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Export markets for Australian seafood: ABARE Outlook Conference 2004: speakers papers.



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OUTLOOK 2004 SPEAKERS PAPERS

Speaker Ron Edwards Rock Lobster Industry Advisory Committee

Title Export Markets for Australian Seafood

Session Seafood Outlook 2.00-3.30pm Tuesday 3 March National Convention Centre, Canberra

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EXPORT MARKETS FOR AUSTRALIAN SEAFOOD: Critical issues and future growth

Ron Edwards BEc, MEd (Hons), Dip Tch.1

INTRODUCTION

This paper will examine the critical issues facing Australian seafood marketing, in particular, the markets for high value seafood such as Australian penaeid prawns and western rock lobster.

This paper discusses where these industries are currently marketing their products and indicate where the potential is for future growth. This paper will contend that the future of these industries lies with environmentally sustainable fisheries that produce safe quality food. The challenge is to communicate these characteristics to the international market and it is argued that generic levies provide the necessary mechanism to achieve this.

BACKGROUND

Over the last three decades the Australian seafood industry has experienced considerable growth. The total gross value of Australian fisheries production in 2001/2002 was $2.43 billion and $ 2.3 billion in 2002/2003 (ABARE Report Australian Fisheries Statistics 2002, 2003).

It is estimated that the Australian seafood industry annually injects $10 billion worth of income activity into the Australian economy (Australian Seafood Industry Council, 2004). The export value of Australian seafood in 2001/2002 reached $A 2.1 billion (ABARE 2002) and $ A 1.84 billion in 2002/2003 (ABARE 2003). By comparison, the Australian wine industry contributed $2.3 billion to Australia’s exports during 2002 reporting a 21% increase during that year (Department of Foreign Affairs and Trade, 2002).

State wild caught fisheries contribute a gross value of production (GVP) of $1.288 billion (ABARE 2002, and in 2002/2003 $1.214 billion (ABARE 2003) Fisheries Research and Development Corporation, 2002). Aquaculture production continues to be a growing sector of activity with a GVP reaching $732 million in 2002 (Australian Seafood Industry Council, 2004) and $743 in 2003/2003 (ABARE 2003). Total fisheries production in 2002/2003 was $2.3 billion (GVP) (ABARE 2003). Australian fisheries classified as Commonwealth fisheries contributed $480 million to the Australian GVP outcome in 2001/02 and $417 million in 2002/2003 (ABARE 2003, Australian Seafood Industry Council, 2004).

1 The author has been Chairman of the Australian Prawn Industry Association and is currently the Chairman of the Rock Lobster Industry Advisory Committee, a statutory committee to the Western Australian Government.

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The major constituent components of the total GVP of Australian fisheries production of $2.43 billion in 2002 were crustaceans $996 million, fish products $869 million, molluscs $540 million and other products $25.2 million. In the fish component of $861 million, tuna contributed $323 million. Other commodities are rock lobster $509 million, prawns $428.7 million, crab $54.4 million, abalone $247.4 million, scallops $23 million and oysters $57 million (Australian Seafood Industry Council 2004, ABARE 2002). In the non-edible area of Australian production pearls contributed $404 million in export income. In 2002/2003 the major constituent components of the total GVP of Australian fisheries production of $2.3 billion were crustaceans $ 873.3 million, fish products $856.8 million, molluscs $523.5 million and other products $43.7 million. Rock lobster contributed $459.9 million, prawns $354.9 million, crabs $48.8 million, abalone $212.4 million, scallops $32.8 million and pearls contributed $331.9 million in export income.

Major contributing factors to this significant industry growth have been the skill and expertise of the Australian fishing industry, sound government policies, favourable terms of trade, growing export markets in the Asian Region and the development of specific high value seafood lines such as southern blue fin tuna, western rock lobster and Australian penaeid prawns.

