TPP- 11 gives SA businesses every prospect of a happy New Year
TPP-11, effective from 29 December 2018, gives SA businesses – particularly those involved in, or associated with, wine or the State’s growing agricultural sector – every prospect of a happy and prosperous New Year.
Formally referred to as the Comprehensive and Progressive for Trans-Pacific Partnership, TPP-11 includes 11 remaining countries after President Trump’s withdrawal of the US.
True, this means the group now accounts for 13% of the world’s economy rather than 30% but any affect this reduction could have on Australia is expected to be minimal.
We punch way above our weight
Compared with the 39 countries in the Asia-Pacific region for which it has data, the International Monetary Fund (IMF) ranks Australia’s economy as the fifth largest, headed only (in order) by China, Japan, India and South Korea. (The IMF has no data for North Korea or 14 micro Asia Pacific economies).
In short, Australia is an economic force in TPP-11 out of all proportion to its small population, with the prospect of being able to benefit even more than it does now. The partnership is able to include many more member countries, all trading under agreed “common rules” and in a “predictable regulatory environment”.
As it is, Australian adults are already the second most wealthy per head of population in the world bested only by the Swiss.
Greater access to a range of markets
What will TPP-11 mean to Australia in the context of our other 10 partners – New Zealand, Canada, Mexico, Peru, Chile, Japan, Brunei, Singapore, Malaysia and Vietnam?
It will reduce or eliminate tariffs across a range of Australian exports to all 10 countries, increase access to existing markets, and will likely open up others previously unknown.
The trade deal means Australia’s $830m wine industry will more readily be able to tap into substantial wine markets like Canada where tariffs of up to $4.68 per litre will be scrapped forthwith.
Malaysia, Mexico and Vietnam will variously eliminate their tariffs on Australian wine between 2021 and 2023.
Chief executive of Winemakers’ Federation of Australia Mr Tony Battaglene says the removal of Mexico’s 20% tariff will have the effect of opening up this potentially largemarket to Australia’s premium wine producers, previously unable, because of this imposition, to compete against comparable producers from other countries.
Furthermore the wine and spirits annex of TPP-11, the first of its kind, will bring greater stability to Australian wine exporters by addressing issues relative to non-tariff barriers.
Such barriers can make the cost of exporting prohibitive, and also impose unreasonable restrictions or requirements on exporters.
Outlook for farm produce and seafood
Tariffs on Australia’s sheep meat exports were eliminated from the start of the New Year by all in the TPP-11 partnership with the exception of Mexico.
SA’s 5000 beef producers can henceforth secure greater access to the booming Japanese beef market because of tariff reductions.
For the first time SA cereal and grain farmers will benefit from reduced tariffs on exports to Canadian and Mexican markets.
The TPP-11 deal also locks in lower taxes on exports by Riverland citrus growers who will now have opportunities for sales in Japan never before available to them.
And it offers SA’s seafood industry – already renowned worldwide for the pristine quality of its products -- unprecedented access, plus the prospect of rising sales, in the lucrative markets of Japan, Mexico, Vietnam and Canada.
It’s happening on a wave of confidence
Opportunities arising from TPP-11 will supercharge the growing confidence of SA’s farmers revealed in Rabobank’s most recent Rural Confidence Survey.
Useful rainfalls and promising starts to good harvests towards the end of last year led 31% of respondents to the survey to say they were optimistic about the agricultural sector’s outlook for 2019 compared to just 13% in a September quarter survey.
Analysts attribute this to good market conditions for sheep graziers and a firming opinion among grain growers that harvests would be better than expected mid-year.
The survey results also showed that 35% of business owners expected the State’s agricultural economy to improve, 11% more than those who had the same expectation in a survey taken about three months earlier.
RaboResearch analysts say that while Chinese interest in the wool market has dampened slightly, this is in effect nothing more than a “price correction”. They believe SA producers, whose businesses are geared to run on a comparatively low-cost base “will be unlikely to be too concerned by the decline from previous highs”.