Few free trade favours from Fortress Japan

Business Spectator, Australia

Few free trade favours from Fortress Japan

By Peter Cai

8 April 2014

Prime Minister Tony Abbott and Trade Minister Andrew Robb have hailed the freshly inked free trade agreement with Japan as “historic”. Yes, it is historic in a sense that it is a repeat of the much criticised 2004 free trade agreement with the United States that provide very limited commercial benefits to Australian farmers.

It seems that Australian trade negotiators have been defeated again at the gate of Fortress Japan, despite the government’s claim of a historic victory. Australian farmers have been quick to point out the failure of the deal with Japan. Some are more diplomatic and others are scathing of the so-called free trade agreement.

Brent Finlay, the President of the National Farmers’ Federation, said “we are disappointed with the overall outcomes for agriculture with a number of sectors facing marginal improvements or limited commercial gains.”

“This agreement does not improve — or marginally improves — market access and terms of trade for a number of sectors such as dairy, sugar, grains, pork and rice.” And these sectors happen to be many of the most important agricultural sectors for Australia.

The dairy industry, the country’s third-largest rural industry behind beef and wheat, didn’t mince words when it issued a press release high critical of the free trade agreement. The Australian Dairy Industry Council said it was “extremely disappointed” about the deal.

“We were hopeful 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,” said the deputy chair of the council, Robert Poole. “There has been no movement in this agreement on fresh cheese — the number one objective for Australia dairy industry — with tariffs to remain at 29.8 per cent.”

Japan has offered a few symbolic concessions like duty free access for marginal products like protein concentrate and casein, which constitute about 10 per cent of the overall exports.

The industry is concerned that the Japanese deal will set a bad precedent for the protracted negotiation with China, which is likely to become one of the most important markets for Australian dairy products.

The beef industry arguably fares the best among agribusiness sectors under the free trade agreement with Japan and can at the best only claim a partial victory.

The tariff on frozen beef will be cut to 19.5 per cent on full implementation, which will take 18 years to finish. The tariff on fresh beef will be cut to 23.5 per cent over 15 years. To be fair to the government, Australian farmers are the first significant beef exporter to secure preferential access to Japan.

But the President of the Cattle Council of Australia, Andrew Ogilvie, was not too excited, saying that he was disappointed with deal, according to a Fairfax report. However, the chairman of the beef industry’s Australia-Japan Free Trade Agreement taskforce, Lachie Hart, defended the deal.

“We understand that the Australian government achieved the best result it could for the Australian beef industry given this is the first deal Japan has done with a major agricultural exporter — and we are pleased with the progress made,” he said.

However, we hope that this outcome represents a first step, with the industry seeking further gains through future trade reform efforts with Japan via the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership negotiation.”

Let’s continue. With sugar, it is completely farcical that the government can claim “Australian sugar exporters will benefit from tariff elimination and reduced levies for international standard raw sugar.”

Because we don’t export international standard raw sugar to Japan! The Japanese offered Australia a symbolic reduction of 184 per cent to 110 per cent in a category in which Australian farmers have no business with Japan. Warren Miles from Canegrowers said they only squeezed some water out of the high tariff.

Australia only exports the so-called J-Specific sugar to Japan, which attracts a tariff of 70 per cent — and that stays unchanged. Twenty years ago, Australian farmers exported 900,000 tonnes to Japan and that has declined to only 350,000 tonnes last year. Miles said it would continue to decline as a result of the deal.

The CEO of Canegrowers, the peak body representing sugar farmers, Brendan Stewart is scathing of the deal. “This is the US 2004 free trade failure all over again,” he said. “This is yet another kick in the guts for Aussie cane growers.”

“There is no improvement in market access for sugar, no improvement in terms of trade and no commercial gains for Australia’s export driven sugar industry.”

Don’t even talk about rice, which is supposed to have mystical quality in Japan; it is off the table in both Korean and Japanese trade negotiations. It is hard to imagine that China would want a deal less than two smaller powers.

Ricegrowers’ Association of Australia President Les Gordon is “extremely disappointed” with the deal, like many other farmers. “Even more disappointing is that the Australian government seems unable or unwilling to even acknowledge rice in any statements about the agreement,” he said.

It is not surprising given Japanese prime minister Shinzo Abe is reluctant to take on the powerful farm lobby in Japan, which has supported the ruling Liberal Democratic Party for decades after the end of the Second World War.

Aurelia George Mulgan, a Japanese agricultural industry expert from the University of New South Wales wrote there was “no evidence that the Abe administration is willing to create domestic conditions conducive to agricultural trade liberalisation under the Trans-Pacific Partnership.”

The substandard agreement with Japan is also likely to disappoint the Americans, who want to use the Australian free trade agreement as a bargaining chip to further force Japan to open up its highly protected farm sector.

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