Australia-Japan FTA Negotiation a Valuable Opportunity

Media release 13 December 2006

The Minister for Trade, Warren Truss, today welcomed the announcement by Prime Minister John Howard and Prime Minister Shinzo Abe of Japan that Australia and Japan would commence negotiations on a Free Trade Agreement (FTA) in early 2007.

Mr Truss said the decision to commence negotiations reflected Japan's vital importance to Australia as an economic partner. Next year will be the 50^th anniversary of the signing of the first Japan Australia Commerce Agreement which provided the basis for our strong trading relationship.

“Negotiations will be challenging, given both sides’ sensitivities, but we will look to cement our excellent existing relationship and create real opportunities for the full range of Australian businesses,” Mr Truss said.

Japan is the world’s second-largest economy and has the second-highest per capita wealth in the world.

“Japan is our largest trading partner, and has been Australia's number one export market for nearly 40 years. Forging an even closer economic relationship with Japan will help to ensure Australia’s continued prosperity.”

Japanese purchases of Australian minerals and energy alone amount to 2.2 per cent of Australia’s GDP (coal, LNG, aluminium, LPG, copper ore). Japan is Australia’s number one market for beef, dairy products, fish, canola, and pet and livestock foods. It is also our second-largest market for horticultural products.

Australian exporters of services will also benefit from new opportunities - with Japan the third-largest source of tourists for Australia.

“In 2006, with Austrade assistance, Australian company Flight Training Adelaide won a $30 million contract from JAL Express, while ‘Emerging Exporter of the Year’ award winner Aconex won a major contract to support six Japanese companies in building the world’s largest construction project in Algeria,” Mr Truss said.

“Today’s announcement follows the completion of a joint government study on the feasibility of a bilateral FTA which was commissioned by Prime Minister Howard and his then counterpart, Junichiro Koizumi, in April 2005.

“The study recommended that Australia and Japan begin negotiations with all products and issues on the table. This reflects Australia’s long-standing approach to FTAs, but it is a significant step for Japan to begin negotiations without excluding sensitive agricultural products at the outset,” Mr Truss said.

More information on Australia-Japan Free Trade Agreement Negotiations

Australia-Japan Free Trade Agreement

Background Information: Japan's economy

• Japan’s economy, with a GDP of A$5,980 billion (2005), is the largest in the East Asian region, and the world’s second largest;
• Japan has 127.7 million high-income, discerning consumers and a per capita GDP of A$46,900 (2005), the highest in the East Asian region and among the highest in the world; and
• The Japanese economy accounts for around 10 per cent of global output - more than six times the size of the Australian economy. It grew 3.2 per cent in the year to March 2006 and is enjoying its longest continuous period of expansion in the post-war period.

Australia-Japan trade and economic links

• Australia-Japan trade and economic links have helped underpin both countries’ prosperity for nearly 40 years. Today, Australia and Japan enjoy one of the most significant partnerships in the East Asian region. The relationship is deep and broad, reflecting our shared values and interests;
• In 2005-06, two-way trade in goods and services totalled A$53.9 billion, making Japan our largest trading partner;
• Japan accounts for 18 per cent of Australia’s global exports of goods and services (2005-06) – almost as much as those to China and the United States combined
  • our exports to Japan are growing – up 20 per cent in value in 2005-06 to $34.5 billion;
  • Japan is Australia’s largest market for energy and minerals products.
  • In 2005-06, Japan spent an estimated $21 billion on Australian energy and minerals products – 2.2 per cent of Australia’s GDP and growing.
  • Japan is our largest market for coal, LNG, aluminium, LPG and copper ore.
  • Since October 2005, Australian producers have concluded new agreements to sell more than 11 million tonnes per annum of LNG to Japan over the next 25 years;
• Japan is also the largest market for our agricultural exports – estimated at A$6 billion in 2005‑06.
  • Japan is our largest market for beef, offal, dairy products, fish, canola, and pet and livestock foods; and it is our second largest market for horticultural goods;
• Japan is Australia’s third largest source of tourists – 674,400 Japanese visited Australia in 2005‑06;
• In December 2005, Japan was the third largest source of foreign investment in Australia with total investments valued at A$53 billion. Japan is the fourth largest destination for Australian outward investment;
• Japanese investment in the mining, manufacturing, services and food sectors has been an integral part of Australia’s economic expansion over the last four decades.
  • Japanese companies employ more than 200,000 Australians; and
• Australian investment in Japan has also been increasing in recent years. Examples include:
  • In 2006, Macquarie Bank formed an important joint venture with Japan’s Shinsei Bank to provide advisory services on infrastructure asset acquisitions.
  • In the Hokkaido ski fields, Australian investors have been prominent players in the developed of new ski lodges and related tourist infrastructure
    • Australian investment has boosted Hokkaido’s regional economy by more than 10 billion yen over the past three years and the number of Australia visitors to Hokkaido has increased from 5,000 to 20,000 over the last 5 years;
• Australian office services firm Servcorp has established itself in 15 locations in Tokyo, Osaka and Nagoya.

