Japan’s new trade deal with Australia promises billions of dollars of economic benefits for both nations. How can Australian SMEs take advantage?
Known officially as the Japan-Australia Economic Partnership Agreement (JAEPA), the pact has been described as the most liberalising trade agreement Japan has ever signed. Under JAEPA, which entered into force on January 15, more than 97 per cent of Australia’s exports to Japan will receive preferential access or enter duty-free, delivering significant benefits to a range of sectors.
Agricultural gains
Agriculture is the big winner from JAEPA, with beef sales alone expected to increase by more than $5.5 billion over the next 20 years as Australia secures a major competitive advantage.
This includes an immediate reduction in the frozen beef tariff, from 38.5 per cent to 30.5 percent, declining to 19.5 per cent over 18 years, while fresh beef tariffs will be cut to 23.5 per cent over 15 years, with a six percentage point cut in the first year followed by two annual one percentage point reductions. Tariffs on beef offal, preserved and prepared beef will also be cut within growing quotas.
Cheese exports to Japan were worth $372 million in 2013 and there are immediate benefits, such asduty-free access for cheeses such as cheddar, along with milk products such as protein concentrates and casein. Ice cream and frozen yoghurt exports have been granted growing quotas, while a duty-free Australia-only quota for cheese will expand to 20,000 tonnes.
Similarly, sugar producers will benefit from the immediate elimination of the tariff on high polarity raw sugar and a reduced levy.
Elsewhere, the vast majority of Australian horticulture exports will see tariffs eliminated, including for fruit, vegetables and nuts. Pork producers will gain preferential access for a large volume of pork and pork products, while there is immediate duty-free access for barley, and the removal of tariffs on seafood such as crabs and prawns, among other products.
Wine is seen as a major winner, with all tariffs on bottled, sparkling and bulk wine to be eliminated over seven years. Since the 2007 Japan-Chile trade deal, inexpensive Chilean wine has become Japan’s most popular import, but Australian wine will now be cost competitive, benefitting exporters such as Sirromet Wines.
Manufacturing and resources winners
Australian manufacturers will benefit from the elimination of previous tariffs of up to 30 per cent on products such as textiles, clothing and footwear along with plastics and wood products.
For resource companies, all tariffs on energy and mineral products will be removed within 10 years, with the immediate elimination of tariffs on aluminium hydroxide, coking coal, petroleum oils and titanium dioxide.
Services success
Similar to Australia, services is Japan’s biggest sector and represents an enormous untapped market for Australian SMEs, considering that currently it only represents around 6 per cent of the total value of two-way trade.
Education is a major growth sector, with Australian education providers guaranteed access to Japan’s higher education services market, including vocational and technical education. Japanese students seeking to study in Australia, including at TAFE, are now eligible for Japanese low-interest loans, with other opportunities seen in Japan’s “Tobitate” (“Fly away”) scholarships and Australia’s acceptance of Japan’s “Eiken” English language certificate as proof of English language ability.
In the finance sector, Japan’s funds management industry has an estimated $20 trillion in investable funds, the world’s second-largest, offering enormous opportunities for Australian fund managers. Australian financial service providers can take advantage of streamlined licensing procedures, being now allowed to offer specified services including investment advice, portfolio management and wholesale securities transactions on a cross-border basis without needing to open a full commercial office in Japan.
In the legal sector, Australian law firms will be allowed to form legal professional corporations under Japanese law, with an ongoing legal services cooperation agenda set to deliver further benefits.
For telecommunications, JAEPA has committed Japan to non-discriminatory treatment, regulatory transparency, competitive safeguards and fair and reasonable access to telecommunications networks and services.
JAEPA also enhances opportunities for increased investment from Japan, which already has $123 billion invested in Australia. Under the pact, the screening threshold for Japanese private investment into non-sensitive sectors has been raised from $248 million to more than $1 billion, with recent deals including Japan’s Recruit’s proposed acquisition of recruiter Chandler Macleod.
Importantly, thanks to the deal’s “most favoured nation” provision, Australian exporters will automatically receive the benefit of any superior trade deal negotiated by Japan, such as through the Trans-Pacific Partnership talks.
Japanese entrepreneur Ko Nagata, managing director of Global Sky Group and founder of the Queensland Business Centre in Tokyo, said JAEPA would have major benefits for SMEs from both countries.
“JAEPA will spur increased Japanese investment in new areas such as services, as well as the traditionally strong sectors of resources, agriculture and property,” said Nagata, managing director of Global Sky Group.
“With the upcoming Tokyo Olympics and associated investment, the Japan tourism boom and the economic boost to Japan’s prospects from ‘Abenomics,’ now is a perfect time for Australian SMEs to explore the many opportunities available in the world’s third-biggest economy.”
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About the Author:
Anthony Fensom is a freelance writer and communication consultant with more than a decade’s experience in the financial and media industries of Australia and Asia.
