Fulbright Presentation On 5 Years Of Ausfta
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!!! 1
peter gallagher
!!! Agriculture in the AUSFTA Fulbright Symposium 2009: Australia-United States Free Trade Agreement
Peter Gallagher — trade & public policy
www.petergallagher.com.au
August 2009
g
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 0
Agriculture
1963 1968 1973 1978 1983 1988 Source: World Bank.
1993
1998 2003
Nominal shares (%) 30 25 20 Oil 15 10 O res and metals
5 0
Agriculture
1963 1968 1973 1978 1983 1988 Source: World Bank.
1993
1998 2003
Agriculture accounts for a declining share of world trade Five biggest agricultural product importers ($US ‘000) 110,000K
United States of America Germany United Kingdom France China
82,500K
55,000K
27,500K
0K
2004
2005
2006
2007
2008
… but the US market accounts for more than any other
Growth in trade but not in Australian agricultural exports* * Comparisons are sensitive to ‘cherry-picking’ the start date
United States Imports from Australia
Australian Imports from the United States
15,000,000
30,000,000
11,250,000
22,500,000
7,500,000
15,000,000
3,750,000
7,500,000
0
2004
2005
2006
2007
2008
All goods Agriculture (HS 01 - 24)
0 Value in 2004 Value in 2005 Value in 2006 Value in 2007 Value in 2008
Agriculture (HS 01-24) All goods
39% nominal in imports of all goods
50% nominal in imports of all goods
-3% nominal change in agriculture
90% nominal increase in agriculture
Source: USITC
Source: UN-ITC
We’ve gone backward,* * From a share of 3.7% to a share of 3.6%
Shares of U.S. agricultural imports from the world (%) 30.0
22.5
15.0
7.5
0
2004
2005
Australia
2006
Chile
2007
Mexico
2008
Canada
Source: USITC
Especially compared to other ‘free trade’ partners
US Imports of Australian Meat ($US ‘000)
US Imports of Australian Dairy ($US ‘000)
1,500,000
70,000
1,125,000
52,500
750,000
35,000
375,000
17,500
0
Value in 2006 Value in 2007 Value in 2008
0
0201 Meat of bovine animals, fresh or chilled 0204 Meat of sheep or goats - fresh, chilled or frozen 0202 Meat of bovine animals, frozen
US Imports of Australian Lobsters, fish ($US ‘000)
75,000
850,000
50,000
800,000
25,000
750,000
700,000 Value in 2007
0302 Fish, fresh, whole 0306 Crustaceans
Value in 2008
Value in 2008
US Imports of Australian Wine, Beer ($US ‘000) 900,000
Value in 2006
Value in 2007
0405 Butter and other fats and oils derived from milk 0402 Milk and cream, concentrated or sweetened 0406 Cheese and curd
100,000
0
Value in 2006
Value in 2006
Value in 2007
Value in 2008
2203 Beer made from malt 2204 Wine of fresh grapes
Source: UN-ITC
US Imports of Australian Meat ($US ‘000)
US Imports of Australian Dairy ($US ‘000)
1,500,000
70,000
1,125,000
52,500
750,000
35,000
The “Beer Gap”
375,000
17,500
15,000 0
0
Value in 2006 Value in 2007 Value in 2008 10,000
0201 Meat of bovine animals, fresh or chilled 0204 Meat of sheep or goats - fresh, chilled or frozen 0202 Meat of bovine animals, frozen
Value in 2006
Value in 2007
Value in 2008
0405 Butter and other fats and oils derived from milk 0402 Milk and cream, concentrated or sweetened 0406 Cheese and curd
5,000
US Imports of Australian Wine, Beer ($US ‘000)
US Imports of Australian Lobsters, fish ($US ‘000) 100,000
0
75,000
2006
2007
Aus Imports
2008
Aus Exports
900,000
850,000
50,000
800,000
25,000
750,000
0
700,000 Value in 2006
Value in 2007
0302 Fish, fresh, whole 0306 Crustaceans
Value in 2008
Value in 2006
Value in 2007
Value in 2008
2203 Beer made from malt 2204 Wine of fresh grapes
Source: UN-ITC
Top 5 Australian Ag Imports from USA ($A ‘000) 200,000
150,000
Beer & spirits : imports from USA ($A ‘000)
