Dairy Industry Association of Australia - 1999 National Conference

Address by the Deputy Prime Minister Leader of the National Party Minister for Trade The Hon Tim Fischer MP to the Dairy Industry Association of Australia, 1999 National Conference

Melbourne, 22 April 1999

(Check Against Delivery)

Introduction

Mr George Davey (Federal President, DIAA), Mr Peter Brown (President, DIAA - Victoria), Mr Pat McNamara (Deputy Premier), Mr Charles Beckendorf (Vice Chairman, US Dairy Farmers Federation), distinguished guests, ladies and gentlemen.

I am pleased to be here this morning in Melbourne and I thank the Dairy Industry Association for its kind invitation.

I have no doubt that the significant adjustment and commercial imperatives facing the Australian dairy industry are foremost on all your minds at present. Many of you will be feeling the pressure of this uncertainty.

But it is essential at such times to remain focused on the prize at the end of the road. This industry has an historic opportunity to forge its destiny in the international market - and this is a very exciting prospect. As Minister for Trade, I can only emphasise the importance of a strong export focus as a vital ingredient to your future growth and success.

An Export Success

But lets make no bones about it - you are already an Australian export-earning success story. Australia is one of the most efficient producers of milk in the world, reflected in our ranking as the third most important world dairy trader.

Exports of high quality dairy product are expanding each year. We currently export about 50 per cent of our annual milk production and 60 per cent of our manufactured products. Put another way, you could say that around half of the 50,000 or so people involved in the industry directly owe their jobs to this export success.

But we should not shy away from the fact that we are presently in an extremely difficult international trading environment. The economic crisis in Asia - where some of our biggest dairy markets lie - has had an impact on the fortunes of the Australian dairy industry. But the medium term outlook remains positive particularly as Australia's international competitiveness as a dairy producer continues to improve.

Global demand for dairy products is projected to continue growing over the medium term, with increases in consumer incomes and changes in food expenditure patterns expected to favour the consumption of dairy products.

The benefits flowing from current World Trade Organisation commitments and the gains we make during the next round of World Trade Organisation (WTO) agriculture negotiations will further improve the situation for low-cost producers such as Australia.

The Domestic Environment - Making the Most of Opportunities

Australia must, however, be ready to take advantage of growing international demand and market openings. I commend your many efforts to reform and improve the industry so you can be on a more competitive footing.

The Government clearly recognises the difficulties faced by those having to adjust to a more deregulated environment. I can also assure you that we do not believe in deregulation for deregulation's sake. It remains the Government's view, however, that reforms such as the legislated ending of the Domestic Market Support (DMS) scheme are important to assisting the Australian industry to develop a long term competitive position in both international and domestic markets.

International trade: the key to growth

No industry can ever afford to be complacent. As the international market becomes more sophisticated and competition intensifies, Australia's dairy industry must be fully prepared to meet the challenges and the tremendous opportunities globalisation of markets brings with it.

At the same time you can be sure that the Government will continue playing its part at all levels: bilateral, regional and global.

On the bilateral country-to-country front, one important win was the recent move by the Republic of Korea to agree to a manufacturer-determined shelf life for UHT milk. The Australian Dairy Corporation at the time estimated that access for UHT milk would assist it in meeting its target of expanding exports to Korea from around $30 million to $100 million within a few years.

At the multilateral level in the WTO we need to build on the achievements of the Uruguay Round of trade negotiations - and that won't be easy. One need only look at recent developments in Europe where EU leaders, at their summit in Berlin, agreed to wind back an already modest Agenda 2000 reform package for the Common Agricultural Policy. Dairy reform, for instance, has been delayed until the 2005/6 marketing year, two years later than Agriculture Ministers had previously agreed.

This head in the sand approach in Europe is why earlier this week, as Chair of the Cairns Group of agricultural fair traders, I released a highly critical Cairns Group Ministerial statement of the Agenda 2000 package. Australia and the Cairns Group will be looking to the next round of agriculture negotiations in the WTO, commencing at the end of this year, for the EU to make up for the lost opportunity in Berlin to meaningfuly reform the CAP .

I am also increasingly hopeful that these negotiations, to be launched at the WTO Ministerial meeting in Seattle in November/December, will coincide with a new comprehensive round of trade negotiations - an important objective for Australia at the Seattle meeting.

You can be confident Australia will be a winner in any further freeing up of world trade. The great benefit for the Australian dairy industry of the next WTO negotiations is that the trade playing field will progressively become less tilted towards those economic giants which can afford to subsidise their industries. One need only look at massive subsidising regimes like the CAP to realise that we are still a long way from an international level playing field.

A Partnership with Industry

During the Uruguay Round of trade negotiations, the Government's partnership with industry played a key role in ensuring the best possible outcome. This close cooperation will be equally important as we prepare for the next round of multilateral negotiations.

Companies and industry associations have a great stock of knowledge, experience and ideas, vital to the process of policy development and priority setting in advance of the negotiations.

We will be tapping into this through extensive consultations with industry. As some of you will be aware, my Department has commenced a sector-by-sector consultation process to develop a set of Australian objectives for the 1999 negotiations. I have also called for public submissions by the end of April on how we should approach the future WTO negotiations.

At the first meeting with the dairy sector, we were advised in a preliminary way of the broad negotiating priorities for the industry. Further meetings are planned for later in the year, at which we hope to receive your more thoroughly considered and refined views.

And as we enter the critical final phases of the preparatory process leading up to the Seattle meeting, which will launch the agriculture negotiations and, hopefully, a new comprehensive multilateral round, we will need to establish more detailed negotiating objectives and strategies in relation to dairy trade.

Conclusion

Your industry's success, its efficiency, and its vitality place a great responsibility on Government to ensure that your efforts do not go to waste, that every opportunity for export and trade is taken up. This is a responsibility we will not shirk as we continue to fight hard on all levels to ensure that the

playing field is as level as possible for the Australian dairy industry.

Thank you for the opportunity to speak to you today.