The Prime Ministers of Japan and Australia signed the Japan- Australia Economic Partnership Agreement (JAEPA) and its Implementing Agreement on 8 July 2014. The intention behind the execution of the JAEPA is to improve Australia’s access to the Japanese market.
Entering into an agreement with Australia’s second-largest trading partner brings substantial benefits to Australian agricultural exporters, industrial exporters and services suppliers by granting preferential access to the Japanese market and eliminating or reducing certain tariffs and duties. The JAEPA will also remove all remaining Australian tariffs on Japanese imports.
As anticipated, the JAEPA does not include Investor-State Dispute Settlement provisions.
The JAEPA will be implemented following domestic treaty processes in Australia and Japan. Below are some of the key outcomes of JAEPA:
Tariffs Removed for Australian Agricultural Exporters
The JAEPA includes the following key outcomes for Australian agricultural exporters:
- tariffs of up to 219% will be eliminated or significantly reduced on many exports including beef, cheese, horticulture, wine and seafood; and
- tariffs for wool, cotton, lamb and beer will be eliminated.
Australian Industrial Exports to Japan Will be Duty-free
The JAEPA will allow Australia’s resource, energy and manufacturing products to be exported to Japan duty-free.
Products for which tariffs will be eliminated include:
- coke and semi coke of coal and non-crude petroleum oils;
- unwrought nickel and ferro-manganese; and
- paints, key plastic products and pearl jewellery.
Outcomes for Australian Service Suppliers
The JAEPA increases market access for Australian services exporters into Japan, including legal and financial services firms and telecommunications providers.
Key outcomes for Australian service suppliers include:
- Australian financial services providers will be able to supply a clearly defined list of financial services on a “cross-border” basis, enabling Australian providers to do business in Japan without the need to open a full commercial presence;
- guaranteed market access for Australian lawyers, including ensuring Australian law firms will be able to form Legal Professional Corporations under Japanese law;
- both governments will support work towards enhanced mutual recognition of professional qualifications;
- thresholds will be increased for private Japanese investment into non-sensitive sectors (these thresholds will be the same as those that apply to US investors under the Foreign Acquisitions and Takeovers Act 1975 (Cth));
- Australian intellectual property protections will be broadly equivalent in Japan; and
- Australian telecommunications providers will benefit from commitments on non-discriminatory treatment, regulatory transparency, competitive safeguards and fair and reasonable access to telecommunications networks and services.
Removal of Australian Tariffs for Importers
On full implementation, all remaining Australian tariffs on Japanese imports will be eliminated, including for:
- Japanese motor vehicles;
- electronics; and
- white goods.
No Dispute Settlement Provisions
The JAEPA does not include Investor-State dispute settlement (ISDS) provisions. Such provisions are intended to protect against political and cross-border risks. The reason for the exclusion of ISDS provisions may be the ongoing negotiations in relation to the Trans-
Pacific Partnership (TPP). As Japan and Australia are party to the TPP, investors may be able to rely on the provisions of the TPP to protect their investments.
The JAEPA includes a provision to review the inclusion of an ISDS provision.
Timeline for Implementation
Both Japan and Australia need to carry out domestic approval processes to implement the JAEPA. For Australia, this includes having the agreement considered by Parliament and the Joint Standing Committee on Treaties before Australian laws are changed.
The government has announced that both countries aim to complete domestic treaty processes this year. Following this, Diplomatic Notes will be exchanged and the JAEPA will enter into force after 30 days.
The JAEPA has been described as “the most ambitious trade deal Japan has ever concluded with anyone” and covers a broad range of services. Australian businesses should consider the impact of the JAEPA in their industry and how they can advantage of related opportunities.