Trade and investment are intrinsically linked and to enhance trade relationships, investment must flow readily. There is wide debate about trade versus investment when there shouldn’t be any argument. Trade and investment are equally as important to Australian agriculture and we need each to participate in growth markets, rising global commodity prices, increase industry investment and improve farm gate profitability.
According to the Australian Government Department of Foreign Affairs and Trade (2014), Australia has secured Free Trade Agreements (FTA) accounting for 28 per cent of Australia’s total trade and FTA’s currently in negotiation account for a further 45 per cent of Australia’s trade. Australia’s global trade relationships are amongst the best in the world and benefit the agricultural industry directly as a net export sector.
The Federal Government came to power in 2013 with a promise to lock in FTAs with Australia’s major Asian trading partners within twelve months. The three key areas of any FTA negotiations are:
- Removing or reducing tariff and non-tariff barriers affecting bilateral trade to reduce transaction costs and improve efficiency;
- Reduction or removal of regulatory barriers which restrict services to improve trade flows; and
- Implementation of measures to improve investment flows between trade partners.
Foreign investment into Australian agriculture is being treated independently to other sectors by the Federal Government. For example, the pact with South Korea allows investment in ‘non-sensitive sectors’ to AU$1.078 billion before scrutiny by the Foreign Investment Review Board (FIRB), the same as the agreement with the US, although has a specific ‘carve-out’ for agricultural investments requiring FIRB approval for farmland investments over AU$15 million, agribusiness investments over AU$58 million and any investment by a State Owned Entity over AU$1. This specific ‘carve-out’ for agricultural investments is also being sought in the China-Australia FTA negotiations. Investments in media, telecommunications and defence are also considered sensitive and trigger FIRB review.
The China-Australia FTA negotiations began in 2005 involving a complicated array of sectors, trade flows and negotiations. China is Australia’s largest two-way trade partner and is vital to our future. The National Party have supported the China-Australia FTA although wish to place heavy investment limits on Chinese companies buying Australian farmland and agribusinesses, such as those imposed in the recently signed South Korea-Australia FTA.
The Japan-Australia FTA negotiations began in 2007 and have been laborious due to the power of Japan’s farm lobby group. Currently, Australian beef and dairy exports to Japan, our largest export market for both commodities, are subject to large tariffs which are of high priority to Australian negotiations although Japan’s farm lobby group wish to protect Japanese farmers and markets.
Trans-Pacific Partnership (TPP) negotiations have been going for nearly four years. The TPP holds great potential for Australia, integrating our economy into the Asian region offering many trade opportunities. The countries involved in the TPP are responsible for 40% of the world’s GDP and close to 26% of total global trade.
These three FTAs will reap major rewards for Australian agriculture; however the devil is in the detail. We await the final negotiation stages to see how trade and investment flows can be enhanced and in what timeframe. The direct benefit of effective FTAs is well displayed in New Zealand.
Australia is at the start of a long food super cycle whereby our close neighbours will increasingly require quality, safe agricultural commodities. Our strategic trade partnerships will allow Australia to effectively participate in this growth sector for decades to come.
AMC has a proven track record in working with agricultural investors to make strategic investments to take advantage of competitive advantages in the supply chain and deliver optimal results in today’s growth market. Call AMC on +617 33079555 to find out how we can help!