China-Australia free trade agreement
Factsheet: Agriculture and Processed Food
China is Australia’s largest agriculture, forestry and fisheries export market, worth $8 billion in 2014, up from $5 billion in 2010.
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 that China will account for 43 per cent of global growth in agricultural demand by 2050.
Until now, the absence of a bilateral FTA with China has meant Australian producers and exporters have faced significant tariffs on agricultural products and have been at a competitive disadvantage to countries that have 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 larger players, such as the US, EU and Canada.
ChAFTA will also provide a base for further liberalisation through a commitment to review outcomes three years after entry into force.
Key Outcomes
Beef
China’s demand for high-quality beef is growing rapidly, driven by a growing middle class. The OECD assesses that beef will be the fastest-growing import sector in China.
In 2014 Australian beef exports to China totalled 128,000 tonnes, worth $655 million.
Australia – already China’s dominant supplier with 50 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 other large beef exporters.
Key outcomes include:
Elimination of tariffs on beef imports (currently ranging from 12-25 per cent) within 9 years.
Elimination of the 12 per cent tariff on beef offal within 4-7 years.
China has retained the right to apply a discretionary safeguard on beef (not including offal) if imports exceed a set annual “safeguard” trigger volume. The trigger starts 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.
Dairy
China is Australia’s second largest market for dairy exports. This market is expanding rapidly with exports worth $347 million in 2014. Australia’s main competitors are New Zealand, the EU and the US. Currently, New Zealand’s dairy produce receives a considerable tariff advantage under its bilateral FTA with China.
ChAFTA will progressively close this gap; tariffs will be progressively eliminated across all 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 will only face 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:
Elimination of the 15 per cent tariff on infant formula within 4 years.
Elimination of the 10 – 19 per cent tariff on ice cream, lactose, casein and milk albumins within 4 years.
Elimination of the 15 per cent tariff on liquid milk within 9 years.
Elimination of the 10 to 15 per cent tariff on cheese, butter and yogurt within 9 years.
Elimination of the 10 per cent tariff on milk powders within 11 years.
Sheep and goat meat
China’s demand for sheepmeat is also growing rapidly. In 2014, total Chinese imports of sheepmeat reached 281,000 tonnes, up from 124,000 tonnes in 2012. New Zealand has traditionally been China’s largest supplier and enjoys a competitive advantage over Australian exporters due to its FTA. New Zealand lamb now only faces tariffs ranging from 2.7 – 5.1 per cent and will be duty-free by 2016.
In 2014, Australian exports to China were worth $425 million (108,000 tonnes), up 10 per cent on 2013 exports at $385 million. China is already Australia’s second-most important sheepmeat export destination, despite China imposing tariffs ranging from 12 – 23 per cent.
With the progressive elimination of tariffs on sheepmeat, ChAFTA positions Australian farmers to further build trade and increase profitability.
Key outcomes include:
Elimination of the tariffs on sheepmeat (currently ranging from 12 to 23 per cent) within 8 years.
Elimination of the 18 per cent tariff on frozen sheepmeat offal within 7 years
Elimination of the 20 per cent tariff on goat meat within 8 years.
Wool
China accounts for 70 per cent of Australia’s wool exports. Australia is China’s largest source of imported wool, with a 63 per cent market share, ahead of New Zealand (14 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 will receive an exclusive duty-free Country Specific Quota of 30,000 tonnes clean wool (approximately 43,000 tonnes greasy wool). This volume will grow by 5 per cent each year to almost 45,000 tonnes clean (approximately 64,300 tonnes greasy) by 2024, all at duty-free rates. This is the best outcome China has provided in any of its FTAs to date.
Pork
Tariffs of up to 20 per cent on pork eliminated within 4 years.
Hides, skins and leather
Hides and skins are a crucial agricultural export to China worth $910 million in 2014. This is more than ten times our next largest market (Italy). Currently hides and skins face tariffs of 5 to 14 per cent.
Under ChAFTA, all tariffs on hides, skins and leather will be eliminated. Key outcomes include:
Elimination of the 7 per cent tariff on sheep skins over 4 years – exports worth $342 million in 2014.
Elimination of the 5 to 8.4 per cent tariffs on cow hides and skins between 2 and 7 years – imports worth around $518 million.
