TPP: Will the Trans-Pacific Partnership benefit Australian Food Industry?

20 October 2015

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After eight years of negotiations, 12 Pacific-rim nations – including Australia – have agreed upon the largest free-trade agreement in history during a last-minute round of talks in Atlanta, Georgia.

What is it?

The Trans-Pacific Partnership (TPP), which covers 40 per cent of the global economy, will strip thousands of trade tariffs in the region and set common labour, environmental and legal standards among signatories.

The TPP is a web of agreements between the involved countries designed to boost trade and economic growth.

They span everything from the sale of T-shirts to steaks to niche intellectual property used by science and technology-based companies.

The 30-chapter report of revised and new trade agreements will not be released until later this month but here is what we know so far.

Who is involved in the partnership?

The countries involved make up 40 per cent of the world economy.

The agreement began as almost casual negotiations between New Zealand, Brunei, Singapore and Chile but rapidly expanded.

The final agreement was signed by Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, Vietnam and Australia. Each country will need to pass and ratify associated legislation for the partnership to begin.

While one of Australia’s largest trading partners, China, is not involved in the deal, several other countries have indicated they are hoping to be covered in the new system of trade rules. These include South Korea, the Philippines, Taiwan and Colombia.

Who stands to benefit in Australia?

Agriculture

For Australia, one of the Industries that stands to benefit is Agriculture with HSBC Australia chief executive Tony Cripps saying changes to tariffs and partnerships could add as much as $US2.6 billion [$3.7 billion], or 19 per cent, to Australian agriculture by 2015,

“As the world’s largest regional trade agreement, capturing 40 per cent of global GDP [gross domestic product], the TPP can transform Australia’s trade by providing businesses with freer market access and new trade and investment corridors.”

“The countries that make up the TPP account for more than one-third of Australia’s total trade today. Looking ahead, we believe the TPP will usher in a new era of trade growth for Australia linked to innovative global value chains, agriculture and high-value services,” he said.

Dairy

Speaking to the impact on the Dairy sector in particular, the world’s biggest dairy exporter, Fonterra, said the TPP fell “far short” of its “original ambition to eliminate all tariffs”.

dairy cows

Dairy was the last major area to be resolved. Photo: Louie Douvis

 

 

 

 

 

 

 

 

 

 

 

 

“The entrenched protectionism demonstrated by the US dairy industry in particular had ensured that the deal on dairy failed to reach its potential,” said John Wilson, the chairman of the New Zealand dairy co-operative.

But Australian farmers welcomed the agreement. National Farmers’ Federation president Brent Finlay said the TPP would “improve on the Japan Australia bilateral agreement” struck in 2014.

Mr Finlay said it would eliminate tariffs on certain cheese products, as well as providing tariff reductions and new quota allocations for remaining cheese products.

“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,” Mr Finlay said.

Despite being disappointed overall, Mr Wilson acknowledged the TPP was a “small but significant step forward for the dairy sector”.

“Dairy has been very hard to resolve and New Zealand has managed to get some progress against the odds,” he said. “There will be some useful gains for New Zealand dairy exporters in key TPP markets such as the US, Canada and Japan. Greater benefits will be seen in future years as tariffs on some product lines are eliminated.”

Dairy was the last major area to be resolved. Exporters Australia and New Zealand had called for greater access to the US market, though the biggest criticisms were reserved for Canada, where a system of tariffs and supply management has insulated the country’s 12,000 dairy farmers from the rest of the world.

Mr Finlay said the TPP would eliminate 98 per cent of tariffs on Australian exports to TPP countries and create longer-term benefits for Australian farmers beyond those that can be achieved in a bilateral free-trade agreement, particularly in the three countries where we did not have agreements in place – Canada, Mexico and Peru.

Tractor

The changes to tariffs and partnerships could add as much as $3.7 billion, or 19 per cent, to Australian agriculture by 2015, HSBC says. Photo: Glenn Hunt

 

 

 

 

 

 

 

 

 

 

 

 

Grains

In the grains sector, the agreement will result in the creation of new quota volumes for wheat and barley exports to Japan under the simultaneous buy-sell mechanism which were worth approximately $481 million in 2014. It will also provide for new quota access for roasted malt exports, while tariffs on exports of Australian wheat and barley to Mexico will be eliminated.

Rice

For the rice sector, the TPP results in new quota access into Japan with a new 6,000 tonne quota from entry into force, a reduction in tariffs on a number of rice preparation products, and an amendment to the World Trade Organisation quota of an extra 60,000 tonnes of medium grain rice for processing use.

The TPP will eliminate all remaining tariffs on Australian raw wool and cotton 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.

Read Rose Powell’s excellent full TTP coverage here

Stay tuned for further updates as they are released to discover more about what the TPP could mean for food processors.