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Trade shocks? This calculator shows the effects at your own business level

By Leon Gettler, Talking Business >>

US PRESIDENT Donald Trump’s tariffs will affect all economies and all businesses right around the world.

According to Arne Geschke, the co-founder and CTO of the Australian tech startup, Fair Supply, it will cost the Australian economy $15 billion. The worst affected sectors will be health, construction services, public administration and defence.

What’s caused this? The tariffs will hit the supply chains of these sectors. 

“Australia is not part of those countries that are directly affected by tariffs on a grand scale, obviously, and especially imports into Australia have not been tariffed specifically in response to what’s been going on – but still there’s an experienced increase in costs in the sectors in Australia,” Dr Geschke told Talking Business.

“That’s because the supply chains for these sectors span around the world,” he said.

“For example, health and social services in Australia don’t operate in a vacuum in Australia. They rely on machinery, on products for example that are required to run hospitals, medical devices that are often very complex and imported.

“Those products in themselves are complex and require inputs that are essentially embedded in global supply chains frameworks and some of these supply chains that cross borders are now affected by tariffs and those tariff costs are passed down.”

The Supply Chain Tariff Calculator

Dr Geschke’s firm has developed a Supply Chain Tariff Calculator which can help Australian businesses navigate ongoing trade tensions and supply chain chaos. It calculates the full impact of tariffs across multi-tiered and highly intertwined supply chains throughout all tariff points.

By using the calculator, businesses can estimate how the tariff will affect them and enable comparisons between other countries to identify the most cost-effective sourcing options. 

This calculator is based on data sets that come from global statistical agencies.

“In a globalised word, you need a data set that understands supply chains within countries and also the trade linkages between countries and in order to pull that off, you need a whole heap of data sets that need to be merged together into a single framework,” Dr Geschke said.

This is all real time modelling – as far as the statistical agencies do it – but it becomes real time by linking the tariff data sets to the stats data sets. It assesses how the tariffs’ supply chain shock trickles through the supply chains in that instance. The calculator is based on a country-to-country supply chain framework.

This is different to COVID trade shock

“The existing supply chains are now subject to tariff shocks and price increases and as these price increases are felt, over time companies start to find different suppliers and they might choose suppliers from different countries where the tariffs are not as high,” Dr Geschke said.

He said the supply chain shock felt around the world during COVID, which created higher inflation globally, was a forerunner of what is happening now with tariffs.

The difference, he said, was that during COVID, companies couldn’t produce because of sector shutdowns.

“COVID was a good dry run for understanding supply chain vulnerability and also supply chain fragility,” Dr Geschke said.

“As we move forward in this journey of putting tariffs in place but also a world where we are more prone to natural disasters, we will feel more of these disasters where, say, severe tropical storms take out production facilities, or flooding takes out production facilities.” 

www.fairsupply.com

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness

https://shows.acast.com/talkingbusiness/episodes/talking-business-13-interview-with-dr-arne-geschke-from-fair

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New Indonesian school milk program creates opportunities for Australian dairy

AUSTRALIA’s dairy sector may be the beneficiary of a new school milk program being implemented in Indonesia.

Food and agribusiness banking specialist Rabobank said the program, which is currently being rolled out across 400,000 schools in Indonesia, is part of the recently-elected Indonesian government’s Nutritious Meals Program, aimed to combat malnutrition and promote healthy eating among the country’s 60 million school children, as well as in pregnant women.

The school milk program is expected to significantly increase Indonesia’s total dairy consumption, creating opportunities for Australia and other global dairy players, according to a new report by Rabobank’s RaboResearch division.

In the report, Indonesia’s new school milk program could nourish minds and global dairy markets, Rabobank found the new Indonesian government has introduced a range of policy measures with the potential to transform the country’s dairy supply chain.

“The centrepiece is the Nutritious Meals Program, which aims to provide food, including milk, to 60 million students on every school day by 2029,” report author and RaboResearch senior analyst Michael Harvey said. 

RaboResearch estimates the total milk required at full implementation could surpass 2 billion litres.

“This estimate is based on an anticipated 83 million recipients accounting for school absenteeism, lactose intolerance, and an average serving size between 125ml and 200ml,” Mr Harvey said.

The report says the school milk program has the potential to significantly increase Indonesian demand for liquid milk, both domestically produced and imported.

“The majority of milk consumed in Indonesia in 2024 was imported, with domestic production estimated at 900 million litres, and an additional 2.5 billion litres (liquid milk equivalent) imported,” Mr Harvey said.

