Agriculture and the WTO
Australian Agricultural Exports
Agriculture is an important part of the Australian economy. Australia is a competitive net agricultural exporter, with around two thirds of total production being exported. Exports of Australian agricultural goods have continued to grow and in 2010 Australia accounted for 2.3% of all global agricultural exports. In 2011 food and agricultural products accounted for 13.8% of Australian merchandise exports.
Australia provides competitive agricultural produce to world markets without the high levels of financial support, protection and other trade-distorting practices used by many other countries. This results in Australia being one of the world’s most efficient agricultural producers. Australia’s leadership in this area is demonstrated by the Producer Support Estimate (PSE) produced by the Organization for Economic Cooperation and Development (OECD). The PSE estimates the percentage of farm income arising from government support. Australia’s PSE in 2010 was only 2.2%, the second lowest among OECD countries.
| Major agriculture export products | CY2011 A$m | Share of Rank | Total |
|---|---|---|---|
| Total Agriculture | 34,316b | 100.0% | |
| Wheat | 6,076 | 1 | 17.7% |
| Beef | 4,684 | 2 | 13.7% |
| Wool | 2,832 | 3 | 8.3% |
| Cotton | 2,536 | 4 | 7.4% |
| Wine | 1,922 | 5 | 5.6% |
| Lamb and mutton | 1,646 | 6 | 4.8% |
| Barley | 1,380 | 7 | 4.0% |
| Rape and colza seeds | 1,106 | 8 | 3.2% |
| Live animals | 1,069 | 9 | 3.1% |
| Milk and cream | 1,066 | 10 | 3.1% |
| Vegetables | 957 | 11 | 2.8% |
| Raw hides and skins | 850 | 12 | 2.5% |
| Cheese and curd | 754 | 13 | 2.2% |
| Edible meat products and preparations | 614 | 14 | 1.8% |
| Animal feed | 473 | 15 | 1.4% |
| Food preparations | 452 | 16 | 1.3% |
| Animal fats | 389 | 17 | 1.1% |
| Pet food | 323 | 18 | 0.9% |
| Malt | 317 | 19 | 0.9% |
| Rice | 263 | 20 | 0.8% |
a Based on the WTO definition of agriculture, which excludes fisheries, forestry and rubber.
bThis figure does not include raw sugar (in bulk) due to ABS confidentiality restrictions. In 2010 Australian raw sugar exports totalled $2.1 billion.
| Major agriculture export markets | CY2011 A$m | Rank | Share of Total |
|---|---|---|---|
| Total all countries | 34,316a | 100.0% | |
| China | 5,892 | 1 | 17.2% |
| Japan | 4,222 | 2 | 12.3% |
| Indonesia | 2,293 | 3 | 6.7% |
| Republic of Korea | 2,147 | 4 | 6.3% |
| United States | 2,142 | 5 | 6.2% |
| New Zealand | 1,382 | 6 | 4.0% |
| Vietnam | 910 | 7 | 2.7% |
| Thailand | 869 | 8 | 2.5% |
| Singapore | 864 | 9 | 2.5% |
| Malaysia | 824 | 10 | 2.4% |
| Netherlands | 810 | 11 | 2.4% |
| Taiwan | 757 | 12 | 2.2% |
| United Kingdom | 644 | 13 | 1.9% |
| Philippines | 630 | 14 | 1.8% |
| Hong Kong | 580 | 15 | 1.7% |
aThis data excludes sugar and other products where applicable due to ABS confidentiality restrictions
Sources: DFAT STARS database, based on ABS Cat No 5368.0, January 2012 data; ABS special data service.
World Agricultural Markets – unfair and distorted
Globally, agricultural trade is the most distorted sector of trade in goods. It is characterised by very high tariffs and high levels of government support to primary producers.
Average tariffs for agricultural goods are more than 3 times higher than for non-agricultural goods — some agricultural tariffs are as high as 800%.
In no other area does domestic support distort international markets to the extent that it does in agriculture, with over US$268 billion in 2006 provided in support and protection for agriculture by rich developed countries worldwide.
Export subsidies, the most trade-distorting form of subsidies, are tolerated in the agricultural sector — in contrast to other sectors, such as manufacturing, where they have long since been prohibited.
Australia has reduced its own tariff levels on agricultural and food products since the early 1970s through a series of across-the-board measures and as the result of inquiries into particular industries and commodities. General tariffs have been phased down to 5% and assistance to import-competing industries has been substantial reduced.
