sub-program 4.1 global competitiveness€¦ · dah-1a industry adjustment to support agricultural...

RIRDC Completed Projects in 2002-2003 and Research in Progress as at June 2003

Sub-Program 4.1 GLOBAL

COMPETITIVENESS

August 2003 RIRDC Publication No 03/074

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© 2003 Rural Industries Research and Development Corporation. All rights reserved. ISBN 0 642 58641 1 ISSN 1440-6845 "RIRDC Completed Projects in 2002-2003 Research in Progress as at June 2003 - 4.1 Global Competitiveness Publication No 03/074 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: [email protected] RIRDC Publications Manager 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: [email protected] Website: http://www.rirdc.gov.au

Published in August 2003 Printed on environmentally friendly paper Canprint

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Foreword This year RIRDC has produced Research in Progress, June 2003, which contains short summaries of continuing projects as well as those that were completed during 2002-2003 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 to 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 over 900 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/eshop Simon Hearn Managing Director Rural Industries Research and Development Corporation

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Contents

4.1 GLOBAL COMPETETIVENESS RESEARCH IN PROGRESS

PROJECT No

PROJECT TITLE RESEARCHER PHONE ORGANISATION PAGE No

Domestic Impediments to Industry Performance BLC-4A Advancing the securitization of Australian agriculture Dr. Terry Dwyer (02) 6286 5900 Bob Lim & Company Ltd 1 AEC-3A Evaluating logistics chain technology: Australian

farmgate to port Dr. Bob Hawkins (02) 6273 1222 Access Economics Pty Ltd 2

Trade Policy Reform CIE-13A Preferential access, trade reform, the US farm bill

and bank debt for developing countries Dr. Andrew Stoeckel (02) 6248 6699 Centre for International

Economics 3

CIE-18A Challenging the formation of FTAs as a means of avoiding agricultural policy reform

Dr. Andrew Stoeckel (02) 6248 6699 Centre for International Economics

4

ABA-16A Agriculture in the current WTO negotiations: two critical facets

Dr. Vern Topp (02) 6272 3823 ABARE 5

DAH-1A Industry adjustment to support agricultural trade liberalization

Mr. David Harris (03) 9889 9879 David Harris 6

Markets for Agricultural Products ANU-51A Global demographic and income trends: their impact

on food consumption Prof. Ronald Duncan

(02) 6249 4765 Australian National University

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UM-60A Generic promotion in the food marketing chain Prof. John Freebairn (03) 8344 6414 The University of Melbourne

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Supply Chain Linkages UQ-98A Converting value chain information into producer-

based action Dr. Ray Collins (07) 5460 1328 The University of

Queensland 9

Policy and Institutional Analysis AWT-1A Economic effects of income tax-law on investments in

Australian agriculture (with particular reference to new and emerging rural industries)

Dr. Alistair Watson (03) 9370 7438 Alistair Watson 11

4.1 GLOBAL COMPETETIVENESS

COMPLETED PROJECTS PROJECT

No PROJECT TITLE RESEARCHER PHONE ORGANISATION PAGE

No

Domestic Impediments to Industry Performance UNE-79A Food retailer/processor market power in input

markets Dr. Chris O'Donnell (02) 6773 2815 University of New England 13

Trade Policy Reform CIE-16A The environmental effects of global agricultural

subsidies Dr. Andrew Stoeckel (02) 6248 6699 Centre for International

Economics 14

ABA-18A An Australia-US free trade agreement: business opportunities for agriculture

Mr. Neil Andrews (02) 6272 2242 ABARE 16

Markets for Agricultural Products UA-57A Global biotechnology adoption and policy responses:

consequences for Australian exporters Prof. Kym Anderson (08) 8303 4712 The University of Adelaide 17

UQ-89A Unlocking successful new rural industries: Is supply chain management the key?

Ray Collins and Lilly Ann Lim

07 5460 1328 School of Natural and Rural Systems Management The University of Queensland Gatton

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US-92A Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps

Dr. Kate Owen (02) 9351 7368 The University of Sydney 21

Communications UMO-27A

Annual awards for excellence in agribusiness Dr. Lawrie Dooley (03) 9903 2757 Monash University 23

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Research in Progress

Project Title

Advancing the securitisation of Australian agriculture

RIRDC Project No.:

BLC-4A

Start Date: 5-Jan-02 Finish Date: 30-Sep-03 Researcher: Dr. Terry Dwyer Organisation: Bob Lim & Company Ltd

National Centre for Development Studies Room 130 Crawford Building ANU ACT 0200

Phone: (02) 6286 5900 Fax: (02) 6286 4981 Email: [email protected] Objectives

• This project will take forward RIRDC Project BLC 3A Efficient Equity and

Credit Financing for the Rural Sector by researching in depth and developing a practical model for securitisation of Australian rural businesses. The Report will have a long shelf life as a major reference document for the progressive up-take of securitisation techniques in Australian agriculture.