In addition to the trade value of the Australian fishing industry there is a very significant employment effect generated by the industry. The Australian Seafood Industry Council estimates this impact to be in the order of 100,000 jobs produced either directly or indirectly by the industry. Critically, a large proportion of the jobs created are in regional Australia thus creating the great benefit of employment activity outside the major population centres.

The western rock lobster industry directly employs approximately 4,000 people primarily in regional communities (Western Australian Fishing Industry Council, 2004). The average catch of that fishery is 10,000 to 11,000 tonnes with the 1999/2000 season producing a then record of 14,500 tonnes. The current 2003/2004 season is expected to yield 14,400 tonnes.

The Australian prawn industry produced $428.7 million in GVP in 2002 and $354.9 million in 2002/2003. The largest individual fishery is the Commonwealth managed Northern Prawn Fishery that contributes on average $150 million to the annual catch. The Northern Prawn Fishery in the Gulf of Carpentaria and Joseph Buonaparte Gulf has been at the forefront of introducing environmental management techniques such as turtle excluding devices and by-catch reduction devices. The Shark Bay Trawl Fishery in Western Australia is a model of self management in which the industry members agree upon non-trawl areas in sensitive and nursery areas of the fishery. The Spencer Gulf Prawn Trawl in South Australia is also a model fishery in the adept use of quotas to establish fishing times by agreement. The prawn industry is also an important contributor to regional employment.

THE WORLD MARKET FOR SEAFOOD

Growth

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The Australian fishing industry sells predominantly to the world export market. In this respect, it is in competition with other food sources such as beef, pig meat and poultry. Additionally, Australia’s wild capture fishery such as, prawns and lobster compete with aquaculture seafood products in the world export market. It is instructive to consider an analysis of the world wide growth in animal protein production from 1990 to 2002.

Table 1 ‐ courtesy of Dr Roderick McNeil and Seafood Directions 2003.

The small growth rate in wild capture fisheries reveals the obvious point that most wild catch fisheries are at capacity and most are in fact overfished. Australia and New Zealand are important players in the world of sustainable fisheries. Both countries have developed well managed sustainable fisheries such as New Zealand hoki and western rock lobster. Given that wild capture fisheries are operating at capacity, it is clear that the contribution of aquaculture to the world seafood trade will grow in significance.

Another conclusion to draw from this pattern of production and trade development is that for Australian seafood producers the future lies in sustainability, quality, food safety and value-adding. Recent concerns with food safety in beef and poultry and amongst some aquaculture prawns, gives a premium to matters of food safety and quality for Australian seafood.

Market share

Within the world export market both wild catch and aquaculture seafood is a significant source of animal protein. Following is a table setting out the 2002 world animal protein production in millions of tonnes.

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Table 2 ‐ 2002 World Animal Protein Production (Millions of Tons). Table courtesy of Dr Roderick McNeil and Seafood Directions 2003.

It is apparent from this table that seafood is emerging as a major food source in competition with beef, poultry and pig meat. As disease risks emerge in these latter food sectors it is likely that there will develop a premium for the production of clean safe and sustainable seafood.

Wild catch/aquaculture

Historically, most seafood was sourced from wild capture. Since the mid 1980’s aquaculture has come to play a growing role in annual seafood production. The table below illustrates the phenomenal growth in aquaculture over that time.

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Table 3 ‐ Annual Seafood Production. Table courtesy of Dr Roderick McNeil and Seafood Directions 2003.

Based on this table it appears likely that over time the aquaculture sector will come to match the wild catch sector as a source of seafood for the worlds markets.

Comparison of seafood and meat consumption

The table below demonstrates that both meat and seafood consumption have increased over time. As lifestyle and health issues play a greater role in the market place the demand and consumption of safe quality seafood can be expected to expand.

