Under the China-Australia Free Trade Agreement (ChAFTA), preferential tariffs are given to our agricultural goods (including infant formula). The Chinese put safeguards in place to protect their own domestic agricultural industry. These safeguards are called "Special Safeguard Volumes" which come into effect once China has imported a given level of any good listed in the agreement. Essentially, past a certain import volume the tariff will increase. It resets again in the next financial calendar year.
Here's the really interesting bit for Bubs. For dairy, the ChAFTA clearly lays out a progressive path to ZERO, yes, ZERO import tariffs on Australian milk powder by year 2026 (current tariff is 5%). That is not changing. What the ABC article is saying is that department of agriculture predicts that the special safeguard volume put in place for milk powder is likely to be triggered by the end of this year.
This implies that the volume of milk powder exported from Australia is so great that it will trigger the special safeguard mechanism before the end of the year. The volume required to trigger the safeguard this year is 22,335 tonnes of milk powder (by 2029 this limit will be close to 30,000 tonnes). For comparison - the average volume of milk powder exported from Australia pre 2015 "averaged 12,650 tonnes per year. In 2014 the volume was 12,262 tonnes."
Again - the tarriff reset at the start of the next calendar year. So what this news is telling us is that milk export volumes to China this year are far greater than anticipated under the ChAFTA. And we learnt that tariffs on our milk powder are only going to decrease each year until reaching 0%.
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