Current Progress (200 words maximum)

The research program has proceeded in two streams. Firstly, theoretical and practical issues in securitisation have been researched in depth and a draft model for securitisation developed. A Reference Committee has been formed to assist in this stage of the research and development of the draft model, and to provide assistance throughout the project. The second stream of research activity has been empirical testing of the draft model through a series of structured interviews and discussions covering the institutional, financial, legal/regulatory and farm sectors. Refinement of the securitisation model is proceeding in light of feedback from the empirical testing phase of the research with issues and obstacles being progressively identified and addressed. Further refinement and development of the model will be undertaken with issues and findings summarised and presented in the project final Report.

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Project Title

Evaluating logistics chain technology: Australian farmgate to port

RIRDC Project No.:

AEC-3A

Start Date: 01-Apr-2003 Finish Date: 30-Apr-2004 Researcher: Dr. Bob Hawkins Organisation: Access Economics Pty Ltd Phone: (02) 6273 1222 Fax: (02) 6273 1223 Email: [email protected] Objectives

1. An assessment of the nature and efficiency of current technology in the movement of containerised rural exports from farm gate to port; and the incentives and constraints to the uptake of further investment in technology. 2. Compare the use of technology in Australia against other selected, comparable countries in their application of relevant technology in the land-based export supply chain.


The project started in April has undertaken the literature review and especially established the project steering committee. A meeting of the steering committee is planned soon which will finalise the directions for the project. Background papers have been drafted for this meeting.

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Project Title

Preferential access, trade reform and bank debt for developing countries

RIRDC Project No:

CIE-13A

Start Date: 31/05/01 Finish Date: 31/08/02 Researcher: Dr. Andrew Stoeckel Organisation: Centre for International Economics

Ian Potter House Cnr Marcus Clarke & Edinburgh Avenue CANBERRA ACT 2600


a. An appreciation of the potential dangers for Australian agricultural exports

if preferential access is granted to developing countries. Encouragement for a non-discriminatory, open world trading system for agriculture.

b. An appreciation of the changing influences on US Farm Policy that will allow a better strategic response by Australia and the Cairns Group as part of the ongoing WTO talks on agriculture, including the stimulus to the formation of a coalition of reformers in the US and active participation in an expert panel to draft a series of reports on agricultural liberalisation to go to policy makers.

c. The advancement of ideas that will help break the current impasse in the WTO Doha round of trade talks.

d. The encouragement of global banks and banks in developing countries to take a strong interest in promoting world agricultural trade reform, which is in Australia's interest.

Current Progress Project (a) and (b) completed.

Project (c) has been included to reflect the imperative of breaking the impasse of the stalemate in international trade negotiations and project (d) has been scheduled to start in 2004 and finish in 2005. Some preliminary work has been undertaken on project (d). A steering group meeting on project (c) has been held and background reading and research undertaken. Discussions are proceeding with the Cordell Hull Institute to participate in another follow-up meeting as was done for project (b) but this time surrounding the research in project (c). The meeting is called ‘Breaking the Impasse’.

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Project Title

Challenging the formation of FTAs as a means of avoiding agricultural policy reform

RIRDC Project No.:

CIE-18A

Start Date: 10-Jan-02 Finish Date: 31-March-2004 Researcher: Dr. Andrew Stoeckel Organisation: Centre for International Economics



• An examination of the trend for countries to form Free Trade Areas (FTAs)

but which do not include agriculture in contravention of GATT rules. • The exposure of countries avoiding agricultural trade reform and hence the

encouragement of the Cairns Group to mount a challenge against 'incomplete' FTAs or at least tighten the rules in the WTO.


Some background research material has been collected, but priority has been given to project CIE-13A, which will be used as the basis for an international meeting in Washington in October this year. Work will continue in earnest following that meeting.

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Project Title

Agriculture in the current WTO negotiations: two critical facets

RIRDC Project No.:

ABA-16A

Start Date: 7-Jan-02 Finish Date: 31-Jul-04 Researcher: Dr. Vern Topp Organisation: Australian Bureau of Agricultural and Resource Economics (ABARE)

International Trade and Policy Branch BARTON ACT 2604

Phone: (02) 6272 3823 Fax: Email: [email protected] Objectives

• The outcome of this project will be better informed Australian negotiators

and agricultural industry groups on a number of key WTO issues. There will be a range of deliverables from this work that will need to reflect/take account of timing and processes in the negotiations. We intend to disseminate a paper on the overlap between WTO and multilateral environment agreement rules; release a database on market access barriers; provide extensive briefing utilising analysis of said market access database; and attendance by an ABARE officer at critical meetings to provide technical back up on research outcomes from this research to negotiators.


The market access database has been developed for selected commodities and distributed to key industry contacts. It provides information on the magnitude of cut in bound tariffs that is required before any additional trade can occur. This database is available for distribution to any interested people from Australian industry. The information has been extensively used in the development of Australia’s position and for comparing alternate proposals in the WTO negotiations. In addition, a paper has been released using this information to assess some proposed tariff reductions in the negotiations. This paper Opening Agricultural Markets through Tariff Cuts in the WTO is available for free on the ABARE website. Two seminars have been held on the trade and environment inter-linkages and we are currently seeking additional input from RIRDC and key stakeholders on the form and content of this work.