Millions of farmers around the world, including in developing countries, are unfairly disadvantaged in the world market. Agricultural subsidies in many developed countries generate excess production, which puts downward pressure on international markets. In particular, the reduction of long-standing distortions to global agricultural production and trade is critical to achieving food security in developing countries.
The Australian Government is working hard through the WTO to make global agricultural trade fairer.
World Trade Organization (WTO) and Agriculture
The WTO, which was established in 1995, is the successor organisation to the General Agreement on Tariffs and Trade (GATT). For most of the post-war period, agricultural products were largely excluded from the multilateral trade liberalisation which took place during GATT negotiations. In the early 1980s, it was widely acknowledged that agriculture had become the most heavily protected and distorted sector in the world economy, with consequent substantial negative effects on international trade and particularly on those developing countries that are heavily reliant on agriculture for their economic development. Reform of the global rules covering agricultural trade began with the Uruguay Round of GATT negotiations that concluded in 1996. The Uruguay Round Agreement on Agriculture provided for increased market access through tariff cuts (over six years for developed countries and ten years for developing countries), for the conversion of non-tariff measures to more transparent tariff protection, and for a progressive reduction in export subsidies and trade-distorting domestic support measures.
Agriculture in the Doha Round
As the most heavily protected sector in world trade, agricultural reform stands to deliver the greatest development benefits. Rules and disciplines in the WTO for agriculture are less developed than for industrial products. WTO members agreed to launch the current “round” of WTO negotiations in November 2001, in Doha, Qatar. The Doha mandate on agriculture calls for ambitious reform. Members agreed to achieve “substantial improvements in market access; reductions of, with view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.”
The July 2004 Framework Agreement included a ground-breaking commitment to eliminate agricultural export subsidies. It also outlined a broad structure for reductions in trade distorting domestic support.
However, the July 2004 Framework provided less guidance on how to address the critical issue of market access. Two important market access principles were agreed: that higher tariffs be subject to deeper cuts; and an agreed number of sensitive tariffs could be subject to lesser tariff cuts so long as the tariff rate quotas associated with those quotas were expanded.
The Hong Kong Ministerial Meeting in 2005 saw further progress and was followed by a period of intense work leading to the release of draft negotiating texts from July 2007.
Discussions and subsequent revisions of this text continued throughout the rest of 2007 and to mid 2008. The July 2008 Package reflected the considerable progress that has been made by the WTO’s 153 Members over the last years.
The meeting of WTO Ministers in Geneva 21-29 July was the largest WTO Ministerial Meeting since 2005. Convergence had been reached in nearly all outstanding issues before the talks failed to reach agreement over a handful of elements in the package – in particular, the Special Safeguards Mechanism (SSM) for developing countries. Despite this setback, the meaningful gains that had been negotiated remain on the table and ongoing negotiations have further refined the overall package. Australia remains committed to resolve the SSM issue and will work closely with other members to find a solution.
The Cairns Group coalition of 19 agricultural fair traders, chaired by Australia, played an instrumental role in framing the Doha mandate and subsequent WTO negotiations seeking agricultural reform. A diverse coalition bringing together developed and developing countries from the Americas, Africa, Asia and the Pacific region, the Cairns Group has been an influential voice in the agricultural reform debate since its formation in 1986.
The Australian Government is also working to achieve freer and fairer agricultural trade through the negotiation of WTO-consistent Free Trade Agreements (FTA).
Other issues - quarantine and food safety
WTO Agreements of most relevance to the application of quarantine, food safety, animal and plant health regulations are the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement).
The SPS Agreement allows all WTO members (including Australia) to set their own level of sanitary and phytosanitary protection in relation to quarantine and food safety. It also requires quarantine and food safety measures to be based on science and not industry protection. This ensures that Members cannot use unfair and unjustified quarantine or food safety restrictions to block trade.
The Codex Alimentarius Commission, the World Organisation for Animal Health (OIE) and the International Plant Protection Convention (IPPC) are the three international standard setting bodies (ISSBs) that hold special status under the WTO SPS Agreement. For the purposes of the SPS Agreement, ISSB standards are recognised as relevant international standards protecting human, plant and animal health from additives, contaminants, toxins or disease in food.
The TBT Agreement gives countries the right to adopt standards or regulations they consider appropriate to protect life or health, and also for the protection of the environment or to meet other consumer interests. For example, food labelling regimes are considered technical regulations and fall within the scope of the TBT Agreement.
Given the importance of international trade rules for Australia’s food and agriculture trade, Australia takes an active role in the WTO and related standard setting bodies in order to continually improve the conditions faced by Australian exporters in overseas markets.