'Remarkable' trade deal is good news for farmers: Trade MinisterShare via EmailShare on Google PlusPost on facebook wallShare on twitterPost to LinkedinShare on RedditA global trade deal that will make Australian producers more competitive in key industries such as dairy, sugar, grain and wine has capped off an already exceptional year for exporters, write Joanna Mather and Greg Earl.
All 163 members of the World Trade Organisation will abolish agriculture export subsidies. Bloomberg
by Joanna Mather and Greg Earl
An agreement by all 163 members of the World Trade Organisation to end agricultural subsidises should make Australian farmers more competitive in dairy, sugar, grain and wine.
In a deal that coincided with the first day of the Australia-China trade agreement operating, which triggered tariff cuts, the World Trade Organisation decided on Sunday to phase out $15 billion of export subsidies.
The deal at a meeting in Nairobi mainly targets the United States and European Union, which have used export subsidies during low global prices to boost sales into Australia's key Asian markets, which has disadvantaged the dairy industry in particular, according to the Food and Grocery Council.
WTO members also agreed to limit for the first time the ability of export finance to distort agricultural trade. They agreed to conditions that will ensure international food aid does not damage global trade or production in countries that receive it.
Trade Minister Andrew Robb said the abolition of subsidies would make Australian producers of sugar, meat, dairy, grain, wine, fruit, processed foods and cotton more competitive.
"For decades, export subsidies have threatened the livelihoods of Australian farmers," he said in a statement from Kenya. Ending the subsidies has "been a major objective of Australian trade policy since the 1970s".
Under the 1995 Uruguay Round agreement, WTO members were allowed to use more than $15 billion of agricultural export subsidies. More than 90 per cent of these are held by Europe and North America.
BIG PROBLEM
Government sources said that when the European Union last applied an export subsidy on skim milk powder in 2009 the international price dropped by 23 per cent and the cost of EU skim milk powder was 40 per cent lower than the world price. When the European Union applied export subsidies for beef, the world price dropped by as much as 15 per cent.
A former senior trade negotiator, Peter Grey, said the removal of export subsidies would have had much more impact 30 years ago when they were a big problem for Australia, but the weekend's agreement was still historic.
"It is best to take the things that are available at the time in these negotiations rather than worry about other things," he said of the other trade barriers which remain. "While the European Union has moved away from being a big subsidiser, there are still some areas where the deal will have an impact."
James Hogan, the head of commercial banking for HSBC in Australia, said anything that put the Australian agricultural sector on an even playing field with the rest of the world was beneficial.
"We believe Australia's next era of trade growth is linked to agriculture – particularly as markets in Asia continue to urbanise and grow wealth, demanding higher quality produce," he said.
In what National Farmers Federation president Brent Finlay said had been an extraordinary 12 to 18 months, Australia has signed trade agreements with South Korea and Japan, and finalised the Trans-Pacific Partnership.
"The burgeoning demand for premium Australian agricultural product coupled with these great advances in trade policy will help our sector grow," he said.
UPBEAT
Others were similarly upbeat. "The free trade agreements together with this initiative creates the most optimistic environment our agricultural exporters have operated in for decades," Export Council of Australia director and Gadens law firm partner Andrew Hudson said.
"The promise that these export subsidies are going to be phased out will assist our exporters because they will get a level playing field when competing against other exporters."
Australia's bigger problem now may be import barriers and restrictions. In two of the most recent export controversies for Australian farmers – cattle to Indonesia and access to the US sugar market – it was protection barriers for Indonesian and US farmers that caused the problem rather than export subsidies.
Mr Grey said the removal of farm export subsidies agreement was a testament to the way the WTO director general Robert Azevado had been able to find ways to make the institution work despite the logjams surrounding the broader Doha round of multilateral negotiations.
"The more of these things you pick out of the Doha package the less need there is for the Doha negotiation," he said.
He said the removal of export subsidies would have an important secondary impact by now putting pressure on countries which produced surplus farm products using domestic support payments to farmers and then used exports subsidies to get rid of these surpluses. "With export subsidies now gone inappropriate domestic support will be even more in the spotlight," he said.
The current round of WTO trade negotiations, known as the Doha Development Agenda, began in November 2001.
"This is the first time in 20 years that the WTO has delivered an outcome specifically on agriculture," Mr Robb said. "As chair of the Cairns Group of agricultural exporting nations, Australia played a crucial role in achieving this outcome."
The Cairns Group is a collection of 19 developed and developing agricultural exporting countries seeking free trade in agriculture.
Some observers say it is time to abandon the Doha agenda and point to the Trans-Pacific Partnership as an example of the smaller-scale deals that can be successful.
The dollar has dropped 11.5 per cent since January 2015 and this is translating to material export growth, according to HSBC, which is tipping exports to grow by 8 per cent in 2016.
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