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Historic trade agreements a big win for Australian exporters

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Historic trade agreements a big win for Australian exporters   article image

New trade agreements with Japan and South Korea will give Australian exporters unprecedented access to two of the world’s biggest markets.  

And the door of opportunity will be opened even wider if a free-trade agreement can be secured with China by the end of the year, as expected.  

Heather Ridout, a director of the Reserve Bank and former chief of the Australian Industry Group, has hailed the new deals as “a very good achievement for Australia, a genuine achievement.”  

Agribusiness is of course the big winner under the new Free Trade Agreements.  

But the deal also opens the door to a plethora of new opportunities for Australian services. Lucrative markets for education, health services, aged care, finance and legal services will soon be opened to Australian firms.  

The Japan-Australia Economic Partnership Agreement (JAEPA) will add billions of dollars to Australia’s economic growth over the next 20 years.  

The historic agreement delivers a significant boost to Australian exporters and producers who were previously locked out of the impenetrable Japanese domestic market.  

The new deal will substantially free up exports of Australian beef, dairy, wine, sugar, horticulture and a range of services.  

It also makes Japanese cars, cameras, televisions and other high-tech goods cheaper in Australia.  

Good for the Australian economy  

In a joint statement, Prime Minister Tony Abbott and Minister for Trade and Investment Minister Andrew Robb said the agreement with our second largest trading partner “is good for the Australian economy, good for jobs, good for farmers and good for consumers.”  

The agreement, the culmination of negotiations that started in 2007 under former Prime Minister John Howard, is expected to be signed when Japan’s Prime Minister Shinzo Abe visits Australia in June.  

Mr Abbott said the new agreement is the first time Japan has negotiated a comprehensive economic partnership agreement, or FTA, with a major economy – particularly one with a strong agricultural sector.  

Japanese determination to protect its farmers has been a major stumbling block to earlier finalisation of the FTA.  

The Japan-Australia Economic Partnership Agreement (JAEPA) will give Australian producers better trade access to Japan for key agriculture products including beef, cheese, horticulture and wine.  

“This will give Australia a head start over our competitors in this market,” Mr Abbott said.  Tony Abbott3

Major windfall for Australian beef  

JAEPA represents a major windfall for Australian beef – our biggest agricultural export to Japan, currently worth $1.4 billion. This includes a halving of the tariff on frozen beef from 38.5 per cent to 19.5 per cent, with deep cuts in the first year.  

Cheese, by far Australia’s largest dairy export to Japan at $372 million, will gain significant new duty-free access. Australian horticultural producers will gain from immediate tariff eliminations across a wide array of fruit, vegetables and nuts.  

The tariffs on canned products such as tomatoes, peaches and pears, as well as fruit and vegetable juices, will also be eliminated.  

The beef industry, which is currently worth $1.4 billion in Japanese exports, will see the tariff almost halved from about 38.5 per cent.  

This could see the beef industry grow by $2.8 billion in the next two decades, measured in current dollars, say analysts.  

The tariff on frozen beef will be halved, from 38.5% to 19.5%, with deep cuts in the first year. The full fall is to take place within 18 years, while a fall to 23.5 % for chilled beef is to be achieved within 15 years. There will be limits on how much beef can be imported into Japan.  

Dairy exports set to soar  

And Australian exporters of high quality sugar, dairy products including ice cream, yoghurt and natural cheese all stand to benefit from the free trade deal.  

In dairy, where the Japanese have long maintained import quotas above which high import duties attach, Australia has been granted its own category effectively, taking its duty-free quota to 47,000 tonnes a year up from the current 27,000.  

Cheese, Australia’s largest dairy export to Japan and worth $372 million, would gain significant new duty free access.  

Natural cheese, which is used to used to make processed cheese such as cheddar or Colby, is a big winner in the deal as there will be immediate duty-free access to make processed cheese.  

An Australia-specific 4000 tonne quota, rising to 20,000 tonnes in 20 years will be put in place, while the 40 per cent tariff for processed cheese will be halved over 10 years, with the quota rising from 50 to 100 tonnes.  

Tariffs for ice cream exports will fall by 50 per cent to between 14.9-10.7 per cent over ten years while the quota grows from 180 tonnnes to 2000 tonnes, and frozen yoghurt tariffs will halve to 14.9 per cent in 10 years, with the quota doubling to 200 tonnes.  

Consumers will be major beneficiaries  

Australian consumers will also be major beneficiaries of this Agreement, with tariffs eliminated on imported cars from Japan, as well as on household appliances and electronics. Australian services providers will also gain significant new access to the Japanese market across areas such as financial, education, telecommunications and legal services.  

Japan is Australia’s second largest export market and second largest trading partner. Two way trade was $69.3 billion in 2012-13, representing 11 percent of Australia’s total trade.  

With a population of 127 million people and extremely limited natural resources, Japan has always been regarded as a jewel in the crown for Australia as its economy has been so protected.  

Mr Abbott said JAEPA sends a strong message to Japanese investors that Australia is open for business.  

The Japan trade deal follows the successful conclusion of a Free Trade Agreement with Korea, which was formally signed in Seoul this month.  

New opportunities for service providers  

The Australia Korea Free Trade Agreement (KAFTA) will see tariffs on primary products that range from about 15 per cent to more than 500 per cent removed.  

As part of the deal, tariffs of up to 300 per cent will be eliminated on Australian exports such as beef, wheat, sugar, dairy, wine, seafood, resources and manufactured goods.  

Australian automotive suppliers will benefit from the immediate removal of tariffs as high as eight per cent.  

The deal also provides new market opportunities for Australian services in education, telecommunications, as well as financial, accounting and legal services.  

Mr Abbott says independent modelling shows the Korean free trade agreement would be worth $5 billion between 2015 and 2030 and boost the economy by about $650 million annually after 15 years.  

China agreement expected by the end of the year  

The signing is the culmination of five years of negotiations with the South Korean government.  

And Mr Abbott is optimistic of securing a free-trade agreement with China by the end of the year following one-on-one talks with China's Premier Li Keqiang this month.  

A free trade agreement with China has long been regarded as a major boon for Australian exporters, provided it includes rights of Australian businesses to invest in China.  

As part of the deal Australia is pursuing greater rights to provide services in China in areas such as finance, health and ageing services and environmental water management.  

The Japan-Australia FTA at a glance  

FARMERS:

  • Tariff cuts for wine, barley
  • Tariffs eliminated for sugar, cheese, horticulture, vegetable oils, seafood, honey  

BEEF:

  • Exports $1.4 billion in 2013
  • Sales up $5.5 billion over 20 years
  • Beef production up seven per cent
  • Frozen beef tariffs down to 19.5 per cent (cut of 19 percentage points)
  • Chilled beef tariffs down to 23.5 per cent over 15 years (cut of 15 percentage points)
  • Meat and Livestock Australia Japan taskforce chairman Lachie Hart hopes the deal will eventually abolish tariffs  

DAIRY:

  • Exports $511 million in 2013
  • Industry saves $4.7 million in first year; $11.6 million by 2031
  • Farmers gain 0.1 of a cent per litre over 20 years
  • Fresh cheese tariffs remain at 29.8 per cent  

CARS:

  • Cost of Japanese cars down by $1500
  • No tariffs currently on Australian cars and car parts  

MINERALS

  • Tariffs on all energy and mineral products eliminated within 10 years.

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