RIRDC Completed Projects in 1998-1999 and

Research in Progress as at June 1999

Sub-Program 4.1

GLOBAL COMPETITIVENESS

September 1999 RIRDC Publication No 99/111

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© 1999 Rural Industries Research and Development Corporation. All rights reserved. ISBN 0 642 57929 6 ISSN 1440-6845 "RIRDC Completed Projects in 1998-99 and Research in Progress as at June 1999 - 4.1 Global Competitiveness Publication No 99/111 The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report. This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone 02 6272 3186. RIRDC Global Competitiveness Research Manager Dr Jeff Davis RIRDC Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6272 4152 Fax: 02 6272 5877 Email: jeffd@rirdc.gov.au RIRDC Publications Manager Eva Hickman Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6272 3186 Fax: 02 6272 5877 Email: rirdc@rirdc.gov.au Website: http://www.rirdc.gov.au

Published in September 1999 Printed on environmentally friendly paper Canprint

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Foreword

This year RIRDC has produced Research in Progress, June '99, which contains short summaries of continuing projects as well as those that were completed during 1998-99 for all of the Corporation’s 20 program areas. The complete report on all the programs is only available in electronic format on our website at http://www.rirdc.gov.au The following report is a hardcopy extract covering Sub-Program 4.1. It contains all entries from continuing and completed Global Competitiveness research projects funded by RIRDC. This program aims identify important impediments to the development of a globally competitive Australian agricultural sector and support research that will lead to options and strategies that will remove these impediments.

This report is the newest addition to our extensive catalogue of almost 400 research reports, videos and CD-Roms of projects supported by RIRDC. Please contact us for the latest publications catalogue or view it on our website: • downloads at www.rirdc.gov.au/reports/Index.htm • purchases at www.rirdc.gov.au/pub/cat/contents.html Peter Core Managing Director Rural Industries Research and Development Corporation

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Contents

4.1 GLOBAL COMPETITIVENESS COMPLETED PROJECTS

PROJECT

No PROJECT TITLE RESEARCHER PHONE ORGANISATION PAGE

No New Market Opportunities for the Food Sector 1

AMR-3A Some Asian festivals and customs: A food exporters’s guide

Mr Grant Vinning, Dr Kaye Crippen

07 3376 2244 Asian Markets Research Pty Ltd

1

STA-1A Economic Developments in the Agrifood Sectors of Three Key Asian Economies (Indonesia, Malaysia and the Republic of Korea)

Dr Brian Johnston, STA Ltd , Dr Ray Trewin, ANU; Dr Jong Soon Kang, ANU; Mr John Meyers, Meyers Strategy Group; Mr Brian Hall, Meyers Strategy Group

02 62721717 Supermarket to Asia Ltd

2

UQ-36A An evaluation of the effectiveness of “Thinking of Asia”: University of Queensland final year agribusiness undergraduates engaging in market research in Asia

Associate Professors Ray Collins and Tony Dunne

07 54601328 School of Natural and Rural Systems Management, University of Queensland Gatton College,

3

Domestic Impediments to Industry Performance 5

SGH-4A Structural Change in the Farm Inputs Industry Dr Selwyn Heilbron and Ms Fiona Roberts.

03 9810 9542 S.G. Heilbron Pty Ltd and Agri-Focus Pty Ltd.

5

Trade Policy Reform 6

CIE-2A World Agricultural Products Trade: Towards a Strategy for Australia

Dr Andrew Stoeckel 02 6248 6699 Centre for International Economics 1st Floor, Ian Potter House

6

CIE-4A Implications of the MAI for Australian agriculture Brent Borrell 02 6247 6699 Centre for International Economics

7

CIE-5A Intellectual property in agricultural trade Dr Andrew Stoeckel 02 6247 6699 Centre for International Economics 7 ITS -1A Cairns Group farm leader trade strategy

development seminar. Mr Alan Oxley 03 9654 8323 International Trade Strategies Pty

Ltd

9

Supply Chain Linkages 10

US-48A The Impact of Strategic Behaviour of Multinational Firms on Australian Agricultural Exports

Associate Professor Fredoun Ahmadi-Esfahani

02 9351 3559 University of Sydney 10

Policy and Institutional Analysis 11

AEC-1A The impact of Australian indirect taxes on the Australian farm sector

Mr Geoff Carmody 02 6273 1222 Access Economics Pty Ltd 11

Communications 12

AAA-1A Sponsorship of The Australian Agribusiness Review The Agribusiness Association of Australia.

02 92426910 The Agribusiness Association of Australia.

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4.1 GLOBAL COMPETITIVENESS RESEARCH IN PROGRESS

PROJECT

No PROJECT TITLE RESEARCHER PHONE ORGANISATION PAGE

No New Market Opportunities for the Food Sector 13

DFT-1A Asia's food and agribusiness revolution continues: new opportunities in a resurgent Asia (subsistence to Supermarket ii)

Mr Graeme Thomson 02 6261 2545 Department of Foreign Affairs and Trade

13

UQ-62A Incongruity between perceptions and behaviours in agri-food marketing: Are perceptions alone a valid basis for policy formulation and research investment

Dr Ray Collins (07) 5460 1328 University of Queensland 14

Domestic Impediments to Industry Performance 15

UNE-67A Where is market power in the Australian food marketing chain?

Prof Roley Piggott 02 6773 2313 University of New England 15

BLC-1A A study of the provision and pricing of economic infrastructure to rural and regional Australia under national competition principles

Dr Terry Dwyer 02 6286 5900 Australian National University 16

Trade Policy Reform 17

ABA-8A The dynamics of international agricultural policy reform

Mr Ivan Roberts 02 6272 2239 Australian Bureau of Agricultural and Resource Economics (ABARE)

17

ANU-36A Issues, options and strategies for improving Japanese agricultural trade policies

Dr Ray Trewin 02 6249 0134 Australian National University c/- Australia-Japan Research Centre (A-JRC)

18

Markets for Agricultural Products 19

DAQ-209A Japanese consumer co-operatives - a market entry strategy for horticultural products

Mr Rick Ada 07 4688 1388 Department of Primary Industries (Qld)

19

UA-45A Anatomy of successful export-led growth: Lessons from the grape and wine industry