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Project Title

Industry adjustment to support agricultural trade liberalization

RIRDC Project No.:

DAH-1A

Start Date: 01-Apr-2003 Finish Date: 31-Dec-2004 Researcher: Mr. David Harris Organisation: David Harris Phone: (03) 9889 9879 Fax: Email: [email protected] Objectives

Evaluate the policy options for managing industry adjustment pressures created by trade policy reform. Describe the principles of adjustment policy that facilitates change and promotes industry competitiveness. Influence the development of adjustment policy for industries with import protection and those competing on the export markets.


A literature search of recent industry adjustment programs in the Australian agricultural sector has been completed. The literature review was used to compile a selection of programs for initial evaluation. A conceptual framework for evaluating the selected programs has been developed. An overview of the key features of the adjustment programs and the issues behind the need for assistance has been completed. A summary paper of this initial research is being finalised. It includes a matrix that compares the key features of the selected programs and recommendations for case studies that will be evaluated in the second stage of the project. Discussions with the DRDC on the design of a jointly funded survey of the response of Australian dairy producers to the dairy deregulation assistance package have commenced. Preparations for a meeting of the project advisory group involving key stakeholders in AFFA, DFAT, ACIAR, NFF and RIRDC are in progress. The initial meeting of this group will consider the findings of the preliminary review of industry adjustment programs and the recommendations for case study evaluations.

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Project Title

Global demographic and income trends: their impact on food consumption

RIRDC Project No:

ANU-51A

Start Date: 01/07/01 Finish Date: 31/07/04 Researcher: Prof. Ronald Duncan Organisation: Australian National University

The National Centre for Development Studies CANBERRA ACT 0200

Phone: (02) 6125-4765 Fax: (02) 6125-5448 Email: [email protected] Objectives

• Assessment of global and regional demographic projections, yielding a set

of projections of population by age group, with error margins indicated. • Projections of global and regional income changes and of income

distribution within regions. • Projections of trend changes in the pattern of global and regional food

product demands, by commodity, as driven by changes in income and its distribution on the one hand and the size and age structure of population on the other.

Current Progress

1. Demographic forecast errors: The paper prepared in 2002 by the demographer, Dr Chris Wilson, on errors in global population forecasts is under revision by Professor Ron Duncan. It is now very near ready for widespread circulation and to serve as background for the model projections of food demand in the light of future population and income changes. 2. Analysis of food consumption patterns: Good progress is now being made on our econometric analysis of Chinese consumption data to see how diets have been changing in that country as people age and as their incomes have increased. This work exploits very detailed panel data uniquely available in China. Dr Xin Meng of The Australian National University has joined the project to assist with the analysis of these data. The parameters estimated for China will also be credible to apply for other countries that have experiencing or can be expected to experience the same income level changes. 3. Simulations and forecasts: After significant delays due to the loss of capable technical staff, good progress has recently been resumed. Dr. Qun Shi joined the project early in May with the specific task of completing the preparation and adaptation of the simulation model. Already, new simulations have been completed and work continues apace.

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Project Title

Generic promotion in the food marketing chain

RIRDC Project No.:

UM-60A

Start Date: 1-Oct-02 Finish Date: 30-Nov-03 Researcher: Prof. John Freebairn Organisation: The University of Melbourne

Department of Economics PARKVILLE VIC 3010


• The project outcomes will be a detailed review of the generic promotion

literature, a new theoretical framework for examining issues of generic and brand advertising in agricultural industries, and an assessment of whether and under what conditions generic promotion would be successful in some case study agricultural industries.


A major task has been to bring together issues associated with (a) international trade of Australian agricultural products and the effect of trade on farm prices received, (b) in the case of many products to include the effects of market power exercised by processors and retailers of agricultural products, including the extremes of monopoly and monopsony, and more generally oligopolistic games between processors and retailers, (c) the development of retailer and processor brands as one of their marketing strategies, and (d) the price taking behaviour of a relatively competitive farm production sector. We have found elements of the story in the literature of agricultural economics, industrial organisation and marketing. A principal task has been to integrate the different threads of this diverse literature to understand the effects of generic advertising funded by farmers on the farm price and on farm returns. Investment in advertising by farmers will improve their returns only if it leads to higher farm prices. Clearly farm funded advertising is not warranted for agricultural products where the farm supply curve is highly elastic, or where Australia is a small country exporter or importer in which farm price is the world price. Where generic product advertising and processor/retailer brand advertising primarily affect market shares and have little effect on aggregate sales, farmers gains from advertising will be small.

