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Open the Horticulture Session at Outlook 2000, National Convention Centre, Canberra, 29 February 2000: address.



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Senator The Hon Judith Troeth Parliamentary Secretary for Agriculture, Fisheries and Forestry

Address to open the Horticulture Session at Outlook 2000

National Convention Centre, Canberra, 29 February 2000

Introduction

Last year, when I addressed this session of Outlook conference, I talked about the challenges for the horticulture industry and what I saw as the priorities, namely the process of ongoing rural adjustment; managing the biotechnology revolution; building stronger supply chains; managing our natural environment sustainably (particularly water); cultivating a skilled labour force; and further liberalisation of world trade.

While I believe all of these issues are still priorities, today’s topic is "Emerging Export Opportunities". This is a topic that should be of vital interest to anyone who is in horticulture for the long haul. It is one in which we all have much to learn but where the rewards can be very worthwhile.

Today I want to touch on my observations of our Asian markets, our commitment to the WTO and what trade really means for Australian producers.

The official industry figures produced by ABS are testimony to the fact that the horticultural industry is continuing to grow and despite the setbacks along the way, such as the Asian currency crisis, exports are also growing substantially.

Preliminary ABS data shows the gross value of production of horticulture in 1998/99 at $5.5 billion - an increase of almost 8 per cent over the previous year. In the same year, fresh exports increased by 4 per cent to $698 million for the whole of horticulture. So despite the problems in some of our Asian markets, fresh horticultural exports have continued their upward trend with a 32% increase over the last five years.

Asia visit

Last year I had the privilege of leading a horticultural industry delegation to Singapore, Taiwan, Japan and South Korea.

These markets offer great potential for Australia. It’s not easy - buyers there are looking for top quality produce at very competitive prices. And, as we heard time and time again, consistency of supply and long term trading relationships are very important to Asian buyers - you have to be there for the long haul.

In each country we were able to speak directly to importers; producers and marketers; key government officials and politicians. We saw, first hand, some of the opportunities that are available, the scope of the market and the competition in it, and the hurdles we have to overcome if we are to compete successfully.

Overall, the mission provided valuable opportunities to promote Australia’s horticultural interests to a range of government and industry contacts.

The over-riding message from all the markets visited and importers is that Australia is viewed favourably as supplier of clean/green products

However, in all of these markets competition is fierce from around the world.

When you consider this in the context of the size of our industry and the population in these markets, to gain just a foothold in these markets is a real achievement that has enormous potential and rewards. For example, Japan has a population of approximately 125 million people, compared to our 19 million. So even a small percentage share of the market can be relatively substantial for us.

In terms of horticulture, our exports to Japan represent around only 2% of total Japanese imports for horticulture products. Notwithstanding the trade barriers, opportunities exist to supplement local shortfalls in production, supply of counter-seasonal products, and to provide a range of non-traditional item increasingly demanded by Japanese consumers.

It is encouraging that, in the past 12 months, the Japanese MAFF has granted access for fuji apples, easy peel citrus and four other varieties of mangoes - so it is now up to Australian exporters to take full advantage of these new market opportunities and prove themselves as reliable, high quality suppliers - the scope is enormous but the market is demanding!

There is no doubt we have a significant counter-seasonal advantage in northern hemisphere markets, but while year round supply can build markets, we can also expect that competition will become increasingly tougher as other southern hemisphere producers such as South Africa, Chile and Argentina try to build their share of these markets.

Food safety is a growing concern throughout these markets with varying degrees of response. As exporters it is an issue we cannot ignore. We saw first hand, the empty supermarket shelves in Singapore that had been cleared of all products from Belgium as a result of the dioxin scare.

Importers clearly want to see our produce labelled as Australian, first and foremost. They are not so concerned with company and regional promotion as they prefer labelling that is familiar to their customers.

