Address by The Hon Tim Fischer MP, Deputy Prime Minister, Leader of the National Party, Minister for Trade, to the 1997 Australian Sugar Convention, Brisbane, 7 May 1997

Introduction

Chairman of the Canegrowers', Harry Bonanno, State Ministers Trevor Perrett and Howard Hobbs, fellow guests, and exporters extraordinaire - namely canegrowers, ladies and gentlemen.

It gives me great pleasure this morning to address the 1997 Australian Sugar Convention.

Today I want to outline the Government's views and actions on some particular matters of importance to your industry - namely the outcome of the sugar industry review, and the trade challenges before this great export industry.

The Sugar Industry Review

I can say straight out that a deal has been done with and for the sugar industry and we will ensure that the deal is delivered.

In this regard, you will be aware that the Prime Minister announced on 4 March 1997 that the Federal Government had endorsed all of the recommendations of the Sugar Industry Review Working Party, which included the removal of the tariff this year.

In addition, the Federal Government noted that the package of recommendations had already been fully endorsed by the Queensland Government at the start of the year.

And you would realise I am sure that almost all the recommendations proposed changes at a State level.

The Government considers that the Working Party's package of recommendations is sound, and is a significant step towards a successful, internationally competitive and sustainable industry.

Given that the Working Party recommendations:

• had the unanimous support of the Chairmen of the peak industry bodies which represent over 95 per cent of cane production;
• had the prior support of the Queensland Government which decided to implement export parity pricing, thereby negating the effect of the tariff; and
• were accompanied by a strong message from the industry representatives on the Working Party that the package was to be accepted as a whole;

the Federal Government decided to endorse the industry backed recommendations.

The removal of the tariff was the main recommendation over which the Commonwealth has jurisdiction, but it is a removal not in isolation. We will deliver what the sugar industry has determined as its priorities.

The industry wanted the single desk powers for export markets and domestic sales and that is what we have delivered, 100 per cent of single desk and it stays for the wheat and rice and sugar industries.

You wanted the strength of single desk negotiations for your marketing arm and you are getting it. Yes there are purists who would dynamite the single desk core structure, but I will never be one of them.

Improving the Trade Environment for Sugar

As part of the quid pro quo for the tariff reduction, improving the competitive access of the industry on world markets is essential, so the market access agenda for sugar is extremely important.

The tariff and other barriers that the industry faces are substantial, but improvement is in prospect. Countries which are now within the range of zero to 5 per cent include, at zero tariff: Brunei, Hong Kong, Indonesia, Israel, Kazakhstan, Kuwait, Latvia, Malaysia, New Zealand, Singapore, Slovenia, the United Arab Emirates; at 1 per cent Russia; at 2 per cent Brazil; and at 5 per cent Bulgaria, Egypt, and Korea. With Canada we have enjoyed a duty free preference under CANATA. And Jordan dropped its tariff from 50 per cent to 5 per cent during my recent visit there.

This group of countries, which includes a number of our 'top ten' markets such as Canada, Malaysia, Korea, New Zealand and Singapore, covers over 60 per cent of our exports of sugar.

Other 'top ten' markets include:

• Japan, where the tariff has just been lowered to 15 yen per kilogram;
• China, where in the WTO accession negotiations better market access for sugar is a high priority;
• the United States, where we continue to push for fundamental reform of the sugar regime, and where we have benefited from a quota increase this year; and
• Taiwan, an important market where Australia is the dominant supplier, and where in the interim access package we negotiated with Taiwan last year in close consultation with industry, we were able to secure guaranteed levels of access from the time of accession to the WTO, together with a halving of the tariff from 25 per cent to 12.5 per cent.

We are committed to working with industry to improve the market prospects for Australian sugar wherever possible. For instance, following my recent trip to the Middle East, accompanied by the Queensland Sugar Corporation, I hope to see a substantial increase in our exports to Egypt next year and am hopeful of at least 250,000 tonnes being supplied to Saudi Arabia.

And in Bulgaria's WTO accession negotiations last year, we were able to secure a tariff quota commitment of 250,000 tonnes at a bound maximum tariff of 5 per cent.

We have before us a range of issues on the market access front - in the ASEAN markets, particularly the Philippines and Indonesia, the European Union, the Middle East and North America.

Among the most contentious issues are the possible increase in the sugar tariff in the Philippines, the impact of state trading arrangements for Indonesia's imports, the high level of protection afforded competitors like Thailand and the European Union, and the threat of a possible decrease in Australia's share of the United States' sugar quota as a result of access being sought by Mexico under NAFTA provisions.

We are very much alive to these threats and, with industry, working to protect our interests.

And I want to stress that we have given nothing away in trade negotiating terms as a result of the implementation of the Working Party recommendations. The removal of the tariff does not in any way impair Australia's capacity to negotiate improved market access in the future.

This is because the Government, in future multilateral negotiations, will be seeking to negotiate on the basis of our Uruguay Round ceiling binding of 7 cents/kg. And the reduction in the applied rate will give us significant negotiating coin for any future negotiations.

We will also be seeking "credit" for the tariff removal in our APEC negotiations, as we encourage others to also lower their tariffs.

An Important Export Industry

This trade and reform agenda is all the more important given that the sugar industry is vital to the viability of many rural and regional economies as well as to the economy of the nation as a whole.

In addition it is a critical component of Australia's export program and is consistently one of our leading farm export commodities. Earnings averaged around $1.5 billion in the three years to 1996/97 and are expected to be at about that level again in 1997/98.

Australian production is forecast by ABARE to be 5.45 million tonnes for 1997/98, up slightly on 1996/97 and continuing the gradual increase in volumes in recent years.

Queensland's share of production is around 95 per cent with New South Wales accounting for about 5 per cent. Western Australia produced around 42,000 tonnes in 1996, its first year of commercial production.

National production is expected to grow further as acreages increase and new improved technology takes effect.

I yield to experts present with regard to projections of world sugar prices, taking into account increases in production in Latin America and India.

This will provide some short term challenges to the industry, however I am confident these are challenges which will again be accepted by industry.

Some 85 per cent of Australian production is exported onto the world market where only 30 per cent of total world sugar production is traded, thereby creating considerable price volatility.

Conclusion

In conclusion, to the many visitors who are here from overseas for this conference, I would like to welcome you all here to this great country, to this great state, and this great city of Brisbane.

I am sure you will see the Australian sugar industry as one which is very well positioned to increase its presence in world markets as a reliable supplier of the very best quality product at world competitive prices.

That is good news for our customers and bad news for our competitors.

But that will only be achieved by the industry's ongoing commitment to production efficiencies, the adoption of new technology and world's best practice, a focus on quality, and a commitment to customer relations.

This is being achieved, it will continue to be achieved, and I therefore congratulate all industry participants for their positive commitment to ensure Australia's sugar industry continues to grow and develop.

Let me leave you in no doubt that the deal struck between the Federal Government, the Queensland Government and the sugar industry will stick and will provide the focus to ensure the long term competitive advantage of the Australian sugar industry.