The Trans Pacific Partnership between 11 nations (known as TPP-11) is expected to boost trade opportunities for Australian grain growers and support the existing free trade agreements already linking Australia to Asia.
Under the TPP-11, Australia will enjoy reduced tariffs and additional quota access with 10 other nations including Brunei, Canada, Chile, Japan, Malaysia,
Mexico, New Zealand, Peru, Singapore and Vietnam.
Australia’s grain trade to these countries amounts to 15-20 per cent of all exports, including about 4mmt of wheat, 382,000mt of barley and 216,000mt of canola.
Luke Mathews, Trade and Economics Manager for GrainGrowers, said the TPP-11 would provide many benefits for the Australian grains industry.
“The average value of Australian grain exports to TPP-11 members over the past five years has been around $1.6 billion,” Luke said.
“The TPP-11 includes five of Australia’s most important grain export markets: Vietnam (1.6mmt), Japan (1.5mmt), Malaysia (940,000mt), New Zealand (480,000mt) and Singapore (100,000 mt).
“It also improves access for Australian wheat and barley into the very large, and rapidly expanding, Mexican market.”
Existing FTAs
Australia’s grain industry already enjoys existing preferential market access with many of the nations participating in the TPP-11.
Zero tariff arrangements are in place for trade with Vietnam, Malaysia, Singapore, New Zealand and Brunei through the ASEAN-Australia-New Zealand FTA. Australia also has preferential access to Japan through the Japanese Australia Economic Partnership Agreement (JAEPA).
However, the TPP-11 is expected to complement these deals and allow non-tariff barriers to be addressed.
“One of the key benefits for Australia from the TPP-11 is the ability to address non-tariff barriers, which are among the biggest obstacles” Luke said.
“The TPP-11 also includes improved processes for rules of origin, self certification and increased transparency on import licensing, export arrangements and food security claims. “Removing some of this red tape
will improve access to these countries and remove the risk associated with trade.”
Mixed benefits with Japan
While the TPP-11 introduces the Australia-only quota for wheat into Japan, it also opens up opportunities for competitors with reduced mark-ups and a TPP 11 quota for barley.
Luke said Canada would be the main country to benefit from this, but it was important to remember no country had better access than Australia.
“Australia has achieved a country specific wheat quota into Japan of 38,000 mt, growing to 50,000 over eight years under the TPP-11” he said.
“While this may seem minimal, Japan is not a growing market so we will be taking market share off other origins.
“Furthermore, mark-ups on Japanese food wheat imports will be reduced by 45 per cent under TPP-11” “A TPP-11 quota for barley into Japan has been set at 65,000mt, and offers a 45 per cent reduction to Japan’s mark-up on wheat and barley within eight years of entry.”
Lyndon Asser, Glencore Agriculture’s Senior Commercial Manager, agreed the TPP-11 benefits with Japan would complement the existing JAEPA, but were a mixed blessing for Australia.
“Australian-Japanese trade is already fruitful for Australian growers as we are exempt from the formal Japanese Government tender process, allowing customers to purchase from Australia independently any time they wish,” Lyndon said.
“Other countries have to follow this tender process, giving Australia a competitive advantage and increasing demand for Australian grain into Japan.
“The TPP will now allow nations such as Canada to enjoy easier access to Japan.
“However Australian grain is still expected to compete well due to our premium quality and perceived lower mycotoxins.”
Access to China still strong
While not a member of the TPP-11, China is still an accessible market for Australian grain due to the China Australia Free Trade Agreement (ChAFTA), introduced in December 2015.
Lyndon said ChAFTA was an excellent agreement as it removed tariffs on Australian barley, sorghum, pulses, oats and other grain products heading into China.
“We have a zero tariff arrangement with China on these commodities which provides a great competitive advantage to Australian growers,” Lyndon said.
“Other origins face tariffs of 2-3 per cent, which equates to about a
US$4 saving for Aussie growers.
“ChAFTA is a great example of an FTA working for the grower.”
United States on outer
The United States withdrew from the original TPP agreement in January 2017, a decision which worked in Australia’s favour.
Luke said if the United States re-entered the TPP-11, the Australian grains industry would lose its competitive edge.
“The US is a major exporter of grains and oilseeds and competes directly with Australia in a number of TPP-11 markets. Under TPP-11 Australia continues to have preferential access (over the US) into member countries.
“This is particularly the case for Australian wheat exports to Japan, which have averaged A$330 million over the past five years, and compete directly with US wheat exports into this high-priced market.”