SYDNEY — Two old friends and customers, Japan and Australia, have come closer to putting the finishing touches to a historic deal that will firm up one of the world’s most successful business partnerships.
The proven, mutually beneficial nature of the long-running bilateral relationship is at a stage where a new, freer trade pact can strengthen the bases for past successes — a reliable supply of natural resources to fuel Japan’s industrial engine and a regular inflow of goods to feed Australia’s hunger for technology.
A free-trade deal could not come at a better time for drought-devastated Australia. And there’s the rub, for Japan’s notoriously protectionist farm lobby still wants to keep its traditional veto against cheap foreign food.
An odd event happened Nov. 7 that got the average Australian thinking about his northern neighbor. Once a year this country stops for a horse race, the Melbourne Cup. Surely it’s the only nation where most citizens place bets on a horse race. Two Japanese-owned horses wowed punters by making cup history, winning first and second places.
Meanwhile, in the real world, Australian Prime Minister John Howard and his Japanese counterpart, Shinzo Abe meet in Vietnam this week to get to grips with updating a two-nation commerce agreement signed in 1957 by Abe’s grandfather, Nobusuke Kishi.
Japan has long been Australia’s biggest trading partner and a key source of investment. For 50 years, smooth business dealings have widened cultural exchanges that, for young Australians in particular, have opened many career opportunities. The 50-year-old agreement has worked so smoothly, and to such mutual profit, that both sides agree it is time for a broader arrangement.
For the average Australian, Japanese brands are household names — for everything from cars to computers. In today’s global economy; however, competitive trading means old deals are being quickly replaced by new brands, notably from China. For Japanese industry, Australia’s untapped mineral resources are no longer its preserve.
China is making a run on new mining projects, disrupting a lead long held by Japanese industry. Natural gas and iron ore from Western Australia, originally developed through two-nation joint ventures, are increasingly going to fuel China’s steel mills. Coal exports from Queensland, another Japanese initiative, are sought for Chinese power generators. Now an industrializing India is starting to invest in Australian projects to get its slice of Australian raw materials.
For Australian consumers, busily spending at record levels, the reciprocal trade in cheaper Asian goods is welcome — except among those facing staff cuts by domestic manufacturers. Canberra is keen on maintaining a high rate of economic growth via the complementary trade route. The skill is to keep up business with our best customer while fostering growth with emerging Asian suppliers and at the same time expanding domestic production.
Trade Minister Warren Truss went to Tokyo for no-holds-barred talks designed to iron out protectionist arguments from the traditional obstructionist, the Liberal Democratic Party’s rural lobby. As a farmer himself and a key figure in the Australian equivalent, the National Party, straight-talking Truss wants a free-trade agreement at an early date.
In return for Japanese concessions on beef and rice, he offers long-term access to iron ore, coal, liquefied natural gas, aluminum and crude petroleum. For Japan, already a valued defense ally, there is augmented security of supply. For Australia, the cash benefits are estimated at $40 billion over 20 years.
The Abe-Howard talks in Vietnam are key sidelines during the week’s Asia-Pacific Economic Cooperation conference of 21 national leaders. As a climax to two years of Tokyo-Canberra negotiations, this one-to-one meeting could well provide the most immediate tangible benefit yet from affiliation with APEC. Rather than prolong the agony of waiting for APEC agreements, Japan and Australia may well settle for bilateral gains early.
One gain includes tourism. Last year 685,000 Japanese visited Australia, making Japan the second-largest source of tourists. Australian holiday resort developers are hoping the fickle Japanese holiday trade will again return en masse to the likes of Queensland’s Gold Coast.
Drought is adding a bitter imperative to Canberra’s efforts for an early start to a new Japan treaty. A dry spell across the southern half of the continent is being called the worst in 1,000 years — truly a misnomer in a country with only two centuries of records. Still, drought has become politically explosive. Lack of water is so grim that Howard summoned the premiers of four states to Canberra on “sacred” Melbourne Cup day, a time normally given over to celebrations.
The urgency is for joint federal-state government aid to inland towns practically dying of thirst. Howard agreed to extend government-backed interest-rate subsidies of up to $500,000 over five years. Many farmers in the tinder-dry Murray-Darling rivers basin are already failing to pay debts even with a subsidy.
A Newspoll voter survey has found that 92 percent of Australians think Howard has not done enough on climate change and drought. Yet Labor, the main opposition party, is divided on whether Canberra should join most of the world on the Kyoto Protocol on climate change. Party parliamentarians fear their leader, Kim Beazley, is turning his back on the coal industry to court the green vote.
Mining electorates are a traditional Labor stronghold. Instead of calling Howard “a fossil fool,” Labor should decide whether to support Kyoto or King Coal.
As this dry continent enters the bushfire season of summer, the political fallout can only worsen for politicians of all persuasions — and for the economy.
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