Agriculture industry groups want the Federal Government to move quickly to ratify a free trade agreement with South Korea, now that the details of the deal have been revealed.
The Federal Trade Minister Andrew Robb released the 1,800-page document on Monday, saying the agreement would eliminate or phase out tariffs on 99.8 per cent of Australia’s exports to Korea.
Much of the farm sector is expected to benefit from the deal, which was struck in December 2013. Before it comes into force, the agreement must be signed off by parliamentary processes in both countries.
Mr Robb says he anticipates the agreement coming into force towards the end of 2014, and he’s confident that the South Korean and Australian parliaments will support the agreement.
“All I can say is that [in] my contact with my counterpart in Korea, they are very excited about what we’ve signed up to,” he said.
“They’ve got processes to go through, because of course, to make all these concessions to us, there are pockets of concern amongst industries who might be affected in Korea.
“But they’ve made a very conscious decision as a government, they are really leading much of Asia in terms of [trade] liberalisation and they’re going to benefit as a country, I have no doubt, as a consequence.
Time is of the essence for the beef industry, in particular, in terms of getting the deal ratified before the end of the year.
Currently, tariffs on Australian beef put it at an 8 per cent disadvantage compared with beef from the United States, which is Australia’s biggest competitor in the Korean market.
If the deal is ratified before the end of 2014, that will be cut to a 5.4 per cent difference, until tariffs are phased out altogether over the next 15 years.
“I’m very confident that hopefully we’ll get it signed within a couple of months, and then there are processes to go through, and hopefully it’ll go into force before the end of the year and we’ll get the full advantage of that beef [tariff] rundown,” Mr Robb said.
The sugar industry is also keen to get the deal ratified. Under the agreement, the 3 per cent tariff on raw sugar would be immediately eliminated, helping Australia remain competitive with Thailand, which is no longer subject to tariffs into Korea.
Korea is a huge market for Australian cane growers, with about 1 million tonnes of raw sugar sent into that market from Australia each year. Korea’s existing 35 per cent tariff on white sugar will be phased out over 15 years, although the agreement would allow for a relatively small quota of Australian white sugar to be imported tariff-free into Korea from day one. An existing 3 per cent tariff on molasses would also be cut over five years.
Dairy industry urges swift ratification
The dairy industry is also calling on the Federal Government to finalise the deal sooner rather than later.
Cheese tariffs of 36 per cent and an 89 per cent butter tariff will be phased out between 13 and 20 years after the agreement is ratified, but tariff-free quotas for cheese, butter and infant formula will allow some product to be imported into Korea duty-free, as soon as the deal is ratified. The Federal Government says the starting duty-free cheese quota represents 80 per cent of the volume of cheese exported to Korea in 2013.
The Australian Dairy Industry Council (ADIC) chairman Noel Campbell has thanked government for its consultation with his industry over the deal.
“Korea is a significant dairy market for Australia and currently ranks 10th by value with $88 million worth of exports in 2012-13,” he said.
“In 2011/12 Australian exports to Korea were $116 million. Key commercial rivals such as the USA and European Union already have FTAs with Korea, and Australia’s FTA with Korea is vital to stop continued market erosion.”
Horticulture welcomes moves toward level playing field
Further details of the tariff reductions for horticulture have also been made clear with the release of the full agreement document.
Cherries, almonds and dried grapes go duty-free as soon as the deal comes into force, cutting existing tariffs of between 8 and 24 per cent.
A 27 per cent tariff on asparagus will be phased out over three years, while tariffs of between 30 and 54 per cent on macadamia nuts, carrots and most fruit juices will be phased out over five years.
Tomatoes and apricots, currently subject to a 45 per cent duty, will see that reduced to nothing over seven years. Tariffs of between 30 and 63.9 per cent on mangoes, peaches, plums and peanuts will be eliminated over 10 years.
Korea also agreed to seasonal tariff elimination on other horticultural exports during Australia’s exporting months.
For chipping potatoes, the existing 304 per cent tariff will go straight away for exports from December to April, with tariffs phased out for other months over 15 years. Exports of Australian chipping potatoes to Korea were worth $6 million in 2012-13.
Table grapes will have their tariff almost halved to 24 per cent, and phased out altogether for exporting months from between November to April, over five years.
Citrus growers have been calling for tariff cuts into Korea for some time. Under the agreement, orange exports will see tariffs immediately reduced from 50 to 30 per cent, with duties eliminated over seven years for exports between April and September. A tariff-free quota of 20 tonnes of oranges will also be accepted as soon as the agreement is ratified. For mandarins, the existing 144 per cent tariff will be eliminated over 18 years, for the months from April to September.
The general manager of Fruitgrowers Victoria, John Wilson, says opening expanded markets for fresh fruit is vital for growers.
“We need to export fruit, it’s very obvious, we have a market that’s oversupplied in Australia and if we wish to grow our markets, we have to look overseas.
“We’ve got to be on a level playing field with our competitors who already have free trade agreements,” he said.
Seafood will also see tariffs cut, with existing bluefin tuna tariffs of 10 per cent, and rock lobster tariffs of 20 per cent, to be eliminated after three years.
Rice, honey disappointed over KAFTA exclusion
Agricultural products excluded from the agreement, which will see no tariff reductions, are rice, unhulled barley, milk powders and condensed milk, abalone, ginger, apples, pears, watermelon, walnuts, onions, capsicums, garlic, and frozen pork belly. The Australian Government says these are not significant exports, accounting for 0.2 per cent of Australia’s exports to Korea.
The rice industry has previously expressed its disappointment at being left out of the deal, with the Ricegrowers’ Association’s Ruth Wade saying it “punishes Australian growers by preventing expansion into this important market”.
“Trade agreements with exclusions are not free trade agreements,” Ms Wade said in December after the deal was announced.
The honey industry is also excluded under the deal, and the executive director of the Australian Honey Bee Industry Council, Trevor Weatherhead, says it will continue to face tariffs of up to 250 per cent as a result.
That’s in contrast to New Zealand’s free trade deal with Korea, which will see NZ honey subject to zero tariff when its FTA is fully implemented.
“It is very disappointing. The honey that does go into Korea can now attract tariffs ranging from 150 per cent up to 250 per cent, so it is a big impost on our industry and the returns to beekeepers drop accordingly as this tariff is imposed,” Mr Weatherhead said.