Prof Kym Anderson 08 8303 4712 University of Adelaide 20

US-40A Impact of quality attributes and trade impediments on Australia's rural exports to Asian markets/ The impact of strategic behaviour of multinational firms on Australian agricultural exports to Asian markets

A/Prof Fredoun Ahmadi-Esfahani

02 9351 3559 University of Sydney 21

Policy and Institutional Analysis 22

GLL-1A An international comparison of cooperative marketing arrangements between Australia, United States and Europe

Mr Glen Thompson 08 9319 8998 Global Linkages Pty Ltd 22

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4.1 Global Competitiveness Completed Projects

New Market Opportunities for the Food Sector

Project Title

Some Asian festivals and customs: A food exporters’s guide

RIRDC Project No.:

AMR-3A

Researcher: Mr Grant Vinning, Dr Kaye Crippen Organisation: Asian Markets Research Pty Ltd

157 Horizon Drive, WESTLAKE QLD 4074 and Jakarta, Indonesia

Phone: 07 3376 2244 Fax: 02 3376 7264 Email: avinning@ozemail.com.au Objectives

• To identify aspects of Asian festivals and customs that Australian food

exporters could utilise to increase their exports into the region.

Background:

Festive seasons and special ceremonial events are important opportunities for marketing food products in Asia. The issues of universal product and marketing systems must be sensitive to the localisation of product offerings associated with these events. Cultural aspects of doing business in Asia continue to be important despite the vicissitudes of a number of the region’s economies. Seemingly small issues such as colours, numbers, and symbols can have a major impact. In a number of cases the traditional emphasis placed on a product’s attributes by the Australia exporter, such as flavour, may not be as important locally as, say, size and colour.

Research

Three festive seasons were studied: the Chinese New Year, Islam’s Ramadam and Idul Fitri, and Christmas. Basic description of these festivals in Indonesia, Malaysia, and Singapore were provided. This helped identify issues such as location of activity associated with the festive season, the type of food activity, and the actors involved in that activity. In undertaking the case studies a large number of specific instances of cultural significance were identified. These were collected into an accompanying Compendium.

Outcomes

The research identified a large number of specific activities Australian food exporters could undertake to improve their penetration in the region. These related to the varying strengths during the different festive seasons of food outlets such as supermarkets, five-star hotels and restaurants, and wet markets; pricing; and packaging. Lessons were drawn regarding labelling, publicity, signage, and the use of halal certification. Micro factors such as auspicious colours, numbers and symbols were identified for specific cultural groups and cultural uses.

Implications

Australian food exporters have not always been as sensitive as they could be towards cultural aspects in Asia. The research highlighted a number of cultural issues that can be important to food marketing in the region. It illustrated how some of these customs can be utilised to provide a positive marketing impact.

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Publications

“Festive Season in Asia: A Unique Marketing Opportunity”. Australia New

Zealand Journal of Agribusiness, December 1997 (with Scott Vinning). “Food and festivals in Asia”. Poster paper delivered at VIII World Congress of

the International Food and Agribusiness Management Association, Indonesia, June 1997 (with Scott Vinning).

Project Title

Economic Developments in the Agrifood Sectors of Three Key Asian Economies (Indonesia, Malaysia and the Republic of Korea)

RIRDC Project No.:

STA-1A

Researcher: Dr Brian Johnston, STA Ltd , Dr Ray Trewin, ANU; Dr Jong Soon Kang, ANU; Mr John Meyers, Meyers Strategy Group; Mr Brian Hall, Meyers Strategy Group

Organisation: Supermarket to Asia Ltd 55 Blackall Street BARTON ACT 2600

Phone: 02 62721717 Objectives

• To report on economic change and developments in three key Asian markets

for agrifood which are undergoing rapid change as the result of the Asian crisis and

• To identify strategies for agrifood companies to pursue to remain or expand sales to these markets.

Background:

Asian agrifood markets are very important to the Australian agrifood industry. In 1997-98 Australia exported $10.4 billion of food to over 20 Asian countries. It is the goal of the Supermarket to Asia Council to significantly expand exports to these markets over the next five years. The Asian economies are, however, currently being adversely affected by the economic crisis and the scope for expansion in the short term appear limited.

Research

Research teams drawn from the Australian National University, Meyers Strategy Group and Supermarket to Asia Ltd were formed and data and information on each Asian economy collected and analysed utilising in-country contacts and expertise. Because each economy was undergoing rapid economic change care was taken to identify the underlying economic forces at work, drawing on background research underway in each country within the specialised agricultural economic and agrifood agencies. This work was supplemented by country visits and interviews with senior decision makers.

Outcomes

For each economy, the key economic factors at work were identified and their impact on the country’s agrifood sector documented. This allowed conclusions to be drawn regarding likely future directions for each agrifood sector and their implications for Australian agrifood exporters. Five key strategies for Australian agrifood companies were identified : Keep markets open Position Australian products Reduce costs through the supply chain Establish joint ventures and in-country investment Understand the markets and competitors.

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Implications While the agrifood markets in each country were undergoing rapid change and in some cases down-sizing in terms of food imports, there are opportunities for Australian agri-food companies that are prepared to be patient and build close and ongoing ties with their trading partners in the countries in question. On-going and more effective monitoring of developments is warranted because recovery, and hence new orders, may begin sooner than many Australian agrifood companies think. The research and market intelligence work required to provide timely and relevant information to Australian companies is relatively resource intensive and beyond the scope of many small to medium sized agrifood companies. Austrade and the Department of Foreign Affairs and Trade, in conjunction with State Government offices (all of which have staff on the ground in Asia) need to assume greater on-going responsibility for getting this information effectively back to potential agrifood exporters in Australia, if the emerging opportunities are to be maximised.