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Project Title

Converting value chain information into producer-based action

RIRDC Project No:

UQ-98A

Start Date: 01/07/01 Finish Date: 31/12/04 Researcher: Dr. Ray Collins Organisation: The University of Queensland

School of Natural and Rural Systems Management GATTON COLLEGE QLD 4345


Working in partnership with the Queensland Farmers' Federation and the Agricultural Business Alliance of Queensland, this project aims to research, develop and implement the most effective strategies to: • Raise producer awareness of the role of value chain alliances in improving

farm competitiveness (the outcome will be a very large number of producers across most primary industries exposed to generic information about value chains).

• Transform generic awareness of value chains into applied knowledge that is specific to individual enterprises in individual industries (the outcome will be a large number of producers actively involved in transforming value chain information into knowledge that is specific to their own circumstances).

• Create a small number of best practice (role model) examples of how to use this knowledge to develop and implement chain based strategies to improve competitiveness (the outcome will be a smaller number of producers actively involved in transforming value chain knowledge that is specific to their industry and their personal circumstances into actual chain building activities).

• Monitor and evaluate the effectiveness of this approach to engaging producers with their value chains (the outcome will be a formally researched process whereby value chain information is turned into producer based commercial action - a process that can be applied in other Australian primary industries.

Current Progress

Alliances have been formed with three agribusiness organizations in the cotton, citrus and aquaculture industries in order to conduct action learning case study research on their respective supply chains. The case studies are being developed as a means of influencing the conversion of value chain information into producer-based action in real time. Continual observations are being made as to how knowledge is developed and managed within each of the supply chains in order to innovate and create addition value for chain partners.

Workshops have been conducted to identify the key strategic drivers of each of the supply chains and to develop strategies for initiating and enhancing supplier and buyer relationships. Discussions have been held with some of the downstream and upstream partners in the supply chains in order to engage them in the projects. Downstream supply chain partners include both Australian and overseas businesses.

Theoretical literature is being reviewed and compared with ‘real-world’ observations within the case study supply chains to ensure that action learning is informed by existing theory and principles, and to identify those gaps in the

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literature to which this research will make a contribution.

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Project Title

Economic effects of income tax-law on investments in Australian agriculture (with particular reference to new and emerging rural industries)

RIRDC Project No.:

AWT-1A

Start Date: 7-Jan-02 Finish Date: 31-Aug-03 Researcher: Dr. Alistair Watson Organisation: Alistair Watson

403/147 Beach St PORT MELBOURNE VIC 3207


• Improved understanding of the way taxation affects the growth of new

agricultural industries, the economic efficiency and equity implications of recent tax law changes and their likely impact on new agricultural industries. Development of ideas concerning taxation policy for agriculture.


Work in the last twelve months has concentrated on elaborating conceptual and empirical aspects of the effects of income-tax law on investment in Australian agriculture. At a conceptual level, major issues identified include:

• A seeming disconnect between the economics of investment and risk sharing and the application of tax law and regulation.

• The impact of tax law and regulation on the organisational form of investment in agriculture – particularly new and emerging industries.

• Potential to better address important informational asymmetries in both the investor market and the tax ‘market.’

Data on managed investment schemes (MIS) have been collected from several sources – the Australian Security and Investment Commission (ASIC), ‘Product Rulings’ by the Australian Taxation Office (ATO), inquiries by the Australian Senate, industry organisations and from prospectuses published by promoters of MIS. This data further demonstrates the serious problems in the quality of information available to investors. Already there have been changes in regulatory arrangements and procedures of the ASIC and ATO. A major thrust of future research will be examining ways that the quality of information can be improved through market and regulatory means. Despite well-documented deficiencies (including high charges and commissions by promoters), MIS unlike company structures have the desirable feature that losses in early years that are characteristic of agricultural investments can be passed back to investors. This feature assumes greater significance with the Division 35 – non-commercial loss provisions introduced in 2000 – which limit the ability of natural entities to claim losses against income earned elsewhere. Division 35 has substantial implications for many actual or would be direct investors in new and emerging industries and also appears to have questionable consequences for farmers wishing to diversify into new agricultural enterprises. Aspects of these issues are being explored through development of spreadsheet models that trace economic effects of schemes on investors, promoters and the community (as revealed by initial taxation costs and subsequent benefits). The

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models investigate the effects of different business structures on costs, benefits and risks.

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Completed Projects

Project title:

Food retailer/processor market power in input markets

RIRDC Project No.:

UNE-79A

Researcher: Dr. Chris O'Donnell Organisation: University of New England Phone: (02) 6773 2815 Fax: (02) 6773 3607 Email: [email protected] Objectives

• New empirical information on the competitive structure and conduct of the Australian food processing and marketing sectors in their dealings with farmers, and an assessment of the causes and responses to market power.

Background In a recent empirical study which examined competition across the entire Australian food

marketing chain, Griffith (2000) found evidence of statistically significant departures from a competitive market on the input side of the bread, breakfast cereal and margarine end-product markets. That is, he found that firms in (parts of) the processing and marketing sector exerted market power when purchasing grains and oilseeds from farmers. This finding is consistent with the fact that bread manufacturer George Weston was fined twice during 2000 for non-competitive conduct. The ACCC has also recently pursued cases against Safeway in grains and oilseeds product lines.

