Australia-Japan trade deal annoys US

10 Apr, 2014 05:23 AM
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The US will have to extract some more, because they won't be able to do the deal otherwise

THE United States is ­irritated Australia sealed a bilateral trade deal with Japan at a time when American trade officials are in Tokyo trying to iron out differences to progress the proposed Trans-Pacific Partnership agreement.

The US trade fraternity believes the deal agreed on Monday by Prime ­Minister Tony Abbott and Prime ­Minister Shinzo Abe does not go far enough in dismantling Japanese ­agricultural protections.

US Congress members will want ­bigger concessions on beef, dairy, pork, wheat, sugar and possibly rice before dropping their opposition to the TPP and supporting the Obama administration's Pacific Rim free trade and investment push.

"The US will have to extract some more, because they won't be able to do the deal otherwise," said Timothy Keeler, a former chief of staff to US trade representative Susan Schwab in the George W. Bush administration.

Jeffrey Schott, a former US ­negotiator in the Tokyo round of the General Agreement on Tariffs and Trade, said Australia had accepted more limited Japanese trade liberalisation on agriculture than the US wanted.

"The United States will not regard the Australia deal as a precedent for its own talks with Japan and the TPP," said Mr Schott, a senior researcher at the Peterson Institute for ­International Economics.

"It will expect significantly deeper reforms to ­Japanese agricultural protection."Tokyo gives ground

Under the Australia-Japan economic partnership agreement, Tokyo finally gave some ground on sheltering its local agricultural sector from foreign competition. It will gradually lower the tariff on high-value chilled Australian beef imports to 23.5 per cent over the next 15 years, from 38.5 per cent today.

The frozen beef tariff will fall to 19.5 per cent. Australia also scored some concessions on pork and dairy.

In return, Australia will cut tariffs on Japanese cars, as well as lifting the threshold to $1.08 billion when Foreign Investment Review Board scrutiny will apply to investment by a private ­Japanese company.

The trade agreement contains a preferred nation clause in relation only to beef. If Japan strikes a more accommodating deal with another country on beef, Australia will get the same market access.

­However, there is no safety net for other agricultural commodities, besides dairy which would trigger a review.

The deal does not include an investor state dispute settlement mechanism, which allows foreign companies to sue governments that impose rule changes that breach trade and investment treaties.

The US is pushing for the ISDS mechanism to be inserted in the TPP, a proposed Pacific Rim trade agreement between 12 countries accounting for 40 per cent of world GDP.

Japan wants better market access for its vehicle makers in the US, including cuts to the 2.5 per cent tariff on passenger cars and 25 per cent on light trucks.

The Australia-Japan bilateral ­economic partnership agreement will complicate the multilateral TPP ­discussions, which are dragging on beyond the 2013 deadline set by US President Barack Obama.

US Trade Representative Michael Froman and his deputy, Wendy Cutler, have been in Tokyo this week, negotiating with their Japanese counterparts.

Mr Froman told a Congressional hearing last week "it's time for Japan to step up to the plate".

President Obama is due to visit Tokyo to meet Mr Abe this month, with the aim of progressing the TPP as part of the US "rebalance" to Asia.

A senior source in Washington said the US had been privately unhappy for months about Australia pursuing the bilateral deal, believing it may ­undermine concessions the Americans can extract from Japan in the TPP.

However, some American trade experts welcomed the news, believing it would renew pressure on the US to overcome domestic political ­opposition to free trade deals.

"It's positive momentum and a wake-up call for the United States that the world is not waiting around for us to get our politics right," said Scott Miller, senior adviser at the Centre for Strategic and International Studies.

"It helps calibrate expectations within the agricultural communities of all the TPP parties about what's ­possible," he said.

Democrats in Congress are blocking the President's wish to be granted "fast-track" approval for a trade agreement reached.

A fast track permits Congress to only a "yes" or "no" vote on a trade deal, and removes its power to amend details. Such a mechanism is viewed as crucial in helping to convince other countries the US can live up to its word on agreed outcomes.

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READER COMMENTS

Bushie Bill
11/04/2014 2:35:48 PM

Can't be all bad, then.

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