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Thursday, 25 September 2014
Page: 7263

Senator McKENZIE (Victoria) (21:34): It gives me such great pleasure to be here tonight, and I thank all my colleagues for sticking around to listen to what Senator Faulkner and I have to say tonight. Tonight I want to address the Senate on the importance of securing the best possible outcome for our farmers in Australia's negotiations with China on a free trade agreement. The Australian dairy industry started with seven cows and two bulls brought ashore from the First Fleet where they grazed in pastures around Parramatta—now a city within Sydney—and Australian dairy is today a $13 billion farm, manufacturing and export industry.

Communication by our early pioneers has evolved beyond their imagination with the domination of social media, used by most Australians including our business savvy farmers. I specifically refer to the hugely successful #FTA4dairy campaign launched by Australian dairy farmers early this month to raise awareness and strong support for a positive outcome for the industry as Australia negotiates a trade deal with China. The campaign reached over 1.7 million Twitter users within days—1,390 tweets on the launch day alone. It broke new ground for Australian agriculture in grassroots campaigning and sparked national and international online and media interest, including from China. Even Australian politicians, like my own National Party Senate team, helped spread the word and enjoyed a cold glass of milk in the party room on the day of #FTA4dairy campaign launch. Support for the campaign was, and still is, justified—and I will tell you why.

As mentioned before, the dairy industry is a $13 billion farm, manufacturing and export industry. Australia's 6,400 dairy farmers produce around 9.2 billion litres of milk per year. Forty-three thousand Australians directly employed on farms and in dairy processing. More than 100,000 Australians rely on dairy for their livelihoods, including vets, scientists, mechanics, financial advisors and feed suppliers. Ninety-eight per cent of Australian dairy farms are family-owned businesses.

The dairy industry in my home state of Victoria is the largest rural industry, with a gross value of raw milk production of around $2.52 billion. Victoria supplies around 86 per cent of Australia's dairy product exports, worth around $1.93 billion in the financial year 2011-12. More than 10,000 people are employed in dairy production and more than 9,000 work in the dairy processing sector. Australia is the fourth largest dairy exporter in the world, accounting for seven per cent of global trade. More than 40 per cent of milk production is exported, and Australian exports are worth around $2.7 billion a year. More than 125 Australian companies export dairy. Australian dairy therefore makes a vital contribution to the national economy and, with a farm-gate value of $13 billion, dairy enriches regional Australian communities.

China is the world's largest importer of dairy products and is Australia's biggest dairy export market. In 2013, 109,790 tonnes of Australian dairy exports went to mainland China—14.7 per cent of our total volume of dairy exports—valued at over $460 million. Australian dairy is also an important partner of the domestic dairy manufacturing and processing industries within China. It has been the key supplier, particularly Victoria, of imported dairy heifers to China over the last 10 years, helping domestic dairy development and production, as well as delivering a number of scholarship, training, conference and delegation programs to the mutual benefit of both countries.

Australia has world-class quality assurance systems that ensure the quality and safety of dairy products, and the industry has invested almost $1 billion in modernisation and improving our processing capacity. China is itself a substantial dairy producer, but its domestic industry cannot nearly satisfy demand for growth and is increasingly reliant on imports to fill the gap. Factors contributing to growing dairy demand include continued economic growth, rising disposable incomes, ongoing urbanisation, more working mothers, the relaxation of the one-child policy—with 16 million babies born in China last year—and increasing Western influence in diets. Dairy retail sales value has quadrupled over the last decade.

While Australia could not solely meet this massive demand and is no threat to domestic dairy production in China, our exports have helped to meet the shortfall between domestic supply and demand for higher value added products, including cheese, butter and particularly our high-quality assured infant formula. However, the Australian dairy industry is operating at a commercial disadvantage to New Zealand since our Tasman cousin secured a free trade agreement with China six years ago. It includes early elimination of most tariff lines which have already phased to zero in 2012 or 2013. Sensitive tariff lines such as liquid milk, milk powders, butter and cheese will be eliminated by 2019.