Elimination of the 9 per cent tariff on kangaroo hides and skins and the 14 per cent tariff on kangaroo leather over 4 years.
Elimination of tariffs between 5 and 14 per cent on a range of other leather products either on day one of the Agreement or over 4 years.
Wine and spirits
China’s wine import market is growing dramatically, almost doubling in size since 2010 to be worth over $1.7 billion in 2014.
China is Australia’s third-largest export market for wine, worth $211 million in 2014. However, Australia competes with New Zealand and Chile, both of which have preferential wine access under their FTAs with China. China’s wine imports from Chile have increased almost seven-fold since its FTA with China entered into force in 2006.
Under ChAFTA, tariffs of 14 to 20 per cent on Australian wine imports will be eliminated within 4 years
Tariffs of up to 65 per cent on other alcoholic beverages and spirits will be eliminated within 4 years.
Horticulture
China is a rapidly growing market for Australian horticultural products, with exports worth $56 million in 2014 – 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:
Elimination of the 10 to 25 per cent tariff on macadamia nuts, almonds, walnuts, pistachios and all other nuts within 4 years.
Elimination of the 11 to 30 per cent tariff on oranges, mandarins, lemons and all other citrus fruits within 8 years.
Elimination of the 10 to 30 per cent tariff on all other fruit within 4 years.
Elimination of the 10 to 13 per cent tariff on all fresh vegetables within 4 years.
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 grains
Australia’s trade to China in barley and sorghum is significant and growing rapidly. In 2014, barley exports were worth more than $1 billion, up more than 330 per cent since 2010, while sorghum exports were worth $264 million. Key outcomes under ChAFTA include:
Immediate elimination of the 3 per cent tariff on barley and 2 per cent tariff on sorghum.
Elimination over 4 years of the 15 per cent tariff on cotton seeds – exports worth $21 million in 2014.
Elimination of the 10 per cent tariff on malt and wheat gluten within 4 years.
Immediate elimination of the 2 per cent tariff on oats, buckwheat, millet and quinoa.
Elimination of tariffs of up to 7 per cent on pulses within 4 years.
Seafood
Australian seafood exports to China totalled $35 million in 2014. Australian abalone and rock lobster are the leading Australian premium seafood exports to China, with exports worth $15 million and $2 million, respectively, in 2014. Tariffs on all Australian seafood exports will be eliminated progressively over 4 years.
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 quadrupled (to $402 million). Key outcomes under ChAFTA include:
Elimination of the 10-14 per cent tariff on abalone within 4 years.
Elimination of the 15 per cent tariff on rock lobster within 4 years.
Elimination of the 12 per cent tariff on southern bluefin tuna, salmon, trout and swordfish within 4 years.
Elimination of the 14 per cent tariff on crabs, oysters, scallops and mussels within 4 years.
Elimination of the up-to-8 per cent tariffs on prawns within 4 years.
Processed foods
Changing consumption habits and Australia’s reputation for high-quality produce also provide great opportunities in the processed food sector. Key outcomes under ChAFTA include:
Elimination of the 7.5 to 30 per cent tariff on orange juice within 7 years, and elimination of tariffs of up to 30 per cent on other fruit juices within 4 years.
Elimination of the 15 per cent tariff on natural honey, and the up-to-25 per cent tariff on honey-related products, within 4 years.
Elimination of the 15 per cent tariff on pasta within 4 years.
Elimination of the 8 to 10 per cent tariff on chocolate within 4 years.
Elimination of the 15 to 25 per cent tariff on canned tomatoes, peaches, pears and apricots within 4 years.
Elimination of the 15 to 20 per cent tariff on biscuits and cakes within 4 years.
Live animals
China is Australia’s second largest market for live animals, worth $254 million in 2014. It is an important and growing market, with exports doubling from $117 million in 2010. Pure-bred cattle currently dominate Australia’s live animal exports to China, worth $206 million in 2014. Key outcomes under ChAFTA include:
Elimination of all tariffs on live animal exports within four years, including the 10 per cent tariff on live cattle (pure-bred breeding cattle already enter China duty free).
China’s WTO quotas and related products
Under 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 enters into force, including on market access.
China’s products into Australia
Consistent 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, will be phased in over 3 years.
