Overview of the Japan-Australia Free Trade Agreement

The conclusion of negotiations on the Japan Australia Economic Partnership Agreement (JAEPA) was announced in Tokyo on 7 April 2014 by Prime Minister Tony Abbott and Prime Minister Shinzo Abe. As Japan and Australia are natural partners with highly complementary economies, JAEPA will deepen Australia’s engagement with Japan, Australia’s second-largest export market and trading partner.

Total two-way trade reached $69.3 billion in 2012-13 – 11 per cent of Australia’s total trade. In 2012-13, Australian exports to Japan were valued at $48.6 billion, accounting for over 16 per cent of all Australian exports. Total goods exports were valued at $46.5 billion. Japan is Australia’s largest market for LNG and coal (both around $14.0 billion). Total services exports were valued at $2.1 billion, comprising mostly recreational travel services ($828 million) and transport services ($596 million).

Australia imported $20.6 billion from Japan in 2012-13. Of this, goods imports accounted for $18.3 billion. Services imports were valued at $2.3 billion, including transport services of $1.0 billion.

JAEPA Overview:
JAEPA is an historic development in Australia’s economic relationship with Japan. The agreement will deliver significant benefits to Australian agricultural producers, resource exporters, service providers and consumers. JAEPA will give many Australian producers and exporters a significant competitive advantage. Australia is the first major agricultural exporter to unlock Japan’s high import barriers.

More than 97 per cent of Australia’s exports to Japan will receive preferential access or enter duty-free when JAEPA is fully implemented. For Australian consumers JAEPA will deliver benefits through lower priced cars, and household and electronic consumer goods.

JAEPA sends a clear message to Japanese investors that Australia is an attractive investment destination. It will promote further growth and diversification in the flow of Japanese investment into Australia by raising the screening threshold. JAEPA also provides enhanced protections and certainty for bilateral investments.

Agricultural goods:
Agricultural tariffs of up to 219 per cent will be eliminated or significantly reduced on many Australian agricultural exports. Exporters of beef, sugar, horticulture, wine, and seafood will benefit from preferential access to the Japanese market, and tariffs will be bound at zero for wool, cotton, lamb and beer.

Industrial goods:
On entry into force, 99.7 per cent of Japan’s industrials imports by value from Australia will enter Japan duty-free, with 99.9 per cent eliminated within 10 years. On full implementation of the agreement, 100 per cent of Australia’s industrials exports will benefit from duty-free entry into Japan.

Energy and mineral resources:
Energy and mineral products account for almost 89 per cent of the value of Japan’s merchandise imports from Australia. Under JAEPA, all tariffs on energy and mineral products will be eliminated within ten years, most on entry into force of the agreement.
Although many of Australia’s major resource exports, such as coal, iron ore and liquefied natural gas, already enter Japan duty-free, Japan will eliminate tariffs for all remaining resources products over 10 years, including unalloyed nickel and ferro-manganese.

Manufactured products:
Japan currently applies tariffs of up to 30 per cent on some manufactured products. Under JAEPA, tariffs on $243 million worth of Australian manufactured exports to Japan will be eliminated immediately on entry into force of the agreement.

Services:
JAEPA guarantees Australian services suppliers access to the significant and well-developed Japanese market in key areas of commercial interest including financial, education, telecommunications and legal services. The Agreement provides Australia with outcomes equal to or better than, the best commitments Japan has made in any of its other trade agreements.

Investment, intellectual property and government procurement:
JAEPA sends a clear message to Japanese investors that Australia is an attractive investment destination. It will promote further growth and diversification in the flow of Japanese investment into Australia by raising the screening threshold, at which private Japanese investment in non-sensitive sectors is considered by the Foreign Investment Review Board, from $248 to $1,078 million.