Jap-Aussie Ink Trade Pact

Japan and Australia clinched a bilateral trade pact on Monday, 7 April, agreeing to slash import tariffs on a series of products, including beef, dairy, and automobiles. The news has sparked questions over what impact the deal might have on the pace - and outcome - of the 12-country Trans-Pacific Partnership (TPP) negotiations, of which both countries are members.

The Economic Partnership Agreement (EPA) was announced during Australian Prime Minister Tony Abbott’s much-touted visit to North Asia, his first since taking office last September.

The Australian leader has made deepening Asian ties one of the main focuses of his prime ministership, particularly given the high reliance his country has on trade from the region. China, Japan, and South Korea together account for 55 percent of Australia’s total bilateral trade.

Just weeks after taking office last year, Abbott made headlines when announcing that he hoped to conclude trade deals with all three countries within a 12-month period. A deal with Seoul was reached in December and signed on Tuesday, though negotiations with China are expected to take longer.

Agriculture, automobiles

The deal is Japan’s first with a major agricultural exporter, and includes a series of concessions in products that are traditionally sensitive for the Asian island economy, such as beef and dairy.

Japan has a highly protected and subsidised farm sector, particularly in the areas of rice, beef, pork, dairy, and sugar.  The country’s powerful farm lobby has long resisted any efforts to liberalise trade in those products, with officials noting that this week’s deal could indicate Prime Minister Shinzo Abe’s willingness to push for these controversial changes.

“Japan’s agriculture is now regarded as a fresh growth industry and stands at a point where it needs to reform the way it thinks,” Japanese Economy Minister Akira Amari said.

Notably, the deal includes an agreement to cut tariffs on frozen beef in half - from 38.5 to 19.5 percent - over an 18-year period. For fresh beef, tariffs will be cut to 23.5 percent over 15 years. Australia’s beef exports to Japan totalled A$1.4 billion (US$1.3 billion, at today’s exchange rate) in 2013.

With regards to dairy, Japan has agreed to increase Australia’s tariff-rate quota on cheese - in other words, how much can be imported free of duties - from 27,000 tonnes to 47,000 tonnes annually. Cheese makes up the bulk of Australia’s dairy exports to Japan.

The two sides have also signed off on eliminating Australian import tariffs on Japanese-made automobiles, one of the Asian economy’s key exports.