In 2017, Australia imported 221,360 million dollars (MD) representing 1.2% of world imports and ranking it as the 24th largest import market in the world. Australia’s imports coming from Mexico stood at 2,134 MD, represented 0.96% of total imports, this figure made Mexico ranked as Australia’s 20th largest import supplier.
In terms of tariff lines, Australia imported from Mexico throughout 1,843 tariff lines at 10-digit level in 2017, according to Australian import data, while world imports were registered in 7,163 tariff lines; namely, Mexican imports entered into Australia using only 24.6% of the Australian Harmonized Tariff Schedule available, meaning that there are a lot of opportunities for Mexican exports to expand and wait to be tapped.
In order to assess partially the tariff liberalization made by Australia in the CPTPP for Mexican exports, it is proposed to carry out a simulation analysis using Australia’s Tariff Schedule in the CPTPP and apply this negotiating results to actual Mexican imports made by Australia for the calendar year of 2017.
For purposes of simplicity and representability, I will be analyzing only 300 tariff lines of Australia’s imports coming from Mexico in 2017 out of the 1,843 tariff lines abovementioned, descendingly-ordered in value terms, which in this case accounted for almost 94% of total importation.
Some important results and implications of this simulation exercise are:
- 115 tariff lines out of the 300 Mexican universe of this exercise are entering duty free nowadays, namely, 38.3% in terms of number of tariff lines or 58.6% in terms of import value. This set of tariff lines is called the consolidation of the MFN duty-free regime under the CPTPP for Australia which is of special interest to Mexico.
- The first year of implementation of the CPTPP for Australia (expected to be 2019), Mexico will be saving at least 35.3 million US dollars in payments of customs duties for 185 tariff lines which will become tariff free or will be getting a reduced base rate tariff. Conversely, Australia’s Treasury authority will be facing a reduction in its tariff collection for the same amount.
- On 1 January 2019, the expected date of Entry Into Force (EIF), Australia will allow 155 tariff lines out of the 300 Mexican universe analyzed to enter duty-free at EIF, that is, 51.7% in terms of tariff lines or 29.3% of Australia’s import value coming from Mexico in 2017. This tariff elimination will mean for Mexican imports not to face tariff collection payments for an amount of almost 31 million US dollars. This set of tariff lines is called the new tariff liberalization commitments made by Australia under the CPTPP which is of special interest to Mexico. Some tariff lines in this set are: new passenger motor vehicles, vessels, single loudspeakers, distilled alcoholic beverages, among others, which now are facing a 5% ad valorem tariff. Also, there are 2 tariff lines in the apparel sector that Mexico exports regularly to the Australian market which now are facing a 10% ad valorem tariff that will become tariff free at EIF.
- On 1 January 2019, 25 tariff lines will be getting a tariff cut from 5% to 2% and will be tariff free in a linear fashion by 1 January 2021. Some of these tariff lines are sparking piston engines, gear boxes of a kind used as components in passenger motor vehicles, parts and accessories of motor vehicles, motor vehicle wiring harness, clutches and parts thereof, lead-acid type electric accumulators, among others. Also, the 10% ad valorem tariff of 2 tariff lines of the apparel sector will be cut by half at EIF, benefiting Mexican exports for 3.4 million dollars in 2017.
- Only 3 tariff lines out of the 300 Mexican universe will be facing the toughest Australian phasing out schedule, namely, AU4-B (the 4-year bullet/grace period) and these Mexican products (machinery for lifting, handling, loading or unloading; still image and other video camera recorders; and leather (including sides), further prepared after tanning or crusting) will be receiving the 5% MFN tariff for 3 years but by 1 January 2022 will be duty-free.