Table 4 - courtesy of Dr Roderick McNeil and Seafood Directions 2003 ‐ Per Capita consumption of Animal protein

Per capita grain consumption

It is valuable to also consider figures in relation to per capita grain consumption which are contained in Table 5. When considered in conjunction with Tables 1 and 2 Table 5 demonstrates the shift from grain consumption (carbohydrates) to protein consumption over the last decade. It is likely that this shift in consumption patterns is related to the stages of economic development of various countries. The decline in per capita grain consumption can be matched against the growth in protein consumption of which seafood consumption features prominently.

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Table 5 - courtesy of Dr Roderick McNeil and Seafood Directions 2003 ‐ Per Capita Grain Consumption

ANALYSIS BY SECTOR

The Rock Lobster Industry

Export markets

Table 6 provides an analysis of the share of export markets between live, frozen, cooked and tails for Australian rock lobster.

Australian Exports of Crustaceans and Molluscs Rock Lobster

1999-2000 2000-2001 2001-2002 2002-2003

Tons $’000 Tons $’000 Tons $’000 Tons $’000

Whole

Live, fresh or chilled 8,080 295,755 7,670 317,708 6,649 307,341 5,873 228,064

Frozen 988 34,647 1,175 42,134 788 28,941 775 25,184

Cooked 4,280 141,734 3,037 100,942 2,261 84,109 2,821 90,548

Tails (fresh/chilled/frozen) 1,693 95,289 1,037 60,309 870 65,362 1,698 112,922

Other 448 10,231 426 11,554 374 6,855 368 6,388

TOTAL 15,489 577,656 13,345 532,647 10,942 492,608 11,535 463,106

Table 6 Source: ABARE Fishing Industry Statistics 2003/2004.

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The key markets for Australian rock lobster are:

♦ Japan

♦ Chinese Taipei (Taiwan) ♦ Hong Kong (China) ♦ The United States of America.

In the “live” trade the main markets in 2001/2002 were Hong Kong (China) who took 3,938 tonnes worth $A187 million, Japan 1,413 tonnes worth $A63 million, Chinese Taipei (Taiwan) who took 881 tonnes worth $A37 million and France 78 tonnes at $A3 million (See Appendix A). By 2002/2003 the “live” trade had declined both in volume and value principally due to a significant loss of market share in Hong Kong (China) 3,481 tonnes worth $A140 million, Chinese Taipei (Taiwan) 686 tonnes at $A21.7 million and Japan 1,332 tonnes at $A50 million. (See Appendix A)

The “live” trade has been an emerging area of market growth in recent years. It is considered to be a high value market. However, the loss of market in “live” product arose principally from an excessively high beach price for western rock lobster, being $A35 per kilogram at the beginning of the season on 15 November 2002. This unrealistically high beach price was unsustainable in the prevailing market conditions and the main markets for “live” product then sourced lobster from countries such as Mexico, Cuba and South Africa.

The market overhang of product resulted in a reduction of the beach price to $A22 per kilogram by January 2003 and a subsequent fall of the beach price to a notional $A10-12 per kilogram by the end of the season. Additionally, product that could have been sold “live” was then sold as frozen, cooked or tails. Some industry estimates indicate that between 60 and 100 containers of product were left unsold at the end of the 2002/2003 season. By that time the markets for lobster products in Asia were being impacted by the excessively high initial beach price. The high season opening beach price removed some buyers from the market along with the strengthening Australian Dollar and the SARS (Severe Acute Respiratory Syndrome) crisis. It is worth noting that the beach price for western rock lobster began at $15 per kilogram for the 2003/2004 season. This price has been satisfactory for clearing the market. The current beach price at February 2004 is $17 per kilogram.

The frozen market in 2001/2002 was shared between Chinese Taipei 183 tonnes at $A6.7 million, Japan with 387 tonnes at $A13.8 million and the United States with 144 tonnes at $A6.5 million. The cooked market for lobster is found principally in Chinese Taipei 1,030 tonnes worth $A38 million, Japan 785 tonnes at $A28.7 million and Singapore 265 tonnes at $A10million. In 2002/2003 Japan took 569 tonnes worth $A18 million, Chinese Taipei 109 tonnes at $A4 million and China 59 tonnes at $A1.4 million.

