future industry growth 7

Demand for dairy is growing 7

Key export markets for Australian dairy 8

Australian dairy competitors and international trade 9

Cooperatives Working Together (CWT) 10

North Asian markets 11

Japan 11

China 11

South Korea 12

Taiwan 13

South-East Asian markets 13

Middle East markets 13

Trade barriers and market distortions 14

Geographic Indications (GIs) 15

Conclusion 16

Appendix One – trade policy 17

The WTO: Doha Development Round 17

Plurilateral/Regional agreements and negotiations 17

Bilateral agreements and negotiations 17

Appendix Two – technical market access – non-tariff barriers 19

Appendix Three – promoting the Australian food safety system 20


Executive summary

Global dairy demand is growing, driven by

increased demand in developing dairy

markets including China, South-East Asia

and the Middle East.

Our dairy industry produces more milk than

is required domestically and a signifi cant

proportion is destined for export. Any future

production growth will need to fi nd a home

and by necessity this is likely to be on the

international market.

Australia competes in the global dairy market

with New Zealand, the EU and the USA, as

well as with smaller players such as

Argentina, Ukraine and Uruguay. Many

competitors are increasing both their

production and export focus.

As Australian production and export volumes

have stagnated in recent years, we have lost

ground in our percentage share of global

dairy trade, signifi cance and relevance as a

dairy supplier.

At the same time Australia has embraced an

open market approach, but not all countries

have been as progressive in eliminating tariffs

and reducing trade barriers, subsidies and

support mechanisms for dairy.

Australia is committed to global agricultural

market reform and actively participates in

multilateral, plurilateral and bilateral trade

negotiations. We already have a number of

free trade agreements (FTAs) in place and

are actively negotiating several others. Such

agreements can provide real commercial

opportunities and benefi ts for dairy

exporters, but where competitors manage to

negotiate their own agreements with our

trading partners Australia can fi nd itself at a

commercial disadvantage.

As a supplier of high-quality, clean and safe

dairy products, Australia enjoys a positive

international reputation upon which we can

capitalise further. Our industry’s long-term

growth and profi tability is linked closely to its

status as a competitive producer that can

develop and retain global market positions.

4


Introduction

The dairy industry is Australia’s third-largest

rural industry behind beef and wheat, with a

farmgate production value approaching $4

billion.

Approximately 6700 farmers produce nearly

9.5 billion litres of milk annually, and the

industry provides direct employment of

approximately 43,000 Australians. Dairy

ranks fourth in Australia’s agricultural exports

with a value of $2.76 billion in 2011/12,

whilevalue-added processing delivered a

wholesale value of dairy products in excess

of $13 billion last year.

This paper reviews the export market

position of the Australian dairy industry,

including:

• perceptions of Australia as a dairy supplier,

• the importance of trade to our industry,

• growth in international dairy demand,

• our major export markets,

• our major competitors in export markets,

• trade barriers and market distortions and

• trade policy.

Trade and the Australian Dairy Industry

5


Australia as a dairy supplier

There are positive perceptions in

international markets of ‘Brand Australia’

and of Australian dairy, which can and

should be capitalised upon by the Australian

industry at every opportunity.

These include Australia’s positive

reputation as a producer of high-quality

and safe agricultural products, including

dairy, and favourable attributes such as its

natural beauty, lifestyle and the openness

of its people.

This provides the opportunity to differentiate

ourselves from competitors and expand on

our credentials for safety and quality built on

our policy, processing and farming

practices. We have not experienced the

types of animal welfare and contamination

issues that have impacted around the world

as farming and processing have intensifi ed.

We should emphasise the clean, natural

environment in which we rear our animals,

our pasture-based feeding systems and the

rigorous quality and safety standards that

are maintained by our farmers and

processors and enforced by our

government bodies to help ensure the

supply of the safest dairy products to

international markets.

