Australia will benefit from and can play a larger role in providing high-quality food to Asia, especially to those fast developing nations like China and India, said a report by the Economist Intelligent Unit (EIU) launched Tuesday here.
The report, commissioned by chemical and seed company DuPont, considers scenarios for economic growth in the agricultural and food sector over the next decade, providing an outlook to 2030 that points to a situation where real per-capita food consumption could increase by 79 percent for developing countries, and could more than double in China and South Asia.
Under the core scenario, by 2030, China will import 59 percent of all food exports from Australia, up from 12 percent in 2007. Even under a slower economic growth scenario, China will buy a significant share, or 42 percent, of all Australian food exports.
The report, titled Fortifying Australia's Rold in Asia Food Security, predicts that as Chinese people become more affluent, China's food self-sufficiency may be reduced from 97 percent to 87 percent.
Agriculture has been an important area in the Free Trade Agreement (FTA) talks between Australian and China. The talks has been running since 2005 and are now at the final and critical stage.
Australian Prime Minister Tony Abbott had pledged not long after taking office last September that he will have the Free Trade Agreement with China finalized in 12 months. Chinese Premier Li Keqiang mentioned in his Government Work Report to the National People's Congress on March 5 that China will accelerate the FTA talks with Australia, lifting the hope that Abbott will fulfill his promise.
Once finalized, FTA between China and Australia is expected to reduce the trade barrier and enable Australian agricultural product a smoother entry to the lucrative Chinese market just as its neighbor, New Zealand, has enjoyed since signing FTA with China in 2008.
The report points out that apart from increasing trade barriers, import restrictions, and government subsidies to farmers, countries can increase agricultural productivity by expanding public investment in rural public goods and increasing productivity. "Increases in productivity offer the opportunity not only to improve agricultural self-sufficiency rates, but also to raise overall levels of both farm production and national economic welfare," the report says.
The report also suggests Australia to retain a flexible exchange rate system and keep the dollar down. The recent depreciation of the Australian dollars "is already boosting farm income prospects and thus encouraging renewed investment in farming and agribusiness in Australia".
The Australian government is also recommended to take complementary measures to make its agricultural sector more competitive internationally and more attractive as a source of food supplies in Asia.
They include seeking greater market access for farm products abroad through trade agreement, considering Australia's own remaining protection of and subsidies to manufacturing, facilitating foreign investment in Australian farms and agribusinesses, encouraging infrastructure investment to lower trade costs along the food-value chain, and encouraging more investment in agricultural and food processing research and development.
Australians have strong feelings toward their land. It is a rather sensitive issue for foreign companies to invest in Australian farms or agricultural businesses.
At the end of last year, Treasurer Joe Hockey has vetoed the 3. 4 billion AU dollar (3.07 billion U.S. dollar) takeover of GrainCorp, which handles most of eastern Australia's grain crop and exports, by U.S. firm Archer Daniels Midland.