Some other Australian firms taking up opportunities in the Japanese market, with the assistance of Austrade, include:

• ResMed, the 2006 Australian Exporter of the Year, which has a presence in 65 other countries, is also very well known in Japan for its sleep therapy equipment. Japan is, by far, ResMed’s single largest export market in the Asia Pacific;
• Earlier this year, Flight Training Adelaide signed a $30 million contract with JAL Express;
• Amarok Estate, a wine producer based in the Margaret River, has been successful in exporting its boutique wines to Japan. Winning a gold award this year at the Margaret River Wine show, Amarok Estate bases its success in Japan on its distinctive, fruity, easy-drinking flavours and its focus on friendly relations in business, having built a friendship with the Ikari Supermarket chain;
• Fashion house 33south has caught the export wave and in December 2005 delivered its first shipment of its premium surf fashions to Japan’s leading fashion store, Beams. Since its initial success, 33south has exported to other boutiques in Japan and is launching a new vintage graphic line, to be released in Japan’s 2007 summer;
• Japan's largest ferry company, Libera, has this year ordered two large car/passenger ferries from Incat, of Tasmania; and
• A landmark property trust set up by global investment firm, Babcock and Brown, returned 47.1 per cent in the last financial year.

New Opportunities from an FTA

An FTA with Japan would generate significant economic gains for Australia, integrating us more closely with our largest trading partner and the most advanced country in the East Asian region. Through the FTA negotiations, we will seek to:

• address tariff and non-tariff barriers facing Australian companies and create new, commercially meaningful opportunities across all industries;
• secure and expand export opportunities in our largest agricultural market;
• include measures to promote two-way investment;
• improve opportunities for Australian services exporters;
• secure and enhance our relationship with the largest buyer of Australian minerals and energy;
• address the discrimination Australian exporters and investors face as a result of Japan’s FTAs with others; and
• provide the foundation for the Australia-Japan economic relationship over the next 50 years, just as the 1957 Australia-Japan Agreement on Commerce has for the last 50.

Australia-Japan FTA Feasibility Study

• In April 2005, Australia’s Prime Minister, John Howard, and Japan’s then Prime Minister, Junichiro Koizumi, launched a joint government study on the feasibility of a bilateral FTA;
• The recently finalised study concludes:
  • a comprehensive, WTO-consistent FTA would deliver significant benefits to Australia and Japan;
  • an Australia-Japan FTA is feasible;
  • negotiations should begin with all products and issues on the table;
  • an FTA should be comprehensive, WTO-consistent and wherever possible WTO-plus, and concluded through a single undertaking; and
  • sensitivities on both sides are best handled through negotiations with all options for flexibility available to negotiators; and
• Joint government-commissioned research published in 2005 found that as a result of full and immediate trade and investment liberalisation, the GDP of Australia and Japan could increase by as much as A$39 billion and A$27 billion respectively over 20 years.

Media Inquiries: Minister Truss' office 02 6277 7420 - Departmental Media Liaison 02 6261 1555

see http://www.trademinister.gov.au/releases/2006/wtt028_06.html