Our ability to trade underpins success

By: "Farm Tender" News
Hay & Fodder News
Jun 06, 2019
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By Robbie Sefton - Non Executive Director at Prime Media Group.

The Indonesia-Australia trade agreement signed in March was another important deal for Australian agriculture, and follows a series of similar agreements the current government has forged with China, Japan and Korea.

Australian agriculture produces far more than our domestic market can consume, and often needs a greater return on its produce than the domestic market can pay. Our agricultural success is built on our ability to trade.

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It's worrying, then, that two of our biggest trading partners, the United States and China are engaged in trade brinkmanship that shows no signs of resolution.

It's the nature of trade that if a commodity is blocked from flowing to one country, it will flow to another. Australia has often been adept at exploiting these sudden diversions in trade flow: our high-value beef trade with Japan and Korea was the result of swift and inspired action when US beef was locked out of these countries in a BSE scare.

However, as formerly developing nations have modernised their agriculture and started to generate surpluses, global agricultural trade has become more congested than it used to be. And Australia is doing very nicely as things stand.

China has swiftly become the primary destination for our agricultural commodities: it holds the lead by several lengths. In 2017/18 Australia pushed $11.89 billion of agricultural product into China (led by wool and beef), versus $4.74b into Japan and $3.83b into the US.

Across the Pacific, the US has among other things become a major importer of Aussie grassfed beef – about 230,000 tonnes of it in 2017-18 – supported by US consumer desire for grassfed meat, and the US cattle industry's small grassfed footprint.

The falling-apart of trade flows between these two behemoths may have advantages to Australia ... or it may not. There are too many factors at play to make predictions. Where will US produce go if it doesn't go to China? Will either country, in a renewed zeal for trade barriers, want certain loyalties from Australia in exchange for trade doors being left open?

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Then there is Brexit, and the anti-European Union sentiment expressed in the recent European elections. These are mostly over questions of national identity, but free trade could become roadkill along the way.

At a time when Australia has finally matured into its role as global free trader, the world seems to have shifted course back towards protectionism.

Hopefully it's just a brief tacking manoeuvre to accommodate populist politics, and it will be recognised that protectionism and populism have never been good ideas – but Australia has to deal with whatever trade environment it finds itself in.

Meanwhile, we can only applaud and support governments that open trade doors for us, as the incumbents have done. Open doors mean opportunity; closed doors are merely closed.

Robbie Sefton has a dual investment in rural Australia as a farmer, producing wool, meat and grains, and as managing director of national marketing communications company Seftons.

https://seftons.com.au/