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Joint Standing Committee on Foreign Affairs, Defence and Trade
07/08/2017
Australia’s trade and investment relationship with the United Kingdom

CATTLE, Mr Ian, Quota Manager, Exports Division, Department of Agriculture and Water Resources

CUPIT, Dr Jenny, Assistant Secretary, Exports Division, Department of Agriculture and Water Resources

COOPER, Ms Barbara, Assistant Secretary, Meat Exports, Exports Division, Department of Agriculture and Water Resources

CUNNINGHAM, Dr David, Assistant Secretary, Export Standards Branch, Department of Agriculture and Water Resources

FREEMAN, Ms Fran, First Assistant Secretary, Exports Division, Department of Agriculture and Water Resources

GRAINGER, Ms Jo, Assistant Secretary, Wool, Dairy, Wine, Small and Emerging Industries Branch, Department of Agriculture and Water Resources

VAN MEURS, Ms Louise, Frist Assistant Secretary, Trade and Market Access Division, Department of Agriculture and Water Resources

WORRELL, Mr Matthew, Assistant Secretary, Multilateral Agriculture Policy and Bilateral Branch, Department of Agriculture and Water Resources

[11:49]

CHAIR: I now welcome representatives from the Department of Agriculture and Water Resources. We've got your submission. It's very comprehensive. Thank you very much. Do you have an opening statement?

Ms van Meurs : I do have an opening statement, if that is okay, that I'd like to read out.

CHAIR: Excellent. Thank you, and then we will go to questions.

Ms van Meurs : Australia's agricultural relationship with the United Kingdom is longstanding and strong. In 2016 the two-way agriculture trade was worth $1.3 billion, with Australian agricultural exports to the UK valued at $446 million and agricultural imports from the UK valued at AU$672 million. Agriculture exports to the UK are concentrated. In 2015 the export of wine was AU$357 million, of beef and veal was AU$95 million and of sheepmeat was AU$84 million, which constituted over 82 per cent of the total Australian agricultural exports to the UK. According to the Australian tax office, the UK is also the largest foreign owner of Australian agricultural land. As of 30 June 2016 the UK was a source country of 52.7 per cent of foreign owned agriculture land in Australia, which is 27.5 million hectares or 7.2 per cent of total agriculture land area.

There are a range of issues that will impact on Australia's capacity to expand our trade and investment opportunities with the UK. Foremost, the implications of the UK departure from the EU for Australia's agricultural industries are not yet clear and it will depend on any agreement that the UK and the EU reach on the terms of the UK exit and the policies the UK adopts in areas of current UK competence, including tariffs, agricultural policy and food standards. The key issue is how the current EU WTO import quotas, which include Australian country-specific quotas for beef, sheepmeat, cheese and rice, will be treated under Brexit. For example, will the existing EU quota be divided between the EU and the UK, or will another approach be adopted? Any reduction in the quota would require the negotiation of compensation in accordance with the long-term WTO GATT rules. Although this could be a lengthy process, we are keen to ensure that Australia's access to the EU market is not negatively impacted by reduced quota volumes or by splitting quotas, which may make trade uneconomic.

There are also uncertainties around the current export channels into the UK and the EU. What will be more or less commercially attractive if the UK is no longer part of the EU? This will be particularly important if the UK is faced with tariffs and other barriers to trade with the EU. There is significant intra-EU trade and it is not clear what share of Australian agriculture exports to the UK is consumed domestically and what share is transhipped to other European markets, so the trade flows are unclear.

Mr PERRETT: Unclear? No idea unclear or—

Ms van Meurs : We've got some idea, but for some we don't. The department of agriculture has key interests in our trade and investment with the UK, particularly ahead of exit from the EU, as the department facilitates market access for Australian exports and European imports by negotiating technical requirements for trade and managing export quotas to the EU for beef, sheep, goat meat, buffalo and dairy products. We also provide specialist advice and analysis to the Department of Foreign Affairs and Trade to ensure that the broadest possible gains for agriculture, food, fish and forestry products are negotiated during a free trade agreement. The department, in collaboration with DFAT, also intersects significantly with our European Union counterparts on a range of agricultural issues. We are currently increasing our interactions with our UK colleagues on issues where they have expressed an interest in understanding our systems and policies, including our agriculture policies, our biosecurity arrangements and our sanitary and phytosanitary measures.

You also may be aware that our Deputy Prime Minister recently visited the EU and the UK for meetings with the European ministers, industry stakeholders and the recently appointed Secretary of State for the Environment, Food and Rural Affairs, Michael Gove. A network of agricultural counsellors in key markets around the world provide insights into different markets. We have an agriculture trade and cooperation agenda with the UK through our minister-counsellor who is in the Australian embassy in Brussels, who is also working closely with the Australian high commission in London.

I'm aware that during the public hearings a number of issues have been raised with the committee. I have a number of officers from the department, as you can see, who will be able to talk to you in depth about some of those issues. Thank you.

Mr SNOWDON: Can I just ask a question to kick off, because I need clarity on the imports that you were referring to. What are the primary produce imports from the UK?

Ms van Meurs : Matthew might be able to provide an answer to that.

Mr Worrell : Agrifood imports into Australia from the UK, as Louise has said, were valued at $672.2 million in 2016. The top ones, in order of value, are food preparations, animal feed, printing and writing papers, beer, and paper manufactured products.

Mr PERRETT: Can you explain how we get coffee from the UK? Is it processed there? They're not renowned for their tropical rainforests, I would have thought.

CHAIR: It comes from the colonies!

Ms van Meurs : It'd be processed. They do import it from other countries.

Mr SNOWDON: They import the beans and do what we do.

Mr PERRETT: While we're on that topic, with the elaborately transformed tobacco, do we export tobacco to them? Do we still grow tobacco?

Ms van Meurs : The plant extracts.

