CPTPP in play from December
31 October 2018
The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP or TPP-11) is set to become a reality, following Australia’s finalisation of ratification procedures and subsequent notification of New Zealand (as the TPP-11 depository) on 31 October 2018.
TPP-11 required at least half (six) of the signatories to have completed their domestic ratification processes for TPP-11 to enter into force (EIF).
Australia becomes the sixth signatory to ratify the deal (along with Singapore, Japan, Canada, Mexico, and New Zealand) which in turn has triggered a 60 day notification period and thus an EIF date of 30 December 2018.
EIF before the end of this calendar year results in a bonus of two tariff cuts within three days - with the 30 December cut being closely followed by a second reduction on 1 January 2019 (1 April 2019 in the case of Japan).
These tariff cuts only apply to those TPP-11 members which have ratified. Member countries yet to ratify are Chile, Malaysia, Peru, Vietnam and Brunei.
The agreement is the largest trade reform agreement of its kind and the result of many years of negotiations. The Australian red meat industry has been a strong supporter of the Australian Government’s efforts in pursuing these negotiations – and harvesting the gains following the withdrawal of the United States from the original TPP in January 2017.
What does it mean for the Australian red meat industry?
The Australian red meat industry will benefit from improved competitiveness in our international markets – with TPP-11 complementing the gains derived from other free trade agreements Australia has concluded to date.
A key example of the opportunities on offer will be the further reduction of tariffs for Australian beef entering Japan. In addition to the tariff reductions negotiated via the Japan-Australia Economic Partnership Agreement (or JAEPA), under TPP-11 the tariff on both frozen and chilled beef will fall to 9% over 15 years - as opposed to the end point of 19.5% for frozen beef and 23.5% for chilled beef secured under JAEPA. Under TPP-11 an extra 10% tariff reduction has been secured.
This outcome places Australian beef in a prime position to hold its market share in Japan. With increasing competition in Japan from US beef, the tariff advantage Australia will benefit from will be substantial – with US beef continuing to face a 38.5% tariff until such time as Japan and the US strike a bilateral deal.
Additionally, TPP-11 will see the Australian red meat industry benefit from new high-quality and ultimately free trade arrangements with Canada and Mexico – neither of which were in Australia’s existing suite of FTAs.
In Canada, the current 35,000 tonne beef quota (0% in-quota tariff) will remain, however, the above quota tariff of 26.5% will be phased out within 5 years. Additionally, the 2.5% tariff on Australian sheepmeat will be eliminated on EIF.
For Australia’s trade to Mexico, the current 20-25% tariffs on beef will be eliminated within 10 years; the 10% sheepmeat and goat meat tariffs will be eliminated within 8 years; the majority of offal tariffs will be eliminated on EIF; and the 10-15% tariffs on live animals will also be eliminated on EIF.
Key red meat outcomes:
- Under the CPTPP, the tariffs levied on Australian beef entering Japan will be further reduced from those negotiated under the Japan-Australia Economic Partnership Agreement (JAEPA).
- The tariff on both frozen and chilled beef will fall to 9% over 15 years - as opposed to the end point of 19.5% for frozen beef and 23.5% for chilled beef secured under the JAEPA. All CPTPP member countries supplying beef to Japan will be similarly advantaged by these CPTPP tariff cuts. A global beef safeguard provision will apply to this trade.
- In addition, processed red meat import tariffs applied by Japan, which currently range from 6-50%, will be eliminated within 15 years; the majority of offal tariffs eliminated within 10-15 years; and the tariffs applied to live cattle imports will also be eliminated.
- In Canada, the current 35,000 tonne beef quota (0% in-quota tariff) will remain, however, the above quota tariff of 26.5% will be phased out. Additionally, the 2.5% tariff on Australian sheepmeat will be eliminated on entry into force (EIF).
- For Australia’s trade to Mexico, the current 20-25% beef tariff will be eliminated within 10 years; the 10% sheepmeat and goat meat tariffs will be eliminated within 8 years; the majority of offal tariffs will be eliminated on EIF; and the 10-15% tariffs on live animals will also be eliminated on EIF.
- In Peru, the CPTPP will complement the recently concluded Peru-Australia Free Trade Agreement, which will see the 11-17% tariffs on beef phased out and the 9% sheepmeat and goat meat tariffs eliminated on EIF under both agreements. Peru represents a new market opportunity for Australian red meat (pending the development of protocol arrangements).
Brunei, Chile, Malaysia, New Zealand, Singapore and Vietnam
- For these remaining CPTPP members, existing bilateral and / or regional agreements have, or are already delivering, market access improvements.