Free trade deals fail to boost Australian agriculture and food manufacturing

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It is often claimed that free trade agreements (FTAs) with certain trading partners will benefit Australian agriculture. OECD statistics say the opposite.

Australia’s agriculture and agri-food trade balance has deteriorated since the entry into force of FTAs ​​with New Zealand, the United States and Thailand.

The long-standing 1983 agreement with New Zealand shows an increase in imports of processed food products, particularly since 2000. Australian food exports to New Zealand have stabilized since 2011 with an Australian deficit of 600 million US dollars on food products in 2014. Agricultural products were close to balance with just over 270 million US dollars of raw or minimally processed products flowing in each direction.

The net result (shown in black) was a persistent and generally worsening deficit for Australia in its agricultural and food trade with New Zealand throughout the period.


Author developed from the OECD Bilateral Merchandise Trade Database STAN

The agreement with the United States entered into force in 2005. Again, agricultural products are close to Australian imports of US $ 210 million, slightly exceeding exports since 2007. Australian food exports have consistently exceeded imports, but the surplus halved between 2004 and 2013. The near doubling of food exports in 2014 is unclear, but meat products driven by the decline in the herd of cattle in drought-stricken Queensland would make part of what could be a one-time peak.

The net result (again shown in black) has been a persistent but generally declining surplus for Australia in its agricultural and food trade with the United States since the entry into force of the FTA. Australia’s 2014 surplus of around US $ 2 billion looks likely to decline to around US $ 700 million or less in the coming years.


Author developed from the OECD Bilateral Merchandise Trade Database STAN

Thailand also signed a bilateral agreement in 2005 and the result has been a general worsening of the agricultural and food trade deficit.


Author developed from the OECD Bilateral Merchandise Trade Database STAN

The increase in Australian food imports from over US $ 200 million to over US $ 800 million in the decade leading up to 2011 is pronounced, as is the leveling off that followed. Australian agricultural and food exports to Thailand generally traveled together until 2008, but thereafter, agricultural exports rose sharply for three years before falling back. The rise and then the fall in commodity prices largely explain this bump.

Obviously, these three FTAs ​​did not work. There has been no obvious improvement in the agricultural and food trade situation under the three agreements. On the contrary, the deterioration was evident in each case.

Looking now to the world, Australia’s agricultural and food balance has been a persistent and generally growing surplus. It is the opposite effect. Australian business performance has been better with un-contracted partners. Again, the effects on commodity prices are evident in recent years for agricultural exports.


Author developed from the OECD Bilateral Merchandise Trade Database STAN, Author provided

New Zealand, the United States and Thailand account for about 30% of the increase in food imports, but only about 15% of the increase in food exports to the world. They also represent only about 5% of agricultural exports but 35% of imports.

Further analysis can be undertaken, but on these numbers the FTA partners have clearly been able to outperform Australian companies. On the other hand, where no deal has been reached, Australian companies have outclassed their partners to record a generally improving agricultural and food trade surplus.

How could things change with three new trade, regulation and investment agreements in North Asia (Japan, Korea and China), and perhaps a trans-Pacific partnership? History suggests that there are no necessary gains or trend losses on merchandise trade for the food and agriculture industries.

It seems we should be watching the realities of trade more closely, not focusing on rhetoric and so far empty promises.

There is nothing “free” about these trade agreements.


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