The “tails” market is principally in the United States where in 2001/2002 831 tonnes were sent for a return of $A61.9 million (See Appendix A). In 2002/2003 a larger volume of tails were sent to the United States to compensate for the losses experienced in the “live’ market. The 2002/2003 data shows that 1,475 tonnes of tails were sent to the United States to a value of $A102 million (See Appendix A).

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Key features in trade

Sustainability

The western rock lobster industry took a major step towards establishing third party audited sustainability status when in March 2000 it received certification by the London based Marine Stewardship Council (MSC). This organisation is backed by the Packard Foundation in the United States and supported by the World Wide Fund for Nature (WWF) and Unilever. The recognition by the MSC meant that the industry was the world’s first fishery to be given this accolade. Importantly, the industry in cooperation with the Fisheries Department of Western Australia was able to provide some forty years of catch data to demonstrate the achievement of stock sustainability. The modelling process using stock assessment techniques, including puerulus aggregation devices, has been able to achieve high levels of catch predictions for industry management purposes. In association with management methods such as minimum size restrictions, escape gaps in lobster pots, protection of large females and bans on taking breeding females, the industry has been able to preserve breeding stocks.

Significantly, the industry is a limited entry fishery with 596 licensed boats and 69,000 lobster pots that are required to meet size specifications. The existence of input controls means that biological sustainability of the fishery has been given a priority in the management strategy for the fishery.

Quality

The management of the west coast fishery has been at the forefront of maintaining codes of practice in lobster handling techniques designed to ensure safe handling of lobster in terms of occupational health and safety as well as food handling and safety. The latest manual designed to address these area of activity will be released this year by the Western Australian Fishing Industry Council in conjunction with the Western Rock Lobster Council and the Western Rock Lobster Development Association

In 2001/2002 season in addressing the market needs, the industry also introduced a ban on the use of beef hides and hocks as bait in lobster pots. The industry was responding to concerns in the Asian market about the interaction with the fishery from other animal species. Additionally, at the time, the market was reacting to the outbreak of mad cow disease and foot and mouth disease. There has been complete adoption of the bait handling practices in the commercial sector.

In 1996, the western rock lobster industry asked the Australian Quarantine Inspection Service (AQIS) to undertake a comprehensive risk assessment on the use of imported herrings and pilchards as lobster bait. These bait sources received a risk clearance. At present AQIS provides risk assessments in relation to imported lobster bait sources for the rock lobster industry.

In the live sector of the lobster market the question of leg loss has been of concern in that live lobster with lost legs are marked down in market price. The industry is currently trialling cold stunning techniques designed to prevent leg loss. This research project is

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funded by the Fisheries Research and Development Corporation and is supervised by Dr Glenn Davidson at the Geraldton Fishermen’s Cooperative.

A responsive management system

The western rock lobster industry is currently undertaking a review to determine the best management system for the west coast fishery. The National Competition Policy is providing the immediate need for this review.

Hon Kim Chance, Minister for Agriculture and Fisheries has announced that:

“The current input based management regime for the Western Rock Lobster Fishery remains in place until at least December 2006 with the Department of Fisheries and the Rock Lobster Industry Advisory Committee to review and quantify any further efficiency gains from additional changes to the current regulatory regime, including the costs and risks of management failure, over the next 2-3 years”. (Hon Kim Chance, Minister for Agriculture and Fisheries, January 2004).

The Minister has indicated that the objective for the assessment process is:

“To investigate alternative management strategies using the current management package as the benchmark with a view to providing the best long-term socio-economic return to the state from the ecologically sustainable use of the western rock lobster resource by:

(a) providing the greatest incentives and opportunity for growth in economic return from all sectors of the rock lobster industry to Western Australia; and

(b) in the context or providing a net socio-economic benefit to the Western Australian community, encourage the maintenance and development of regional communities.” (Hon Kim Chance, Minister for Agriculture and Fisheries, January 2004).

