Australia: Free Trade Agreement is concluded with Japan: the second leg of the North Asia Trifecta has arrived

Last Updated: 10 April 2014
Article by Andrew Hudson

Following a flurry of media speculation last evening, the Federal Government announced that Australia had concluded negotiations for a free trade agreement with Japan as Australia's second-biggest trading partner. However, it is not called a free trade agreement rather it has been titled the Japan-Australia Economic Partnership Agreement ("JAEPA"). The use of an alternative terminology is interesting and the explanation for the use of such a term is yet to be provided.

The media release from the Minister for Trade for the JAEPA refers to Australia being the first major agricultural exporting country to conclude such a liberalising agreement with Japan. At this stage, the full text of the JAEPA has not been released, nor has full detail of concessions granted by each country to the other. Accordingly, details are limited to those provided by DFAT.

The highlights which can be distilled from the DFAT release suggest the following:

  • Australian agricultural exports will secure significant benefits with tariffs of up to 219% to be eliminated or significantly reduced on many agricultural exports. In particular, exporters of beef, cheese, 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. In addition, there appears to be some relief from existing Japanese quotas on many of these products.
  • At the time the JAEPA enters into force, 99.7% of Japan's industrial imports by value from Australia will enter Japan duty-free with the overwhelming majority eliminated with 10 years. On full implementation 100% of Australia's industrial exports will benefit from duty-free entry into Japan. This includes eliminating tariffs on a number of resources on which tariffs still apply.
  • In terms of services, the JAEPA is expressed to deliver outcomes equal or better than the best commitments Japan has made in other trade agreements. There have been improvements for providers of Australian financial services and the creation of an ongoing legal services co-operation agenda providing for greater movement and recognition of each other's lawyers and improving co-operation on trans-national legal services in third countries following further negotiation. However, it does not make clear whether any of these commitments are in fact agreed or whether they are still subject to further agreement (as is more likely to be the case).
  • One of the major commitments to Japan is to raise the screening threshold at which private Japanese investment in non-sensitive sectors is considered by the FIRB from $248 million to $1,078 million. However, Australia has apparently reserved the right to screen investments at lower levels in agricultural land and for agribusinesses. The detail will be of significant interest together with the provisions which apparently provide for enhanced protections and certainty for bilateral investments. This would tend to suggest the inclusion of some limited form of Investor State Dispute Resolution provisions ("ISDS").
  • In terms of intellectual property the promise is that Australian holders of intellectual property will benefit from levels of protection "broadly equivalent to protections provided in Australia".
  • Continuing the trend with other free trade agreements, the JAEPA apparently guarantees Australian suppliers access to the Japanese Government procurement market and contains commitments that will ensure transparency and facilitate participation in procurement processes. This includes promises of national treatment for goods and services and suppliers for those from both countries for procurement above agreed value thresholds (although those thresholds have not been described).
  • Australian consumers have been identified as major beneficiaries of the JAEPA with tariffs eliminated on imported cars from Japan as well as household appliances and electronics.

However, in the recent tradition of market releases regarding free trade agreements, there is much yet to be known on the content of the JAEPA including specific Rules of Origin, whether there is a need for certificates of origin (and their content) and rules regarding permitted movement of goods other than between Australia and Japan which will still allow concessional treatment of those goods.

We also await details of the ISDS contained in the JAEPA.

At this stage, the parties have yet to refer to any proposed commencement dates for the JAEPA. Following this announcement, the specific terms of the JAEPA will be reviewed by the lawyers for each country and the JAEPA will then need to be approved through the domestic processes of both countries. In Australia's context this will mean review and approval by the Joint Standing Committee on Treaties and the introduction and passage of domestic legislation required to implement the commitments in the JAEPA.

As always, we will keep you informed of developments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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