The Australian dairy industry is fl exible,

adaptable and innovative, which can create

more value and investment opportunities

for our customers. The variety of

processing companies, factory sizes and

broad product range can be an advantage

compared to some competitors who are

more aligned to large-volume commodity

business. These factors can allow our

processors to supply more value-added

dairy products that can better meet

customer needs in terms of specifi cations,

logistics, innovations and support.

A growing component of total Australian

dairy export is ‘fi nished’ products that are

processed and packaged into their fi nal

saleable format prior to export. These

value-added products provide signifi cant

economic benefi t within Australia and help

maintain the reputable image of Australian

dairying. This provides an opportunity to

promote Australian dairy, along with all its

benefi ts, directly to international consumers

in a consistent way.

A concern sometimes raised by

international customers is the Australian

industry’s capacity to maintain a

consistent product supply due to drought,

environmental factors, competing land

use, a need for investment and so on.

This provides an opportunity to

communicate to our markets about how

the Australian dairy industry is adapting to

current and future environmental, societal

and regulatory needs – articulated through

the recently industry-endorsed

Sustainability Strategic Framework.

3

4 5 6 7

2

8

1

2012 world trade share

1 European Union 31%

2 New Zealand 37%

3 United States of America 11%

4 Argentina 5%

5 Ukraine 2%

6 Uruguay 3%

7 Other 4%

8 Australia 7%

6


International trade is important to future industry growth

Australian dairy farms currently produce

around 9.5 billion litres of raw milk per year.

About 40% is exported in a range of product

formats. The Australian dairy industry

reached its production peak in 2001/02,

producing over 11.2 billion litres of milk that

year; 60% of that milk volume was exported.

Australia’s domestic consumption grows only

slightly over time, in step with a slow

population increase (1.8% population growth

in the 2012 calendar year). Per capita

consumption of dairy products is already

relatively high at around 300 kilograms per

year; by comparison, the per capita per year

consumption in China is around 30

kilograms, with signifi cant scope for increase.

Export markets provide an alternative to the

domestic market. It will be crucial that

Australia has access to international markets

to ensure it remains highly competitive.

Regional examples, such as Queensland and

Western Australia, illustrate that when a dairy

region loses export manufacturing and

capacity over time, pressure on farm and

manufacturing margins and profi tability can

develop as the industry becomes overexposed

to the domestic fresh milk market

and supermarket or retail chains. The dairy

industries in these regions are actively

exploring opportunities for alternative

products and markets – including

international trade.

12,000

10,000

8,000

6,000

4,000

2,000

0

Domestic Export Share exported (right axis)

70%

60%

50%

40%

30%

20%

10%

0%

90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13

Estimated

Australian dairy domestic/export mix since 1990

Trade and the Australian Dairy Industry

7


Demand for dairy is growing

Dairy market assessments indicate that the

volume and value of global dairy product

trade will continue to grow in the short,

medium and long term, driven by increasing

demand in developing dairy markets and

regions including China, South-East Asia

and the Middle East.

A common feature of these markets is that

local milk supply cannot keep pace with

consumption growth, resulting in sustained

dairy defi cits that must be fi lled by imports.

A recent Rabobank report identifi ed several

factors driving the increase in demand for

dairy in developing markets, including:

• a perception that imported products

are safer and more trusted,

• economic growth rates at higher levels

than ‘developed’ economies,

• rising incomes and the emergence

of a consuming ‘middle class’,

• high birth rates and young populations,

• consumers becoming more,

health-conscious

• growth in ‘modern’ retailing

and food service,

• urbanisation enabling access

to more consumers,

• school milk programs

and consumer education,

• a desire for parents to include dairy

(infant formula) in the diets of children and

• relatively low levels of dairy consumption,

with related growth potential.

Global dairy markets hold signifi cant

potential for the Australian industry if our

industry is able to service market

opportunities. Given the industry’s resources

and current infrastructure structure,

questions remain about the most effective

way to capitalise on market opportunities

and translate that most effectively into value

for our farm sector.

