- Australia will trigger the 2019 beef safeguard to Korea in the coming days.
- The imported beef tariff will increase from 24% to 30% until 31 December 2019.
- Strong demand in Korea for Australian beef has led to the annual safeguard volume being fully utilised since KAFTA entered into force in 2014.
Korea’s beef import safeguard – what is it?
The beef import safeguard is a mechanism that allows Korea to increase tariffs temporarily once imports exceed an agreed level under the Korea-Australia Free Trade Agreement (KAFTA). The safeguard volume for 2019 is 170,673 tonnes swt and increases by 2% each year. In the next few days Australia will trigger the safeguard, resulting in Korea raising the tariff for Australian products from 24% to 30% – effective until 31 December 2019.
- During KAFTA negotiations Australia’s safeguard volume was calculated using the average of 2007 to 2009 Australian beef import volumes (using Korean import data) plus an additional 10%.
What are the implications for Australia?
Competition in the market
The US is Australia’s major competitor in the Korean imported beef market. The US tariff will remain at 18.7% due to a greater safeguard volume (312,000 tonnes swt) under the Korea-US Free Trade Agreement (KORUS).
- The US’ safeguard volume was based on US exports to Korea prior to the 2004 suspension of US imports into Korea after an outbreak of BSE. US beef exports to Korea were at record highs during this time.
Once Australia has triggered the safeguard volume, the tariff differential between Australia and the US will increase from 5.3% to 11.3%. While the differential will create challenges for Australian beef in an already highly competitive market, this is a marked improvement on 2018, when the tariff differential was 18.7%.
Demand for Australian beef
The higher tariff, as a result of triggering the safeguard, will impact the market but not in isolation.
In the short-term, the impact will be negligible, given the modest tariff increase in 2019. Although tight domestic cattle supplies may limit Australia’s ability to serve the market in 2020, it is possible that Australia will trigger the safeguard again, as the remainder of Australian exports in 2019 will carry over and count towards the 2020 safeguard.
Fundamental consumer preference for Australian beef will remain unchanged. MLA conducts an annual consumer tracker survey in Korea, which shows:
- ‘Country of origin’ is extremely important for Korean customers, as the country relies on imports for around 64% of its beef consumption.
- Australian beef is the most favoured among all imported beef and regarded as the most superior, amongst the safest to eat and a family favourite.
Other contributing factors to future demand include prices from both Australia and the US, exchange rates and the ongoing African Swine Fever outbreak Asia.