October 10th 2015


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Articles from this issue:

COVER STORY Will drought and falling dollar spike food prices?

CANBERRA OBSERVED Nationals extract good deal in Turnbull takeover

EDITORIAL Obama's climate gambit: do as I say, not as I do!

FAMILY AND SOCIETY Senate committee says no to marriage plebiscite

NATIONAL AFFAIRS Turnbull divides party in Cabinet reshuffle

RURAL AFFAIRS FTAs eat away at our food and agriculture surpluses

RELIGION IN RUSSIA Byzantine Catholics driven underground

FINANCE Hidden by a metaphor: the secret life of money

EDUCATION Proliferation of screens making kids no smarter

NATIONAL AFFAIRS Cabinet door must be open to public service

FAMILY AND SOCIETY Child-support program under the microscope

PUBLIC POLICY Prohibition of drugs has the evidence on its side

CINEMA Kids will love pixelated Aussie classic: Blinky Bill: The Movie

BOOK REVIEW Hope for the Land of the Southern Cross

BOOK REVIEW Evaluating arguments against free will

LETTERS

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RURAL AFFAIRS
FTAs eat away at our food and agriculture surpluses


by Mark McGovern

News Weekly, October 10, 2015

Since Australia signed free trade agreements (FTAs) with the United States, Thailand and New Zealand, its balance of trade in agriculture and food manufactures has deteriorated with these three countries. In contrast, in trade with countries where Australia has no FTAs, Australian enterprises have outperformed partners to record a generally improving surplus in agriculture and food trade.

 

Free trade agreements have given

us little enough to warble about

when it comes to food and agriculture.

Yet claims continue to be made that FTAs with select trading partners will benefit Australian agriculture. The Organisation for Economic Cooperation and Development (OECD) statistics say otherwise.

 

The arrangement with New Zealand has been in place since 1983. Since then Australia’s imports of processed food products have grown, especially since 2000. Australian food exports to New Zealand have leveled off since 2011, leaving Australia with a $US600 million deficit on food products in 2014. Agricultural goods have been close to balance, with just over $US270 million of raw or minimally processed product flowing each way.

The net result has been a persistent and generally worsening deficit for Australia in its agriculture and food trade with New Zealand for the whole period.

The agreement with the United States came into effect in 2005. Again agricultural products are close, with Australian imports of $US210 million slightly exceeding exports since 2007. Australian food exports to the U.S. have always exceeded imports but the surplus halved between 2004 and 2013. Food exports to the U.S. almost doubled in 2014, although the reason why is unclear. But meat products driven by beef herd rundown in drought-affected Queensland would be part of what may be a one-off spike.

The net result has been a persistent but generally narrowing surplus for Australia in its agriculture and food trade with the U.S. since the FTA came into play. The Australian 2014 surplus of around $US2 billion appears likely to settle back to around $US700 million or less in the years to come.

Thailand and Australia signed a bilateral agreement in 2005 and the result has been a generally worsening agriculture and food trade deficit for Australia.

There was a pronounced rise in Australian food product imports from Thailand from under $US200 million to more than $US800 million in the decade to 2011. That growth has subsequently leveled off.

Australian agricultural and food exports to Thailand generally travelled together until 2008, but after that agricultural exports rose markedly for three years before falling back. The rise and then fall of commodity prices explain much of this hump.

Clearly, these three FTAs have failed to deliver. There has been no improvement evident in the agriculture and food trade position under any of the three agreements. Rather, deterioration has been evident in each case.

Yet, when we turn to Australia’s trade position with the world in general, the trend in agriculture and food has been a persistent and generally growing surplus for Australia; just the opposite effect to what we have experienced with the three FTA countries. This can only mean that Australia’s trade performance has been better with non-agreement partners.

New Zealand, the U.S. and Thailand account for about 30 per cent of the rising food imports to Australia but only around 15 per cent of Australia’s rising food exports to the world. They also account for only around 5 per cent of Australia’s agricultural exports but 35 per cent of imports.

On these figures, Australia’s FTA partners have clearly been able to outperform Australian enterprises. On the other hand, where no agreements have been struck, Australian enterprises have outperformed partners to record a generally improving agriculture and food trade surplus.

How might things change with three new north-Asian trade, regulation and investment agreements (Japan, Korea and China), and perhaps a Trans-Pacific Partnership? History suggests no necessary gains and trending losses on merchandise trade for both food manufacturing and agricultural industries.

It seems we should be more closely monitoring the realities of trade, not fixating on rhetoric and empty promises. There is nothing “free” about these trade agreements.

Dr Mark McGovern is a senior lecturer at QUT Business School, Queensland University of Technology. This article first appeared on The Conversation website on September 17, 2015.




























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