9 July 2024
Good evening, everybody. Thank you to Richard Andrews, CEO of the Australia Japan Business Cooperation Committee for convening this event, and to Ashurst for being such a good host and promoter of Australia-Japan business ties. Just to show that I can still be parochially Victorian, it rained much more in Sydney when I was there last week.
And of course, many distinguished people we have here tonight. It is great to see two former Chairs of the AJBCC – they have already been mentioned, former Ambassador of Australia to Japan, Mr Murray McLean and my colleague, the Consul-General in Melbourne, Mr Shimada Junji, as well as many other distinguished contributors to our relationship. Good evening, everybody.
I spoke quite recently, actually, to the sister organisation, JABCC, on the 17th of June, about future economic opportunities, including those stemming from the Future Made in Australia package. So that's the future. But tonight, it's good to reflect on JAEPA and its 10th anniversary, signed on the 8th of July 2014. Some of it has already been mentioned and Richard made some really good points about it already.
I did want to say, especially given Richard mentioned Abe Shinzo, that the 8th of July, by sad coincidence, is also the anniversary of his assassination, a mere two years ago. So, I wanted briefly to remark on that fact. A very tragic event indeed.
The signing of the agreement that we're here to celebrate was significant, actually, for both Australia and Japan. It had some practical trade outcomes, of course, but it also enabled something else – a deeper, more important strategic partnership between Australia and Japan.
The trade breakthroughs came despite there being significant sensitivities for both sides. Richard mentioned agriculture – we all know how sensitive that was in Japan and still remains to a large degree. It was a key priority for Australia. At the time, ten years ago, the automobile manufacturing industry in Australia was our big sensitivity. So, that was a significant issue to work through.
But the fundamentals of the economic partnership and the opportunities were very clear. The two Governments were able to agree JAEPA, a significantly liberalising agreement, but one with a strategic purpose, as we've already heard. It wasn't easy, with seven years of negotiations. It's a long time.
Many people in this room, some of them already mentioned, but some not yet acknowledged, were crucial to help push the deal through. Because, as always, we needed a business constituency in both countries to keep governments focused on the task and the opportunity.
Of course, Australia did not get everything it wanted. That's the nature of sensitive negotiations. But, I spoke to a number of my colleagues involved in the agreement, and it really was trail-blazing. At the time, it was by far the most liberalising trade agreement Japan had ever concluded, particularly on agriculture.
And it showed that Japan, despite those sensitivities, could reach meaningful agreements, including for strategic reasons. It set a new benchmark and a new precedent, and it was the springboard, we think, for Japan subsequently not just to join, but later to lead on the TPP, later the CPTPP.
So, for strategic and economic reasons, it was important in Japan. As some of you will know better even than I, precedent is important. And sometimes the idea of gaiatsu or external pressure to reform is also important.
So, would CPTPP have been delivered with all of the tough decisions involved, had it not been for JAEPA? Would Japan have been able to play the role it did in RCEP, the agreement between ASEAN and six other economies, without it?
For Australia, the gains were significant. The agreement gave, and continues to give, Australian exporters significantly improved market access in goods and services, and enhanced investment protections. And once fully implemented – we're not quite there yet, we have still got another ten years for that – around 98% of Australia's merchandise exports to Japan, all of our resources, energy and manufactured goods included, will receive preferential access or enter duty free.
Immediately after entry into force, which was early January 2015, almost all of Australia's exports of resources, energies and manufactured products indeed started entering Japan duty free. Tariffs for many key agricultural exports were eliminated and many others entered a phased-out period. This included rapid reductions on tariffs for Australian beef, still Australia's largest agricultural export to Japan, and it still gives us a significant competitive advantage over our major competitor, the United States. And I should say to all of you, if you come to the Australian Embassy, you don't have much choice about what to eat. We serve Aussie beef!
JAEPA removed barriers, as well, and opened up opportunities, for professional service providers in areas including the law, finance, education and design. Now, since that point, in early 2015, our total goods and services exports to Japan have climbed from $50.3 billion in 2014 to $90.2 billion in 2023.
And although both of our nations have entered other regional trade agreements since JAEPA, it still remains one of our most utilised bilateral FTAs. Australian businesses now have a number of options for commercial interactions with Japan, and JAEPA is just one piece of a trade architecture to support closer economic ties.
Now, as in life, a birthday, for an FTA is not the start point or end point, it is part of a continuum. And this is certainly true for our economic partnership. Indeed, as we look ahead, we have to prepare for quite a different future. To some degree, JAEPA was about getting governments out of the way – eliminating tariffs and reducing red tape.
Now, though, in a pretty different environment, as we deal with concerns about supply chain security, and we think about enabling investments in clean technologies, the role of government is changing.
