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Agriculture in the AUSFTA
Fulbright Symposium 2009: Australia-United States Free Trade Agreement

Peter Gallagher — trade & public policy www.petergallagher.com.au August 2009
August 2003

Negotiations engaged but no
details of access
Doha disaster building
Cairns group in trouble
Cancún Chairman’s text
(Harbinson revised)
Zoellick - Mandelson proposals
high expectations for FTA, in Australia
So far… no bonanza
Agriculture accounts for a declining share of world trade
Nominal shares (%)
30

25

20
Oil
15

10

O res and metals
5
Agriculture
0
1963 1968 1973 1978 1983 1988 1993 1998 2003

Source: World Bank.
Nominal shares (%)
30

25

20
Oil
15

10

O res and metals
5
Agriculture
0

Agriculture accounts for a declining share of world trade
1963 1968 1973 1978 1983 1988 1993 1998 2003

Source: World Bank.

Five biggest agricultural product importers ($US ‘000)
110,000K
United States of America
Germany
United Kingdom
France
China
82,500K

55,000K

27,500K

0K
2004 2005 2006 2007 2008

… but the US market accounts for more than any other
Growth in trade but not in Australian agricultural exports*
* Comparisons are sensitive to ‘cherry-picking’ the start date

United States Imports from Australia Australian Imports from the United States
15,000,000 30,000,000

11,250,000 22,500,000

7,500,000 15,000,000

3,750,000 7,500,000

0 0
2004 2005 2006 2007 2008 Value in 2004 Value in 2005 Value in 2006 Value in 2007 Value in 2008

All goods Agriculture (HS 01-24)
Agriculture (HS 01 - 24) All goods

39% nominal in imports of all goods 50% nominal in imports of all goods
-3% nominal change in agriculture 90% nominal increase in agriculture
Source: USITC Source: UN-ITC
We’ve gone backward,*
* From a share of 3.7% to a share of 3.6%

Shares of U.S. agricultural imports from the world (%)
30.0

22.5

15.0

7.5

0
2004 2005 2006 2007 2008

Australia Chile Mexico Canada Source: USITC

Especially compared to other ‘free trade’ partners
US Imports of Australian Meat ($US ‘000) US Imports of Australian Dairy ($US ‘000)
1,500,000 70,000

1,125,000 52,500

750,000 35,000

375,000 17,500

0 0
Value in 2006 Value in 2007 Value in 2008 Value in 2006 Value in 2007 Value in 2008

0201 Meat of bovine animals, fresh or chilled 0405 Butter and other fats and oils derived from milk
0204 Meat of sheep or goats - fresh, chilled or frozen 0402 Milk and cream, concentrated or sweetened
0202 Meat of bovine animals, frozen 0406 Cheese and curd

US Imports of Australian Lobsters, fish ($US ‘000) US Imports of Australian Wine, Beer ($US ‘000)
100,000 900,000

75,000 850,000

50,000 800,000

25,000 750,000

0 700,000
Value in 2006 Value in 2007 Value in 2008 Value in 2006 Value in 2007 Value in 2008

0302 Fish, fresh, whole 2203 Beer made from malt
0306 Crustaceans 2204 Wine of fresh grapes

Source: UN-ITC
US Imports of Australian Meat ($US ‘000) US Imports of Australian Dairy ($US ‘000)
1,500,000 70,000

1,125,000 52,500

750,000 35,000

375,000 The “Beer Gap” 17,500
15,000

0 0
Value in 2006 Value in 2007 Value in 2008 Value in 2006 Value in 2007 Value in 2008

10,000
0201 Meat of bovine animals, fresh or chilled 0405 Butter and other fats and oils derived from milk
0204 Meat of sheep or goats - fresh, chilled or frozen 0402 Milk and cream, concentrated or sweetened
0202 Meat of bovine animals, frozen 0406 Cheese and curd
5,000

US Imports of Australian Lobsters, fish ($US ‘000) US Imports of Australian Wine, Beer ($US ‘000)
0
100,000 900,000
2006 2007 2008

75,000 850,000
Aus Imports Aus Exports

50,000 800,000

25,000 750,000

0 700,000
Value in 2006 Value in 2007 Value in 2008 Value in 2006 Value in 2007 Value in 2008