2000

1800

1600

1400

1200

1000

800

600

400

200

0

South-East Asia Africa Middle East Greater China Japan Russia Mexico

2007 2008 2009 2010 2011 2012

Dairy imports from all sources (volume)

Key export markets for Australian dairy

Key export markets for Australian dairy are North Asia (Japan, Greater China,

Taiwan and South Korea) and markets within South-East Asia and the Middle East.

TOP 10 AUSTRALIAN EXPORT MARKETS, 2011/12

Country Volume – Tonnes % of total Country Value – A$ million % of total

Japan 114,709 15% Japan $518 19%

Greater China* 108,895 14% Greater China* $389 14%

Singapore 89,710 12% Singapore $241 9%

Indonesia 47,849 6% Indonesia $176 6%

Malaysia 46,787 6% Malaysia $163 6%

Thailand 34,307 4% New Zealand $127 5%

New Zealand 33,197 4% Thailand $124 4%

Philippines 32,552 4% South Korea $116 4%

South Korea 27,349 4% United Arab Emirates $102 4%

United Arab Emirates 26,763 3% Philippines $96 3%

Source: Dairy Australia and ABS

* includes China, Hong Kong and Macau

Australian dairy exports 2011/12 (value and % of total value)

8


Australian dairy competitors and international trade

Since Australian production peaked in

2001/02, the Australian industry has been

through an extended period of reduced or

fl at production. Production has been

constrained largely by extended drought

and poor seasonal conditions in many

dairy regions. Volatile international

commodity prices and the high

Australian dollar have impacted export

competitiveness and profi tability.

During the same period international

competitors have increased production

volumes (signifi cantly for New Zealand)

and increased their international market

focus (the USA).

Simultaneously, the USA has displaced

Australia as the third-largest exporter

behind New Zealand and the EU. Our

percentage share of global dairy trade

has declined from above 15% in 2002

to slightly less than 7% in 2012.

4

5

6

3

7

Australian exports by region

2011/12 (AUD million)

8

1 South-East Asia $816

2 Japan $518

3 Other Asia $698

4 Europe $57

5 Middle East $347

6 Africa $54

7 Americas $105

8 Other $162

2

1

The international market perception of

Australia has changed over the last

decade. The country is losing signifi cance

and relevance in terms of global dairy

trade, which has led to its role in

international trade being questioned.

3

4 5 6 7

2

2012 world trade share

1 European Union 31%

2 New Zealand 37%

3 United States of America 11%

4 Argentina 5%

5 Ukraine 2%

6 Uruguay 3%

7 Other 4%

8 Australia 7%

New Zealand is the leading international

market supplier of dairy. Its production

volumes, processing capacity and

relatively small domestic market means

that the country exports around 95% of its

dairy production. New Zealand has built a

number of large factories that operate at

or near capacity during peak periods,

making it an effi cient producer and

manufacturer of high-volume commodity

lines such as whole milk and skim milk

powders (WMP and SMP). New Zealand

dairy exports are dominated by WMP,

which account for about 44% of total

export volumes and go primarily to

mainland China. In 2012 New Zealand

exported over 420,000 tonnes of WMP to

China. Australia exported just 6,500

tonnes of WMP to China the same year.

8

1

The EU, as a single entity, is also a major

dairy exporter. The majority of European

dairy production is traded and consumed

within the EU, but when ranked on dairy

traded beyond the EU region it holds the

second-largest world market share at

31%.

In 2015 the EU will remove dairy

production quotas for member states.

Itisdiffi cult to predict the net effect this

might have on EU dairy exports, but

market intelligence suggests that several

EU member countries and companies

anticipate increased production volumes

and more product availability for export

toregions outside the EU, including the

Middle East and South-East Asia.

