Trade and the Australian Dairy Industry. and the Australian dairy industry

Transcription

1 Trade and the Australian Dairy Industry and the Australian dairy industry

2 Dairy Australia was commissioned by the Australian Dairy Industry Council (ADIC) to prepare this report. ADIC The ADIC is the dairy industry's peak policy body coordinating industry policy. Comprising farmers (via Australian Dairy Farmers Ltd) and manufacturers (through the Australian Dairy Products Federation Inc.), the ADIC represents the whole industry on national and international issues. Visit Dairy Australia Dairy Australia is the national services body for dairy farmers and the industry. Our role is to help farmers adapt to a changing operating environment, and achieve a profitable, sustainable dairy industry. Visit

3 Contents Executive summary 4 Introduction 5 Australia as a dairy supplier 6 International trade is important to future industry growth 7 Demand for dairy is growing 7 Key export markets for Australian dairy 8 Australian dairy competitors and international trade 9 Cooperatives Working Together (CWT) 10 North Asian markets 11 Japan 11 China 11 South Korea 12 Taiwan 13 South-East Asian markets 13 Middle East markets 13 Trade barriers and market distortions 14 Geographic Indications (GIs) 15 Conclusion 16 Appendix One trade policy 17 The WTO: Doha Development Round 17 Plurilateral/Regional agreements and negotiations 17 Bilateral agreements and negotiations 17 Appendix Two technical market access non-tariff barriers 19 Appendix Three promoting the Australian food safety system 20 Trade and the Australian Dairy Industry 3

4 Executive summary Global dairy demand is growing, driven by increased demand in developing dairy markets including China, South-East Asia and the Middle East. Our dairy industry produces more milk than is required domestically and a significant proportion is destined for export. Any future production growth will need to find a home and by necessity this is likely to be on the international market. Australia competes in the global dairy market with New Zealand, the EU and the USA, as well as with smaller players such as Argentina, Ukraine and Uruguay. Many competitors are increasing both their production and export focus. As Australian production and export volumes have stagnated in recent years, we have lost ground in our percentage share of global dairy trade, significance and relevance as a dairy supplier. At the same time Australia has embraced an open market approach, but not all countries have been as progressive in eliminating tariffs and reducing trade barriers, subsidies and support mechanisms for dairy. Australia is committed to global agricultural market reform and actively participates in multilateral, plurilateral and bilateral trade negotiations. We already have a number of free trade agreements (FTAs) in place and are actively negotiating several others. Such agreements can provide real commercial opportunities and benefits for dairy exporters, but where competitors manage to negotiate their own agreements with our trading partners Australia can find itself at a commercial disadvantage. As a supplier of high-quality, clean and safe dairy products, Australia enjoys a positive international reputation upon which we can capitalise further. Our industry s long-term growth and profitability is linked closely to its status as a competitive producer that can develop and retain global market positions. 4

5 Introduction The dairy industry is Australia s thirdlargest rural industry behind beef and wheat, with a farmgate production value approaching $4 billion. Approximately 6700 farmers produce nearly 9.5 billion litres of milk annually, and the industry provides direct employment of approximately 43,000 Australians. Dairy ranks fourth in Australia s agricultural exports with a value of $2.76 billion in 2011/12, while value-added processing delivered a wholesale value of dairy products in excess of $13 billion last year. This paper reviews the export market position of the Australian dairy industry, including: perceptions of Australia as a dairy supplier the importance of trade to our industry growth in international dairy demand our major export markets our major competitors in export markets trade barriers and market distortions trade policy Trade and the Australian Dairy Industry 5

