Alan O’Brien, Bord Bia, Shanghai Office
Last week (Nov 17th) saw the ratification of a free trade agreement (FTA) between Australia and China, following negotiations that started almost 10 years ago. China is Australia’s largest trading partner, with 20% of Australian imports coming from China, and 36% of exports going to China.
Under this deal China will benefit from easing of restrictions on foreign direct investments, with core benefits in mining, energies and agriculture. The Chinese market is currently worth €6.37bn to Australia’s agrifood sector, however, the country's share of China’s import market has more than halved over the last 10 years, dropping from 6% to 3% of the overall import market, with countries including New Zealand, France, Indonesia and Brazil increasing share across key sectors, primarily meat and dairy. This new trade deal represents a big win for Australian dairy and meat sectors, with tariffs being phased out over the next 10 years (4 years for dairy in line with the New Zealand FTA).
Implications for the Australia’s Dairy Sector
Australia is a strong player in China’s dairy market but, as highlighted by Rabobank (2014), the country has been marginalised as a major exporter due to a decrease in Australia’s overall dairy production; volume growth representing a core marketing tool in China in building strategic relationships. This FTA will increase Australia’s competitive position in China, especially with regard to New Zealand, its core competitor in powders and commodity products. Tariffs on Australian dairy products are expected to be brought in line with New Zealand; all being phased out by 2019. This deal will also impact Europe’s competitive position across key commodities, including infant formula.
Implications for Australia’s Beef Sector
Unlike the FTA for dairy products, the meat sector, including beef and pork, will see tariffs phased out slowly over a 10 year period. Last year Australia dominated China’s beef import market, accounting for 51% of China’s total imports of 282,890 MT (New Zealand accounting for 12.4%). This deal will strengthen the country's already strong position (general beef tariff currently 25% versus New Zealand 5.6% -all phased out by 2025).
China’s Beef & Pork Offal Tariffs
China’s total offal imports reached 832,058 MT in 2013, with pork accounting for 97% of this figure. The current general tariff facing Australia (and the EU) ranges from 12%-20%; preferential rates for New Zealand range from 0%-2.7%. These rates for Australia will be phased out entirely by 2025, with pricing implications for European competitiveness.
For more information contact alan.obrien@bordbia.ie