And in Japan, like in Australia, governments are trying to manage the convergence of security and economic issues. Sometimes that helps get an agreement delivered like JAEPA. At other times, it's a very complex issue. How do you protect and advance your converging strategic interests with some market discipline and transparency? That's something both Australia and Japan wrestle with.
So, we need to look ahead to new ways of collaborating. Japanese corporates I know already are very interested in the Future Made in Australia initiatives and the Future Gas Strategy. On energy transition in particular, they know in Japan, like in Australia, it's going to be complicated and we are respectively each other's most important energy partners. Japan is now spending a lot on GX or green transformation. Just one example alone $31 billion Japan will spend on the first round of contract for difference incentives for the production and importation of hydrogen.
The Australian Government, for its part, is making a smaller but still sizable investment through the Future Made in Australia package. So, we need to work closely on all of this, including to make the most of these government incentives and different offers of support. How can we use them to take advantage of our deep business links?
Just like Japan – as some of you in the room know very well – was crucial in driving our iron ore, coal and LNG industries. I see a really clear future for Japan and Australia to support each other's decarbonisation and energy security, including through Japanese investment and offtake. Energy cooperation is never easy. Certainly, in the future it can't be ‘set, invest and forget’. We need communication and we need partnership and we need it between businesses as well as between governments.
I'm here in Melbourne at this time, halfway through my term as an Ambassador. I would like to, but won't be able to emulate Murray McLean, who I think clocked up nearly seven years. It's just not going to be possible for me.
But in the remainder of my term, I think that's the key theme. How can we partner on this energy transformation both countries are going through? And I want to work closely with the private sector, AJBCC and others on that opportunity. We have to work hard to get better outcomes for Australian firms in this process, and some of that will still be through JAEPA. Some of it will be through the CPTPP, or it could be in new areas.
Here, I wanted to quickly mention agriculture again. We've got an opportunity, I think, to emulate, to a degree, the partnership in energy security, in food security. Japan, I think, is changing the way it looks at the importation of agricultural products. Earlier this year, food security was enshrined as a key issue in the Basic Food Law, moving away from a purely self-sufficiency focus. It's just not possible anymore, for any nation, not least one that has the constraints and resources that Japan has in a pretty tricky security predicament to think about pure self-sufficiency.
So, who can be the reliable, strategically aligned partner in secure food supply chains, like in energy? Well, I think it's Australia and we have to work hard to make it so. We want to use the time we have now to open up a conversation about how Australia can contribute to Japan's food security, through more efficient trade and better cooperation.
We'll continue to work away at technical issues, of course. Some of these don't get much media, but they take time to unlock. Last week, for example, Japan agreed to provide technical market access to all varieties of Australian table grapes. And in new areas and in new ways we will look to set rules, including working with Japan, as we are, on an e-commerce deal at the World Trade Organization.
There is a clear recognition about the Australian economy in Japan. Corporates have cashed up positions. They see the Australian economy as growing and vibrant, and we know that Japan is one of our biggest investors. It is currently the biggest investor, for example, in new areas like real estate in 2023, the number one, including some on build-to-rent. In our own national priorities, this economic partnership delivers, over and above the commercial benefits it provides.
Finally, central to all our efforts, I do want to say how vital I know it is to have the great power convened in this room – our business links our people-to-people ties. Later this year in Nagoya at the end of October, there will be the Joint Business Conference. And Melbourne, of course, hosted a very successful, arguably intimidatingly successful conference for the Japanese organisers. This year, the JABCC Chair, Hirose-san, is extremely motivated and he's an extremely effective person. I hope to see as many of you as possible in Nagoya to keep pushing this forward.
I also want as Ambassador – and this will happen in every single speech I give from here on – to give a plug about the Osaka Kansai Expo 2025. More and more of our promotional and commercial promotion activity will be based and centered around the Expo. So please get involved.
This is an important anniversary for JAEPA, which I want to celebrate with all of you. But I want to say in particular that I see far larger possibilities for Japan and Australia. Just to return to that point that Richard made in his introductory remarks, we do live in a world where strategic and economic issues converge. So, the opportunity for Australia and Japan is how to leverage and fully exploit their strategic alignment to work together in all sorts of important economic ways.
Of course, where we have a surplus and Japan has a deficit, we will trade. Where we have a capital requirement and Japan can invest, that will happen. But in supply chains, technologies of the future and clean energy, we're going to need a deeper form of economic alignment. One, in many ways, first envisioned and encapsulated by the free trade agreement that so many of you worked so hard to deliver all those years ago.
As someone who comes in later on and benefits from the fruit of your labor, I want to commend all of you and recognise how far we've come, but how many more opportunities we have ahead. Thank you very much.