6 Australia as a dairy supplier There are positive perceptions in international markets of Brand Australia and of Australian dairy, which can and should be capitalised upon by the Australian industry at every opportunity. These include Australia s positive reputation as a producer of high-quality and safe agricultural products, including dairy, and favourable attributes such as its natural beauty, lifestyle and the openness of its people. This provides the opportunity to differentiate ourselves from competitors and expand on our credentials for safety and quality built on our policy, processing and farming practices. We have not experienced the types of animal welfare and contamination issues that have impacted around the world as farming and processing has intensified. We should emphasise the clean, natural environment in which we rear our animals, our pasture-based feeding systems and the rigorous quality and safety standards that are maintained by our farmers and processors and enforced by our government bodies to help ensure the supply of the safest dairy products to international markets. The Australian dairy industry is flexible, adaptable and innovative, which can create more value and investment opportunities for our customers. The variety of processing companies, factory sizes and broad product range can be an advantage compared to some competitors who are more aligned to large-volume commodity business. These factors can allow our processors to supply more value-added dairy products that can better meet customer needs in terms of specifications, logistics, innovations and support. A growing component of total Australian dairy export is finished products that are processed and packaged into their final saleable format prior to export. These value-added products provide significant economic benefit within Australia and help maintain the reputable image of Australian dairying. This provides an opportunity to promote Australian dairy, along with all its benefits, directly to international consumers in a consistent way. A concern sometimes raised by international customers is the Australian industry s capacity to maintain a consistent product supply due to drought, environmental factors, competing land use, a need for investment and so on. This provides an opportunity to communicate to our markets about how the Australian dairy industry is adapting to current and future environmental, societal and regulatory needs articulated through the recently industry-endorsed Sustainability Strategic Framework world trade share 1 European Union 31% 2 New Zealand 37% 3 United States of America 11% 4 Argentina 5% 5 Ukraine 2% 6 Uruguay 3% 7 Other 4% 8 Australia 7% 6

7 International trade is important to future industry growth Australian dairy domestic/export mix since 1990 Australian dairy farms currently produce around 9.5 billion litres of raw milk per year. About 40% is exported in a range of product formats. The Australian dairy industry reached its production peak in 2001/02, producing over 11.2 billion litres of milk that year; 60% of that milk volume was exported. Australia s domestic consumption grows only slightly over time, in step with a slow population increase (1.8% population growth in the 2012 calendar year). Per capita consumption of dairy products is already relatively high at around 300 kilograms per year; by comparison, the per capita per year consumption in China is around 30 kilograms, with significant scope for increase. Export markets provide an alternative to the domestic market. It will be crucial that Australia has access to international markets to ensure it remains highly competitive. Regional examples, such as Queensland and Western Australia, illustrate that when a dairy region loses export manufacturing and capacity over time, pressure on farm and manufacturing margins and profitability can develop as the industry becomes overexposed to the domestic fresh milk market and supermarket or retail chains. The dairy industries in these regions are actively exploring opportunities for alternative products and markets including international trade. 12,000 10,000 8,000 6,000 4,000 2,000 0 Domestic Export Share exported (right axis) 70% 60% 50% 40% 30% 20% 10% 0% 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Estimated Australian dairy domestic/export mix since 1990 Trade and the Australian Dairy Industry 7

8 Demand for dairy is growing Dairy market assessments indicate that the volume and value of global dairy product trade will continue to grow in the short, medium and long term, driven by increasing demand in developing dairy markets and regions including China, South-East Asia and the Middle East. A common feature of these markets is that local milk supply cannot keep pace with consumption growth, resulting in sustained dairy deficits that must be filled by imports. A recent Rabobank report identified several factors driving the increase in demand for dairy in developing markets, including: a perception that imported products are safer and more trusted economic growth rates at higher levels than developed economies rising incomes and the emergence of a consuming middle class high birth rates and young populations consumers becoming more health-conscious growth in modern retailing and food service urbanisation enabling access to more consumers school milk programs and consumer education a desire for parents to include dairy (infant formula) in the diets of children relatively low levels of dairy consumption, with related growth potential. Global dairy markets hold significant potential for the Australian industry if our industry is able to service market opportunities. Given the industry s resources and current infrastructure structure, questions remain about the most effective way to capitalise on market opportunities and translate that most effectively into value for our farm sector South-East Asia Africa Middle East Greater China Japan Russia Mexico Dairy imports from all sources (volume) Key export markets for Australian dairy Key export markets for Australian dairy are North Asia (Japan, Greater China, Taiwan and South Korea) and markets within South-East Asia and the Middle East. Top 10 Australian export markets, 2011/12 Country Volume Tonnes % of total Country Value A$ million % of total Japan 114,709 15% Japan $518 19% Greater China* 108,895 14% Greater China* $389 14% Singapore 89,710 12% Singapore $241 9% Indonesia 47,849 6% Indonesia $176 6% Malaysia 46,787 6% Malaysia $163 6% Thailand 34,307 4% New Zealand $127 5% New Zealand 33,197 4% Thailand $124 4% Philippines 32,552 4% South Korea $116 4% South Korea 27,349 4% United Arab Emirates $102 4% United Arab Emirates 26,763 3% Philippines $96 3% Source: Dairy Australia and ABS * includes China, Hong Kong and Macau Australian dairy exports 2011/12 (value and % of total value) 8

