Australian Department of Foreign Affairs and Trade

The Australian Wool Industry - Pipeline or Pipedream?

Speech by the Australian Deputy Prime Minister and Minister for Trade, The Hon Tim Fischer to the to the "Working with Wool" Seminar, Canberra Institute of Technology, Canberra

29 June 1998

I am pleased to have been asked to take part in this evening's seminar, both in my capacity as Minister for Trade and also because wool plays such a large role in the economy of southern New South Wales. This of course includes the Monaro and Hume areas around Canberra as well as my own electorate of Farrer, along the Murray River from Mt Kosciusko to the South Australian border.

It is also very gratifying to meet the students of CIT's Woolclassing Course, and may I take this opportunity to wish you all the best for your future studies. You are a vital part of the wool industry.

Wool - of vital importance to Australia

Whenever we talk about the wool industry in Australia, it is important to remind ourselves of the important position it occupies in the economy. Over the last two hundred years, Australia has nurtured its reputation as the largest producer and exporter of fine merino wool in the world. Last financial year this amounted to around $3.5 billion in exports, and the value is expected to approach $4 billion this year. This is around 17 per cent of all our farm exports and Australia remains the largest exporter of wool in the world.

I am sure I don't need to explain to this audience how important trade is to the livelihood of the Australian farm sector. Over 70 per cent of Australian farm produce is exported, but for wool this figure is even higher at over 98 per cent.

Wool exports are therefore a major employer in rural and regional Australia providing employment and economic stability for tens of thousands of Australians. The Australian Government has worked with the wool industry to improve the quality and competitiveness of our exports. This has been achieved through research and development, through programs aimed at opening new markets, and through training programs such as at CIT to encourage wool growers to provide a product tailored even more to meet the buyers' demand.

The industry is currently going through an undeniably difficult time of low profitability. Current financial problems in Asia have added to this uncertainty in an industry which has already had to develop strategies in the 1990's to overcome strong competition from other fibres, and the enduring effects of the disintegration of the Soviet Union and its associated markets. It is all the more important, therefore, that the industry continue to strive to provide high quality products geared to international consumer demand.

One of the ways to ensure this is to provide well-trained workers for the industry, and institutions such as the CIT play an important role in helping to ensure higher quality exports.

Winning market access - the wool 'pipeline' to North America

When the Government took office two years ago, we reinvigorated our efforts on bilateral market access to complement ongoing work under regional mechanisms such as APEC, and at the multilateral level in the World Trade Organization (WTO). Our efforts have achieved results that translate into real dollars for our wool growers and processors.

Now many of you might say this all sounds good in theory, but just how does it create more export dollars for Australia? The example of the wool 'pipeline' we have opened up into Mexico and the USA will show you just how it works.

One of the Government's main achievements has been to secure the removal of Mexico's 10 per cent tariff on scoured wool, wool tops and wool noils and waste imports from Australia. Not surprisingly this has seen Australian wool exports to Mexico increase by 60 per cent in volume and 75 per cent in value in the last financial year. Nearly all the increase has been in high-value wool tops.

But the good news doesn't stop there. This is because Mexican textile industries are beginning to take advantage of the opening up of the US and Canadian markets under the North American Free Trade Agreement. In fact, Mexican wool processing capacity is expected to increase by nearly 40 per cent by the year 2000 - and we want to make sure most of this is from Australian wool.

All those who have been in the industry for a long time have known of the difficulties of getting the Americans to wear wool like the other high income Northern Hemisphere nations of Western Europe and Japan. We are now seeing wool going to Mexico and then leaving Mexico in the form of Italian designer label suits for the US. Nineteen out of every twenty woolgrowers are dependant on export markets and this pipeline provides us with the opportunity of breaking into a new 'wool frontier'.

In addition to Mexico we have also won wool tariff reductions or concessions with the Republic of Korea, India and China. We have developed important new markets in countries like Indonesia where exports over the last four years have been up 15-fold and Lithuania up 10-fold over the same period.

The WTO - increasing access for Australian exports

The WTO Uruguay Round has also delivered benefits to the Australian wool industry in the form of lower overseas tariffs on greasy and semi processed wool as well as on wool yarns. Generally, the tariffs on greasy, scoured and carbonised wool in all countries were subject to a minimum cut of 15 percent. Countries such as the US agreed to go further by cutting tariffs on combed wool by 52 per cent and wool tops by 50 per cent.

But the most important outcome for the wool industry was the agreement as part of the Uruguay Round outcome in 1994 to phase out over 10 years import quotas applied under the Multifibre Arrangement. Ten years, of course, is a long time, but the real benefits of this agreement for Australian exporters will begin to be seen in the next few years.

Australian industry - need for initiative

The Government is committed to improving market access. But it is the industry itself that needs to win markets by continuing to enhance the image of Australian wool as a high quality fabric of choice.

Just as food industries are striving to promote the image of clean, green Australian food overseas, the wool industry can enhance the image of Australian wool by clever marketing and the consistency of product to support promotion efforts.

I know that David Boyd is going to address you on the subject of marketing Australian wool in a moment, and I don't want to steal his thunder. But I do want to highlight a few issues where Government and industry are working to ensure that Australian wool remains a product that is in strong global demand.

We all need to take quality assurance programs seriously. Wool contamination, in all its forms, remains one of the major problems confronting the wool industry. The Australian industry has made gains in this area, with the introduction of Quality Assurance schemes for wool, and measures such as the phasing out of the old Standard 1 HDPE pack.

The Australian Wool Exchange (AWEX) is developing a national quality assurance scheme which will include current industry and commercial quality assurance schemes such as Dalcare (Dalgety) and Clipcare (Alders). It is also important to build strategic alliances with brokers, processors and overseas importers.

Training is important in many areas of the industry, and the important position of the classer needs to be acknowledged. The classer's role in quality control includes selective breeding and ensuring a minimum of natural genetic diversity within a commercial flock, in order to produce wool characteristics demanded by the market. Institutions such as the CIT are essential in this process.

Conclusion - the potential of wool

Any industry that wants to survive in today's competitive environment needs to produce for its market. Fortunately, the Australian wool industry is getting its act together with respect to marketing, training and innovation. One need only look at new, exciting products such as wool plus lycra, wool cotton blends such as "Denimwool" and "Colana" to see that the industry is taking market development seriously.

I think you will have guessed that I am not one of the doomsayers who see the ultimate demise of wool in every market downturn. As a product, it has qualities second to none. The industry's challenge is to convince a new generation of consumers about wool's benefits - benefits their parents and grandparents appreciated only too well.

I am confident that if we work together to take maximum advantage of these opportunities, we can significantly improve the welfare of the many tens of thousands of Australians who are associated with the wool industry. And that will secure you, who are soon to be on the front line in our trade battles, a long and bright future.