US and Australia sign free trade agreement

Monday, 09 Feb 2004 10:25AM

The United States and Australia have signed a trade agreement that officials say will eliminate duties from more than 99 per cent of American manufacturing exports to Australia.

US Trade Representative Robert Zoellick described the deal, which requires congressional approval, as "the most significant immediate cut in industrial tariffs ever achieved in a US free trade agreement".

Australia, the United States' 13th largest export market, buys more goods from the United States than from any other country. The US economy has a $US9 billion ($A11.84 billion) trade surplus in two-way trade that totalled about $US28 billion ($A36.84 billion) in 2002.

A statement from Zoellick's office said the agreement could increase American manufacturing exports to Australia by $US2 billion ($A2.63 billion) a year. Some of those are aircraft, motor vehicles and parts, machinery, computers, chemicals and wood and paper products.

Australian manufacturing exports to the United States will also grow, largely in pharmaceuticals, light commercial vehicles and motor vehicle parts, according to the statement.

Many agricultural products are also covered, although quotas and tariffs are unchanged on sugar, a major Australian export. American sugar producers had lobbied hard against opening US markets to more Australian sugar.

The agreement should lead to small increase in exports of beef by both countries, the US statement said. Quotas will remain as they are, but the agreement will phase out tariffs of beef above the quotas.

"All US agricultural exports to Australia, totalling more than $US400 million ($A526.28 million), will receive immediate duty-free access," the statement said. It said the deal "is sensitive to concerns that have been raised" by farmers, cattlemen and members of Congress from farm states.

There will be no change in US tariffs for dairy imports above the quota. Initial increases in imports from Australia will amount to about 0.17 per cent of annual US dairy production. Australia exports about two per cent of US dairy imports.

The first US free trade agreement with a developed country was with Canada in 1988, five years before the 1993 North American Free Trade Agreement that linked the United States and Canada with Mexico.

Other countries linked to the United States by free trade pacts are Israel, Jordan, Chile and Singapore. The Central American Free Trade Area will link the United States with Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica if the pact is approved by Congress.
AP

Australia-United States Free Trade Agreement

AGRICULTURE

--The AUSFTA will give Australian agriculture a significant boost in the US market.
--Two thirds of all agricultural tariffs - including in important commodities such as lamb, sheep meat and horticultural products, will be eliminated immediately, a further 9 per cent of tariffs will be cut to zero within four years.
--The AUSFTA provides greater access to the US market for two of Australia's key agricultural export industries, beef and dairy.
--Australia's sugar access remains unchanged at 87,000 tonnes per annum.
--Australia's single-desk arrangements for marketing Australian commodities to the world, such as for sugar, rice, wheat and barley, have been preserved.
--Australia's quarantine and food safety regimes, which ensure our health and our environment are protected, are not affected by the Agreement. This includes labelling requirements for products such as GM foods

Summary

The agriculture deal in the AUSFTA delivers substantial market access gains for the majority of Australia's agricultural producers - including for the beef and dairy industries - who have faced restrictive barriers in the US market.

Dairy

Under the AUSFTA, the Australian dairy industry can send nearly three times as much of current tariff quota products from year one, with ongoing growth in the quotas at an average yearly rate of 5 per cent.

The increase - worth $55 million (assuming US Exchange rate of 0.75) in the first year of the Agreement - is across the board for all dairy products constrained by quotas, providing significant new market opportunities for dairy processors and producers.

The biggest market access gains are in products where the Australian dairy industry is most competitive and sees great prospects for substantial growth. The deal includes access for dairy products previously excluded from the US market, such as certain cheeses, butter, milk, cream and ice-cream products. Examples include 7.5 million litres of milk, ice-cream and cream, and 2000 tonnes of European type cheeses.

In addition, Australia has gained significant increases in quota access for whole-milk powder (used primarily in bakery and confectionary products), from 0 to 4,000 metric tonnes.

Beef

The AUSFTA provides greater access for Australia's number one export to the United States.

In addition to the substantial WTO quota that Australia already holds, our beef producers will have access for an additional 15,000 tonnes of beef in year 2, increasing to 70,000 tonnes in year 18, and then effectively free trade.

In-quota tariffs will be eliminated immediately, and over-quota duties will be phased out from years 9 to 18 of the Agreement.

Tariff-only products

Tariffs on the majority of agricultural products, including most lamb and sheepmeat, and products such as oranges, cut flowers and cotton seeds, will be zero from day 1 of the Agreement. Further elimination of other tariffs will take place over periods of 4, 10 and 18 years.

The bulk of our lamb and sheep meat exports will benefit from immediate tariff-free access, clearing the way for continued success in a market where Australian producers see great prospects over the long term.

The elimination of tariffs will mean that agricultural sectors such as horticulture can look to the US market as a serious commercial prospect. Horticulture is a fast growing export industry and should benefit from new access opportunities in the AUSFTA.

--Zero tariffs on oranges will provide the citrus industry with savings of nearly $670,000 in duties alone.
--Quota access for the first time, for avocados will help the burgeoning avocado industry in Australia, currently growing at 10 percent.
--Zero tariff access for olives and fresh macadamia nuts will also benefit two other fast growing horticulture industries.

Single export desks

Australia's single-desk arrangements for marketing Australian commodities to the world, such as for sugar, rice, wheat and barley, have been preserved.

Who to Contact
For further information, please contact DFAT's AUSFTA Taskforce:

Hotline: 1300 558 413 (local call rates) between 9am and 5pm (AEST) - Mon- Fri

E-mail: usfta@dfat.gov.au