Mr PERRETT: 'Contains essential plant oils and elaborately transformed tobacco'. It's in (b) in 'Plant extracts'.

Ms van Meurs : I'd have to take that on notice.

Ms Freeman : Some of it, I think, is imports from the UK. Some of that would be things like cigars and things like that, I think.

Mr PERRETT: Okay.

Ms van Meurs : That one there is exports, though.

Mr PERRETT: The top column—the exports to the UK. It says 'plant oils', which I can almost understand.

Ms van Meurs : Yes. 'Elaborately transformed tobacco' was what you were asking about, so I have to take that on notice.

Mr PERRETT: Yes. I didn't realise that we grew tobacco still.

Ms van Meurs : I'd have to check. There are small quantities.

Mr PERRETT: Up in North Queensland?

Ms van Meurs : I can check. I'll have to take that on notice.

Mr PERRETT: Is it around Mareeba?

Ms van Meurs : It used to be around Mareeba, but I'll have to check.

Mr PERRETT: And apples. The previous witnesses from the Food and Grocery Council said that there are niche products. Something like apples is only $2.5 million, but can you still make a quid out of it? Where do we grow tobacco? Tasmania still?

CHAIR: We used to grow it in King Valley in the north-east of Victoria, but now we're growing beautiful wine.

Ms Freeman : Tasmania would be the other one.

Mr PERRETT: It's just interesting that you could still make money out of something.

Ms Freeman : Unless they're higher value. Tasmania has much more diverse varietals of apples that they would grow, and for some of them it's potentially cheaper to export offshore than to the mainland. Obviously the UK used to be the primary market for apples from Tasmania, and that all changed when the UK joined the EU, but I think there are still some niche products. I may stand corrected; we'd have to check.

Mr PERRETT: That's counterseason, I assume.

Ms Freeman : Yes. I'd have to check, but it may be that some of the varietals go out of Tasmania—some of those niche varieties which Tasmania produces.

Mr PERRETT: How are the quotas on Australian meat and other produce exporters managed by the agriculture department? Should major meat exporters need to buy quota from smaller non-packer exporters of non-premium meats for kebabs?

CHAIR: We want to understand the process of accessing quota.

Mr Cattle : There are two primary functions to quota. One is certification; one is allocation.

CHAIR: We want to understand both.

Mr Cattle : The certification process is pretty standard across all quotas. You require a certificate from the Australian government to receive the reduced tariff when you import.

CHAIR: How do I get that certificate?

Mr Cattle : You apply to the department through your request-for-permit process. When you ask for your health certificate and other documentation that are required to export—

Mr PERRETT: They come and inspect the cold rooms and the whole shebang?

Mr Cattle : That's not a quota requirement; that's a requirement to export to the EU. Barb could expand on that. For quota purposes, that's how you apply for your certificate. A couple of requirements to be granted that certificate include that the quota is available and that stems—

Mr PERRETT: Not transferable? You can't be a middleman?

Mr Cattle : You certainly can. I can touch on that, if you like. It's about the allocation process. It depends on the quota. The dairy quotas and the cheese quotas that we have with the EU are currently called first-come, first-served quotas. If you're an exporter with a shipment ready to go, you can apply through the normal export documentation, tick the box saying you want quota and you'll be automatically granted that quota and you'll get your quota certificate to receive the reduced tariff into the EU. For quotas like sheepmeat and high-quality beef—

CHAIR: Voluntary restraint quotas?

Mr Cattle : What was that—sorry?

CHAIR: Go ahead.

Mr Cattle : For those two quotas specifically, you must have an allocation of quota, which means you have been given quota in your bank account, so to speak.

Mr PERRETT: By your department?

Mr Cattle : Yes.

CHAIR: What's the process of allocation?

Mr Cattle : The quota is allocated on your shipping history. It depends on the quota. For example, the high-quality beef quota, the Hilton Quota, is based on your previous three-year shipping history to the EU, under quota. It's a proportional allocation based on applications. If you apply for a quota and last year you shipped 10 per cent of the quota out of all the applications, you would receive 10 per cent. In the last three years, if you did 10 per cent, you would receive 10 per cent allocation.

CHAIR: How do new entrants—

Mr Cattle : That's a great question. It depends on the quota. The different quotas vary. For the European Union high-quality beef quota, there's a new-entrant capacity in the legislation that says that any new entrant can apply. You're allowed to be a new entrant for the first three years. In the first year, you would be allocated 12 tonnes as a minimum allocation.

CHAIR: You say '12 tonnes'. You were using percentages previously—the 10 per cent. Twelve tonnes is what percentage of the total quota we have to that market?

Ms van Meurs : In the high-quality beef quota, there's 7,150 tonnes and for the grain—

CHAIR: Twelve of that 7,000 is available for new entrants?

Mr Cattle : Five hundred tonnes is available for new entrants in total.

CHAIR: Out of 7,000?

Mr Cattle : That's about seven per cent.

Mr SNOWDON: But 12 tonnes for each new entrant.

Mr Cattle : That's correct, up to a maximum of 36 as a new entrant.

Mr PERRETT: Mr Cattle, is it the meatworks or the company that gets the quota?

Mr Cattle : It's the exporter. On the export documentation, the person or the company that applies for the certificate to export—say, the health certificate—the same exporter is used as the company—

Mr PERRETT: So it could still be coming out of Dinmore irrespective of who owns Dinmore at the moment?

Mr Cattle : That's right. Dinmore is the works where the product is slaughtered, but that product could belong to another company. Dinmore could just be the middleman who does the processing.

Ms van Meurs : In 2016-17, 56 per cent of the quota has been filled.

Mr Cattle : Which is a really small amount.

Mr PERRETT: What was the percentage?

Ms van Meurs : That's the Hilton Quota—56 per cent.