Indonesia was Australia’s fourth largest dairy export market in 2023/24, after China and Japan, taking more than 60,000 tonnes of Australian product. Australia has also been a long-standing exporter of dairy cattle to Indonesia.

Local production to ramp up

 To meet the growth in demand that will result from the program, the Indonesian Government’s dairy industry plan would significantly increase the national dairy herd, the report said.

As the rollout of the program gathers pace, investment across Indonesia’s dairy sector is expected to accelerate, Mr Harvey said, and this will also have pronounced impacts on the global sector.

“For Indonesia to achieve its ambitious milk supply growth targets and accommodate the considerable number of dairy cattle needed, it will need to scale up both live cattle supply and the local dairy supply chain,” Mr Harvey said.

“This will include need for feed genetics, farm infrastructure and farm management skills to support the expanding local industry. And overall, we expect global input players and dairy companies to benefit.”

Export opportunities for Australia

While the school milk program is likely to result in an increase in domestic milk supply and provide a tailwind for local Indonesian dairy players, Mr Harvey said, Indonesia’s dairy import demand was also expected to rise.

“Fundamentally, RaboResearch expects Indonesia to remain a net importer of dairy and anticipates that annual import volumes are likely to grow over the medium term.” he said.

The report said Indonesia was recognised as a high-growth dairy market compared with advanced economies, driven by its large population and rising disposable incomes.

“Even before the announcement of the school milk program, Indonesia was viewed as a dairy market with long-term high growth potential,” Mr Harvey said. “In a country with nearly 280 million people, the average per capita dairy consumption is around 15kg annually.

“Indonesia boasts a vibrant liquid milk market, which in 2024 was estimated at 1.1 billion litres, including both flavoured and white milk. And Indonesia faces a significant dairy import deficit as it strives to keep up demand.

Mr Harvey said “Australia plays an important role in Indonesia” and the new program could create opportunities to further lift dairy exports to Indonesia.

Mr Harvey said the new school milk program could also create additional live cattle export opportunities for Australia given Indonesia’s desire to expand its domestic dairy cattle herd.

“To meet the increased milk demand, the local milk supply would require a four-fold increase in the domestic Indonesian dairy herd, underpinned by the importation of more than one million dairy cattle from various countries over the next five years,” he said.

Mr Harvey said Australia has been a long-standing exporter of dairy cattle to Indonesia.

“According to Dairy Australia, between 2019 and 2023, Australia exported an average of 80,000 dairy cows each year, although with the vast majority going to China and only 7,500 destined for Indonesia,” he said.

However, Mr Harvey said, the timing of Indonesia’s current herd expansion was somewhat favourable, given “the softer Chinese demand for imported dairy heifers resulting in a surplus of heifers in Australia”.

Overall, Mr Harvey said, “clearly Indonesia is an important trading partner for Australian dairy and will continue to present growth opportunities moving forward”.

www.rabobank.com.au

 

 

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Trade boost: Australia and Indonesia sign Mutual Recognition Arrangement

AUSTRALIAN Trusted Traders are about to gain faster, more efficient, and more secure access to one of the world’s fastest growing economies: Indonesia.

Businesses in Australia and Indonesia will benefit from a simplified customs process after the two countries signed an Authorised Economic Operator Mutual Recognition Arrangement (AEO MRA).​

Australian Border Force (ABF) Commissioner, Michael Outram, and the Indonesian Director General of Customs and Excise (DGCE), Askolani, signed the arrangement at the 23rd Customs-to-Customs Talks in Canberra on August 7.

Commissioner Outram said Australia's 11th MRA would mean Australian Trusted Traders (ATT) gain faster, more efficient, and more secure access to one of the world’s fastest growing economies.

“Indonesia is a vitally important partner for Australia, and it is my honour to host today’s Customs-to-Customs Talks and to sign the arrangement,” Commissioner Outram said. 

“It is important we continue to strengthen cooperation and information sharing between our countries on enforcement and trade facilitation matters.

“Following today’s signing, our two agencies will operationalise the arrangement, which will reap tangible economic and security benefits. This is only possible due to the hard work of our officers over the past few years to finalise the details of the arrangement,” Commissioner Outram said.

“While this will be my last Customs-to-Customs Talks planned with Indonesia before I conclude my time as ABF Commissioner, I am confident that the long-standing cooperation between the ABF and DGCE will continue into the future.”

In 2022-23, Indonesia was Australia’s 13th largest two-way trading partner by value ($26.2 billion) and 9th largest export market ($15.7 billion). Indonesia is also on track to become one of the world’s 10 largest economies by the mid-2030s and the fourth largest economy by mid-century. 

