According to a Sept. 15 report in The Australian newspaper, Australia and China could conclude negotiations on a free trade agreement by the end of this year. Minister for Trade and Investment Andrew Robb said the past month has produced significant progress in the negotiations, which began nearly a decade ago.
The Australian dairy industry has been one of the strongest proponents of the FTA, as it seeks to compete with New Zealand’s growing dairy exports to China. Through July, China had already imported $5 billion in dairy products – double last year’s pace – with New Zealand accounting for 69 percent of import value, followed by the United States and Australia.
New Zealand’s beef exports to China also enjoy a tariff advantage over the 12 percent duty faced by Australia and other major beef suppliers. China’s duties on imports of New Zealand beef are currently 2.7 percent, and will go to zero in 2016.
Despite the lack of an FTA, Australia is still China’s largest beef supplier. Through July, China’s imports of Australian beef totaled 90,156 metric tons (mt), up 16 percent from a year ago. But the pace of these imports has slowed significantly since early May, when China began stricter enforcement of its hormone ban. July was the second consecutive month that China’s imports of Australian beef were lower year-over-year, and lower than its imports of Uruguayan beef. China’s January-July imports from Uruguay increased 29 percent from a year ago to 57,334 mt.
While August import totals are not yet posted, China’s beef market appeared to regain momentum last month – helping propel wholesale short plate prices to record levels. Higher offer prices across all suppliers, including $3 per pound for Australian grass-fed short plate, reflect increasingly tight global beef supplies and strong demand by China’s foodservice industry.
On a related note, the Australian and Chinese agricultural ministries, which signed an agricultural cooperation agreement in 1984, recently announced the Australia Sino Hundred Year Agricultural and Food Safety Partnership, or “ASA100.” More details on this agreement are available online.
Import data source: Global Trade Atlas