Australian Free Trade Agreement with Malaysia promises new opportunities for food industry

Posted by AFN Staff Writers on 23rd May 2012

A Free Trade Agreement, signed in Kuala Lumpur yesterday (22 May 2012) by Trade and Competitiveness Minister Craig Emerson and his Malaysian counterpart Mustapa Mohamed, will aim to improve trading conditions for Australian farmers and processed food producers.

The Free Trade Agreement will guarantee tariff-free entry for 97.6 per cent of recent goods imports by Malaysia from Australia once it enters into force, further integrating the Australian economy with the fast-growing Asian region. This will rise to 99 per cent by 2017.

Australian opportunities for agriculture and food

Malaysia is an important regional market for Australian agriculture – it is currently ranked among Australia’s top five markets for dairy, horticulture products, wheat and sugar.

The Free Trade Agreement with Malaysia will improve cooperation on food regulatory issues such as halal certification and abattoir accreditation, quarantine, food standards, labelling requirements and Customs clearance times.

Free Trade Agreement to eliminate existing tariff barriers

Malaysia’s agricultural trade regime has enabled Australian agricultural producers to maintain exports at between AU$764 million and AU$1.1 billion over the last six years. Many key commodities already enjoy zero or low applied tariffs, but some products continue to face significant tariff barriers.

Dairy products, some horticultural products, processed meat, some seafood, and a range of processed foods, among others, currently face tariffs of between five and 30 per cent. Some tropical fruits and alcoholic beverages, notably wine, also face specific rate tariffs.

Tariffs such as these restrict the ability of the Australian agriculture and processed food producers to compete in the Malaysian market. The new Free Trade Agreement with Malaysia aims to eliminate these remaining barriers.

Investment opportunities

Malaysia’s aim of becoming a regional hub for halal food processing may provide opportunities for increased Australian investment in Malaysia’s food processing industries.

The Malaysian Government’s aim of modernising its agriculture sector could also stimulate greater commercial opportunities for Australian businesses as Malaysia looks to adopt new technologies and modern management systems and encourage greater participation by the private sector.

There is recognition that foreign investment in Malaysian agriculture could be an important driver of this modernisation. For instance, initiatives to encourage investment in downstream processing industries, including for halal products, would benefit supply chain management and productivity in agriculture more generally.

Free Trade Agreement with Malaysia “fills vital gaps” for agriculture

The National Farmers’ Federation (NFF) has welcomed the signing of Australia’s Free Trade Agreement with Malaysia, noting that it will “fill a number of gaps” within the ASEAN-Australia-New Zealand FTA (AANZFTA) and improve international market access for Australian agricultural goods.

National Farmers’ Federation Vice President Duncan Fraser said, “After seven years of negotiation, the NFF is under no illusion of how challenging it has been to complete this Free Trade Agreement with Malaysia.

“Protectionist sentiment around agricultural goods is rife and growing across the globe, so in this context it is pleasing that Australia has managed to forge an agreement with Malaysia that has dealt with some sensitive agricultural issues that were not effectively covered by AANZFTA.”

Mr Fraser said the agreement was particularly important for sectors such as dairy that have been facing a competitive disadvantage in Malaysia compared with New Zealand, which already has a Free Trade Agreement with Malaysia in place.