Australia, Japan sign free-trade pact

MARK KENNY
Last updated 12:09 08/04/2014
abbott abe
Reuters
Australian Prime Minister Tony Abbott shakes hands with Japanese Prime Minister Shinzo Abe at the start of summit talks at the state guest house in Tokyo on Monday.

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Australian Prime Minister Tony Abbott has secured a historic trade deal with Japan worth billions of dollars over the next 20 years, unlocking the previously impenetrable Japanese domestic market for Australian producers.

It comes ahead of the recently concluded free-trade agreement with South Korea, which will be signed in Seoul on Tuesday.

The Japanese deal will substantially free up exports of Australian dairy, beef, wine, sugar, horticulture, and a range of services, while also making Japanese cars, cameras, televisions and other high-tech goods cheaper in Australia.

Three-quarters of Japanese cars will be freed of Australia's existing 5 per cent tariff, and the remaining vehicles will be tariff free after three years. That tariff had existed only to protect the local Australian car industry, which will be gone in three years in any event. The government says retail purchase prices should drop by about A$1500 (NZ$1619) on average.

However, Australian automotive components makers will lose the protection of tariffs applied to Japanese competitors albeit over a longer, five-year phase-down to allow them greater time to latch on to the global supply chain.

Australian cultural and economic staples of beer, lamb, wool, and cotton will also attract zero tariffs.

The agreement represents the most extensive inroads to the notoriously powerful Japanese farm lobby, and comes with the added protection of ''most favoured nation'' status, meaning it is automatically upgraded for Australian beef and dairy exporters if Japan gives another country a better deal in the future.

Australian trade officials could not hide their delight at extracting concessions beyond anything ever believed possible with Japan before now.

In beef alone, which is currently worth A$1.4 billion (NZ$1.5b) in Japanese exports, industry experts say the benefit of a virtual halving of the previously immovable 38.5 per cent Japanese import tariff, will see the industry grow by A$2.8 billion (NZ$3b) in the next two decades, measured in current dollars.

With the government of Prime Minister Shinzo Abe facing a difficult byelection within weeks, gaining a cut in the tariff for beef was the final sticking point because it put him on a collision course with the agriculture sector, which holds a lot of power in Japanese politics.

With Australia's frozen and fresh beef export trade split 50:50, the new deal is an immediate win for Australian producers, because reductions are ''front loaded''. So, on frozen beef the tariff drops by 8 percentage points in the first year, and then by 2 points and 1 point in the following years, till it reaches its floor of 19.5 per cent.

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Fresh beef drops at a slightly slower rate of 6 percentage points initially, then annually by 1 point to reach 23.5 per cent.

In dairy, where the Japanese have long maintained import quotas above which high import duties attach, Australia has been granted its own category effectively, taking its duty-free quota to 47,000 tonnes a year up from the current 27,000.

The deal, officially known as the Japan-Australia Economic Partnership Agreement, was confirmed by Trade Minister Andrew Robb in Tokyo on Monday afternoon, and Abbott shook hands with Abe on Monday evening.

However, it had gone down to the wire, with Abbott and Abe ''nuancing'' the final details over dinner on Sunday evening.

Sources said the two reforming conservatives had built a strong relationship, and had exchanged gifts.

Abbott presented Abe with a 30-page album of photographs from his prime-ministerial grandfather's historic 1957 visit to Australia to sign a groundbreaking trade compact with then Australian prime minister R.G. Menzies.

Abe was said to have been moved by the gesture, remarking: ''this will mean a lot to my mother''.

Abbott was presented with high-tech Shimano cycling componentry that, Abe said, came from the renowned manufacturer's factory in his own prefecture.

The trade deal will now be subject to ''lawyering'' on both sides before receiving final parliamentary scrutiny in each country.

It is hoped it can be signed when Abe visits Australia in June, when he has been invited to address the Australian Parliament.

The hard-fought deal concluded negotiations that formally began under John Howard in 2007 but which had followed a feasibility study for two years before that and initial work dating back to 2002.

Robb, who handled much of the hard grind of negotiations with his Japanese counterpart, Minister Yoshimasa Hayashi, said he was honoured to be part of the agreement.

With a population of 127 million people and extremely limited natural resources, Japan is regarded as the great prize by trade liberalisers because its economy has been so protected.

A Japanese reporter commented after the announcement, that it was amazing because her country had ''never given anything away'' in past trade negotiations.


- Sydney Morning Herald

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