AUSTRALIA, NEW ZEALAND & OCEAN TRADE 2007 - Australian food producers respond well to globalization

By: | at 07:00 PM | Channel(s): International Trade  

Report finds exporters capitalize on local strengthsBy Peter A. Buxbaum, AJOTGlobalization is challenging Australia’s food industry, but has also opened up new export markets with strong potential, according to a new report released by an Australian government agency last month. One of the reports’ key findings is that, despite intense competition from multinational food processors, Australian food producers have concentrated in products that best utilize local strengths and resources. This has allowed Australian food exports to grow at a rate above the global average for international trade in food products and the Australian average for exports among other product sectors.
Australia’s food exports have grown six-fold over a ten-year period, from around $5 billion in 1995 to over $30 billion in 2004, said the report titled “Australian food industry performance and competitiveness,” from the Australian Bureau of Agricultural and Resource Economics (ABARE), a government research agency.

“In an increasingly globalized trading environment, competitive pressures on food producers have sharpened significantly, driven by large multinational food manufacturers and supermarket chains,” noted Philip Glyde, ABARE’s executive director. The report found that in 2003, about 75% of industry revenue in Australia was generated by 50 companies, more than half of which were foreign-owned or publicly listed.
“However, globalization has also created new opportunities for Australia’s food trade, opening markets not only in the Asia Pacific region, but also in more distant countries and regions, and expansion in existing markets,” Glyde added.
Globally in 2002, the food manufacturing sector had worldwide sales of $4 trillion, with packaged foods valued at around $1.9 trillion, according to the report. Of that total, six percent of processed food products and 16% of bulk agricultural commodities were traded internationally.
World food markets are becoming increasingly globalized, the report found, and are being driven by large multinational food manufacturers and supermarket chains. “The increased competition associated with globalization,” the report said, “is putting greater pressure for change on both Australia’s domestic and export oriented food sectors.”
The export of processed foods from Australia, which excludes unprocessed products such as grains, live animals and seafood, has grown at an average of 3.5% a year since 1994, around one percentage point higher than the growth in total world trade in similar food products. Australia’s food manufacturing sector has grown by an average two percent a year over the past decade, slightly above the Australian manufacturing sector as a whole.
In 2004, Australia’s biggest food export market was Asia, accounting for $7.8 billion in export sales. North American markets bought $2.6 billion in Australian food exports and were the largest overseas consumers of Australian meat products at around $1.5 billion. The European export market was worth $1.5 billion to Australian exporters and Europeans were the largest export consumers of Australian wines, at $1 billion.
North America imported slightly less than $1 billion in Australian wines in 2004. Other leading food products exported to North America included dairy products, around $65 million, and seafood, around $52 million.
Comparative advantage equals continued successThe continued success of Australian food exporters is demonstrated by the fact that 75% of the value of Australia’s food exports were in products in which Australia’s share of export markets was growing. In addition, 35% of Australian food product exports are being shipped to growing world markets which are increasing their share of world trade. Conversely, only a small share, six percent, of exported product lines went to markets for which both trade is declining and Australia is losin

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.