China is Australia's largest agriculture, forestry and fisheries export market, worth an estimated $13.5 billion in 2017, up from $6.6 billion in 2011. Show China's demand for high-quality agriculture and food products is growing rapidly. The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) predicts China will account for 43 per cent of global growth in agricultural demand by 2050.1 In the past, the absence of a bilateral FTA with China meant Australian producers and exporters faced significant tariffs on agricultural products, and were at a competitive disadvantage to countries that had an FTA with China – including New Zealand, Chile and ASEAN. The China-Australia Free Trade Agreement (ChAFTA) addresses this issue, and also gives Australia a significant advantage over other larger players, such as the US, EU and Canada. ChAFTA, which entered into force on 20 December 2015, also provides a base for further liberalisation through a commitment to review outcomes three years after entry into force. Key outcomesBeefChina's demand for high-quality beef is growing rapidly, driven by a growing middle class. In 2017, Australian beef exports to China totalled 116,603 tonnes, worth $832.5 million. Australia – already one of China's major imported beef suppliers with 21 per cent of the import market and with an outstanding reputation for quality – will be ideally placed to capitalise on this growing demand, with ChAFTA delivering a real competitive advantage over almost all other large beef exporters. Key outcomes include:
China has retained the right to apply a discretionary safeguard on beef (not including offal) if imports exceed a set annual "safeguard" trigger volume. In 2017, the trigger started at 170,000 tonnes – 10 per cent above Australia's historic calendar year peak export levels to China – and grows over time. There is also a set review process to consider removal of the safeguard. DairyChina is Australia's largest market for dairy exports, worth $905 million in 2017. Australia's main competitors are New Zealand, the EU and the US. ChAFTA is progressively closing the competitiveness gap with New Zealand; tariffs will be progressively eliminated across all Australian dairy products. Crucially, New Zealand's FTA with China contains restrictive safeguard measures on a wide range of dairy products, including liquid milk, cheese, butter and all milk powders (where China raises the tariff back to the higher normal rate when New Zealand exports exceed a certain volume). By contrast, under ChAFTA, Australia only faces a discretionary safeguard on whole milk powders, with the safeguard trigger volume set well above current trade levels and indexed to grow annually. For all other dairy products, Australia will receive unlimited preferential access. Key outcomes under ChAFTA include:
Sheep and goat meatChina is Australia's second-most important sheepmeat export destination, despite China imposing tariffs ranging from 12 to 23 per cent, with Australian exports to China worth $471 million (108,497 tonnes) in 2017. With the progressive elimination of tariffs on sheepmeat, ChAFTA positions Australian farmers to compete better with New Zealand, further building trade and increasing profitability. Key outcomes include:
WoolChina accounts for 75 per cent of Australia's global wool exports. As a result, Australia is China's largest source of imported wool, with a 74 per cent market share, ahead of South Africa (8 per cent). China already provides virtually duty-free access on wool, under a large WTO tariff rate quota of 287,000 tonnes. Tariffs within this quota are set at just 1 per cent. While China has the right to impose a 38 per cent tariff outside the quota, traditionally it has not done this, as wool is an important input into domestic manufacturing. Under ChAFTA, in addition to the existing WTO quota, Australia received an exclusive duty-free Country Specific Quota of 33,075 tonnes of clean wool from 1 January 2018. This volume will grow by 5 per cent each year to 44,324 tonnes clean (approximately 63,500 tonnes greasy wool) by 2024, all at duty-free rates. This is the best outcome China has provided in any of its FTAs to date. PorkTariffs of up to 20 per cent on pork will be eliminated by 1 January 2019. Hides, skins and leatherHides and skins are a crucial agricultural export to China, worth $722 million in 2017. This is more than ten times our next largest market (Thailand). Under ChAFTA, previous tariffs of between 5 to 14 per cent on hides, skins and leather are being eliminated. Key outcomes include:
Wine and spiritsChina's wine import market is growing dramatically, more than doubling in size since 2010 to be worth $3.6 billion in 2017. China is Australia's largest export market for wine, worth $827 million in 2017. However, Australia competes with Chile which has preferential wine access under its FTA with China. China's wine imports from Chile have increased eleven-fold in size since its FTA with China entered into force in 2006.
HorticultureChina is a rapidly growing market for Australian horticultural products, with exports worth $412 million in 2017 – up from $13 million in 2010. However, China applies some of its highest tariffs on horticultural products. Under ChAFTA, all tariffs on horticultural products will be progressively eliminated. Key outcomes include:
Separate to the FTA negotiations, Australia already enjoys quarantine access protocols for export into China for many horticultural products, and will be able to take immediate advantage of tariff reductions for a range of products including citrus, grapes, almonds, macadamias, mangoes and some cherries. There are no changes to Australia's domestic science and risk-based quarantine measures as a result of ChAFTA. ChAFTA facilitates customs processing of perishable goods, including horticulture products. Barley, sorghum and other grainsAustralia's trade to China in barley and sorghum is significant and growing rapidly. In 2017, barley exports were worth $1.4 billion, up 392 per cent since 2010, while sorghum exports were worth $72 million. Key outcomes under ChAFTA include:
SeafoodAustralian seafood exports to China totalled $356 million in 2017. Australian abalone and rock lobster (including some other sea crawfish) are the leading Australian premium seafood exports to China, with exports worth $61 million and $184 million, respectively, in 2017. Tariffs on all Australian seafood exports will be eliminated by 1 January 2019. ChAFTA will create a huge opportunity for Australian seafood in the Chinese market. Since the China‑New Zealand Free Trade Agreement came into force, China's imports of seafood from New Zealand have grown five‑fold (to $525 million). Key outcomes under ChAFTA include:
Processed foodsChanging consumption habits and Australia's reputation for high-quality produce also provide great opportunities in the processed food sector. Key outcomes under ChAFTA include:
Live animalsChina is Australia's third largest market for live animal exports, growing from $117 million in 2010 to $150 million in 2017. Dairy cattle currently dominate Australia's live animal exports to China, worth $67 million in 2017. Key outcomes under ChAFTA include:
China's WTO quotas and related productsUnder China's WTO accession protocol, China applies quotas on imports of rice, wheat, maize, sugar and vegetable oils. These are open to all WTO members, including Australia. In-quota tariffs are set at only 1 per cent for wool, rice, wheat, cotton and maize; 8 to 10 per cent for vegetable oils and related products and 15 per cent for sugar. Imports of vegetable oils are no longer administered through a quota. Australia's exports of these products enter China under existing WTO arrangements. Arguing that these products are key staples and already enjoy virtually duty-free access, China has not further liberalised these products in any of its FTAs to date. Accordingly, China has not provided preferential access to Australia under ChAFTA. However, China has agreed to a built-in review process three years after the agreement entered into force, including on market access. China's products into AustraliaConsistent with all of Australia's FTAs, Australia will eliminate remaining tariffs on agricultural and processed food imports from China. To allow adjustment by domestic industry, the elimination of some of these tariffs, in particular on a range of canned fruit products and peanuts, was phased in by 1 January 2017. |
Which statement best explains why a large number of agricultural products are imported into the United States from Chile?
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