9 Australian dairy competitors and international trade Since Australian production peaked in 2001/02, the Australian industry has been through an extended period of reduced or flat production. Production has been constrained largely by extended drought and poor seasonal conditions in many dairy regions. Volatile international commodity prices and the high Australian dollar have impacted export competitiveness and profitability. During the same period international competitors have increased production volumes (significantly for New Zealand) and increased their international market focus (the USA). Simultaneously, the USA has displaced Australia as the third-largest exporter behind New Zealand and the EU. Our percentage share of global dairy trade has declined from above 15% in 2002 to slightly less than 7% in The international market perception of Australia has changed over the last decade. The country is losing significance and relevance in terms of global dairy trade, which has led to its role in international trade being questioned world trade share 7 1 European Union 31% 2 New Zealand 37% 3 United States of America 11% 8 1 In 2015 the EU will remove dairy production quotas for member states. It is difficult to predict the net effect this might have on EU dairy exports, but market intelligence suggests that several EU member countries and companies anticipate increased production volumes and more product availability for export to regions outside the EU, including the Middle East and South-East Asia. The USA also consumes most of its production internally. The USA has traditionally focused its exports on neighbours such as Mexico and Canada. In recent years, however, the USA has shown an increasing focus on diversifying export markets and building market share in China, Japan, South Korea and South-East Asian countries all key markets for Australia. Over time, the USA has been viewed as a significant exporter of products such as whey powder, lactose and SMP. USA exporters have been using the producer-funded Cooperatives Working Together (CWT) program to subsidise exports into some of these markets. Cooperatives Working Together (CWT) Argentina 5% 5 Ukraine 2% 6 Uruguay 3% 7 Other 4% 8 Australia 7% An example of a market-distorting mechanism is the CWT program, managed by the US National Milk Producers Federation. CWT is an industry-funded program that has been carefully constructed to avoid being classified as an export subsidy program under World Trade Organisation protocols. Australian exports by region 2011/12 (AUD million) 1 South-East Asia $816 2 Japan $518 3 Other Asia $698 4 Europe $57 5 Middle East $347 6 Africa $54 7 Americas $105 8 Other $162 New Zealand is the leading international market supplier of dairy. Its production volumes, processing capacity and relatively small domestic market means that the country exports around 95% of its dairy production. New Zealand has built a number of large factories that operate at or near capacity during peak periods, making it an efficient producer and manufacturer of high-volume commodity lines such as whole milk and skim milk powders (WMP and SMP). New Zealand dairy exports are dominated by WMP, which account for about 44% of total export volumes and go primarily to mainland China. In 2012 New Zealand exported over 420,000 tonnes of WMP to China. Australia exported just 6,500 tonnes of WMP to China the same year. The EU, as a single entity, is also a major dairy exporter. The majority of European dairy production is traded and consumed within the EU, but when ranked on dairy traded beyond the EU region it holds the second-largest world market share at 31%. CWT is being used to subsidise US exports of butterfat and cheese into key Australian markets such as Japan and South Korea. This depresses the prices paid for these products in these markets. This in turn is reducing Australia s market share and revenue from the Japanese cheese market Australia s largest international cheese market. Trade and the Australian Dairy Industry 9

