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Long-term value for beef in Malaysian FTA deal

Beef Central, 29/05/2012

The newly-signed Free Trade Agreement with Malaysia might offer little in the way of direct and immediate benefits to Australia’s beef and cattle industry, but the strengthening of market access issues fostered by the deal will provide significant long-term value, industry leaders believe.

The Malaysia-Australia Free Trade Agreement (MAFTA) was signed in Kuala Lumpur last week, representing the culmination of seven years of negotiation. The agreement is expected to take affect some time in 2013, following official ratification by each country.

Meat and Livestock Australia said the MAFTA builds on the existing ASEAN-Australia-New Zealand FTA (AANZFTA), of which Australia and Malaysia are both signatories.

“Under AANZFTA, Australian livestock and meat entering Malaysia face zero tariffs. MAFTA will reaffirm the existing zero tariffs applicable to livestock and red meat products,” MLA reported.

“It will also incorporate text outlining procedures, co-operative and consultative mechanisms to deal with standards, technical regulations and conformity assessment.”

An immediate beneficiary of the deal will be the dairy industry, which has faced a competitive disadvantage in Malaysia compared with New Zealand which has a completed FTA in place. Under the MAFTA Australian dairy exporters will be able to increase exports of liquid milk to Malaysia under a zero tarrif rate.

Other direct beneficiaries include processed food exporters, who earn an immediate elimination of tariffs on exports into Malaysia, and tropical fruit exporters, who will have tariffs on their products gradually phased out by 2016.

Most benefits for the beef and cattle industries are likely to come through shoring up the trade relationship with a market in the heart of a significant growth region.

Malaysia has grown strongly as an emerging market for Australian beef exports in recent years, driven by strong food service hotel and restaurant demand for chilled product, as well as for frozen manufacturing meat and offals.

Total trade, including offals last calendar year was 14,436 tonnes, a 19 percent increase on the previous year (11,700t), according to the Department of Agriculture, Fisheries and Forestry.

Australia exported around 10,000 cattle to Malaysia last year. The market is included in the second tranche of countries that will be introduced to the Export Supply Chain Assurance System from September 1.

Industry sources have told Beef Central this week they believe progress towards that timeframe is on track, as a result of the efforts of exporters working with their customers and the relevant Malaysian ministries.

The National Farmers Federation said the strengthening of bilateral relationships and more business friendly rules fostered by the MAFTA would improve long-term market access issues with Malaysia.

“Protectionist sentiment around agricultural goods is rife and growing across the globe, so in this context it is pleasing that Australia has managed to forge an agreement with Malaysia that has dealt with some sensitive agricultural issues that were not effectively covered by AANZFTA,” NFFederation vice president Duncan Fraser said.

With economic growth at around 5 per cent per annum, Malaysia forms an important part of the “Asian Century story”, he said.

“Demand for Australia’s top quality food and fibre will only continue to escalate in the medium to long term in countries like Malaysia and Australian farmers are ideally positioned to capitalise on the increased demand that will ensue.

“Despite the completion of this agreement, there is still a lot more to be done in order for Australia’s farmers to tap into the full potential across the Asian region and beyond.

“The NFF will now throw its attention towards ensuring that agriculture remains front and centre in completed FTA’s with South Korea, Japan, China and Indonesia as immediate priorities.

“These are all markets with enormous growth opportunities and where significant barriers to trade in agriculture still exist, not only through tariffs that restrict trade but also through technical or so called ‘behind the border’ restrictions.”

Malaysia is currently the eighth largest customer of agricultural exports from Australia, worth around $1 billion in trade.

“This agreement with Malaysia will offer increased opportunities for Australia’s farmers to export even more of their products to Malaysia,” minister for agriculture Joe Ludwig said.

While the FTA process had gone smoothly. nNegotiation of the Malaysian Halal protocol has proven a more difficult task over recent years, industry sources say.
 
While the protocol and Halal issues are not part of the FTA, the consultative infrastructure that will be put in place as a result of the FTA should help in its negotiation. The Ag Minister's office has been made fully aware of that objective. 

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