Opinion divided on who benefits most from Japan-Australia deal

By Barbara Bierach, in Sydney

- Last updated on GMT

Related tags: Australian beef, International trade, Meat, Japan, Beef, Pork

Beef producers to gain unprecendented access to Japanese markets
Beef producers to gain unprecendented access to Japanese markets
The new Japan-Australia Partnership Agreement (JAEPA), agreed on 8 April, allows unprecedented access to Japanese markets, but it is not necessarily only the Australian meat producers who will profit.

This deal lowers the tariffs for frozen beef to 19.5% (a cut of 19 percentage points) over an 18-year period, and for chilled beef to 23.5% over 15 years (down 15 percentage points). As a result, beef producers will gain an unprecedented level of access to the Japanese market.

However, the Australian Bureau of Agricultural and Resource Economics and Sciences estimates that foreign-owned companies process over 40% of all Australia’s red meat production, including companies owned by JBS from Brazil and Japan’s Nippon Meat Packers.

Professor Bill Pritchard from Sydney University’s School of Geoscience, said: "For a better understanding of benefits from this latest market liberalisation, we must understand the larger canvas of how the multinational firms that dominate the Australia-Japan beef trade will take advantage of these new tariff rules."

This could reflect what happened after the last comprehensive World Trade Organisation (WTO) agreement (following the Uruguay round talks) in 1995, when Japan dropped beef tariffs from 50% to 38.5%. "Because of their pre-emptive investments in the late 1980s, Japanese firms controlled the lion’s share of this trade."

Pritchard claimed that Australian beef farmers became suppliers to a highly concentrated processing sector, with Japanese firms owning more than half of capacity, on-selling product to an even more highly concentrated set of trading channels operated by Japanese firms. "Although the Australian economy did receive net gains from being able to export more beef to Japan, the magnitude of those benefits was shortened by the structuring of value chains in accordance with buyer, not supplier, interests,"​ concluded Pritchard.

That said, he accepted the JAEPA will dent Japanese trade barriers, adding: "For a country that has a reputation for fighting inch-by-inch to protect its farmers, this is a significant change to the market access of Australian beef into Japan."

And this matters, given Japan’s beef consumption in 2013 totalled 864,512 tonnes of boneless meat and Australian meat accounted for 32% of the total market, according to industry group Meat & Livestock Australia (MLA). Japan is Australia’s most important foreign market for meat, taking 26% of all its beef exports.

The MLA has been promoting beef sales in Japan with a ‘Genki’ campaign. The word means ‘energy’ in Japanese and has its own hand signal: with the thumbs and index fingers of both hands forming a triangle resembling the brand logo of Australian beef. An online advertising campaign in Japan last year involved Japanese performers – from body-builders to hip hop dancers – showing how much Australian beef has enhanced their well-being.

Lately, though, business has suffered. Beef consumption in Japan is down 1% from the previous year, and 4% down from 2012. Australia’s exports in frozen, fresh and chilled beef in 2013 into Japan were worth US$1.26bn, down from US$1.56bn in 2012.

Market researcher Brooke Tonkin from IBISWorld said the AU$5.5bn (US$5.16bn) Australian beef industry has indeed been shrinking at an annual rate of 3.4% since 2009. But "due to growing demand in Asia and Middle Eastern markets and depreciation in the Australian dollar",​ Tonkin expected annual export growth in the next five years of 2.6% per year.

Lachie Hart, chairman of MLA’s Japan FTA taskforce and CEO of beef producer Stockyard Beef was therefore happy about the JAEPA trade deal: "Freeing up any further access into the market is certainly going to be good news for the processing industry, the lot feeders, and the cattle producers in Australia. It is a great outcome for the Australian beef industry."

Stockyard’s CEO Hart disagreed with Pritchard’s caution: "Opening up the Japanese market will help the bottom line of many Australian cattle producers. And the more countries review their trade barriers, the better."

As the world’s largest buyer for pork, Japan will also lower its tariff on pigmeat to 2.2%, down from 4.3%, within a quota that rises to 16,700 tonnes within five years. However, in this case, Emily Mackintosh, a spokesperson for industry body Australian Pork, is not impressed: "This deal does not represent additional commercial value to the pork industry and is a missed opportunity to build a valuable export market. Pork exports to Japan remain prohibitive, due to the continued high levies and surcharges,"​ she said.

A tariff reduction of 50% from a base of 4% represents little commercial value, argued Mackintosh. Also, JAEPA does nothing to address the single most prohibitive barrier to trade – the excessive levies and surcharges imposed on imported pork from Australia, averaging above JP¥400 (US$3.91) per kilo. As a result, pork exports to Japan have fallen by 98% since 2002, she stressed. There is no import tariff imposed on sheepmeat to Japan.

Related topics: Meat

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