Sir,
I refer to comments made recently in
News Weekly concerning Australian trade policies and the size of the domestic market for agricultural products.
You draw attention to work by Dr Mark McGovern of the Queensland University of Technology. He has argued that exports are much less important to Australian agricultural than is maintained by ABARE and other organisations such as the department of Foreign Affairs and Trade and the National Farmers Federation.
Unfortunately, Dr McGovern's arguments are misleading and may result in confusion on the part of your readers. His assessment of the proportion of agricultural production exported is based on an inappropriately narrow interpretation of input- output statistics from the Australian Bureau of Statistics.
It is correct that Australian agricultural supplies around 22 per cent of its production to exports directly in the form of unprocessed products such as grains, greasy wool and live animals.
However, this only tells part of the story. In order to gain a proper understanding of the importance of exports, we also need to take account of the farm level value of agricultural products shipped after processing into a form required by our overseas customers. Examples of these include meat and dairy products, sugar, wine, and scoured wool. It is clearly wrong to ignore them when attempting to estimate the proportion of farm production that is exported.
ABARE's most recent published estimates of the value of farm output going to export are contained in the March 2001 issue of Australian Commodities (pages 20-21). In 1999-2000 an estimated 64 per cent of farm output (in value terms) was exported.
This figure, which is net of any additional processing and transport, is consistent with estimates for the other years of the late 1990s. In each of those years between 60 and 70 per cent of production was exported with year to year variations in the number being due largely to the effect of seasonal conditions on crop size and livestock turnoff. For readers who may be interested, the methodology used to come up with the above estimates is described in ABARE's December 2000 issue of
Australian Commodities (page 596).
The ABARE research confirms that individual agricultural products are heavily reliant on export markets. In the late 1990s, exported shares of production were 78 per cent for wheat, 65 per cent for barley, 71 per cent pulses, 88 per cent for cotton, 80 per cent for sugar and 62 per cent for beef. These are some of the largest and most valuable agricultural industries in Australia. Anyone suggesting, as Dr McGovern's arguments imply, that Australian farmers do not produce commodities such as sugar or beef for export is plainly wrong.
The fallacy of Dr McGovern's assertions about the relative unimportance of exports to Australian agriculture can also be demonstrated by considering the likely consequences of losing access to key export markets. In such an event, there would need to be substantial (even enormous) increase in domestic consumption in order to absorb current levels of agricultural production. To achieve such increases in consumption, both retail and farm gate prices for many agricultural products would have to decline to an extreme degree. Many of our existing farmers and associated businesses could be expected to cease operation because of substantially reduced earnings.
By way of example, I am sure that no one would want a repeat of what happened to Queensland's beef industry in the mid-1970s. Access to the Japanese market was suddenly denied and the quota restrictions on beef imports tightened in the European Community and the United States. Cattle prices fell to disastrous levels and did not begin to recover until the Australian Government negotiated a re-opening of the Japanese market and our producers had substantially cut herd numbers and production.
Finally after many years of research and interaction with farmers and agribusinesses, I am thoroughly convinced that growth in trade and improved access to international markets will remain the cornerstone of success for many of Australia's agricultural industries.
Agriculture stands to gain substantially from further negotiated liberalisation of both regional and global trading arrangements. Improved market access will provide our farmers and agribusiness with better opportunities to expand their enterprises whilst meeting the needs of the ultimate users of their products - domestic and overseas consumers.
Brian Fisher,
Executive Director,
ABARE,
Canberra, ACT
- Editor's Note: Dr Mark McGovern will reply to ABARE's criticisms in the next issue.
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