Australian farmers look to be the main beneficiaries of the Australia-China Free Trade Agreement. The door has been opened even more widely for Australian produce to enter the world’s biggest market. According to a recent study conducted by The Economist, China is the second fastest growing food and beverage market out of all major Asian countries, with an average annual growth rate of 30% in the past five years, according to the Ministry of Commerce.
From the viewpoint of the National Farmers’ Federation (NFF), the agreement represents millions of dollars in export value to Australian farmers.
NFF president, Brent Finlay, stated, “China is already our major trading partner with Australian farm exports doubling in five years to be valued at over $7 billion in 2013.
“The agreement is an outstanding achievement that will build on Australia’s important trading future with China and provide significantly improved international market access for Australian agricultural goods.
“Based on our own growth and the New Zealand experience we could conceivably see a tripling in agricultural exports to China within the decade. We must strive to take full advantage of the improved outcomes.
“The landmark agreement will see the elimination of tariffs on Australian lamb, beef, horticulture and dairy products to China. It’s an enormous achievement that will deliver increased options and improved returns for Australian farmers.
Tariffs on dairy products such as cheese, milk powder and butter will be phased to zero, resulting in millions of dollars in tariffs saved. Similarly, tariffs for products like strawberries, potatoes, cut flowers and other horticulture products will be reduced to zero over five years. In the red meat sector, Australian lamb and beef will see an elimination of tariffs across the board, including products like skins and hides.”
The agreement puts these Australian primary industries on an equal footing with New Zealand’s and provides more opportunities to market product resulting in increased incentive to invest, innovate and grow.
Sugar, rice, cotton and some grains, were excluded from the agreement. These products will be in high demand in China over coming years and the NFF is now campaigning to have these included in the review arrangements after three years.
“Beyond border issues, protocols and technical measures that facilitate trade must be improved going forward. We see this agreement as a critical step to help improve the current situation,” Finlay added.
Of course, the removal or reduction of tariffs does not guarantee that Australian beef, dairy and wine producers are best positioned to take their place on the world stage as China’s premium providers.
Tony Pititto, national head of food & beverage, Grant Thornton Australia, has outlined what Australian producers need to consider to take advantage of the opportunities given.
“While the FTA will help Australian producers decrease their reliance on the Australian market and its strong supermarket position, developing the right relationships with Chinese customers will be crucial to Australian companies being able to take advantage of greater access to Chinese markets.
“Our global research indicates approximately one third of all Australian food & beverage companies surveyed will look at acquisitions in the next 12 months, and a further one third will look at selling their organisations or businesses over the same period.
“The FTA will, in some cases, increase the investment level at which approval from the Foreign Investment Review Board is required (estimated to increase from $248 million to $1 billion). With this reduced regulation, the industry faces a greater wave of acquisitions, and we expect interest from Asian investors in the sector to continue to grow. Australian producers looking to sell should consider their succession planning and exit strategies to ensure they are well positioned to take advantage of the incoming investment opportunities about to come our way.”
To reap the rewards of this market of 1.3 billion people, the world’s largest consumer market for food and beverage (F&B), surpassing the United States in 2011, producers will have to understand the rules. Austrade has set out a clear explanation of trends and opportunities as well as labelling, food safety and marketing guidelines here.
