New Year to kick off key tariff cuts

New Year to kick off key tariff cuts

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Find out which tariff cuts come into effect on January 1, 2020, under recent free trade deals.

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A fresh round of tariff cuts will come into effect from January 1, 2020, under some key free trade deals struck with China, Korea and across the Pacific.

Minister for Agriculture Senator Bridget McKenzie said the China-Australia Free Trade Agreement (ChAFTA), which came into force in December 2015, continued to deliver for Australia's meat, dairy, wine, seafood and horticultural sectors.

"Since ChAFTA came into force, agriculture, food, fisheries and forestry exports have increased by 60 per cent from $9.9 billion in 2014-15 to $15.9 billion in 2018-19," said Minister McKenzie.

"On 1 January 2020 remaining tariffs on key commodities will reduce further, including beef tariffs falling to 4.8-10 per cent depending on the cut, while China's import quota for our beef will increase 3 per cent from 174,454 tonnes in 2019 to 179,687 tonnes, in a New Year win for our producers and exporters.

"ChAFTA will also see tariffs lowered on dairy products such as milk, milk powder, butter and yoghurt, while our horticulture growers will have an opportunity to build on the record 2018-19 export peak of $3.4 billion with tariffs on oranges and mandarins both falling.

"These reductions follow the most successful export season Australian citrus growers and exporters have had with industry estimating that over 273,000 tonnes worth over $500 million of citrus was exported to China in the 2019 season."

The Korea-Australia Free Trade Agreement will also deliver benefits when the seventh round of tariff reductions come into effect.

"Improved outcomes across a range of key commodities, including beef, lamb, barley, cheese and mangoes will help to protect and improves our competitive position in Korea, helping ensure Australian farmers and businesses have access to prosperous markets into the future," the Minister said.

Under KAFTA, beef exports to Korea totalled $1.37 billion in 2018, up 24 per cent from 2017.

Lamb exports totalled $133 million in 2018, up 26 per cent from 2017 while cheese exports totalled $51 million in 2018, up 73 per cent from pre-KAFTA, with opportunity to expand this relationship further for many commodities.

"The Pacific-spanning Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) will also deliver benefits with a further round of tariff reductions in Canada, New Zealand, Mexico, Singapore and Vietnam," Minister McKenzie said.

"For example, under the CPTPP a 6.6 per cent tariff for high quality wine will fall to zero in 2020, potentially putting more Australian wine onto shelves in one of Latin America's fastest growing economies. And Australia dairy exports to Canada will also benefit from another increase in Canada's quota for tariff free exports of dairy products including whole milk powder.

"These reductions are the result of years of international negotiations and underpin the profitability of our farmers and the prosperity of our regional and rural areas."

Tariff reductions in detail:

CHAFTA

  • Reduction of current tariffs for beef meat ranging from 6pc to 12.5pc will reduce to 4.8pc to 10pc depending on the cut-this includes a reduction of tariffs from 6pc to 4.8pc for the most exported cuts of beef to China.
  • An increase of 3pc in the beef meat quota from 174,454 tonnes in 2019 to 179,687 tonnes in 2020.
  • Reduction of current tariffs for sheep and goat meat ranging from 5.3pc and 10.2pc will reduce to 4pc and 7.7pc depending on the cut. In the first 10 months of 2019, Australian lamb and mutton exports to China increased by 32pc and 52pc year-on-year respectively.
  • Tariffs on dairy products such as milk, milk powder, butter and yoghurt ranging between 5pc and 10pc will reduce to between 4pc and 8pc.
  • Tariffs on oranges fall from 4.9pc to 3.7pc and mandarin tariffs fall from 5.3pc to 4pc.

Korea/KAFTA

  • Tariffs on beef will fall from 24pc to 21.3pc.
  • Tariffs on lamb will fall from 9pc to 6.7pc.
  • The duty free quota for malt barley will increase from 11,041 to 11,262 tonnes, with a reduction in the out-of-quota tariff from 161.4pc to 143.5pc.
  • The duty free quota for cheese will rise from 5367 to 5528 tonnes, with a reduction in the quota exceed rate from 24pc to 22pc.
  • The tariff on mangoes will fall from 12pc to 9pc.

Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP)

The CPTPP entered into force on 30 December 2018 for five of the first six parties that ratified it: Australia, Canada, New Zealand, Mexico, and Singapore and for Japan in April 2019.

For Vietnam, the agreement entered into force on 14 January 2019. Exporters have received two tariff reductions for each of the countries in which the agreement has entered into force.

On 1 January 2020, a further round of tariff reductions will occur in Australia, Canada, New Zealand, Mexico, Singapore and Vietnam. (The third round of tariff reductions in Japan will occur on 1 April 2020.)

Canada:

  • Beef and veal exporters to Canada will benefit from a further reduction in the out of quota tariff rate from 17.6 to 13.2pc. This compares to an MFN rate of 26.5 per cent.
  • Following the elimination of all tariffs on sheep meat exports to Canada on entry into force of the CPTPP Australian exports rose by $8 million in the 12 months to the end of October 2019 compared to the same, preceding, 12 month period.
  • Dairy exporters will benefit from a further increase in the quota for tariff free exports of certain dairy products to Canada, including whole milk powder. Exports of dairy to Canada increased by $5 million in the 12 months to the end of October 2019 compared to the same, preceding, 12 month period.

Mexico:

  • A reduction from a 6.6pc tariff to zero for exports of high quality wine (valued at over $US5/lt) to Mexico. Other wine, spirits and liqueurs benefit from a 2pc tariff reduction.
  • Exports of dairy to Mexico has increased $4 million (from $2.8 million) in the 12 months to the end of October 2019 compared to the same, preceding, 12 month period. Tariffs were eliminated on the entry into force of the CPTPP for yoghurt, and the creation of new Tariff Rate Quotas (TRQs) for dairy, including for butter, cheese and milk powders. Over $4.9 million of butter has been exported to Mexico in the 12 months to the end of October 2019.

AANZFTA

The major traded commodities in the South East Asia region that are subject to tariff rate changes at 1 January 2020, fall under either AANZFTA or TAFTA. The major traded commodities and the changes in tariff rates are listed below.

Laos

  • Bovine meat - reduction in tariff from 10pc to 5pc

Philippines (AANZFTA)

  • Fresh and Chilled swine meat: Carcasses and hams will fall from 5pc to 0pc, Pork bellies, fore-ends and cuts thereof will fall from 30pc to 24pc (in quota) and 40pc to 32pc (out quota)
  • Frozen swine meat: Carcasses and hams 30pc down to 24pc (in quota) and 40pc down to 32pc (out quota)

Thailand (AANZFTA)

  • Fresh, chilled or frozen bovine meat will fall from 50pc to 0pc
  • Edible offal of bovine animals fresh or chilled will fall from 30pc to 0pc
  • Butter and cheese will also fall from 30pc to 0pc

Vietnam (AANZFTA)

  • Oranges fresh or dried and Macadamias (in shell and shelled) will all fall from 3pc to 0pc

TAFTA

Thailand (TAFTA)

  • Fresh, chilled or frozen bovine meat will fall from 2.67pc to 0pc
  • Butter and cheese will fall from 2pc to 0pc

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