The USA also consumes most of its

production internally. The USA has

traditionally focused its exports on

neighbours such as Mexico and Canada.

In recent years, however, the USA has

shown an increasing focus on diversifying

export markets and building market share

in China, Japan, South Korea and

South-East Asian countries – all key

markets for Australia.

Over time, the USA has been viewed as

asignifi cant exporter of products such

aswhey powder, lactose and SMP. USA

exporters have been using the producerfunded

Cooperatives Working Together

(CWT) program to subsidise exports into

some of these markets.

Cooperatives Working Together

(CWT)

An example of a market-distorting

mechanism is the CWT program,

managed by the US National Milk

Producers Federation. CWT is an

industry-funded program that has been

carefully constructed to avoid being

classifi ed as an export subsidy

program under World Trade

Organisation protocols.

CWT is being used to subsidise US

exports of butterfat and cheese into key

Australian markets such as Japan and

South Korea. This depresses the prices

paid for these products in these markets.

This in turn is reducing Australia’s market

share and revenue from the Japanese

cheese market – Australia’s largest

international cheese market.

Trade and the Australian Dairy Industry

9


North Asian markets

China

China is now the world’s largest dairy

importing country. It imported 1.375 million

tonnes of dairy products in 2012, 47% from

New Zealand. New Zealand’s FTA with

China gives it a clear commercial

advantage. It supplied more than 650,000

tonnes of dairy product to mainland China

in 2012. By comparison Australia supplied

just over 61,000 tonnes. Despite this

scenario Chinese customers have

occasionally expressed concern about

being reliant on a single supplier. This risk

management aspect could potentially

benefi t Australian dairy exporters.

Despite New Zealand’s commercial

advantage, China is Australia’s fastestgrowing

dairy market. When mainland China

is combined with Hong Kong and Macau

(Greater China) it represents our secondlargest

market by volume and value.

South Korea

South Korea is currently our tenth-largest

dairy export market and is an important

destination for Australian cheese and SMP.

A signifi cant proportion of SMP is mixed

with other ingredients for re-export to

Japan. EU and USA FTAs with South Korea

will increasingly reduce Australia’s

competitiveness each year as tariffs and

quotas are phased down for European and

US dairy products.

South Korea is also the fi rst market where a

Geographic Indication (GI; see section on

GIs) for dairy has impacted Australian-origin

exports. According to the EU-South Korea

FTA, a number of dairy products, including

feta, can no longer be marketed using their

generic name.

Taiwan

Taiwan is currently Australia’s eleventh

most important dairy market, where

Australian exports include UHT milk,

SMP, WMP and cheese.

New Zealand and Taiwan recently

announced the signing of a FTA that is likely

to be implemented from early 2014. It is

understood that the agreement includes

early tariff reduction and elimination for New

Zealand dairy products. New Zealand is

already the major supplier of dairy imports

to Taiwan with a 44% market share.

Australia ranks third as a dairy supplier to

the market behind New Zealand and the

EU.

The trade agreement between New Zealand

and Taiwan will give New Zealand a

commercial advantage over other suppliers,

including Australia.

Chinese demand for dairy appears certain to

grow. The question is how quickly Chinese

domestic dairy production can grow relative

to total market demand. Chinese

Government-imposed reorganisation of the

dairy sector and increased regulation since

the 2008 Melamine adulteration incident and

a subsequent string of food safety issues

have constrained growth of domestic

production. Chinese consumers have

become distrustful of domestically produced

product, especially infant formula, and exhibit

a strong preference for imported brands.

Ideally, the Australian industry wants to see

an FTA completed between Australia and

China as soon as possible, with a favourable

outcome for dairy to help restore the

commercial advantage lost to New Zealand.

100%

90%

80%

WMP

70%

Whey powder

60%

SMP

50%

Milk

40%

Lactose

30%

Infant powder

20%

Cheese

10%

Butter oil

0% Butter

Chinese imports 2011/12

10


Japan

Japan is the single largest export market for

Australian dairy. It is primarily a market for

industrial cheese used for further processing

in Japan.

