I come from the North-West coast of Tasmania. Agriculture and, particularly vegetable production, is an
industry that I can’t escape. Everybody there knows where to find me, where I live, and I’ve had a long
association with the industry over a period of time.

I was Parliamentary Secretary for Agriculture in 2005 when the tractors came from Tasmania to
Canberra when McDonalds changed their potato contracts with Simplot. The farmers and I spent hours
sitting in my office, chewing over that conversation, deciding where we might go, what we might do and
what the options for the industry were.

I’ve maintained that interest over a long period of time. So, in 2010, I drafted the terms of reference for
the select committee on food processing and then chaired that committee and the report for that was
brought down in August last year. And I’ve also participated in workshops, particularly in Tasmania,
around the development of the Food Plan. There seems to be a confluence of events that are occurring
around food and food supply at the moment following on from the food processing inquiry that we did
and also the Blueprint for Agriculture the National Farmers Federation is putting together. And just
recently I commissioned an intern in my office to do a project on supply chains and exporting
vegetables into China.

The issues we’ve just heard from Meat and Livestock Australia (MLA) are important – the research, the
market research, the relationships, the market development.

So why did I pick exporting vegetables to China as a topic? Well one of the things that has become
apparent to me, and I think it was just demonstrated to you all by the last presentation, was the
discussion around the importance of export markets to industry more generally.
I notice that we’ve got the supermarkets here, as part of the deal today, and it is good to see them. But
one of the things that came through to me in the food processing inquiry was that having alternative
markets, having options for your markets, was absolutely vital. We had experts from Australia and also
from overseas tell us about the importance of market options. And so that led me to look at what the
market options for a vegetable industry were here in Australia.

And I’ve been following the trade figures for a considerable period of time. ABARES each quarter
publishes trade figures for our exports and our imports and where the markets are, where the markets
are growing and where the trends are moving to. So when you look at the numbers, it was more than
evident to me that China had to be part of the equation.

Last year the opportunity came up to grab a spot on a delegation to go to China and set some of the
agenda for that delegation. One of the things we pushed really hard for was to talk about vegetable
exports, and food exports and food security into China.

It was a very, very difficult conversation, because when we wanted to talk about food security in China,
they sent a representative to talk to us about food safety. That is how they see food security into their
country – it is about food safety. And that leads again to one of the real features of what we provide out
of Australia. We provide a high quality, safe food product. I had that demonstrated to me very, very
graphically while we were there. We were talking to a young mum who runs a very big business,
something of the scale of David Jones, in a small provincial south-western city in China called
Kunming. Small provincial means seven million people. But she was buying Bellamy’s baby food from
Australia for her toddler because she knew it was safe. And she was prepared to pay the premium for
that food because she knew it was safe.

We have heard about the melamine stories, we have heard about Asian demand for baby formula
stripping supermarket shelves here in Australia last summer because they are looking for a safe supply
of food. Now there has been a lot of rhetoric, a lot of rhetoric, about Australia being the food bowl for
Asia. I’m not going to go down that track, because as you just saw in the MLA presentation, those
numbers just don’t stack up. You are talking about a population in China alone of 1.2 billion people.
When we talk about what our capacity is to enter into that market, at current population levels
Australian farmers can supply enough food for Australia and less than 1% of the broader Asian
population.

If food production can be doubled by 2050, and that is not unrealistic, Australia will be able to feed the
projected population of Australia and less than 1.3% of the Asian population. So we are never going to
be the food bowl of Asia. But as MLA has done, the opportunity is to identify niche markets into that
huge market in Asia. So when we look National Food Plan that was released last weekend the work
around investigating markets, looking at market opportunities, looking at supply chains and developing
supply chains, the brand ID work, all of those things are really very important parts of what we ought be
doing. The food processing inquiry found the same thing. The NFF’s blueprint found the same thing.
The National Food Plan found the same thing. And our intern Tegan Bensley’s report reinforces that
yet again.

So all very, very important opportunities and when you look at the actual numbers around what’s been
happening with the food supply in the region and look at the growth in those markets, there is one
market that stands out yet again, and that’s China.

We hear a lot about the food imports that come to Australia from China and that is part of the local
campaign about buying Australian, and I understand that and that is important. But food imports from
China to Australia have grown by about $300 million since 2006-2007. So in 2006-07 they were $536
million. In 2011-12 they were $841 million. But that’s only half the equation. If you look at the other side
of it, that’s where the opportunity is. In 2006-07 food exports to China from Australia were $664 million.
In 2011-12 they were $2.174 billion. They have over trebled in that period of time. That gives an
indication of what the market opportunities are. And that number stands out amongst all of the other
numbers in the report that comes out quarterly from ABARES.