10 North Asian markets China China is now the world s largest dairy importing country. It imported million tonnes of dairy products in 2012, 47% from New Zealand. New Zealand s FTA with China gives it a clear commercial advantage. It supplied more than 650,000 tonnes of dairy product to mainland China in By comparison Australia supplied just over 61,000 tonnes. Despite this scenario Chinese customers have occasionally expressed concern about being reliant on a single supplier. This risk management aspect could potentially benefit Australian dairy exporters. Despite New Zealand s commercial advantage, China is Australia s fastestgrowing dairy market. When mainland China is combined with Hong Kong and Macau (Greater China) it represents our secondlargest market by volume and value. South Korea South Korea is currently our tenth-largest dairy export market and is an important destination for Australian cheese and SMP. A significant proportion of SMP is mixed with other ingredients for re-export to Japan. EU and USA FTAs with South Korea will increasingly reduce Australia s competitiveness each year as tariffs and quotas are phased down for European and US dairy products. South Korea is also the first market where a Geographic Indication (GI; see section on GIs) for dairy has impacted Australian-origin exports. According to the EU-South Korea FTA, a number of dairy products, including feta, can no longer be marketed using their generic name. Taiwan Taiwan is currently Australia s eleventh most important dairy market, where Australian exports include UHT milk, SMP, WMP and cheese. New Zealand and Taiwan recently announced the signing of a free trade agreement that is likely to be implemented from early It is understood that the agreement includes early tariff reduction and elimination for New Zealand dairy products. New Zealand is already the major supplier of dairy imports to Taiwan with a 44% market share. Australia ranks third as a dairy supplier to the market behind New Zealand and the EU. The trade agreement between New Zealand and Taiwan will give New Zealand a commercial advantage over other suppliers, including Australia. Chinese demand for dairy appears certain to grow. The question is how quickly Chinese domestic dairy production can grow relative to total market demand. Chinese Government-imposed reorganisation of the dairy sector and increased regulation since the 2008 Melamine adulteration incident and a subsequent string of food safety issues have constrained growth of domestic production. Chinese consumers have become distrustful of domestically produced product, especially infant formula, and exhibit a strong preference for imported brands. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ideally, the Australian industry wants to see an FTA completed between Australia and China as soon as possible, with a favourable outcome for dairy to help restore the commercial advantage lost to New Zealand Chinese imports 2011/12 WMP Whey powder SMP Milk Lactose Infant powder Cheese Butter oil Butter 10

11 Japan Japan is the single largest export market for Australian dairy. It is primarily a market for industrial cheese used for further processing in Japan. Japan is viewed as a static dairy market with limited growth prospects. Japan s population is ageing and declining in number. Domestic economic problems including deflation have constrained market growth and reduced price premiums and there is little prospect of this changing in the short-term. Japan has transitioned to a much more price-conscious market than a decade ago. Japan s market for agricultural products is seen as protectionist; a complex combination of high tariffs, quotas and government-administered import licensing arrangements carefully manage and limit dairy imports. Australia exported $518 million worth of dairy products to Japan in 2011/12 and paid over $116 million (22% of the total value) in tariff charges. Australia has been negotiating a bilateral FTA with Japan since Indications are that Japan is resisting significant market access reform for agriculture. Sticking points from Japan s perspective include issues on motor vehicle tariff reduction and investment. Japan has also recently joined the Trans- Pacific Partnership (TPP) negotiations, but only after fierce, and ongoing, internal political debate over how a TPP outcome might impact its domestic farming sector. USA dairy exporters are using the CWT subsidy program (see section on CWT) to increase US market share in Japan, especially for cheese for shredding. This has impacted on Australian s market share and has also depressed commodity cheese prices. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% WMP Whey powder SMP Milk Lactose Cheese Butter Japanese imports 2011/12 Trade and the Australian Dairy Industry 11

