Feedback wanted for China-Australia Free Trade Agreement

Provide your feedback to DFAT on the first 5 years of trading under the China-Australia Free Trade Agreement by 31 July 2020.

The Department of Foreign Affairs and Trade (DFAT) is now seeking feedback on the China-Australia Free Trade Agreement (ChAFTA), as we mark its 5th year of being in force.

Businesses and any other interested stakeholder can provide their written submission, which will help inform DFAT’s 5 year Post-Implementation Review (PIR) of the ChAFTA.

The Assistant Secretary of the Department of Agriculture, Water and the Environment Strategic Trade Policy and North Asia Branch, Amy Fox, said that Australia’s agriculture, food, fisheries and forestry sectors are important players in our trading relationship with China, and that their feedback is vital to the ongoing shaping of the agreement.

“Primary producers and exporters in this sector benefited to the tune of $15.9 billion in 2018-19 thanks to the trade relationship with China,” Fox said.

“It’s important that we continue to review and seek industry feedback on our existing FTA with China, despite any current trade issues in this space. This agreement shapes how industry does business, and so their input is invaluable, and we strongly encourage submissions to this review, particularly from the agriculture sector.”

Interested stakeholders have until 31 July 2020 to make their submissions.

The Post-Implementation Review marks the first 5 year review of ChAFTA since the agreement came into force on 20 December 2015. Since the agreement’s implementation, the export of Australia’s agricultural products to China has increased by 60 per cent.

Tariff cuts under the agreement to products like beef, veal, dairy, citrus and table grapes has led to growth in exports for each of those products.

“Your feedback to the Post-Implementation Review panel will inform the Australian Government on the impact ChAFTA has on your business. We want to know how it has affected your competitiveness in the market, and your ease and cost of doing business,” Fox said.

“The Post-Implementation Review seeks to uncover any unintended impacts of the agreement, whether beneficial or not. Your opinion on whether ChAFTA has delivered a net benefit to the Australian community is also valuable.”

Tariffs slashed on exports to Peru

Peru is one of Latin America’s fastest growing economies, and an opportunity for Australia’s agriculture thanks to the Free Trade Agreement between the two countries.

In February 2020, the Peru-Australia Free Trade Agreement (PAFTA) entered into force, beginning the process of phasing out tariffs and boosting Australia’s agricultural competitiveness in the South American nation.

The nation of over 32 million people is the 4th most populous in South America, and a promising market for Australia’s agriculture. The trade of agricultural products between Peru and Australia was valued at $108 million in 2018-19.

Head of bilateral trade in the Americas, Matt Worrell, said that the agreement will slash tariffs across a wide range of Australia’s goods, allowing Australian farmers and exporters to enter a level playing field against competitors in the market.

“The US, Europe and Canada all have deals with Peru, and now we’ll be able to compete at the same level. This will give our world-class food products the best chance to get on Peruvian supermarket shelves and dinner tables,” Worrell said.

Tariffs on seafood, sheep meat, kangaroo, most horticulture products and wheat were immediately lifted at the commencement of the FTA, as were some tariffs on wine and pork. Tariffs on beef and many more on wine will be phased out over the next 5 years.

“Overall, 99.4 per cent of tariffs on Australian goods exported to Peru will be abolished by 2025,” Worrell said.

“We’ve also negotiated for preferential quotas on sugar, dairy, rice and sorghum. These quotas will increase over time, which is a win for those industries.

“Peru has been one of the fastest growing economies in Latin America, and at times the world, over the last decade. The agreement heralds a great opportunity for Australia’s agriculture to stake a claim of that strengthening market.”

Free trade agreement good for agriculture

The Minister for Agriculture, David Littleproud has welcomed the news that Indonesia has completed the domestic ratification process for the free trade deal with Australia. Littleproud said this bilateral agreement has been an objective of the Australian Government for a long time and the benefits will begin to flow from the 5th July.

“This is great news for Australian farmers and Australia’s agricultural sector,” Minister Littleproud said. “Indonesia is already our 6th largest agricultural export market. This agreement will help us see the $2.5 billion export market grow even further. There is still more work to be done on technical barriers for trade with Indonesia but this is a great basis in which to start from.

“The benefits will be across the board and is a reminder of how our farmers and the agriculture sector will continue to be the bedrock of our recovery from the COVID-19 crisis. There will be duty free access for 575,000 head of live male cattle per year, increasing 4 per cent a year to 700,000. The remaining 5 per cent tariffs on Australian frozen beef and sheep meat will be reduced to 2.5 percent and then eliminated after 5 years.

For Australian grain producers there will be a guaranteed duty free access for 500,000 tonnes per year of feed grain such as wheat, barley and sorghum and that will increase 5 per cent each year.

Dairy farmers will benefit from the elimination of 5 per cent tariff for milk and cream, concentrated or containing added sugar. There will also be the elimination of 5 per cent tariff for grated and powdered cheese of all kinds.

“And there will be improved access for citrus fruits such as mandarins, oranges, lemons and limes,” said Littleproud. “The Nation’s farmers have been calmly going about feeding the Australia and exporting to the world. The Australian Government will stand with our farmers and continue to work to find new and expand existing markets to give them a competitive edge.”

 Globalisation commitment wavering post-Brexit

Signs the international community are moving away from their commitment to globalisation has been reinforced with the release of the latest CIPS Risk Index. Risk relating to global supply chains has reached its highest levels since 2013 due to a convergence of international issues including uncertainty around the post-Brexit relationship between the UK and the European Union as well as economic and political instability across the Middle East.