Other strong messages to come from these countries are that we must be able to provide consistency in our supplies in terms of volumes, quality and timeliness. Near enough is not good enough - and unfortunately we have a reputation for this! Our trading partners, ie importers, are looking to establish long term relationships with suppliers - they do not appreciate it if suppliers let them down when the market shifts to a more profitable area.

However, the strongest message of all, for us as agricultural exporters, is that we cannot lose sight of the drive towards greater market liberalisation and access and we must keep pressure on our trading partners to commit to and push for further reforms in the WTO talks.

Our world trading environment is not getting any easier. The leaders that I spoke to in Japan and Korea made it perfectly plain the strong position they want to hold onto in terms of food security and multifunctionality.

These are very entrenched themes in countries that, in reality, find it very difficult to be fully self sufficient in food production. In terms of trade - food safety, biotechnology and environmental management are also growing concerns both in Australia and among our trading partners to varying degrees and have the potential to become further trade hindrances.

Trade liberalisation and the WTO talks

So where do we stand with the protracted start to a new round of WTO negotiations, which were expected to begin in Seattle, and where does that leave us in trying to expand our market opportunities?

While we will have to wait for agreement to be reached on a comprehensive trade round, probably until after the US election, agriculture negotiations are already mandated and have formally commenced. It is a welcome sign that agreement has now been reached in the WTO on the mechanism for these negotiations and the first session of discussions will take place later this month. However, progress will almost certainly continue to be protracted without agreement on a full round.

We can’t lose sight of the fact that Australia’s prosperity remains highly dependent on our ability to increase our exports to world markets. We have no choice - we export five times more food than we import and we export around 80 per cent of all our rural produce.

We fought hard in the Uruguay round of trade talks to dismantle tariffs and subsidies and to establish a quarantine system based on scientific risk. The growing signs of protection in the US (eg, lamb imports and recent increases in support levels) and the stand-off between the US and the EU on bananas and hormone treated beef are disappointing.

However, the advent of the World Trade Organisation and more clearly defined multilateral rules, covering all areas of trade, have been major steps in the globalisation of trade and particularly important to Australia’s rural-based industries.

Australia, as the leader of the Cairns Group of fair agricultural traders will continue to push for further agricultural trade reform. The Cairns Group has already agreed to ambitious broad objectives for the negotiations, which include the elimination of export subsidies, substantial reduction in domestic subsidies and further opening of agricultural markets.

We have also seen the development of the Cairns Group as a significant negotiating force within the WTO as its membership has grown, along with that of the WTO. In recent times the pivotal role this Group plays has been recognised by both the US and the EU. For example the US worked closely with the Cairns Group in the lead up to Seattle.

Australia, as the leader of the Cairns Group, will push strongly in these negotiations for further major reform. The Cairns Group has already agreed to ambitious broad objectives for the negotiations, which include the elimination of export subsidies, substantial reduction in

domestic subsidies and further opening of agricultural markets.

Meanwhile, we can still be optimistic that China and Taiwan will be granted membership of the WTO in the near future. Such moves will be highly significant for Australia in terms of the export market potential that such countries can offer our producers.

When I was in Taiwan last year we had a meeting with the then Chairman of the Council of Agriculture, Dr Peng, where I made the point that Australia would like to see an increase in quotas for apples, citrus, and stonefruit. Their firm answer was "Be patient - all will be fixed when Taiwan is granted membership of the WTO". We’ll wait and see, but we will have to watch that quarantine restrictions do not simply replace quotas and tariffs.

So what does trade actually mean for Australian producers?

The quid pro quo, of course, is that as export markets expand through globalisation, there is also greater pressure on Australia to further open its own markets to competition. Trade is a two-way relationship and we have to be mature enough to recognise that if we want to export our produce, we also have to accept the market is open to competitive imports under the same WTO rules based system.

I want to emphasise this point, as it seems to be missing in the current controversy surrounding Canadian salmon imports, durians from Thailand and grapes from California. I have no doubt there will also be strong protests from the industry as the NZ apples, Chilean grapes and Philippines bananas applications also go through their import risk assessment processes, pending the final decisions.

