9.1
The tariff outcomes for Australia from the Trans-Pacific Partnership Agreement (TPP) are unequivocally good.
9.2
Australia has some of the lowest tariffs in the world, and other TPP parties impose significant tariffs on many products. This means that Australia will lose very little and has the potential to gain a great deal from the TPP in relation to tariffs.
9.3
According to the National Interest Analysis (NIA), the TPP will eliminate 98 per cent of tariffs applied by TPP parties. For Australia, this will remove tariffs on $13bn of Australian exports to TPP countries. In other words, the TPP will remove tariffs on about 15 per cent of Australian exports by value to TPP parties.
9.4
This Chapter details the specific benefits that will accrue to a representative sample of industries.
Agriculture
9.5
Australian agriculture will be a significant beneficiary of tariff reductions under the TPP.
9.6
Australia exported around $15bn worth of agricultural goods to TPP parties in 2014. This represents about 33 per cent of Australia’s total agricultural exports. The TPP will eliminate tariffs on more than $4.5bn of these exports upon entry into force.
9.7
According to Dr Jeffrey Wilson:
… agricultural products have been a longstanding area of under-reform and in some cases outright omission in the global trade architecture. There are typically very high tariff barriers compared with other sectors, and very often other forms of quantity restrictions, particularly around quotas, tariff rate quotas and a number of these things. These restrictions are very extensive in many of Australia's key trade partners for agriculture, which are presently and will in the future increasingly be in the Asian region. The TPP offers a number of benefits. These sometimes involve tariff reductions and sometimes involve limits on quotas or the abolition of quotas or the raising of quota levels. It depends on the country in question and the product in question. But the core market access gains for Australia, not exclusively but predominantly, will be in achieving market access gains through these provisions.
Sugar industry
9.8
Total Australian exports of sugar were estimated to be valued at $1.8bn in 2015, and over one quarter of these exports (valued at $507m) went to TPP countries.
9.9
TPP market access gains for Australian sugar producers and exporters include:
the United States providing Australia with the largest access granted to a sugar exporting country in over 20 years, with an additional 65,000 tonnes of access;
the United States will also provide Australia with 23 per cent of future additional quota allocations, which could see Australia's raw sugar exports to the US climb above 400,000 tonnes by 2019/20;
the elimination of Japan's tariff and reduction in the levy on high polarity sugar exports on entry into force of the TPP;
the elimination of Canada's tariffs on refined sugar (currently CA$30.86/tonne) within 5 years of entry into force of the TPP;
Mexico will apportion Australia a guaranteed 7 per cent of any quota for raw sugar in the years in which it is offered;
the elimination of in-quota tariffs on Vietnam's WTO sugar quota on entry into force; and
Malaysia committing to allow Australia to engage in the wholesale distribution of refined sugar in Malaysia for use in the food and beverage industry.
9.10
According to the Australian Sugar Milling Council:
… in relation to the Japan market ... The benefits that will accrue from that access are somewhere in the vicinity of $25 a tonne for Australian sugar going into that market. That is a very significant outcome and is certainly commercially worthwhile for the Australian industry.
In terms of the US market … We have gained an additional 65,000 tonnes of new quota access on top of our existing 87,000 tonnes … certainly it is an increase on where we are at the moment and it is commercially meaningful.
… we have removed the in-quota tariff, which is worth around $3 million to the Australian industry, and there is the potential for additional annual allocation of access based on US needs.
9.12
Canegrowers commented that:
… the access that it has provided—an additional 75,000 tonnes—represents a 74 per cent increase over the current base amount. My understanding is that the agreement will enable Australia to increase its access by 23 per cent of any future additional quota allocations for raw sugar.
9.13
In terms of benefits to the industry, the Sugar Milling Council pointed out:
… when we were negotiating a lot of this TPP, the price differential was something like $200 per tonne. That is, there was a $200 per tonne benefit in sending sugar to the US than there was to the rest of the world market. That is a massive price differential and benefit. At those sorts of prices, we would certainly be putting the full quota allocation into that US market.
Dairy industry
9.14
Total Australian dairy products exports were valued at $2.6bn in 2015, and around 43 per cent (valued at $1.1b) was exported to TPP countries.