The review will consider three management scenarios:

1. The status quo of an input controlled management system.

2. An individually transferable effort system.

3. An individually transferable quota system.

The review process will take place in the context of meeting the ecological management standards set at the Commonwealth level by the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) and the certification requirements of the MSC.

One element of the review that will attract attention for the possibilities for improvement of the industry’s performance is the potential for improved market outcomes. As part of the global food industry the rock lobster industry needs to take account of a number of factors such as:

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♦ The activities of competitors in existing markets.

♦ The possibilities for adapting the current management regime in order to meet the competition.

♦ The potential for new markets.

♦ The possibilities for extending the season to target specific markets.

♦ The importance of year round supply to the market.

♦ Recognition of market based activities such as religious events and cultural events.

♦ Opportunities for value adding in specific markets.

At present, it is considered that the two key drivers for supply to the export market are:

1. Beach price.

2. Storage capacity (in particular freezer capacity).

Rock lobster strategies

As indicated, the rock lobster industry in Western Australia has led the way in achieving third party certification for environmental sustainability having achieved recognition of this status in 2000 by the MSC. This outcome has enabled the industry to achieve some degree of market leverage since this recognition was the first in the world for any fishery. Since that time other fisheries have also been recognised by the MSC. Higher levels of certification of other fisheries will assist the rock lobster industry to achieve a critical mass for environmentally sustainable fisheries. The other element to be achieved in this process is for there to be a much higher level of recognition of MSC in the Asian Region. At present the MSC is well recognised in Europe and North America however the level of awareness in the key Asian markets such as Japan, Taiwan and Hong Kong (China) is too low.

Generic levy

There is a clear recognition within the western rock lobster industry of the importance of a generic levy to promote the product. The Rock Lobster Council is currently actively pursuing the issue amongst lobster fishermen in Western Australia. Additionally, the Western Rock Lobster Development Association is keen to provide a levy from its processor members. The interest arises from recognition by industry players that the market premium for western rock lobster has disappeared in key locations such as Japan, Taiwan and the United States. Lobster from places such as Mexico, Cuba and South Africa has eroded the market position of western rock lobster

Eco-labelling

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The industry in Western Australia has been mindful of the value of an eco-label in relation to the MSC certification. It recognizes that in the future, in particular in Europe and North America an eco-label will be a valuable component of a trade development strategy.

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The Australian Prawn Industry

Introduction

In terms of its export markets the Australian prawn industry has experienced the same pattern of competition as the western rock lobster industry. There has emerged significant competition in the last ten years, largely from aquaculture prawns grown in Thailand, Indonesia and China as well as from locations such as Ecuador and Bangladesh. Difficulties with food safety, such as chemical contamination, have meant that the supply of the competitive product has been varied. Most recently China has become the source of large quantities of vannamei aquacultured prawns (estimated to be 400,000 tonnes) that are providing fierce competition for Australian sea caught prawns.

Main fishing grounds

The main fishing grounds for Australian sea caught prawns are:

♦ The Gulf of Carpentaria

♦ The Joseph Bonaparte Gulf (together with the Gulf of Carpentaria this constitutes

the Northern Prawn Fishery)

♦ Torres Strait

♦ Kimberley Trawl

♦ Broome King Prawn Fishery

♦ Exmouth Gulf

♦ Shark Bay

♦ Gulf St. Vincent

♦ Spencer Gulf

♦ New South Wales Coast

♦ Queensland East Coast

Export markets

Table 7 provides an analysis of the share of export markets between headless, whole and other prawns.