Publications

Economic change and agrifood developments in Indonesia: Report prepared by

Supermarket to Asia Ltd, December 1998 Economic change and agrifood developments in Malaysia: Report prepared by

Supermarket to Asia Ltd, December 1998 Economic change and agrifood developments in the Republic of Korea: Report

prepared by Supermarket to Asia Ltd, December 1998 Economic developments in the agri-food sectors of Indonesia, Malaysia and

South Korea: Background Working Papers, R Trewin (ed), RIRDC Publication 99/tba, July 1999

Project Title

An evaluation of the effectiveness of “Thinking of Asia”: University of Queensland final year agribusiness undergraduates engaging in market research in Asia

RIRDC Project No.:

UQ-36A

Researcher: Associate Professors Ray Collins and Tony Dunne Organisation: School of Natural and Rural Systems Management

University of Queensland Gatton College, LAWES QLD 4345

Phone: 07 54601328 Fax: 07 54601324 Objectives

• To engage final year agribusiness undergraduates in market research in

Asian countries for Australian agribusinesses. • To challenge students to apply knowledge and demonstrate proficiencies in

a fully commercial, team-based, cross-cultural context. • To provide excellent market research outcomes for agribusiness clients. • To enhance the reputation of the University of Queensland’s agribusiness

program.

Background:

Agribusiness employers around the world have consistently demanded business graduates with better developed commercial, interpersonal and communication skills. Universities have not always translated this challenge into appropriate educational strategies. The University of Queensland’s agribusiness curriculum integrates basic business training with practical subjects that apply that training in commercial contexts. The capstone subject of the curriculum, “Thinking of Asia”, places groups of 4 to 5 students with a staff mentor, in a commercial relationship with fee paying clients. The task of each group is to engage in market research in an

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Asian country as required by the client. The project counts for half of each student’s final semester’s marks, 40 per cent of which come from the client, not the University. Over the last six years “Thinking of Asia” has involved 25 market research assignments in 12 different countries by 125 students on behalf of 19 clients.

Research

This report evaluates the processes and outcomes of the “Thinking of Asia” program over six years since its inception in 1993. It uses Bennett’s hierarchy as an evaluative framework. A total of 108 of the 125 past students of the program, 17 clients and all 9 staff were surveyed. The analysis matched each objective of the program against responses from stakeholders to determine at what level, according to Bennett’s hierarchy, the objective was satisfied. In the ideal situation, objectives are satisfied at the highest level, where the presence and activities of the program are directly responsible for a change in practice.

Outcomes

Results were overwhelmingly positive across the three groups of stakeholders (students, clients and staff). Past students reported that the program significantly improved their commercial, interpersonal and communication skills (three attributes most strongly desired by employers). Of 17 clients, all rated the program as a success and 10 stated that it directly resulted in changes within their organisation. Four clients employed students from the program. All staff mentors rated the program as worthwhile, largely because it built and maintained industry contacts, networks and links. We conclude that the program is achieving the desired results in terms of producing graduates who meet agribusiness employers’ needs, providing value for money market research that improves business practices, and assists the professional development of academic staff associated with the program.

Implications

Other developers of agribusiness curricula, as well as agribusiness firms, could learn a great deal from this approach. While it is demanding of time and organisational skills, the payoff is in an enhanced reputation for the University with the employers of its graduates, and quality research for firms that are also making a contribution to the education of future agribusiness professionals.

Publications

Collins, R.J. and Dunne, A.J., 1996, “Utilising multi-level capstone courses in an integrated agribusiness curriculum”, Agribusiness, vol. 12, pp. 105-112.

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Domestic Impediments to Industry Performance Project Title

Structural Change in the Farm Inputs Industry

RIRDC Project No.:

SGH-4A

Researcher: Dr Selwyn Heilbron and Ms Fiona Roberts. Organisation: S.G. Heilbron Pty Ltd and Agri-Focus Pty Ltd.

832 High Street EAST KEW VIC 3102

Phone: 03 9810 9542 Fax: 03 9249 9600 Email: heilbron@eisa.net.au Objectives

• To improve our knowledge and understanding of the structural changes

currently occurring in the farm inputs industry.

Background: The Australian farm inputs industry is currently valued at around $20 billion. The industry is of critical importance to the competitive position of Australian agriculture; with the materials and services used as farm inputs accounting for around two thirds of total Australian farm costs. This publication investigates some of Australia’s key farm input sectors and examines the structural changes occurring in these sectors. The project reviews international literature on structural changes occurring in farm input sectors around the world and examines the drivers for change in the farm input industry. Implications of the changes identified in the research on the farm input industry and on Australian agriculture, are discussed.

Research The methodology included a review of previous research on structural change in the farm inputs industry; a study of farm input suppliers in two particular geographic regions and an analysis of the structural development of two national firms. An analysis was also undertaken of structural changes occurring in the farm input sectors of wool and cotton marketing, farm consumables and rural finance. Drawing on the above research, an assessment of likely future directions for the farm inputs industry, and how these directions may impact on the competitive performance of the rural sector was made.

Outcomes What is apparent from the research is that: • There has been little research done in this area, and this report represents an

important starting point for understanding these sectors and the industry. • A differentiating feature can be the level of service offered to customers; this

and increasing demand for knowledge based inputs are encouraging closer customer contact.

• Some sectors of the industry have grown rapidly while other sectors have declined. Differential trends in various sectors often reflect relative developments in end markets.

• The sectors analysed are characterised by vigorous competition, relatively low barriers to entry and considerable competitive pressure to lower cost and improve services offered.

Two contradictory trends have become evident, depending on the market examined. One trend is the contraction occurring in some segments; while in other areas there is significant expansion.

Implications A continuation of current trends is likely in the future, on the basis that the rural industry will continue its long-term secular decline. Pressures towards fragmentation and rationalisation are likely to continue in the foreseeable future.

Publications

‘Structural Change in the Farm Inputs Industry’, by S. Heilbron, S.G.Heilbron Pty Ltd and F. Roberts, Agri-Focus Pty Ltd.

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Trade Policy Reform Project Title

World Agricultural Products Trade: Towards a Strategy for Australia

RIRDC Project No.:

CIE-2A

Researcher: Dr Andrew Stoeckel Organisation: Centre for International Economics

1st Floor, Ian Potter House Cnr Marcus Clarke and Edinburgh Avenue CANBERRA ACT 2601

Phone: 02 6248 6699 Fax: 02 6247 7484 Objectives

• To develop a strategy to secure a reduction in levels of protection for agriculture

globally and an expansion of world agricultural trade.

Background:

Agricultural trade remains highly protected. Although the Uruguay Round was successful in getting agriculture brought under the WTO system and border protection levels converted to tariffs, little or no liberalisation overall was achieved. The task ahead is now to secure a reduction in levels of protection for agriculture globally and an expansion of world agricultural trade. What is required is a strategy to secure the liberalisation of global markets.