Research Aggregate Australian data were used to estimate a price-transmission and market power model for thirteen grains and oilseeds products handled by seven groups of agents.

Outcomes We found there is positive probability that flour and cereal food product manufacturers exert market power when purchasing wheat, barley, oats and triticale; that beer and malt manufacturers exert market power when purchasing wheat and barley; and that other food product manufacturers exert market power when purchasing wheat, barley, oats and triticale.

Implications The project confirmed the preliminary conclusions reached by Griffith (2000). We found evidence of oligopsonistic behaviour by grains buyers – this has implications for the deregulation of marketing boards and the ability of producers to exert countervailing power. We found no consistent evidence of market power by downstream sectors engaged in the sale of flour and other cereal foods, or the sale of bread and other bakery products – this is despite the fact that these sectors had been highlighted by the Prices Surveillance Authority (1994) as being “not effectively competitive”; these sectors also contain firms that have been subject to numerous actions by the ACCC. There is, however, some uncertainty surrounding our estimates. Much of this uncertainty stems from the lack of good quality data. Future research efforts should be directed at improving the collection and integrity of relevant data (including for the retail and distributive sectors of the various markets).

Publications A paper is currently being prepared for submission to the Journal of Agriculture and Food Industrial Organisation. Two papers have been presented at national conferences: O'Donnell, C.J., Griffith, G.R., Nightingale, J.J. and R.R. Piggott (2003), “Testing for market power in the Australian grains and oilseeds industries: further results", paper presented to the 47th Annual Conference of the Australian Agricultural and Resource Economics Society, Fremantle, 12-14 February. Griffith, G.R. and O'Donnell, C.J. (2002), “Testing for market power in the Australian grains and oilseeds industries", paper presented to the 46th Annual Conference of the Australian Agricultural and Resource Economics Society, Canberra, 13-15 February.

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Project Title

Environmental effects of global agricultural subsidies

RIRDC Project No:

CIE-16A

Researcher: Andrew Stoeckel, John Humphreys and Martin van Bueren Organisation: Centre for International Economics


Phone: (02) 6248 6699 Fax: (02) 6247 7484 Email: [email protected]; [email protected] Objectives

To write a clear, concise report suitable for an international audience that draws in key environmental groups to support the removal of global agricultural subsidies that hurt Australia’s interests. The study will demonstrate the harmful impact of perverse subsidies on the environment and mount a case for their removal.

Background In 2001, RIRDC published the book, ‘Solving the Problem’. This book outlined the political economy issues surrounding agricultural trade reform and outlined the need to build a coalition of interests against farm protection, to increase farm trade to the benefit of the Australian rural export sector. One of the groups identified as vital in building a strong coalition is environmental groups, given the growing influence of green groups and the perverse effects of farm subsidies on the environment. Subsequently, this study was commissioned to identify and highlight the environmental costs from farm protection and pursue a way forward in removing perverse subsidies for economic and environmental gain.

Research This study has examined global agricultural subsidies – how high they are, the effects they have on the economy and the environment, why they are supported and how they can be removed. Most especially, this study has looked at how the agricultural policies of the European Union, the United States and Japan have negatively impacted on the environment. The research in this study has benefited from the input of members of a Steering Committee – including representatives from the National Farmers Federation, World Wildlife Fund (WWF), Environment Australia (EA), RIRDC, the Department of Foreign Affairs and Trade and the Australian Bureau of Agricultural and Resource Economics.

Outcomes Information about the negative impact of agricultural subsidies on the environment has been around for a while. However, despite the recognition of ‘perverse subsidies’ (subsidies that have a negative impact on both the economy and the environment), OECD statistics indicate that subsidies remain high, and they remain highly distorting. What is needed is an organisation with a mandate to reform. This reform should involve putting all agricultural subsidies through a consistent and transparent framework to ensure that the subsidies are still necessary, that they are producing a net benefit and that the benefit can not be achieved in a more efficient way. Using the discipline of such a framework would result in the removal of perverse subsidies.

Implications Many farm subsidies damage both the economy and the environment, yet the size and nature of agricultural subsidies are not being adequately addressed. National governments should address the issue of perverse subsidies by undertaking a consistent and comprehensive review of all farm subsidies, following a framework similar to the one outlined in this study. Groups interested in good economic and/or environmental outcomes should lobby governments to introduce such a system. Already, the WWF and EA have shown a high level of interest in this project.

Publications A report titled ‘Greening Farm Subsidies: the next step in removing perverse farm

mailto:[email protected];

mailto:[email protected]

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subsidies’ has been submitted to RIRDC

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Project Title

An Australia-US free trade agreement: business opportunities for agriculture

RIRDC Project No:

ABA-18A

Researcher: Mr. Neil Andrews Organisation: Australian Bureau of Agricultural and Resource Economics (ABARE) Phone: (02) 6272 2242 Fax: (02) 6272 2318 Email: [email protected] Objectives

The outcome of this project will be better informed Australian and American stakeholders on the nature of existing and potential trade and business benefits of a free trade agreement between Australia and the United States. The key deliverable of this project is a report timed for release during the US 90 day notification period. Key messages from the research will be delivered directly to relevant US players, including negotiators and agricultural business groups, via meetings in Washington DC.

