The dairy industry is firing up a major offensive to convince Canberra that milk products must be a key priority when Australia sits down to sign a free trade agreement (FTA) with China.
Already bruised by a similar recent agreement with Japan which achieved negligible gains for dairyfarmers and processors burdened by tariff barriers of almost 30% on some products, the dairy sector is fearful about the consequences of a half-hearted effort in negotiations with Beijing.
The biggest fear is that New Zealand’s dairy sector, already the dominant export supplier to China, will enjoy even stronger preferential treatment thanks to its trade deal sealed back in 2008 unless Australia’s tariff cuts are fast-tracked to match NZ’s position.
While Australian dairy products sold to China are currently weighted down with tariffs averaging about nine per cent, NZ exports are moving towards zero tariffs and duties by 2017 and currently pay an average of just 3pc.
The stark difference in opportunities in the hungry Chinese dairy market are epitomised by the much-applauded new fresh milk trade from NSW which cops a 15pc tariff when it lands in Shanghai, while NZ’s booming nutritional powder exports pay no tariff at all.
Every litre of fresh milk sent to China by the Norco co-operative attracts a tariff of about 60 cents, while Australian infant formula powder exporters pay $1.50 a kilogram.
Unlike many farm and mining export industries with hopes for China, removing import barriers on dairy exporters promises to create enormous job and cashflow gains in regional Australia because milk products must be processed and value-added before the leave our shores.
“Compared to a lot of other stuff that’s just dug out of the ground or harvested and poured into the hull of a ship, a lot of people and skills are involved in the dairy supply chain,” said Australian Dairy Farmers (ADF) president Noel Campbell.
About 43,000 Australians are directly employed in dairy sector jobs, with the booming export sector mostly concentrated in south-eastern regions from the NSW Riverina to Tasmania and eastern South Australia.
“About $1 billion in further investment is also currently going into upgrading our industry infrastructure, largely to improve our export capabilities,” said Mr Campbell who milks about 450 cows in Victoria’s west Gippsland.
“More investment is also likely to come into Australia from places like China if the FTA works out positively for our industry.”
The ADF is driving home the point in Canberra that an FTA deal matching NZ’s current trade barrier dismantling gains would save Australian exporters about $630 million between 2016 and 2025.
Farmers in NSW and Queensland are excited by prospects for their largely domestic-based sector, too, because improved export opportunities and the chance keep pace with NZ’s sales efforts in China would let them to break free of the crippling $1-a-litre supermarket milk environment.
“Dairy regions across NSW have a wide variety of current and proposed manufactured products to supply the high-end Chinese consumer market,” said Dairy Connect NSW president Adrian Drury.
Apart from existing processors such as Richmond Dairies, Bega Cheese, Norco and Hastings Milk already exporting goods ranging from frozen cream to extended shelf life milk and fresh milk, new powder processing plants were planned for the Mid North Coast, the Illawarra and Central West.
These new ventures, which were likely to have a mix of local and Chinese investment backing, would also supply an infant milk processor in Sydney.
NSW Farmers dairy committee chairman Rob McIntosh said the infant formula market alone offered extraordinary potential with the relaxation of China’s one child policy.
“Last year 16 million babies were born in China and that number is soon projected to rise to 20m annually,” he said.
China’s total dairy product imports jumped more than 40pc between 2012 and 2013 to two million tonnes and are forecast to keep growing at 14pc annually according to Dairy Australia.
But without an even footing alongside NZ exporters in China the NSW industry could not grow to take advantage of the global export boom, said Dairy Connect chief executive officer Mike Logan.
“We need access to the export market for dairy and that’s basically in China where the Kiwis have an advantage over us at the moment,” he said.
A suitable NZ-plus FTA deal would resolve that and allow us to grow by attracting up to $300m each for on-farm and manufacturing upgrade investment and injecting $500 into regional economies.”
Dairy Connect and NSW Farmers have teamed up to join an ADF initiative to ensure every federal parliamentarian and the wider community understood what was at stake in the FTA talks with China, due to be finalised by year’s end.
“We all know that milk is worth more than $1/litre,” Mr Logan said.
“An FTA with China will allow our farmers to get fair value for their product – it’s vital to the NSW dairy industry.”
Source: The Australian Dairyfarmer
