Commodity Fact Sheet
What’s the Outcome for Dairy?
On February 8, 2004, the United States and Australia concluded negotiations on a Free Trade Agreement (FTA), and on February 13, 2004, President Bush notified Congress of the intent of the United States to enter into an FTA with Australia. The FTA contains commitments on most agricultural products, and addresses other trade measures between the two countries as well.
The current situation. . . Australia generally applies low tariff rates on agricultural products, and in some cases provides better market access than required under its WTO commitments. In recent years, U.S. dairy products faced import tariffs of 5 to 30 percent. From 2001 through 2003, U.S. dairy exports to Australia averaged $11.9 million annually.
With the agreement . . . Australia locks in duty-free tariff treatment for all U.S. dairy products.
United States Commitments
The current situation. . . As part of the Uruguay Round (UR) agreement conducted under the WTO, the United States established tariff-rate quotas (TRQs) on imports of many dairy products from all sources. These TRQs are defined in terms of specific dairy product and cover several individual tariff lines. In some instances, countries are allocated specific volumes for a particular TRQ. For example, Australia has a country-specific TRQ for 2,450 tons of Cheddar cheese that is subject to an in-quota tariff rate of 12 percent. Dairy imports over the TRQs typically face higher over-quota tariffs set at most favored nation (MFN) rates. The over-quota or MFN rate for U.S. imports of Cheddar cheese is set at $1.23/kg. As part of the UR, Australia has been allocated a country-specific annual import TRQ of 7,000 tons for cheese, 92 tons for condensed milk, and 3,073 tons for other dairy products (excluding butter/butterfat). U.S. dairy products that are not included in the TRQs are subject to tariffs with rates ranging from zero to 17 percent. From 2001 through 2003, U.S. dairy imports from Australia averaged $77.6 million annually accounting for 4 percent of the U.S. dairy import market.
With the agreement. . . The FTA will provide Australia with two types of access for TRQ items. First, the Australian country-specific dairy TRQs established under the UR will immediately receive duty-free treatment. Second, Australia will have additional access to the U.S. dairy market via the establishment of specific FTA duty-free TRQs that will expand over time. Due to the broad range of dairy products covered, various TRQs have been defined to include categories of several products. The initial TRQ quantities and corresponding annual growth rates will vary, with growth rates ranging from 3 to 6 percent for an indefinite period of time. The over-quota most favored nation (MFN) and safeguard duty rates on all dairy products will remain unchanged.
The following categories and initial year duty-free TRQ volumes under the FTA are to be established:
The FTA TRQs will grow at the following annual rates:
Tariffs on dairy items not included in TRQs will be phased-out over 18 years in most cases.
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