Australia has now signed arrangements with Canada, the People’s Republic of China, Hong Kong Special Administrative Region, Japan, the Republic of Korea, New Zealand, Singapore, Taiwan, Thailand and India.

Indonesia has also signed with The Republic of Korea, Hong Kong Special Administrative Region, the United Arab Emirates, and the Association of South East Asian Nations (ASEAN).

AEO MRAs, as outlined in the World Customs Organization (WCO) SAFE Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework), are arrangements between Customs administrations with equivalent AEO programs.

Australian businesses, which form part of the international supply chain, are encouraged to visit the ABF website to submit an application to join the ATT program. ​

To find out more, visit the Trusted Trader page on the ABF website.  ​

www.abf.gov.au

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Widdison warns on the logic of today’s global logistics

By Leon Gettler, Talking Business >>

THE GLOBAL supply chain has been caught up in a ‘perfect storm’ according to New Laboratories managing director Rohan Widdison.

The turbulence ranges from the war in Ukraine to the energy crisis hitting manufacturers in Europe and to Indonesia stopping the export of palm oil which slowed down the supply of glycerine.

New Laboratories supplies the cosmetics manufacturing industry for skin care, body care and tanning products.

“You might have 20 raw materials that go to one manufacturer to create that material and when all these things stop happening, then those suppliers run down their supplies, then price starts moving up, they try to catch up with demand – and they can’t catch up with demand so it becomes a supply-demand situation,” Mr Widdison told Talking Business. 

“So you might have bamboo material that comes out of Thailand that goes to France to be processed. Well, when you don’t have a demand for Thailand, then suddenly those materials stop getting made.

“It’s a perfect storm situation because right now we’re seeing shortages happening and prices going up because of situations like that very unfortunate war in Ukraine. A lot of oils come out of there, particularly sunflower oil. And so we suddenly saw sunflower oil take a 200-300 percent increase overnight,” he said.

“At the same time, you see the issue of energy going into Europe, particularly for German manufacturers, and that has a kick-on effect for manufacturers in Germany, so suddenly you get short supply and cost increases

“Then you compound that with Indonesia reducing the export of palm oil. That pushes up the price of basic materials so suddenly glycerine goes up 300-400 percent in a matter of months.”

Manufacturing lead times ‘blown out’

As a result, Mr Widdison said, the lead time to manufacture products “has blown out”.

“What that means for the consumer is that you go to a store and you see an increase in something that used to be $29 and it’s now $32,” he said. “That’s the reality of it. The cost unfortunately kicks on down the line because manufacturers pass on the cost to the brand and the brand passes on the cost to retailers and consumers.”

There is also the issue of shipping costs, which rose massively during COVID.

 New Laboratories is telling its brand partners that this will continue until 2025. Which means it’s a “rocky road ahead”.

Inflation ‘built in’ to 2025

The other issue too, Mr Widdison said, was that whenever there had been a shortage of raw materials, and subsequent price increases, they never go back to their old prices.

This is the inflationary aspect to supply shortages, he said.

This also means accepting there will be a longer lead time in the manufacture of certain products.

“That’s a common discussion, almost daily discussion, we have with our clients,” Mr Widdison said.

“Don’t think about having your products made within 60 days. Think of them being made four to six months down the track, subject to availability of raw materials.”

Added to this is the problem that inflation will still be around for the next two years, he warned. 

www.newlabs.com.au

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.

https://play.acast.com/s/talkingbusiness/talking-business-29-interview-with-rohan-widdison-from-new-l

 

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Farmers say strong climate policy will deliver strong EU trade deal

STRONG climate policy can help deliver Australian farmers a great trade deal with the EU, according to Farmers for Climate Action CEO, Fiona Davis.

Australia’s beef, lamb and dairy farmers will directly benefit from such a deal, Dr Davis said. 

“EU Trade Commissioner Valdis Dombrovskis has now clearly stated climate change targets will be part of any trade deal between Australia and the EU. The EU has much more ambitious climate targets than Australia – 55 percent below 1990 levels by 2030,” Dr Davis said.

“The EU Trade Commissioner has also made it clear that Australia’s farmers may face trade sanctions if Australia does not catch up on climate. The EU and other markets have warned of a carbon border tariff on Australia unless we catch up on climate and now this is becoming reality. 

“Let’s not miss the opportunity to seal a great trade deal for our farmers by pushing deep emissions reductions this decade. Strong climate policy creates strong regional economies and tens of thousands of regional jobs.

