WHILE the United States and China are hunkered down in their trade-war trenches firing tariff broadsides at each other, the rest of the world is getting on with the business of doing business and ushering in a massive new wave of Free Trade Agreements.
Thought to be dead in the water when President Trump pulled the US out of the deal shortly after taking office, the Trans-Pacific Partnership defied doomsayers when the 11 remaining members under strong leadership from Japan regrouped as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or TPP-11 for short.
Following ratification by individual member countries, this massive trade pact which represents nearly 40pc of global gross domestic product hit the ground running on December 30.
That was great news for the Australian beef industry because its biggest and highest value export market is Japan and TPP-11 represents even greater tariff relief than the existing bi-lateral Australia/Japan trade deal, JAEPA.
What’s more, the December 30 start means the TPP-11 tariff-reduction schedule moves to Year 2 when the Japanese fiscal year rolls over on April 1.
The US beef industry is very much aware of the advantage this bestows to their largest competitor in the lucrative Japanese beef trade as they remain stranded on a tariff rate of 38.5pc while Australia and its cohorts New Zealand, Canada and Mexico (who also have an interest in the Japanese beef trade albeit much smaller) all move to 26.6pc.
US Meat Export Federation president Dan Halstrom said in the 2018 annual report that the outstanding success the US has achieved in Japan is at risk due to competitor market-access gains through TPP-11 and the Japan-EU Economic Partnership Agreement.
“It is essential that the US secures similar terms in a Japan-US trade agreement, and does so without delay,” he said.
To highlight the disadvantage of the US remaining without a trade agreement with Japan, USMEF prepared estimates for both beef and pork of the potential loss in export value.
For beef the loss in trade is estimated at US$550 million in year 5 rising to $1.2 billion by year 10.
But if a US/Japan agreement was only concerned with beef, the deal would already be done as what each side has flagged in negotiating objectives appears to satisfy the other.
According to USMEF the US wants equivalence in access to what Japan has agreed in both TPP-11 and its EPA with the EU.
A recent article in business-oriented Nikkei Asian Review stated unequivocally that Japanese negotiators will concede the US agricultural tariffs in line with TPP-11 and EU accords.
The sticking point instead may be the extent to which the US is prepared to eliminate tariffs on Japanese industrial goods.
After all, it was concern that TPP would become a zero-tariff backdoor for industrial/manufactured goods into the American market that was in large part the reason for the US pull-out.
In addition to its endeavours with Japan, the US has also targeted the large and complex relationship it has with the EU to achieve what it considers to be fairer and more balanced trade.
Following on from the October 2018 announcement of intention to negotiate a deal, the Office of the US Trade Representative released its summary of Specific Negotiating Objectives earlier this month.
It reads like an Australian trade-union ambit claim covering a broad range of industrial, textile and agricultural goods plus non-tariff barriers and restrictive rules that distort agricultural markets to the detriment of the US.
Unfortunately for the US, the European Commission appears to have a different interpretation on what President Trump and President Junker agreed to in July last year.
EC Commissioner for Trade Cecilia Malmstrom released the first draft of their negotiating directives on January 18 for submission to EU Member States. Those states must give the green light to the proposals before negotiations can begin.
Specifically the EC proposals provide for two potential agreements with the US; one strictly focused on removal of tariffs on industrial goods excluding agricultural products and the other on removal of non-tariff barriers.
In other words the EU is saying very clearly that agriculture is specifically off limits.
Given USMEF and other agricultural organisations support for the position that agricultural trade must be included, it is difficult to envisage a deal with agricultural trade excluded gaining enough support in Congress to be ratified.
With such a chasm between the two sides chances are this deal may not even get to the starting line.
From the US beef-industry perspective that would be very disappointing as the Japan-EU EPA, which is expected to commence February 1, represents considerable competitive advantage for those EU member countries that have regained access to Japan’s beef market following the ban Japan imposed on beef imports from the EU in 2001 due to BSE. These include Denmark, France, Netherlands, Ireland and Poland.
Britain is the latest to regain entry to Japan’s beef market with the announcement made earlier this month but that is now clouded by the issue of whether Brexit occurs with or without a deal.
Mixed blessings
WHILE BoM this week showed the northern monsoon trough bringing rain down through Cairns, Townsville, Mackay and even some isolated falls out at Winton, the difference in the southernmost part of the state is stark.
In the Southern Downs/Granite Belt region hot days and clear skies are drying up creeks and dams and turning what little grass is left into brittle blow away.
For vegetable growers the season has been cut short due to lack of water and some will not have enough to finish what crop they have in the ground.
Some livestock operators are holding out for the weaner sales to lighten off but others are getting what they can off to meatworks and feedlots.
Concern for a hard winter is mounting with not much time left for pasture growth if a break does come.