After seven years of negotiation, Prime Minister Tony Abbott, with the help of Trade Minister Andrew Robb, has signed a free trade agreement (FTA) between Australia and Japan.
The scale of the agreement goes well beyond initial expectations, with Australian agriculture being allowed unprecedented access to Japanese markets and tariffs eliminated on most horticultural products. Wine and cheese makers will also be given greater access to export their products to Japan, with tariffs cut on some items and quotas lifted on others.
Early industry estimates suggest the agreement could grow the Australian beef industry by $2.6 billion over the next 20 years and other industries could record similar gains. A 2005 government analysis suggested that a similar deal with Japan would add $39 billion to the economy over two decades.
Australia has agreed to drop the five per cent tariff on Japanese cars within a year for three quarters of vehicles, while the remainder will lose the tariff within three years. The current five per cent tariff on components will also be dropped in five years.
The agreement is the first of its kind to be struck by Japan with any country.
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This week has seen two significant steps forward for the economic recovery of Australia, with free trade agreements with Japan and also South Korea being signed by Prime Minister Tony Abbott on his seven-day trade mission to North Asia.
The details of both these trade agreements signal a changing landscape for Australia, with the agreements removing many tariffs and restrictions surrounding electronics, cars, auto components and whitegoods. The removal of these tariffs will increase Australian sales of products from our trade partners while resulting in significantly lower prices for consumers. The removal of tariffs and increases in quota numbers will see an unprecedented increase in the export of beef, diary, sugar, wool, cotton, lamb, beer, seafood and more, and is estimated to grow each of these industries in Australia by close to $2.6 billion over the next 20 years.
While these agreements don’t spell the immediate death of certain affected industries, the writing has been on the wall for many years with struggling industries such as the Australian car industry which has seen the announcement from major brands of plans to exit the manufacturing industry in Australia. The agreement signed with Japan should cause an average drop in car prices of more than $1000 on some models sold in Australia, making it very difficult for Australian manufactures to be competitive.
It’s difficult to accept change, and even harder to see an industry such as the car manufacturing industry practically disappear overnight, but if we are to be progressive as a nation, we need to focus on the industries which best suit our plentiful land resources and high (by international standards) minimum pay rates. We are heading for 10 years of budget deficits, according to current figures, and I feel these trade agreements are a step in the right direction.
What do you think? Has Tony Abbott doomed a number of Australian industries with these agreements? Or do you think these agreements are in the best interests of a prosperous, debt-free Australia?