Mr SNOWDON: That's for high-quality beef?

Ms van Meurs : No, that's the Hilton Quota. The high-quality beef quota is 48,200 tonnes and 28 per cent of that has been filled in 2016-17.

Mr PERRETT: Are they seasonal conditions?

Ms van Meurs : Yes.

Mr Cattle : Yes. Generally speaking, the Hilton Quota would be 99 per cent filled, but last year it was because of the conditions at the time. It wasn't because of drought conditions; it was because it rained. Everyone held their stock.

Mr SNOWDON: What happens in those circumstances if we don't fill our quota and the EU wants that beef? Do they go to Argentina or somewhere else to get that quota filled?

Mr Cattle : Correct. They'd have to go to another country—

Ms van Meurs : With the grain-fed, high-quality beef quota, they'd go to those that can comply with the EU requirements. That's because they've got not only quota requirements but also hormone-free requirements and, obviously, high-level specifications on high-quality beef. There's certain criteria that the countries have to fill, so they've got to be able to do that as well.

Mr SNOWDON: But there is a competitor for us who's going to get access to that market because we can't fill it?

Dr Cupit : Only for those quotas. In general, our quota is allocated by country and by commodity. There's only one lot that's actually not allocated like that, and that's the competitive one that you're talking about.

Mr SNOWDON: But, next year, if the Hilton quota comes back to what it was for us—

Mr Cattle : Yes, every year.

CHAIR: Can I ask about the EU accreditation process?

Mr SNOWDON: Yes, you go right ahead. I was going to ask about quotas, but—

CHAIR: No, you go there.

Mr SNOWDON: I'm looking at the data on the market for beef into the EU. Forty per cent of total EU beef, 72 per cent of sheep meat and 64 per cent of wine goes to the UK. That's what the proportion is of our quotas of those products that go to the UK—is that correct?

Ms van Meurs : Yes, but the issue is it's not clear then what happens to them and how the intra-EU trade happens.

Mr SNOWDON: What do we know of that intra-EU trade on any of those products?

Ms van Meurs : I'd have to ask Matt. We've actually asked industry, and we've also done a little bit of work ourselves in preparation for the EU FTA. But it's been quite hard to get the trade flows clear with regard to what happens with the meat products from Europe into the UK. It might be a bit simpler for wine, but I doubt it.

Mr SNOWDON: When you say 40 per cent, do you mean that 40 per cent has landed in the UK?

Ms van Meurs : It's not necessarily staying in the UK. We don't know.

Mr SNOWDON: So it's landed in the UK?

Mr PERRETT: Do you know it's landed?

Ms Cooper : It's been cleared at that port for access to the European Union.

Mr SNOWDON: So we've got no idea where it ends up? Gotcha.

Mr PERRETT: I just want to clarify that the second column is value—is it? The 64 per cent wine is not volume?

Ms Cooper : It's value.

CHAIR: I have a question on quotas. Why does beef have this historical quota access as opposed to something like dairy and other commodities which are a first come, first serve process?

Mr Cattle : It's all on the demand of the quota.

CHAIR: But what you're saying is it's a different system about quota allocation. We've got this first come, first serve process for these products, but, for this product over here, we've got this complicated web of historical access, and some measures will hopefully encourage new entrants into an industry which we all know is quite tangled and conflicted at times. Can you tell me why we have those two different processes?

Mr Cattle : Quite simply, it's about demand for that product in that market. There's a very high demand for high-quality beef in the European Union. There's a very high demand, and the quota is small. It is 7,150 tonnes.

CHAIR: I'm talking about our process of allocation of that quota. That's an internal thing that we've decided as government.

Mr Cattle : That's right. I will compare it to the US example. I know we're talking about the EU, but in the US our quota for this year is 423,000 tonnes. It's a massive quota, so we have a first come, first serve process for that because there is no need for that extra regulation. When it comes to distributing that quota, we can make it a first come, first serve process to minimise the regulation. It allows any person into that market—so any new entrant can come straight in and export as much as they like.

CHAIR: So we've got this tangled web because it's a small quota?

Mr Cattle : Correct.

CHAIR: And we're not confident that anyone will fill it?

Mr Cattle : It will be over filled.

Ms Freeman : I'd say that it's due to the market. Everyone wants to get the higher price, so there's a battle to the death almost. I think it's about managing people who all want to get a slice of a very valuable pie.

Mr Cattle : It quite clearly has a value.

CHAIR: First in, first served—do you know what I mean? If they all want it, let them compete to deliver it; and if you don't, then you get to ship to the US.

Mr SNOWDON: I don't think we should exercise our interest in that just yet, until we identify how we are going to deal with the UK.

CHAIR: Warren, I'm just wanting to understand, because I have a few constituents who have a significant issue with the process of getting their product to market, and they find this quota process quite ridiculous in the 21st century. I want to understand why we have this particular allocation process. Ms Freeman, you're nodding. Do you have anything to add to assist me?

Ms Freeman : My comment would be—and maybe I'm showing my age—they are less than ideal arrangements in the sense that what you would have in a normal competitive market would be, 'Off you go, let's compete.' They're a function of very complex trade rules with some of our trading partners, and industry are having a fight to the death and having skirmishes. Historically, there have been a lot of skirmishes for this quota, and even the US quota, once upon a time, has been a fight to the death because it's been very valuable. Now, off the back of the USFTA, it's opened up more and more product is shipped, so the competition that Mr Cattle was referring to has actually died down because there is something for everyone who wants it, basically.

CHAIR: Into that market.

Ms Freeman : Into that market. I think the question is: how do you have a system that balances equity and efficiency between who is potentially the biggest, the quickest or the whatever to get in and get a slice of what is a very valuable pie, versus some arrangement from the others and the politics around that? From the department's point of view, we're actually trying to come up with a system that gives someone a shot at trying to get a slice of a pie.