9.15
Key TPP market access outcomes for Australian dairy producers and exporters include:
market access improvements in Japan for Australian dairy including: the elimination of tariffs on certain cheese products, and tariff reductions and new quota allocations for remaining cheese products; new quotas for butter and skim milk powder with the in-quota mark-up eliminated within 10 years of entry into force of the TPP; and new quotas and tariff reductions for a range of dairy products including ice cream, whole milk powder, condensed milk, yoghurt and infant formula;
the United States will eliminate all WTO in-quota tariffs for dairy products on entry into force of the TPP and will eliminate all tariffs on milk powders, infant formula, ice cream and selected cheese lines where we have a growing trade.;
the United States will also improve quota administration arrangements. Australia's dairy exports to the US were worth around $55m in 2015;
preferential access into the highly protected Canadian market with new quotas for dairy products including, cheese, milk powders and butter and the elimination of tariffs on milk protein concentrates on entry into force; and
Mexico will create new quotas access, including for butter, cheese and milk powders, and will eliminate tariffs on yoghurt.
9.16
Dairy Australia advised the Committee that at present:
… referring to Japan, it is a rather difficult situation, because Japan has not only a percentage or ad valorem tariff—for instance, it might have a tariff of 29.9 per cent on cheese—but also, particularly on sensitive areas dairy products, a value figure. For instance, it might have 29.9 per cent, then it might have another 300, 400 or 500 yen per kilogram tariff on top of that, which adds up to $8 a kilogram, and $8,000 a tonne adds up to such a prohibitive level that it makes it impossible to export to Japan.
9.17
Dairy Australia indicated that the TPP would significantly improve this situation.
Grain industry
9.18
Total Australian exports of grains were valued at around $8.5bn in 2015, around 16 per cent (or $1.3bn) of which was exported to TPP countries.
9.19
TPP market access outcomes for Australian cereals and grains producers and exporters include:
market access improvements in Japan for wheat, barley and malt, including: a reduction in the mark up on wheat and barley by 45 per cent within eight years of entry into force; the creation of new quota volumes for wheat and barley; and new quota access for malt exports;
the elimination of Mexican tariffs on wheat (currently 67 per cent) within 10 years of entry into force;
the elimination of Mexican tariffs on barley (currently 115 per cent) within five years of entry into force;
the elimination of Peru's tariffs on cereals and grains (currently nine per cent) within five years of entry into force; and
the elimination of all Canadian tariffs on cereals and grains upon entry into force of the TPP.
9.20
According to GrainGrowers:
The Trans-Pacific Partnership group of nations includes two of Australia's top five export grain markets, Japan and Vietnam, as well as New Zealand, Singapore and Malaysia, which in total account for approaching 20 per cent of our grain exports. In 2014–15, this was worth close to $2 billion.
9.21
In terms of impact on Australian exports:
… the current price of grain on the international markets, somewhere like Japan, is sitting at around $330 a tonne … If we are not part of the TPP, Australian wheat and barley imported to Japan will be $50 to $100 per tonne higher in cost because, under the TPP, Japan has agreed to reduce its import mark-ups on wheat and barley by 45 per cent over 10 years.
If Australia is not in the TPP, Australian wheat and barley will not have expanded access to Japan via growing tariff-free quotas for these grains. These growing quotas avoid the in-quota tariff of 55 yen per kilogram, which equates to around $700 a tonne—which, on a basis of $330 per tonne, is very significant. If Australia is not in the TPP, Australian grain will not be traded with the improved efficiencies of regional trade characterised by improved self-certification and increased transparency on import processing, import licensing and export arrangements. If Australia is not in the TPP, grain trade barriers, which are increasing—those of a technical nature—will not have the chance to be resolved using the Technical Barriers to Trade Committee. If Australia is not in the TPP, it will forgo all of these benefits while the US and Canada gain equivalence to the previously preferential access we have had to markets such as Vietnam and Japan, as well as gain the benefits we will have forgone.
