Subsidy heat blows back on China as AFI reveals ag's true disrupters

China, EU, US are subsidy leaders, but Aussie ag gets little support says OECD

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Barley 'dumping' accuser, China, paid farm support mechanisms equivalent to about 1.75 per cent of its GDP in 2018

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As China turns up the heat on Australia, insisting subsidies helped our exporters discount the sale price of barley in 2018, international research shows the Chinese are world leaders in the farm subsidy support stakes.

In 2018 China paid farm support mechanisms equivalent to about 1.75 per cent of its gross domestic product according to data from the Organisation for Economic Co-operation and Development.

That compared with Australian farmers continuing to sit at the bottom of the ladder receiving just 0.1pc of government support as a proportion of GDP.

Total Chinese government subsidy help has been as high as 2.5pc in 2015, 2013 and 2005 - well ahead of the next biggest supporters, the European Union and the USA, which paid about 0.6pc and 0.5pc respectively two years ago.

Getting facts straight

"These figures don't tell us anything terribly new, but we have to make sure the facts are clearly spelt out when the topic of subsidies is discussed, as it has been lately," said Australian Farm Institute executive director, Richard Heath.

"China's threat to impose tariffs which would effectively end Australian barley sales, based on an unsupported allegation of subsidisation, is a clear example of the need to present data clearly and dispassionately."

There's just no evidence to support the dumping claims, yet these are the sort of trade barriers getting put forward to stop our products - Richard Heath, Australian Farm Institute

Australia, which exported 71pc of its total agricultural output, faced numerous market access challenges in export markets, including China's allegations of barley "dumping" and tariffs and levies unexpectedly imposed in the past two years on pulses selling into India.

Richard Heath

Richard Heath

"There's just no evidence to support the dumping claims, yet these are the sort of trade barriers getting put forward to stop our products," Mr Heath said.

"We need to keep putting the evidence out, basing our discussions on facts, and clearly understand the ramifications to Australia, and indeed farmers across the globe, from such support policies."

According to OECD data used to compile a report by the AFI with help from farm advocacy body Graingrowers, what modest funding Australian governments did give as farm industry assistance was primarily directed to agricultural research and development and extension, or for inspection and marketing.

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Farmgate or producer revenue support from government was also identified as "input assistance", which included drought support measures such as concessional interest rates on loans for water infrastructure and equipment upgrades, or farm management deposits and income averaging arrangements which helped farmers better manage risk.

Trade transparency

The AFI briefing paper, titled "Truth and transparency in trade" identified China, the EU, the US and Canada as contributing starkly more funding support to their respective farm sectors for the past 20 years.

Although farm support funding among OECD's 37 member nations has been declining for 20 years, the Australian figures had remained virtually unchanged and "extremely low by comparison" according to the report.

In fact since 2009 no more than 0.19pc of Australia's annual GDP has been provided as support to the agriculture sector.

As a gross percentage of farm receipts EU farmers enjoy the best subsidy deals - earning 20pc of their income from government coffers in 2018.

That's well below the 33pc they collected two decades ago, but interestingly only slightly above the figure across all OECD countries that year.

Chinese farmers received 14.3pc of their gross receipts via government support strategies; the US 12.2pc; Canada 8.8pc, and Australia at 2.4pc.

Over the full 20 year period Australian farmers had received an average of just 3pc, slightly ahead of the lowest ranking beneficiaries, NZ farmers.

Europeans averaged 25pc, Canadians 15pc, Americans 12pc and Chinese 11pc.

Global impact

GrainGrowers chief executive officer David McKeon said while Australian grain farmers operated in highly competitive international markets, facing full exposure of market volatility and localised climate variability, they were negatively affected by the support policies received by their counterparts across the globe.

David McKeon

David McKeon

Market price support mechanisms continued to undermine Australia's trade competitiveness and global markets generally.

Mr Heath agreed. Any artificial price support or differentiation in the global market sent the wrong message to traders and punished Australian efficiency and competitiveness.

Australian farm export earnings were eroded by 29pc or $10.4 billion and net incomes on farms cut by 15pc in 2014 because of support policies for farmers in other countries.

China's real barley problem

While Australia was being falsely accused of discounting our barley export prices, the real culprits were likely to be artificial price incentives paid to promote Chinese wheat and corn, which subsequently discouraged barley production and left a shortage in the local market.

Barley buyers responded by importing cheaper grain from offshore producers such as Australia, which in turn was blamed by Chinese authorities for undermining the trade.

He said remarkably the Chinese were now tipped to buy barley from the US.

"The evidence is very clear that US farmers get considerable support from Washington," he said.

US support for soybean and corn producers had been obvious in the past year after China imposed tariffs on imports, but the US Farm Bill provided multiple programs for different commodities, including crop insurance and income support for all grain producers.

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