CHAIR: When was the last time this application process was reviewed?

Mr Cattle : 2011 or 2012.

CHAIR: And it was found to be sensible and no change?

Mr Cattle : It was all in agreement with industry.

Dr Cupit : We are in the process of undertaking a regulation impact statement at the moment. I am looking at the administrative arrangements for all the quotas that we administer in the department. That is currently underway.

CHAIR: When will that be completed?

Dr Cupit : The close-off date has been extended a couple of times at the request of industry. They have asked us for greater time to make comment. It is literally in the process now. I think we are just about ready to close off before it'll be presented to the minister for consideration.

CHAIR: Do some smaller non-packer exporters send non-premium meat to the EU to maintain their quota?

Ms Cooper : They may well, but not under that quota, because the specification to meet that quota is very strict—it's a feeding regime with a certain amount of time.

Mr SNOWDON: You must be speculating, I'm assuming, or at least game planning what possible scenarios there might be. What do you see as the most feasible scenario in terms of where you know discussions are currently going, both in the UK and the EU, about how these quota issues might be addressed?

Ms van Meurs : Again, that is between the UK and EU. Our understanding is that the UK is looking to uplift its whole system that it currently has with the EU. It's hoping that whatever it has in place today it will have in place tomorrow. The issue will be, then, for people like Australia, if you have a WTO quota—which is the grain-fed high-quality beef quota—how that is split. We are very aware of that and we are working with our department of foreign affairs colleagues to make sure we understand the situation and what we can do to make sure that those quotas—

Mr SNOWDON: When you say they'll attempt to uplift what they have currently and put it back in control of the UK, what does that mean? What precisely are you talking about?

Ms van Meurs : I'll ask Matt to clarify a little bit, but it's really about all the regulations they currently have. They're basically asking that those regulations in the EU are uplifted and put into the UK.

Mr SNOWDON: So they have the same import regulations as the EU.

Mr Worrell : At the moment, trade with the rest of the EU is the UK's predominant source of wealth and income. It imports a lot of agrifood products from the rest of the EU as well. In terms what is going on with the Brexit negotiations, the future of trading relationship between the UK and the EU is of prime importance to the UK and the EU. One of the things that's already been touched on here is that, at the moment, the EU has WTO import quotas, which the UK is part of. As part of the separation the UK will have to establish its own WTO quotas. The EU and the UK are discussing this matter, but it is also a matter for other trading partners that have rights and obligations through the WTO. But, at the moment, it's those two parties—the UK and the EU—that are discussing those arrangements.

Australia has expressed its strong interest in this matter. Clearly we don't want to be any worse off than what we are at the moment. Relatively speaking, although these quotas are very valuable to Australia, the volume of product is quite small. So, in terms of those discussions, we're keen to ensure that the arrangements the EU and the UK come up with aren't going to disadvantage Australian exporters who may want to export either into the UK or the EU. I think the Australian government has been very clear in its representations to the UK and to the European Commission that we don't want to be any worse off than what we are at the moment. The UK, when it separates from the EU, will be in a position to negotiate free trade agreements with its bilateral trade partners. The Australian government has expressed strong interest in being party to such a negotiation, where we would seek to have preferential trade arrangements to those that currently exist.

CHAIR: Evidence to this committee is that particularly our meat industry wants EU plus. They don't want the status quo. What conversations are we having in those informal channels about that? Mr Worrell, it sounds like you're saying we're saying the status quo is our ambit claim, when industry is seeking EU plus.

Mr Worrell : No, I'm not saying 'status quo'; I said 'no worse off', because that could actually be an outcome of those discussions. Of course we don't want to be worse off; we'd like to be better off and substantially better off. I think realistically though, in the context that we're in, with the UK so dependent on the rest of the EU for its trade relationships, you could understand that that's going to be their primary focus, and they would want to have, as much as possible, seamless trade with the EU when they do separate. That's their priority. Clearly, though, the Australian government sees this as an opportunity to negotiate better trading arrangements than what we've currently got, but were also realistic about that.

CHAIR: Can someone give us a bit of a briefing on the difference between the New Zealand quota and the Australian quota. I know it's a historical arrangement. I'd suggest New Zealand's moved on, since they're little more dairy and a little less sheep meat. Is that something that's on the agenda to change?

Ms van Meurs : Are you referring to the sheep quota?

CHAIR: Yes.

Ms van Meurs : The thing I'd say about that is: it's pretty historical. In 1973, when the UK chose to be part of the European Economic Community, there were some negotiations, and part of those negotiations, as I understand it, was to do with the trade flows at the time. New Zealand had quite a significant sheepmeat market, so trade was based on volumes. There were other factors as well, as I understand it, but volume was key, whereas Australia was more wool based, and therefore the volumes weren't there. That's part of why there's that different quota arrangement.

CHAIR: I appreciate the why. Do we have view of what a better arrangement would be? Is that something that is on the list of things to tackle?

Ms van Meurs : So you're talking about whether you'd want a different quota?

CHAIR: I think we do want a different quota, but I'm just wondering: do we have a goal in mind? Have we done any work around what that new quota might look like?

Mr van Meurs : There is some initial—for the UK or for the EU? We are starting to look at negotiations as part of the EU FTA, and of course that hasn't been formally agreed yet, but we are looking in the background at what is possible there with industry. We have lots of conversations with industry about what is possible. The UK and the EU have made it very clear that they are negotiating a free trade agreement and are not prepared to discuss work on a free trade agreement with Australia until that is finalised. We do have a working group with the UK, which we are talking about lots of issues with, and it mentioned that in our opening—

CHAIR: How often has that met?

Mr van Meurs : I will have to take that on notice, but we have had two telephone hook-ups with the UK.

