Countdown to the China-Australia Free Trade Agreement

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Countdown to the China-Australia Free Trade Agreement

Photo credit: Jakub Kapusnak

Australian agribusiness prepares for the ChAFTA to enter into force before the end of 2015. 

 

Trade and Investment Minister Andrew Robb and Chinese Commerce Minister Gao Hucheng signed the China-Australia Free Trade Agreement (ChAFTA) in Canberra on 17 June 2015. Final negotiations are now underway within Australian parliament to complete the deal by the end of the year. 

 

China is Australia’s largest agriculture and fisheries export market, worth $9 billion in 2015, up from $5 billion in 2011. ChAFTA delivers to Australia significantly improved market access for agriculture and processed foods, on par or better access to China than any other FTA partner.

 

In a statement on their website the National Farmers Federation (NFF) has welcomed bipartisan support for the landmark agreement, which will see the deal ratified by parliament and deliver a double tariff cut to Australian farmers.

 

NFF President Brent Finlay said the peak farm body is relieved that politics have been put aside in the interests of Australia’s economic future.

 

“This agreement is a game-changer for Australian agriculture, and should have never been held to ransom. Common sense has prevailed – there was always too much riding on this agreement for it to be sidelined.

 

“Ratification will mean Australian farmers and agribusinesses can take advantage of the reduced tariffs on Australian food and fibre products as soon as possible. This presents huge opportunities for Australian farmers, boosting economic growth and farm-gate returns,” he said. 

 

According to an article by Sue Neales in The Australian on the 26th October, the tariff cuts, which will be phased in over four to nine years, put Australian food exports on the same or a better competitive footing with their New Zealand, Brazilian and Chilean rivals.

 

The article also describes the ambitious plans of Yarra Valley Dairy, a business that has carved out lucrative niche markets in the US and Middle East during the past seven years, as its soft cheese exports grow to 10 per cent of its boutique $8 million business. With the new bilateral trade deal with China axing the 12 per cent tariffs currently imposed on all Australian fresh cheese imports over the next nine years, head of the company Caroline Evans is keenly aiming to capture a slice of the lucrative Chinese dairy market next. 

 

“If you’re serious about developing export markets in the long term, it’s really important to do the research and grow your knowledge base first, so you are providing customers with what they like and want, rather than what you have always done,” she said. 

 

“We are not a big business and could never supply all of China so have to target just specific premium markets in a few cities and get it right from the start, which makes reduced tariffs in this trade deal all the more important.” 

 

An October 26 exclusive by Rebecca Urban in The Australian has also outlined how Australia’s largest food and liquor wholesaler Metcash is now looking to Chinese middle-class shoppers to boost its fortunes, setting up space in one of China’s largest online shopping malls as part of a broader push into a huge market that is increasingly infatuated with Australia brands and produce. 

 

According to the report, Metcash has established a flagship store on China’s Tmall Global website, with Australian pantry staples such as Weet-Bix , Uncle Toby’s Oats, honey, longlife milk and infant formulas. 

 

The Metcash push is taking place on a scale not seen before by an Australian business and comes as it struggles against unprecedented competition in the local grocery market. It has employed social media marketers to infiltrate China’s prominent networking and chat sites We-Chat and Weibo to help build awareness, and its Tmall Global store has been designed to educate shoppers about the company, stressing its Australian origins. 

 

In the article Austrade states that about 39 per cent of Chinese shoppers report buying goods from Australia, while the country’s cross-border commerce market is tipped to swell to RMB 1 trillion by 2018. 

 

China is also proving to be a ripe opportunity for citrus growers. The West Australian reported on the 1st of October that Shane Kay, manager at Moora Citrus, and Gavin Foord, of Badgingarra’s AGRIfresh orchard, have been the first to capitalise on the export opportunity. Between them they have sent more than 500 tonnes of navel oranges to China and South-East Asia.

 

“We are looking at ramping that up tenfold in the next three to five years,” Mr Foord said. “We sell our premium fruit to China, but we get a return on it that more than covers the extra expenses.”

 

A summary of agricultural outcomes of the ChAFTA include

 

Beef: tariffs (currently ranging from 12-25 per cent) will be eliminated within 9 years of entry into force.

 

Dairy: all tariffs on Australian dairy products (up to 20 per cent) will be eliminated within 4 to 11 years. This includes rapid elimination of the 15 per cent tariff on infant formula and the 10-19 per cent tariff on ice cream, lactose and casein, both within 4 years.

 

Sheep and goat meat: tariffs on all sheep and goat meat (ranging from 12-23 per cent) will be eliminated within 8 years.

 

Pork: all pork tariffs (up to 20 per cent) will be eliminated within 4 years

 

Hides and Skins: tariffs of 5 to 14 per cent on hides and skins including, sheepskin, cowhide and kangaroo hides and skins, will be eliminated within 2 to 7 years.

 

Wine and Spirits: tariffs of 14 and 20 per cent on wine and tariffs up to 65 per cent on alcoholic beverages and spirits will be eliminated within 4 years.

 

Horticulture: tariffs on all fruit, vegetables and nuts, ranging up to 30 per cent, will be eliminated, most within 4 years.

 

Barley and Sorghum: the 3 per cent tariff on barley and 2 per cent tariff on sorghum will be eliminated on entry into force

 

Seafood: tariffs on all seafood exports will be eliminated within 4 years. This includes elimination of the 14 and 15 per cent tariffs on fresh abalone and rock lobster, respectively, within 4 years.

 

Processed foods: tariffs will be eliminated across a range of processed foods, including fruit juices and honey.

 

Wool: Australia will receive an Australia-only duty-free quota of 30,000 tonnes clean wool, which will grow by 5 per cent each year to 44,324 tonnes (clean) in 2024. This is offered in addition to the 287,000 tonne existing WTO wool quota already extensively accessed by Australia (which imposes a tariff of 1 per cent).

 

Austrade list the following opportunities for Australian suppliers: 

  • Milk powders (including infant formula), UHT and pasteurised milk, cheese and butter
  • Seafood (particularly saltwater shell fish such as oysters, crabs and live/frozen lobster and abalone)
  • Fresh fruits (e.g. citrus, table grapes, cherries)
  • Wheat and barley
  • Chilled or frozen meat (limited to red meat, there is currently no protocol in place for white meat and game meat)
  • Processed foods
  • Wine and Beer
  • Natural fruit juice
  • Convenience and ‘instant’ foods
  • Confectionery and snack products
  • Condiments.

For details of grants and specific opportunities you can find more information online at Austrade or contact us at TradeVine!