At a time when our major competitors in the global dairy market, New Zealand, the EU and the US, are increasing both production and their export focus, the Australian industry’s long-term growth and profitability is linked closely to its status as a competitive producer that can develop and retain global market positions.
Bilateral trade agreements are often about relative competitive positioning, and while the Korean agreement was not as comprehensive as the industry would have liked, it put us on free trade trajectories for key product lines.
Japan was always going to be tough for our government and industry as the Japanese sought to protect their domestic dairy industry. Unfortunately progress was minimal this time and further progress with Japan will now focus on the multilateral Trans Pacific Partnership talks in which the US, Japan, Australia and New Zealand are key players. We remain hopeful of progress.
The importance of China to the future Australian industry cannot be overstated. China is already the largest importer of dairy foods on the planet and consumption continues to grow. Chinese imports of dairy products rose by 36 per cent in 2013 to more than 1.8 million tonnes. For milk powder alone, China imported a total of 850,000 tonnes last year, up by 49 per cent compared with 2012.
New Zealand’s success in securing favourable trading terms with China in 2008 saw them supply more than 80 per cent of the Chinese milk powder last year. This agreement puts Australian producers at a disadvantage to their NZ counterparts. Australian imports to China currently face tariffs in the range of 10 to 15 per cent on most key dairy foods including milk powders, butter, cheese, infant formula and liquid milk. Meanwhile, New Zealand is six years into tariff reductions and currently pays between zero and 5 per cent on these lines, heading to zero in the next few years, albeit protected by trigger volumes.
Given the size of the Chinese market, it will be the performance of the Australian dairy industry in China that determines our success over the next decade. Accordingly, we welcome the reported progress towards an Australia-China FTA by the end of this year. The goal is a New Zealand-plus deal for Australian dairy food into China. A comprehensive outcome for Australian dairy in China is fundamental for the industry’s future.
Source: The Australian