Research

As part of this project a high level symposium was held in September 1997 at the Australian National University with over 50 people, including many trade specialists, participating. Many useful suggestions and ideas were gleaned from these participants and these ideas have been developed and grouped into the strategies in this report.

Outcomes

The research identified a number of strategies that need to be developed that will lead to the objective of lower barriers to agricultural trade being realised. Any strategic response requires an objective, a set of actions that will realise those objectives, and a set of priorities and time sequencing on those actions. A long term goal of Australia should be to secure a level of protection for agriculture no higher than exists for manufacturing. Treating agriculture the same as other manufacturing has some strategic advantages. The precedent for more liberal trade has already been set for manufacturing and the implicit message is that there is nothing special about agriculture.

Implications

A coordinated program of work covering a host of key areas will be required over the coming twelve months for significant progress to be made. These areas cover things as diverse as measurement, trade and aid, European enlargement, and the environment and trade. Results of this work would need to start to become public early in 1999, whether through conferences, publications or both, to focus minds of policymakers and officials on the issues that need to be addressed and thought through.

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Project Title

Implications of the MAI for Australian agriculture

RIRDC Project No.:

CIE-4A

Researcher: Brent Borrell Organisation: Centre for International Economics

88 Northbourne Avenue CANBERRA ACT 2601

Phone: 02 6247 6699 Fax: 02 6247 7484 Objectives

• To better understand the consequences of foreign investment for the economy

and agriculture. • To better understand the consequences of Australia signing the Multilateral

Agreement on Investment (MAI)

Background:

International capital flows have been important for Australia’s development. The complexity of issues surrounding the MAI have led to concerns in rural Australia. Rural Australia needs to understand the rationale and implications of foreign investment and the MAI to ensure sensible responses to the agreement in Australia.

Research

This is a desk based project drawing on economic rationale to practically examine industry concerns about the MAI and foreign investment.

Outcomes

A wider appreciation within rural industries of the rationale for, and implications of the MAI, and the consequences if Australia does not participate.

Implications

Agricultural industries are generally supporters of liberal trade flows. Linked trade and financial flows are strongly linked. The agricultural sector may have much at stake if impediments restrict either trade or capital flows.

Publications

Trojan horse or more horsepower? – foreign investment and the Australian rural economy. RIRDC publication.

Project Title

Intellectual property in agricultural trade

RIRDC Project No.:

CIE-5A

Researcher: Dr Andrew Stoeckel Organisation: Centre for International Economics

Ian Potter House Cnr Marcus Clarke St and Edinburgh Ave CANBERRA ACT 2601

Phone: 02 6247 6699 Fax: 02 6247 7484 Internet: Website: http://www.intecon.com.au Objectives

• To better understand how intellectual property affects agricultural trade. • To better understand the opportunities and pitfalls that the forthcoming

renegotiations of international intellectual property law present.

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Background:

Intellectual property is becoming increasingly important to agricultural trade. The success of Australian agriculture may be determined more in the future by our ability to engage in effective marketing and product innovation, than our ability to continue to improve yields. If this is the case, the international rules governing the trade aspects of intellectual property are important in defining the path of Australia’s continued development in the agricultural sector. The Agreement on Trade Related Aspects of Intellectual Property (TRIPs) sets minimum standards for intellectual property rights throughout the world. TRIPs is due to be reviewed at the end of 1999. In this context, it is timely to consider what opportunities the international intellectual property framework gives Australia and to begin to form an opinion about what outcomes are desirable for agriculture in the coming TRIPs review.

Research

This publication considers how changes in the TRIPs agreement might impact on Australian agriculture. It identifies contentious issues that are likely to arise in the coming renegotiation of TRIPs and examines how these areas affect market outcomes. It identifies areas where Australian agriculture stands to gain, and some areas where it stands to lose. Using this analysis, it suggests what might be a good outcome from the coming review of TRIPs and which industries are likely to be most affected.

Outcomes

The analysis conducted in the report suggests that an extension of the patent provisions in TRIPs to include the mandatory protection of biotechnological innovations would be in Australia’s interest. Such a move would assist the development of markets for biotechnological products. The analysis also suggests that any further extension of the protection of geographical indications would be detrimental to Australian consumers and producers. This is because the primary effect of protecting geographical indications is to restrict the use of generic food labels and terms.

Implications

A case exists to support the proposition that intellectual property, such as brands and product innovation, will be increasingly important to Australian agriculture as time progresses. To this end, it is important agricultural producers examine how they use intellectual property and what forms of international intellectual property protection are important

Publications

Intellectual Property in AgriculturalTrade, by John Asker and Andrew Stoeckel, Centre for International Economics, RIRDC Publication.

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Project Title

Cairns Group farm leader trade strategy development seminar.

RIRDC Project No.:

ITS-1A

Researcher: Mr Alan Oxley Organisation: International Trade Strategies Pty Ltd

60 Collins St MELBOURNE 3000

Phone: 03 9654 8323 Fax: 03 9650 7622 Objectives

• To review developments and strategies in the Uruguay Round, assess issues in

global agricultural trade in the post Uruguay Round period, identify objectives for Cairns Group countries in the next WTO Round of multilateral trade negotiations and

To consider strategies to advance the interests of Cairns Group Farm Groups in the next WTO Round.

Background:

The Uruguay Round Agreement on Agriculture set out a six year program of reform of agricultural trade. The Agreement contained a commitment that negotiations on the next phase of reform would begin in 1999. It is perceived that this would become an integral part of the a new Round of multilateral trade negotiations in the WTO. Cairns Group countries had been very successful in playing a leading role in the negotiations in the Uruguay Round. Ministers of Cairns Group countries met regularly since the conclusion of the Uruguay Round and were scheduled to meet in Sydney in April 1998 to assess prospects for a resumption of negotiations on agriculture. The Australian National Farmers Federation proposed to host symposium of counterparts from Cairns Group countries to meet in parallel with the Cairns Group Ministers. The aim of the symposium was to review the strategies adopted in the Uruguay Round, assess the circumstances and devise strategies for roles that Cairns Group Farm Leaders might consider to advance the interest of Cairns Group countries in seeing further global liberalisation of markets for agriculture.

