Reborn TPP good news for Australian wine and cheese makers

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The Trans Pacific Partnership has been reborn as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Matthew McDonald examines the new agreement and what it means for our food and beverage industry.

The Trans Pacific Partnership (TPP), which originally was to include 12 Pacific nations, seemed dead in the water early last year when the then newly elected President Donald Trump declared that the US would not be involved in the deal.

However, at the World Economic Forum in Switzerland in January, the 11 remaining nations –  Japan, Canada, Australia, Mexico, Malaysia, Singapore, Chile, Peru, Vietnam, New Zealand and Brunei – agreed to a new deal known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Then in March, all parties signed the deal (which is also being called TPP-11). Broadly, it cuts tariffs and puts in place common laws and regulations. It is a framework under which separate 18 new bilateral deals between participating countries will sit. Australia, for example, has made new deals with Canada and Mexico.

What’s in it for Australia

From an Australian perspective, farmers and the service sector are the big winners.

In terms of agriculture, our beef exports to Japan (which were worth $2 billion in 2016-17) will be boosted by tariff reductions; and there will be new access for dairy products into Japan, Canada and Mexico.

In addition, Australia will have new access into the Japanese, Canadian and Mexican sugar markets; and there will be an elimination of all tariffs on sheep meat, as well as an elimination of many tariffs on seafood and horticulture.

Also, our cereals and grain exporters will gain new access into Japan. Significantly, for the first time in 20 years, this will include rice products.

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However, agriculture isn’t the only winner. The CPTPP will eliminate more than 98 per cent of tariffs in the free trade area. Australian cheese makers, for example, can look forward to the scrapping of a range of tariffs into Japan which currently cover over $100 million of trade.

Also, Australian wine makers, who were already on a high following the recent release of record-breaking export figures for 2017, will further benefit from the news that the CPTPP will see the elimination of tariffs on wine. CEO of Wine Australia, Andreas Clark told Food & Beverage Industry News that the two core benefits for the sector are reduced tariffs and a specific annex for wine and spirits.

“The annex is an exciting part of the partnership as it provides an opportunity to remove a range of technical barriers that can impact our exports. All the parties involved in the CPTPP have agreed on a cooperative framework to remove some of these barriers, which will help streamline trade,” he said.

“The Australian grape and wine community has seen many benefits from our existing free trade agreements with the USA, Japan, Korea and China – among many others – and the CPTPP may allow additional benefits to flow back to grape and wine businesses across the country.”

Clark’s positive reaction was echoed across Australian industry.

“The deal covers 11 nations that together constitute around 30 per cent of the global economy, and four of Australia’s top 10 export markets for food and beverages. The economic weight of the TPP and common set of rules established among 11 countries will greatly support Australian food exporters, providing Australian jobs and economic growth,” said Australian Food & Grocery Council (AFGC) CEO Tanya Barden.

She pointed out that the deal will result in greater alignment and harmonisation across the region on regulation and behind-the-border trade issues and added that this is particularly relevant to the food industry, which generally face onerous import controls that differ from one nation to another.

“The parliamentary process for reviewing international trade agreements will provide an opportunity to review the TPP agreement in great detail. At the forefront of that review must be the promotion of jobs, investment and growth for Australia’s economic prosperity,” said Barden.

What are the negatives?

While the Opposition has been mostly positive about the deal, sections of the Labor Party claim some Australian workers could suffer as a result of the CPTPP. They say the establishment of labour market testing for any foreign workers are crucial. Opposition leader Bill Shorten has called for the Productivity Commission to conduct an independent analysis of the deal first. He said that if modelling shows the deal is good for the nation and Australian jobs, Labor would back it.

One important feature of trade deals not often noted by the lay person is the fact that they aren’t all about free trade. They are also investor rights agreements. As such, the deal includes an investor-statement-dispute-settlement mechanism (ISDS). This has raised fears that, as the result of the CPTPP, corporations could sue the Australian Government if Australian laws adversely affect their performance. Many point to Philip Morris suing the Australian Government for introducing plain cigarette packaging as an example of what could happen.

Trade Minister Steve Ciobo responded to the fears by saying Australia will retain the right to make its own legislation and that the fears were unfounded.