Trade

Historic TPP trade agreement signed: What does it mean for red meat exports?

Jon Condon, 04/02/2016

THIS morning’s signing of the Trans-Pacific Partnership in New Zealand is a major step forward towards advancing opportunities for Australian agriculture and food exporters in a landmark regional trade agreement covering some of the world’s largest economies.

The countries involved in the TPP – Australia, the US,  Japan, NZ, Canada, Chile, Malaysia, Mexico, Peru, Singapore, Brunei and Vietnam – represent 25 percent of world trade, 36 percent of the global economy and around one third of Australia’s agricultural exports.

Hamburg Sud's Cap Beatrice shipping export tradeAgriculture minister Barnaby Joyce said the gains solidified in today’s signing could drive stronger profits to Australian agricultural and food producers.

“We’re now a step closer to the benefits that will flow from the world’s largest ever regional trade agreement—an agreement including five of our top 10 trading partners,” Minister Joyce said in a statement.

“This agreement gives us preferential access that will have real, tangible outcomes for exporters of most of our main export commodities.”

“At the same time, we are working hard to pursue improved technical market access. Tariff reductions and eliminations are essential but we also need to achieve technical market access to translate FTA outcomes into real opportunities,” Minister Joyce said.

The TPP agreement follows Australia’s earlier bi-lateral trade agreements with Korea, Japan and China, plus others in progress with India and Indonesia.

Key outcomes for the red meat industry (listed and explained below in more detail) include

  • Japan’s tariff on both chilled and frozen beef imports will be reduced from 38.5pc to 9pc over 15 years, and Canada (currently 25.6pc), Mexico (25pc) and Peru (17pc) will eliminate all tariffs on beef over 10 years. the elimination of the US price-based safeguard that currently applies under the Australia-US Free Trade Agreement.
  • Tariffs on lamb exports to Mexico, $22 million market in 2014, will be eliminated within 8 years. Any tariffs on sheepmeat in other TPP markets will be eliminated on entry into force.

 

NFF urges swift ratification

The National Farmers Federation welcomed the formal signing of the TPP and urged the swift ratification of the agreement so as to create new export opportunities for Australian agriculture and to further build the sector’s contribution to the national economy.

NFF president Brent Finlay said the TPP would eliminate 98pc of tariffs on Australian agricultural exports to TPP countries, build on existing trade agreements with Korea, Japan and China, and had potential to create longer-term benefits for Australian farmers in countries where we did not have agreements in place, like Canada, Mexico and Peru.

“We recognise the collaborative and constructive efforts put in by the Federal Government and industry groups in reaching this milestone,” Mr Finlay said, “however it is critical the next step is taken swiftly and that this agreement passes through each of the member country’s parliamentary processes, including here at home.”

“What we need is for the clear benefits of this agreement and its potential to bolster Australia’s export opportunities and the broader economy to be recognised and for the ratification process not to be politicised and stalled.”

“The signing of the TPP is a game changing move for Australian agriculture and a comprehensive and liberalising agreement for the Australian community,” Mr Finlay said.

“We now urge those involved to ensure the agreement is ratified so that our industry and the broader economy can reap the benefits of increased global market opportunities.”

 

What TPP means for the beef, sheepmeat and wool industries

In the red meat sector, beef tariffs will be further reduced in Japan beyond what has been achieved under the bi-lateral Japan-Australia FTA, and the agreement will also result in the elimination of price safeguards in the US.

Tariffs on sheepmeat exports to Mexico will be eliminated in eight years and from day-one of the agreement coming into effect in all other TPP countries.

The TPP will eliminate all remaining tariffs on Australian raw wool exports to TPP countries from day one of the agreement coming into effect, and also deliver improved rules of origin for textiles, which will encourage greater demand for Australian fibre products.

Here’s some details.

Beef:

TPP members account for about 52pc of Australia’s beef, sheepmeat and offal trade and the existing import tariffs applicable to Australia’s exports destined for TPP markets represent an annual tax on the supply chain of around $1 billion. The gradual removal of this cost burden will positively impact the profitability of Australian cattle and sheep producers, processors and exporters, red meat industry peak councils said.

The implementation of the TPP agreement will also help to ensure that the Australian red meat supply chain remains internationally competitive – with more seamless trade rules, reduced costs and less red tape making it easier for our sector to respond to the growing consumer demand across much of the Asia-Pacific region.

  • Under the TPP, the tariffs levied on Australian beef entering Japan will be further reduced from those negotiated under the Japan-Australia Economic Partnership Agreement. The tariff on both frozen and chilled beef will now fall to 9pc over 15 years – as opposed to the end point of 19.5pc for frozen beef and 23.5pc for chilled beef secured under the earlier JAEPA deal.
  • All TPP member countries supplying beef to Japan will be similarly advantaged by these TPP tariff cuts, but Australia is further advanced than most others in the schedule of reductions. A global beef safeguard provision will apply to this trade.
  • In addition, processed red meat import tariffs applied by Japan, which currently range from 6-50pc, will be eliminated within 15 years; the majority of offal tariffs eliminated within 10-15 years; and the tariffs applied to live cattle imports will also be eliminated.
  • TPP will also see the elimination of the United States price-based safeguard under the Australia-US Free Trade Agreement (AUSFTA). Australia beef exports to the US were valued at $2.7 billion in 2015.
  • In Canada, the current 35,000 tonne beef quota (0pc in-quota tariff) will remain, however, the above quota tariff of 26.5pc will be phased out. Additionally, the 2.5pc tariff on Australian sheepmeat will be eliminated on activation of the agreement.
  • For Australia’s trade to Mexico, the current 20-25pc beef tariff will be eliminated within 10 years, and goat meat tariffs will be eliminated within 8 years; the majority of offal tariffs will be eliminated; and the 10-15pc tariffs on live animals will also be eliminated.
  • In Peru, which represents a new market opportunity for Australian red meat, the 17pc beef tariff will be phased out and the 9pc sheepmeat and goat meat tariffs will be eliminated on EIF.

Sheepmeat:

  • Australia exports around $965 million in lamb and mutton to TPP markets, 38 percent of all sheepmeat exports.
  • Key TPP market access outcomes include:
  • Tariffs on exports to Mexico will be eliminated within 8 years of entry into force of the TPP. Australia sheepmeat exports to Mexico were valued at $22 million in 2014.
  • Tariffs on sheepmeat exports to all other TPP countries will be eliminated.

Wool:

  • Total Australian exports of wool were valued at around $2.4 billion in 2014, and wool exports to TPP countries were valued at around $82 million in 2014.
  • The TPP will eliminate all remaining tariffs on Australian raw wool exports to TPP countries from entry into force of the Agreement. Products produced using Australian wool in Malaysia, Vietnam or any other TPP partner will receive preferential treatment throughout the TPP region.  The rules of origin for textiles will encourage greater demand for the Australian wool used to produce high quality yarns.

For the remaining TPP members, existing bilateral agreements have, or are already delivering market access improvements.

As a regional free trade agreement, the TPP will also create additional benefits. The combined effect of new market access and common rules will make it easier for Australian businesses, exporters and consumers to participate in, and benefit from, regional value chains.

 

Click here to view an earlier article outlining AMIC processor council chief executive Steve Martyn’s views on the reality of what the TPP means to the Australian meat industry.

 

 

 

 

 

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