Beef hopes hinge on trade talks

The future prosperity of Australian beef producers is resting on key negotiations between Australia and Korea in finalising a free trade deal this year.

President Lee Myung-bak and Australian Prime Minister Julia Gillard announced last week in a joint statement issued after their summit at Cheong Wa Dae that a free trade deal would be concluded this year.

The two leaders welcomed the progress of economic and security ties between Seoul and Canberra, saying negotiations on signing a free trade agreement (FTA) were in their final stages.

Korea and Australia began their FTA negotiations in May 2009. They are currently working out issues for the agriculture and automobile sectors, among others.

Ms Gillard stressed that the Korea-Australia FTA, if implemented, would be particularly beneficial to agriculture and service sectors in Australia.

Bilateral trade volume between the two countries amounted to $27 billion last year.

South Korea, which imports a third of its total mineral resources from Australia, is the third-largest export market for the country.

Cattle Council of Australia (CCA) chief executive David Inall said the announcement was good news for beef producers because it improved Australia’s competitiveness in the South Korean market place.

“Korea is one of Australia’s largest export markets for beef,” Mr Inall said. “Valued at more than $A600 million a year, the South Korean market is strategically a critically important market, offering significant opportunities into the future.”

While negotiations over beef tariffs in the Australian/Korean FTA are yet to be finalised, Mr Inall said CCA and industry were pushing for at least parity with what had been negotiated in the US/Korean FTA.

“That is, the 40 per cent tariff reduced to zero over 15 years,” he said.

“If we don’t achieve the same outcome, or are delayed in implementation, we will be locked into a position where the US has a comparative tariff rate advantage over Australian producers.

“If both the Australian and US agreements involve a 2.5 per cent tariff reduction per year, but the US agreement enters into force a year before Australia’s, then the US will always have a 2.5 per cent advantage for the 15-year life of the agreement.

“We need to pull out all stops to ensure an equal or better deal.”

Mr Inall said lower tariffs over time should make Australian beef more competitive with other protein sources in Korea, such as seafood, pork and chicken.

He said per capita beef consumption in Korea was low compared with Australia and CCA anticipated that lower tariffs would allow beef to be more competitive and grow its market share relative to other proteins.

“It is difficult at this stage to determine any significant changes in volume, however we are hopeful an important component of this negotiation is recognising the significant downside impact if we do not strike an agreement,” he said.

Mr Inall said it was too early to tell if Australian cattle prices would be impacted.

“Australian beef fits a specific market in Korea,” he said.

“The local Hanwoo product is a very high-value product and Australian beef is not competing in this area.

“A lower tariff will make Australian beef more affordable for Korean consumers and increase demand.”

Mr Inall said any increased export demand was a good thing for Australian producers because it underpinned demand and therefore price for our product.