Australia ratifies Trans-Pacific Partnership (TPP-11) trade agreement

Australia has ratified the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (TPP-11) giving red meat processors greater market access, and better business and investment opportunities.

TPP-11 markets account for $3.4 billion (26%) of Australia’s red meat and co-product exports, including $2.4 billion (32%) of beef and veal, $473 million (15%) of lamb and mutton, $22 million (9%) of goatmeat, and $543 million (25%) of co-products (2017 values).

Australia is the sixth country to ratify the agreement, meaning it can now enter into force on 30 December this year. We join Canada, Japan, Mexico, New Zealand and Singapore as part of the first group to ratify.

George Revell, AMPC's agricultural economist, says that the TPP-11 agreement has the potential to significantly increase the volume and value of Australia’s red meat and co-product exports.

"The TPP-11 agreement will deliver an important comparative advantage for Australian beef in Japan, where it will build on the existing Japan-Australia Economic Partnership Agreement (JAEPA) to deliver a baseline 29.5% tariff advantage over US beef," Mr Revell says. "If the US triggers its safeguard volume (as it currently has), Australia’s advantage could be as high as 41%."

As a result, "the TPP-11 has the potential to significantly reduce the relative cost of Australian beef compared to US, and thereby increase Japanese demand for Australian beef," Mr Revell says. "With over 80% of Australia’s combined red meat and co-products exported, market access is of critical importance to the sustainability of Australia’s red meat processing industry, the 29,800 people who work in red meat processing, and the communities in which these facilities operate."

Initial tariff reductions are due to occur on 30 December 2018, with a second round of reductions following quickly on 01 January 2019.

Key market access outcomes for Australian red meat processors include:

• Japan’s beef tariffs will be reduced to 9% within 15 years of entry into force of the TPP-11. Under the existing JAEPA, beef tariffs would still be as high as 23.5% (fresh and chilled) and 19.5% (frozen) after 15 years.

• In comparison, US beef (Australia’s main competitor in Japan) will remain at the general tariff rate of 38.5%, with a snapback to 50% if safeguard volumes are triggered. Snapback for TPP-11 participants will be aggregated (benefiting Australia) and incur a snapback tariff starting at 38.5% and reducing to below 20% after 15 years. Japan is Australia’s largest beef market with fresh, chilled and frozen beef exports valued at $2.0 billion in 2017.

• The majority of Japan’s tariffs on offal will be eliminated over 10 to 15 years of entry into force of the TPP-11 (currently 12.8–50%). Australian offal exports to Japan were valued at $208 million in 2017.

• Canadian beef tariffs (currently 26.5%) will be eliminated within five years of entry into force of the TPP-11. Australian beef exports to Canada were valued at more than $127 million in 2017.

• Mexican tariffs on beef carcasses and cuts (currently up to 25%) will be eliminated within 10 years of entry into force of the TPP-11. Australian beef exports to Mexico were valued at $291 million in 2017.

• Tariffs on sheepmeat exports to Mexico, currently at 10%, will be eliminated within 8 years of entry into force of the TPP-11. Australia sheepmeat exports to Mexico were valued at $13 million in 2017.

• The majority of Mexico’s tariffs on beef offal (currently 10–20%) will be eliminated from entry into force of the TPP-11. Australian exports of offal to Mexico were valued at $4.7 million in 2017.