Research

Expert analyses on Cairns Group strategies, global issue in agriculture and the WTO, issues in liberalisation of processed food, policies in the EU, the US, experiences with liberalisation in New Zealand and Argentina, the benefits of liberalisation, and strategies were commissioned and discussed at the Symposium

Outcomes

Cairns Group Farm Leaders acquired a detailed understanding of the issues and decided that they should collaborate in a systematic way to advance their collective issues. They also perceived that it was necessary to expand understanding among their own farm groups of the benefits of liberalisation to create a constituency of support for further reform.

Implications

Farm Groups will need to develop strategies to explain the benefits of liberalisation to their members and will need to develop strategies to promote liberalisation at international fora.

Publications

“Liberalising World Trade in Agriculture - Strategies for Cairns Group Countries in the WTO”, by International Trade Strategies Pty Ltd, RIRDC Publication.

10

Supply Chain Linkages Project Title

The Impact of Strategic Behaviour of Multinational Firms on Australian Agricultural Exports

RIRDC Project No.:

US-48A

Researcher: Associate Professor Fredoun Ahmadi-Esfahani Organisation: University of Sydney

NSW, 2006. Phone: 02 9351 3559 Fax: 02 9351 4953 Email: f.ahmadi@agec.usyd.edu.au Objectives

• To identify and analyse key attributes of multinational firms. • To assess the impact of these attributes on Australian agricultural traders. • To suggest marketing and trade strategies to enhance Australia’s export

competitiveness in Asian markets.

Background:

A broadening of strategies from the traditional concern for cost competitiveness to non-price strategies is apparent in the policies of Australia’s major food exporters. However, the success of these strategies will depend upon strategic opportunities such as greater market access and lower competitive barriers to entry. A freeing up of the distribution and retail sectors in at least some Asian economies appears likely over the medium to long term. The emerging structure of the markets will be critical for Australia’s ability to access final consumers and command an adequate return. However, with the globalisation and concentration of food providers comes a globalisation of competitive strategies. Multinational corporations will inevitably attempt to appropriate the benefits of trade reform through anti-competitive practices. This is of particular concern for Australia given that the source of foreign capital will primarily be multinational retail and trading companies based in the United States, Europe and Japan. Whether Australian food exporters are to benefit from the sort of expansion which is expected in many Asian food markets over the medium to long term will depend on the answers to the following two questions. What impact will recent reforms to trade, investment and competition policy have on the nature of competition in Australia’s major Asian food markets? As a result, what will be the impact of reforms on price elasticities along with the appropriate strategies for market entry and defending market shares? The project addresses these two questions.

Research

Research includes estimation of price transmission elasticities at each significant stage of the distribution channel in order to measure the impact of the competitive environment and government intervention on the degree to which an economy may be insulted from world price movements. The results are incorporated within a market shares framework and complemented by qualitative assessment of the competitive environment for each of the selected markets (Japan, South Korea, Malaysia, Singapore, Philippines and Indonesia).

Outcomes

The project provides policy-makers in both government and industry with a quantitative and qualitative evaluation of multinational corporate strategies on the performance of Australian food exporters in East Asia. The work has been combined with a project by the same researcher and entitled “The Impact of Quality Attributes and Trade Impediments on Australian Rural Exports to Asian Markets”(US-40A). The results will be included in the final report for that project.

Implications The role of trade reforms in opening up markets to international competition is not as clear-cut, in terms of their benefits for Australian exporters, as commonly thought. After a broader assessment of their likely impact on the competitive environment,

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policy-makers need to be wary of equating trade reform with greater market access. The results reinforce calls for greater coordination in trade reforms and reforms to investment and competition policy.

Policy and Institutional Analysis Project Title

The impact of Australian indirect taxes on the Australian farm sector

RIRDC Project No.:

AEC-1A

Researcher: Mr Geoff Carmody Organisation: Access Economics Pty Ltd

PO Box E347 KINGSTON ACT 2604

Phone: 02 6273 1222 Fax: 02 6273 1223 Objectives

• To provide a comprehensive evaluation of the impact of indirect taxation on

the farm sector and the major industries therein.

Background:

Indirect taxation arrangements can have a significant impact on the competitiveness of Australian agriculture. This research sought to quantify this impact.

Research

The project used an input-output based statistical framework as compiled by the Australian Bureau of Statistics (ABS) and the use of that in a computable general equilibrium model. The farm sector is defined as the sum of ABS input-output codes 0101 to 0107 (ie grass, sheep, beef cattle, dairy cattle, pigs, poultry and other agriculture).

Outcomes

The research found that the current set of indirect taxes on agriculture results in:

• an overall indirect tax burden (net of subsidies) that is somewhat lower than the burden faced on average across all Australian industries, as far as supply used for intermediate and domestic consumption purposes is concerned;

• an overall indirect tax burden (net of subsidies) that is significantly higher than the burden faced on average across all Australian industries, as far as supply used for export purposes are concerned, with primary industry levies helping to explain this outcome;

• a lower tax burden than the all-industry average in respect of the wholesale sales tax, payroll tax, and FID/BAD taxes; and

• the farm sector as a whole faces a total petroleum product excise burden slightly lower than the all-industry average, although the diesel fuel component of that burden is close to the all-industry average.

Implications

Given the current taxation treatment of farm inputs, the greatest benefit of any change in policy comes from a reduction in input taxes on petroleum products.

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Communications Project Title

Sponsorship of The Australian Agribusiness Review

RIRDC Project No.:

AAA-1A

Researcher: The Agribusiness Association of Australia. Organisation: The Agribusiness Association of Australia.

PO Box N26, Grosvenor Place, SYDNEY, NSW 1220

Phone: 02 92426910 Fax: 02 93386980 Email: agri@agribusiness.asn.au Objectives

• To develop the agribusiness discipline through facilitating ongoing

communication between members of the agribusiness community and between the agribusiness community and the relevant academic communities.