Background Australia and the United States have agreed to enter into negotiations on a free trade agreement. On 13 November 2002 the US Trade Representative notified the US Congress that the US President intends to initiate negotiations on a free trade agreement with Australia. A key objective of this work is to provide relevant information on the potential implications of more open markets between Australia and the United States in agricultural and related industries.

Research This study provides relevant information on agriculture and related industry trade and investment flows between Australia and the United States. This is designed to provide an overview of the existing economic relationship between the two countries, with a particular emphasis on agricultural trade patterns. Informal meetings were held with a range of firms that already conduct agricultural business between Australia and the United States. This was an attempt to briefly canvass views on opportunities and impediments that might arise in the context of their bilateral trade relationship and negotiations on a free trade agreement. Understanding of the existing trade and investment patterns, together with knowledge of potential opportunities and impediments to trade provides a platform for consideration of the potential economic impacts of a free trade area between Australia and the United States using ABARE’s GTEM model.

Outcomes Even without a free trade agreement in place there is already a significant amount of trade between Australia and the United States. Reflecting the already strong US presence in Australia, the US is the largest foreign direct investor in Australia. This investment can form part of a global strategy of US companies already operating and exporting from Australia, but it also reflects US companies taking advantage of Australia’s high productivity, available resources and closeness to major Asian markets.

Implications For the US, an FTA provides the opportunity for further growth in bilateral economic activity. Australia provides a politically stable, technologically advanced and financially and legally dependable market that is well suited as a base for expanding into the growing Asian markets. The US government has indicated that all areas of the US economy are open for negotiation, including agriculture. Under such conditions, an FTA would provide Australian businesses with closer links with the world’s biggest and most competitive economy. Analysis is currently being undertaken to quantify the potential impacts of an Australia-United States Free Trade Agreement.

Publications

Joint ABARE Research Report/RIRDC Report.

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Project Title

Global biotechnology adoption and policy responses: consequences for Australian exporters

RIRDC Project No:

UA-57A

Researcher: Professor Kym Anderson and Dr Lee Ann Jackson Organisation: Centre for international Economics Studies, University of Adelaide Phone: 08 8303 4712 Fax: 08 8223 1460 Email: [email protected] Objectives

To inform Australian farmers, agribusinesses, rural researchers and RDCs about the likely economic effects of alternative responses abroad (and at home) of producers, consumers and policy makers to new GM products

Background New agricultural biotechnologies, including those that involve genetically modified organisms (GMOs), have great potential for farmers (and ultimately consumers) in Australia and elsewhere. However, consumers and community groups are concerned about their potentially adverse food safety and environmental impacts. Government responses to those concerns include banning the field-trialing, production and/or use of GMOs or mandating strict GMO labelling laws and even bans on consumption and imports. Even the threat of such action has non-trivial impacts on agricultural product markets and hence on agricultural research agendas. In response to the EU moratorium the US launched (on 13 May 2003) a case against the EU on GMOs at the WTO.

Research Whether Australia should adopt GMO technology if it increases the risk that consumers abroad will not buy Australian foods produced with that technology is a question that can only be answered empirically, and with a model of the global economy such as GTAP. We use that GTAP model, in some cases separating GM-free and GM-inclusive markets within each country/region being modelled.

Outcomes Simulation results are provided for a range of adoption/response scenarios.

Implications For Australia and its states (and even regions within states), there is scope to go beyond judging whether the potential gains from adopting GM technology outweigh the potential costs, including decreased market access abroad. A more scientific approach is to determine the nature of any externalities (positive as well as negative) associated with GM technologies and then apply optimal measures to overcome them. In relation to food policy, labelling regulations could play a key role in providing information to consumers. And in relation to the WTO, Australia has to decide whether it is going to support the US challenge to the EU’s moratorium on approving GM products, which the US claims is simply a disguised form of agricultural protection.

Publications

A series of more than a dozen papers have been published and many can be downloaded at http://www.adelaide.edu.au/cies/biopubs.htm

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Project Title

Unlocking successful new rural industries: Is supply chain management the key?

RIRDC Project No:

UQ-89A (GLC99-21)

Researcher: Ray Collins and Lilly Ann Lim

Organisation: School of Natural and Rural Systems Management The University of Queensland Gatton

Phone: 07 5460 1328

Fax: 07 5460 1324

Email: [email protected]

Objectives

The primary purpose of this research is to study the relationship between success or failure in new rural industries in Australia and the adoption of supply chain management thinking, planning and execution. If a linkage with supply chain management principles can be shown to be associated with a new rural industry's prospects of success, it should then be possible to identify approaches that could improve new industry development processes in Australia through the improvement of supply chains.

