ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)

Impact on South Australia for Trade in Goods and Services

Trade in Goods

South Australian merchandise exports to ASEAN (Financial Year 2008/2009): $1.3 billion. Principal exports:

• Copper: $566 million
• Lead: $155 million
• Wheat: $73 million
• Alcoholic beverages: $67 million
• Cereal preparations: $61 million
• Ferrous waste and scrap: $36 million
• Meat (other than beef): $30 million
• Fruit and nuts: $16 million
• Pulp and waste paper: $15 million
• Confidential items: $78 million

The following analysis summarises tariff outcomes under the ASEAN-Australia-New Zealand FTA (AANZFTA) for Indonesia, Malaysia, the Philippines and Vietnam for some of South Australia’s principal exports. These are the four largest AANZFTA markets with which Australia does not already have a bilateral FTA.

The tariff outcomes in AANZFTA include (export figures are for South Australia, financial year 2008-2009):

Meat and Animal Products

• The reduction of a 10% tariff to 7% in 2012, to 5% in 2013, and its elimination in 2019, on $2.5 million of exports of frozen edible offal of sheep, goats, horse and some other animals to Vietnam.
• The binding of current 0% tariffs from 1 January 2010 on $7.5 million of exports of frozen sheepmeat cuts to Malaysia.

Cereals

• The elimination in 2016 of a 5% tariff on $9.1 million of exports of wheat to Vietnam.
• The binding of current 0% tariffs from 1 January 2010 on $29.2 million of exports of wheat to Malaysia.
• The binding of current 0% tariffs from entry-into-force on $17.9 million of exports of wheat to Indonesia.
• The elimination in 2016 of a 5% tariff on $22.9 million of exports of malt to Vietnam.
• The elimination on 1 January 2010 of a 3% tariff on $1.3 million of exports of rolled or flaked grains of oats to the Philippines.

Pasta

• Tariff-free treatment will be achieved on all tariff lines:
  • Indonesia: the current 5% tariff will be eliminated on entry-into-force
  • Malaysia: current tariffs generally in the 5%-8% range and will all be eliminated by 2011
  • Philippines: current tariff of 15% was reduced to 7% from 1 January 2010, and further reductions will lead to tariff elimination by 2013 for all except 1 tariff line, on which the tariff will be eliminated in 2020
  • Vietnam: current tariffs of 40% subject to annual reductions leading to tariff elimination in 2018.

Citrus

• The binding of current 0% tariffs from 1 January 2010 on $7.6 million of exports of oranges to Malaysia.
• The elimination on entry-into-force of a 5% tariff on $0.9 million of exports of oranges to Indonesia.

Wine

• The reduction on 1 January 2010 of a 7% tariff to 3%, and its elimination in 2015, on $3.2 million of wine exports to the Philippines.

Seafood Exports

• While ASEAN is currently a small market for Australia’s seafood exports, AANZFTA will deliver significant liberalization:
  • All tariffs on seafood exports to Malaysia will be eliminated by 2011, except for tariffs on octopus which will be eliminated by 2015.
  • Tariffs on all seafood exports to the Philippines will be eliminated, generally by 2011 or 2015, except for tariffs on frozen mackerel and fish fillets which will be cut to 4% or 5%.
  • Most tariffs on seafood exports to Indonesia will be eliminated, either on entry-into-force or by 2013, except for a small number of products on which the tariff will be cut to the 2.5%-7.5% range.
  • Tariffs on 75% of seafood tariff lines in Vietnam will be eliminated by 2018, with all other tariffs phased to 5% by 2022.

Copper and Lead Exports

• On South Australia’s leading export to ASEAN, copper, AANZFTA will ensure tariff-free treatment for most products:
  • To Indonesia by 2014, except for copper cathodes (a significant export) where the tariff will be bound at 5%.
  • To Malaysia by 2013, except for copper wire on which the tariff will be eliminated by 2020.
  • To the Philippines by 2013 (with many eliminated on 1 January 2010).
  • To Vietnam by 2018 (with many bound at 0% from 1 January 2010).
• The outcomes on copper include:
  • The elimination on 1 January 2010 of a 3% tariff on $1.9 million of exports of copper mattes to the Philippines.
  • The binding of current 0% tariffs from 1 January 2010 on $228 million of exports of unwrought refined copper cathodes to Malaysia.
• On South Australia’s second most important export to ASEAN, lead, AANZFTA will ensure tariff-free treatment for all markets:
  • To Indonesia and Malaysia by 2012.
  • To the Philippines from 1 January 2010.
  • To Vietnam from 1 January 2010.
• The outcomes on lead include:
  • The elimination on entry-into-force of a 5% tariff on $16.9 million of exports of unwrought refined lead to Indonesia.
  • The binding of current 0% tariffs from 1 January 2010 on $42.4 million of exports of unwrought refined lead to Malaysia.

