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Australia trade deal gives Japan leverage in TPP talks

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Shinzo Abe's success in signing a free-trade deal with Australia proves Japan's prime minister can bend the once-powerful farm sector to his will, experts say, offering leverage against US claims of intransigence in a wider pan-Pacific deal.

Tokyo looks set to make the most of its triumph, which came just weeks before U.S. President Barack Obama arrives in Japan on a state visit that had at one point been expected to crown the Trans-Pacific Partnership (TPP).

The Japan-Australia deal was signed Monday after Abe's summit with Prime Minister Tony Abbott, and followed seven years of sometimes torturous negotiations.

The agreement will see Australia drop its 5% duty on small and mid-sized Japanese cars -- something of a symbolic move for a country that is soon to lose the last of its auto plants.

In exchange, Canberra has partially prised open Japan's tightly-controlled agricultural markets, winning an up-to-50% cut in steep tariffs on imported Australian beef.

The deal "puts pressure on the United States over deadlocked talks with Japan" that form a key plank of the TPP project, said Takaaki Asano, research fellow at the Tokyo Foundation.

At issue is what Washington and many of the other parties to the talks -- which also involve Chile, Mexico, Canada and several Asian countries -- see as Japan's unwillingness to open its lucrative agricultural market.

Putative suitors have long complained that sky-high tariffs -- on rice it is nearly 800% -- and non-tariff barriers, like overly-strict safety requirements, are naked protectionism pandering to a powerful farming sector.

Japan's farmers -- largely elderly, conservative and with smallholdings that would barely be worth tilling in many countries -- have traditionally been a formidable political force.

Through large and well-organized cooperatives they have backstopped Abe's Liberal Democratic Party, helping it to maintain a virtual stranglehold on Japanese politics since the mid-1950s.

The narrative these cooperatives spin intimately links Japanese national identity with the shape of the countryside, idealising the small rice paddies that make up the rural landscape and warning this essence of Japanese-ness is under threat from an onslaught of poor-quality, unsafe farm imports.

Abe's triumph in the Australian deal has been to prove that he is prepared to take on this entrenched ideology and offer up his beef farmers, pitting them against the vast ranches of the Outback, whose economies of scale dwarf their Japanese competitors.

The mass circulation Yomiuri Shimbun reported Abe had told his ministers that he definitely wanted a trade deal struck during Abbott's visit, regardless of protests from the farming lobby.

But the trick, says Waseda University professor Shujiro Urata, is that Tokyo has not given away very much.

"The compromise Japan made this time is not huge," he told AFP. Commentators have noted that the full roll-back of beef tariffs to the headline level will take almost two decades.

But nevertheless, it was a compromise, and it undermines U.S. complaints that Tokyo is not prepared to budge.

"The ball is now in Washington's court. They must be thinking hard now," said Urata.

As the ink on Abe's signature dried, U.S. Trade Representative Michael Froman arrived in Japan for three days of TPP horse-trading with his Japanese counterpart Akira Amari.

Asked by reporters about the impact of the Tokyo-Canberra deal on the TPP talks, Froman told reporters: "I don't think it has much effect in one way or the other. We are looking for a level of ambition in the TPP that is significantly higher than that."

The pact, which if realized could cover 40% of global GDP, is a key plank in Obama's foreign policy, an effort to anchor the U.S. firmly to a region that is increasingly feeling the pull of Beijing's mighty economy.

Negotiators missed the end-of-2013 deadline they had set themselves -- a target that always looked ambitious but became much more so when Tokyo came onboard during the year, and no new end-date has been set.

However, Obama's Asia trip is expected to provide some momentum and may focus minds on both sides of the Pacific, where each government would like to be able to claim some sort of victory from the visit.

Most commentators agree a settlement is not likely anytime soon given remaining gaps over trade barriers and U.S. midterm elections later this year, which will make U.S. political concessions more difficult.

But that has not dampened the spring in the step of Japanese leaders after their triumph with Canberra.