22 Beverages, spirits and vinegar 8 Edible fruit, nuts, peel of citrus fruit, melons 21 Miscellaneous edible preparations 23 Residues, wastes of food industry, animal fodder 2 Meat and edible meat offal
150,000
112,500
75,000 100,000 37,500
0 50,000
Value in 2004
Value in 2006
Value in 2008
2203 Beer made from malt 2208 Spirits, liqueurs 0 Value in 2004
Value in 2005
Value in 2006
Value in 2007
Value in 2008
Table Grapes : imports from USA ($A ‘000) 60,000
Pork (bacon, hams) : imports from USA ($A ‘000) 100,000
45,000
75,000
30,000
50,000
15,000
25,000
0
Value in 2004
Value in 2006
0806 Grapes, fresh or dried
Value in 2008
0
Value in 2004
Value in 2006
Value in 2008
20329 Swine cuts, frozen nes Source: UN-ITC
e n i t n a r 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
! ! ! 12
peter gallagher
All too predictable? An important part of the negotiating strategy will be to resist any attempt to ‘manage’ the agriculture problem by 1. Excluding agricultural sectors from liberalization 2. Postponing their liberalization beyond the dates for other sectors in the interim agreement 3. ‘Back-loading’ tariff cuts or using ‘claw-back’ safeguards that jeopardize the ‘lock-in’ of liberalization
1. Sugar excluded 2. No postponements but timeframes for beef, dairy, are roughly twice what they should be (& quarantine?) 3. Beef and horticulture safeguards ve i t a l e r
ly
t l u s e r d A goo Better: NAFTA, ANZCER… EU
g
! ! ! 13
peter gallagher
Bigger result in a narrower framework The world will change during the period of the ‘interim agreement’ in ways that are likely to reduce both the ‘bonanza’ for Australian producers and the ‘threats’ to U.S. producers.
t u o l l i t s s i Jury
I expected, over the course of a decade, that: 1. The U.S. market would open up more on an MFN basis, reducing the margin of preference. 2. U.S. producers would become more specialized and less threatened by imports (although the GDP share of the sector would fall further).
g
! ! ! 14
peter gallagher
Impact on multilateral agreements The… FTA is one of the best ways to ‘manage’ future directions in global agricultural trade policies
An ambitious AUSFTA — perhaps combined with other FTA’s (Singapore, other ASEANs, ‘Western Hemisphere’) — seemed a potential inducement to complete the Doha round in 2004, as planned
? m o h w r o F ? t n Induceme
…not China, India
g
! ! ! 15
peter gallagher
Reproducible result? “Although it seems to offer a ‘bonanza’ to Australian producers, the prospect of large increases in exports of some agricultural products poses a threat to key U.S. agricultural lobbies”
y m e n e e h t s i “Better Voltaire ” d o o g of It would be better for them too (but so what?)
Theorem: Each side made concessions to a competitive supplier that were possible only in a specific political context. But this realization is still not integrated into Australian FTA policies. Why do we not have an FTA in services + investment with EU, Japan? Because it would be better for us to have a ‘goods’ deal that covered agriculture? Is this a good reason?
g
! ! ! 16
peter gallagher
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
g petergallagher.com.au
peter gallagher
!!! Agriculture in the AUSFTA Fulbright Symposium 2009: Australia-United States Free Trade Agreement
Peter Gallagher — trade & public policy
www.petergallagher.com.au
August 2009
g
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 0
Agriculture
1963 1968 1973 1978 1983 1988 Source: World Bank.
1993
1998 2003
Nominal shares (%) 30 25 20 Oil 15 10 O res and metals
5 0
Agriculture
1963 1968 1973 1978 1983 1988 Source: World Bank.