Global supply chain risk Q3 2016

The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) conducted by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains. The upward trend in supply chain risk can be partly attributed to a breakdown in political consensus over globalisation, with the World Trade Organisation reporting an average of 22 new trade restrictive measures introduced each month in its latest report.

According to Bodhi Ganguli, Lead Economist, Dun & Bradstreet, the CIPS Risk Index reflected the general unease about the state of the global economy with its increase in operational risk.

“Political and economic uncertainties, such as the extent of the growth slowdown in China, emerging markets’ financial vulnerabilities, the impact of terrorism on cross-border movements, and the fallout from Brexit, continue to weigh on global business sentiment,” Mr Ganguli said.

In addition, growing disillusionment with globalisation is contributing to political risk. Elections over the next 12 months are expected to see gains for far-right parties across the globe. Incumbent governments are also demonstrating worrying responses to the growing issue of cross border movements with the Australian government proposing radical changes to immigration policy in response to perceived terrorist threats stemming from violence in the Middle East.

All told, increased political and economic risk globally is beginning to effect the bottom line of businesses as they look to navigate an increasingly hostile global trade and supply market.

Mark Lamb, General Manager of CIPS Asia Pacific, said: “Supply chain managers are facing a new wave of impediments to the flow of goods across borders. With international trade deals under threat around the world, supply chain managers must be as aware of political risks as they are of natural disasters and economic hardship.”

Asia Pacific has bucked the global trend with slight improvements in risk levels for domestic businesses. Australian suppliers in particular have benefited from rising coal and iron ore prices together with an increase in national defence spending. In the short-term, Australian businesses are also showing improved payment performance. Of concern is a continued reliance on an unstable Chinese economy. A major issue likely to have deep effects on Asian trade is the recent bankruptcy of South Korea’s Hanjin Shipping. Responsible for 3 per cent of global shipping, it has left cargo as large as $14bn unable to dock. The bankruptcy is likely to have wide-ranging impact on trans-Pacific and Asia-Europe supply chains.

A further breakdown of region-specific results shows the highest increases in risk can be found in Western & Eastern Europe, Central Asia, the Middle East, and North & Sub-Saharan Africa, while there is Improved risk in the Asia Pacific region.

A full copy of the latest CIPS Global Risk Survey can be found here.

Free trade agreements fail to boost Australian agriculture and food manufacturing

Many claims are made that Free Trade Agreements (FTAs) with select trading partners will benefit Australian agriculture. OECD statistics say otherwise.

The balance of trade positions of Australian agriculture and food manufacturing have deteriorated since FTAs with New Zealand, the United States and Thailand have come into play.

The long-standing 1983 New Zealand arrangement shows growing imports of processed food products, especially since 2000. Australian food exports to New Zealand have levelled off since 2011 with a US$600 million Australian deficit on food products in 2014. Agricultural goods have been close to balance with just over US$270 million of raw or minimally processed product flowing each way.

The net result (shown in black) has been a persistent and generally worsening deficit for Australia in its agriculture and food trade with New Zealand for the whole period.

 

Author developed using OECD STAN bilateral trade in goods database

 

The agreement with the United States came into effect in 2005. Again agricultural products are close with Australian imports of US$210 million slightly exceeding exports since 2007. Australian food exports have always exceeded imports but the surplus halved between 2004 and 2013. The basis for the almost doubling of food exports in 2014 is unclear, but meat products driven by beef herd rundown in drought affected Queensland would be part of what may be a one-off spike.

The net result (again shown in black) has been a persistent but generally narrowing surplus for Australia in its agriculture and food trade with the US since the FTA came into play. The Australian 2014 surplus of around US$2 billion appears likely to settle back to around US$700 million or less in the years to come.

 

Author developed using OECD STAN bilateral trade in goods database

 

Thailand also signed a bilateral agreement in 2005 and the result has been a generally worsening agriculture and food trade deficit.

 

Author developed using OECD STAN bilateral trade in goods database

 

The rise in Australian food product imports from over US$200 million to more than US$800 million in the decade to 2011 is pronounced, as is the subsequent levelling off. Australian agricultural and food exports to Thailand generally travelled together until 2008 but after this, agricultural exports rose markedly for three years before falling back. The rise and then fall of commodity prices explain much of this hump.

Clearly, these three FTAs have failed to deliver. There has been no improvement evident in the agriculture and food trade position under any of the three agreements. Rather, deterioration has been evident in each case.

Turning now to the world, Australia’s agriculture and food balance has been a persistent and generally growing surplus. This is the opposite effect. Australian trade performance has been better with non-agreement partners. Again commodity price effects are evident in recent years for agriculture exports.

 

Author developed using OECD STAN bilateral trade in goods database, Author provided

 

New Zealand, USA and Thailand account for about 30% of the rising food imports but only around 15% of rising food exports to the world. They also account for only around 5% of agricultural exports but 35% of imports.

Further analysis can be undertaken, but on these figures, FTA partners have clearly been able to outperform Australian enterprises. On the other hand, where no Agreements have been struck, Australian enterprises have outperformed partners to record a generally improving agriculture and food trade surplus.

How might things change with three new North Asian trade, regulation and investment agreements (Japan, Korea and China), and perhaps a Trans-Pacific Partnership? History suggests no necessary gains and trending losses on merchandise trade for both food manufacturing and agricultural industries.

It seems we should be more closely monitoring the realities of trade, not fixating on rhetoric and so far empty promises.

There is nothing “free” about these trade agreements.

The Conversation

Mark McGovern, Senior Lecturer, QUT Business School, Economics and Finance, Queensland University of Technology

This article was originally published on The Conversation. Read the original article.