Australian Prime Minister Tony Abbott and his Japanese counterpart Shinzo Abe concluded seven years of negotiations between their two countries by announcing a free-trade agreement in Tokyo on Monday.
Abbott said the deal was of historical proportions because it was the first time a significant agricultural country had been able to win improvements to access for its imports to Japan’s heavily protected consumer markets.
Officials in Tokyo said the agreement showed Japan’s willingness to make concessions on agricultural market access.
It said that could carry over into the Trans-Pacific Partnership (TPP), which it is a party to along with New Zealand, Australia, the United States, Japan, and a handful of other Asian countries.
However, NZ’s agricultural trade envoy Mike Petersen said the Japan-Australia deal sent a worrying signal on just how little Japan was willing to offer in the TPP.
“This has fallen well short of our expectations,” he said. “No doubt about that. It is very disappointing.”
On Australia’s biggest single export, frozen beef, tariffs will be cut from 38.5% to 30.5% in the agreement’s first year and to 19.5% after 18 years.
The tariff on chilled beef exports will fall to 23.5% over 15 years.
Although the tariff rate cuts are estimated to be worth A$5 billion to the Australian beef industry in the next 20 years the deal falls a long way short of the TPP’s aim to eliminate tariffs, which Australia and Japan signed up to.
Petersen said the deal left NZ exporters at an increasing disadvantage to their Australian rivals as time went by.
This country also faced the diminishing prospect of Japan agreeing to scrap its 38.5% tariff on NZ beef in the TPP, as was hoped when it joined the talks in 2011.
“I wouldn’t call it a free-trade deal. It is a preferential access deal that gives preferential access to some importers over others,” he said.
“It places us in a really difficult position. The most important outcome now is that we cannot allow this to carry over into TPP.”
There were also only small gains for the Australians in market access for dairy, which Japan has identified as one of five “sacred” agricultural products – along with beef and pork, rice, wheat, and sugar – it is reluctant to open to foreign competition in the TPP.
Under current arrangements Australia and other countries combined can send 27,000 tonnes of cheese to Japan tariff-free.
Under the agreement Australia will receive a tariff-free quota of 20,000 tonnes. It has also gained immediate duty-free access for casein.
Dairy Companies Association of NZ chairman Malcolm Bailey said while the deal did not place the industry at a significant disadvantage to its Australian rivals it was disappointing as a marker for what could be expected from Japan on dairy in the TPP.
“The whole thrust of trade negotiations in the 21st century is about the elimination of tariff barriers on agricultural products and this falls well short of that.
“(Australia) should have been pushing a lot harder.”
Bailey described the agreement as a political rather than a commercial deal.
In the Australian election campaign Tony Abbott pledged to complete in his first 12 months in charge three free-trade agreements – with South Korea, Japan, and China – started under the previous Labour government.
Petersen said that was a strategic mistake by Abbott and lowered the chances of getting a good deal in the case of the Japan-Australia free-trade agreement and in the TPP.
“The moment Abbot came out and said that you effectively took away your negotiating power.”
US President Barack Obama’s trip to Tokyo later this month loomed now as a significant pointer to the future of TPP and getting a deal that lived up to its aim of a comprehensive deal that scrapped barriers to trade and investment between its members, Petersen said.
“This is a very, very important trip for Obama and Abe to get on the same page.”
