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Australia, Japan Announce Economic Partnership Agreement

Australian & Japanese Flags

On April 7, Japanese Prime Minister Shinzo Abe and Australian Prime Minister Tony Abbott announced that they had reached “substantive agreement” on a long-awaited trade agreement. Abbott said the Japan-Australia Economic Partnership Agreement (JAEPA) will provide “better access for key agriculture products – including beef, cheese, horticulture and wine – and will give Australia a head start over our competitors in this market.”

The announcement prompted discussion in the media about the agreement’s impact on the Trans-Pacific Partnership (TPP) negotiations between the United States and Japan. But this week U.S. Trade Representative Michael Froman reiterated that the TPP aims for a higher level of trade liberalization and that the JAEPA fails to meet the ambitions expressed by other TPP partners. (An update on the U.S.-Japan TPP negotiations is included in this email.)

The Australian government released a JAEPA fact sheet that provides the following details regarding Japan’s imports of Australian beef, which are currently subject to the same 38.5 percent tariff that applies to U.S. beef:

  • The tariff on frozen beef will be cut to 19.5 per cent on full implementation. This takes place over 18 years, but there will be significant front-end loading with an eight percentage point cut in the first year, two in the second year and one in the third year.
  • The tariff on fresh beef will be cut to 23.5 per cent over 15 years. The tariff will be cut by six percentage points in the first year, followed by two annual one percentage point cuts.
  • For Australia, Japan’s 50 per cent global snapback tariff will be replaced with a discretionary safeguard (preliminary reports indicate separate annual safeguard volumes for chilled and frozen beef from Australia, with a trigger duty of 38.5 percent, and annual growth in the safeguard volumes).
  • Japan’s imports of Australian beef offal, worth $153 million in 2013, will face reduced tariffs within a growing quota (duties on most variety meats are currently 12.8 percent and are not subject to quotas).
  • JAEPA will reduce tariffs on imports of Australian preserved and prepared beef, worth over $20 million in 2013, under a growing quota.

Though not included in the official summary released by the government, the Australian trade publication Beef Central reports that the agreement also contains these review clauses:

  • Should another exporter country get a better deal on beef with Japan under another bilateral agreement, Australia will automatically ”upgrade” to that deal.
  • Reviews scheduled in five-year intervals, to potentially renegotiate better outcomes under the agreement should circumstances change.
  • The safeguard protections designed to protect Japan from one-off large surges in exports are also discretionary, meaning they do not have to be applied if circumstances do not require it (although it is important to note that the government of Japan has never acknowledged that it has any discretion in the application of current safeguards).

The Australian beef industry’s response to the agreement has been mixed, with some organizations expressing disappointment in the level of tariffs that will remain on imports of Australian beef. Several of Australia’s other agricultural sectors, including the pork industry, have been critical of the agreement.

Australia is not a major supplier of pork to Japan, exporting only 283 mt last year valued at less than $1.5 million. Australia’s pork exports to Japan have declined steadily since peaking in 2002 at 15,093 mt valued at $55.8 million. Australia’s worldwide pork exports also peaked in 2002 at 65,746 mt and were just 35,697 mt last year. Singapore remains the leading market for Australia’s pork exports. (Global Trade Atlas data)

Available details have been limited on the JAEPA’s treatment of Australian pork imports, but news reports suggest that its provisions are similar to those agreed to in Japan’s current economic partnership agreements with Mexico and Chile.