12 South-East Asian markets South-East Asia comprises a number of individual markets, each with its own opportunities, requirements and, in some cases, barriers. The ASEAN Australia New Zealand Free Trade Agreement (AANZFTA) has reduced tariffs and removed quota restrictions for many, but not all, dairy products exported to South-East Asian markets. Australia also has bilateral agreements with Singapore, Thailand and Malaysia and is in the early stages of negotiating a Comprehensive Economic Partnership Agreement (CEPA) with Indonesia. ASEAN countries are also participants in the Regional Comprehensive Economic Partnership (RCEP) negotiations, and several are also members of the TPP negotiations. The Australian industry has a long history of investment, collaboration and relationship development in South-East Asian markets. This is often noted by customers in these markets. From the early 1960s the industry was active in establishing joint-venture manufacturing facilities and providing technical support. Several of the major dairy manufacturing companies active in the region today grew from initial Australian investment and technical expertise. The largest single destination for Australian exports within South-East Asia is Singapore, an important and highly developed consumer market. A significant volume of Australian dairy exports to Singapore is re-exported to other markets, sometimes after being blended with other ingredients or processed into finished product. Malaysia, the Philippines, Thailand and in particular Indonesia, with a population of around 250 million people and its proximity to Australia, are also significant growth markets for Australian dairy. According to the World Bank, the number of middleclass consumers in Indonesia increased from 81 million in 2003 to 131 million in 2010, while the volume of cheese imports increased by 31%, to 23,500 tonnes, in Vietnam is also seen as a developing market opportunity based on its attractive demographics and economic potential, while other smaller or less-developed dairy markets such as Myanmar, Cambodia, Laos and Brunei are seen as niche opportunities. 12

13 Middle East markets As in South-East Asia, Australia has a long history of trading, investment and collaboration in the region. The Australian Dairy Corporation subsidiary AustDairy Ltd (ADL) was active in the region until the mid 1990s, in particular through in a joint venture and technical support capacity into Saudi Arabia. Saudi Arabia and the United Arab Emirates are major markets for Australian exports. The UAE is both an end market and redistribution point for near markets. As noted, Australia has been negotiating a regional agreement with the Gulf Cooperation Council (GCC) since July Of concern to the Australian industry would be the potential for competitors such as New Zealand, who are also involved in long-standing negotiations with the GCC, to complete a trade deal before Australia and gain a commercial advantage within the region. Also of concern is the potential for EU countries to focus additional exports into Middle East markets when production quotas are removed in Trade and the Australian Dairy Industry 13

14 Trade barriers and market distortions Australia has been a leader in embracing an open-market approach. Not all countries, however, have been as progressive about opening up their markets. Global dairy markets feature a range of tariffs, barriers and subsidies that distort the movement of dairy products including export subsidies, excessive government intervention and trade-distorting domestic support. Dairy Australia estimates that Australian dairy exports attract in excess of $200 million in direct tariff charges each year as our products enter destination markets. This has a direct impact on revenue and profitability for Australian farmers. Many countries also protect their dairy sectors with a range of non-tariff barriers to trade such as restrictive customs procedures, port of entry inspections, product testing, factory inspections and veterinary certificate requirements that extend beyond genuine food quality and safety concerns. Australia is one of the few countries that operate a free, open-market dairy environment. Tariff imposts by country and consolidated A$ China 16,386,592 17,721,602 Hong Kong 0 0 Indonesia 8,263,462 6,042,921 Japan 116,618, ,181,061 Malaysia 525, ,309 Philippines 1,254,361 1,239,412 Singapore 0 0 South Korea (ROK) 34,993,441 27,090,832 Taiwan 19,091,426 15,403,067 Thailand 6,306,369 7,506,089 Sub-total - ten countries 203,439, ,444,292 Japan as a % of SE and East Asian 10 57% 61% Japan plus ROK as a % of SE and East Asian 10 75% 75% Gulf Cooperation Countries (est) 12,807,903 13,460,353 Sub-total including GCC 216,246, ,904,645 Geographic Indications (GIs) GIs are a form of intellectual property where the geographic name indicates a given quality, taste or other attribute of a product. The EU asserts that ownership of the rights to many food names whose origins may be European belong to European-based producers. The EU is aggressively pushing for these rights to be recognised and its GIs standards to be adopted by other countries via bilateral or regional trade agreements or other treaties such as the Lisbon Agreement. If the EU is successful in re-appropriating key names for foods, including cheeses, there will be far-reaching implications for the Australian dairy industry. There is a real risk that, in export markets, the Australia dairy industry will be unable to use product names and descriptors that we believe are generic, such as parmesan, mozzarella, feta, brie, camembert and cheddar, among others. The Australian dairy industry has been vigorously defending its rights to use common food names to avoid being required to re-label and re-brand affected products, which will involve added costs and lead to confusion for buyers and sellers. 14

