1. Purpose and structure

Market access for agriculture is covered by the following Chapters, Schedules
and Annexes of the Agreement:

• Chapter 2 (National Treatment and Market Access for Goods) establishes
  tariff elimination for agricultural products
• the Tariff Schedule of the United States and the Tariff Schedule of
  Australia (both of which form part of Annex 2-B) - together with the provisions
  of Annex 2-B and the General Notes and Annex I of the tariff schedules
  - set out the procedure for the elimination of tariffs on agricultural
  goods and the creation of duty free tariff rate quotas on certain agricultural
  products
• Chapter 3 (Agriculture) establishes a Committee on Agriculture, covers
  institutional provisions, and - together with Annex 3-A - sets up agricultural
  safeguard measures

The Agreement provides for increased market access for most Australian agricultural
products and the elimination of tariffs over time on almost all United States
agricultural tariff lines. In addition, the Agreement provides for
increased upfront duty free quotas on a range of products. Some safeguards
will apply to beef and some agricultural products, as detailed below.

2. Tariff elimination

2.1 United States agricultural tariffs

Every United States agricultural tariff line at the 8-digit tariff code
level is assigned a staging category. This staging category establishes
the rate at which the relevant tariffs will be eliminated under the Agreement. The
staging categories for each tariff line are identified in the Tariff Schedule
of the United States.

Five main staging categories are established for the elimination of United
States tariffs on Australian agricultural goods. The staging categories
- most of which are defined in Annex 2-B of the Agreement - are as follows:

Confirmation of pre-existing zero tarif	E
Immediate tariff elimination	A
Elimination of tariffs in equal annual instalments over 4 years	B
Elimination of tariffs in equal annual instalments over 10 years	D
Elimination of tariffs in equal annual instalments over 18 years	F

In addition to these five main staging categories, there are a number of
additional staging categories applying to a small range of goods. These
are identified in the General Notes section of the Tariff Schedule of the
United States and apply to products such as beef and avocadoes. The
tariff elimination schedules for wine are identified in Paragraph 28 of Annex
I to the Tariff Schedule of the United States.

The Agreement provides for the elimination over time of all United States
agricultural tariffs, with two exceptions. In relation to dairy products
subject to tariff rate quota, the Agreement does not provide for any change
to the over-quota tariffs for these goods. The Agreement does, however,
provide for a significant increase in the volumes of duty free quota access
for these products and for the elimination of existing in-quota tariffs -
see the dairy section below - as well as for the elimination over time of
all tariffs on non-quota dairy products). In addition to dairy products,
the Agreement does not provide for any change to any tariffs on sugar or
sugar-products.

2.2 Australian agricultural tariffs

All Australian agricultural tariffs will be eliminated immediately the Agreement
enters into force. Most of these tariffs are already zero. The
remainder are currently applied at four or five percent (except for a small
number of dairy tariffs, which are $1.22/kg). These tariffs are identified
in the Tariff Schedule of Australia.

3. Tariff rate quotas

In addition to the elimination of United States agricultural tariffs detailed
above, the Agreement also provides for increased duty free access for certain
Australian agricultural goods in the form of a tariff rate quota. This
allows Australian producers to export increasing amounts of these products
free of duty to the United States during the tariff elimination period. In
the case of dairy products subject to tariff rate quotas, the new (and growing)
quota volumes provide the only additional access for these products into
the United States market, in the absence of tariff reductions for these products.

Tariff rate quotas apply to the following products:

• beef
• dairy
• tobacco
• cotton
• peanuts
• avocadoes

The additional tariff rate quota access provided for each of these products
is set out in Annex I to the Tariff Schedule of the United States.

The new duty free tariff rate quotas for beef and dairy established under
the Agreement will be administered from Australia. The Australian
Government will issue export certificates to Australian producers for the
total volume of the tariff rate quotas. These export certificates
will be recognised by the United States Customs Service and enable those
products to enter the United States duty free. The Australian Government
will develop procedures for the allocation of export certificates in consultation
with Australian industry.

3.1 Beef

Australia currently has access to a tariff rate quota under the WTO agreements
for 378,214 tonnes of beef. The tariff paid on that quantity of beef
is US4.4c/kg, compared to a 26.4% tariff on beef exports to the United States
in excess of 378,214 tonnes. Paragraph 2 of Annex I to the Tariff
Schedule of the United States provides that the US4.4c/kg in-quota beef tariff
will be eliminated immediately once the Agreement enters into force.

