Govt delay in Australia-Korea FTA jeopardises $770m beef export market
Beef Central | 12 Nov 2012
Govt delay in Australia-Korea FTA jeopardises $770m beef export market
By Jon Condon
Australia’s share of the Korean export beef market could be slashed by half over the next 15 years, unless a Free Trade Agreement can be expediently established between the two countries.
Recent modelling by the Centre for International Economics has exposed the significant financial and market share disadvantage Australia will be exposed to, unless an FTA can be established with Korea to match that implemented with the US earlier this year.
According to CIE data, unless an FTA comes into force, the Australian beef industry will incur an initial $13 million loss (present value terms) in 2013, with Korean export market share falling from 49 percent today to 37.5pc next year due to the tariff differential between US beef and Australian beef.
The annual financial impact will rise to $182 million by 2026, by which time Australia’s export market share is forecast to decline to only 26pc in the absence of an FTA. The cumulative losses would approach $1.4 billion over the 15-year term.
A delegation including representatives from the Cattle Council of Australia, Australian Lot Feeders Association and the Australian Meat Industry Council returned from Korea this week. The group held discussions with key importers and retailers of Australian beef on the effect the delay in the completion of the Australia-Korea FTA is having on Korean trade.
As outlined in this earlier Beef Central article summarising the current situation, the AKFTA is yet to be concluded due to an impasse on incorporating an Investor State Dispute Settlement (ISDS) mechanism in the agreement. A stalemate exists, with the Australian Government seeking to exclude ISDS and the Korean Government supporting its inclusion.
“Waiting for the Australian and Korean Governments to resolve the ISDS issue is not a cost-free exercise for the beef sector,” AMIC representative Stephen Kelly said, in a statement issued today after the delegation’s return.
“From 1 January 2013, imported beef from the US will have a 5.3pc tariff advantage over Australia, as a result of the Korean-US FTA. Under the schedule next year, the US will pay a preferential tariff of 34.67pc, compared to 40pc for Australian beef.”
This tariff differential will widen by a further 2.66pc on January 1 each year, with US beef entering Korea tariff-free from 2026.
“Business interests in Korea have confirmed Australian beef industry fears that the delays in the AKFTA negotiations will have a disastrous effect on beef sales into Australia’s third largest beef export market,” Mr Kelly said.
“Australia’s market position will dramatically decline from 2013 unless Australian beef is able to compete on comparable tariff terms with US product,” he said.
He suggested it was critical that the Australian and Korean Governments return to the negotiating table as soon as possible to iron-out their differences on the ISDS clause.
“The Australian Government has just released its ‘Australia in the Asian Century’ White Paper, where it suggests that FTAs give concrete benefits and help agriculture and food exporters to compete on equal terms. The Australian beef industry is now urging the Government to act decisively and work on implementing the vision outlined in its own White Paper, by completing the Australia-Korea FTA,” Mr Kelly said.
The Australian Government had the opportunity to lessen the potential negative impact by addressing the ISDS issue and expedite finalisation of the AKFTA negotiations. The Australian red meat industry is seeking a swift conclusion to the AKFTA deliberations via a high quality agreement which will minimise the tariff differentials compared to those levied on competing products.
Korea is Australia’s third largest beef export customer, taking 146,300 tonnes in 2011, representing 15pc of Australia’s global beef exports, worth $770 million.