15 Conclusion International trade is important to the future of the Australian dairy industry. The industry finds itself, however, at somewhat of a crossroads as a global market supplier. Global demand is increasing, with much of the opportunity and growth being driven from our key markets. Meanwhile, production volumes and export availability from Australia has stagnated over the last 10 years, raising questions around the ongoing significance and relevance of Australia as a supplier into the global dairy marketplace. In attempting to capture the opportunity that international demand growth represents, the Australian dairy industry must continue to push for the liberalisation of the global dairy trading environment while reinforcing the compelling industry and product characteristics that define our industry. Trade and the Australian Dairy Industry 15

16 Appendix One trade policy Australia participates in three varieties of trade reform; multilateral, plurilateral and bilateral. Multilateral reform involves all countries who are members of the World Trade Organisation (WTO) and offers the most comprehensive outcome for all participants. Plurilateral approaches involve a smaller number of countries such as the regional TPP negotiation. Bilateral is a negotiation between two countries, such as the current Japan- Australia FTA negotiations. Australia is committed to global agricultural market reform because a multilateral approach through the WTO offers the broadest outcome. It is the only global mechanism that can address the issue of trade-distorting domestic support. In the absence of any real recent progress on multilateral reform, however, Australia is actively involved in a range of plurilateral and bilateral negotiations. With no multilateral agreement on trade reform in sight, Australia s ability to negotiate significant free trade agreements will be critical to maximising returns for the industry. The bilateral agreements negotiated by competitor countries will also have an important bearing on trade flows and access to and profitability in markets of choice. The WTO: Doha Development Round The Doha Development Round is the WTO s current round of trade negotiations. Its objective is to lower trade barriers around the world, which will help facilitate the increase of global trade. The Doha talks on international trade liberalisation commenced in November 2001 and broke down in July 2008 with developed and developing nations, like China and India, unable to reach agreement over agricultural tariffs. Its future is uncertain. Plurilateral/Regional agreements and negotiations Australia is a member of the AANZFTA, which entered into force from 1 January AANZFTA is delivering commercial benefits to Australian dairy exporters including extensive tariff reduction and quota elimination commitments. Australia has been negotiating a regional agreement with the GCC comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, since July Australia is one of a number of countries negotiating FTAs with the GCC, however, the GCC has paused its trade negotiations with all partners pending a review of its trade agreement policy. The Middle East is a key region for agricultural exports including dairy products. An agreement would address a range of tariff and non-tariff barriers related to our dairy exports. Australia, along with a number of other countries, is engaged in negotiations to develop processes to provide possible pathways to a free trade area of the Asia- Pacific. We have been part of the TPP since 2010 and the RCEP since Bilateral agreements and negotiations Bilateral FTAs are important to Australia s trade negotiating agenda. FTAs can: deliver economic benefits to Australia more quickly than might be possible through the WTO round tackle specific issues in more depth and often at a higher level of ambition than is possible in the WTO be more comprehensive, covering trade in goods and services, investment, as well as other trade-related issues such as competition policy and intellectual property help secure Australia s competitiveness in key export markets. Australia has a number of bilateral agreements already in place: New Zealand Closer Economic Relations (established 1983) Singapore-Australia Free Trade Agreement (2003) Australia-USA Free Trade Agreement (2005) Thailand-Australia Free Trade Agreement (2005) Chile-Australia Free Trade Agreement (2009) Malaysia-Australia Free Trade Agreement (2012). Australia is currently negotiating the following bilateral agreements: China (since 2005) Japan (since 2007) South Korea (since 2009) Indonesia (since 2010) India (since 2011). Bilateral agreements can provide opportunities and commercial advantages for Australian dairy exporters by reducing tariffs and providing improvements to market access conditions and administrative procedures. All countries above are important existing or potential markets for Australian dairy exports and a good outcome for dairy is important in any finalised agreement. However, this works both ways; where export competitors can negotiate and implement agreements with our target markets, Australia finds itself at a commercial disadvantage. An example is the commercial advantage that New Zealand enjoys through its FTA with China, which in 2013 imposes a 5% tariff on New Zealand WMP compared to a 10% tariff on WMP from other suppliers, including Australia. Other examples are South Korea s FTAs with the USA and EU. China and South Korea are both important dairy markets. Each year that passes means that Australia is faced with a larger tariff differential in those markets. More recently New Zealand finalised an agreement with Taiwan that will likely be implemented in early This will give New Zealand a commercial advantage in yet another important dairy market for Australia. Australia s ability to negotiate FTAs is critical to the industry s future participation in export markets. The Australian dairy industry has taken a strong position that the Australian Government should pursue FTAs that favourably position dairy in a successful outcome. The Australian Dairy Industry Council (ADIC) has been working hard to achieve this through ongoing advocacy. 16

