Australia, Japan announce trade agreement
It’s never fun to try to organize a big party, only to learn some of the key guests are planning their own festivities on the side. For some, this can be a social “faux pas” that goes well beyond hurt feelings and ruffled feathers. But in the current situation of Pacific trade negotiations, however, it’s unclear how much of a problem this reverse party crashing really is.
Last Monday, the Australian and Japanese governments announced the conclusion of longrunning bilateral trade talks regarding, among other things, reducing tariffs on agricultural products—including beef—from Australia. This culminated in the Japan-Australia Economic Partnership Agreement (JAEPA), which will give Australian farming exports greater access to the Japanese market by reducing or eliminating tariffs on a number of Australian agricultural products.
“JAEPA represents a major windfall for Australian beef—our biggest agricultural export to Japan, currently worth $1.4 billion [$1.31 billion U.S.],” proclaimed the Australian office of the Minister for Trade and Investment. According to the Australian Department of Foreign Affairs and Trade, the benefits to the Australian agricultural sector are widespread and far reaching. Among other benefits, it highlighted the follow ing:
Over 97 percent of Australia’s exports to Japan will get preferential access or enter duty-free when JAEPA is fully implemented over several years.
Tariffs of up to 219 percent will be eliminated or reduced on most Australian agricultural exports into Japan.
The tariff on frozen Australian beef will drop from 38.5 percent to 19.5 percent over several years; the first year will see the tariff drop by 8 percentage points.
The fresh beef tariff will drop from 38.5 percent to 23.5 percent over 15 years, with a 6 percentage point drop in the first year.
An increased quota with lower tariffs for Australian beef offal and preserved and prepared beef.
Increased, preferential, dutyfree, Australia-only quotas on cheese.
Tariffs eliminated on many types of Australian seafood.
Preferential treatment regarding large volumes of pork and pork products.
Almost total removal of tariffs on industrial, energy and minerals from Australia.
The department also noted that the JAEPA is a landmark trade agreement with Japan and the first of its kind. Additionally it noted that the decision makes Australia “the first significant beef exporter to secure preferential access to Japan,” which in turn will give “Australian beef producers an immediate advantage over their competitors in this market.”
JAEPA vs. TPP
Concerns have been raised about what the JAEPA could mean to Japan’s potential entry into the Trans-Pacific Partnership (TPP) and its effect on U.S. beef producers. The details on tariff reductions, rather than eliminations, were sticking points for the National Cattlemen’s Beef Association (NCBA) which has been vocal about Japan’s insistence on maintaining its agricultural tariffs in TPP talks.
“NCBA is deeply concerned that the Bilateral Trade Agreement between Japan and Australia does not call for full tariff elimination,” announced NCBA President, Bob McCan, in the group’s official statement.
“This Bilateral Agreement undermines the long-standing goals and principles that are the base of the TPP. This development only pushes the high-standing ideals of TPP further out of reach for all countries involved, and it is not a move that U.S. beef producers can support. The TPP has been referred to as a 21st century agreement, but this Bilateral Agreement is from the 20th century playbook and will not serve to foster open trade and certainly will not benefit con sumers and producers globally.”
Collin Woodall, NCBA Vice President of Governmental Affairs, conceded that the JAEPA will give Australia the advantage over U.S. beef producers with the lower tariffs. For now.
“By them going ahead and getting that deal done, [Australia is] going to be able to send more product into Japan and they’re going to have half the tariff we do. I think this is just another reason why we need to get TPP done so we can make sure we’re not giving them that competitive advantage.”
Woodall reiterated Mc- Can’s denouncement of the JAEPA, calling it a sub-par deal that amounts to little more than a distraction given the TPP’s focus on tariff elimination.
“Even though it does not preclude any additional conversations on the overall TPP agreement, I think everybody on all sides will have this in mind,” he said. “Ultimately we are very clear that the deal that Australia and Japan cut in the bilateral agreement is just flat unacceptable and we would not even entertain that as something to consider.”
However, when asked if the JAEPA would impact Japan’s participation in TPP or if it might meet their trading needs, Woodall said no.
“They would not walk away from TPP just because of the bilateral agreement with Australia,” he told WLJ. “I think they very much want the TPP and will continue to push to be included as part of it. So I don’t think this lessens any of the pressure on them to come to table and negotiate to finalize this TPP agreement.”
He did note, however, that the issue of tariff elimination has and continues to be central to TPP negotiations.
“We had discussions at one time saying very clearly that if they did not want to negotiate and look at tariff elimination, we might need to look at kicking them out of TPP,” he said of Japan.
Others were more reserved in their interpretation of what JAEPA means for TPP. Joe Schuele, Communications Director with the U.S. Meat Export Federation (USMEF), generally declined to speculate on the situation.
“We try to stay out of the business of playing armchair quarterback when USTR [the U.S. Trade Representative] is engaged with a trading partner, so I don’t want to try to speculate on how our negotiations are going. I look at Ambassador (Michael) Froman’s statements saying we are fully engaged with Japan and seeking positive results.”
Diplomatic trade talks are ongoing between U.S. and Japan, and in the TPP overall to finalize an agreement.
Acting Deputy USTR Wendy Cutler was visiting Tokyo last week to continue TPP negotiations regarding vehicles and agricultural products, and President Obama will be touring the country in the coming weeks to discuss similar topics with Japanese officials.
In the past, Philip Seng, President and CEO of US- MEF, has warned against the hard-line all-or-nothing tack the U.S. takes in free trade agreements like TPP.
“If you look at the U.S. approach, we have maintained a comprehensive approach to negotiating free trade agreements. In other words, when we say ‘comprehensive’ that means everything is put on the table. Everything,” he said to the amassed audience at the “Cattle Industry at a Crossroads” conference on Jan. 14, 2014. He stressed how important this detail is, especially as the U.S. interpretation of “comprehensive” involves Japan removing tariffs on rice, which he characterized as economically “sacred.”
“Do you know what that means? My grandchildren will never see rice totally liberalized in Japan. Why do we link beef to rice?” he asked, almost exasperated.
“When do we say, ‘This is a damn good deal for the beef industry’? Do we have to wait to get to utopia? Do we have to wait until we get to completely zero? The [Japanese beef] duty today is 38.5 percent. Is 15 percent enough? These are questions we need to be asking ourselves.”
To the entertainment of the audience, Seng referenced the famous George Gershwin 1935 opera, “Porgy and Bess,” specifically one line from the song “I Got Plenty O’ Nuttin’.”
“‘I’ve got plenty of nothing, and nothing’s plenty for me.’ Are we going there when it comes to this thing?” Seng asked about trade with Japan.
Following his prediction of a bilateral trade agreement between Japan and Australia very much like JAEPA, Seng closed with a bit of advice from his years living in Asia.
“I learned a long time ago, you’ve got to bend like the bamboo. If you’re going to be a stiff oak, you’re going to break. There’s got to be some flexibility.” — Kerry Halladay, WLJ Editor