Japan, Australia reach agreement that will see tariffs on frozen Australian beef eventually be cut from 38.5% to 19.5%

Nevin Barich

TOKYO , April 7, 2014 (Bloomberg LP) – Japan and Australia reached broad agreement on bilateral trade after seven years of wrangling, in a pact that will lower or eliminate tariffs on everything from cars to canned tomatoes.

The terms of the agreement will see tariffs on frozen Australian beef eventually cut to 19.5 percent from 38.5 percent and those on Japanese cars, household appliances and electronics abolished, according to a statement from Prime Minister Tony Abbott’s office issued after he met with counterpart Shinzo Abe in Tokyo. Two-way trade between the nations in the 12 months to June 30 reached A$69.2 billion ($64.1 billion).

“We have a deep, shared commitment to the universal aspirations of democracy, freedom and the rule of law,” Abbott said after meeting with Abe. “The relationship between Australia and Japan is about much more than economics and trade and growing wealthy together. It’s about respect, it’s about values. That’s why this is such a very strong partnership.”

Abbott, 56, is visiting Tokyo during his first North Asian trip since coming to power seven months ago. He is seeking to deepen trade and security ties with Japan while not damaging relations with China, Australia’s biggest trading partner. Japan, China and South Korea, which Abbott will also visit, buy more of Australia’s iron ore, coal and other exports than the rest of its customers combined.

The agreement is a “major windfall” for Australian beef, the country’s biggest agricultural export to Japan, Abbott’s office said in the statement. Cheese exporters will gain “significant new duty-free access” and tariffs on canned products such as tomatoes, peaches and pears, plus fruit and vegetable juices, will be removed, according to the statement.

TPP Spur

The trade deal with Japan could help spur progress on the U.S.-led Trans-Pacific Partnership to link the economies of 12 countries around the Pacific.

The agreement “with Australia will probably proceed ahead of TPP, so there will be a gap in tariffs between Australian beef and U.S. beef,” said Japan’s Ambassador to the TPP talks, Hiroshi Oe. “That will be very difficult for the U.S. beef industry. I think it would be good if that became an incentive for reaching an early agreement.”

Trade talks between Australia and Japan began in 2007, during Abe’s first term in office. Abbott has touted Japan as Australia’s “closest friend in Asia” and has pledged to strengthen defense ties at a time when China is flexing its military muscle in the region and Sino-Japanese ties have frayed.

NSC Meeting

Abbott yesterday became the first foreign leader to attend a meeting of Japan’s National Security Council. The two nations’ defense and foreign ministers will hold their next meeting in June in Tokyo, and will work to enhance defense cooperation, including on technology such as research into marine hydrodynamics, according to a joint statement issued by both nations.

“Japan and Australia will continue to cooperate toward the goal of peace and stability in the region and in the international community, as well as respect for the rule of law at sea and in the skies,” Abe told reporters after the meeting.

The Australian leader is looking to balance longstanding diplomatic leanings toward Japan against the need to safeguard economic ties with China, which has tripled trade with Australia in seven years. Twenty-five years ago Japan accounted for 23 percent of Australia’s two-way trade of merchandized goods, and China 2.3 percent; now Japan has a 13 percent share against China’s 27 percent.

Tensions over trade with China increased after the previous Labor government cited national interest concerns for its refusal to let Huawei Technologies Co., China’s largest phone-equipment maker, work on Australia’s A$30 billion broadband infrastructure project.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net; Maiko Takahashi in Tokyo at mtakahashi61@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Andrew Davis

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