Automotive Parts and Components

• There will be significant tariff elimination on automotive parts and components. For most products, tariff-free treatment will be achieved, with tariffs on remaining products generally reduced to 5% or less, compared to current tariffs generally in the 10%-15% range, and for Vietnam in the 20%-50% range.
  • Indonesia: tariff-free treatment on almost all tariff lines achieved by 2020 (and on about 80% of tariff lines by 2013).
  • Malaysia: tariff-free treatment on almost all tariff lines achieved by 2020 (and on about 88% of tariff lines by 2013).
  • Philippines: tariff-free treatment on 93% of tariff lines achieved by 2020 (and on about 91% of tariff lines by 2013).
  • Vietnam: tariff-free treatment on 88% of tariff lines achieved by 2020 (with tariffs reduced to the 0-5% range on 88% of tariff lines by 2017).

Passenger Motor Vehicles (PMV)

• Early tariff elimination will be achieved in the Philippines, and on medium to large vehicles in Malaysia.
  • Indonesia: Tariff elimination achieved by 2014 for PMV with spark ignition engines in the 3000-4000cc range. Tariff elimination achieved by 2019 for PMV with smaller spark ignition engines. Tariff only reduced to 50% for other PMV.
  • Malaysia: Tariff elimination achieved by 2013 for PMVs with engines exceeding 2500cc. Tariffs phase to 5% by 2017 for other PMV.
  • Philippines: Tariff elimination achieved in 2010 for PMV with engines exceeding 3000cc, and in 2012 for all other PMV.
  • Vietnam: Tariff reduced to 50% in 2022 for most PMV.

Building Materials

• The reduction on 1 January 2010 of a 10% tariff to 5%, and its elimination in 2012, on $3.9 million of exports of prefabricated structural components for building and civil engineering of cement, concrete or artificial stone to the Philippines.

Instruments

• The elimination of tariffs in the 0%-10% range on entry-into-force or 2012 on $1.7 million of exports of optical, photographic, measuring and medical instruments to Indonesia.
• Tariffs will be eliminated on all optical, photographic, measuring and medical instruments by:
  • 2012 for the Philippines
  • 2013 for Malaysia

Trade in Services

• South Australia is well placed to tap into the growing services markets in ASEAN. Services exports account for more than 17 per cent of South Australia’s total exports (worth $1.99 billion in Financial Year 2008/2009).
  • The largest sector being education-related travel exports (accounting for $892 million, or 45% of services exports).
  • Statistics are not available on the percentage of these exports that go to ASEAN.
• Under AANZFTA, ASEAN countries have made substantial, commercially meaningful improvements on existing WTO commitments in a range of services sectors – including education and professional services, where South Australia has particular strengths. For example:
  • Vietnam has committed to reduce the experience requirement for Australian teachers in higher, secondary and other education services (including foreign language training) from five to three years and to expand from 5 to 36 the (WTO-committed) fields of study that can be delivered by foreign education suppliers.
  • Malaysia has committed to 40 per cent foreign equity participation in locally registered accounting partnerships or accounting firms and to 30 per cent foreign equity participation in multidisciplinary joint ventures in architecture and engineering firms.
  • The Philippines has bound arrangements under which Australian accountants, landscape architects and civil, mechanical metallurgical and sanitary engineers can practice under temporary permits from its Professional Regulation Commission.
  • Indonesia has committed to permit foreign lawyers to work or take part in Indonesian law firms (up to 5 foreign lawyers per firm with an upper limit of 20 per cent) as employees or experts in international law.
• A built-in review provision will ensure that further improvements can be negotiated over time, as the ASEAN countries progressively liberalise their services sectors.

19 January 2010