"In negotiations both sides need to show flexibility. Like the Japan-Australia (trade deal), it's important that we share feelings that it's a win-win situation" in the TPP talks, Abe told a TV news program Wednesday.

His negotiator, Amari, acknowledged a lot of hard graft remained, but added: "I expect the (TPP) talks will accelerate (after the deal with Australia)".

© 2014 AFP

©2022 GPlusMedia Inc.

5 Comments
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The article's premise is flawed: Australia didn't get a "free trade" deal with Japan. Maintaining 800% tariffs on a key crop and export is anything but "free trade."

If anything, this deal, that saw the Japanese hardly budge at all, gives even more support to the skeptics in Washington who want to play hardball...or no ball at all....with Tokyo.

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The real winners are Australian families, rather than our farmers/exporters, as they'll soon be able to purchase family vehicles (needed to traverse our large landmass) at greatly reduced prices (well more or less).

This is more likely to occur now we have an FTA with Korea and possibly another FTA with China soon.

Although it's worth pointing out the irony that much of Australia's large scale ag producers are owned by Japanese firms (ie; Nippon Meats, Dairy Farmers).

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David ElsonApr. 12, 2014 - 05:21AM JST The real winners are Australian families, rather than our farmers/exporters, as they'll soon be able to purchase family vehicles (needed to traverse our large landmass) at greatly reduced prices (well more or less).

The real winners are Australian car dealers and Japanese car manufacturer. TPP agreement will save the manufacturer about $1500 per car. It means that there will be more profit to manufacturer and dealers. I doubt they will pass the entire savings to the customers. Regardless, Australia is a small market with only 22 million people (less than 1/5th of Japan). It will not make much difference.

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The real winners are Australian families, rather than our farmers/exporters, as they'll soon be able to purchase family vehicles (needed to traverse our large landmass) at greatly reduced prices (well more or less).

The real losers are Australian families, rather than our farmers/exporters, as they'll soon be realized that cutting 5% duty on small and mid-sized Japanese cars will not make any significant difference for overall sale price of imported Japanese cars. Market will not make special concession for Australian consumers with price. Instead they will supply extra features in their cars with same price. However not everyone will be interested in extra features.

http://www.caradvice.com.au/280688/japanese-car-makers-weighing-up-how-to-pass-on-free-trade-agreement-benefits/

Honda Civic, Accord and Jazz are made in Thailand with Japanese design. Therefore that deal will not make any impact about the cheaper deals for the Honda fans of Australian consumers.

Although it's worth pointing out the irony that much of Australia's large scale ag producers are owned by Japanese firms (ie; Nippon Meats, Dairy Farmers).

Japan has insecurity about the food and energy supply. As you posted, large organization of high volume producers of Australian food industry are owned by Japanese Inc. The outcome is Japanese are partially controlling the Australian food supply chain regardless of FTA. On the contrary, Aussie are powerless to push down the price of Japanese imported cars and consumer electronics.

The winner of the freer trade( Not the free trade) deal is Japan. Not the Australia.

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f anything, this deal, that saw the Japanese hardly budge at all, gives even more support to the skeptics in Washington who want to play hardball...or no ball at all....with Tokyo

For once, I agree with you. The deal between Australia and Japan was not a "free trade" deal. Since when does one side lowering tariffs from a bruisingly high 38% down to a ridiculously high 23% over 15 years, while the other side lowers tariffs to 0% count as "free trade"? I'm sure Tony Abbot still can't sit after the hammering he and Australia took in this so-called deal. Australian farmers gained absolutely nothing in this deal, there will be no decrease in price of their beef in the retail Japanese market, so there will be no increase in sales for the farmers. The big Japanese retailers and distributors will keep extra cash for themselves, just like they always do.

The other countries involved in TPP will only see the Australian trade deal as a further reason to throw Japan out. Japan has never entered a trade deal without getting their way, by hook or crook, and everyone knows this, the agreement with Australia is just the latest example.

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