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Abe, Abbott reach FTA agreement

by Mizuho Aoki and Reiji Yoshida

Prime Minister Shinzo Abe and Australian Prime Minister Tony Abbott agreed on a free trade pact Monday in Tokyo, ending seven years of negotiations.

“Today’s general agreement has a historic significance for the two nation’s efforts to establish closer ties,” Abe said during a joint press conference Monday.

Abbott described the opportunity as “a marvelous and historical day.”

Tokyo has agreed to lower its tariffs on Australian beef from the current 38.5 percent to the 20 percent range, while Australia will scrap its tariffs on imported Japanese automobiles, according to government sources.

With the agreement, Australia becomes the first major farm-exporting nation to reach an FTA deal with Japan.

Abe and Abbott are expected to formally sign an FTA agreement this summer. If everything goes smoothly, the accord is expected to take effect in 2015.

In response to domestic farmers’ concerns about how cheap Australian beef will impact their business, Tokyo will keep tariffs on chilled beef higher than those on frozen beef.

Australian chilled beef is competitive in the domestic livestock market.

Under the agreement, Japan will gradually lower the tariff on Australian chilled beef over 15 years to 23.5 percent. The tariff on frozen beef will be 19.5 percent in 18 years.

Australia will in turn scrap tariffs on most Japanese industrial products immediately after the accord takes effect, a foreign ministry official said.

It will drop the 5 percent tariff on Japanese cars with engines between 1500cc and 3000cc, which account for about 75 percent of Japan’s auto exports to Australia, when the FTA takes effect, the official said.

Tariffs on all other Japanese automobiles will end in three years.

In the meantime, Japan will abolish tariffs on most Australian industrial products in 10 years.

However, Australian rice, wheat, sugar, skim milk and butter were excluded from the agreement.

Australia is Japan’s fourth-largest trading partner after China, the U.S. and South Korea. Most Australian imports are farm products and energy resources, while Japan mainly exports automobiles and other industrial products.

Australia accounts for much of the beef and dairy products imported into Japan. In 2011, 63.7 percent of the beef imported into Japan was from Australia in value terms, followed by 25.9 percent from the United States, according to government data.

Australian exports to Japan totaled around ¥4.51 trillion in 2011.

To demonstrate closer security cooperation between Australia and Japan, Abbott joined a special session of the National Security Council on Monday in Tokyo.

Abe and four other key ministers joined the session with Abbott.

According to Chief Cabinet Secretary Yoshihide Suga, at the outset of the session Abbott praised Japan’s contributions to world peace and the establishment of the rule of law.

Abbott referred to Japan as a “special partner” and he “expressed his strong intention to develop not only economic and trade ties but also cooperate on various security issues” during the session, Suga told a daily press briefing later in the day.

Suga didn’t reveal the specific issues discussed during the NSC session. But a senior government official said Abbott appears to be interested in Japan’s advanced submarine technologies.

Information from Kyodo added

  • Douglas

    The local industry is already dead. Toyota will end manufacturing in Australia in 2017 and then no more Australian made cars. No reasons to keep tariffs on imports any more.