Mr Worrell : The Australia-UK Trade Working Group is headed up by the Department of Foreign Affairs and Trade, so that is their working group—

CHAIR: But do you sit on it? Do we have a department of agriculture rep on that working group?

Mr Worrell : There has been a series of discussions of officials from various portfolios, both in Australia and with our UK counterparts. So, yes, this portfolio has participated in a series of teleconferences with the Department for Environment, Food & Rural Affairs to discuss matters around agricultural policy and Australia's experience with its reforms over the last 20, 30 or 40 years in this space, as well as in the biosecurity area. These are areas the UK has expressed interest in better understanding our experiences on, and we are very open to building stronger linkages with our counterparts in the UK.

CHAIR: So we have had two teleconferences since that was announced?

Mr Worrell : That we have participated in, yes. But the Department of Foreign Affairs and Trade are leading this process, and there is a series of other discussions occurring as well.

CHAIR: And was that quite early on in the piece, when we announced we were having informal discussions, but not negotiations?

Mr Worrell : I can't remember the exact timing.

Ms Freeman : I participated in one of them at great length, and I would say it goes back to April, possibly. I would have to confirm that, but it would be around that time. It was really demonstrating how far back the UK is, because they don't actually have any policies on anything, and in many respects they were a bit like a sponge. It was really starting at the basics for them, and I think we would have gone all night. If they had their way, we would have sat there all night. I think it's a very valuable area for the Australian government to continue to cooperate with the UK government in, to assist them in something they know they need help on. I think that, hopefully, is about building the relationship with the UK government in a very valuable way, particularly on agriculture.

Mr RAMSEY: Louise, was it the UK or the EU that said they don't really want to do a negotiation with you until they had the other deal? I understood that we were still negotiating with the EU. Is that correct?

Mr van Meurs : The formal negotiations have not been finalised yet. We've had our scoping study and now we are looking to launch negotiations.

Mr RAMSEY: With the EU?

Mr van Meurs : Yes, with the EU.

Mr RAMSEY: Is that unlikely to be really affected by Brexit, or do you think it will be?

Mr van Meurs : The EU negotiations?

Mr RAMSEY: Yes.

Mr van Meurs : Do you mean the timing?

Mr RAMSEY: Yes, and whether the EU sees the exit of Britain as a complication to trying to make a new, freer trade deal with us?

Mr van Meurs : No. All the indications are that they are ready to negotiate with us, but, again, they've got a lot on their plates, and so do we.

Mr SNOWDON: But those quota issues would still be relevant to those discussions?

Mr van Meurs : Yes they are.

Mr RAMSEY: Where would you rate other countries? We are not the only country trying to get a better trade deal with the EU. Where would you put other countries as against our push for trade with the EU?

Mr van Meurs : I will probably refer to Matt again too, because there are a number of EU FTAs being undertaken at the moment, so you can look at who else is negotiating one. I'm not sure—have you got that list with you?

Ms Freeman : As has been referred to, both Australia and the EU are going through our domestic ratification processes to be able to get approval to commence the formal negotiations. I think both governments have indicated it is a high priority for us to commence negotiations to build closer economic relations. You might have seen in recent weeks there's been a lot of press around the arrangements that the EU and Japan have been negotiating, and I understand that political agreement has been reached but the negotiations have not been finalised as yet. So we are seeking to understand the details of that arrangement and what that might mean for Australia and Japan and the EU.

Mr RAMSEY: Is your guess that Japan is probably in front of us in a timescale?

Mr Worrell : They are well advanced of us because they have been negotiating for a number of years and are close to finalising. We haven't yet even commenced negotiations. We've undertaken a scoping paper negotiation with them over the last year, and that's finalised, and now we are just going through the formal, tick-off process.

Mr RAMSEY: I've been contacted by a producer who has actually been before this committee, a kingfish producer, who stated that if Japan gets a free trade agreement in front of us, and our kingfish are facing a 15 per cent deficit tariff—as adverse to the Japanese, who are good producers of farmed kingfish—it would be extremely detrimental to our local industry.

Mr Worrell : I think we are seeing that there is a growing number of bilateral free trade agreements being negotiated. Australia's strong preference is for multilateral trade outcomes to be developed and agreed, but, obviously, with the relatively slow progress in that space, countries are seeing that it is in their interests to negotiate preferential trade agreements, either bilaterally or plurilaterally, so it's a constantly changing landscape, and Australia is part of that. At the moment we are negotiating with Peru and also with the Pacific Alliance in South America. And there are a number of other free trade agreements underway at the moment that agriculture is involved in, and our portfolio provides support to the department of foreign affairs to try to ensure that the best outcomes are achieved for Australian agricultural exporters in those negotiations.

Mr RAMSEY: Would it be fair to say it is going to be harder for us to get an agreement with EU on agricultural access—I'm talking about fish products or meat or anything else—than Japan, because of the nature of what it is that we export?

Mr Worrell : I think with Europe, like a number of other countries, agriculture is a sensitive area, so no doubt it will be a difficult and complex part of our discussions with them. In the case of Australia, we have unilaterally removed most of our barriers, so in terms of negotiations I guess we don't have a lot to give them in the agriculture tariff space, although we do have some tariffs still. But obviously we will have to see what comes about.

CHAIR: Do we see opportunities with the UK FTA around—not, as we said, lifting the EU regulatory environment and placing that on the UK—things like UKAS, hormone growth proponent free, opportunities or treated product? Have we given thought to what those opportunities may be and whether we pursue that?

Mr van Meurs : We have got that informal discussion with them on biosecurity issues. That is only very new and in its infancy, so there might well be some areas there we can cooperate with them on. For example, I think there are various different talks on microbial resistance, which we, from an international point of view, have a very good partnership with the UK on. But whether the UK government chooses to do something different to the EU is not clear. We will have to continue to work with them on that.