Japan is viewed as a static dairy market

with limited growth prospects. Japan’s

population is ageing and declining in

number. Domestic economic problems

including defl ation have constrained market

growth and reduced price premiums and

there is little prospect of this changing in the

short-term. Japan has transitioned to a

much more price-conscious market than a

decade ago.

Japan’s market for agricultural products is

seen as protectionist; a complex

combination of high tariffs, quotas and

government-administered import licensing

arrangements carefully manage and limit

dairy imports. Australia exported $518

million worth of dairy products to Japan in

2011/12 and paid over $116 million (22% of

the total value) in tariff charges.

Australia has been negotiating a bilateral

FTA with Japan since 2007. Indications are

that Japan is resisting signifi cant market

access reform for agriculture.

Sticking points from Japan’s perspective

include issues on motor vehicle tariff

reduction and investment.

Japan has also recently joined the Trans-

Pacifi c Partnership (TPP) negotiations, but

only after fi erce, and ongoing, internal

political debate over how a TPP outcome

might impact its domestic farming sector.

USA dairy exporters are using the CWT

subsidy program (see section on CWT) to

increase US market share in Japan, especially

for cheese for shredding. This has impacted

on Australian’s market share and has also

depressed commodity cheese prices.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

WMP

Whey powder

SMP

Milk

Lactose

Cheese

0% Butter

Japanese imports 2011/12

Trade and the Australian Dairy Industry

11


South-East Asian markets

South-East Asia comprises a number of

individual markets, each with its own

opportunities, requirements and, in some

cases, barriers.

The ASEAN Australia New Zealand Free

Trade Agreement (AANZFTA) has reduced

tariffs and removed quota restrictions for

many, but not all, dairy products exported to

South-East Asian markets. Australia also has

bilateral agreements with Singapore,

Thailand and Malaysia and is in the early

stages of negotiating a Comprehensive

Economic Partnership Agreement (CEPA)

with Indonesia. ASEAN countries are also

participants in the Regional Comprehensive

Economic Partnership (RCEP) negotiations,

and several are also members of the TPP

negotiations.

The Australian industry has a long history of

investment, collaboration and relationship

development in South-East Asian markets.

This is often noted by customers in these

markets. From the early 1960s the industry

was active in establishing joint-venture

manufacturing facilities and providing

technical support. Several of the major dairy

manufacturing companies active in the

region today grew from initial Australian

investment and technical expertise.

The largest single destination for Australian

exports within South-East Asia is Singapore,

an important and highly developed

consumer market. A signifi cant volume of

Australian dairy exports to Singapore is

re-exported to other markets, sometimes

after being blended with other ingredients or

processed into fi nished product.

Malaysia, the Philippines, Thailand and in

particular Indonesia, with a population of

around 250 million people and its proximity

to Australia, are also signifi cant growth

markets for Australian dairy. According to

the World Bank, the number of middleclass

consumers in Indonesia increased from 81

million in 2003 to 131 million in 2010, while

the volume of cheese imports increased by

31%, to 23,500 tonnes, in 2012.

Vietnam is also seen as a developing

market opportunity based on its attractive

demographics and economic potential,

while other smaller or less-developed dairy

markets such as Myanmar, Cambodia, Laos

and Brunei are seen as niche opportunities.

12


Middle East markets

As in South-East Asia, Australia has a long

history of trading, investment and

collaboration in the region. The Australian

Dairy Corporation subsidiary AustDairy Ltd

(ADL) was active in the region until the mid

1990s, in particular through in a joint

venture and technical support capacity into

Saudi Arabia.

Saudi Arabia and the United Arab Emirates

are major markets for Australian exports.

The UAE is both an end market and

redistribution point for near markets.

