Why Australian agriculture needs trade diversification after China blow

What chance does Australia have to break the China trade stronghold and how can it be done?

Australian agricultural exports were worth $49 billion in 2019 – and almost a third of that goes to China. Picture: File

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THE NEWS knocked Australia’s barley growers for six: on this otherwise quiet Sunday in May, their industry was suddenly facing devastation as their biggest customer flagged a knockout blow.

China made good on threats to hit Australian barley imports with anti-dumping tariffs of 80 per cent just 10 days later, crippling the billion-dollar trade.

It followed the collapse of Australia’s rock lobster exports in January, as the coronavirus pandemic took hold of China, wiping out that premium market in an instant as Chinese consumers holed up at home to avoid the virus.

One market devastated by commercial factors out of its control; the other, a reminder that the whims of a foreign government can make or break you when your livelihood counts on them.

Both were reasons enough for Australian agricultural groups to quickly back calls for trade diversification, in a bid to peddle-back our reliance on the economic powerhouse.

But how likely is that to occur? Australian agricultural exports were worth $49 billion in 2019 – and almost a third of that goes to China. It accounted for about $14 billion in ag exports; Japan a distant second at $5.3 billion.

“Engaging with giant markets other than China would be wonderful – if only they existed,” director of the Australia-China Relations Institute, James Laurenceson, told the current parliamentary inquiry into trade diversification.

“In the real world, Australia does not get to choose where the demand for its goods and services comes from. That depends on which countries want and have the purchasing power to pay for them.”

There’s no doubt Australia has done very well from China’s past 20 years of growth, and its emerging middle classes are almost insatiable for our premium produce. It’s Australia’s No. 1 market for beef by volume, the buyer of 80 per cent of our wool clip, and an ever-growing market for Aussie wine.

Most trade experts say diversification is the key, but it’s likely to be a case of selling to other countries as well as, not instead of, China.

The short-term opportunities are biggest in our own backyard. Agriculture analyst Andrew Whitelaw points to Bangladesh, India, even Myanmar, while Indonesia – with a newly minted free trade agreement – “could potentially be bigger than China for us”.

Long term, he says keep an eye on the developing economies of Africa, which could be a chance not just for agribusiness and exports, but also to exchange skills. With large tracts of land similar to Africa, Australian agricultural skills and expertise could easily be transferred.

It’s not a new concept. The Indonesia-Australia trade deal, for example, includes a grain skills partnership for the first time.

Wheat is already Australia’s third-biggest export to Indonesia, but it’s hoped this partnership will take that further. “We can share some of our skills with the Indonesian people, how to improve milling value, how to improve taste and digestibility,” GrainGrowers chairman Brett Hosking says.

“The hope is the relationship will go beyond just purchasing, to the point where they say, ‘We love Australian grain, because they come over here and show us about it’.”

It’s a model Hosking thinks future trade agreements should seek, in a bid to develop not just markets but relationships.

“The trap we fell into with China up to now was that trade was very transactional – we provide a product and you pay us for a product,” he says.

“One of the challenges with China is that beyond the transaction, there is little to no dialogue with the country, where they’re coming from, their culture. I feel like that part of the relationship broke down.”