Mr Worrell : I think, at the moment, the process that is underway with the 'Great Repeal Bill' means that they are picking up, because of very short time frames. They've got to get this all up and running, so they'll essentially look to bring most of the EU regulatory framework into the UK or for it to maintain it. And then it will be a matter of whether they might seek then to change those arrangements over time. Obviously, we would be happy to work with them to support any reforms that might also be in Australia's interests as well.

Ms Freeman : I think another area that might be of interest is wine. Ms Grainger might be able to fill you in, but that has obviously been one where we have a wine agreement with the EU. And there is a big question and a lot of conversations going on with industry about what is potentially in the best interests of the Australian wine industry. That's another one that Ms Grainger has been working on heavily with industry.

Ms Grainger : At this stage, there's information with the repeal bill that is happening. Our initial thinking, in combination with DFAT, is that the wine agreement, which is important to us, will actually be rolled over. So that's quite useful. But that's subject to that piece of legislation entering the parliament—it is staying away right now—so it's certainly not guaranteed. But industry, I think, is positive, and that's the outcome we're seeking to achieve, if possible.

CHAIR: Thank you. Have you read the Hansard around the EU accreditation process and the critique of the department's handling?

Dr Cupit : Some of it.

CHAIR: I'm just going to go to some of the evidence we received. We heard from a meat exporter around the trade barriers, being the EU accreditation of the plant in terms of the amount of money, but also from a fish processor around the process taking months and months. They think the application is in Brussels and they ring up to see why it's taking so long, and it hasn't even left Adelaide because nobody's told them that this is all part of the process—so, say, seven years ago, you had a $15 debt that you hadn't paid, and nobody even bothered to communicate that, so it can't be sent from Adelaide to Brussels via Canberra. Similarly, there is the sending of accreditation notes off in batches and them sitting on desks for a long, long time. We've heard some pretty rigorous critique, and I want to give you the opportunity to deal with that.

Dr Cupit : I'll make a couple of comments, if I can. In relation particularly to the seafood one—that's the one I'm most familiar with—our process has several parts to the whole—

CHAIR: I just need to understand the process.

Dr Cupit : Normally for an establishment to be registered for export—you've got to be registered for export from Australia if you're a seafood exporter. That takes its normal process. We will have to make sure that the establishment is able to be fit for purpose, that it can actually export, that there is no debt owed to the Commonwealth, and that the people are fit and proper persons. They become registered in that regard. The establishment is then audited. For seafood, we have qualified auditors who go out and assess to make sure everything's fit for purpose and that they can actually produce their product.

CHAIR: How long does it take from getting the tick for 'fit for purpose/no debt/fit and proper person' to an auditor arriving at those facilities?

Dr Cupit : Unfortunately, this is where the department could improve some of its practices. We do have multiple systems going forward. Sometimes an auditor will come out, do the audit and fill in the documentation with the establishment, and they will, for whatever reason, push it into the right areas of the department at the right time. Other auditors don't necessarily do that.

CHAIR: So we've got a process that relies on an individual—

Dr Cupit : On individuals at the moment; yes, correct. We are trying to make our processes no longer manual. A lot of our documentation processes are still manual.

CHAIR: Yes, we did hear that.

Dr Cupit : Yes. So we're trying to improve that process, and there is work underway in the department to improve that. If we can actually get work flows that are automated, they can have concurrent processes going through different areas of the department. That would speed things up. At the moment, it does tend to go to a finance area. We wait for them to come back and respond—

CHAIR: The finance area in the department of ag?

Dr Cupit : Yes, in our department. They're doing the checks, as you mentioned, on outstanding debt to the Commonwealth. It then goes into a separate process for—

CHAIR: How long does it sit with the finance guys?

Dr Cupit : It depends on their workload.

CHAIR: There's no time frame?

Dr Cupit : There's no time frame, unfortunately. If we had a fully automated system, we'd be able to get prompts on that and be able to push it through a little bit faster. We are working on that, but it's not with us yet. It then goes into the 'fit and proper persons' process. Again, they do the same sort of checking to make sure that the people are the right sort of people who we would like to be in the export business.

Once we have them registered completely for export, we also have to make sure that they can meet all the requirements of the EU, if it's an establishment that wants to go to the EU. There are very specific requirements from an importing country that we have to assess. That would be done at the time of the initial audit, back at step 1. The exporter would be saying to the department, back at step 1, 'I want to export these commodities to these countries,' and so we'd help them. If they change any of that, we have to go back in to audit again, to make sure that they can now meet any other importing country requirements. So if they say, 'We want to go to Japan,' and then all of a sudden want to go to the EU, we have to go back in and audit and make sure that they can actually meet those requirements.

CHAIR: When you're auditing, do you charge per country or per visit?

Dr Cupit : It's an hourly rate, in general.

Ms Cooper : If the company submits an application and it's everything that they want, they would have that one hourly rate. If they call us back in to review and we have to send staff out then we would start an hourly rate at that point.

Dr Cupit : Again.

CHAIR: Okay.

Dr Cupit : So once we have our establishment fully registered, we would then take all the new listings from right across Australia for the EU and send that information on a monthly basis to the EU. We batch them, and that's a requirement of the EU. They tell us they don't want ad hoc requests; they want them—

CHAIR: How often do we send a batch?

Dr Cupit : Monthly.

CHAIR: Every month we send a batch.

Dr Cupit : Monthly, if there are changes. If there's nothing happening within the sector, that we're aware of, we don't send it for that month. We wait until the next month: 'Is there anyone out there who wants to put anything in? We'll put up that next batch.' So it's only monthly if there's something going on in the month, if there's a change every month.

If an exporter gets all of their documentation with us, we know what they're doing, we've got them ready for the list, they can meet all the importing country requirements for the EU and they come in after we've sent something—usually that's about the first or second week of the month—they need to wait until the next month. So there's that time frame, as well.

