Francisco A. Laguna & Jennie Linder Cunningham
This week we continue our series on Australia, focusing on the country’s trade relations with Japan and the United States.
Australia-Japan trade dates to the mid-19th century, and, with the exception of World War II, Japan has been Australia’s most significant trading partner. The first trade agreement Japan sought with Australia sought dates to 1915. Australia primarily exports coal and iron ore/iron ore concentrates, along with copper ores and beef to Japan, while importing mainly vehicles and some refined petroleum.
As a result of the global recession, Australia’s Free Trade Agreement talks with Japan stalled; however, the current administration of Prime Minister Tony Abbott has expressed that the successful negotiation of the FTA is a high priority. Trade experts note that one of Abbott’s two foreign affairs advisers, Andrew Shearer, is a Japan specialist who was instrumental in crafting the 2007 defense and security pact between the two countries known as the Japan-Australia Joint Declaration on Security Cooperation (JDSC).
Japan has also expressed a renewed interest in concluding the FTA talks, mainly in order to get a jump on its Asian competitors, including China. In particular, the high-tech manufacturing sector has been petitioning the Japanese administration to conclude the talks, to give them the best chance of increasing market share in everything from Japanese cars to cameras and televisions. This is highly prescient and could be a matter of timing, as China moves to diversify its economy beyond low-tech manufacturing into the sectors that Japan has historically dominated.
Australia and the United States have long regarded each other as political and economic allies, despite the significant physical distance between the two countries. The United States has also historically been a major presence in Southeast Asia, and remains the focus of nations like Australia, South Korea, Japan, and even the Philippines, as China continues to assert a greater presence in the region and as it recently surpassed Japan as the world’s second-largest economy.
Through its Pivot to Asia policy, the US has indicated that it intends to increase its presence in the region. However, the US is currently in initial stages of implementing a “pivot” (from the Middle East), as it remains wary of overextension in Asia while still involved in the Middle East. Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell recently stated that the countries of the Asia-Pacific recognize that the United States still had pressing situations in Afghanistan and Iraq, and a premature withdrawal would not be positively indicative of Washington’s commitment to the region.
The US is Australia’s fourth largest export market and second largest import market. Overall, it is Australia’s third largest trading partner (after China and Japan). Exports to the US account for A$14.6 billion, a 4.9% share, with imports totalling $41.6 billion, a 13% share. Two-way trade is estimated at $56.2 billion, after China with $125.2 billion and Japan with $71.1 billion. From these numbers alone, and by referencing the trade table in last week’s blog, we can determine that the US-Australia connection goes beyond the economic. A 9% trade share is not insignificant, but it pales in comparison to China’s 20.3%.
The 2005 US-Australia Free Trade Agreement is a fairly new development, and one that bears watching. According to the Office of the US Trade Representative, the FTA established working groups in 2009 to examine several issues and potentially foster cooperation on the agricultural, sanitary, and phytosanitary fronts. Recall that food exports, agriculture, and farmland remain major hurdles to resolving the China-Australia FTA.
TransLegal has two correspondent offices in Australia in Sydney and Perth. We are available to answer your questions concerning doing business in the country.