13 May 2020
With packets and cans back on supermarket shelves, it is easy to forget that only two months ago a food shortage seemed to top the national security agenda of many Australians. But now, as they can once again satisfy their apparent fondness for meals of rice and crushed tomatoes, the real food-security conundrum is emerging.
Australia is a nation that exports two thirds of its agricultural output. This week, China indicated it could significantly limit exports of two Australian products. It plans to impose anti-dumping tariffs on barley and has suspended beef imports from four large abattoirs.
At first glance, these moves look like a retaliation over Australia’s support for a COVID-19 inquiry. But the Australian government has resisted this interpretation, which could fuel a tit-for-tat scenario with its largest trading partner. It pointed out that the barley dispute has been going on for more than a year and the four beef producers are fixing technical breaches, some of which date back to last year, in order for their permits to be reinstated.
On second glance, an analysis of China’s actions might involve more of a journey into the black box of dumping complaints. Such complaints typically arise when domestic businesses object to competition from foreign imports they claim are unfairly priced below market value and they lobby the government to negotiate some relief.
Australian farmers are amongst the least subsidised in the world, but water allocation and drought relief packages have given Chinese barley producers an excuse to investigate dumping claims and unsettle their Australian competitors who are dependent on trade with China. While Australia can generally occupy the dumping moral high ground on food exports, the reality is that its own use of anti-dumping measures has been rising in recent years and Chinese steel exporters have been a key target. So, this might well be tit for tat, even if it’s not just about the pandemic. And the hardheads in Beijing probably don’t mind creating the impression that it is.
At third glance the biggest takeaway is that the whole world, not just Australia, seems to have escaped the COVID-19 food crisis that many feared and that is a testament to the effectiveness of the complex A$10 trillion global supply chain that feeds the world, reducing starvation and improving global security. It needs to be protected, but the challenge of keeping this system operating, despite periodic efforts by many governments to impose restrictions in response to various crises, is only going to get greater as the world’s population grows.
In a report released last month, the Australian Bureau of Agricultural and Resource Economics and Sciences dismisses the local panic buying of food in blunt terms: “Australia is one of the most food secure countries in the world, with ample supplies of safe, healthy food”. But it goes on to detail how the biggest risk for Australia – which exports agriculture products valued at about A$50 billion a year – is from supply chain and logistical disruptions due to COVID-19 lockdowns and government interventions.
It provides an insight into the complexity of Australia’s farm-trade relationship with China, which buys about a quarter of Australia’s agricultural exports. China supplies machinery and fertiliser valued at more than A$500 million a year to Australian farmers, which amounts to more than 1 per cent of the value of Australia’s agricultural exports. But China needs about A$2 billion of Australia’s A$13 billion farm exports to China (or 4 per cent of total farm exports) to manufacture its own food exports.
Untangling this supply chain is at the core of the dependence and diversification debate now intensified by the threats to barley and beef exports. Both sides of the debate are playing out in the business world, with agribusiness Elders saying it would be foolish to turn away from China, while Nufarm, an agricultural chemical manufacturer, says it wants to reduce its dependence on Chinese trade.
Most Australians don’t need to worry where their next meal will come from. But, with an economy that’s dependent on exporting agricultural products and importing farm supplies, Australia does need to worry if other countries weaponise trade barriers and make politicised threats to a hungry world’s complex supply chains.
Greg Earl is an editor and writer. He was The Australian Financial Review correspondent in Japan and South-East Asia.