Background:

The audience of the Review is intended to be people mainly and quite directly involved in developing and applying theoretical and practical agribusiness knowledge - specialists, theorizers and educators. The Australian Agribusiness Review is a publication consisting of papers that are subject to Peer Review and papers that are refereed by a Review Editorial Group. The Australian Agribusiness Review also contains a section titled the Agribusiness Perspective Papers. This section is intended as a vehicle for information that is topical and practical, intended for a wide general readership, at all levels of the agribusiness value chain and are refereed by the Editors. The Australian Agribusiness Review is published using the Internet and consists as a focal point of the Agribusiness Association of Australia Internet strategy - Agribusiness OnLine. In addition to the internet, the review is published at least once per year as a CD-ROM and supplied to members of the Agribusiness Association of Australia, libraries, government department and is available for sale to members of the public. The manner in which the Review is published electronically conforms to commonwealth government requirements for citing and referencing. Agribusiness OnLine attracts an average use rate of 560 users per day - or approximately 205 000 users per year. Approximately 60% of the Internet users that visit Agribusiness OnLine enter the Australian Agribusiness Review section of the site.

Outcomes

In part due to this project The Australian Agribusiness Review is now established as a vehicle by which relevant parties can publish peer refereed academic works. The Perspectives section, an innovation of the current editors, has created a vehicle for the publication of material of relevance to agribusiness that is not classified as 'academic' work.

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4.1 Global Competitiveness

Research in Progress

New Market Opportunities for the Food Sector Project Title

Asia's food and agribusiness revolution continues: new opportunities in a resurgent Asia (subsistence to Supermarket ii)

RIRDC Project No.:

DFT-1A

Start Date: 6/07/98 Finish Date: 30/11/99 Researcher: Mr Graeme Thomson Organisation: Department of Foreign Affairs and Trade

Trade Negotiations and Organisations Division RG Casey Bldg John McEwen Crescent BARTON ACT 0221

Phone: 02 6261 2545 Fax: 02 6261 1858 Email: graeme.thomson@dfat.gov.au Objectives

• To convey clear and useful information, analysis and guidance for Australian

companies, agribusiness, farmers, exporters and investors, together with Australian policy-makers, about the continuing major changes underway in the pattern of Asian agrifood demand and supply and, in particular, about the agrifood supply opportunities in Asia over the coming decade or so, ways of better accessing Asian markets and problems to be overcome.

• The report will be a single-volume accessible resource and guide to the Asian agrifood markets, written in clear, straight-forward language and presented in a user-friendly layout. As a public good, the report will be sold at a moderte price (c$40) affordable for small and medium-sized businesses and primary producers.

Current Progress:

Commenced and continuing review of recent/current literature and statistics on: (1) macroecoomic trends and forecasts for individual Asian economies and the

Asian region, plus of some selected provinces/states; (2) Asian consumer category profiles and consumer trends; (3) Asian agrifood supply trends, including Asian government policies, developments in Asian agricultural production and agribusiness, Asian corporate developments, and agrifood trade and investment flows.

(2) Commenced and continuing data compilation and analysis of Australian agrifood-related companies’ trade and investment activities in relation to Asian markets. Designed and part-way through commissioning consultancy work in several Asian economies on profiles of leading Asian agrifood-related companies. Part-way through design and commissioning of modelling work on likely agrifood demand trends in Asia over 2000-2010.

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Project Title

Incongruity between perceptions and behaviours in agri-food marketing: Are perceptions alone a valid basis for policy formulation and research investment

RIRDC Project No.:

UQ-62A

Start Date: 1/02/97 Finish Date: 31/12/99 Researcher: Dr Ray Collins Organisation: University of Queensland

School of Natural and Rural Systems Management GATTON COLLEGE QLD 4345

Phone: (07) 5460 1328 Fax: (07) 5460 1324 Email: rcollins@uqg.uq.edu.au Objectives

• To develop a methodology to test the theory that in marketing Australian agri-food products to Asian customers, changing people's perceptions (the usual target of market research and promotion) may or may not change their actual behaviour (the desired outcome of promotion).

• Incongruity (misalignment) between perceptions and behaviours may indicate the need to change traditional ways of thinking about how marketing policy is formulated and how market research is focused.

• Specifically, we aim to case study two horticultural products to identify the degree of congruence between perceptions and behaviours relating to product quality, service and value for money along the marketing chain from Australian grower to Asian consumer.

Current Progress:

An inductive approach to this research has been adopted, ie. we are not initially testing hypotheses, rather we are going into the ‘field’ with a view to gaining understanding of the key influencing factors at work, then using this understanding to frame research questions and to build a methodology. Three field trips to Malaysia over the last two years have resulted in more than 600 consumer observations at point of sale plus 600 interviews of the same people, 30 depth interviews with importers, distributors, retailers, and producers, and detailed evaluations of the quality of the case study products, apples and broccoli. Results are being used to refine a methodology, the theoretical basis of which has now been documented. The last field trip in September 1999 will be used to test hypotheses generated as a result of the inductive preliminary stages of the research.

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Domestic Impediments to Industry Performance Project Title

Where is market power in the Australian food marketing chain?

RIRDC Project No.:

UNE-67A

Start Date: 1/07/98 Finish Date: 31/09/99 Researcher: Prof Roley Piggott Organisation: University of New England

Agricultural and Resource Economics School of Economic Studies ARMIDALE NSW 2351

Phone: 02 6773 2313 Fax: 02 6773 3281 Email: rpiggott@metz.une.edu.au Objectives

• To identify whether current knowledge allows a reliable conclusion to be

made about the existence and effects of market power in Australian food markets by undertaking a literature review and holding a workshop to assess the conclusions of the review.

Current Progress:

Key literature is being identified, read and synthesised into a literature review. Particular attention is being focussed on paradigms for the study of market power, incentives for collusive behaviour, changes in management practices within the food chain and their implications for market power, and contributions by agricultural economists to the measurement of market power. The researchers have met with the project steering committee to obtain guidance on various matters. One thing that is becoming clear is that there is a fine line separating the exercise of market power that might be questionable under the Trade Practices Act and the aggressive behaviour of firms consistent with contemporary theories of how firms remain competitive. Another thing that seems clear is that there are important implications for farmers resulting from changing management practices in the food chain.

