Here's The Sweeping Impact Of The Japan-Australia Free Trade Agreement On Economic Sectors

A Japanese Geisha serves green tea. Photo: Getty / File

Japan used to be Australia’s biggest export destination. Then came China and its hunger for raw materials.

However, Japan is still a very important market and supplier for Australia.

In 2013, two-way goods and services trade reached $70.8 billion ($66.5 billion in goods and $4.3 billion trade in services), making Japan Australia’s second-largest trading partner.

Japan is Australia’s second-largest export destination (15.5% of total exports) and third-largest source of imports (6%). At the end of 2013, Japanese investment in Australia was valued at $131 billion and Australian investment in Japan reached $50.2 billion.

The Japan-Australia Economic Partnership Agreement (JAEPA), which has been under negotiation since 2007, and finally signed this week, will deliver benefits to Australian farmers, manufacturers, exporters, service providers and consumers.

More than 97% of Australia’s exports to Japan will receive preferential access or enter duty-free under JAEPA.

Although Prime Minister Tony Abbott and Japan Prime Minister Shinzo Abe have signed the paperwork, the deal still needs to go to the Australian parliament and has to be approved by Japan’s parliament. The agreement is expected to be implemented late this year.

Here’s the detail on what the agreement will mean:

Consumers

The cost of an average Japanese car will fall by about $1,500, according to Trade Minister Andrew Robb.

Remaining Australian tariffs on Japanese imports will be eliminated including 5% tariff on Japanese passenger and goods motor vehicles electronics and white goods, with consumers and businesses to benefit from lower prices and greater availability of Japanese products.

Agriculture

Key points:

  • Rapid tariff reductions for beef, Australia’s largest agricultural export to Japan worth $1.4 billion in 2013, providing a significant competitive advantage over major competitor, the United States.
  • Elimination of the 15% tariff on bottled wine over 7 years, with the tariff on bulk wine eliminated immediately. Wine exports were worth $42 million in 2013.
  • Duty-free quotas for Australian cheese, with trade worth $372 million in 2013.
  • Immediate and preferential duty-free access for the growing trade in milk protein concentrates, lactose and casein (worth $53 million) as well as new opportunities for ice-cream and frozen yoghurt exports.
  • Fast tariff elimination on the vast majority of Australia’s fruit, vegetables, nuts and juice, worth $111 million in 2013. For example tariffs on macadamia nuts (exports worth $16.2 million in 2013), and asparagus ($13.5 million) will be eliminated immediately.
  • Tariffs on lobsters, crustaceans and shellfish will be immediately eliminated and the tariff on Australia’s largest seafood export, tuna, and Atlantic salmon, will be phased out over 10 years. Australia’s seafood exports to Japan were worth $200 million in 2013.
  • Immediate duty-free and quota free access for wheat for feed and barley for feed as well as streamlined export arrangements for some Australian wheat varieties. Australia’s grains trade to Japan was worth over $770 million in 2013.
  • Immediate tariff elimination and reduced levies for high polarity (international standard) raw sugar, with Australian exports of low polarity sugar to Japan worth an estimated $235 million in 2013.

Australian resource and manufacturing exporters

On entry into force of JAEPA, 99.7 per cent of Australia’s exports of resource, energy and manufacturing products will enter Japan duty-free. On full implementation of JAEPA, all of Australia’s current resources, energy and manufactured goods exports will benefit from duty-free entry into Japan.

Exports of these products to Japan were worth over $42 billion in 2013.

Key points:

  • Elimination of tariffs on entry into force for coke and semi coke of coal (worth $89 million in 2013), non-crude petroleum oils ($74 million), aluminium hydroxide ($73 million) and titanium dioxide (over $14 million).
  • Elimination of tariffs for unwrought nickel ($98 million) and ferro-manganese ($37 million).
  • Elimination of tariffs on paints ($6 million), key plastic products (around $33 million) and pearl jewellery (Japanese imports worth $13.9 million) on entry into force.

Australian services suppliers

JAEPA guarantees Australian services suppliers access to the significant and well-developed Japanese market in financial, legal, education, and telecommunications services. JAEPA will provide Australian services exporters with the best treatment Japan has agreed with any other trading partner.

Key points:

  • Australian financial service providers guaranteed cross-border access to Japan when providing investment advice and portfolio management services.
  • Improved access to the Japanese legal services market for Australian law firms.
  • Guaranteed market access for Australian education providers to Japan’s higher education services market, including vocational and technical education. JAEPA is expected to boost the international competitiveness of the Australian TAFE sector.
  • Australian telecommunications providers to benefit from commitments on non-discriminatory treatment, regulatory transparency, competitive safeguards and fair and reasonable access to telecommunications networks and services.
  • Australian professionals (including architects, engineers and accountants) to benefit from guaranteed existing market access and visa access arrangements, including for their spouse and dependants to enter and stay in Japan.
  • Australian innovators and creative industries to enjoy high levels of intellectual property protection in Japan broadly equivalent to protections provided in Australia.

Japanese Investment

The agreement sends a clear message to Japanese investors that Australia is an attractive investment destination.

It will promote further growth and diversification in the flow of Japanese investment into Australia by raising the screening threshold, at which private Japanese investment in non-sensitive sectors is considered by the Foreign Investment Review Board, from $248 million to $1,078 million.

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