News that a deal has been reached among the signatory nations of the Asia-Pacific Trans Pacific Partnership suggests the Australian services and consumer goods sectors may see substantial benefits in the years ahead.
Five of Australia's top 10 trading partners are signatories including the United States, Japan, Singapore, Malaysia and New Zealand.
China is not a signatory but the bi-lateral free trade agreement announced with it in 2014 is likely to have similar stimulatory effects for Australian exporters via the reduction or demolition of trade tariffs.
Knocking down trade tariffs which can be commonly up to 20% on foodstuffs and agricultural products means the cost savings for Australian exporters can either drop straight to the bottom line or be passed on to make Australian exports more price competitive versus those of non-TPP signatory nations for example.
Here are a few businesses that look to be likely beneficiaries of reduced trade tariffs across the Asia Pacific as a result of the TPP.
Treasury Wine Estates Limited (ASX: TWE) exports a lot of its wines to price-sensitive consumers in Asia and the United States, lower tariffs may improve profit margins.
Bega Cheese Ltd (ASX: BGA) Operating since 1899, Bega manufactures and distributes dairy and cheese products with Asia as its dominant export market.
Capilano Honey Ltd (ASX: CZZ) manufactures and exports 100% pure Australian honey which is in strong demand. In the most recent financial year growth in the key export markets of Asia was up 29% and North America 36%.
Huon Aquaculture Group Ltd (ASX: HUO) is a Tasmania-based commercial salmon farmer that continues to target growth in exports to profitable Asian and Pacific markets.
Salmon is predominantly farmed in the cool waters of Northern hemisphere countries like Norway, which suggests other Asia-Pacific-based signatories of the TPP are unlikely to enjoy any reciprocal benefits regarding any reduction on tariffs of salmon exports.
Select Harvests Limited (ASX: SHV) is an almond farmer and exporter that has benefited from rising almond prices recently as a record-breaking drought in the almond growing capital of California continues to impact supply.
The tailwind of huge demand from the growing Asian middle class for Australian foodstuffs is as an additional carrot for long-term investors. I would look to Huon, Capilano and Select Harvests as the most eligible candidates for investment at the moment.
