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Market access key concern among MLA levy payers

Jon Condon 23/11/2012

 

RMAC chairman Ross Keane moderates last week's industry forum in FremantleThe impact that international market access developments are having on the Australian beef industry clearly registered as a front-of-mind concern among stakeholders attending last week’s industry annual meetings in Western Australia.

With close to 70 percent of all beef produced in Australia now directed into export markets, a sense of concern and frustration was evident over recent trade access issues in markets like Korea, and to a lesser extent emerging markets like China.

Beef Central has provided extensive coverage over the recent standoff with South Korea over the progression of a Free Trade Agreement between the two countries (see an earlier report here). The stalemate placed Australian beef at an increasing disadvantage, tariff wise, against competing product from the US.

A forum in Fremantle last week chaired by Red Meat Advisory Council chairman Ross Keane included representatives from all meat and live export industry peak councils.

Chairman of the Australian Processors Council, David Larkin, told the forum that one of the emerging issues for the Australian processing sector would be which countries each export-licensed abattoir was licensed for, which could curtail export opportunity, in some cases.

“Did you know there are only five plants in Australia that can sell beef to Malaysia?” he said.

“Nor can every export-licensed abattoir in Australia access the emerging Chinese market. China chooses to list those establishments in each exporting country that it will allow product from.”

A considerable number of Australian processors were also currently excluded from access to the Russian market.

“Those are the sorts of issues that don’t make the front page, but which are being worked on behind the scenes – trade constraints being placed on us by our trading partners’ Governments,” Mr Larkin said.

“World trade is changing,” he said. “It isn’t just about quota anymore. It isn’t just about changing a rate of tax on imports – it’s about positioning yourself and your commodity, or placing a technical trade barrier on that commodity that suits the flavour of the importing country’s politics.”

“It’s unfortunate that agriculture is one of the areas that people in politics want to play with. It’s our job to get out there and tell people that Australia has a world-class processing system that is second to none. It should be the Australian system that the Chinese Government recognises, and we shouldn’t allow our regulators to be manipulated, in issuing licences for supply to China to some plants and not others.”  

Mr Larkin said these technical access issues in China and Russia, and southeast Asian countries like Indonesia and Malaysia, “absolutely needed to be dealt with.”

He said market access was one of the key influences over the value chain for the Australian agricultural industry.

AMIC chairman David LarkinBy way of explanation of the challenges facing processors, he told the forum that from each beast purchased for slaughter, 200 different items were typically produced.

“Twenty percent of those we sell at less than cost; 40pc we might break-even on; and 40pc we might get a profit on,” he said.

“There are a lot of issues that happen around those trades that are important to us (such as trade access), and ultimately to the producer, as pricing is translated back down the chain.”

 “We (processors) have been working with other peak councils to make Government understand that it is not only about market access, but also market maintenance and market development.

“No business can survive if it does not have new customers to join the ones it already has.”

To that end, the meat industry and AMIC had entered into an Inter-Departmental Committee (IDC) with the Ministers for Trade and Agriculture and their respective departments, which would act as a small working group to work around the issues associated with international trade.

“Last week I accompanied the Agriculture Minister on a trade delegation to Vietnam and Thailand, and one of the features that left an impression on me was how commodities can be traded on a political platform, through international diplomacy. In one meeting, palm oil, table grapes, beef offal and horticulture were discussed, and how much they wanted each of those commodities One can influence the other.”

Mr Larkin said AMIC and the industry would continue to work on market access because ultimately it was one of the big issues that could put money in the industry’s bank accounts, that would allow all sectors to continue to progress.

In an apparent reference to the Korean FTA, he said there were a ‘number of issues’ that had been floating around the industry for some time that needed to be brought to some closure, however.

“In some ways, we really have to think about an ‘Australia Inc’ approach,” he said.

Responding to a question about industry-wide profitability, Mr Larkin said return on investment within the processing sector had been very challenging, and in negative territory for the past two years, which was unsustainable.