Under Paragraph 3 of Annex I, Australia will receive additional duty free
access for an increasing volume of beef in subsequent years of the Agreement. The
additional quota volumes will grow from 20,000 tonnes in year 3 of the Agreement
(at the latest) to 70,000 tonnes in year 18 of the Agreement. Meanwhile,
from years 9-18 the 26.4% tariff on over-quota exports will be reduced to
zero. Beginning in year 18, Australia will be free to export an unlimited
amount of beef to the United States, subject to a beef safeguard (see below).

Table: Beef access arrangements under the United States FTA

Year	Additional duty free FTA quota volumes (tonnes)	Total duty free quota volumes WTO + FTA (tonnes)	In-quota tariff	Over-quota tariff
1	Zero	378,214	Zero	26.40%
2	15,000*	393,214	Zero	26.40%
3	20,000	398,214	Zero	26.40%
4	20,000	398,214	Zero	26.40%
5	25,000	403,214	Zero	26.40%
6	25,000	403,214	Zero	26.40%
7	30,000	408,214	Zero	26.40%
8	30,000	408,214	Zero	26.40%
9	35,000	413,214	Zero	24.64%
10	35,000	413,214	Zero	22.88%
11	40,000	418,214	Zero	21.12%
12	40,000	418,214	Zero	19.36%
13	45,000	423,214	Zero	17.60%
14	45,000	423,214	Zero	14.08%
15	50,000	428,214	Zero	10.56%
16	55,000	433,214	Zero	7.04%
17	60,000	438,214	Zero	3.52%
18	70,000	448,214	Zero	Zero
19 and beyond	Unlimited	Unlimited	Zero	Zero

*the 15,000 tonnes in year 2 will only be granted if United States beef
exports return to their pre-BSE (2003) levels. Additional quota volumes
in years 3 and beyond are guaranteed, regardless of United States exports.

The current 378,214 tonne WTO tariff rate quota for beef may be used for
all types of beef, including high quality beef and manufacturing beef. The
additional quota volumes obtained under the FTA apply to a more limited range
of beef (see Tariff Schedule of the United States, Annex I, sub-paragraph
3(c)). The additional 20,000 tonnes in year 3, for example, may be
used to ship all types of Australian beef with two exceptions - carcasses
and half-carcasses of beef, and processed beef made ready for particular
uses by the retail consumer (eg fancy cuts).

The tariff reductions on the 26.4% tariff apply to all types of beef.

Beef safeguards

Two types of beef safeguard will apply at different times under the Agreement.

First, during the 18-year tariff elimination period, a safeguard applies
to exports of beef which exceed 110% of the total preferential quota volume
in that year. The details of this safeguard are set out in Section
B of Annex 3-A.

For example, in year 15 the preferential quota amount is 50,000 tonnes -
so the safeguard would only apply to over-quota exports in excess of 5,000
tonnes. In other words, in year 15 the safeguard would only apply
to exports exceeding the total of the 378,214 tonne WTO quota, plus the 50,000
tonne FTA quota for that year, plus an additional 5,000 tonnes (that is,
a total of 433,214 tonnes).

If the 10% trigger is exceeded, any additional over-quota exports would
have to pay a tariff equal to the FTA preferential tariff (10.56% in year
15) plus 75% of the difference between the original tariff and the FTA preferential
tariff (i.e. 75% of 26.4%-10.56% = 11.88%). The tariff applied to
those exports in excess of 433,214 tonnes in year 15 would therefore be 22.44%
(still lower than the current 26.4% tariff).

Second, a price-based beef safeguard applies to beef exports starting in
year 19 of the Agreement (that is, once the quotas and tariffs on beef have
been eliminated). This safeguard is set out in Section C of Annex
3-A.

The price-based safeguard only applies to beef exports in excess of 448,634
tonnes in year 19 (the existing 378,214 tonne quota plus the additional 70,000
tonne quota in year 18 plus 420 tonnes). That amount will grow by
an additional 420 tonnes in year 20 and every year thereafter. In
other words, this amount of beef will always receive duty free access into
the United States and cannot be subject to the price-based beef safeguard.