9.23
According to GrainGrowers, the benefits appear very small, but:
… in the context of the margins at which grain is traded around the world they are significant. Five per cent on an import into Vietnam will get up to about a $25 a tonne benefit. On a $330 base, and given that shipping prices are relatively low—around $10 a tonne for most markets into Vietnam at the moment—that is significant.
Red meat
9.24
Fifty-eight per cent of Australia's beef exports go to TPP markets. Beef is Australia's largest global agricultural goods export, worth $10bn in 2015. TPP market access outcomes for Australian beef producers and exporters include:
Japan reducing its beef tariffs to nine per cent within 15 years of entry into force;
the majority of Japan's tariffs on offal will be eliminated over 10 to 15 years of entry into force, and tariffs on cheek and head meat significantly reduced to 9 per cent within 15 years of entry into force;
the elimination of Japanese tariffs on processed meat products within 15 years of entry into force;
the elimination of the United States price-based safeguard under the Australia–United States Free Trade Agreement (AUSFTA) on entry into force;
the elimination of Canadian beef tariffs (currently 26.5 per cent) within 10 years of entry into force;
the elimination of all Peruvian beef tariffs (currently 17 per cent) within 10 years of entry into force;
the elimination of all Mexican tariffs on beef carcasses and cuts (currently up to 25 per cent) within 10 years of entry into force; and
the elimination of Mexico's tariff (currently 20 per cent) on ‘other offal’ (used for taco meat) from entry into force.
9.25
In relation to sheep meat, Australia exports around $1.1bn in lamb and mutton to TPP markets, 44 per cent of all sheep meat exports.
9.26
Key TPP market access outcomes include:
the elimination of tariffs on exports to Mexico within eight years of entry into force; and
the elimination of tariffs on sheep meat exports to all other TPP countries upon entry into force.
9.27
The Australian Red Meat Industry advised the Committee that:
The tariff on both frozen and chilled beef will fall to 9% over 15 years—as opposed to the end point of 19.5% for frozen beef and 23.5% for chilled beef secured under the [Japan–Australia Economic Partnership Agreement (JAEPA)]. All TPP member countries supplying beef to Japan will be similarly advantaged by these TPP tariff cuts (and hence Australia will lose its current JAEPA preference).
In addition, processed red meat import tariffs applied by Japan, which currently range from 6–50%, 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.
9.28
In relation to Canada:
… the current 35,000 tonne beef quota (0% in-quota tariff) will remain, however, the above quota tariff of 26.5% will be phased out. Additionally, the 2.5% tariff on Australian sheepmeat will be eliminated on entry into force.
9.29
Red meat sales to Mexico are also expected to increase:
For Australia’s trade to Mexico, the current 20–25% beef tariff will be eliminated within 10 years; the 10% sheepmeat and goat meat tariffs will be eliminated within 8 years; the majority of offal tariffs will be eliminated on EIF; and the 10–15% tariffs on live animals will also be eliminated on EIF. (Unfortunately the TPP did not address some key non-tariff barriers to trade—which will necessitate an ongoing industry and government focus in order to facilitate trade flows.)
9.30
Finally, in relation to Peru:
In Peru, which represents a new market opportunity for Australian red meat (pending the development of protocol arrangements), the 17% beef tariff will be phased out and the 9% sheepmeat and goat meat tariffs will be eliminated on EIF.
Other industries
9.31
A number of other industries contributing to the inquiry identified the benefits they would receive as a result of TPP tariff cuts.
9.32
The wine industry stated:
We are particularly excited by the opportunity presented in Mexico. An imported wine market of 61 million litres will be opened up for Australia through the removal of the 20 per cent tariff, thus levelling the playing field with wines from Chile and the USA.
9.8In relation to fisheries:
Canada is probably the biggest prospect. Another part of our business is an importing activity. So we actually buy premium certified seafoods out of a number of Canadian enterprises. They run a tight ship in terms of fisheries management. We would like to see some of our products going back.
9.33
The Minerals Council of Australia stated there would be a number of opportunities for the Australian mining industry:
the TPP removes Peru's tariffs on iron ore, copper, nickel and inorganic chemicals upon entry into force; and
for Australian manufacturers and exporters of mining equipment, the TPP will eliminate tariffs of up to 15 per cent on mining equipment to Mexico.