Australian Exports of Crustaceans and Molluscs Prawns

1999-2000 2000-2001 2001-2002 2002-2003

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Tons $’000 Tons $’000 Tons $’000 Tons $’000

Headless 926 20,540 1,005 25,162 785 18,607 580 12,002

Whole 10,096 209,386 10,789 258,481 10,870 239,367 8,739 192,567

Other 608 13,863 330 7,405 270 4,853 213 3,676

TOTAL 11,630 243,789 12,124 291,048 11,925 262,827 9,532 208,245

Table 7 Source ABARE Fishing Industry Statistics 2003/2004

The market for headless prawns in 2001/2002 was principally in Japan 539 tonnes worth $A14 million. The whole prawn market was shared principally between Japan 4,194 tonnes worth $A129 million, Hong Kong China 1,777 tonnes at $A32.9 million, China 1,414 tonnes at $A23 million, Thailand 1,076 tonnes at $A15 million and Spain 915 tonnes $A15.6 million (See Appendix A).

By 2002/2003 the market for prawns reflected, to some extent, the experience of the lobster industry in terms of the decline in the high value market for seafood. In relation to prawns, the rapid expansion in the supply of aquaculture prawns from China in particular impacted upon the market demand for Australian sea-caught prawns. The 2002/2003 data indicates that Japan took 428 tonnes to the value of $A9.6 million. The whole prawn market was located principally in Japan 3,815 tonnes at $A105 million, Hong Kong (China) 1,388 tonnes at $A26 million, Spain 1,223 tonnes at $A17 million and China 780 tonnes at $A14.9 million (See Appendix A).

Key features of trade (Australian sea-caught prawns)

Sustainability

In recent times as a major trawl industry, the Australian wild capture prawn industry has directed a great deal of attention to the issue of sustainability. The largest, the Northern Prawn Fishery, has undergone significant restructuring efforts in order to reduce catching pressure on the fishery. The shift to a gear units management system in 2001 was seen as a method of introducing a more subtle input control management regime that could be adapted to catch predictions in the fishery. The improved catches in the 2003 season have borne out the wisdom of the restructuring of effort in the Northern Prawn Fishery. This approach has been successfully combined with time closures to enable the fishery to recover.

The catch data for the trawl fisheries in Spencer Gulf in South Australia, Exmouth Gulf, Shark Bay and Broome in Western Australia demonstrate that they are sustainable. This has been achieved through input controls in Western Australia and quota in South Australia.

Quality and safety

The Australian prawn industry has been at the forefront of recognizing the importance of food safety and quality. The industry with the support of funding from the then

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Department of Industry Science and Technology and later from the Fisheries Research and Development Corporation began the development in 1997 of a Prawn Quality Manual to establish a “hands on” Code of Practice. The manual was trialed on board trawlers in the Shark Bay Prawn Trawl before being introduced through the Australian industry. Workshops were conducted and the manual was introduced to skippers and deck hands throughout the industry. One important shift in the Code of Practice related to the emergence of the processing of the catch on board trawlers whereas at the beginning of the quality and safety programme the majority of the catch was still handled in onshore facilities. The adoption of the manual has meant that much of the industry is of a Hazard Analysis Critical Control Point standard in relation to post-harvest handling on board trawlers.

The Australian Prawn Promotion Association (APPA)

In 1989 a group of industry representatives commenced negotiations to establish an industry body as a vehicle for the major prawn exporters and producers to meet the increasing competition on major overseas markets from farmed prawns produced in low cost South East Asian countries. Production from these countries was seen as a serious threat to Australian sea-caught prawns. The best solution to combat this threat was considered to be to vigorously promote the clean and natural qualities of the Australian product. They worked towards the establishment of the Australian Prawn Promotion Association (APPA).

At the outset the aims of APPA were to promote Australian sea-caught prawns and in particular to:

♦ Stabilize and maximize prices.

♦ Explore the advantages of a quality trade mark to promote the identity and quality

of the product.

♦ Establish the product on the Japanese food services market and reduce reliance on

supermarket outlets which were under strong competitive pressure from low-priced

South East Asian farmed prawns.

♦ Promote the product to existing and new markets.

♦ Consider the merits of further value-adding on-board and on-shore.

♦ Explore opportunities for joining other Australian food exporters and service

providers (tourist operators, airlines etc.) in promotion activities.

