CANBERRA OBSERVED: Beware the fine print in Asian trade agreements
by our national correspondent
News Weekly, April 26, 2014
For Prime Minister Tony Abbott, the three-country mission to Japan, South Korea and China was a personal triumph, marked by the privileges granted by his hosts, including official state-visit status, state dinners, signed bilateral trade agreements and numerous photo opportunities.
In both Japan and South Korea, Mr Abbott was able to stand with his hosts, recognising their democratic traditions, and confirming Australia’s close political, strategic and economic ties in what was described as a “special relationship”.
In China, which is not a democracy, he concentrated on the importance of Australia’s long-term economic relationship as both a reliable supplier of raw materials and a destination for China’s manufacturing goods.
From Australia’s point of view, the mission will be judged on the importance of the trade agreements reached or promised. Negotiations for what are described as free trade agreements (FTAs) have been under way for years, but were ramped up after Trade and Investment Minister, Andrew Robb, took office last September.
Mr Robb’s background gives him a personal appreciation of agriculture and trade issues. He grew up on a dairy farm and, after studying agricultural economics, worked as an economist for the National Farmers Federation (NFF) before being being appointed executive director of both the NFF and the Cattle Council of Australia.
He knows from long personal experience how Japan has resisted efforts to liberalise agricultural imports, and how aggressively it has protected the small Japanese domestic agricultural industries from international competition.
While Mr Robb hailed the Japan trade agreement as “historic” and “marvellous”, and Tony Abbott characterised it as “good for Australia, good for Japan, good for the region and good for the world”, the fine print shows a different story.
Of the five areas in which Japanese protection has been extreme — dairy, beef, pork, sugar and rice — the Japanese negotiators have made significant concessions in only one area, beef exports where Australia was already a major player.
The Japanese government has agreed to reduce export tariffs on frozen beef from 38.5 per cent to 30.5 per cent immediately, by a further one per cent a year over the next three years, then by 8.5 per cent over the following 12 years. Smaller reductions will apply to fresh or chilled beef exports.
While the Australian government has claimed that our duty-free cheese exports would grow dramatically, the dairy industry completely disagreed, calling it “a dud deal”.
The Australian Dairy Industry Council “expressed its extreme disappointment” about the agreement.
Estimating that the agreement would save just $4.7 million a year on implementation, it said: “We were hopeful [that] government had heeded the industry’s message in regards to freeing up market access in Japan. However, it now appears our words fell upon deaf ears.
“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 per cent. A successful outcome on this tariff line would have delivered approximately $60 million in tariff savings — instead we have received nothing and the tariff stays in place.”
Rice exporters were, if anything, even more scathing. The president of the Ricegrowers Association of Australia said he was “extremely disappointed” that there was no liberalisation of rice imports into Japan. “Even more disappointing is that the Australian government seems unable or unwilling to even acknowledge rice in any statements about the agreement,” he said.
Pork producers said the same.
The Australian trade negotiators seem to have lost their way in regard to sugar exports. In their statement, they announced that Japan had promised to reduce its sugar tariffs from 184 per cent to 110 per cent. The Australian government announced that our sugar industry would “benefit from tariff elimination and reduced levies for international standard raw sugar”.
However, Australia only exports the so-called J-Specific sugar to Japan, which attracts a tariff of 70 per cent, and that will remain unchanged.
The sugar-producers’ peak body, Canegrowers, said Australia’s sugarcane farmers feel they’ve been “hung out to dry”.
“There’s been no improvement in market access for sugar, no improvement in terms of trade, and no commercial gains for Australia’s export-driven sugar industry,” Canegrowers’s CEO Brendan Stewart said.
On the other hand, Australia has immediately scrapped the low 5 per cent tariff on Japanese electronic and household goods, and most Japanese motor vehicles.
Additionally, the threshold at which the Foreign Investment Review Board would consider Japanese investment was raised from $248 million to over $1 billion in most sectors of the economy.
If the Coalition government does not protect and advance the interests of its rural constituency, it runs the serious risk that the support which put it into power last September will evaporate, as has happened so often in the past.