Once we get it over to the EU, for their purposes they have to list it. As soon as we've sent something over to them they'll send something back to us and say, 'We've got your request. We will now assess it.' That can take anything up to three months. We have no control over that. Once it is listed on their listings we have to be notified of that. We aren't officially notified; we have to go in and check every month to see where there have been changes. We do that around the same time as we're ready to send more information across to them. We'll check on our system, see their listings, make sure that that's okay, put it into our system and then notify the establishment that they're okay to go. That whole process can take, at a minimum, probably about four to five months.

CHAIR: What's the range from our best case that we've ever got someone EU accredited to our worst case?

Dr Cupit : I wouldn't know the—

CHAIR: Could you give that information on notice—and maybe the mean.

Dr Cupit : We could try to get that information.

CHAIR: I would really appreciate that. I assume someone would collect that data so you can manage the system.

Dr Cupit : Not necessarily on time frames, no. It would only be a collection of the most recent ones we could go and have a look at, but we wouldn't necessarily keep that sort of information, generally. But we could have a look.

CHAIR: That answers a lot. In terms of a UK agreement, that does potentially lift this process to here. What would you like to see changed about that process?

Dr Cupit : The one thing we don't want them to do—we can say what we don't what—is change their process of listing. At the moment, it's quite favourable for us. They will actually trust us to send across a list that says, 'These establishments meet your requirements.' They list according to that, after they've done a little bit of an assessment. Some countries don't do that. They come out and audit, and that can take anything up to two years. We don't want that to occur. So we would like it, as a minimum, to at least stay the same way for that particular path.

CHAIR: And obviously then mutually recognise their internal accreditation process.

Dr Cupit : For imports?

CHAIR: Yes, for imports into Australia from the EU.

Dr Cunningham : Not necessarily.

Ms van Meurs : It depends on the disease status of the particular country and the systems we've got in place.

Dr Cupit : Correct.

Ms Cooper : I think ultimately from an Australian export perspective our wish would be, as it would be for any market, that they accepted the Australian system and that product that was eligible for the Australian market was also eligible for the UK. That would be our ultimate.

Dr Cupit : So there are no additional importing country requirements.

Mr SNOWDON: That works if we go to the boxed beef problems?

Dr Cupit : Yes.

Mr SNOWDON: Some years ago we had problems with exporting boxed beef because of some things that happened in Australia. We got our beef banned.

Dr Cupit : In the UK?

Mr SNOWDON: No, not in the UK.

Ms Cooper : Indonesia, I think, were talking about it.

Mr SNOWDON: And the US.

Ms Cooper : Substitution.

Mr SNOWDON: Yes.

Ms Cooper : No, we don't want to do that again.

CHAIR: In terms of the seafood EU accreditation, is that the same process for abattoirs in the EU?

Ms Cooper : The process in terms of the listing would be the same, but the sorts of things that an abattoir would have to comply with are probably more rigorous or intensive than for seafood. You mentioned the UKAS system. From the point of view of sourcing and the animal treatment, there are requirements to meet the Europeans' HGP-free regime.

CHAIR: Are you imagining those regimes transferring to any agreement with the UK, and is that something you would seek to change?

Ms Cooper : I think we would hope to again have the basic Australian system accepted as our ultimate. Obviously that is a decision that the UK has to make, and it really depends on what the UK trade is. If the UK trade in beef is reprocessing and sending it into the European Union, then logic would tell me that they will probably want to maintain that system. But, if that product is being consumed within the UK, then there may be an opportunity to remove that, depending on what the UK's position is with regard to use of hormonal growth promotants.

CHAIR: Does anyone else have anything to add to that? Okay. Mr Ramsey.

Mr RAMSEY: I just want to bring it back to the fish people again. Clean Seas Aquaculture operate in my electorate, so I obviously have a keen interest. I think it was the non-tariff trade barriers, and they raised the EU arrangements. Kingfish is a very fine source of sushi, and, at this stage, they are being asked to freeze their product, presumably as a defence against worms, which their fish don't have, because they're fed a dry, land based feed. Are people sufficiently across this in the negotiation to try and iron out some of these discrepancies? We know how difficult non-tariff trade barriers are, and I wouldn't say that in the past even Australia hasn't used them, but we need to make sure that those people that are negotiating these deals are particularly across the detail at that level.

Dr Cupit : As Ms Cooper said, we would be trying to get the Australian standard as the one that is picked up by the UK if that was possible. The current standard that you are talking about is an importing-country requirement. The EU currently requires fish that is minimally further processed—it's almost eaten raw—to be frozen, to control nematodes and parasites, as you said.

Mr RAMSEY: Which with the very high-price market can be—even though the Japanese have come to accept it—quite a difficult sell.

Dr Cupit : Yes. Because it's an importing-country requirement, our exporters have to meet that, so there is no negotiation at the current moment on that. But, if the UK were to consider what was going on into the future right down to that level, we could actually negotiate that out, and that would be great, but we have not got to that stage yet.

Mr RAMSEY: And the EU, as we sit down to renegotiate with them?

Dr Cupit : We could try, but I don't know—

Ms Van Meurs : Just to remind you, though, the free trade agreements are really around tariffs and quotas. If they're talking about particular food safety issues, then that's a different sort of scenario. You can have mechanisms within a free trade to have more talks and more negotiations—we have done that in a number of other free trades. Just remember too that it's really a separate discussion around why the EU wants that particular sanitary issue and what you can do from a technical point of view to try and unlock that.

CHAIR: So are we better off dealing with those issues in a forum at the WTO than in a bilateral arrangement or discussion?