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Project Title

A study of the provision and pricing of economic infrastructure to rural and regional Australia under national competition principles

RIRDC Project No.:

BLC-1A

Start Date: 15/01/99 Finish Date: 30/09/99 Researcher: Dr Terry Dwyer Organisation: Bob Lim & Company Ltd

National Centre for Development Studies Room 130 Crawford Building AUSTRALIAN NATIONAL UNIVERSITY ACT 0200

Phone: 02 6286 5900 Fax: 02 6286 4981 Email: Terry.Dwyer@anu.edu.au Objectives

• To produce a theoretical and empirical report from the viewpoint of rural and

regional Australia of the impact of National Competition Policy on the provision and pricing of economic infrastructure.

• To produce (1) an Issues Paper in April 1999 addressing key theoretical and practical issues at stake for rural and regional Australia. The Issues Paper will be coming out at the same time as the draft report of the Productivity Commission on National Competition Policy and rural and regional Australia.

Current Progress:

This study has produced an initial paper outlining rural and regional issues in relation to infrastructure. Infrastructure should be provided where its total economic benefits (including external benefits) exceed its total social costs. Can this desideratum of economic efficiency always be met if infrastructure is financed solely by user charges? Economic efficiency also requires that available infrastructure be supplied to users at marginal cost. If prices charged to rural and regional users of infrastructure are above (often very low) marginal cost, is it correct to assert that there is cross subsidization of rural by urban users? In relation to network infrastructure (such as railtracks, gas pipelines and electricity wires), the National Competition Policy access regimes for competing users require fixing an access price which generates a reasonable return on investment for the (natural monopoly) infrastructure provider. What is an appropriate rate of return and how should regulators measure invested capital (eg historic cost, replacement cost or market value)? Does price capping regulation generates a bias against infrastructure provision in higher cost rural areas? The complexity of price regulation and public review mechanisms are outlined with attention being drawn to the need for rural and regional user input to the rate review processes if they are not to be disadvantaged by regulatory outcomes.

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Trade Policy Reform Project Title

The dynamics of international agricultural policy reform

RIRDC Project No.:

ABA-8A

Start Date: 1/12/98 Finish Date: 30/09/99 Researcher: Mr Ivan Roberts Organisation: Australian Bureau of Agricultural and Resource Economics (ABARE)

Edmund Barton Building Cnr Broughton and Macquarie Streets BARTON ACT 2600

Phone: 02 6272 2239 Fax: 02 6272 2139 Email: iroberts@abare.gov.au Objectives

The outcome will be: • more informed and therefore effective policy development and negotiation

positions in Australia and elsewherein the next WTO agricultural negotiations; • a strengthened Australian negotiating position in the negotiations through

increasing the awareness in key countries of the benefits of multilateral trade liberalisation for agriculture.

The deliverables will be a research report to be released at an international conference before the WTO Ministerial meeting that will set the scene for the upcoming WTO agricultural negotiations which are to commence by the end of 1999 and an ABARE 'current issues' paper on the 'multifunctionality of agriculture'.

Current Progress:

The research report is being addressed in three parts:- the agricultural protection problem and progress in addressing it; forms of agricultural protection and implications for market distortions; and necessary reforms to achieve benefits from trade. The first seminar was held on 12 February and feedback was received with important contributions from DFAT, AFFA and NFF. The first part of the report is advanced, with sections on problems from agricultural protection, desirability of trade liberalisation, trends in support and links to world prices, and why the Uruguay Round was only a beginning for reform, drafted. The final section of this part on gains from liberalisation is currently in progress with development of a baseline and simulations using the GTEM general equilibrium model. The second part is in progress with authors working through effects of various forms of protection, and associated market distortions. A chapter on the multifunctionality of agriculture is drafted but being developed further. An adaptation of this chapter will also be published separately. The final part on necessary reforms to achieve benefits from reform is contingent on results from the first two parts and has only just been commenced.

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Project Title

Issues, options and strategies for improving Japanese agricultural trade policies

RIRDC Project No.:

ANU-36A

Start Date: 1/04/99 Finish Date: 31/12/99 Researcher: Dr Ray Trewin Organisation: Australian National University

c/- Australia-Japan Research Centre (A-JRC) CANBERRA ACT 0200

Phone: 02 6249 0134 Fax: 02 6249 0767 Email: ray.trewin@anu.edu.au Objectives

The key outcomes and deliverables will be • The publication and broad presentation of a RIRDC report, including at public

symposiums, involving Australian and Japanese researchers covering issues (eg. food security, environment), options (eg. more open trade and investment) and

• Strategies for improving Japanese agricultural policies which affect an important agri-food export market for Australia.

Current Progress:

Research formally started in April with a visit to Japan by Professor Peter Drysdale when he lined up membership for the Japanese Research Advisory Group. This Group includes high powered people such as Professor Iwao Nakatani, Deputy Chair of Prime Minister Obuchi’s Economic Strategy Deliberation Council. A similar group is being formed in Australia. A visit to Japan was undertaken by Dr Ray Trewin in late April to hold discussions with collaborators (e.g. Professor Honma), bureaucrats (e.g. MAFF), academics (e.g. Professor Shogenji, Tokyo University), business (e.g. MLA), the Embassy (e.g. Agricultural Counselor) and to obtain copies of relevant material such as the New Basic Agricultural Law. A review of the literature and analysis of background data has commenced to be built into an issues paper. This paper and others by Professor Honma on the New Basic Agricultural Law, by Dr Jennifer Amyx on political economy aspects, and by Professor Allan Rae on relevant modelling, will be presented at a workshop, ‘A way forward for Japanese agriculture’, planned for 13 July. The workshop will include a lunchtime panel session and will involve members of the Research Advisory Group and other relevant parties such as ABARE as discussion openers.

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Markets for Agricultural Products Project Title

Japanese consumer co-operatives - a market entry strategy for horticultural products

RIRDC Project No.:

DAQ-209A

Start Date: 1/07/96 Finish Date: 31/12/99 Researcher: Mr Rick Ada Organisation: Department of Primary Industries (Qld)

PO Box 102 TOOWOOMBA QLD 4350

Phone: 07 4688 1388; 019 474 032 Fax: 07 4688 1199 Email: adar@dpi.qld.gov.au Objectives

To establish the opportunities for market entry via Japanese Consumer Co-operatives for fresh and value-added horticultural produce by: • developing a detailed analysis of the product requirements of Japanese

Consumer Co-operatives • identifying potential strategic aliances between Australian producers and the

Japanese Consumer Co-operative movement • and providing this information to targeted producers and producer groups

through a report and input to producer and Agribusiness seminars aimed at improving marketing skills and the understanding of the import process.