“The ‘Australia Inc’ approach, where government and industry work together with what we’ve got, in trying to liberate that, is going to be what gives us a future. Trying to pull each other apart (sectors) is not going to build a future for either the production or processing sectors,” he said.

“It’s about education and getting an overall charter of priorities.”

Queensland cattleman Peter Hughes told the forum that the priority, in his view, was the trade agreement with Korea.

“With the taxes and red tape the beef industry already faces in Australia, we are disadvantaged as exporters before we start,” he said.

“To further damage our competitiveness against other exports like the US and Brazil makes the FTA agreement with Korea absolutely priceless,” Mr Hughes said.

“We have to resource ourselves so that we can get into the position where we can fight these things properly.”

Cattle Council of Australia CEO David Inall assured Mr Hughes that the industry was working hard to achieve an outcome.

“We did the first media interview on the Korean FTA six years ago. “We’ve been to Korea now five different times. We’ve met with the Korean Ambassador three times and hosted Korean farmers in Australia, to demonstrate why Australian beef does not represent a threat to their own industry.”

“CCA deputy CEO Jed Matz was in Korea only a fortnight ago as part of an industry delegation, leading to the issuance of a press release calling on Government to fix the ISDS provisions clause so that we can strike an FTA agreement,” he said.

“We know that market access is the number one priority for this industry, and we do the best we can, in getting that message across to the respective Ministers. The Government is acutely aware of our ambition, but unfortunately it is Federal Government policy to never again sign a trade agreement containing an ISDS provision. That’s ALP policy, but we’re doing what we can to turn that around,” Mr Inall said.

Queensland lotfeeder Kev Roberts noted that while that response came from CCA, he wanted to know what the Red Meat Advisory Council was doing about the situation.

“My understanding of RMAC’s role is to advise the Minister on such matters. Where are we up to?” he asked.

RMAC chairman Ross Keane said the organisation had a specific Korean FTA committee, chaired by Malcolm Foster, that involved all sectors of industry in seeking a resolution.

One of the members of that sub-committee, Don Mackay (recently appointed ALFA chairman) said one earlier issue had been that the industry was “held up as being not sufficiently focussed, or in full agreement” on some of the rules of engagement.

“But at the end of the day the problem was that rules associated with the capacity for investors to sue the Australian Government, which flows from specific issues in the tobacco industry, currently over-rides everything else.”

Mr Mackay said regardless of which political party in Korea was successful in next month’s national election, it appeared the rules of engagement over the contentious ISDS issue would stay the same.

“The Americans, in their agreement, signed off on the clause. My personal view is that if Australia wants a similar agreement, it has to get over the issue. I can’t see that the Koreans are likely to change a rule for little old Australia, if the US has already agreed to it. Maybe there’s some modifications that might work in appeasing both sides, but if we don’t find a solution, Australia will be 2.6pc behind the US in rate of tariff into Korea today, 5.5pc from January next year, and all indications are that when it reaches 8-10pc we will seriously start to lose market share in Korea,” Mr Mackay said.

“That’s despite US beef in Korea will being regarded with a degree of scepticism, since BSE days, but at best, it will be March next year before we can re-engage with Korea over the process,” he said.  

AMIC’s David Larkin said a Korean FTA deal was put on the table earlier this year that was deemed not to be in the best interests of the industry.

“To use an example, that’s the sort of thing we need to get on and do, galvanising the industry’s voice in front of Government about Government policy, and let them see what their constituents believe the reality to be.”   

Another levy payer asked whether the industry ‘had it right’ in terms of industry structures to deal with matters like the Korean FTA. “Is there something better we can do to facilitate these 37 free trade agreements that are currently on the table? They underpin our future profitability,” he said.

“What we need to do is focus ourselves, as an industry, on what our priorities should be, and taking a definitive approach to government as to what those priorities are,” David Larkin said.

“Ultimately we have what the world wants, and that’s clean, green food.”

      

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