Ms Van Meurs : For certain steps. We have bilateral discussions with the EU all the time. If there's a particular issue that's an irritant to industry, we can talk through that from a technical point of view. Sometimes we win those arguments and sometimes we don't. It's around what's the technical basis and what's behind that, and whether you can unlock some of those technical requirements. We can do that now. In order to go for a WTO type dispute, that's really the last straw. It takes time, it takes money and often the outcome is not what you wanted. Yes, there are those possibilities but our view is there are other mechanisms that we can use with ourselves, our other colleagues, other departments, industry and other governments to try and unlock some of those requirements.

Mr Cunningham : If I can come back to the start of your question about the department's capability. We do have capability in food safety and veterinary science and other technical areas to be able to engage in these discussions. Yes, if we can demonstrate scientifically that we can achieve the importing country requirements, we attempt to do that.

Mr RAMSEY: So the onus there falls back on the industry concerned to try and come up with the scientific data to mount a convincing case?

Mr Cunningham : In some cases, yes. If it's well established in the scientific literature then we would attempt to present that. But in other cases, we do have to work with industry to establish a track record and demonstrate that we can achieve the importing country requirements.

Mr RAMSEY: In this particular industry's case, what would you suggest is the first step for them to do just that? What should they do?

Mr Cunningham : I'm not sufficiently across the particular example.

Mr RAMSEY: It doesn't matter what the industry is. How does an industry push this case?

Mr Cunningham : Initially, they would be dealing with us as the department and we would interact with the importing country government. We do that government-to-government negotiation on their behalf.

CHAIR: Isn't there a trigger point or does industry just come forward and say, 'This is a problem. Can you help us fix it?' Is there a point of decision or do you need X percentage of industry? What's the trigger for you to then say I'm going to go and have a chat with them?

Mr RAMSEY: You have to be convinced it's a worthwhile thing to pursue and they have a realistic chance of having a win, otherwise it is wasted resource.

Mr Cunningham : Exactly. Those are the factors that would influence this. Every day there are technical challenges around the world in various markets.

CHAIR: Is it just case by case?

Mr PERRETT: Can I get an example that might illustrate: mad cow disease, '86 to '98 from the UK. We effectively have had no beef into Australia. Obviously we're an export country. We might get a bit of beef from New Zealand occasionally, as a mad cow diseases free place. How do we go about accepting beef from countries like that?

Ms van Meurs : That's a different set of people. They're the technical experts. If you're talking about a fish example, there's some science that says we can try and negotiate it away with the EU. You're talking about imports. I suppose the EU might well have similar people who are looking at the science when we send our information over. On the other end, there's a different set of people in the department. For your example, they are also the department of health and also within our department who look at what we call import risk assessments and look at the analysis of what can come in and why, our appropriate level of protection and whether there are any conditions that will allow that to come in in a safe way.

CHAIR: After our discussion on quotas, you said there was a review done in 2011 and 2012. I would love a copy of that. If there are any recommendations out of that review, I would also like to understand how we are tracking on delivering on those.

Ms van Meurs : We will take that on notice.

CHAIR: Do we have department of ag based in the UK and Europe, and if so where?

Ms van Meurs : We have an officer in Brussels, an SES band 1 officer. She is doing a fabulous job. She's an agricultural counsellor. We have another one based in Rome, looking at FAO and other OECD issues. Of course, we're considering what we might do in the UK in the future.

CHAIR: Further questions?

Mr SNOWDON: I reckon we could be here all day.

CHAIR: Same.

Mr SNOWDON: I think it's a really interesting area and discussion for us to get a deeper understanding of the issues confronting you, as you try to cut your way through whatever is happening in London.

CHAIR: What we might do is have you back informally for a briefing to chat not just about this specific area but more broadly. I think the committee as a whole would really appreciate that.

Ms van Meurs : We'd be happy to do that.

CHAIR: I have one last question. We have heard from certain sections of industries that they are not included in consultations and they don't feel their needs are being heard. Could you briefly let us know what sort of consultations the department of agriculture does? Or is it foreign affairs that actually does the consultation? When we're going through a negotiating process, generally, how do we identify who we're talking to within industry?

Ms van Meurs : If we were talking about the EU, for example, though it's the same people we'll deal with for the UK, we've got an extensive stakeholder consultation. We're looking over the table at one of them at the moment—the NFF, for example.

CHAIR: Yes, of course.

Ms van Meurs : We have industry bodies such as—off the top of my head—MLA and the Cattle Council; we've had a number of conversations with the dairy industry.

CHAIR: With the Cattle Council?

Ms van Meurs : I'm pretty sure. I'll double-check.

Mr Worrell : Effectively, though, in terms of the formal consultations around an FTA negotiation, the Department of Foreign Affairs and Trade leads on that. We feed into that and try to be part of the discussions with our agricultural stakeholders.

CHAIR: So RMAC?

Ms van Meurs : We have been consulting with RMAC, yes.

CHAIR: How do you do horticulture when they're so—

Ms van Meurs : We have HIA.

CHAIR: Yes, we do now. Do you have a list?

Ms van Meurs : We can provide you with a list of who we've consulted with so far, bearing in mind that this is the beginning. We don't even have a negotiation with the UK.

CHAIR: No, we're not having negotiations with the UK; that's loud and clear, and that's why we're doing an interim report.

Ms van Meurs : I can give you a general list about the EU—

CHAIR: Of who you've consulted thus far.

Ms van Meurs : as we're coming up for the scoping study.

CHAIR: No, you've done your scoping study for the EU. I'm assuming we're having informal conversations about the UK—not with the UK, but internally, domestically.

Ms van Meurs : We're having conversations with different stakeholders on all issues. We're having a discussion with MLA on Wednesday about six or seven countries.

CHAIR: Could you give the committee some sense of the informal conversations the department is having with domestic stakeholders who are interested in export opportunities to the UK and the EU.

Ms van Meurs : Yes.

CHAIR: Thank you very much. I look forward to those answers to questions on notice.