Agricultural and food trade
Agriculture is an important part of Australia’s economy. In 2018-19, agriculture accounted for around 11 per cent of goods and services trade, 2.2 per cent of value added gross domestic product (GDP) and 2.6 per cent of employment.
Australia is a globally significant agricultural exporter. However, some interventions by foreign governments in their domestic agricultural markets impact negatively on Australian farmers. High tariffs can lock Australian exports out of markets, while certain forms of subsidies may unfairly distort production, trade, and prices in both domestic and global markets.
In addition to hurting Australian producers and business, these trade-distorting practices can impede global food security and imperil the livelihoods of farmers in developing nations. DFAT is working at every level — bilaterally, plurilaterally and multilaterally — to address these challenges, securing market access for Australian farmers and leading global efforts to reform agricultural trade rules to ensure they are fair and market-oriented.
The state of Australian agricultural exports
Australia currently exports more agricultural products than we import, with around 70 per cent of Australia's total agricultural production sent overseas. In 2018-19, the value of Australian agriculture exports was almost $49 billion. China continues to be the largest importer of Australian agricultural products, with Japan, the United States and the Republic of Korea also important markets for Australian agricultural exporters.
The Australian Bureau of Agriculture and Resource Economics and Sciences maintains a comprehensive set of agricultural commodities and trade data Agricultural commodities and trade data.
The importance of global agricultural trade
The global agricultural and food system, underpinned by World Trade Organization (WTO) rules, spans international borders, bringing food, fibre, and other essential products to people all over the world. Open trade complements domestic production in ensuring and supporting global food security. No single economy can lay claim to full self-sufficiency. We all rely on international trade for key components of our diet, and for access to inputs, machinery and services that allow us to produce safe and affordable food.
Trade facilitates access to food during local production shocks and across different production seasons, and acts to prevent domestic shortages. Trade also leads to a more efficient and sustainable allocation of factors of production, such as land and water resources. Under open market conditions, agricultural supply chains are able to adapt to occasional and temporary challenges. Without predictable agricultural and food trade we would all be significantly worse off.
Why we need agricultural trade reform
Supporting the Australian agricultural sector, including farmers, processors, and traders, is an important role of all Australian governments. Likewise, the governments of other countries also actively support their agricultural sectors. However, Australian farmers, along with farmers in other efficient agricultural exporting countries, are disadvantaged by trade distortions in global agriculture and food markets caused by foreign government policies.
Such distortions include high tariffs, which decrease or eliminate the competitiveness and access for imports, and government subsidies, which can unfairly alter the costs and profitability of production, which often leads to overproduction. This overproduction can spill over into global markets, suppress prices for key Australian exports, and increase global price volatility.
A major cause of agricultural trade distortions is excessive agricultural subsidies. Governments worldwide spend more than US$525 billion on trade distorting domestic support every year. Major economies like the United States, China, Japan, India and the European Union are among the world’s largest subsidisers. This forces farmers elsewhere to compete against artificially cheap exports or locks these farmers out of what might otherwise be lucrative markets. While the consequences of these policies are perhaps felt most acutely by farmers in developing countries, all farmers are affected, and the global economy is weaker as a result.
Governments, through the WTO's 1995 Agreement on Agriculture, agreed to limits and disciplines on their interventions in agricultural markets. Australia played a key role in the establishment of these rules that, for the first time, disciplined the actions and domestic support measures of governments inside their own territory.
Unfortunately, these disciplines, while a solid foundation, have proven insufficient to sufficiently reform the trade-and production-distorting policies in agriculture. If left unchecked, global trade-and production-distorting entitlements could exceed US$2 trillion per annum by 2030. The Australian Government is therefore pursuing major agricultural trade policy reform to ensure trade-distorting domestic support does not put Australian farmers at a disadvantage and undermine global food security.
Australia has significantly reduced its own tariffs and other trade-distorting agricultural protections since the 1970s. According to the WTO, our simple average applied tariff on agriculture is only 1.2 per cent.
Australian farmers are some of the least subsidised in the world — second only to New Zealand in terms of countries where comparable information is available. As measured by the OECD, just over two per cent of Australian farmer revenues in 2016-18 were derived from government support. Globally, Norway (61 per cent), Iceland (59 per cent) and Switzerland (55 per cent) in Europe, and the Republic of Korea (52 per cent) and Japan (46 per cent) in Asia, provide the highest levels of agricultural subsidies.
Low tariffs and subsidies promote competition and productivity in our agricultural sector, helping Australian farmers provide high-quality and competitively priced products to the rest of the world without the excessive trade-distorting support used by other countries.
Bilateral, regional and plurilateral initiatives
Through our negotiations in bilateral, regional and plurilateral free trade agreements, we aim to improve the access of Australian exporters to key export markets abroad.
For example, the Indonesia-Australia Comprehensive Economic Partnership Agreement provides preferential access for more than 99 per cent of Australia’s agricultural goods exported to Indonesia. The China–Australia Free Trade Agreement significantly reduces or eliminates the tariffs faced by Australian exporters of beef, dairy, barley, wine, and wool. Similarly, the Korea–Australia Free Trade Agreement eliminates or meaningfully reduces Korean import duties on sugar, wine, wheat, beef and dairy. And the Japan-Australia Free Trade Agreement eliminates or meaningfully reduces Japanese import duties on beef, dairy, sugar, seafood and horticulture.
Plurilaterally, the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) provides preferential access for more than $5.5 billion of Australia's dutiable agricultural exports to CPTPP countries.
The Australian Government is also working to address non-tariff barriers (NTBs) affecting Australia’s agriculture products in key export markets.
For more information on DFAT’s work to remove NTBs for Australian businesses see addressing non-tariff trade barriers.
The challenge of domestic support reform can only be comprehensively addressed globally through the WTO. Australia plays a significant leadership role in the WTO and sees the forum as vitally important to maintaining an open, transparent and rule-based global trading system that is vital to our agricultural export interests.
Australia is also the coordinator of the Cairns Group – a group of 19 agricultural trading nations committed to free and fair trade in agriculture. As part of this work, Australia and the Cairns Group have attempted to ‘reset’ the WTO agriculture negotiations on the rules around domestic support through the launch of the ‘Framework for Negotiations on Domestic Support’ in January 2020. The Framework proposes to cap and reduce the sum of current global trade-and production-distorting domestic support entitlements by half by 2030.
For more information on the Framework see Cairns Group.