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Australia - US FTA
Key Outcomes for Agricultural Products
Tariff Rate Quotas
Agricultural Safeguards
Sanitary and Phytosanitary Measures
Overview
After several years of extensive negotiations the Australia-United States Free Trade Agreement (AUSFTA) came into force on 1 January 2005.
The Agreement provides for increased market access for most Australian agricultural products and the elimination of tariffs over time on almost all US agricultural tariff lines. While not achieving the desired gains for every sector of Australian agriculture, the Government was able to maintain existing single-desk arrangements for marketing sugar, rice, wheat and barley.
Under the Agreement, Australia’s already low tariffs on imported agricultural products from the US were eliminated, however this has not seen a significant increase in agricultural imports from the US.
Australia’s quarantine and food safety regimes remain unchanged under the Agreement. Both Australia and the US reaffirmed that decisions on matters affecting quarantine and food safety will be based only on science and that the World Trade Organization, rather than the AUSFTA, should settle any quarantine dispute.
Market access for agriculture is covered by the following Chapters, Schedules and Annexes of the Agreement:
- Chapter 2 (National Treatment and Market Access for Goods) establishes tariff elimination for agricultural products.
- the Tariff Schedule of the United States and the Tariff Schedule of Australia (both of which form part of Annex 2-B) - together with the provisions of Annex 2-B and the General Notes and Annex I of the tariff schedules - set out the procedure for the elimination of tariffs on agricultural goods and the creation of duty free tariff rate quotas on certain agricultural products
- Chapter 3 (Agriculture) establishes a Committee on Agriculture, covers institutional provisions, and - together with Annex 3-A - sets up agricultural safeguard measures.
The final text of the agreement is available from the Australian Government's online guide to Free Trade Agreements
Key Outcomes for Agricultural Products
Beef
The Agreement eliminates all US beef tariffs over time, with the previous in-quota tariff of 4.4 US cents/kg eliminated from 1 January 2005 and the 26.4 per cent over-quota tariff will be reduced to zero over 18 years. There is to be an 18-year phase out of the out-of-quota duty beginning in year 9, with one-third of the duty phased out in years 9-13 and the remainder in years 14-18.
The Agreement also provides for increasing quota access during the 18 year tariff elimination period. The $1.7 billion annual quota for Australian beef exports to the United States will expand by 20,000 tonnes to 398,214 tonnes in 2007, increasing to 448,214 tonnes in 2023. The estimated additional value to Australian beef exporters in 2023 is around $245 million if the quota is fully utilised.
From year 19, all Australian beef will be free to enter the US market without tariff or quota restrictions and subject only to a price-based safeguard. This safeguard applies to exports over a specified amount based on growth from the quota in year 18. The US also has discretion to not apply the safeguard.
Wine
Wine is Australia’s second largest agricultural export to the United States, valued at around $833 million.
The Agreement phased out tariffs on Australian wine entering the US States market under a harmonisation scheme operating over 11 years. The value of this tariff elimination is expected to be around $38 million annually once full free trade is achieved.
Dairy
The Agreement provided for the immediate elimination of all in-quota tariffs on dairy products exported from Australia and the reduction of out-of quota tariffs over 18 years.
The Agreement also allowed for duty free access for an increased range of Australian dairy products. In 2005 access for Australian dairy producers expanded by 27,350 tonnes and became available for certain cheeses, butter, milk, cream and ice-cream products which had been unable to obtain access to the US market.
Under the Agreement the value of Australia’s annual exports of dairy products affected by US tariff rate quotas increased from around $36 million to around $95-100 million in 2005. Duty-free quota volumes will continue to grow at around 5 per cent per annum after year 20.
Horticulture
Prior to the implementation of the Agreement only two per cent of fresh Australian horticultural products entering the US was duty free. The AUSFTA increased duty free access to 99 per cent. It eliminated tariffs for a range of horticultural products that included:
- Fresh mangoes (previously 6.6 US cents per kg)
- Mandarins (previously 1.9 US cents per kg)
- Fresh tomatoes (previously seasonal tariffs of up to 3.9 US cents per kg)
- Olives (previously 8.8 US cents per kg)
- Olive oil (previously 3.4 US cents per kg)
- Fresh macadamia nuts (previously 5 US cents per kg)
- Cut flowers (previously tariffs of up to 6.4 per cent).
Tariffs on a range of other horticultural products will also be reduced to zero over time, opening up the US market to new and emerging Australian export industries for the first time.
Avocados
The Agreement delivers conditional new market opportunities to Australian avocado producers, eliminating the previously prohibitive tariff of 11.2 US cents per kilogram, and creating 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. The 4,000 tonne duty free quota is divided into two seasonal periods, which cover the whole year. Over-quota tariffs will also be completely eliminated over 18 years.
Peanuts
New market access was also created for 500 tonnes of peanuts and peanut products for 2005, the quota growing by 3 per cent in each subsequent year, with all tariffs being eliminated over 18 years.
Other Agricultural Products
Improved access conditions have also been obtained under the Agreement for a range of other agricultural products exported to the US, including cotton seeds, wool, sheepmeat, seafood, wheat gluten, cereals, processed food and forest products.
For detailed information on specific products see the United States tariff schedule.
Tariff Rate Quotas
As identified above, in addition to the elimination of US agricultural tariffs, the Agreement also provides for increased duty free access for certain agricultural products in the form of tariff rate quotas. Quotas under the Agreement apply to beef, certain dairy products, tobacco, cotton, peanuts, and avocados.
Quotas for beef and dairy products exported to the US were previously managed by the department and existing administrative processes have been expanded to accommodate the additional quotas. Details of the quota management processes may be found at: http://www.daff.gov.au/quota
Exports of tobacco, cotton, peanuts, and avocados have been well below the quota provided and are not formally managed. These operate on a first-come, first-served basis.
The additional tariff rate quota access provided for these products is set out in Annex I to the Tariff Schedule of the United States.
Australian agricultural tariffs
All Australian agricultural tariffs will be eliminated immediately when the Agreement enters into force. Most of these tariffs are already zero. The remainder are currently applied at 4 or 5 percent (except for a small number of dairy tariffs, which are $1.22/kg). These tariffs are identified in the Tariff Schedule of Australia.
Agricultural Safeguards
(Article 3.4 and Annex 3-A)
Three types of agricultural safeguard measures may apply to Australian exports to the United States - a horticulture price-based safeguard (Section A, Annex 3-A), a quantity-based beef safeguard (Section B, Annex 3-A) and a price-based beef safeguard (Section C, Annex 3-A).
Sanitary and Phytosanitary (SPS) Measures
Both countries have reaffirmed that decisions on matters affecting quarantine and food safety will be based on science. The agreement preserves the rights of both countries to protect animal, plant and human health and life in their respective territories.
Australia's regulatory systems, risk assessment and policy development processes are not affected, and the AUSFTA does not compromise Australia's quarantine regime.