Bush Matters Op-Ed – “Feeding the elephant and the dragon”

23 July 2015

While many of us have keenly watched the century old contest against England at Lord’s during this past week, a completely different pursuit is bowling over Australians a little closer to home.

I’m talking about the race to feed the growing appetites of the elephant and the dragon.

In many ways the economies of India and China are still awakening, with academics and economists speculating that both countries will surpass the United States in earnings and growth over the coming decade or two.

It is little wonder that Trade Minister Andrew Robb and Agriculture Minister Barnaby Joyce have identified these nations for attention and dedicated significant resources to improving political and business relationships ties with both countries.

India and China are both emerging economies that have exhibited annual GDP growth greater than 7.5 percent over the past decade. This is at least three times the rate of more advanced economies.

At the same time, Australia has seen a strong resource and housing boom that has fuelled uninterrupted economic growth over the past two decades. No other developed economy has experienced anywhere near this success.

It has placed all these nations on a reasonably strong footing as we look to how best we can improve our international competitive advantage in the coming decades.

It is remarkable to think that China now imports more goods on a single day than it did on any given year throughout the 1970s.

The benefits to the Australian economy, especially rural industry, from these dramatic import increases across China have been only felt in the past decade; there is still much evidence to suggest the best years still lay ahead of us.

Australian agriculture has an enviable reputation for ‘clean, green and safe’ produce that will help ensure our farmers increasingly seek a price premium over many global competitors in terms of quality.

The Chinese have also proven to be very keen for our product with Barnaby Joyce announcing this week that the Federal Government was a step closer to the commencement in trade in live slaughter and feeder cattle to China.

When the deal with China is finalised, it will be the seventh livestock slaughter cattle export market the Federal Government has opened since being elected — adding to Lebanon, Bahrain, Egypt, Iran, Cambodia and Thailand.

Andrew Robb, who is perhaps the busiest trade minister on the planet, has also been driving home Australia’s part in the Trans Pacific Partnership (TPP) agreement, which involves 12 countries and collectively represents 40 per cent of global GDP or about $28 trillion as well as 800 million people.

Modelling work conducted by the US Department for Agriculture shows that Australia would be the biggest beneficiary of all 12 countries under the TPP.

By 2025 the TPP could add U.S. $2.6 billion extra to the annual value of our agricultural exports — an increase of more than 19 per cent.

This would include $1.6 billion extra for our meat exports, $357 million for dairy, $161 million for cereals and $485 million extra across a range of other agriculture and horticulture.

Andrew Robb has also returned from his third visit to India this year in a continued effort to construct and finalise a strong and mutually-beneficial Comprehensive Economic Cooperation Agreement (CECA) by the end of 2015.

India is currently Australia’s 12th largest trading partner. In 2014, Australian foreign investment into India reached $9.8 billion.

There is also strong evidence that signing a CECA with India will provide more opportunities for Australian farmers.

It’s clear that India’s appetite is changing with the highest increases in food consumption coming from product previously too expensive and thus not typical of an Indian’s daily diet.

An additional 320 per cent increase in India’s per-capita gross domestic product (GDP) by 2030 is likely to further drive increases in overall food consumption over the next 20 years.

It’s clear already that increases in income has led to diet diversification, with Indian consumers moving away from traditional grains such as jowar and bajra to higher quality grains such as wheat and rice and, more recently, increasing consumption of high value food products such as milk, egg, meat, and fruits and vegetables.

From all reports, the change is occurring among both rural and urban households.

But aside from enabling our farmers to export primary produce, the Australian Government believes there are strong opportunities for Australia and India to also trade in service delivery.

In a recent opinion piece that appeared in The Hindu Business Line newspaper in India, Andrew Robb argued that a “services silk road” could be established where Australia trades its skills and expertise in exchange for the skills and expertise of other nations we have established free trade agreements with.

Robb wrote that Australia, like India, is something of a services superpower.

“Australia is renowned for its mining and agriculture sectors — which are indeed among the best in the world — so it’s perhaps a secret that our biggest export is services, which account for over 40 per cent of our valued-added export earnings,” he stated.

“We see tremendous synergies between dynamic sectors in Australia and India — be it health and aged care, education and skills, IT and communications, legal and accounting services, financial services, insurance, and architecture.

“Some of the most exciting opportunities are in agriculture: Australian dairy cows are five times more productive than Indian cows, a gap that can be narrowed — to the great benefit of India’s farmers — by investment and technology transfer.”

So where once Australia focussed on shipping its primary goods to other nations, there is great scope for our nation to build training courses and sell our new technologies in leading industries such as agriculture and mining.

If done correctly, it will provide real opportunities for smart and adaptable Australian agriculture companies to export their frontline intellectual services to the fastest growing regions in the globe.

Whichever way you look at it, for a middle power nation such as Australia, working with the dragon and the elephant can provide real opportunities to expand beyond our borders, increase business profitability and reach billions of new customers.