For most of the year, the price-based beef safeguard will be triggered if
the price of beef in the United States falls 6.5% below the average of the
past two years in two months of a quarter. A one month trigger applies
to the final quarter of the year. If the safeguard is triggered, beef
exports to the United States in excess of the minimum quota amount (448,214
tonnes) will be subject to a tariff equal to 65% of the prevailing tariff
on beef (based on the current tariff, the safeguard tariff would be 17.2%
- still lower than the current 26.4% tariff). Once the safeguard is
triggered, it will remain in place for three months or until the end of the
calendar year, whichever period is shortest.

3.2 Dairy

The Agreement provides for a significant increase in duty free access into
the United States market for Australian dairy products imported with tariff
rate quotas. In addition, the in-quota tariffs in existing dairy quotas
will be reduced to zero immediately once the Agreement enters into force. However,
over quota tariffs on dairy products subject to quota will not change under
the Agreement (except for goya cheese).

The dairy products subject to tariff rate quotas are divided into a number
of product categories. The exact products contained in each category
are set out in Annex I to the Tariff Schedule of the United States. For
each product category, an initial quota amount is allocated for year 1 of
the Agreement. In subsequent years, that amount grows by an additional
percentage every year. The access arrangements for dairy are set out
in the table below.

Table: Dairy access arrangements under the United States FTA

Product	Existing WTO quota (tonnes)	Additional FTA quota (year 1) (tonnes)	Growth of additional FTA quota (after year 1)	In-quota tariff	Over-quota tariff
Milk/cream/ice cream (litres)	0	7.5 million	6%	Zero	No change
Condensed milk	92	3,000	6%	Zero	No change
Butter/butterfat	0	1,500	3%	Zero	No change
Skim milk powder	600	100	3%	Zero	No change
Other milk powder (including whole milk powder)	57	4,000	4%	Zero	No change
Other dairy	3,016	1,500	6%	Zero	No change
Cheddar cheese	2,450	750	3%	Zero	No change
American-type cheese	1,000	500	3%	Zero	No change
Swiss cheese	500	500	5%	Zero	No change
European-type cheese	0	2,000	5%	Zero	No change
NSPF (other) cheese	3,050	3,500	5%	Zero	No change
Goya	0	2,500	5%	Zero	Eliminated after 18 years

The increased trade in dairy products covered by tariff rate quotas is in
addition to the trade Australia already has with the United States in non-quota
dairy products. As noted earlier, the tariffs on all non-quota dairy
products will be eliminated over time under the Agreement, most in equal
annual instalments over 18 years.

In addition, under Article 3.6 of the Agreement, after year 20 of the Agreement
either Party may request consultations with the other party to review the
market access arrangements for dairy. This will give Australia the
opportunity to seek a reduction in over-quota tariffs for dairy products
subject to tariff rate quota (as noted earlier, these tariffs are not being
reduced as part of the current Agreement).

3.3 Tobacco, cotton and peanuts

New duty free tariff rate quotas will be established for tobacco and cotton,
beginning at 250 tonnes in year 1 and growing by an additional three percent
in subsequent years (see Paragraphs 23 and 24 of Annex I to the Tariff Schedule
of the United States). At the same time, the over-quota tariffs on
these products will be eliminated over a period of 18 years.

A new duty free tariff rate quota for peanuts and peanut products will be
established in a similar manner, the only difference being that the quota
volume in year 1 is 500 tonnes (rather than 250 tonnes for tobacco and cotton).

3.4 Avocadoes

Two new seasonal duty free tariff rate quotas will be established for Australian
avocadoes into the United States. Beginning in year 2 of the Agreement,
from February 1 to September 15 an amount of 1,500 tonnes of Australian avocadoes
may enter the United States market duty free. Between September 16
and January 31 an amount of 2,500 tonnes of Australian avocadoes may enter
the United States market duty free. Together, this means Australia
has new access for 4,000 tonnes of avocadoes per year. Both amounts
will grow by an additional ten percent every year until year 18 of the Agreement. At
the same time, the over-quota tariff on avocadoes will be eliminated over
a period of 18 years.

