Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)

17 November 2010

Trade in goods

• South Australian merchandise exports to ASEAN (Calendar Year 2009): $1.2 billion. Principal exports:

• Copper $582 million
• Lead $100 million
• Alcoholic beverages $65 million
• Cereal preparations $60 million
• Wheat¹ $58 million
• Meat (other than beef) $30 million
• Ferrous waste and scrap $19 million
• Fruit and nuts $16 million
• Civil engineering equipment and parts $11 million
• Confidential items $84 million

The following analysis summarises tariff outcomes under the Agreement Establishing the ASEAN-Australia-New Zealand FTA (AANZFTA) for Indonesia, Malaysia, the Philippines and Vietnam for some of South Australia' 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, calendar year 2009):

Copper

On South Australia' leading export to ASEAN, copper (Chapter 74 of the tariff), AANZFTA will ensure tariff-free treatment for most products:

• To Indonesia by 2014, except for copper cathodes (7403.11 ², with exports of $15.6 million) where the tariff will be bound at 5% from entry-into-force and reduce to 3% in 2025.
• To Malaysia by 2013 (with most bound at 0% from 1 January 2010, including copper cathodes (7403.11) with $256.2 million of exports), except for
  • Exports of refined copper wire (7408.11 + 7408.19) on which the tariff will be eliminated by 2020.
• To the Philippines by 2013, with tariffs on many lines eliminated from 1 January 2010.
• To Vietnam by 2018, with tariffs on many lines including copper cathodes (7403.11) with exports of $197.3 million, bound at 0% from 1 January 2010.

Lead

On South Australia' second most important export to ASEAN, lead (chapter 78 of the tariff), AANZFTA will ensure tariff-free treatment for exports to all markets:

• To Indonesia and Malaysia by 2012.
• To the Philippines and Vietnam from 1 January 2010.

The outcomes on lead include:

• The elimination from entry-into-force of a 5% tariff on $18.5 million of exports of unwrought refined lead to Indonesia (7801.10).
• The binding of a 0% tariff from 1 January 2010 on $20.2 million of exports of unwrought refined lead to Malaysia (7801.10).
• The elimination of a 3% tariff from 1 January 2010 on $0.7 million of exports of unwrought refined lead (7801.10) to the Philippines.
• The binding of 0% tariffs from 1 January 2010 on $41.8 million of exports of unwrought refined lead (7801.10) to Vietnam.

Cereals

• The binding of 0% tariffs from entry-into-force on $19.1 million of exports of wheat to Indonesia (1001.90).
• The binding of 0% tariffs from 1 January 2010 on $14.7 million of exports of wheat to Malaysia (1001.90).
• The binding of a 0% tariff from 1 January 2010 on $8.2 million of exports of rolled or flaked grains of oats to Malaysia (1104.12).
• The binding of 0% tariffs from 1 January 2010 on $2.1 million of exports of malt to Malaysia (1107).
• The elimination on 1 January 2010 of a 3% tariff on $0.9 million of exports of rolled or flaked grains of oats to the Philippines (1104.12).
• The elimination in 2016 of 5% tariffs on $12.4 million of exports of wheat to Vietnam (1001.90).
• The elimination in 2016 of 5% tariffs on $26.6 million of exports of malt to Vietnam (1107).

Pasta

Tariff-free treatment will be achieved on all tariff lines for pasta (1902, but excluding 1902.40):

• Indonesia: the 5% tariffs will be eliminated on entry-into-force.
• Malaysia: tariffs generally in the 5%-8% range will all be eliminated by 2011.
• Philippines: tariffs of 15% were reduced to 7% from 1 January 2010, and further reductions will lead to tariff elimination by 2013 for all except 1 tariff line (ex1 and ex2 1902.19.90), on which the tariff will be eliminated in 2020.
• Vietnam: $0.03 million of exports - tariffs of 40% subject to annual reductions leading to tariff elimination in 2018.

Meat and animal products

• The binding of 0% tariffs from 1 January 2010 on $8.2 million of exports of frozen sheepmeat cuts to Malaysia (0204.42, 0204.43).
• The reduction of 10% tariffs to 7% in 2012 and elimination in 2019 on $0.8 million of exports of frozen edible offal of sheep, goats, horse and some other animals to Vietnam (0206.90).

Citrus

• The elimination from entry-into-force of 5% tariffs on $1.1 million of exports of fresh oranges to Indonesia (0805.10).
• The binding of a 0% tariff from 1 January 2010 on $6.8 million of exports of fresh oranges to Malaysia (0805.10).

Wine

• The reduction on 1 January 2010 of 7% tariffs to 3%, and elimination in 2015, on $3.0 million exports of wine exports to the Philippines (2204).

Seafood

While ASEAN is currently a small market for Australia' seafood exports, AANZFTA will deliver significant liberalization (Chapter 3 of the Tariff and 1604-1605):

• Most tariffs on seafood exports to Indonesia will be eliminated, either from entry-into-force or by 2013, except for a small number of products on which the tariff will be cut to the 3%-8% range.
• All tariffs on $1.4 million of exports of seafood 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%.
• Tariffs on 75% of seafood tariff lines in Vietnam will be eliminated by 2018, with all other tariffs phased to 5% by 2022.

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 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

Early tariff elimination will be achieved in the Philippines on Passenger motor vehicles (PMV) (included in 8703 of the tariff), and on medium to large vehicles in Malaysia.

• Indonesia: tariff elimination achieved by 2015 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: Tariffs 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 $4.3 million of exports of prefabricated structural components for building and civil engineering of cement, concrete or artificial stone to the Philippines (6810.91).

Instruments

The elimination of tariffs in the 0%-10% range from entry-into-force or 2012 on $0.6 million of exports of optical, photographic, measuring and medical instruments to Indonesia (Chapter 90 of the tariff)

Tariffs will be eliminated on all optical, photographic, measuring and medical instruments by:

• 2013 for Malaysia, with tariffs on many lines bound at 0% from 1 January 2010, ($2.2 million of exports); and
• 2012 for the Philippines, with tariffs on many lines bound at 0% from 1 January 2010, ($0.4 million of exports).

2. Trade in services opportunities for South Australia

South Australia is well placed to tap into the growing services markets in ASEAN. Services exports to the world account for 20 per cent of South Australia' total exports (worth $2.0 billion in Calendar Year 2009).

• The largest sector being education-related travel exports (accounting for $990 million, or 49% 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.