Australia, Japan reach accord on free trade pact, bridging disputes over farm, auto exports

TOKYO – Japan and Australia have agreed on a free trade deal that both sides say will yield windfalls for their economies.

Australian Prime Minister Tony Abbott and his Japanese counterpart, Shinzo Abe, announced the pact, Japan’s first with a major agricultural economy, at a news conference Monday.

The deal calls for Japan to gradually phase out its nearly 40 per cent tariffs on Australian exports of beef. In turn, Australia is to end its tariffs on Japanese-made vehicles, household appliances and electronics.

“I hope that thanks to this agreement that Australia can be pivotal in assuring Japan’s energy security, its resource security and its food security,” Abbott told reporters.

Abbott, who led his conservative coalition to power in September elections, is leading a mission of hundreds of people to East Asia, seeking to deepen economic ties.

In Abe, a fellow conservative, Abbott has found an ally eager to strengthen diplomatic and defence ties.

Referring to Abbott by his first name, Abe said he believed the summit would lead to a “new relationship” with Australia, a fellow ally of the U.S.

Talks on the trade pact took seven years as Japan has balked at allowing foreign competition in farm products. The “basic agreement” reached by Abe and Abbott on Monday calls for the current 38.5 per cent tariff on beef from Australia to drop to 23.5 per cent for chilled beef within 15 years. The tariff for frozen beef will fall to 19.5 per cent within 18 years.

The agreement also sets limits on the amount of beef that can be imported.

Nevertheless, Abbott described the deal as a “historic” one.

According to details from the Australian trade ministry, Japan will make “deep” cuts on beef tariffs in the first year. Tokyo also agreed to increase duty-free imports of cheese and to phase out its tariffs on wine, sea products, honey and many fruits, vegetables and nuts.

Japan also agreed to end, within a decade, virtually all of its tariffs on Australian industrial products.

“This agreement is good for Australia, good for Japan, good for the region and good for the world,” Abbott said.

Japan is Australia’s second-biggest trading partner after China, importing over two-thirds of the beef Australia exports.

Both sides see significant potential for growth in trade, and officials say Australians can expect access to less expensive Japanese products thanks to the agreement.

“We asked so many times for this,” said Akio Mimura, chairman of the Tokyo Chamber of Commerce and Industry. “This will be the last time.”

Despite the tariffs it imposes on farm imports, Japan buys more from Australia than it exports to the country, mainly due to its purchases of energy and other resources.

Among the business leaders visiting Japan with Abbott were finance, gambling and mining industry executives. Gaming mogul James Packer reportedly is among them, seeking local partners for a joint venture casino that his company Melco Crown hopes to build if Japan passes a new law to allow them.

During his visit to Seoul, Abbott will finalize a free trade agreement reached earlier between Australia and South Korea.

Countries around the Pacific’s rim buy 77 per cent of Australia’s exports, and seven of its top 10 export markets are in Asia.

Earlier Monday, Abbott said he is determined to end Australia’s “Eurocentric” bias. Australia’s exports of iron ore and other resources have played a crucial role in its own affluence and the economic rise of Japan, China and other Asian economies, he said.

There was a time, Abbott said, when some organizations in Australia banned Toyota cars from their parking lots, due to animosity that lingered from World War II.

Separately, the U.S. and Japan were holding talks Monday in Tokyo on a trans-Pacific trade agreement. Australia is also a part of those talks, where progress appears to have stalled, at least partly due to disputes over U.S.-Japan trade in cars and farm products.

Japanese officials said before Abbott’s visit that whaling, another contentious issue, would not be on the agenda.

Last week, the International Court of Justice ruled that Japan’s annual hunt in the Antarctic was not for scientific purposes, as Tokyo had claimed, and ordered it halted. Australia, which brought the case against Japan in 2010, praised the judgment. Environmentalists have long sought an end to the whaling program on ethical grounds.