politics

Free trade agreement between Japan, Australia goes into effect

19 Comments

A free trade agreement (FTA) between Japan and Australia went into effect on Thursday, a deal that both sides say will yield windfalls for their economies.

Australian Prime Minister Tony Abbott and his Japanese counterpart, Shinzo Abe, announced the pact last year, Japan's first with a major agricultural economy.

The agreement calls for Japan to gradually phase out its nearly 40% tariffs on Australian exports of beef. In turn, Australia is to end its tariffs on Japanese-made vehicles, household appliances and electronics. Japanese cars, for example, will cost Australians about $2,500 less after the 5% tariff is abolished.

Talks on the trade pact took seven years as Japan has balked at allowing foreign competition in farm products. The basic agreement calls for the current 38.5% tariff on beef from Australia to drop to 23.5% for chilled beef within 15 years. The tariff for frozen beef will fall to 19.5% within 18 years.

The agreement also sets limits on the amount of beef that can be imported.

According to details from the Australian trade ministry, Japan will make "deep" cuts on beef tariffs in the first year. Tokyo also agreed to increase duty-free imports of cheese and to phase out its tariffs on wine, sea products, honey and many fruits, vegetables and nuts.

Japan also agreed to end, within a decade, virtually all of its tariffs on Australian industrial products.

Japan is Australia's second-biggest trading partner after China, importing over two-thirds of the beef Australia exports.

Both sides see significant potential for growth in trade, and officials say Australians can expect access to less expensive Japanese products thanks to the agreement.

Despite the tariffs it imposes on farm imports, Japan buys more from Australia than it exports to the country, mainly due to its purchases of energy and other resources.

Countries around the Pacific's rim buy 77% of Australia's exports, and seven of its top 10 export markets are in Asia.

© Japan Today/AP

©2021 GPlusMedia Inc.

19 Comments
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15 and 18 years to remove tariffs on Australian beef is hardly what I would call a successful negotiation, especially for Japanese consumers. Beef is disgustingly expensive here, and there's no reason for it, except for a lack of spine amongst politicians who kowtow to domestic producers. And don't tell me Kobe beef is worth protecting - I've eaten not only Kobe, but Canadian, Australian and US beef, and as a cook whose table is appreciated by people of several nationalities, I can tell you one thing for sure - it's all in the preparation.

0 ( +1 / -1 )

15 and 18 years respectfully to get a drop in price of a steak is absolutely ridiculous.

1 ( +1 / -0 )

Need is no cheaper in Australia and many of the cattle in Japan come from from Australia as calves. So yes what a slow process.

0 ( +0 / -0 )

Sorry to say to my Aussie friends but this agreement seems to favor Japan.

2 ( +3 / -1 )

Cripes, I'll be dead by the time the prices fall,,,

Anyways, healthier not to eat too much beef.

1 ( +2 / -1 )

Great for aussies, now they get cheaper cars.

1 ( +3 / -2 )

How long do I have to wait before cheese ceases to be a luxury item? I'm not expecting to see a decent piece of mature cheddar at my local ripoff emporium, sorry, supermarket, anytime soon. Amazed at the lightening speed MAFF can move at once presented with common sense-18 years, wow!

1 ( +1 / -0 )

Aussies get car tariffs reduced by 5%, while their beef exports are reduced by 15%: How is that better for Japan?

0 ( +2 / -2 )

15 and 18 years to remove tariffs on Australian beef is hardly what I would call a successful negotiation, the Australian arnt stupid, this is just a benchmark, Australia could only get this rate as a one on one FTA, the TPP will put a lot more pressure on Japan to lower tarriffs even further. In the unlikely event the TPP collapses Australia has head start over the competition.

0 ( +0 / -0 )

I will only rejoice when I see affordable dairy products here!!!! How about some real Aussie yoghurt for starters?

-1 ( +0 / -1 )

Sorry to say to my Aussie friends but this agreement seems to favor Japan.

agreed but doubt if Japanese Consumers will get any benefits, either same prices or higher !

0 ( +0 / -0 )

This is not a "free" trade agreement by any definition. One side gets zero tariffs, the other gets 18.5% after 15 years? This is called getting "bent over and shafted", there is nothing free about it. The Japanese get an entirely free market, the Aussies get nothing even close in exchange. Worse yet, in a decade and a half from now, when the tariff is reduced to 18.5%, you can bet that local Japanese distributors and sellers will jack up the prices on Australian beef (as they have done to other imported products after tariffs were reduced or abolished), and that there will be little or no difference in the shelf price, which Japanese sellers say "protects consumers from price fluctuations.". The Australian farmers are not likely to see much of an increase in their sales, even less so when after 15 years, there will be millions fewer Japanese consumers around to buy beef. Australia got taken to the cleaners in this so-called "free trade" deal. What a scam.

-2 ( +1 / -3 )

@sangetsu03

Australia got taken to the cleaners in this so-called "free trade" deal. What a scam.

It's even worse with the China-Australia FTA. The Chinese govt. is buying up farmland at a lightning pace, yet Australians are not allowed to buy property in China. I really feel for the farmers...