♦ Seek the assistance of the Commonwealth and State Governments and their

agencies to promote the product.

Initially, attempts were made to fund promotion activities with voluntary fees from the thirty members. However, it soon became apparent that the only way to mount effective programs was through a compulsory levy on exports. Achieving agreement from both the

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catching and processing/exporting sides of the prawn industry was a long and difficult task. Eventually, in 1993 industry-wide agreement was reached and the Commonwealth Government legislated for an industry levy, which became effective from July 1995. To meet objections from one exporter, the levy was in two separate parts ‐ on exports and on export registered prawn trawlers.

To meet the requirements for a levy status the Australian Prawn Promotion Association Limited was registered with the Australian Securities Commission on 30 October 1994.

The mission of APPA was;

“To increase the awareness, profile and value of Australian Sea caught prawns and the prawn industry in global markets.” (APPA Five Year Plan 1995- 2000)

This mission of APPA arose following extensive consultation within the industry. The mission was based upon a realization that the Australian sea caught prawn industry needed to establish its presence in world markets, especially in the face of the threat posed by aquaculture prawns.

The development of APPA saw the evolution of a philosophy that drew upon the views of industry players and approaches to management reflective of the 1990’s. In effect, the industry was aiming at a concept of total quality management within sea caught prawn production.

APPA saw itself as fostering the concept of “From the Sorting Table to the Dining Table” which involved the following:

“To ensure that all sectors of the industry recognize that they are mutually dependent on the consumers of prawns.

To ensure that the industry recognizes that it is a food industry producing a high quality, high value seafood taken from the pristine waters surrounding the Australian continent.

To ensure that the APPA logo becomes recognized as the prawn symbol of quality.” (APPA Five Year Plan 1995-2000)

This philosophy reflected the view of key industry players that the industry needed to: “1. Work together to meet the needs of consumers. 2. Take advantage of the high quality of the product represented by sea caught prawns. 3. Ensure that standard industry practice was aimed at quality management. 4. Ensure that for marketing purposes, the APPA logo became well established

within the industry and in the minds of consumers.” (APPA Five Year Plan 1995-2000)

These approaches to the development of APPA reflected the views of some within the industry and relied upon a belief in generic promotion funded through a levy.

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Generic levy

In 1989 those industry leaders, as mentioned above, who believed in generic promotion began negotiations for a voluntary levy within the industry and the Federal Parliament to achieve this outcome. They were of the view that APPA should be funded ultimately by a boat levy and a per kilogram levy on Australian export prawns and boats working in the export sector such as the Northern Prawn Fishery.

As previously indicated APPA achieved levy status in 1995 following extensive negotiations within the industry. From that time, APPA was funded principally through the compulsory levies imposed under Commonwealth Legislation (Prawn Boat Levy Act 1995 and Prawn Export Charge Act 1995). The Commercial Prawn Boat Levy and Sea Caught Prawn Export Charge provided approximately $150,000 and $230,000 per year respectively for the years 1995/96, 1996/97 and 1997/98 until 1 January 1998. The funds raised by the levy were to be used to promote the quality and safety of Australian sea caught prawns in the Asian market, in particular Japan.

The levy came under challenge in late 1997 from some within the industry who objected to paying a levy for prawn promotion. The Federal Minister for Fisheries at the time, Hon Warwick Parer conducted a plebiscite amongst boat owners and processors and the levy was zero-rated. APPA continued operations until 2001 when the levy monies were entirely expended. By 2001 APPA had changed its name to the Australian Prawn Industry Association (APIA). APPA and APIA were able to point to successes on behalf of the industry including the Code of Practice, the initiation of an annual “Seafood Event” in Federal Parliament and the negotiation of tariffs on Australian Prawns into the European Union.

Eco-labelling

The Australian industry recognizes the value of eco-labelling and has been concerned to maintain sound environmental credentials. This is not an easy task in relation to trawl activities but nevertheless the industry has been willing to adopt turtle excluding devices in the Northern Prawn Fishery and the Shark Bay Prawn Trawl as well as by-catch reduction devices in the Northern Prawn Fishery.