17 Appendix Two technical market access non-tariff barriers Trade policy also includes improving, maintaining and defending existing market access. Australian exporters are continually faced with non-tariff measures that can be technical in nature and might require substantial time and resources to resolve. Increased use of non-tariff barriers in priority markets is affecting trade in agricultural goods including dairy products. Non-tariff barriers are generally of a technical nature and more commonly relate to rules and regulations in place to ensure the integrity of food supply. Although international standards exist to guide market access requirements for most dairy products, many countries have their own standards that differ from international guidelines and may be used as technical barriers to trade. Trade barriers often arise unexpectedly and can be due to government-imposed regulations or commercial requirements. International regulatory frameworks are important to the export-oriented Australian industry. The industry invests significant resources in monitoring and contributing to international standard-setting. DAFF Agricultural Counsellors from the Department of Agriculture, Fisheries and Forestry play a major role in Australia s efforts to remove or lower market access barriers for agricultural products, facilitate trade, monitor emerging international issues and help resolve quarantine issues. The DAFF Agricultural Counsellor program needs to increase regional coverage in South-East Asia and the Middle East. In addition to existing posts, the program should be expanded into key emerging markets: Vietnam, the Philippines, and Saudi Arabia. These countries are high potential growth markets whose needs can t be adequately met through existing posts. Where Agricultural Counsellors are located in international markets they can more effectively engage directly with local officials and government representatives to address access issues as they arise. Counsellors can also work proactively to identify and prevent non-tariff barriers that might impact dairy imports. Trade and the Australian Dairy Industry 17

18 Appendix Three promoting the Australian food safety system A significant part of the industry s response to technical market access is to promote our high standards for food safety and quality assurance across the supply chain. International markets that can be assured of the integrity of Australian produce may not require additional or differing regulation if it can be shown that processes are already in place that ensure safe dairy production. Also, given the high level of safety already achieved, additional requirements are unlikely to represent an improvement. Our government and industry actively promote the Australian food safety system to gain greater acceptance that our system meets the requirements of the importing country and to reduce costly additional regulations (for example unnecessary port-of-entry testing). 18

19 Published by Dairy Australia Limited. Whilst all reasonable efforts have been taken to ensure the accuracy of Trade and the Australian Dairy Industry, use of the information contained herein is at one s own risk. To the fullest extent permitted by Australian law, Dairy Australia disclaims all liability for any losses, costs, damages and the like sustained or incurred as a result of the use of or reliance upon the information contained herein, including, without limitation, liability stemming from reliance upon any part which may contain inadvertent errors, whether typographical or otherwise, or omissions of any kind. Dairy Australia Limited All rights reserved.

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