Speech

Australian Minister for Trade, Mark Vaile

2 August 1999
Speech by Minister for Trade The Hon Mark Vaile MP to the 1999 Lamb Industry Convention, Australian Technology Park, Sydney.

Australian Lamb Needs No 'Special Deals' - Just a Fair Go

Introduction

It is a great pleasure to be able to speak to this Convention as Minister for Trade, because no industry in Australia has done more than yours to show how world's best practice, combined with good old-fashioned honesty and hard work, can win markets for Australian goods overseas.

Lamb producers can rightly be proud of their achievements over the past few years. Innovative marketing - both in Australia and internationally - and changes in the type of lamb produced have been turning around the outlook for the lamb industry. You are competing, and winning, against the world's best in a tough trading environment for Australia. And that is shown by the fact that exports now account for around 30 per cent of lamb meat production, more than double the level in 1990.

The United States - wrong on lamb

A big part of your export success has come from the development of the United States market. Exports in 1998 were valued at $108 million, accounting for 22 per cent of overall lamb exports.

And that makes the recent US decision on lamb all the more deplorable.

As you know, on 7 July the US administration decided to impose unjustifiable tariff rate quotas on imported lamb meat for three years from 22 July 1999. The tariff rate quotas, which are based on 1998 import levels, provide for in-quota tariffs of 9 per cent in the first year, 6 per cent in year two and 3 per cent in year three. There is to be an increase in the in-quota volume of about 5 per cent between the first and third years.

For out-of-quota imports, tariffs are set at 40 per cent in year one, 32 per cent in year two and 24 per cent in year three. If not to rub salt into the wound, US producers will also receive up to US$100 million in assistance over three years for productivity improvements, market promotion, animal health and domestic purchases.

Some of the alternative options that the US Administration had considered were even worse than this outcome, but I know that this is no consolation to you. For our part, the Australian Government made it very clear that no increase in barriers would be acceptable.

Your industry organisations, strongly supported by the Government, made a well-argued and forceful case to the US authorities. You pointed out - correctly, in my view - that inferior product and outmoded marketing methods, not imports, lay at the root of the US industry's problems. The Australian and New Zealand industry organisations even offered to help their US counterparts with promotional funding, with up to US$6 million over four years, but this was rejected out of hand. Now that was particularly wrong-headed, because no one knows more than the producers of Australia how best to develop a market for lamb.

In the end the US Administration caved in to a small, loud pressure group. Special interest triumphed over good policy and the interests of the great majority of Americans. As you may know, lamb is not the only sector where there are loud vested interest group pressures on the US Administration. The US steel industry is also again applying considerable pressure for action against imports, something to which it can claim two centuries of experience. What really troubles me is that the small US lamb lobby appears to have won out because of these wider emotional pressures in the US and the need for a political response, rather than because of their being any logic to the US industry case.

One of the other galling aspects of the decision on lamb - and there are many - is that it sends an appalling signal in the lead-up to the WTO Ministerial Meeting in Seattle and the launch of the next WTO negotiations at the end of this year. It is also completely contrary to the US calls for a big opening up of markets for agriculture in those negotiations.

he decision by the US Administration will provide no real help to US producers, while making high quality product even more expensive for US consumers - and how that is supposed to grow the market is completely beyond me. The end result of the decision is to seriously undermine the credibility of US trade rhetoric.
This is why the Australian Government roundly criticised the US decision as being without a rational basis, unjust and hypocritical. And that is why the Prime Minister made clear Australia's condemnation of the US decision during his talks with President Clinton during his visit to Washington last month.

Transitional Arrangements

So where do we go from here?

Well first a bit of good news for a change. I am pleased to announce that, following the discussions between the Prime Minister and President Clinton in Washington last month, the President has now agreed to measures we had sought to assist in transition to the new regime of restraints. Specifically, the US has agreed that the additional 9 per cent tariff should not be levied on product shipped before the quota implementation date of 22 July. We had sought this to ensure that lamb imports arranged before the quota was announced and implemented would not be penalised.

President Clinton has also agreed the US will cooperate with Australia in administering an export certificate scheme. Such a scheme will help avoid a rush to fill the quota at the beginning of each year. This will allow our exporters certainty and predictability in their marketing plans over the course of each year, important to maintaining and building our relationship with customers in the market.

I would add, of course, that we have made clear to the Administration that while assistance with these measures is appreciated, our position on the restraints remains unchanged and as strong as ever.

Next steps in the WTO

As you know, we have now initiated dispute settlement proceedings in the WTO. We consider we have a strong case, and we will be using this and all other appropriate opportunities to push for the earliest possible lifting of restraints.

Australia held consultations with the United States in Washington under provisions of the WTO safeguards agreement immediately after the Prime Minister's visit. The US was not able to justify the basis for their actions at this meeting in Washington, so on 23 July we requested formal consultations under the dispute settlement provisions of the WTO. We are working closely with New Zealand and expect these consultations - the first stage in formal WTO dispute procedures - to take place in Geneva soon.

I am happy to give the convention this pledge - that our Government will not allow the United States to rest, and will continue to pursue this unreasonable decision through all avenues open to us in the WTO.

Government Lamb Package

One matter that gives me great cause for confidence is the talent and resourcefulness of Australian producers. The Australian industry is far more efficient than its US counterpart and produces a leaner product. This will be in your favour as you strive to maintain the volume of your exports to the United States.
But the US decision is a harsh blow to an industry that has worked hard over a long period - and without government subsidies - to build market share. There is no getting away from that reality.

The Government is well aware of this. And we think our domestic industry deserves a bit of help to cope with the damage that will be caused by the actions of the United States.

For that reason, the Government has agreed to provide specific assistance to lamb producers by paying for up to two years the equivalent of half the transaction levy applying to all lambs sold in Australia. It is estimated this could result in savings to producers in the order of $6-7 million annually.

And the Government will also be establishing a lamb industry development program worth up to $3 million per year for two years. This grant-based program will be available to individual processors, including boning rooms, and to groups of producers. The program is tailored to the future needs of the Australian lamb industry and will deliver strategic benefits to the industry. The program will invite proposals for grants in the following five areas:

Conclusion - The Need for Further Liberalisation

Of course the US is not alone in having barriers to trade in agricultural products. That is why I am pushing on the wider, global front in the fight for Australia's agricultural trade interests ­ including better access for lamb into the EU.

That fight enters a crucial phase at the end of this year, when new multilateral negotiations will begin in the WTO on agriculture. These talks represent a historic opportunity to push hard for major, long-lasting reforms to world trade in agriculture. Together with the like-minded nations of the Cairns Group, Australia will be leading the push to remove barriers for agricultural products, so that Australia's farmers can get the fairest returns possible for their competitive, high quality products on the world market.

I count this as one of the most important tasks before me in the coming years. It is important to Australia because exports, primary products included, account for over 20 per cent of Australia's GDP. Almost one in five jobs Australia-wide depends on exports, but in the areas of agriculture, forestry and fisheries the proportion rises to around 60 per cent of jobs. That's a substantial piece of our economy tied up in trade, and it demands continued hard work by the Government.

Australian producers have won markets around the world because they deliver the highest-quality product at a reasonable price. And in doing so they compete with producers around the world who have been subsidised to the eyeballs, or who have persuaded compliant governments to erect all kinds of trade barriers. That they have done so is due to vision, and a lot of hard work. And no industry, may I say so, has shown that more than the Australian lamb industry.

Our Government is determined to help sweep away the outdated barriers that Australian producers face around the world. We know that Australian lamb producers, and other Australian exporters, aren't asking for a "special deal" - they just want a fair go. Given that, we can take on the world, and win.

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