As noted, Australia has been negotiating a

regional agreement with the Gulf Cooperation

Council (GCC) since July 2007. Of concern to

the Australian industry is the potential for

competitors such as New Zealand, who are

also involved in long-standing negotiations

with the GCC, to complete a trade deal before

Australia and gain a commercial advantage

within the region.

Also of concern is the potential for EU

countries to focus additional exports into

Middle East markets when production

quotas are removed in 2015.

Trade and the Australian Dairy Industry

13


Trade barriers and market distortions

Australia has been a leader in embracing

an open-market approach. Not all countries,

however, have been as progressive about

opening up their markets.

Global dairy markets feature a range of

tariffs, barriers and subsidies that distort the

movement of dairy products including export

subsidies, excessive government intervention

and trade-distorting domestic support. Dairy

Australia estimates that Australian dairy

exports attract in excess of $200 million in

direct tariff charges each year as our

products enter destination markets. This has

a direct impact on revenue and profi tability

for Australian farmers.

Many countries also protect their dairy

sectors with a range of non-tariff barriers to

trade such as restrictive customs

procedures, port of entry inspections,

product testing, factory inspections and

veterinary certifi cate requirements that

extend beyond genuine food quality and

safety concerns.

Australia is one of the few countries that

operate a free, open-market dairy

environment.

TARIFF IMPOSTS BY COUNTRY AND CONSOLIDATED

A$

2011 2012

China 16,386,592 17,721,602

Hong Kong 0 0

Indonesia 8,263,462 6,042,921

Japan 116,618,162 116,181,061

Malaysia 525,209 259,309

Philippines 1,254,361 1,239,412

Singapore 0 0

South Korea (ROK) 34,993,441 27,090,832

Taiwan 19,091,426 15,403,067

Thailand 6,306,369 7,506,089

Sub-total - ten countries 203,439,022 191,444,292

Japan as a % of SE and East Asian 10 57% 61%

Japan plus ROK as a % of SE and East Asian 10 75% 75%

Gulf Cooperation Countries (est) 12,807,903 13,460,353

Sub-total including GCC 216,246,925 204,904,645

Geographic Indications (GIs)

GIs are a form of intellectual property

where the geographic name indicates a

given quality, taste or other attribute of a

product. The EU asserts that ownership

of the rights to many food names whose

origins may be European belong to

European-based producers.

The EU is aggressively pushing for these

rights to be recognised and its GIs

standards to be adopted by other

countries via bilateral or regional trade

agreements or other treaties such as the

Lisbon Agreement. If the EU is

successful in re-appropriating key

names for foods, including cheeses,

there will be far-reaching implications for

the Australian dairy industry. There is a

real risk that, in export markets, the

Australia dairy industry will be unable to

use product names and descriptors that

we believe are generic, such as

parmesan, mozzarella, feta, brie,

camembert and cheddar, among others.

The Australian dairy industry has been

vigorously defending its rights to use

common food names to avoid being

required to re-label and re-brand

affected products, which will involve

added costs and lead to confusion for

buyers and sellers.

14


Conclusion

International trade is important to the future

of the Australian dairy industry. The industry

fi nds itself, however, at somewhat of a

crossroads as a global market supplier.

Global demand is increasing, with much of

the opportunity and growth being driven from

our key markets. Meanwhile, production

volumes and export availability from Australia

has stagnated over the last 10 years, raising

questions around the ongoing signifi cance

and relevance of Australia as a supplier into

the global dairy marketplace.

In attempting to capture the opportunity that

international demand growth represents, the

Australian dairy industry must continue to

push for the liberalisation of the global dairy

trading environment while reinforcing the

compelling industry and product

characteristics that defi ne our industry.

Trade and the Australian Dairy Industry

15


Appendix One – trade policy

Australia participates in three varieties of

trade reform; multilateral, plurilateral and

bilateral.

Multilateral reform involves all countries who

are members of the World Trade

Organisation (WTO) and offers the most

comprehensive outcome for all participants.

