Commodities left out of FTA party

18 Nov, 2014 06:53 AM
There was no good reason for this to occur

THE Australia-China free trade agreement (FTA) has delivered bittersweet outcomes for Australian farmers with the sugar industry digesting the sourest result.

The National Farmers’ Federation (NFF) rated outcomes for seven key commodities according to a five-star system on the historic trade agreement that was signed between the two countries on Monday, concluding decade-long negotiations.

The NFF awarded dairy, beef, sheepmeat and horticulture the maximum score of five stars or “outstanding improvements” in terms of tariff reductions.

But grains, which exported $2.1 billion worth of product to China in 2013-14, rated only three stars, meaning “minor improvements”, as did cotton and wool.

NFF President Brent Finlay said with pressure being placed on Australia’s mineral exports, “agriculture offers a stabilising influence to our economy”.

He said certain products like sugar, rice, cotton and some grains, were “regrettably” excluded from the agreement.

“These products will be in high demand in China over coming years and must be included in the review arrangements after three years,” he said.

“Beyond border issues, protocols and technical measures that facilitate trade must be improved going forward.

“We see this agreement as a critical step to help improve the current situation.”

Trade Minister Andrew Robb’s office said as part of joining the World Trade Organisation (WTO) in 2001, China already allowed generous imports of sugar, rice, wheat and cotton with generally low tariffs imposed within a quota.

Sensitive staples

A statement said China has not provided further liberalisation of these products in any of its FTAs, “on the basis they are significantly sensitive staples”.

“It has also not granted Australia, or any of our competitors, additional access for rapeseed and vegetable oils, on the same basis,” the statement said.

“However, China has agreed to a built-in review process three years after entry into force to review the Agreement, including market access.”

The deal was subsequently slammed by the sugar industry with Canegrowers saying sugar was placed on the “sacrificial altar” in the China FTA.

The peak sugar industry group said the China-FTA omission signalled that reforms in the upcoming Trans Pacific Partnership (TPP) negotiations were critical for Australia to demonstrate its prowess and commitment to real trade reform.

“In this day and age, sugar being excluded in what looks like a trade-off is an absolutely unacceptable outcome,” said Canegrowers chair Paul Schembri.

“Not only is this a lost opportunity for our industry, it is a lost opportunity for China’s sugar importers.

“Yes, sugar is traditionally difficult in trade negotiations, but the fact remains there was no good reason for this to occur.

“The commercial reality is that China has a large and a growing need for sugar imports – almost 4 million tonnes per annum.

“We are looking to help meet a clear supply need,” he said.

“Just because the political reality is that China has not included sugar in any other FTA it has concluded, does not mean that this cannot and should not change.

“Interventionist policies continue to distort markets, preventing the world’s most efficient sugar and lowest cost producers from meeting rising global demand for sugar.”

Industry's 'deep frustration'

Canegrowers welcomed the three-year review period set down in the two-staged FTA, and said: “This time must be used to reach a deal that reflects the commercial reality of China’s growing import need”.

“It is difficult to escape the sugarcane industry’s deep frustration and dissatisfaction, but in equal measure its absolute steely commitment to real trade reform,” Mr Schembri said.

“Our negotiations must take up the mantle of trade reform all the way up to the line.”

The Australian Sugar Industry Alliance (ASA) said it would use every moment of the three-year review process to reach a deal that ensures Australia’s sugar is “ultimately part of a comprehensive FTA”.

“China’s sugar consumption grows and with it comes a growing need for importing sugar,” said ASA trade committee representative Dominic Nolan.

“Exclusions only serve to distort the world market, impacting the ability of those export customers from accessing the most competitively priced sugar available on the market,” he said.

“A comprehensive trade agreement, by its very nature, must include even the most politically sensitive commodities.

“Achieving this would be a good outcome for not only the Australian sugarcane industry but also the importers of our sugar.”

China 'non-negotiable' on grains

GrainGrowers said the FTA contained gains for some Australian grains but not all.

The grains body said after 10 years of negotiations, Australian wheat remains subject to an out-of-quota tariff of 65 per cent, and within-quota tariff of one per cent.

Exports of Canola will also continue to be subject to a tariff of nine per cent, and maize exports have also been excluded from concessions under the deal.

“Wheat and canola continue, along with rice, sugar and maize, to be non-negotiable for China,” said GrainGrowers manager trade and market access Cheryl Kalisch Gordon.

“However, in the case of wheat, the Chinese world wheat quota is currently 9.6 million tonnes, so well above their imports and not binding.

“The one per cent in-quota tariff, as long as it’s applied to all exporters of wheat to China, is not a significant distortion to trade and it’s that equivalence that we will be focusing on in the short-term.”

But Ms Kalisch Gordon said the Australian grains industry would benefit from immediate removal of the three per cent tariff on barley and two per cent tariff on sorghum.

She said Australian exports of those grains to China were growing on the back of an expanding Chinese alcoholic beverage sector and in 2013 exports were valued at $351 million and $91 million respectively.

“The value of tariff removal for these two commodities represents around $12 million per annum in 2013 trade terms with the benefit being shared between Chinese consumers and the Australian grains industry,” she said.

“With trade in these commodities expected to continue to grow over time, these annual benefits will also increase.

Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


Bruce C
18/11/2014 8:13:02 AM

Why are world sugar prices chronically low? Oversupply, perhaps. It is not mandatory to grow sugar, so if another crop or product gives a better return, how about giving it a go instead of whinging all the time.


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