Australia, as a signed up member of the WTO, must assess imports in terms of the risk posed to our domestic industry and environment by pests and diseases that can infest product. Determinations are strictly on the scientific risk posed - not the real or perceived economic risk from competition to producers!

If the Minister is concerned that there may be an economic risk to producers, he has the discretion to ask for an economic assessment to be carried out by AFFA, but this is a separate exercise and has no bearing on the final decision of AQIS’s import risk analysis.

I can assure you that all new requests for access to Australian markets by overseas countries undergo a thorough risk analysis. The Australian Quarantine Inspection Service’s Import Risk Analysis process ensures these are both timely and based on the latest scientific knowledge. The process also involves the close consultation and participation of the domestic industries likely to be affected.

There is a lot of pressure on AQIS to get its IRAs right. The cost is too great with disputes in the WTO and the likely retaliatory action against our other industries and this is being borne out in the salmon case.

AQIS has prepared a handbook on IRAs to help industry get a better understanding of how the process works. You can obtain a hard copy of this from AQIS or electronically through AQIS’s internet site.

Needless to say, if Australia’s access to overseas markets improves, our industries and farmers will stand to considerably boost their export income. The Government is doing everything possible to help Australia gain better access to overseas markets. And, it also goes without saying, Australia will have to play by the same rules with which it expects others to comply!

There has been a lot of criticism levelled at AQIS and the Minister for allowing imports, particularly salmon, durian and Californian tablegrapes. This has created the perception that we are being flooded with undesirable imports that are a direct threat to our domestic industries.

But let me put another perspective on this. Of the 167 import protocol assessments undertaken since 1993-94:

In 46 (28 per cent) cases products were requested by Australian interests, for example barley, horses, various seeds and stockfeed. ●

77 (46 per cent) cases were for genetic material sought by Australian industry, (eg citrus seed, olive trees, honey bees and bovine and ovine embryos and semen) ●

In 25 (15 per cent) cases, conditions were tightened or restrictions were maintained. These included mangoes from the Philippines, nashi pears from Japan, and apples from New Zealand.

●

In only 13 cases (8 per cent), were products in direct competition with Australian producers (eg, fresh durian from Thailand, uncooked pig meat from Denmark and cooked pig meat from Canada)

●

six cases (4 per cent) were for products that were counter seasonal to Australian production (eg, cherries from California, Fuji apples from Japan, ya pears from China). ●

That’s the import side of the ledger. On the export side of the ledger, over the same period of time, we have successfully negotiated new access for 275 products; improved access for 96 products; and maintained access for 257 products.

These figures paint a powerful picture for Australian trade and the work of AQIS in promoting and protecting the interests of our industries.

Trade is two way and we have to comply with our international obligations.

Our quarantine policy is conservative, perhaps the most conservative of all our trading partners. For example, without pre-empting the outcome of the current IRA for NZ apples in any way, Japan, who we believe are very conservative, allow NZ apple imports. In saying this, I am in no way suggesting that our policy should change.

Our policy based is on managed risk strategy as it is simply unrealistic for it to be nil risk.

Conclusion

Before I finish, I would like to launch this report - Australian Horticulture in the Global Environment. It has been commissioned by the Australian Horticultural Corporation and prepared by ABARE to look closely at what our horticultural industries have to gain from

trade liberalisation and what the impediments are.

As I have said earlier, trade is not going to get any easier but we have to persist. The information contained in this report will greatly assist the Government and the industry in developing appropriate strategies for future trade negotiations.

I congratulate the AHC for initiating this work and ABARE for its efforts in preparing the report. I am sure we can learn a lot from it and I would encourage everyone here to study it.

I am sure both Mark (Napper) and Ivan (Roberts), will both be drawing from it in their comments to you here today. But I do want to press the point that it is the responsibility of

each individual member of the industry to recognise what we have to gain from exports, where we sit in terms of world trade and just what is at stake if we don’t push forward.

Thank you