Peru Australia flags
Agreement opens door to expanded grain trade between the two countries.
CANBERRA, AUSTRALIA — The governments of Australia and Peru on Nov. 10 signed abilateral trade agreement, paving the way for improved economic relations between Australia and Latin America and setting the stage for expanded grain trade.

The two countries launched negotiations for a free trade agreement in mid-May, and in agreeing to the Peru-Australia Free Trade Agreement (PAFTA) have created an avenue in which Australia can further expand its business with the emerging market. According to the Australian Government’s Department of Foreign Affairs and Trade, total two-way trade in goods and services with Peru was worth A$590 million in 2016, up 51.2% from 2015.

Announcement of the PAFTA was welcomed by several Australian groups, including GrainGrowers Ltd.

“GrainGrowers strongly supports efforts to liberalize global grain trade through the World Trade Organization and the use of bilateral and plurilateral Free Trade Agreements,” said Luke Mathews, manager of trade and economics at GrainGrowers. “Access to strong, open and fair international markets is critical to the success of the Australian grain industry, the Australian agriculture sector and the Australian economy more broadly.”

Mathews said that while Peru is currently a small market for the Australian grain sector, it is fast becoming a growing consumer and importer of grains, oilseeds and pulses.

“Peru’s annual grain, oilseed and pulse consumption is about 7.5 million tonnes, supported by imports of 5.5 million tonnes,” he said. “Grain consumption and imports have grown by nearly 1.5 million tonnes over the past five years.

“Australian wheat, barley, oats, pulses, malt and canola oil now have the ability to enter Peru tariff free and Australian sorghum exporters have achieved preferential access under an agreed tariff-rate quota. In addition, GrainGrowers recognizes and applauds the improved access to Peru for many other Australian agricultural commodities, such as beef and sheep meat, which are produced by many of Australia’s grain farmers.”

Mathews also said GrainGrowers was optimistic the PAFTA would set a positive and strong precedent ahead of the upcoming FTA negotiations with the Pacific Alliance countries, which include Mexico, Chile, Colombia and Peru. Australia launched FTA negotiations with the Latin American trading bloc on June 30.

“The Pacific Alliance members, of which Mexico is the largest, account for 42% of Latin American GDP with a combined population of 224 million,” he said. “Mexico contributes roughly 60% of both figures. Pacific Alliance grain consumption exceeds 84 million tonnes and is growing at 4.5% per annum, driven by strong population growth and changing diets. The Pacific Alliance’s annual grain imports exceed 41 million tonnes, with growth of 7.4% per annum.”

The Export Council of Australia (ECA) also applauded the signing of PAFTA, saying it signals momentum toward broader agreements, such as the aforementioned FTA with Pacific Alliance countries.

“The greatest value of the FTA with Peru is adding momentum toward completing the Trans Pacific Partnership,” said Lisa McAuley, chief executive officer of the ECA. “If implemented, the TPP will deliver major benefits for Australia across a wide range of sectors. It will simplify exporting by setting uniform rules for trading across TPP members. Plus, by consolidating several FTAs into one big one, it’ll make it easier for businesses to be eligible for tariff reductions and simplify the process for claiming those reductions.”