ChAFTA has mixed re­sults for wood and pa­per

Australian Forests and Timber - - IN THE NEWS - From Greg McCor­mack

WITH THE Chi­naAus­tralia Free Trade Agree­ment (ChAFTA) signed and of­fi­cially in law, it’s a good time to re­flect on what this means for the Aus­tralian forest prod­uct in­dus­tries. We are a di­verse in­dus­try which in­cludes the en­tire value chain from forest grow­ing and har­vest­ing through to wood and pa­per prod­ucts, and this means that the ChAFTA has equally di­verse out­comes through­out the in­dus­try.

This diver­sity is ev­i­dent given the op­por­tu­ni­ties for tar­iff re­duc­tions for some tim­ber prod­uct ex­ports but with the im­bal­ance in tar­iff re­forms for other prod­ucts such as pa­per.

The Aus­tralian Forest Prod­ucts As­so­ci­a­tion, as the peak na­tional body for the forest, wood and pa­per prod­ucts in­dus­try, strongly sup­ports the prin­ci­ples of trade lib­er­al­i­sa­tion in or­der to re­move un­nec­es­sary trad­ing bar­ri­ers and pro­mote greater ef­fi­ciency, in­no­va­tion and in­vest­ment to sup­port global trade. How­ever, we be­lieve it is im­per­a­tive that these prin­ci­ples are ap­plied eq­ui­tably and with com­pa­ra­ble tar­iff re­duc­tion com­mit­ments from our ma­jor trad­ing part­ners in or­der to de­liver these pos­i­tive out­comes to the en­tire in­dus­try.

China is grow­ing to be a very im­por­tant ex­port mar­ket for forestry prod­ucts, with free mar­ket ac­cess for Aus­tralian raw ma­te­rial ex­ports in­clud­ing wood­chips and round­wood. Over the past decade there has been in­creas­ing two-way trade in forest prod­ucts be­tween Aus­tralia and China with ris­ing lev­els of Chi­nese im­ports.

The value of forest prod­uct im­ports from China was over $1.1 bil­lion while Aus­tralian ex­ports to China were around $540 mil­lion in 2013-14. Aus­tralian forestry ex­ports to China have mostly com­prised wood­chips, round wood and re­cov­ered pa­per which are tar­iff-free un­der ex­ist­ing ar­range­ments. By com­par­i­son, Aus­tralia im­ports a high pro­por­tion of pro­cessed forest prod­ucts from China in­clud­ing sawn­wood, wood-based pan­els and pa­per as well as man­u­fac­tured wood prod­ucts in­clud­ing fur­ni­ture.

Com­ing on the back of a sim­i­lar free trade deal China ne­go­ti­ated with New Zealand, the ChAFTA will now have re­duced tar­iffs for some man­u­fac­tured wood prod­uct ex­ports made from Aus­tralian grown ra­di­ata pine, in­clud­ing medium den­sity fi­bre­board. This is great news.

How­ever, the on­go­ing pro­tec­tion of some sec­tors deemed to be sen­si­tive for China un­der the ChAFTA, such as pulp and pa­per, re­mains a con­cern for the Aus­tralian pa­per in­dus­try. Pa­per prod­uct ex­ports to China will con­tinue to at­tract tar­iffs of around 5% to 7.5% while Aus­tralian pa­per tar­iffs on im­ports they are now zero or will be zero over the next 3 to 5 years. This will have an ad­verse trad­ing im­pact on the pa­per in­dus­try, and will im­pede ex­port op­por­tu­ni­ties par­tic­u­larly for pack­ag­ing pa­per.

In 2016, the As­so­ci­a­tion will con­tinue to work to ad­dress these un­bal­anced out­comes un­der ChAFTA through the 3 year re­view mech­a­nism, as well as im­prove trad­ing op­por­tu­ni­ties for wood and pa­per prod­ucts in other trade ne­go­ti­a­tions in­clud­ing with In­dia and the Euro­pean Union.

Greg McCor­mack

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