04 Sep 2014

Recent agreement signals a new era in Australia's trade relationship with Japan

by Zac Chami

Preferential access and reduced – or eliminated – tariffs are the key element of the new Japan-Australia Economic Partnership Agreement.

Japan is Australia's second largest trading partner. In 2013 Australia's two-way goods and services trade with Japan totalled $70.8 billion ($66.5 billion trade in goods and $4.3 billion trade in services).

On 8 July 2014 the Prime Ministers of Japan and Australia signed the Japan-Australia Economic Partnership Agreement (JAEPA) and its implementing agreement. The intention behind JAEPA is to facilitate improved access to the Japanese market for Australian enterprise through a range of preferential access outcomes and the elimination or reduction of certain tariffs and duties. The JAEPA will also remove all remaining Australian tariffs on Japanese imports.

What does this mean for Australian exporters?

The finalisation of the JAEPA offers substantial benefits to Australian exporters with current supply chains into the Japanese market, or those looking to establish trade with Japanese importers.

It's estimated that, upon full implementation of JAEPA, up to 97 percent of Australia's exports to Japan will enter duty-free or will receive preferential access.

A snapshot of key outcomes of JAEPA that benefit Australian exporters upon its entry into force are set out below.

Agriculture exporters

  • Significant Tariff reductions for beef;
  • Elimination of the 15 percent tariff on bottled wine over seven years, and the immediate elimination of the tariff on bulk wine;
  • Duty-free quotas for Australian cheese;
  • Tariff elimination on the vast majority of Australia’s fruit, vegetables, nuts and juice as well as lobsters, crustaceans and shellfish;
  • 10-year phase-out plan for exports of Tuna and Atlantic salmon;
  • Duty-free and quota-free access for wheat for feed and barley for feed supplemented by streamlined export arrangements for some Australian wheat varieties;
  • Tariff elimination and reduced levies for high polarity (international standard) raw sugar.

Resource and manufacturing exporters

  • Elimination of tariffs on entry into force for coke and semi coke of coal, non-crude petroleum oils, aluminium hydroxide and titanium dioxide.
  • Elimination of tariffs for unwrought nickel and ferro-manganese.

Australian service providers

  • Guaranteed cross-border access to Japan for Australian financial service providers when providing investment advice and portfolio management services.
  • Improved access to the Japanese legal services market for Australian law firms.
  • Guaranteed market access for Australian education providers to Japan’s higher education services market, including vocational and technical education.
  • Commitments on non-discriminatory treatment, regulatory transparency, competitive safeguards and fair and reasonable access to telecommunications networks and services.
  • High levels of intellectual property protection in Japan broadly equivalent to protections provided in Australia.

What does this mean for importers of Japanese goods?

Australian importers of Japanese goods will benefit from JAEPA. Upon implementation, Australian tariffs on Japanese imports including for Japanese motor vehicles, electronics and white goods will be eliminated.

JAEPA also aims to promote growth in Japanese in-bound investment by amending the threshold at which private Japanese investment in non-sensitive sectors can be made before such investment has to be considered by the Foreign Investment Review Board.

Implementation timeline

To become operational, JAEPA will need domestic approval in both Australia and Japan.

Australia and Japan are aiming to complete their domestic treaty processes this year. Once this occurs, both countries will exchange Diplomatic Notes to certify they are ready for the entry into force of the Agreement. JAEPA will enter into force 30 days after the exchange of notes.

Australian businesses should consider the impact of the JAEPA in their industry and how they can benefit from the improved reciprocal market access it seeks to achieve.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.