Agriculture has ruled the roost in Australia since the country's inception. Maintaining and expanding international access for its agricultural goods has long been a key plank of the country's trade policy, and its agricultural groups continue to lobby strongly for expansive free trade deals to overcome a small domestic market, to make inroads into countries with more profitable products and to defeat competition from other exporters. And though diversification has resulted in the emergence of others sectors in recent decades, the farming industry's continued growth in value and employment — as well as its alignment with the country's broader trade policies — means it will remain a guiding influence regardless of who rules Australia.
Agricultural exports have long been key to any number of developed countries. But even as the influence of the farming sector wanes in U.S. and EU politics, Australia's farmers remain a potent political force. Their clout, in turn, is driving the government's continued push to open up further export markets, particularly to the north in Asia.
Finding Hungry Markets
Australia is an agricultural export powerhouse for three main reasons. First, the country possesses vast tracts of land, yet it has relatively few people to feed, meaning it has the highest arable land per capita of any nation (2 hectares per person). Exporting agricultural goods helps to overcome the limits of a small domestic market — the country is only as populous as Shanghai — while harnessing the fullest extent of the country's vast geography. The second factor is Australia's links to hungry consumer and industrial markets. During the colonial period, ties to London meant Australian wool, in addition to beef and skins, were in high demand as a manufacturing input. Today, markets that are hungry for Australia's output still exist — with the added bonus that they're much closer than London — because buyers in Northeast, Southeast and South Asia are all eager for its agricultural goods. Last, the country's isolation has left it comparatively free of the plant pests that have dogged agricultural production in similarly sized producers, meaning that farmers have lower input costs and easier access to premium, pest-conscious export markets. Nevertheless, such isolation and reliance on export markets obliges Australia to overcome the costs imposed by distances by becoming more efficient and ensuring that it is able to access those foreign markets.
A Sector in Robust Health
Agriculture plays a vital role in Australia's economy, especially in its rural hinterland. As a result, the sector holds a degree of political sway over all the country's parties, although the National Party is generally the strongest representative of agricultural interests. In 2016, Australian farms yielded $62 billion in farm gate income and accounted for $36.7 billion in exports, contributing 2.2 percent to the gross domestic product. In the same year, the sector directly employed nearly 270,000 people (2.5 percent of the total workforce), dwarfing the number employed in mining (177,649). At the same time, an estimated 1.6 million additional people were employed in retail, logistics and processing supported by agriculture. And the size of the workforce is only growing: From 2011 to 2016, more than 17,000 people found new jobs in the sector. In contrast, the manufacturing industry shed 220,000 jobs over the same period (although the sector still employed about 684,000 Australians in 2016). Agriculture also dominates the national landscape. In 2017, a full 394 million hectares of land were under cultivation, or 51 percent of the continent's total landmass; the figure was much higher for Queensland (80 percent) and New South Wales (69 percent).
The country's farmers are keen to maintain and expand their access to world markets. The sector supplies about 93 percent of Australia's domestic food supply, while the country's small population leaves it with a large agricultural surplus for export. From 2014 to 2017, farmers exported an average of 70 percent of their produce by value — up from 60 percent in 2012. Without question, its rural agricultural exports have become less vital to its export profile due to economic diversification (the figures have slipped from over 75 percent in the early 1960s to 25 percent in 1990), yet they still make up over 15 percent of total exports. In terms of value, however, Australia's agricultural exports have almost tripled since the 1960s, rising at about 3.5 percent per year. Australian farmers have also broadened their exports beyond traditional commodities such as wool and beef to sell wine, cheese and processed foods around the world.
Today, Australia's largest exports are ores, hydrocarbon, precious stones and beef — the last of which totals 4.36 percent of GDP, or $8.3 billion. At present, Australia is the world's third largest beef exporter, supplying about 3 percent of the globe's total, particularly to countries such as Japan, South Korea and the United States. A full 55 percent of Australian farms are devoted to cattle production, while there are an estimated 25 million head of cattle nationwide. In terms of agricultural exports, beef is followed by wheat and wool — all of which account for about half of agricultural exports. Grain production employs 170,000 people — a full 64 percent of the agricultural workforce. The country exports 65 percent of its grain to Asia-Pacific neighbors such as Indonesia, China, Vietnam, South Korea and Japan. Australia's venerable wool sector has deep roots; the economy was said to "ride on the sheep's back" before the mid-20th century. Today, wool producers operate everywhere in the country besides the Northern Territory, while New South Wales alone produces nearly 40 percent of the country's 324,900 tons of output for places such as China, India and Italy.