“The farmers who grow our food do not deserve to be punished for the emissions of the energy and transport sectors," Dr Davis said.

“Farmers have been waiting for better access to the huge EU market for years. We want bigger quotas for our beef, lamb and dairy farmers. The EU trade deal represents a huge opportunity for them, and strong climate policy brings huge opportunity to regional Australia.”

Farmers for Climate Action is a movement of 7000 farmers calling for strong economy-wide climate policies.

www.farmersforclimateaction.org.au

 

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Parliamentary Inquiry supports CPTPP trade expansion to include UK, Taiwan and South Korea

THE Federal Parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) has tabled its report on Expanding the membership of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).

Ted O’Brien, chair of the Trade Sub-Committee, said, “Australia should support the expansion of the CPTPP to include new members, but not unconditionally.

"Only aspiring economies that support an open, transparent and stable trading environment and those that demonstrate an ability and willingness to meet the agreement’s high standards should be considered," Mr O’Brien said.

"The CPTPP is one of the world’s most comprehensive trade agreements and its quality must be maintained." 

Among the committee’s recommendations was that the Australian Government work with other CPTPP members to encourage and facilitate the accession of the United Kingdom, Taiwan and South Korea.

"The UK was the first to apply to join the CPTPP and the process it’s going through can be a template for other future aspirants," Mr O’Brien said.

The committee’s recommendation on Taiwan went one step further, suggesting the government also consider negotiating a bilateral Taiwan-Australia Free Trade Agreement (FTA).

"A lesson from our experience with the UK is that benefits accrue from negotiating a bilateral FTA and the CPTPP at the same time, and we see merit in replicating this approach with Taiwan," Mr O’Brien said.

On China, the committee recommended the Australian Government work with other CPTPP members to, "encourage China to re-establish full trading relations including ending its coercive trade measures and reengaging in ministerial dialogue, and to demonstrate an ability and willingness to commit to the CPTPP’s high standards, prior to supporting the commencement of an accession process".

"The ball is in their court," Mr O’Brien said. "It’s up to China if it wishes to re-engage with Australia and I hope it does because that would enable the discussions that are necessary to determine whether an accession process should commence."

The United States has not sought to join the CPTPP since it withdrew from negotiations under President Trump. Nevertheless, the committee recommended that the Australian Government work with other CPTPP members to encourage the US to renew its interest.

The committee also recommended ongoing informal discussions with other economies that have expressed an interest in joining the CPTPP including Thailand, Indonesia and the Philippines.

A copy of the report and further information about the inquiry is available from the committee’s website.

 

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Taiwan puts forward its case to join the CPTPP

REPRESENTATIVES of the Taipei Economic and Cultural Office in Australia will appear at an Australian parliamentary inquiry to explain Taiwan’s interest in becoming a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Sub-committee chair and Federal Member for Fairfax, Ted O’Brien said he looked forward to hearing from the representatives of Taiwan.

“Only three prospective members have lodged a formal application to join the CPTPP – the United Kingdom, the People’s Republic of China (PRC) and Taiwan (Republic of China, ROC),” Mr O’Brien said.   

“The committee has received an overwhelming number of submissions in support of Taiwan acceding into the CPTPP. This hearing provides an opportunity for Taiwan’s top diplomat to prosecute Taiwan’s own case for joining this vitally important trade agreement.” 

The CPTPP agreement signed in 2018 is a trade bloc of 11 countries that includes Australia and is an export market of 500 million consumers worth nearly $14 trillion.

The parliamentary inquiry by the Trade Sub-Committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade will examine the scope for expanding the CPTPP beyond the existing membership of Australia, Canada, Japan, Mexico, New Zealand, Singapore, Vietnam, Brunei Darussalam, Chile, Malaysia and Peru and the merits of quite different economies seeking to join the trade bloc such as the People’s Republic of China, the UK and the most recent applicant Taiwan.

The committee has heard previously from a range of corporations, business chambers and individuals in both Australia and in Taiwan such as the representatives of the Australia-Taiwan Business Council, the Taiwanese Chamber of Commerce in Australia, Taiwanese Chambers of Commerce in Oceania, the Australia New Zealand Chamber of Commerce in Taipei, Chinese International Economic Cooperation Association Taiwan, the CPC Corporation Taiwan, and the Bankers Association of the ROC and many others seeking closer trade links.

Further details about the about the inquiry, including the program and the terms of reference, details of past public hearings and roundtable discussions, can be obtained from the Committee’s website.

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