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Too Soon To Know If Australia Has Upper Hand In JapanToo Soon To Know If Australia Has Upper Hand In Japan

Even the Australian beef industry’s response to the new announced trade agreement with Japan has been mixed.

May 1, 2014

4 Min Read
Too Soon To Know If Australia Has Upper Hand In Japan

When the Japan-Australia Economic Partnership Agreement (JAEPA) was announced April 7, many were quick to declare that Australian beef had gained an advantage over its competitors. But that analysis is premature, considering the current state of the Trans-Pacific Partnership (TPP) negotiations.

The Australian government released a JAEPA fact sheet that included the following details regarding Japan’s imports of Australian beef, which are currently subject to the same 38.5% tariff that applies to U.S. beef:

• The tariff on frozen beef will be cut from 38.5% to 19.5% over 18 years, but the cuts are front-loaded – dropping the rate to 30.5% the first year, 28.5% in the second year, and 27.5% in the third year.

• The tariff on chilled beef will be cut to 23.5% over 15 years. The tariff will drop to 32.5% the first year, 31.5% the second year, and 30.5% the third year.

• Within separate tariff rate quotas, Japan will also reduce tariffs on imports of Australian beef offal and processed beef products.

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The Australian beef industry’s response to the agreement has been mixed. Some organizations expressed disappointment in the level of tariffs that will remain on imports of Australian beef. So is this really a breakthrough agreement, or did Australia allow Japan to preserve too much tariff protection for its domestic beef industry?

For the time being, it’s difficult to answer this question, because Japan has no agreements with major beef suppliers to which the JAPEA can be compared. The U.S. and Japan are still tackling the issue of beef access in bilateral negotiations under the TPP. These talks intensified prior to (and during) President Obama’s April 24-25 summit meeting with Japanese Prime Minister Shinzo Abe, where both sides acknowledged progress on beef access but announced no specific terms.

 “There are a lot of opinions about how deeply Japan is willing to cut the tariff rates on U.S. beef and the timetable for implementation,” says Thad Lively, U.S. Meat Export Federation (USMEF) senior vice president for trade access. “But until a formal announcement is made, this is really just speculation.”

The Australian trade media has reported that if another beef-exporting country, such as the U.S., negotiates better terms with Japan under a bilateral agreement, Australia will automatically ”upgrade” to that deal. But the text of this provision has not been made available for review.

“This sounds like a big win for the Australian industry, but there is no way to know without seeing the language,” Lively explains. “Who determines whether Japan has given another trading partner a superior deal, and how is this defined? Would Australia be able to choose specific terms that it prefers, or would it be required to ‘opt-in’ to the entire agreement? Would Australia and Japan have to return to the negotiating table to make any of this happen?  Only the full text of the Japan-Australia agreement will answer these questions.”

One disadvantage that the JAEPA clearly highlights, however, is the Obama administration’s current lack of trade promotion authority (TPA). TPA would require Congress to approve or reject the TPP (or any free-trade agreement) on an up-or-down vote rather than subjecting the terms of the agreement to legislative amendments. Without TPA, ratification of the TPP could languish in Congress long enough to give Australia a competitive advantage – even if the actual terms agreed to in the TPP are more favorable.

Lively notes that being the first beef-exporting country to have a free-trade agreement with South Korea recently worked in the U.S. favor, forcing other suppliers such as Australia, Canada and New Zealand to “play catch-up” in gaining reductions in Korea’s 40% tariff on imported beef.

“The agreement with Korea was negotiated under TPA, and it still took a considerable amount of time to get through Congress,” he says. “Without TPA, gaining approval of a major agreement would be a long and difficult process.”

Bills aimed at renewing TPA have been introduced in both houses of Congress, but have met considerable resistance within President Obama’s own party. A vote on the legislation appears unlikely until after the November 2014 mid-term elections.

Joe Schuele is communications director for the U.S. Meat Export Federation.


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