Plurilateral approaches involve a smaller

number of countries such as the regional

TPP negotiation.

Bilateral is a negotiation between two

countries, such as the current Japan-

Australia FTA negotiations.

Australia is committed to global agricultural

market reform because a multilateral

approach through the WTO offers the

broadest outcome. It is the only global

mechanism that can address the issue of

trade-distorting domestic support.

In the absence of any real recent progress

on multilateral reform, however, Australia is

actively involved in a range of plurilateral

and bilateral negotiations. With no

multilateral agreement on trade reform in

sight, Australia’s ability to negotiate

signifi cant free trade agreements will be

critical to maximising returns for the

industry. The bilateral agreements

negotiated by competitor countries will also

have an important bearing on trade fl ows

and access to – and profi tability in –

markets of choice.

The WTO: Doha Development Round

The Doha Development Round is the WTO’s

current round of trade negotiations. Its

objective is to lower trade barriers around

the world, which will help facilitate the

increase of global trade.

The Doha talks on international trade

liberalisation commenced in November 2001

and broke down in July 2008 with developed

and developing nations, like China and India,

unable to reach agreement over agricultural

tariffs. Its future is uncertain.

Plurilateral/Regional agreements

and negotiations

Australia is a member of the AANZFTA,

which entered into force from 1 January

2010.

AANZFTA is delivering commercial benefi ts

to Australian dairy exporters including

extensive tariff reduction and quota

elimination commitments.

Australia has been negotiating a regional

agreement with the GCC comprising

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia

and the United Arab Emirates, since July

2007. Australia is one of a number of

countries negotiating FTAs with the GCC,

however, the GCC has paused its trade

negotiations with all partners pending a

review of its trade agreement policy. The

Middle East is a key region for agricultural

exports including dairy products. An

agreement would address a range of tariff

and non-tariff barriers related to our dairy

exports.

Australia, along with a number of other

countries, is engaged in negotiations to

develop processes to provide possible

pathways to a free trade area of the

Asia-Pacifi c. We have been part of the TPP

since 2010 and the RCEP since 2012.

Bilateral agreements and negotiations

Bilateral FTAs are important to Australia’s trade

negotiating agenda. FTAs can:

• deliver economic benefi ts to Australia more

quickly than might be possible through the

WTO round,

• tackle specifi c issues in more depth and

often at a higher level of ambition than is

possible in the WTO,

• be more comprehensive, covering trade

in goods and services, investment, as

well as other trade-related issues such

ascompetition policy and intellectual

property and

• help secure Australia’s competitiveness in

key export markets,

Australia has a number of bilateral

agreements already in place:

• New Zealand – Closer Economic Relations

(established 1983),

• Singapore-Australia Free Trade Agreement

(2003),

• Australia-USA Free Trade Agreement (2005),

• Thailand-Australia Free Trade Agreement

(2005),

• Chile-Australia Free Trade Agreement

(2009) and

• Malaysia-Australia Free Trade Agreement

(2012).

Australia is currently negotiating the

following bilateral agreements:

• China (since 2005),

• Japan (since 2007),

• South Korea (since 2009),

• Indonesia (since 2010) and

• India (since 2011).

Bilateral agreements can provide

opportunities and commercial advantages

for Australian dairy exporters by reducing

tariffs and providing improvements to

market access conditions and

administrative procedures. All countries

above are important existing or potential

markets for Australian dairy exports and a

good outcome for dairy is important in any

fi nalised agreement.

However, this works both ways; where

export competitors can negotiate and

implement agreements with our target

markets, Australia fi nds itself at a

commercial disadvantage.

An example is the commercial advantage

that New Zealand enjoys through its FTA

with China, which in 2013 imposes a 5%

tariff on New Zealand WMP compared to a

10% tariff on WMP from other suppliers,

including Australia. Other examples are

South Korea’s FTAs with the USA and EU.

