Aussie and Kiwi farmers are celebrating the removal of 98% of tariffs on exports to buyers across the Asia Pacific.
A multilateral trade deal between 11 countries signed March 2018 will come into effect within 18 months, and possibly even before Christmas.
Last month we presented an introduction to the new free trade agreement (FTA) called the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership). This month the Findex team have highlighted parts of the deal affecting the agriculture sector, providing a closer look at what it means for you.
The deal includes three of Australia’s top 10 trade markets; Japan, Vietnam and New Zealand, with CPTPP markets the destination for 23% and 31% of Australia and New Zealand’s respective agricultural exports.
For Australian producers, the highly protected Japanese market was the major focus. Australia saw improvements on the tariff and quota reductions previously achieved under the bilateral Japan-Australia Economic Partnership Agreement (JAEPA) signed in 2015, and the total abolition of tariffs on Australian sheepmeat, wine, cheese, horticulture, cotton, wool and seafood.
Australia’s beef industry was a big winner, seeing tariffs fall to 9% over 15 years, well below the 19.5% and 23.5% achieved under JAEPA, with the 6-50% processed red meat, offal and live cattle tariffs eliminated concurrently. As Australia’s largest agricultural export worth $7.8 billion in 2016-17, beef will now directly compete with New Zealand beef in the premium Japanese market, following Japan’s reduction of New Zealand’s beef tariff to 9%, levelling the playing field to the delight of Kiwi exporters. This new adjustment highlights the fundamental impact FTAs can have.
Beef, sheepmeat and goat meat tariffs into Mexico and Peru will be removed, providing potential new markets for both Aussie and Kiwi exporters, while New Zealand gained new access to Japan, Peru, Canada and Mexico, countries with which it has not previously enjoyed an FTA, seeing the elimination of all tariffs on exports to CPTPP economies, with the exception of beef into Japan, and some dairy products into Japan, Canada and Mexico, where access will be improved through partial tariff reductions and duty-free quotas.
Aussie dairy exports are another big winner, seeing tariff removal or new quotas on a range of cheeses, milk powder and protein products into Japan. Access into Canada’s highly protected market is a special win given Canada’s strong protectionist stance throughout the negotiations, and new quotas into Mexico for butter, cheese and milk powder adds another sweetener to the deal for Australia.
Some countries failed to fully liberalise tariffs, including on sugar, rice, dairy and pork, reflecting their attempts to protect their own domestic industries from foreign competition.
In rare good news for Australia’s rice exporters, Japan increased quotas for the first time since 1995, from 6,000 tonnes to 8,000 tonnes over 12 years. Sugar exporters will also see some tariff removal in Malaysia, Vietnam, Canada, Mexico and Japan.
Biosecurity was a major worry during the negotiations, as Aussie and Kiwi farmers lobbied their governments to ensure our strict, science-based biosecurity rules wouldn’t be affected. These underpin our unique pest and disease freedom profile and subsequent overseas demand for our clean, safe products. A new committee to oversee biosecurity issues will enable challenges to other nations’ use of non-tariff barriers, such as biosecurity, to restrict trade in favour of their own domestic producers.
FTAs have such broad impacts it’s easy to focus on headlines like tariff liberalisation. However, their impact is much greater including future benefits from overall increased trade and its diversification across more markets, which is harder to calculate. Fiona Simson, President of the National Farmers’ Federation, a Crowe Horwath corporate partner, remarked that, ‘trade is good for farmers and its good for Australia as a whole, [meaning greater] investment on-farm in jobs, innovation and efficiencies.’ This sentiment has been echoed by Andrew Hoggard, National Vice President of New Zealand’s Federated Farmers, who observed that ‘trade deals like this ensure that we are on an equal footing globally.’
The titanic social and demographic changes occurring throughout Asia, including the middle-class consumer boom, highlight the importance of agriculture to our future national prosperity, and the generational opportunity for Australia and New Zealand to supply high-quality, safe product.
If you’d like to discuss how FTAs affect your exports, or the range of Crowe Horwath’s export services including Export Strategy planning, Supply Chain Optimisation and Export Grant applications, please contact me directly for a friendly chat, or contact your local Crowe Horwath adviser.
Sam Lawrence, Senior Manager, Global Trade and Customs