Peru-Australia FTA Provides New Opportunities For Exporters

February 13, 2020

The Peru-Australia Free Trade Agreement (PAFTA) recently entered into force on February 11, 2020. Part of a trade trifecta ratified in 2019, PAFTA has diversified Australian export options and provided gateway access to the Latin-America Trade region. The agreement reflects the Australian Government’s continuous efforts to streamline trade processes and broaden economic relations.

According to DFAT, Peru is Latin America’s fastest-growing major economy. The region boasts a rapidly expanding middle class and average annual GDP growth of 4.74% from 2008-18. Canada, the US and European Union recognised this economic prosperity, securing preferential market access and tariff reductions prior to PAFTA.

As a result, Australia could not compete in the Peruvian market. Unlike those with bilateral trade pacts, exporters faced excessively high trade barriers including tariffs of up to 17% on beef and 29% on dairy and sugar.

PAFTA has overturned this uneven playing field, eliminating 93.5% of Peruvian tariffs on Australian exports. By 2025, this will have climbed to over 99%.

The Australian dairy industry is one area that has triumphed from the agreement. Historically, the Peruvian dairy market has been inaccessible despite supply shortages. Australian exporters can now reduce this dairy shortage.

For Australian beef, PAFTA will ensure price-competitiveness by eliminating tariffs of up to 17% within five years. This duty-free access aligns with tariff eliminations on US beef in the Peruvian market.

Significantly, access to Peru’s sugar market exceeds that granted by Peru to all other sugar exporters. However, duty-free sugar imports are capped at 30000 tonnes per annum, climbing to 60000 tonnes in five years, and 90000 tonnes in eighteen years. This is low compared to the 3.8 million metric tons of Australian sugar exported from 2018-19.

Further, immediate duty-free access is available for exporters of Australian wine, sheep meat, most horticulture products, kangaroo meat, seafood, wheat, pharmaceuticals and medical devices, paper and paperboard. PAFTA also supports Australia’s mining industry through the immediate elimination of tariffs on base metals like iron ore, copper and nickel.

Non-tariff barrier reductions include the streamlining of customs and administrative arrangements and elimination of customs duties on digital content. Exporters can also expect to save time and money due to the free flow of data between the two countries.

Overall, PAFTA could significantly reduce the landed cost of exports for businesses exporting to Peru. Seabridge customs brokers are experts at navigating Free Trade Agreements to maximise client savings. For more information, contact us on 1800 727 195.