A JOINT TRADE INITIATIVE

The prawn and lobster industries initiated a very significant trade strategy to improve their trade prospects through market diversification. In 1998 the rock lobster industry joined the prawn industry in commencing a campaign to improve tariff access into the European Union. At that time, the industry was faced with discriminatory tariffs for exporting product into Europe. The objective of the campaign was to achieve improved access into Europe leading to the development of the European Union as an alternative market to the Asian market. The mechanism sought was through an Autonomous Tariff Quota (ATQ) for a specified product, for a limited period of time and for a set volume. It was concluded by the leadership of these industries that an industry led trade negotiation campaign would be feasible as a means of market development. The World Trade Organisation negotiating rounds were underway but it was felt that this process would be too drawn out to yield any early results for the industries seeking improved market access into Europe.

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In 1998 at the commencement of the campaign the tariff on Australian penaeus prawns into Europe was 13.2% whilst the tariff on prawns from developing countries in Africa, South America and Asia ranged from 0%, 4% to 6%. The tariff on Australian panulirus lobster into Europe was 15% whilst the tariff on Canadian homarus lobster was 8%.

The campaign was conducted through European industry, the European Parliament, the European Commission, Australian Embassies and the Western Australian Agent-General’s Office in London. The Department of Foreign Affairs and Trade and the Department of Agriculture Fisheries and Forestry played significant roles in the background. This arose from a strategic decision to keep the negotiations between Australian industry and European industry and governments in order to avoid the complications of a government to government tariff round of negotiations.

Success was realised in 2001 when the tariff on Australian prawns into Europe was reduced from 12.5% to 3.6% for 10,000 tonnes. Unfortunately at the same time the representative body for the prawn industry (APPA) ran out of levy money and was unable to continue the campaign. The initiative was however well worthwhile and demonstrated that such a campaign for an ATQ into Europe could produce results.

In December 2003 the tariff on uncooked spiny rock lobster into Europe was reduced from 12% to 6% for 1500 tonnes of product. It is now a matter of contention as to whether the industry can fully exploit this breakthrough. One issue is the limitation of the category to uncooked lobster. Western Australia had developed a “live” trade with France but this tariff concession does not extend to that form of product. It will be important for the industry to seek to extend the concession to live and cooked forms of product and the initial success should be capitalised on.

When reflecting upon the European experience both industries are well placed to develop export markets in the European Union. Within these markets issues of sustainability, food safety and quality and eco-labelling are given a high priority. Whilst these markets remain underdeveloped as export sources for Australian prawns and lobster it is considered that they deserve much greater attention in the future. The prawn and lobster industries have already proved that better market access into the European Union is achievable. With the attention that these industries already give to environmental sustainability and food quality and safety it is considered that they should seek out further market opportunities in Europe. Funding from a levy source would be a significant factor in establishing generic promotion and as an essential source of funds for trade and market access of this kind.

It also worth considering whether promotion of prawns in Japan, Chinese Taipei (Taiwan) and Hong Kong (China) would be feasible if significant levy monies were in place. Additionally the western rock lobster industry is considering whether levy funds could be collected to fund a campaign for marketing tails into the United States.

CONCLUSION

This paper has examined the critical export marketing issues facing the Australian prawn and lobster industries. It is apparent that both the Australian rock lobster and prawn

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industries market predominantly into the Asian region with other significant markets being the United States (for lobster tails), France (for live lobster) and Spain (for whole prawns).

The pattern of growth in protein consumption is expected to continue and this provides important opportunities for these two industries. In terms of product differentiation in the world markets these industries need to consider how best to promote their status of being environmentally friendly suppliers of safe quality food. It is considered that generic levies represent an important mechanism for achieving market advantage and differentiation for both rock lobster and prawns.

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APPENDIX A

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