Putting things together in Australia: Base rate structure and CPTPP phasing-out schedules.



Slide1

So far, we have described separately Australia’s tariff commitment in the CPTPP and its base rate structure of customs duties. Now, it is time to intertwine these two important elements of any FTA.

The following chart summarizes Australia’s strategy of trade liberalization in the CPTPP by combining its 8 staging categories negotiated and 7 base rates applied. 

Slide2

There are, at least, four aspects that any contracting Party of an FTA must assess when negotiating any market access chapter in the realms of eliminating customs duties.

  1. The maximum number of years that any contracting Party should be allowed to phase out its base rate structure of customs duties.
  2. The base rate of customs duty at which any Party must initiate the phasing out schedule.
  3. The shape of the phasing out schedule that any Party should adopt during the transitional period.
  4. The existence of exclusions regarding the elimination of customs duties commitments, if any. If so, the contracting Parties must minimize the number of products that are to be excluded and seek mechanisms for granting an acceptable market access of those products.

Bearing these 4 analytical concepts in mind, how can we grade Australia’s commitments to trade liberalization within the CPTPP?

ANSWER: OUTSTANDING!

Some comments on Australia’s commitments of tariff elimination

  • It will take Australia only 4 years to liberalize 99.87% of all tariff lines!
  • As it has been said before, the new trade liberalization at Entry Into Force (EIF) carried out by Australia within CPTPP covers 2,826 tariff lines (45.68% of total). However, special attention must be paid to the EIF liberalization of 79 tariff lines which display a 10% tariff, the highest tariff in place nowadays in Australia.
  • Australia’s already low base rate will be reduced even further by initial tariff cuts in 337 tariff lines covered by staging categories AU3-A (from 5% to 2%, and 3-year linear elimination), AU3-B (from 10% to 5% and 3-year bullet/grace elimination) and AU4-A (from 10% to 5% and 4-year bullet/grace elimination). These are very important early crop concessions that Australia made to all CPTTP partners.
  • For 20 tariff lines, Australia used a 4-year linear phasing-out schedule (namely, B4 staging category), which grants more tariff-protection in terms of years but less protection under the shape of the phasing-out curve during the transitional period when comparing with a 3-year bullet/grace period applied only in 2 tariff lines (namely, AU3-C staging category) measured both by using the same initial base rate of 5%.
  • The Australian staging category which granted the greatest tariff-protection during the 4-year transitional phasing out period is AU4-B applied in 54 tariff lines (0.86% of total). But what does it mean AU4-B? It is a phasing-out schedule negotiated by Australia in which the base rate remains at its original level (5%) for 3 years and after year 4 and the subsequent years the customs duties will be eliminated to become a duty-free product/tariff line.
  • Again, the most protected staging category in Australia is AU-R1 applied in 8 tariff lines of second-hand vehicles. These 8 tariff lines will not be fully liberalized at the end of the 4-year transitional period. However, Australia granted some trade liberalization by eliminating the ad valorem component of the MFN customs duty (the 5% part of the compound base rate).
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