What the TPP means for agriculture

The Trans-Pacific Partnership’s (TPP) signing was announced overnight following the most recent round of negotiations at Atlanta, Georgia in the US over the past week.

While the deal is yet to be formally ratified through the Australian parliament and other jurisdictions, the overnight announcement concludes five years of tense talks between the 12 Pacific Rim countries including Japan, Canada and the US.

Mr Robb said the TPP was the biggest trade deal of its kind in 20 years and would now eliminate about 98 per cent of tariffs on agricultural exports.

He said the TPP also represented a “great deal for our farmers” and would combine with other economic opportunities to expand the national economy on the global stage, in areas like services and manufactured goods.

The deal will establish a more seamless trade and investment environment with common rules around trade activity, across the 12 TPP countries which represent around 40 per cent of global GDP, he said.

“Combined with our landmark trade deals with Korea, Japan and China, the TPP forms part of the government’s microeconomic reform strategy to support the diversification of our economy in this critical post-mining boom phase,” he said.

“It will slash barriers to Australian goods exports, services and investment and eliminate 98 per cent of all tariffs across everything from beef, dairy, wine, sugar, rice, horticulture and seafood through to manufactured goods, resources and energy.”

Sugar was a primary concern during the final negotiations but the end result will now see Australian sugar expand market access into the US for the first time in 20 years - effectively doubling Australia’s entitlements, Mr Robb said.

Australia will have an additional quota of 65,000 tonnes base allocation and 23pc share of additional allocations into the US market, triple the previous amount.

Mr Robb said that increase would also take average annual exports of sugar from 107,000 tonnes to 207,421 tonnes.

“Based on USDA long-term projections, this could see Australia exporting over 400,000 tonnes of sugar to the US by 2019-20,” he said.

While the Australian sugar industry had demanded 700,000 tonnes into the protected US market, Mr Robb said it was the first increased access from almost anywhere for 15 years.

“Of course we wanted to try and get more, but it’s a very difficult market,” he said.

“We’re now, after Mexico – which is part of the North American Free Trade Zone where they all have free trade between Mexico, the US and Canada – equal with Brazil, the second biggest supplier.

“And with the quality of our sugar, every time there’s a new demand, we’re in very good shape; we’re guaranteed a quarter of it and we could get more.”

Mr Robb said the TPP agreement also significantly liberalises Australian beef exports to Japan and eliminates tariffs for beef exports into Mexico, Canada and Peru within 10 years.

For Australian dairy, tariffs will be eliminated on a range of cheeses exported to Japan, building on the current trade agreement while Australia will also gain new preferential access into Mexico and the highly-protected Canadian market and exports to the US.

The TPP also produced other wins like eliminating tariffs on wheat and barley exports into Mexico within 10 years and Canada upon entry into force.

Federal Agriculture and Water Resources Minister Barnaby Joyce told Fairfax Media the TPP was a “big deal” for Australian dairy and represented a better deal than what was in place previously for other agricultural exports, like sugar.

“There are always things that people would like to add to the deal but we eventually get to a point where we either have to accept it or turn it down,” he said.

“The TPP will give us some big advantages in dairy and in sugar which were always the two key issues.

“We are a lot further ahead with dairy and we’re ahead on sugar but of course people would like us to be further ahead.

“The only way around that would be to say we won’t take it and hope that we get a better deal in the future.

“But I’m absolutely certain we’re much further ahead with the TPP than we would be without it.”

The TPP involves Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the US and Vietnam.

National Farmers’ Federation president Brent Finlay said Australian farmers exported around $15 billion of agricultural goods to TPP countries in 2014, representing about one third of total exports of agricultural products.

Mr Finlay said that $15b was 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,” he said.

“Reduced tariffs and greater certainty on rules means more market opportunities and more investment and this means more jobs and growth in regional centres.

“While not reaching the high ambition sought by some sectors, there should be no doubt that Australia needs to be a party to the TPP deal.

“The nature of agreement means that exclusion from a completed TPP agreement would have delivered significant negative outcomes for Australian agriculture.

“Regardless, reaching consensus with twelve other nations is significant and game changing for trade.

“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.”

The US Department of Agriculture’s modelling of the TPP’s potential gains from eliminating tariffs out to 2025, says Australia would increase agricultural trade by US$2.611b (19.2pc) to the other 11 countries.

The biggest increases under that scenario would be in Australian cereals (US$161m - 25.8pc), meat (US$1.61b - 25.8pc) and dairy (US$357m - 25.7pc).

Beef: Improving on the outstanding results from the Japan-Australia Economic Partnership Agreement the TPP further will reduce tariffs on Australian exports of beef to 9 per cent; tariffs on beef into Mexico and Canada will be eliminated within 10 years and the AUSFTA beef safeguard into the US will be eliminated.

Sugar: Australia has been granted an effective doubling of access into the US with an additional 65,000 tonnes from entry into force and additional future quota allocations which, based on USDA long-term projections, could see Australian sugar exports to the US climb above 400,000 tonnes by 2019-20; further levy reduction for high polarity sugar into Japan, adding further to the competitive advantage of JAEPA; elimination of the tariff on refined sugar into Canada; elimination of tariffs on raw sugar into Peru; and for the first time wholesale licencing arrangements for supply of refined sugar to the food and beverage industries in Malaysia will be liberalised.

Rice: For the first time in over 20 years, Australia will be able to export more rice to Japan and we have reached agreement on new administrative arrangements to facilitate trade. Rice tariffs into Mexico will be eliminated.

Dairy: With Japan: tariffs will be eliminated on a range of cheeses covering over $100 million in existing Australian trade, and we will be given new preferential access for a further estimated $100 million of trade, building substantially on JAEPA outcomes. There is also new quota access for Australia on butter and skim milk powder. Australian exports to Japan of mozzarella for processing use will be duty free when blended with Japanese cheese.

With the US: We have won access for 9000 more tonnes of cheese, as well as tariff elimination on milk powders and Swiss cheese. Australia will also gain new preferential access into Mexico and the highly-protected Canadian market;

Cereals: Tariffs will be eliminated on wheat and barley exports into Mexico (within 10 years) and Canada (upon entry into force). There will be reductions of the mark-ups applied to wheat and barley in Japan and the creation of new quota arrangements beyond JAEPA.

Wine: Tariffs will be eliminated into Mexico (between 3 to 10 years), Canada (upon entry into force), Peru (within 6 years) and, for the first time, Malaysia and Vietnam.

Seafood: Tariffs into Canada and Peru will be eliminated on entry into force, Japan within 16 years and Mexico within 15 years.