0302 Fish, fresh, whole 2203 Beer made from malt
0306 Crustaceans 2204 Wine of fresh grapes

Source: UN-ITC
Top 5 Australian Ag Imports from USA ($A ‘000)
200,000 Beer & spirits : imports from USA ($A ‘000)
22 Beverages, spirits and vinegar
8 Edible fruit, nuts, peel of citrus fruit, melons 150,000
21 Miscellaneous edible preparations
23 Residues, wastes of food industry, animal fodder
2 Meat and edible meat offal
150,000 112,500

75,000

100,000
37,500

0
50,000 Value in 2004 Value in 2006 Value in 2008

2203 Beer made from malt
2208 Spirits, liqueurs
0
Value in 2004 Value in 2005 Value in 2006 Value in 2007 Value in 2008

Pork (bacon, hams) : imports from USA ($A ‘000)
Table Grapes : imports from USA ($A ‘000)
100,000
60,000

45,000 75,000

30,000 50,000

15,000 25,000

0 0
Value in 2004 Value in 2006 Value in 2008 Value in 2004 Value in 2006 Value in 2008

0806 Grapes, fresh or dried 20329 Swine cuts, frozen nes

Source: UN-ITC
r an ti n e
Qua

Avocados
• Eliminates the previously prohibitive tariff of 11.2
US cents per kilogram
• Creates an initial duty-free access to the US for
4,000 tonnes of Australian avocados after two
years, growing by an additional 10 per cent each
year.
• Over-quota tariffs will also be completely
eliminated over 18 years.

Exports = zero
Lessons from the experience
“Managing Agriculture in the AUSFTA”*

* http://www.apec.org.au/docs/fta2gal.pdf
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All too predictable?
An important part of the 1. Sugar excluded
negotiating strategy will be to
resist any attempt to ‘manage’ 2. No postponements but time-
the agriculture problem by
1. Excluding agricultural sectors frames for beef, dairy, are
from liberalization roughly twice what they should
2. Postponing their
liberalization beyond the be (& quarantine?)
dates for other sectors in the
interim agreement 3. Beef and horticulture safeguards
3. ‘Back-loading’ tariff cuts or
using ‘claw-back’ safeguards t i ve ly
e l a
that jeopardize the ‘lock-in’
r
d r es ul t
of liberalization A goo
Better: NAFTA, ANZCER… EU
! ! ! 13 peter gallagher g

Bigger result in a narrower framework
The world will change during I expected, over the course of a
the period of the ‘interim
agreement’ in ways that are
decade, that:
likely to reduce both the 1. The U.S. market would open up
‘bonanza’ for Australian
producers and the ‘threats’ to more on an MFN basis, reducing
U.S. producers. the margin of preference.
2. U.S. producers would become
more specialized and less
Jury is s ti l l o u t threatened by imports (although
the GDP share of the sector
would fall further).
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Impact on multilateral agreements
The… FTA is one of the An ambitious AUSFTA — perhaps
best ways to ‘manage’ future
directions in global agricultural combined with other FTA’s
trade policies (Singapore, other ASEANs,
‘Western Hemisphere’) — seemed
a potential inducement to complete
the Doha round in 2004, as
planned
…not China, India
n t ? F o r w ho m ?
Induceme
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Reproducible result?
“Although it seems to offer a Theorem: Each side made
‘bonanza’ to Australian
producers, the prospect of concessions to a competitive supplier
large increases in exports of that were possible only in a specific
some agricultural political context.
products poses a threat to key
U.S. agricultural lobbies” But this realization is still not
integrated into Australian FTA policies.
i s t h e e n e m y
“Better Why do we not have an FTA in
o d ” services + investment with EU,
of g o Voltaire
Japan? Because it would be better for
us to have a ‘goods’ deal that covered
It would be better for them too (but so what?)
agriculture? Is this a good reason?
! ! ! 16 peter gallagher g

Next steps to open agricultural markets

1. “Completion” of the AUSFTA — quarantine
protocols, sugar, beef safeguard (>2020?)
2. A trans-Pacific FTA (but small economies only)
3. Completion of the Doha round — 54% cuts in
bound, plus some reduction in support (>2013?)
4. A ‘critical mass’ agreement — 30 products, 38
countries including China, India. Larger welfare gains
than simulated Doha results.
g
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