If you look at the United Kingdom, for example, they have gone from $1.2 billion, our exports to them,
down to $614 million. So where do we focus our effort? Where do we put the research? Where do we
develop the relationships? It’s quite obvious. Hong Kong has gone from $827 million to over a $1
billion. Indonesia $1.5 billion to 2.2, nearly $2.3 billion. Those near neighbours that are looking for a
safe, reliable source of food, where we can target specific markets. That is the role I think that we need
to look at, having somewhere else to go where if you don’t think you are getting the terms and
conditions that you think you deserve, you need an alternative market.

So in that context what is the role of Government? Now we’ve heard lot recently about Free Trade
Agreements with China, with Korea, South Korea and Japan, and the role of Government in my view is
to ensure those market access issues are dealt with.

At the launch of the blueprint, when the NFF were asked what was the first priority if a Government
could do something for them, their response was get the FTA with South Korea signed. We are already
starting to suffer a considerable disadvantage on price with our beef competitors into South Korea
because the US has a free trade agreement and we don’t. And the same thing occurs in China where

New Zealand has negotiated a Free Trade Agreement and they have that 15% advantage over us on
price and they are also a quality supplier of product. So we are in direct competition. They are the one
country that is in direct competition with us into that market. Like for like. And we are already seeing the
effects of them having a Free Trade Agreement and us not.

And it is not so much in vegetables, but it’s in seafood. Where seafood out of Australia is already being
shipped via New Zealand to take advantage of the tariff advantage. And considerable competition for
high-value products like lobsters which are $75 to $95 per kilo – a 15% advantage in those sorts of
markets is quite significant.

It’s not going to be easy. There is a lot of work that has to be done. But it has to be one of the
opportunities. All of those south eastern Asian nations have to be opportunities for us. You can see the
growth in those markets. You can see where the opportunities lie. And when it comes to having those
alternative markets to put your products into, the opportunity to have a premium product and with the
huge numbers of people who are prepared to pay a premium. And that’s one of the things that Tegan
found in her report. An estimated 83% of Chinese middle class consumers are willing to pay more for
safe food products. Let’s take that marketing advantage that we have. Let’s take that understanding
that already exists in that market about the safety and the quality of our food, and let’s leverage off that
so that we can turn around the very difficult circumstances that we are in here in Australia with our
vegetable industry, and let’s make that part of the path and see if we can duplicate what we’ve done in
the lamb industry.

I mean those numbers were quite profound. The turnaround in that industry by developing, doing the
research, understanding the market, developing the supply chains and the relationships, and getting
into those markets. I’m aware the major supermarkets are already looking at virtual type supermarkets
into Hong Kong. I’ve spoken to people who won’t buy poultry in Hong Kong because of the current bird
flu circumstance. So what opportunity does that create for the poultry industry in Australia if there is a
supply chain?

Because we have a reputation for a high quality, safe food product. We have certification systems. We
have all of the precursors that you need and so it then comes back to the role of Government to
develop those country-to-country relationships. And in respect of the market access issues, in my view,
what’s happened too much of late is that Government has been out in front and there hasn’t been
enough of a partnership with industry alongside them to help to negotiate those things.

It is vital to have that solid industry knowledge, partnership and relationship and walk into the markets
together so the markets can understand that you as an industry come with the imprimatur of
government, and the government has an understanding of what the industry needs are as part of the
negotiations so that we can get it right.

So revitalising some of the older-style campaigns, like a ‘Supermarket to Asia’ type of campaign, is part
of our marketing is important. But, as I’ve said, we must leverage off the high-quality, high-value
markets and target into those markets that will provide that premium and provide that opportunity to
pick up a bit of cream. And make sure that the continued investment in research and development,
which we’ve done quite successfully since the R&D Corporation model’s been put in place is continued.

People ask me about whether I see a positive future for agriculture in Australia. And when I’m standing
in front of a group of industry leaders like we have here, I can comfortably say yes, because I know that
there are really, really innovative farmers out there who are looking for the opportunities and be
prepared to work. In my view there are huge opportunities for this industry into that larger Asian market
and I would really look forward to assisting industry to make some real leaps and bounds into the
future.
SENATOR THE HON RICHARD COLBECK Senator for Tasmania Shadow Parliamentary Secretary for Fisheries and Forestry Shadow Parliamentary Secretary for Innovation, Industry and Science