THE federal government is making headlines with its free trade deals, and appears to be making progress on its promise that “we’re open for business”.
But is it making deals for the sake of ticking off a political box at the expense of real benefit?
For agriculture the latest deal with Japan has, for more industries than not, been considered a dud.
Milk products being excluded from most tariff cuts in Japan is most surprising (dairy tariffs will remain relatively unchanged), despite Australia being the biggest exporter of dairy products to Japan.
Some short-term gains will come for beef and horticulture where we’ve beaten our competitors to the punch on signing a deal, but it’s questionable if these deals will help agriculture long term.
Once other countries sign their own trade deals, their competitive advantage on cost of production and subsidies through which they have traditionally been able to undercut us on will still be there.
Other exporters will also see their tariffs drift lower, meaning we’ll effectively be back to the same old “level” playing field.
And other countries might be smart enough not to sign unless they get better access on pork, rice, dairy and sugar.
Meanwhile, we’re assuming companies in Japan and Korea will automatically pass on our import tariff cuts to Australians for
foreign-produced goods such as cars and electrical items.
However, the risk is that those companies will still dictate a price while our balance of trade will be open to the usual maket forces.
In other words, commodity suppliers such as agriculture and mining remain as price takers, while foreign manufacturers will set their price.
One big advantage for our farmgate prices could be that increased accessibility to our beef and horticulture products improves demand, placing price pressure via extra competition back down the chain to impact at the farm gate level.
But all of this will mean nothing if we can’t get the produce to port efficiently.
We already have under-used port infrastructure due to poor road and rail access.
Market access isn’t all about offshore politics – some well targeted projects in our own backyard might have just as much potential to improve our competiveness as any given tariff cuts.