The project to be completed by mid 1999.

Current Progress:

Key achievements in 1998/99 were: • Completion of an in-market research visit to co-ops to obtain additional data

on supply chains and reinforce the contacts developed during the project. The visit has been an important catalyst to the expansion of the supply of product from a single co-op to a larger group of co-operatives. The expanded direct deliveries are expected to commence in August 1999. The project final report will be completed in December 1999.

• Presentation of the results of the study to two international audiences: the International Agribusiness Management Association Congress in Uruguay and the Asia Pacific Congress of the International Co-operative Alliance. The address to the ICA Agricultural Committee in Korea was made by invitation from the Japanese Consumer Co-operative Union.

• Presentation of research results to industry groups including the Brigalow Beef Group; Queensland Co-operative Federation Co-op Manager's Conference and Austrade/Qld State Develeopment Organic Symposium in Brisbane.

• Support has been provided to two producer groups (one horticultural and one beef) to establish and build relationships with the Japanese co-ops.

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Project Title

Anatomy of successful export-led growth: Lessons from the grape and wine industry

RIRDC Project No.:

UA-45A

Start Date: 1/05/98 Finish Date: 30/11/99 Researcher: Prof Kym Anderson Organisation: University of Adelaide

School of Economics UNIVERSITY OF ADELAIDE SA 5005

Phone: 08 8303 4712 Fax: 08 8223 1460 Email: kanderson@economics.adelaide.edu.au Objectives

• An in-depth understanding of the relative importance of the various factors

contributing to the export-led growth success of the Australian wine industry and its lessons for other small rural industries seeking to expand via export sales.

Current Progress:

In seeking to understand lessons from the wine industry for other rural industries, the first year of our study has been focused on accounting for the growth in the grape and wine industries. A model of the Australian economy has been used to first 'backcast' the decade of growth to 1996. The model separately distinguishes non-premium from premium red and premium white grapes and wine. Around half the premium wine output growth in that period is attributed to export demand growth. Other important contributors to growth include upgrading of domestic preferences, increases in national income, input-saving technological changes and (negatively) increases in domestic consumer taxes on wine. Looking forward, recent and intended vine plantings ensure wine output in 2003 will be about twice that of the mid-1990s. Our model is used to examine how that vineyard expansion might affect the market, especially grape and wine prices and wine exports early next century. Results are reported in Wittwer, Glyn and Kym Anderson, "Accounting for Growth in Australia's Grape and Wine Industries, 1986 to 2003", CIES Seminar Paper 99-02, March 1999. Work has now begun on drawing parallels (or lack of them) between the wine industry and the olive industry, with a view to eventually drawing lessons for such other industries seeking to expand their international competitiveness, whether via exporting or import replacement.

21

Project Title

Impact of quality attributes and trade impediments on Australia's rural exports to Asian markets/ The impact of strategic behaviour of multinational firms on Australian agricultural exports to Asian markets

RIRDC Project No.:

US-40A

Start Date: 1/10/96 Finish Date: 31/12/99 Researcher: A/Prof Fredoun Ahmadi-Esfahani Organisation: University of Sydney

Dept of Agricultural Economics R D Watt Building, AO4 UNIVERSITY OF SYDNEY NSW 2006

Phone: 02 9351 3559 Fax: 02 9351 4953 Email: f.ahmadi@agec.usyd.edu.au Objectives

• To identify and analyse the key quality attributes and trade impediments that

are influencing Australian rural goods in Asia. • To assess the impacts of these attributes and impediments on the returns

received and to suggest marketing and trade strategies to enhance Australia's rural exports to Asian markets.

Current Progress:

A Final Report is in the process of being written up with completion of background and empirical studies for two of the six countries under investigation (Japan and Korea), and two of the four product categories (beef and wheat). The remaining countries (Indonesia, Singapore, the Philippines and Malaysia) and products (milk and cheese) are at various stages of completion. Organisations willing to provide their data on quality attributes have proven elusive and this has hampered estimation of quality-premiums on Australian products. Nevertheless, monthly price series have been collected for the estimation of price transmission at different stages of the distribution channel, in order to assess the relative importance of trade policy and market structure in impeding competition at the retail level. Further, a comparison of Australia’s export performance with major competitors, in terms of growth in volumes and shares from 1962 to 1997, has revealed consistent patterns. Combined with background knowledge of the market environment, we have been able to come to preliminary conclusions regarding the impact of trade policies and the competitive strategies of Australia and its rivals.

22

Policy and Institutional Analysis Project Title

An international comparison of cooperative marketing arrangements between Australia, United States and Europe

RIRDC Project No.:

GLL-1A

Start Date: 23/03/99 Finish Date: 30/09/99 Researcher: Mr. Glen Thompson Organisation: Global Linkages Pty Ltd

PO Box 466 CLAREMONT WA 6010

Phone: (08) 9319 8998 Fax: (08) 9319 8998 Email: robglen@wantree.com.au Objectives

• To produce a RIRDC research report pulling together the proceedings and

evaluation of a four-day cooperative leaders program. • To produce a research report providing an international comparison of

cooperative marketing arrangements between Australia, United States and Europe.

Current Progress:

A highly successful cooperative marketing leaders program was held in Melbourne and Perth at which over 60 people attended from government, industry and academic. The program highlighted the trends developing in Australia, United States and Europe in particular the progression of the new generation cooperative. This relatively new form of organisational structure conceived and developed from the USA has provided traditional cooperatives and industry groups with an avenue for not only providing economies of scale in production and financing but also increased grower returns through higher prices and return on investment by value-adding. The program highlighted the fact that the keys to successful cooperatives are that prospective cooperative members should understand the:

Environmental factors that shape the need for a cooperative. These factors will include a thorough understanding of market conditions and the attributes of the membership base; and

Range of cooperative options that exist for creating a structure that suits those needs.

Currently the papers for the program are being compiled and put into a common format. From there a research report will be completed evaluating the information.