Key developments in Australia's open market strategy highlight significant opportunities for Australian agricultural businesses to take advantage of tariff reductions and preferential export arrangements through existing and emerging free trade arrangements with global and regional partners.

Free trade agreements are at the heart of Australia's open market approach to international trade, and whether bilateral or multilateral, regional or global, have significant implications for domestic primary industry businesses seeking to pursue export opportunities with international partners.

Recent developments across existing and emerging trade agreements indicate an opportunity for Australian primary industry businesses to take advantage of preferential tariff and market access in the next 3-5 years and beyond.

Trans-Pacific Partnership (TPP)

In 2015-16, Australian dutiable exports of agricultural goods to TPP countries amounted to approximately $16 billion, representing close to 34% of Australia's total exports of these products. For Australia, the TPP is an economically favourable agreement between some of the world's biggest economies and three of Australia's top 10 goods export destinations: Japan, New Zealand and the US. Once the TPP is acceded to by the Party States, it is forecasted to eliminate tariffs on $4.3 billion of Australia's dutiable exports and provide significant preferential access to a further $2.1 billion through a system of quotas and tariff reductions. The TPP will improve the commerciality of trade with each of the Party states and in particular create new market opportunities with Canada,[1] Mexico and Peru; none of which have an existing FTA with Australia.

Australia's export to TPP markets represents a significant portion of our total agricultural exports. In particular, primary export industries such as beef, pork and seafood engage predominantly with those countries subject to the agreement. The Australian beef industry stands to benefit from a significant reduction in tariffs between their major export partners, for example:

  • a reduction in Japan's beef tariffs to 9% within 15 years (valued at $1.8b in 2015-16);
  • an elimination of Japan's offal tariffs within 15 years (valued at $224m in 2015-16);
  • an elimination of Canada's beef tariffs (currently 26.5%) within 10 years (valued at $183m in 2015-16);
  • an elimination of Peru's beef tariffs (currently 17%) within 10 years; and
  • an elimination of Mexico's beef carcasses and cut tariffs (currently 25%) within 10 years.

Overall, the outcome of the TPP is to eliminate 98% of tariffs in the TPP region. This agreement is expected to create a number of new opportunities for agricultural exporters in the beef, wool, dairy, sugar, cotton, wine and seafood industries, among others.

China Australia Free Trade Agreement (ChAFTA)

As Australia's largest recipient of agricultural exports, China accounted for $10.3 billion in export revenue in 2016 ‒ a figure likely to grow as China is expected to account for 43% of global growth in agricultural demand by 2050. Notably, ChAFTA provides for the elimination of all tariffs for Australian beef imports by 2024, and Australia's reputation for high quality beef products favourably position the agriculture industry to thrive off an inevitably growing demand. In addition, elimination of tariffs on dairy products, pork, wine, horticultural goods and seafood (largely by 2019) highlight further opportunities for Australian exporters to capitalise on preferential arrangements which provide a key advantage over competitors such as the US, EU and Canada.

Japan-Australia Economic Partnership Agreement (JAEPA) Update

The JAEPA is on track to ensure that 97% of Australian exports to Japan receive customs duty-free or preferential tariff access to Australia's second-largest trading partner. Significant reductions on prohibitive tariffs across industries including beef, fruit and vegetables, processed food and wine have already provided Australian businesses with substantial opportunities which are likely to expand in line with ongoing progressive targets. As the JAEPA is one of the most liberal trade agreements ever concluded by Japan, Australian primary industry participants are in a unique position to benefit from broad two-way investment opportunities offered by JAEPA.

Peru-Australia Free Trade Agreement (PAFTA)

While agricultural exports to Peru have dipped from approximately $11.6 million in 2015 to $5.3 million in 2016, the recent finalisation of PAFTA is likely to create some opportunities, both for the elimination of significant tariff regimes ranging up to 17% across a variety of products, and duty free access to Peru's sugar, dairy, rice and sorghum markets, with significant scope for increased access within the next five years. Notably, PAFTA is likely to present broader regional opportunities for Australian agricultural businesses seeking to access Latin American markets.

Singapore Australia Free Trade Agreement (SAFTA)

Singapore is currently Australia's largest trading partner in South East Asia, with two-way goods trading valued at $16.2b in 2015-16. SAFTA is widely regarded as one of Australia's most successful FTAs, and has been the subject of ongoing modernisation and reform. The Agreement to Amend the SAFTA entered into force on 1 December 2017 represents a further upgrade to the trade relations between Australia and Singapore. The primary outcome of the SAFTA has been to continue developing opportunities that stem from the elimination of tariffs and the preferential treatment of Australian agricultural goods.

Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA)

Ongoing negotiations have resulted in significant tariff reductions in sugar exports to Indonesia, as well as continuing to improve trade in goods, customs procedures, trade facilitation and existing technical barriers to trade.

Pacific Agreement on Close Economic Relations (PACER Plus)

Aiming to secure more predictable, secure and liberal market access, the PACER agreement provides a number of advantages for Australian agricultural businesses exporting to Pacific nations. Early reductions or secured duty-free access to Australian wine in the Cook Islands, fruit juices in Niue, and sheep products, poultry, agricultural chemicals, beef sugar and wine in Tonga, all create emerging opportunities to create closer export arrangements across these industries.

Looking forward

Australia's agricultural sector should eagerly await what 2018 may bring. A ratified TPP will begin a decade of progressively diminishing tariffs across the majority of Australia's agricultural exports and both develop and create new opportunities with the TPP Party States. 2018 will also begin with the tenth round of IA-CEPA negotiations which, once concluded, will possibly free up Australia's $15 billion trade industry with Indonesia.

Australian exporters should stay up to date with the development of those FTAs that are relevant to their operations and be ready to capitalise on new opportunities that are created with each successful round of negotiations and improvements.