Japan FTA not so free after all

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ScreenHunter_1805 Mar. 25 14.41

By Leith van Onselen

Earlier this year, I cautioned the Abbott Government against committing to conclude its free trade agreement (FTA) negotiations by September:

A big risk is that in setting a one year deadline to conclude negotiations, the Abbott Government could forgo quality. The Australia-US FTA is a case in point, whereby the Howard Government accepted a sub-standard deal for political reasons, which saw large chunks of agriculture carved-out, draconian price-based safeguards protecting US horticulture (see Annex 3A), as well as complicated product ROO numbering hundreds of pages.

As expected, cracks are beginning to appear in the negotiations for the Australia-Japan FTA, with beef, dairy and rice likely to be excluded from any deal, and wheat and sugar also facing resistance:

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Three Liberal MPs, Dan Tehan, Sharman Stone and Nola Marino all expressed concern that improved access for dairy and beef would be overlooked in the rush to sign an FTA with Japan.

This would set a poor precedent for FTA negotiations with China and for Trans-Pacific Partnership talks, they argued…

Concern has been rising among the backbench since last week when, in Parliament, Mr Abbot used the term “economic partnership agreement’’ to describe an FTA with Japan.

“That means a downgrade of an FTA. We’re getting nowhere on dairy and beef,’’ said one source who shares the concerns but did not speak during the party room meeting.

Given the substantive carve-outs and other costs typically associated with bilateral FTAs, the Australia-Japan FTA is likely to offer at best only modest trade benefits.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.