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Agriculture makes an important contribution to the Australian economy. Australia is a competitive net agricultural exporter, with around two thirds of total production exported. In 2015, Australian agriculture and food exports totalled $46.5 billion, 14 per cent of the total value of Australia’s goods and services exports for that year.*
* Based on the WTO definition of agriculture, which excludes fisheries, forestry and rubber. The value including Australian fisheries, forestry and rubber exports in 2015 was $49.4 billion.
Source: DFAT STARS Database, based on ABS Cat No 5368.0, June 2016 data; ABS Special Data Service.
The Uruguay Round of trade negotiations called for the creation of the World Trade Organization (WTO) and with it a better outcome for agriculture. Under the WTO, the Agreement on Agriculture was negotiated and came into force on 1 January 1995. The Agreement on Agriculture provides the basic legal framework governing agricultural trade.
The Agreement on Agriculture recalls WTO Members’ long term objective to establish a fair and market oriented agricultural trading system. It focuses on three main pillars:
Australia is committed to global food security yet millions of farmers around the world, both in Australia and in many developing countries, are unfairly disadvantaged by ongoing distortions in world agriculture and food markets which can impede the achievement of long term food security.
Trade and production distorting measures lead to greater price volatility and can create a disincentive for farmers to increase output and productivity, such measures can also encourage wasteful surplus production that in turn weakens commodity prices and returns to farmers.
Further agricultural trade policy reform is important to Australian food and agriculture sectors, and to ensure that global food security objectives are pursued in ways that do not undermine the livelihoods of farmers around the world.
As part of its comprehensive agricultural trade policy agenda, the Australian Government continues to pursue multilateral agricultural trade reform. Read more on Australian bilateral and regional negotiations; including together with other Cairns Group members. At the tenth WTO Ministerial Conference held in Nairobi 15-18 December 2015, WTO Members agreed to a significant package of measures in export competition. The most important element of this was the agreement to eliminate all agricultural export subsidies. These subsidies harm farmers around the world and have a negative impact on world prices, agricultural investment, and rural wages – all factors which contribute to poverty and undermine food security in developing countries and especially least developed countries. The elimination of these subsidies is an important step to correct and prevent trade restrictions and distortions in world agricultural markets.
The Australian Government is actively working to reduce distortions in global agricultural trade and to provide better market access for Australian exporters. An important part of the Cairns Group’s contribution to the WTO’s agriculture agenda has been its technical work in the negotiations. The Cairns Group develops detailed negotiating proposals. Cairns Group officials meet regularly in Geneva to discuss negotiating positions and share information. The Cairns Group website provides further details, including communiqués from ministerial meetings.
The Government’s next reform priority is to address global imbalances created by excessive agricultural subsidies.
Trade distorting support practices disrupt global agricultural markets by encouraging excess production, depressing prices, and locking producers out of markets. Major subsidisers, like the US, EU, Japan, India and China, spend well over $100 billion per year on trade distorting subsidies. Substantial subsidies provided by governments in economically stronger countries discourage the efficient production of food and undermine global food security. Farmers in least-developed countries suffer the most, but all farmers are impacted and the global economy is weaker as a result.
Australia has reduced its own tariff levels and other trade distorting protections on agricultural and food products since the early 1970s. Australia’s simple average applied tariff on agriculture is 1.2 per cent. This reinforces a competitive and productive agricultural sector and ensures Australian farmers can provide high quality products to world markets without the high levels of financial support, protection and other trade distorting practices used by other countries. For example, support for producers accounts for less than 2 cents in every dollar earnt by Australian farmers. This compares to some other countries where producer support accounts for 62 cents for every dollar earnt. This kind of excessive domestic support distorts trade and reduces global competitiveness, leaving Australian farmers at a disadvantage.
Recently, WTO Members have expressed an unprecedented level of interest in an outcome on trade distorting support in WTO agricultural negotiations. As Chair of the Cairns Group, Australia is leading discussions on reform and would like to deliver an outcome on trade distorting domestic support at the 11th Ministerial Conference (MC11), which will take place 11-14 December 2017 in Buenos Aires, Argentina.
Agricultural Domestic Support continues to grow for major agricultural producing countries. There has been a particular rise in trade distorting support by emerging economies.
Text version of chart
To support this reform agenda, the Australian Permanent Mission to the WTO in Geneva has developed a Calculator which allows WTO Members to quickly and easily calculate the impact of various domestic support reform proposals. The Agricultural Trade Distorting Support Calculator is an important tool for negotiators and policymakers to assess trade distorting support measures and find suitable reform models for adoption at MC11.
Progressive agricultural trade policy reforms have resulted in Australia being one of the world’s most efficient agricultural producers. This is demonstrated by the Producer Support Estimate (PSE) produced by the Organization for Economic Cooperation and Development (OECD). Australia’s PSE in 2015 was only 1.3 per cent, down from 2.7 per cent in 2012, and remains the second lowest among OECD countries.
The chart shows total agricultural domestic support (trade distorting and non-distorting) in Australia and eight other countries in 2006 and 2010: