77. The TPP will open up market opportunities for Australian exporters and investors in the region.
Impact on Goods Exports
78. Australia’s exports to countries in the TPP represented around $88 billion in 2014 – or 33 per cent of total Australian merchandise exports. The TPP Parties include some of Australia’s major trading partners, such as Japan – where Australian exports were worth over $48 billion in 2014 and the United States,
30 where exports were worth close to $12 billion. Four of Australia’s top ten trading partners are TPP countries (Japan, the United States, Singapore and Malaysia).
79. The elimination of barriers to trade is expected to increase the volume and value of trade with all TPP Parties. From day one of the Agreement, new quota arrangements into the United States will permit increased exports to that market. At current prices, the newly created 65,000 tonne quota for sugar into the United States instantly opens up new trade worth around $48 million into that country.7 The consolidation of five current cheese quotas under the bilateral FTA into just two quotas will allow improved quota management, along with 9,000 metric tons of additional market access. WTO in-quota tariffs on all dairy products will be eliminated immediately on entry into force of the Agreement, and the bilateral milk powder quotas will be combined into one and tariffs eliminated over time. The removal of the US price-based safeguard will also ensure trade into our largest export market for beef (valued at $2.4 billion in 2014) will be completely free of tariff barriers in 2023.
80. The elimination and reduction of tariffs and creation of new quota access into Japan will create opportunities in an export market worth around $4 billion for Australian agricultural exports. Significant new tariff reductions and increased safeguard volumes on beef will allow for increased exports to the Japanese market. The elimination of tariffs and creation of new quotas for dairy products will benefit Australian dairy exporters – Australia exported $433 million of dairy products to Japan in 2014. The elimination of tariffs on cheese products alone covers over $100 million of existing Australian trade. Australia will also receive new quota access for wheat, barley, malt and rice and a reduction in the levy on high polarity sugar will mean that Australian high polarity sugar will now face lower duties than exporters of low polarity sugar 81. The elimination of tariffs in our new FTA partners of Canada, Mexico and
Peru will create new opportunities in export markets worth $1.83 billion in 2014 for Australia. Particular opportunities will be available for our exports to these markets of beef (over $175 million in exports to these countries in 2014), sheep meat ($87 million in exports), wine ($174 million), machinery ($158 million), and pharmaceuticals ($64 million) into these countries. For the first time Australia will also be afforded genuine new access into to the Canadian dairy market, with Canada offering over 100,000 metric tonnes of access for dairy products per year to TPP Parties.
82. The elimination of tariff barriers on some products previously missed in our FTAs with Malaysia and Vietnam will also create new opportunities for
Australia. Malaysia’s elimination of tariffs on liquid milk and an interim quota of 3.3 million litres per year will provide substantial new opportunities for our burgeoning fresh milk industry which exported $189 million in 2014. The elimination of tariffs on wine and alcoholic beverages into Malaysia and Vietnam will provide export opportunities for our highly competitive wine
7 Based on US 3rd quarter 2015 raw sugar prices, and exchange rate at 3 November 2015.
31 industry. Tariff elimination on iron and steel products into Vietnam will
provide welcome new opportunities for that sector – Australia exported $200 million of iron and steel products to Vietnam in 2014.
83. The regional nature of the TPP agreement will also provide new opportunities for Australian exporters to participate in regional supply chains. Under the rules of origin of the agreement, production in any one of the TPP Parties will be counted towards a goods’ originating status, that is, the ability for an
exporter or importer to claim a TPP tariff preference for that good. As a result, demand for TPP products will increase in the region. For example, there will be greater demand for Australian agricultural commodities in South-East Asia as new preferences become available into Japan for food and beverage
products. Australian manufacturers will also be able to export products under TPP preferences which they have produced using content from other TPP Parties. For example a mining equipment manufacturer could source inputs from Japan for transformation and exportation to Mexico or Peru.
84. Trade, both in terms of imports and exports is also expected to increase as a result of a reduction in the reduced administrative arrangements created by the TPP. Under the TPP an exporter or importer will only need to refer to one rule of origin, and use the same, self-certified documentation when exporting to any of the TPP parties under a tariff preference. This will significantly reduce the administrative arrangements an Australian trader needs to be aware of and comply with to access current tariff preferences. At present Australia has seven different FTAs with TPP Parties, each with its own administrative arrangements.
Impact on Goods Imports
85. The TPP will benefit consumers by increasing greater choice of goods at lower prices. Australia’s final tariff offer to TPP countries on goods market access was plurilateral – the same offer was made to all members of the TPP.
Consistent with other Australian FTAs and our trade policy settings,
Australia’s tariff elimination schedule is ambitious, with 93 per cent of all tariff lines eliminated or bound at zero tariff rates upon entry into force of the
Agreement.
86. Virtually all remaining tariffs – covering those sectors where tariffs still provide some level of protection against imports, are eliminated in either three or four years. This includes tariffs of mostly 5 per cent on plastics and rubber, textiles, clothing and footwear, iron and steel, motor vehicle components and some machinery and furniture tariffs. The phased elimination of these tariffs aligns with existing FTAs and will not undercut any existing tariff phasing arrangements for sensitive products with existing FTA partners. The only tariffs in Australia’s offer that are not eliminated are those on used car imports.
Although the 5 per cent ad valorem tariff is eliminated immediately, consistent with our FTAs with Korea and Japan, the larger $12,000 specific tariff is maintained. These tariffs represent only 0.1 per cent of Australia’s total tariff lines.
32 87. Though Australia had already eliminated tariffs for eight of the 11 partner
countries in the TPP, elimination of tariffs for Canada, Mexico and Peru will likely encourage further trade with those countries, and lower the cost of imports into Australia. In particular, some increased imports and price reductions can be expected as a result of increased imports of horticultural products from Mexico (imports of $24.2 million in 2014) into Australia and Peru ($14.9 million in 2014), automotive products from Mexico ($212.8
million in 2014) and Canada ($120.2 million in 2014), pharmaceutical products from Canada ($131.4 million in 2014) and Mexico ($42.7 million in 2014), telecommunications equipment from Mexico ($198.6 million in 2014), alcoholic beverages from Mexico ($142.6 million in 2014) and railway products from Canada ($143.6 million in 2014).
Elimination schedule for Australia’s tariffs on imports from TPP countries
Staging category
Tariff lines No. % of
total
Cumulative (%)
MFN 0% 2,775 46.2% 46.2%
A: 0% tariff on EIF 2,815 46.9% 93.0%
B: 3 year phasing 210 3.5% 96.5%
C: 4 year phasing 200 3.3% 99.9%
D: Used car tariff (ad valorem component
eliminated, specific tariff remains) 8 0.1% 100.0%
Total 6,008 100.0% 100.0%
Impact on Investment
88. The TPP’s rules to protect and promote foreign investment are contemporary and robust. In embracing these, Australia demonstrates that it understands and values the role of investment for our economy – in driving competition,
productivity and innovation. The raising of FIRB general screening threshold to $1,094 million for foreign investment from TPP countries in non-sensitive sectors will further encourage investment into Australia from the TPP region, particularly from financial hubs such as Singapore.
Impact on Services Exports
89. The TPP will contribute to the growth and diversification of Australian exports of services by liberalising barriers and providing more transparent and
predictable operating conditions in TPP countries. Australian services exports to TPP countries were worth over $20 billion in 2014. Australians involved in education, finance, ICT, health, transport and logistics, tourism, mining and professional services sectors all stand to benefit from this deal.
Impact on Domestic Services Sectors
90. The new services market access opportunities created by the TPP will promote a greater export orientation in Australia’s services sectors and increased
33 foreign investment and employment in Australia’s export-focused services industries. The TPP will not impact on the provision of social services. As in other FTAs, Australia has preserved policy space in the TPP with respect to sensitive sectors, such as primary education and audiovisual services.
Incentivising R&D
91. The TPP establishes a common set of rules on IP protection and enforcement for the TPP region. Knowing that IP rights can be protected and enforced in TPP markets provides an important incentive for Australia’s businesses and investors to expand their activities in the region.
A Competitive Environment
92. The Australian business community will be able to benefit from TPP rules ensuring state-owned enterprises and government-designated monopolies engaged in commercial activities make purchasing and sales decisions on the basis of commercial decisions and do not unjustifiably discriminate against suppliers of goods and services from other TPP Parties. The TPP will help to ensure Australian exporters are able to compete on a more level playing field.
PART 7: CONSULTATION