4. Agricultural safeguard measures

(Article 3.4 and Annex 3-A)

Three types of agricultural safeguard measures may apply to Australian exports
to the United States - a horticulture price-based safeguard (Section A, Annex
3-A), a quantity-based beef safeguard (Section B, Annex 3-A) and a price-based
beef safeguard (Section C, Annex 3-A). The beef safeguards are described
above under the section on tariff rate quotas.

4.1 Horticulture price-based safeguard

The horticulture price-based safeguard applies to a limited range of horticultural
products. The list of those products is contained in Section A of
Annex 3-A. The list of safeguard products also sets out a trigger
price for the safeguard. That trigger price has been calculated by
taking the average of the lowest two years from the previous five years. The
trigger price is based on the Customs Import Value of the good (defined in
the World Trade Atlas from where the figures were taken), which is similar
to a $US Free On Board (FOB) price.

The horticulture price-based safeguard will apply if the FOB import price
of the Australian good is lower than the trigger price. If the safeguard
triggers, an additional duty will apply to those goods, depending on the
amount by which the FOB import price of the horticultural good falls below
the trigger price (this is set out in detail in Section A of Annex 3-A.

The horticulture price-based safeguard applies on a shipment-by-shipment
basis. If goods in one shipment trigger the safeguard, the additional
safeguard duty will apply. If a second shipment arrives the following
day with an import price which does not trigger the safeguard, no additional
duty will apply.

The horticulture price-based safeguard only applies during the 18-year tariff
elimination period. After that time, the relevant horticultural products
will be duty free and safeguard free.

5. Other provisions of the agriculture Chapter

5.1 Multilateral cooperation (Article 3.1)

Australia and the United States have committed to working together in the
World Trade Organisation (WTO) agriculture negotiations on the full range
of issues regarding the reform of member country policies and programs that
negatively impact on market access and distort international markets for
agricultural products. This will include cooperating with the United
States on proposals to phase out all forms of agricultural export subsidies,
substantially reduce distorting domestic support and increase market access
for agricultural exporters. The two parties will also consult in other
multilateral fora (for example, OECD, FAO, IPPC, OIE, Codex etc) on issues
relevant to agriculture.

Under Article 3.1, Australia and the US have also agreed to work together
in the WTO to develop disciplines that eliminate restrictions on any individual's
or corporation's right to export. The effect of the provision is that
Australia has indicated it would be willing to consider additional disciplines
on Australia's state trading enterprises in the context of an outcome in
the Doha round that included substantial reductions in export and domestic
subsidies and substantial increases in market access. This is consistent
with Australia's overall position in the WTO negotiations.

5.2 Committee on Agriculture (Article 3.2)

A Committee on Agriculture will be established under the Agreement. This
Committee will meet annually and provide a formal opportunity for Australia
and the United States to discuss a wide range of agricultural issues relevant
to the Agreement, including trade promotion activities; barriers to trade;
and consultation on the range of export competition issues (including export
credits, domestic support, inappropriate surplus food disposal and all export
subsidies). The Committee on Agriculture will report to the Joint
Committee that has oversight of the whole Agreement.

5.3 Export subsidies (Article 3.3)

The United States and Australia have agreed not to use export subsidies
on agricultural goods traded into each other's market. Australia does
not use export subsidies, while the United States is only permitted under
the WTO to employ export subsidies on a limited range of agricultural goods. The
United States currently uses export subsidies on a small range of dairy products
into markets other than Australia.

Should either the United States or Australia consider that another country
is exporting an agricultural good that benefits from export subsidies into
either country's market, the two countries will consult on measures to remedy
the effect of such subsidised exports. In the event that the agreed
measures are not implemented, the agreement to not use export subsidies into
each other's market for that particular good would no longer apply.

5.4 Side-letter on BSE (Bovine Spongiform Encephalopathy - mad cow
disease)

In a side-letter on BSE, the United States and Australia agree to cooperate
in international standard setting bodies. This is intended to cover any international
standards or guidelines that might be developed by OIE (the World Animal
Health Organisation) and Codex Alimentarius (a joint body of the WHO/FAO,
which develops international standards in food). Both of these organisations
are recognised by the WTO as international standard setting bodies. Australia
and the United States already cooperate in these forums on BSE matters.

March 6, 2004

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