China's status as Australia's most lucrative farm export market is set to be strongly challenged by Indonesia in the next couple of decades, helped significantly by July's free trade deal with our near northern neighbour.
Indonesia is on track to be the world's fourth largest economy, and analysts tip Indonesian consumers will likely be eating far more of Australia's key meat and cereal commodity exports than the Chinese by 2050.
However, Australian farmers are being warned our big export gains with Indonesia and other global customers, achieved with help from nine free trade agreements in the past decade, are also at risk of being rapidly eroded.
On the eve of more trade liberalisation pacts being signed with Australia's Asian and Pacific neighbours, and the UK, our export rivals are already achieving similar deals, or better.
The European Union is currently negotiating its own tariff-diminished FTA with Indonesia.
US sneaks in
Late last year the US emulated our celebrated 2015 trade deal with Japan and the extra advantages achieved in the broader 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
American beef exporters effectively gained equivalent Japanese tariff concessions to those negotiated for Australia producers.
Another high value customer, Korea, has an even more preferential agreement with the US, and also signed trade pacts with Canada and New Zealand following its 2015 deal with Australia.
Both Japan and Korea have inked free trade agreements with the EU, too, in the past 18 months.
The Australian Bureau of Agricultural and Resource Economics and Sciences notes Australia's top five export markets - China, Japan the US, Korea and the ASEAN states - all have FTAs with our major export competitors.
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While Australia ranks strongly as one of the world's top 15 agricultural exporters with 81 per cent of our $48 billion of food and agribusiness exports going to countries covered by trade deals with Canberra, an ABARES report highlighted a "proliferation of preferential trade agreements" sealed by other countries in recent times.
By July this year 305 such deals were in force globally.
"The importance of FTA's to Australia's agricultural export performance can't be overstated," said ABARES head of agricultural forecasting and trade, Dr Jared Greenville.
"Agricultural exports to countries with which we have an FTA were worth about $39b in 2019-2020.
"But once we get an agreement some of those gains can be eroded as new countries also negotiate with our trading partners."
Dr Greenville said FTA's like the Indonesia-Australia economic partnership were a long term investment in dismantling tariff barriers and quotas to foster easier global trade, reduce consumer costs and encourage more efficient production.
FTAs could also help buffer Australian agricultural exports from shocks and disruptions such as COVID-19 and they cultivated important market diversification, reducing our dependence on a few key buyers.
Importantly, our agricultural exports should benefit greatly from Indonesia's projected rapid growth and the preferential access our newest FTA allowed.
Indonesia's per person consumption was projected to be greater than China in the commodity areas where Australia excelled.
For the grain sector Indonesia was already worth big money, absorbing more than a fifth of Australia's wheat exports between 2015 and 2018 - more than twice that of our next biggest buyer.
Don't be complacent
However, ABARES' report noted once an agreement was in place, both parties could not be complacent.
"It's important for the government to keep working on securing progressive advances like technical market access for products under the agreements to help realise the potential benefits," Dr Greenville said.
There were only a few major trading partners with which Australia did not yet have a preferential trade deal, including India, the EU and Britain, which is on track to be signed by year's end.
Apart from pursuing these deals, the focus had to be on upgrading existing relationships, particularly reducing the complexity of technical market access requirements from importers such as rules of origin, phytosanitary restrictions, residue levels and other non-tariff barriers.
At the same time, with market competitors potentially securing more favourable free trade deals from our customers, grain sector body GrainGrowers also wants Canberra to increase research into markets and new opportunities, potentially by expanding the work of ABARES and Austrade.
"It is critical Australian industry and government have a proactive plan in place to help exporters have viable market options to help manage rapid, unexpected market changes," the advocacy body stated in a recent submission.
Grain producers relied on exports worth about $11b a year to absorb about 70pc of Australia's average 29 million tonne annual harvest.
The unexpected changes frequently faced by exporters included non-tariff barriers or a surge in domestic production or, lately, "diplomatic challenges with a major trading partner which unfairly target an industry sector, such as those faced by the Australian barley industry" in China.
Indian tariffs of up to 60pc on pulses had a serious impact on all sectors of the market in recent years.
GrainGrowers' submission urged increased efforts to conclude "an ambitious trade agreement with India".
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The story Free for all global rush to free trade deals leaves ag wins vulnerable first appeared on Farm Online.