WINNERS AND LOSERS: Many Australian Food And Wine Exporters Are Feeling Burned By The Japan Trade Deal

Tsukiji Fish market in Tokyo Japan. Image: Shutterstock.

The announcement of the Japan-Australia Economic Partnership Agreement (JAEPA) in Tokyo has brought a mixed response from Australian exporters, most notably, the agriculture industry, which Prime Minister Tony Abbott, and Trade Minister Andrew Robb were keen to paint as the biggest winners from the deal.

But the reaction from farmers has been mixed. Earlier today National Farmers’ Federation President Brent Finlay said his organisation was disappointed with the overall outcomes, with little change for a number of sectors, due to Japanese sensitivities about its own agriculture industry.

“The agreement appears to be positive for Australian beef, horticulture and seafood, with a range of tariffs being reduced over time,” Mr Finlay said.

But, he said, a deal like this needed to be comprehensive. “That means, no sector carve-outs and elimination of tariffs. The Japanese agreement falls short of the mark on a number of fronts in this regard.

“The agreement does not improve—or marginally improves—market access and terms of trade for a number of sectors such as dairy, sugar, grains, pork and rice.”

We’ve spoken to representatives from some of the key producer sectors and rounded up reaction from others today. Some are celebrating, others are deeply unhappy with the outcome.

Beef – Hooray!

Japan is halving its tariff on fresh and frozen Australian beef over the next 15-18 years, and Meat & Livestock Australia predicts that sales will rise by $5.5 billion over the next 20 years, adding 7% to the annual gross value of local beef production.

Japanese beef tariffs are nearly halved. Photo: Justin Sullivan/Getty

Japan is Australia’s largest customer in volume and value terms, taking 26% (288,795 tonnes) of all beef exported in 2013.

Chairman of the Beef Industry’s AJFTA Taskforce Lachie Hart said the industry was pleased with the progress in the deal, but described it as a first step and seeking further gains and trade reforms via other forums.

“Hopefully the successful completion of an AJFTA will be the harbinger of further liberalisation of the beef market into Japan, with tariffs being eventually eliminated and other impediments on the trade removed,” he said.

Dairy – Boo.

Japan is the dairy industry’s top market, with 19% of exports, worth $511m (double exports to China).

But the Australian Dairy Industry Council (ADIC) said it was “extremely disappointed” with the FTA result, saying the savings range from $4.7 million in the first year to an estimated $11.6 million by 2031, which represents just 0.1 of a cent per litre for Australian farmers in 20 years’ time.

ADIC Deputy Chair, Robert Poole, said the agreement fell well short of industry expectations.

“There has been no movement in this agreement on fresh cheese – the number one objective for Australian dairy, with tariffs to remain at 29.8%. A successful outcome on this tariff line would have delivered approximately $60 million in tariff savings – instead we have received nothing.

“While Most Favoured Nation (MFN) status has been put in place for cheese in Trans Pacific Partnership (TPP) agreements, the exclusion of all other product lines leaves us vulnerable to one of our competitors reaching a more wide-ranging deal with Japan, that could leave the Australian dairy industry worse off,” Poole said.

Wine – Hooray!

Australia exports 9.4 million litres of wine, worth $41 million annually to Japan, one of our top 10 markets. Nearly half that wine is at the $2.50-$5 litre value, but the market has been fighting a high dollar and especially rival importer Chile, which struck its own FTA with Japan several years ago and has been reducing tariffs over a 12-year phase.

Victor De Bortoli, export manager, De Bortoli Wines

In broad terms it means Chile currently pays a 10% tariff, while Australia gets in on 15%, making a case of wine $10 cheaper from Chile. Under Australia’s trade deal, tariffs on bottled and sparkling wine will go within seven years. The tariff on bulk wine, which makes up almost a quarter of the export market, will go immediately.

Victor De Bortoli, export manager at De Bortoli Wines, one of the largest exporters to Japan, said the deal is awesome news.

“If you see what the Chileans have done with their FTA, this is quite significant and timely, because we’ve seen dramatic inroads by Chile in recent times,” he said.

“Australia’s been been under pressure for the last few years. We’ve been holding volume, but losing value, so this gives us the ability to claw back sales. We’ve been a real fight to maintain market share at price points where volume is key.”

Japan is 2.5% of De Bortoli sales, but Mr De Bortoli said Australia “should be able to do a whole lot more” in the market as the tariff comes down.

Speaking from Korea, where he’s part of the Prime Minister’s trade delegation, Wine Australia chief executive Andreas Clark said the details was a significant win.

“This is a great result for the industry, and especially important at this time when there are a range of challenges to the sector. Japan is a pretty important market for us and the removal of tariffs will creating a more level playing field,” he said.

“This deal will put us in line, or just ahead of Chileans in phasing out tariffs.”

Seafood – Meh.

Australian seafood exports to Japan were worth $225 million in 2011, second only to Hong Kong, but high value products such as lobster and tuna were coming under increasing pressure from competitors.

Under the Japan deal tariffs on lobsters, prawns, tuna, crabs, abalone, oysters, toothfish, sea urchins and fish oils will go, but it’s not always as impressive at it sounds, with the tariff on southern bluefin tuna at 3.5% and lobster at 4.8%.

Seafood with higher tariffs, such as Atlantic salmon at 9.8% and mussels, at 10%, aren’t mentioned in the deal, however, abalone fishers have a reason to celebrate, with the 7% tariff on live and chilled shellfish going, along with the 10.5% on dried abalone.

For now, much of the detail of how the FTA will pan out remains uncertain, with officials saying it will be clearer when the deal is signed later this year, but Peter Horvat, database manager at the Fisheries Research and Development Corporation believes there’ll be a mixed reaction from the seafood industry.

“Some sections will do much better out of this than others,” he said.

“The two things that will continue to drive exports into Japan will continue to be our production quantity and the Australian dollar.”

Canned food – Hooray!

While Australia’s last surviving cannery, SPC didn’t get the financial help it sought from the federal government a few months back, winding back the tariff on canned foods is a big boost, as Japan is one of its few export markets.

SPC managing director Peter Kelly welcomed the deal and thanked the Prime Minister and trade minister.

“We have been asking for changes to a raft of unfair tariff regimes which have damaged our business, so this new FTA with Japan, where tariffs on our products will be reduced from 16% to zero, is a step in the right direction,” he said.

“While we won’t get full financial benefits from this market until the AUD returns to more normal levels, the tariff reduction provides SPC with a great opportunity to continue to provide Japanese consumers with great Australian made products.”

Sugar – Boo!

Australia supplies Japan with one third of its sugar imports, valued at $226 million in 2013, but sugar growers are “bitterly disappointed” describing themselves as “sacrificial lamb” in a repeat of the 2004 US FTA deal.

Brendan Stewart, CEO of peak body Canegrowers, said his farmer members had been “hung out to dry” by “kick in the guts for Aussie cane growers”.

“There is no improvement in market access for sugar, no improvement in terms of trade and no commercial gains for Australia’s export-driven sugar industry,” he said. “Australia has not gained a single cent of upside in this new deal. From what was our most important market a decade ago, access to our near Asian market is withering.”

While there concessions, they did not go far enough Stewart says.

“Australia has been supplying a specialised Japan-grade sugar for many years to the Japanese market, which is inherently different to the international grade sugar supplied to its other customers,” he said.

“While the new agreement has reduced the tariff reduction on international standard sugar from a 184% to a 110% effective tariff, which is a welcome move, this will not improve Australia’s access to Japan. This tariff remains so much higher than the unchanged effective tariff on the special grade sugar that Australia supplies to Japan for which there is no change, remaining at 70%.”