Background Several studies have been conducted to identify factors relevant to success or failure of new agricultural industries. McKinna (1998) mentioned effective industry associations, adequate funding at the commercial stage, efficient production and processing capabilities and effective marketing as factors necessary for a new agricultural industry’s success. Hyde (1998) stated that for new industries to be successful, they must have an industry champion with the right entrepreneurial skills to lead the new industry, an innovative style of operation, and a market focus. Transferable technologies, the right location, adequate financial resources and the proper management of them, and support from the Government were also identified as key factors to success. Farm production factors, processing factors, market and marketing factors, government involvement factors (R&D excluded) and environmental, social and organisational factors were identified in a study by Wood, Chudleigh and Bond (1994) as the seven broad categories of factors that affect the degree of success of new crop introductions. Of these categories, production and marketing factors were found to have the most significant effect on the success of new crops. Based on the research outlined above, a wide range of success factors for new rural industries have been identified. Not all are found in successful new industries, and the importance of each factor may vary from one industry to another. There is no ‘recipe for success’ so to say. Using these factors as a checklist of ‘things to ensure’ is impossible as many of them are interdependent. Success factors identified in previous research focus mainly on individual parts of an enterprise, and very little on the processes that industries and firms within it engage in. These gaps in new rural industry research suggest the need for a holistic approach to the topic. Critical factors should be viewed as part of a bigger system of factors that work interdependently, with the industry itself viewed as a system made of smaller sub-systems of inter-connected firms. The development of supply chain concepts originates from systems thinking – adopting the view that the behaviour of systems cannot be analysed from the behaviour of their individual constituents (New, 1997). Supply chain management, which allows a system wide view of achieving success through partnerships and a focus on consumers, may


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provide the link to explaining success in new rural industries.

Research This study is largely qualitative in nature, adopting a case study and inductive approach. Each industry chosen for the study (kangaroo, emu, Asian vegetables, Australian native flowers and olives) was represented by three cases, each case chosen for the richness of data it could provide. Each case comprises one or more organisations in a new rural industry, all of which exhibit aspects of supply chain management thinking, planning or implementation. Data collection mainly involved semi-structured interviews, although a combination of methods was used in order to support data from interviews.

A conceptual framework based on supply chain management and new rural industry development theory was developed for the study. The framework guided data collection and analysis.

The analysis was conducted in three stages. Firstly, individual case studies were analysed on the basis of the conceptual framework developed. Each case was rated against each parameter of the framework. Secondly, a cross case analysis was conducted, analysing the performances of each case on each parameter of the framework using SOMine (an advanced tool for analysing and monitoring data sets using Self Organising Maps) and the Statistical Package for the Social Sciences (SPSS) software. Thirdly, qualitative analysis was conducted using the results from SOMine and SPSS.

The results of the SOMine analysis identified three clusters of supply chains, which were further analysed along with the results from SPSS to identify the distinctive characteristics of each cluster. The relationships between the parameters of the conceptual framework were also determined using SPSS, showing those that are highly correlated and those that are not correlated. Thus the characteristics of the clusters could be linked to the supply chain orientation of the cases within each cluster.

Outcomes From the case studies it was possible to give detailed descriptions of various supply chain structures across a range of new rural industries in Australia, identifying essential features and supply chain practices in each case. Using the conceptual framework, the supply chains were analysed and grouped according to their supply chain performance. Among them, three clusters of new rural industry supply chains were identified; labelled as Achievers, Idealists and Operators. Achievers demonstrated higher levels of supply chain management thinking, planning and implementation, and indicated high chances of success. Idealists demonstrated high levels of supply chain management thinking, but lacked implementation and therefore demonstrated lower levels of success. Operators demonstrated high levels of performance in operational aspects of supply chains, but experienced low levels of success. Relationships between parameters of the conceptual framework were identified based on the performance of all supply chains across all parameters. Results showed that some parameters, such as relationship management and strategy development, exerted the greatest influence across most parameters. At the other extreme, the analysis showed that logistics management had no influence on any other parameter of the framework. Further analysis of the three clusters of supply chains illustrated how relationships between parameters explained the clustering results. In essence, improved levels of supply chain management thinking, planning and implementation improved competitive advantage. Achievers have high competitive advantage and value creation because of good supply chain management practices, while Idealists and Operators had lower levels of competitive advantage due to poorer supply chain management practices.

Implications The findings of this study impact on theory, policy and practice involving new rural industries. As a contribution to theory, this study has shown that supply chain management can be used a framework for the study of new rural industries, and that supply chains can be used as units of study in research into the development of new rural industries. Similarly, the use of supply chain management as a framework for analysis, and supply chains as units of analysis, is also applicable to both policy development and practice. The use of public sector funding aimed at new rural industry development may provide greater dividends if a whole of chain approach is taken, as opposed to a focus on industry

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sectors or individual elements of supply chain management. Private sector managers on the other hand, may utilise a supply chain management framework to assess their performance as part of a supply chain, and use this in order to improve their supply chain performance and gain competitive advantage.