China and South Korea are both important

dairy markets. Each year that passes

means that Australia is faced with a larger

tariff differential in those markets.

More recently New Zealand fi nalised an

agreement with Taiwan that will likely be

implemented in early 2014. This will give

New Zealand a commercial advantage in yet

another important dairy market for Australia.

Australia’s ability to negotiate FTAs is critical

to the industry’s future participation in

export markets. The Australian dairy

industry has taken a strong position that the

Australian Government should pursue FTAs

that favourably position dairy in a successful

outcome. The Australian Dairy Industry

Council (ADIC) has been working hard to

achieve this through ongoing advocacy.

16


Appendix Two – technical market access – non-tariff barriers

Trade policy also includes improving,

maintaining and defending existing market

access. Australian exporters are continually

faced with non-tariff measures that can be

technical in nature and might require

substantial time and resources to resolve.

Increased use of non-tariff barriers in priority

markets is affecting trade in agricultural

goods – including dairy products. Non-tariff

barriers are generally of a technical nature

and more commonly relate to rules and

regulations in place to ensure the integrity of

food supply.

Although international standards exist to

guide market access requirements for most

dairy products, many countries have their

own standards that differ from international

guidelines and may be used as technical

barriers to trade.

Trade barriers often arise unexpectedly and

can be due to government-imposed

regulations or commercial requirements.

International regulatory frameworks are

important to the export-oriented Australian

industry. The industry invests signifi cant

resources in monitoring and contributing to

international standard-setting.

Agricultural Counsellors from the

Department of Agriculture, Fisheries and

Forestry play a major role in Australia’s

efforts to remove or lower market access

barriers for agricultural products, facilitate

trade, monitor emerging international issues

and help resolve quarantine issues.

The DAFF Agricultural Counsellor

program needs to increase regional

coverage in South-East Asia and the

Middle East. In addition to existing posts,

the program should be expanded into

key emerging markets: Vietnam, the

Philippines and Saudi Arabia. These

countries are high potential growth

markets whose needs cannot be

adequately met through existing posts.

Where Agricultural Counsellors are located

in international markets they can more

effectively engage directly with local offi cials

and government representatives to address

access issues as they arise. Counsellors

can also work proactively to identify and

prevent non-tariff barriers that might impact

dairy imports.

Trade and the Australian Dairy Industry

17


Appendix Three – promoting the Australian food safety system

A signifi cant part of the industry’s response

to technical market access is to promote

our high standards for food safety and

quality assurance across the supply chain.

International markets that can be assured of

the integrity of Australian produce may not

require additional or differing regulation if it

can be shown that processes are already in

place that ensure safe dairy production.

Also, given the high level of safety already

achieved, additional requirements are

unlikely to represent an improvement.

Our government and industry actively

promote the Australian food safety system

to gain greater acceptance that our system

meets the requirements of the importing

country and to reduce costly additional

regulations (for example unnecessary

port-of-entry testing).

18


Published by Dairy Australia Limited.

Whilst all reasonable efforts have been taken to ensure the accuracy

of Trade and the Australian Dairy Industry, use of the information

contained herein is at one’s own risk. To the fullest extent permitted

by Australian law, Dairy Australia disclaims all liability for any losses,

costs, damages and the like sustained or incurred as a result of the

use of or reliance upon the information contained herein, including,

without limitation, liability stemming from reliance upon any part

which may contain inadvertent errors, whether typographical or

otherwise, or omissions of any kind.

© Dairy Australia Limited 2013. All rights reserved.


Dairy Australia Limited ACN 105 227 987

Level 5, IBM Centre

60 City Road, Southbank VIC 3006 Australia

T + 61 3 9694 3777 F + 61 3 9694 3701

E enquiries@dairyaustralia.com.au

www.dairyaustralia.com.au

Trade and the Australian Dairy Industry

20

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