stock-photo-11719351-rows-of-young-sugar-caneTouted as the largest trade agreement in history, the TPP involves 12 Pacific Rim countries which collectively represent 40% of global GDP. That equates to US$28 trillion dollars and 800 million people.

Australian Trade Minister Andrew Robb claimed the agreement will usher in a new era of economic growth and opportunity across the fast-growing Asia-Pacific region.

Mr Robb emphasised the TPP’s ambitious and comprehensive market access outcomes:

“The TPP will provide new market openings in countries where we do not have existing trade agreements, namely Canada, Mexico and Peru, along with enhanced levels of market access in those countries where we do, like the United States, Singapore, Japan, New Zealand, Chile, Vietnam, Malaysia and Brunei Darussalam.” (The Weekly Times)

Critically for agriculture, Australia’s National Farmers’ Federation says that without the completion of the TPP, the sector would not meet its key objective of doubling in value by 2030.

Impact on the Agriculture Sector

Modelling work conducted by the US Department of Agriculture shows Australia to be the big winner of all 12 countries under the TPP.

Last year, around 40%, or AU$14 billion, of Australia’s total agricultural exports were sent to its fellow TPP countries. By 2025, the TPP could add US$2.6 billion extra to the annual value of Australia’s agricultural exports – an increase of more than 19%.

Beef

Building on the results achieved in the Japan-Australia Economic Partnership Agreement, the TPP will reduce tariffs on Australian beef even further – down to 9%. Tariffs on beef into Mexico and Canada will be eliminated within 10 years. The beef safeguard into the US will be lifted. Meat exports are anticipated to increase by US$1.6 billion.

Dairy

There will be significant new access into all TPP countries for dairy, including some of the most heavily protected markets in the world. Japan will eliminate tariffs on a range of cheese covering over AU$100 million of existing trade, and provide Australia with new preferential access for further trade. There is also new quota access on butter and skim milk powder.

Australia has won access for 9,000 more tonnes of cheese to enter the US market, as well as tariff elimination on milk powders and Swiss cheese. Australia will gain preferential access into Mexico and highly protected Canada. Estimates show these changes will grow our diary exports to TPP countries by US$357 million annually.

Sugar

For the first time in 15 years, Australia has secured increased access to the lucrative US sugar market. The TPP gives Australia an additional 65,000 tonnes base allocation for sugar, and a 23% share of additional allocations. Although the increase is welcomed, it comes from a very low start due to the US Sugar lobby blocking all but this small amount of market access.

Japan will eliminate tariffs and significantly reduce the levy on high polarity sugar, putting Australian exporters at a distinct competitive advantage. This will result in commercially meaningful reduction of costs of AU$25 per tonne for Australian sugar entering the Japanese market.

Grains and Cereals

New preferential quota access will be created for Australian grains and cereals. Japan will increase Australian rice imports, accepting an additional 6,000 tonnes a year, increasing to 8,400 tonnes over time. While a modest gain, this represented significant headway in the highly political and highly protected Japanese rice industry.

Tariffs will be eliminated on wheat and barley exports into Mexico within 10 years, and into Canada upon entry into force.

Wine

Tariffs will be eliminated into Mexico within 10 years, Canada upon entry into force, Peru within 6 years, and, for the first time, Malaysia and Vietnam.

Response from Australian Agricultural Groups

Australian farmers have largely welcomed the TPP.  National Farmers’ Federation president Brent Finlay noted that agricultural exports were now set to increase as a result of the new agreement.

“Farmers currently face a range of tariff and non-tariff barriers across the region. Reduced tariffs and greater certainty on rules means more market opportunities and more investment and this means more jobs and growth in regional centres…. On the whole, there is no doubt this agreement will improve trading conditions for Australian farmers, and must be seen as a baseline template for future plurilateral agreements.”  (Farm Weekly)

However, the Australian sugar industry has again been left disappointed. US market protections have now survived both the bilateral free trade agreement as well as the multilateral TPP without making any significant concessions.

Australian Cane Growers Council Chairman Paul Schembri described the deal as a “net positive” despite not being in the ball park of what Australia would have liked from the US market.

Australian Liberal National Party’s Matt Caravan criticised the deal as a missed opportunity for the sugar industry.

This is an enormous opportunity, a potential revolution and it’s not going to be that unfortunately,” he said.

Next Steps

Before binding treaty action is taken, the TPP will be tabled in the Commonwealth Parliament for 20 days.

Following tabling, the Joint Standing Committee on Treaties will conduct an inquiry into the TPP and report back to Parliament. The Parliament will then consider any necessary legislative amendments to implement the TPP.

The TPP will enter into force 60 days after all original signatories have completed their domestic legal procedures.

If you have any queries, please contact Margie Tannock or Clare Pope.

 

From The Trade Practitioner: Margie, Clare and other colleagues in our Australian offices – Perth, Sydney and Darwin – will contribute to the blog occasionally and provide an Australian perspective on matters of international trade regulations and policy. For more information about our practices in Australia, please visit here.