Dairy Australia estimates the value of New Zealand's preferential access at around US$30 million in 2013, growing to US$230 million per annum, as remaining safeguard volume limits on some specific dairy products are lifted between now and 2024. The Australian dairy industry, understandably, seeks a comprehensive 'New Zealand-plus' dairy outcome in China. This means that, at the commencement of an FTA, tariffs on Australian-origin dairy products will immediately fall to the same level as New Zealand. Products not yet at zero tariff level will phase down to zero at an equivalent rate to New Zealand. Tariffs on Australian dairy products currently range from 10 to 15 per cent. The Australian Dairy Farmers estimates such an arrangement would amount to well over $26 million in savings to the industry in saved tariff payments in the first year alone. It projects cumulative potential long-term savings of $950 million to 2025. It is encouraging that Australia's Minister for Trade and Investment, Andrew Robb, advised the recent Australian Dairy Farm Investment Forum that it is his 'major objective with the China FTA to get at least a New Zealand-equivalent deal for the daily industry', with similar support from the Minister for Agriculture, Barnaby Joyce. However, we acknowledge the challenge in reconciling many competing interests and that decisions should ultimately be based on the national interest. I commend Minister Robb and the government for their success in trade negotiations so far with Korea and Japan, particularly Japan given the strength of the Iron Triangle.

Negotiations with China regarding a trade deal have lasted almost 10 years and the Abbott-Truss government hopes to secure a free trade agreement with China by the end of the year. The signs from China are also encouraging. China's foreign minister Wang Yi, during the recent Australia-China Foreign and Strategic Dialogue, stated:

I would like to work with the Foreign Minister and with the Australian side to have an in-depth discussion on a new definition for our strategic partnership, a new blueprint for our trade and investment cooperation and a new plan for our people-to-people and cultural interactions.

Senior executives in the Chinese dairy industry are also reportedly urging both governments to conclude a trade agreement to capitalise on soaring demand for dairy products.

The Abbott-Truss government has just completed another high-level trade delegation to China, led by The National's minister Barnaby Joyce. It follows a similar one in April involving around 600 delegates led by Minister Robb and Prime Minister Abbott. A key message has been Australia's capacity to sell clean green products into the $7 billion per year Chinese market, which is indeed appealing to our Chinese friends given as much as 90 per cent of China's groundwater is polluted and 25 per cent of its major rivers are so polluted that they cannot be used for industry or agriculture.

Minister Robb recently noted that, while China is likely to be able to maintain self-sufficiency in wheat, rice and a number of other major products, demand for safe, untainted products will continue. These are things that Australia is uniquely positioned to be able to supply. We have a role to play in exporting technology to help our Chinese friends deal with the challenges they face in domestic food production. Minister Joyce highlighted an example in which 35 million tonnes of grain is lost each year from storage processes in China alone. That is one and a half times Australia's annual wheat crop.

Two-way agriculture, fisheries and forestry trade with China was valued at over $11 billion last year. Aside from dairy, our other largest exports include wool, grain and oilseeds, and meat and livestock. They are our six biggest import markets, so we are important despite our smaller economy and population. Minister Robb noted that, aside from agriculture, there is strong interest in and opportunities for our resources and energy, manufacturing, tourism and hospitality, health and medical, banking, services, and education, research and training sectors.

I seek leave to have the last paragraphs of my remarks incorporated in Hansard.

Leave granted.

The paragraphs read as follows—

I would like to note the Education Minister, Christopher Pyne, discussed opportunities to strengthen our education ties with China during a recent visit to the country. He highlighted the opportunities for Chinese students as part of our higher education reforms which will help us to attract the best and brightest students from across the world, and our New Colombo Plan which will expand to include China next year.

China is our largest source of overseas students and continues to be Australia's most important education partner.

Securing a free trade agreement with China has been a priority for the Abbott-Truss government and we are getting close to achieving that. As a regional senator, I feel strongly that our dairy farmers, and other producers are delivered a positive outcome. But it must be an outcome that is ultimately in the national interest.