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Good harvest: Free trade agreements boost fruit and vegetable exports

fruitandveg-full-storyAustralian fresh fruit and vegetable exports have surged since the signing of several free trade agreements (FTAs) in 2014 and 2015. Deals with China, Japan and South Korea have reduced or eliminated tariffs on Australian produce entering these countries. The Japan-Australia Economic Partnership Agreement came into effect in January 2015, immediately eliminating many tariffs on products. Other tariffs, such as those for grapes, various citrus fruits and onions, will be incrementally reduced over the course of up to 16 years. The Korea-Australia Free Trade Agreement came into effect in December 2014, and the China-Australia Free Trade Agreement (ChAFTA) in December 2015. They have also increased domestic growers’ access to substantial consumer markets across Asia.

Citrus, banana and other fruit growers have welcomed the FTAs, with exports having grown at an annualised 19.9% over the past five years. Almonds are included in the industry, and have far outpaced even this strong performance. While FTAs have been partly responsible for the increased almond trade since 2014-15, favourable timing also played a part. Significant almond planting in 2006 and 2007 increased domestic production over the past three years. Concurrently, water scarcity in California, the largest global almond supplier, created a shortage in international markets, driving up the world price of almonds. The depreciation of the Australian dollar has further increased the price received by local growers and fuelled penetration into Asian markets. These trends have driven almond exports over the past three years. Supply links established between Japan, China and Australia are projected to sustain the presence of Australian almonds in Asia as Californian almond harvests recover.

Outdoor vegetable growers have also benefited from the FTAs, with exports having increased at an annualised 8.9% over the past five years. Asparagus exports to Korea have driven some of this growth, with a substantial rise in value of 123.0% from 2014 to 2015. Tariffs of 27.0% were reduced to 9.0% by 2015, and were removed entirely in January 2016.au_industry_a0139_04_revenuevsexportschartdata

Though tariffs for many fruits and vegetables will remain for several more years, Australian farmers have been eagerly establishing supply links with Asian wholesalers and retailers. According to the Australian Department of Foreign Affairs and Trade, the total value of vegetable exports to China jumped from $570,000 in 2014-15 to $17.2 million the following year, highlighting Australian suppliers’ efforts to secure trade routes prior to realised tariff reductions. Furthermore, exports of table grapes to China and Japan have skyrocketed, despite the sizeable tariffs still imposed on these products. Table grape exports in the January to October 2015 export period surged from $600,000 to $6.5 million compared with the same period in 2014. Exporters that have proactively acquired market share in these countries since the signing of the agreements will be better positioned to reap the benefits of diminished trade costs once the tariffs are fully removed.

Domestic growers have also increased production of fruits and vegetables that attract premium prices in overseas markets, such as mangoes, which are sold at substantially higher prices in China than domestically. Imports of fresh Australian mangoes to China have more than doubled since early 2015. Mango tariffs have declined from 15.0% to 9.0% since ChAFTA was ratified, but mangoes are still often sold at up to $12.0 each in Chinese cities.

The FTAs have provided expansion opportunities for traditional export industries, and have opened areas in which Australia had previously been uncompetitive and without market share. Over the next five years, exports for outdoor vegetable growers, and citrus, banana and other fruit growers are projected to continue increasing, at 3.7% and 1.8%, respectively.

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Related industries:

Citrus, Banana and Other Fruit Growing

Outdoor Vegetable Growing

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