The story is similar with other farming products. Australia sends 98 percent of its cotton production abroad, making it the world's fifth largest exporter. It is also the fourth largest exporter of dairy products, behind New Zealand, the European Union and the United States — with most of its output going to Asia. Similarly, the country is the globe's largest exporter of sheep meat (accounting for 8 percent of world production), the third largest exporter of sugar (trailing only Brazil and Thailand) and the fourth largest exporter of wine (only France, Italy and Spain sell more).
Because Australia boasts such a broad array of farming products, Canberra naturally pushes for greater access for Australian agricultural goods when negotiating trade deals.
Driving Deals on Trade
Because Australia boasts such a broad array of farming products, the government in Canberra naturally pushes for greater access for the country's agricultural goods when negotiating trade deals. The main umbrella organization representing Australian farmers is the National Farmers' Federation (NFF), a 31-member organization featuring state- and territorial-level agriculture groups, as well as organizations that represent various agricultural commodities. The NFF aggressively promotes free trade agreements, driving Canberra to complete them quickly while also pushing for a stronger role for its representatives in policymaking. The main NFF trade policy focus is to benefit from the strong global agricultural demand, especially in Asia, by knocking down trade barriers. For example, the NFF criticized the 2014 Japan-Australia Economic Partnership Agreement because it did not go far enough in breaking down economic barriers. Indeed, many NFF members welcomed Prime Minister Tony Abbott's ouster in 2015 because his administration was slow on free trade. Most recently, the NFF hailed the bipartisan consensus to support the ratification of the 11-country Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) in August. Domestically, the NFF focuses on making the sector more efficient while demanding greater access to capital, infrastructure upgrades and a better social safety net — particularly because Australia has fallen behind its peers in the developed world on national agricultural support mechanisms, according to the federation.
Australia's domestic tariffs are relatively low, lying between zero and 5 percent for most goods. In terms of exports, Australia has actively pursued deep and substantive trade agreements — with 13 completed and more in the works. At the World Trade Organization, Australia routinely expresses concern (albeit to little effect so far) about agricultural barriers, subsidies or price controls in the European Union, India, Canada and the United States. Ultimately, however, the main focus of its agricultural trade policy is opening greater access to Asian markets, which consume about 60 percent of the country's agricultural exports. At 20 percent of the total, China — which is expected to account for 43 percent of global growth in agricultural demand by 2050 — is by far the greatest customer for Australian produce, although Japan accounts for 10 percent and South Korea nearly 8 percent. Vietnam, India, Hong Kong and Singapore are also important markets. Australian free trade proponents scored a major victory in 2015 when Beijing and Canberra signed the China-Australia Free Trade Agreement (ChAFTA), which helped raise Australian agricultural exports to $7.2 billion in 2016-17. Before the signing of ChAFTA, Australian farmers encountered steep tariffs that made them less competitive when compared with New Zealand, Chile and the Association of Southeast Asian Nations (ASEAN), all of whom had free trade agreements with China. ChAFTA has evened the playing field, giving Australia a greater advantage over larger players such as the United States, the European Union and Canada. The deal stipulates the steady drawdown of many tariffs on beef, dairy, sheep meat, wool, wine and grains.
And as a result of the massive CPTPP agreement, Australia immediately eliminated most of its agriculture tariffs on the other member countries (one single tariff will be phased out in four years). The deal eliminated 98 percent of agricultural tariffs for three of Australia's top 10 markets — Japan, Vietnam and New Zealand, which together accounted for 23 percent of its agricultural exports. The CPTPP has allowed Australian farmers to improve upon its agreement with Japan, especially on beef, sugar and rice. In the CPTPP, Australia also succeeded in maintaining its strict regulations to remain pest- and disease-free — while establishing a committee to end the use of similar non-tariff barriers in other countries. And while South Korea is already a major market for its agricultural products, the CPTPP will open the East Asian country to even more of Australian goods.
Australia's ongoing agricultural trade push, however, has hit barriers. In its slow-going talks with Indonesia, it has secured Jakarta's agreement about lowering — but not eliminating — tariff barriers. India, meanwhile, has proved even more recalcitrant. New Delhi's average, most-favored nation tariff on agricultural goods stands at 36 percent, meaning its hard-line stance on maintaining protections has stalled free trade talks with Canberra.
To date, Australia’s agricultural interests have managed to open up many key markets, although they still seek to deepen such access. While U.S. protectionism could complicate American agricultural exporters' access to Asian markets, the path is open for Australia to continue its surge to its northern neighbors. As a result, the agricultural sector will continue to loom large over Australia's trade policies — as well as the political movers and shakers in Canberra.