1 ( +1 / -0 )

sighclops

So you are waiting for yoghurt that had been sailing for three weeks?

Maybe you are going to purchase yoghurt that had been flown in with 1000 yen per 300g price tag.

-1 ( +0 / -1 )

Is that G 8 or hollowing among ecquals

0 ( +0 / -0 )

All of the free trade agreements Australia has so far implemented are not in the best interests of the majority of the Australian people and generally only serve the interests of Australia's mineral and energy resources industries, the agricultural export sector and their financial backers.

Australia's once capable manufacturing industry is being deliberately destroyed to further increase imports thereby lowering the Australian dollar and further improving the profitibility of the resources and agriculture export sectors which unfortunately employ far fewer Australians than manufacturing.

The 'neo liberal' economic thinking that is driving this foolishness is currently entrenched in all of the major Australian political parties (including the Labor Party which has betrayed its constituency), most relevant government institutions and by most economists yet it will inevitably lead to a huge increase in unemployment and Australia inevitably having an economy more like a 'banana republic' than a developed nation.

A moderate level of trade protection (10 - 15% tariff) would have enabled highly automated manufacturing sectors such as the Australian automobile manufacturing industry and the white goods industries to not only survive but also to expand but this has been refused by all national governments even though far higher tax payer funded subsidies are provided to the resources industries and finance/superannuation industries.

-1 ( +0 / -1 )

Andreas Bimba

The Australian auto manufacturing industry self imploded due to labor unions with emerging neighboring SE Asian nations with lower wages gaining the bulk of manufacturing sector. That trend is not going to change.

-2 ( +0 / -2 )

SamuraiBlue, your comment is a further example of the flawed thinking that is currently prevalent in Australia. The labour unions are not to blame for the decision made by the final three car manufacturers in Australia, Ford, Holden and Toyota to cease local production. The labour unions did add to the cost pressures faced by these manufacturers but this was nothing new nor was it a major factor. The sustained and historically high Australian dollar, the FTA's and the absurdly low 5% passenger vehicle import tariff for non FTA producers like Europe simply tipped the economic equation towards 100% importation of vehicles being more profitable for Ford, General Motors Holden and Toyota. These negative factors fall within the realm of Industrial Policy which is the responsibility of the Australian national government. It is the Australian national governments, both Conservative and Labor that are responsible for the appalling industrial policy settings that have switched the economic balance towards 100% imports.

Australia, like Europe, Japan and the US have always had higher labour costs than the cheapest Asian producers such as Thailand, China and South Korea. The higher labour cost nations all rely on trade protection or government incentives to compete in the global market place. Even the low labour cost nations have trade protection and generous government incentives. All these nations, including Thailand and China are able to apply technology and automation more or less equally well. Japan, China, South Korea and Europe all have highly protected home markets with over 90% of new vehicles being supplied by local producers. The US market is more trade exposed but US owned manufacturers have regularly received enormous government incentives from US national and state governments. With trade protection and government incentives, the automotive manufacturers in all of these nations, including Australia have attained similar levels of productivity, quality, technical proficiency and product/manufacturing innovation.

The Toyota Australia Altona vehicle manufacturing plant in the western suburbs of Melbourne is a modern 150,000 unit p.a. plant and its production costs are only slightly higher than equivalent Toyota plants in Japan, the US and the UK. The Toyota Thailand operations have even lower production costs but a moderate 10% - 15% vehicle import tariff for Australia would tip the economic balance back towards Australia. The manufacturing operations of Holden and Ford Australia can and have attained productivity levels equivalent to Toyota Australia when their plants are run consistantly at their design capacity.

Both Holden and Toyota Australia had expansion plans for their Australian manufacturing operations in mid 2013 to replace and expand their locally produced product range but the moderate level of government incentives that were requested were flatly rejected by the current Conservative (Liberal and National Party Government). Both the Conservatives and the Labor Party have rejected the more rational alternative of moderate tariff protection.

Australian vehicle manufacturers have competed successfully in the global market place and can continue to do so with moderate tariff protection simply because the assembly plant labour cost is typically only about 10% of the total vehicle manufacturing cost in highly automated factories. Some small local manufacturers such as pharmaceuticals and medical device manufacturers like Cochlear may be able to compete globally without tariff protection but these businesses in total will unfortunately never attain the size of the Australian automotive manufacturing industry which is currently at a historically low $5 billion p.a. turnover. If a national goal was set of 50% of the Australian 1 million p.a. new vehicle market being manufactured locally, plus exports to keep plants at capacity, then this could be a successful $15 - 20 billion p.a. industry. The total industry assistance involved would be far less than that currently provided to the mining and finance/superannuation industries and would in any case be returned back to the government through increased taxation revenue and back to consumers through increased employment and economic activity.

-1 ( +0 / -1 )

Equal trade is the only fair way. If Japan exports for example 50 billion yen in goods to Australia each year, then Australia should be able to export 50 billion yen in products to Japan. The negotiators decide the product needs by each country and system to achieve this

0 ( +0 / -0 )

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