October 14, 2013

 

 

In a ground-breaking deal that could open up a new market and reduce the industry's reliance on shipments to Indonesia, China is set to allow the live import of cattle from Western Australia for the first time.

 

Western Australia (WA) Premier Colin Barnett was in China to witness the signing of a Memorandum of Understanding (MoU), which could see cattle shipments start as early as next year.

 

Australian trade delegations have sought to open a live-export channel to China for decades, but have consistently failed due to the lack of support from Beijing. But for the first time the Chinese central government and coastal province of Zhejiang will support the move and begin a joint feasibility study with WA.

 

"It could be an absolute goldmine if we were able to service the China market," said Sheldon Mumby, spokesman for the Pastoralists and Graziers Association of WA. "It is especially important as many of our other live export markets have tightened up." Mumby hopes the live cattle trade with China will be opened by June 30 next year.

 

After a crackdown on smuggling and a series of food scandals in China, shipments of Australian beef to China have jumped 930% over the past year. China is now the third largest buyer of Australian beef, behind the US and Japan. But these surging volumes look to have unsettled Chinese authorities, who slapped a ban on chilled Australian beef in late August. Concerns over food safety were cited, but the measure is being viewed by producers as a non-tariff barrier designed to protect the local industry.

 

Over the first seven months of the year, chilled cuts, usually sold to high-end restaurants and five-star hotels, accounted for 18% of Australian beef exports to China. The opening up of the live cattle trade could get around this ban as the meat would be processed in China. It would also allow Chinese companies to extract a greater share of profits from the booming trade, as they would fatten and process the cattle.

 

The MoU between WA government and Zhejiang has happened surprisingly quickly, as Barnett only raised the issue on a visit to China in June. It was facilitated by WA's Trade and Investment office in Shanghai.

 

According to one trading company, the rapid progress of the agreement suggests the Chinese are keen to open up the trade, even though live cattle could attract a tariff as high as 26%. The push by WA is likely to be followed by Queensland and the Northern Territory.

 

Other coastal provinces in China are known to be interested in importing live cattle. It may also allow similar agreements on the export of live sheep.

 

Australia exported 634,000 live cattle last financial year worth US$588 million, according to Meat & Livestock Australia. WA accounted for half of the trade.

 

The push to enter the Chinese market is part of an effort to reduce Australia's reliance on shipments to Indonesia, which accounts for half of all live cattle purchases. The trade with Indonesia has been highly political and volatile in recent years. The former Gillard Government slapped a temporary ban on live exports to Indonesia in May 2011, after footage of animal cruelty was aired by the ABC.

 

When the ban was lifted, the Indonesians responded by slashing the number of import permits it issued for Australian cattle.