Agriculture officials admit if Australia abandons live sheep exports to the Middle East, competitor nations with even worse animal welfare standards will simply fill the void.
Horrific footage emerged last month of sheep dying in their own filth on a Middle East-bound ship in August last year.
On day 15 of the voyage, temperatures soared, killing 900 sheep. A further 1000 died in the following two days.
Major importer Al Mawashi has opened talks with other countries after NSW MP Sussan Ley introduced a private bill to end live sheep exports.
"We certainly expect Gulf countries we are currently exporting to, if our exports were to cease, they would seek their live sheep from other markets," Agriculture department deputy secretary Malcolm Thompson told a Senate estimates hearing on Thursday night.
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"Our sense is the welfare standards in many of those countries are lower than Australia."
Horn of Africa countries, South Africa and Eastern European nations were identified as Australia's main competitors.
Assistant Agriculture Minister Anne Ruston flagged there could be increases of boxed and chilled Australian sheep meat into those markets, if live exports stopped.
Government backbencher Barry O'Sullivan said it was hypocritical for Australians to be up in arms over live exports to the Middle East.
"I know the little piggy doesn't want to go to market, but if you've got to go to market, you're better off being a little Australian piggy going to market than you are coming from some darker destinations," he told the hearing.
Senator Ruston responded the Australian public expected animals to be treated properly and the footage had been damaging to the industry's reputation.
The department's culture and capability is under review following the controversy, as part of Agriculture Minister David Littleproud's push to clean up the under-fire trade.
Mr Littleproud introduced a bill to parliament on Thursday to punish dodgy exporters with up to 10 years' jail and multimillion-dollar fines.