1993
1998 2003
Agriculture accounts for a declining share of world trade 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
2004
2005
2006
2007
2008
All goods Agriculture (HS 01 - 24)
0 Value in 2004 Value in 2005 Value in 2006 Value in 2007 Value in 2008
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
Australia
2006
Chile
2007
Mexico
2008
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
Value in 2006 Value in 2007 Value in 2008
0
0201 Meat of bovine animals, fresh or chilled 0204 Meat of sheep or goats - fresh, chilled or frozen 0202 Meat of bovine animals, frozen
US Imports of Australian Lobsters, fish ($US ‘000)
75,000
850,000
50,000
800,000
25,000
750,000
700,000 Value in 2007
0302 Fish, fresh, whole 0306 Crustaceans
Value in 2008
Value in 2008
US Imports of Australian Wine, Beer ($US ‘000) 900,000
Value in 2006
Value in 2007
0405 Butter and other fats and oils derived from milk 0402 Milk and cream, concentrated or sweetened 0406 Cheese and curd
100,000
0
Value in 2006
Value in 2006
Value in 2007
Value in 2008
2203 Beer made from malt 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
The “Beer Gap”
375,000
17,500
15,000 0
0
Value in 2006 Value in 2007 Value in 2008 10,000
0201 Meat of bovine animals, fresh or chilled 0204 Meat of sheep or goats - fresh, chilled or frozen 0202 Meat of bovine animals, frozen
Value in 2006
Value in 2007
Value in 2008
0405 Butter and other fats and oils derived from milk 0402 Milk and cream, concentrated or sweetened 0406 Cheese and curd
5,000
US Imports of Australian Wine, Beer ($US ‘000)
US Imports of Australian Lobsters, fish ($US ‘000) 100,000
0
75,000
2006
2007
Aus Imports
2008
Aus Exports
900,000
850,000
50,000
800,000
25,000
750,000
0
700,000 Value in 2006
Value in 2007
0302 Fish, fresh, whole 0306 Crustaceans
Value in 2008
Value in 2006
Value in 2007
Value in 2008
2203 Beer made from malt 2204 Wine of fresh grapes
Source: UN-ITC
Top 5 Australian Ag Imports from USA ($A ‘000) 200,000
150,000
Beer & spirits : imports from USA ($A ‘000)
22 Beverages, spirits and vinegar 8 Edible fruit, nuts, peel of citrus fruit, melons 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
Table Grapes : imports from USA ($A ‘000) 60,000
Pork (bacon, hams) : imports from USA ($A ‘000) 100,000
45,000
75,000
30,000
50,000
15,000
25,000
0
Value in 2004
Value in 2006
0806 Grapes, fresh or dried
Value in 2008
0
Value in 2004
Value in 2006
Value in 2008
20329 Swine cuts, frozen nes Source: UN-ITC
e n i t n a r 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
! ! ! 12
peter gallagher
All too predictable? An important part of the negotiating strategy will be to resist any attempt to ‘manage’ the agriculture problem by 1. Excluding agricultural sectors from liberalization 2. Postponing their liberalization beyond the dates for other sectors in the interim agreement 3. ‘Back-loading’ tariff cuts or using ‘claw-back’ safeguards that jeopardize the ‘lock-in’ of liberalization
1. Sugar excluded 2. No postponements but timeframes for beef, dairy, are roughly twice what they should be (& quarantine?) 3. Beef and horticulture safeguards ve i t a l e r
ly
t l u s e r d A goo Better: NAFTA, ANZCER… EU
g
! ! ! 13
peter gallagher
Bigger result in a narrower framework The world will change during the period of the ‘interim agreement’ in ways that are likely to reduce both the ‘bonanza’ for Australian producers and the ‘threats’ to U.S. producers.
t u o l l i t s s i Jury
I expected, over the course of a decade, that: 1. The U.S. market would open up more on an MFN basis, reducing the margin of preference. 2. U.S. producers would become more specialized and less threatened by imports (although the GDP share of the sector would fall further).
g
! ! ! 14
peter gallagher
Impact on multilateral agreements The… FTA is one of the best ways to ‘manage’ future directions in global agricultural trade policies
An ambitious AUSFTA — perhaps combined with other FTA’s (Singapore, other ASEANs, ‘Western Hemisphere’) — seemed a potential inducement to complete the Doha round in 2004, as planned
? m o h w r o F ? t n Induceme
…not China, India
g
! ! ! 15
peter gallagher
Reproducible result? “Although it seems to offer a ‘bonanza’ to Australian producers, the prospect of large increases in exports of some agricultural products poses a threat to key U.S. agricultural lobbies”
y m e n e e h t s i “Better Voltaire ” d o o g of It would be better for them too (but so what?)
Theorem: Each side made concessions to a competitive supplier that were possible only in a specific political context. But this realization is still not integrated into Australian FTA policies. Why do we not have an FTA in services + investment with EU, Japan? Because it would be better for us to have a ‘goods’ deal that covered agriculture? Is this a good reason?
g
! ! ! 16
peter gallagher
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
g petergallagher.com.au
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