Publications

PhD submitted; others planned but not yet published

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Project Title:

Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps

RIRDC Project No.:

US-92A

Researcher: Dr K. Owen, Professor J. Louviere, Mr J Clark Organisation: Department of Agricultural Economics, University of Sydney Phone: 61 2 9351 7368 Fax: 61 2 9351 4953 Email: [email protected]

Objectives

• To determine the level of consumer and retail/wholesale concern over the

introduction of genetically modified foods; and • To estimate the likely demand response of consumers and retail/wholesalers to

selected foods that have been genetically modified.

Background Biotechnology developments in the production of food and fibre promise substantial benefits for Australia. However, continuing uncertainty over consumers' response to genetically modified foods both in Australia and overseas hinders strategic development in the production sector. The key to reducing this uncertainty is improved understanding of the true level of consumer and retail/wholesale concern and their expected response to genetically modified products.

Research The research is divided into two stages. The first stage comprises a workshop of stakeholders and a survey of 120 consumers to assess their concerns over the introduction of GM foods. The second stage employs the stated preference method and discrete choice modelling to evaluate demand response to three products: milk, potatoes and crisps. The data was collected through a survey of 1008 consumers. A small pilot survey of 48 retailers was also conducted to assess congruence with consumers.

Outcomes Results from Stage 1 indicate that the level of concern over GM foods relative to other prevalent concerns in the community and to other food safety issues was minor. However, more than half of those with a positive or indifferent attitude to GM food indicated they would be concerned enough to take action if labelling was incorrect or food was contaminated with GM residues. The type of product and modification influenced respondent acceptance of products. In all cases where there were traces of the modification, or no clear benefits, respondents were less inclined to purchase the product but would increase purchases for benefits such as low fat. There was low awareness of the specific bodies responsible for regulating the production and sale of GM foods with the burden of responsibility falling on an undefined “Government” or Departments of Health. Stage 2 results indicate consumers are willing to pay for benefits from GM but these must be valued and may only apply to a segment of the market. Also, advantages from GM may be lost if alternative technologies are available. In the absence of benefits consumers would pay to avoid GM but some could be compensated with lower prices. When there is negative information on GM foods respondents discounted the value of the GM benefits heavily but positive information also increased their perceptions of the value of GM with low fat benefits.

Implications Ongoing GM food research and development, and consumers are likely to purchase products that have clear benifits for them. If there are no direct benefits then some price compensation may improve acceptance. Caveats include: the benefit must be valued which means that solid market research needs to be undertaken to ensure this is the case. That research also needs to establish that the


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size of the market segment(s) who value the benefit are sufficient to be economically viable. Benefits unique to the techonology are more likely to succeed.

Publications To be advised

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Project Title:

Agribusiness Awards

RIRDC Project No.:

UMO-27A

Researcher: Dr Lawrie Dooley Organisation: Monash University

Faculty of Business and Economics Department of Marketing PO Box 197 Caulfield East VIC 3145

Phone: 03 99032757 Fax: 03 99031558 Email: [email protected] Objectives

Award sponsorship provides RIRDC with an opportunity to present their corporate image to the Agribusiness industry. By supporting this prestigious event, RIRDC is able to show its commitment to promoting excellence in the Australian Agribusiness industry.

Background In 1996 the Department of Marketing, Faculty of Business and Economics, Monash University combined with Rabobank Australia Group, part of the international Dutch food and agribusiness bank, Rabobank to present the Agribusiness Awards for Excellence. Initially five award categories were established and sponsorship was obtained from another three companies. The awards were the first national awards in agribusiness in Australia.

Research Members of the business community are invited to nominate organisations or individuals for awards in the various categories. We currently have a mailing list of 6,000 companies and conduct mass marketing via advertisements in selected media. Telemarketing is conducted to invite companies to consider applying for the awards. Leads for applicants are obtained from sponsors and articles of interest collected from BRW, Financial Review, Age and The Australian Newspaper.

Outcomes This year Monash University is proud to present the 8th Annual Agribusiness Awards for Excellence. There are now eight award categories with sponsorship from business, professional associations and government organizations. Last year the awards dinner was attended by over 300 senior executives, government representatives and academics. Previous winners of the RIRDC value adding award include Meadow Lea Foods for Golden Canola, Manildra Group, Darling Downs Bacon, Lenards for value added chicken products, Harvest Freshcuts, Medihoney and Two Dogs International. Details of winners are on the website www.agribis.net.

Implications The awards provide sponsors with an opportunity to promote their corporate image and show support for the Australian Agribusiness industry. The Gala dinner and awards presentation provide individuals in the industry with an opportunity to network and interchange ideas. Sponsors can promote their corporate values to the Agribusiness industry

Publications Over the past seven year’s the RIRDC “Agribusiness Value Adding Award” has received recognition in publications such as the Financial Review, Australian Farm Journal, Rural Business, Food Australia, The Age, Beef Improvement News, Australian Institute of Agricultural Science and Technology, (AIAST) and The Australian . Details of all winners are on the website www.agribis.net.

sub-program 4.1 global competitiveness€¦ · dah-1a industry adjustment to support agricultural...

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