In brief

  • Japan-Australia Economic Partnership Agreement has been signed, and the text has been released.
  • The agreement delivers substantial benefits to Australian exporters in the agricultural, resource and manufacturing and services sectors.
  • As previously anticipated, the agreement does not include investor-state dispute settlement provisions.

Japanese Prime Minister Shinzo Abe and Australian Prime Minister Tony Abbott today signed the Japan-Australia Economic Partnership Agreement (JAEPA),1 following the conclusion of negotiations on 7 April 2014, as discussed in our previous article.2 The text of JAEPA has now been made public and is available on DFAT’s JAEPA website. JAEPA is the second free trade agreement the Coalition has concluded since coming into power in September 2013, having already concluded the Korea-Australia Free Trade Agreement in December 2013.3 Negotiations in relation to a free trade agreement between Australia and China are currently underway, with an agreement expected to be reached by the end of 2014.4

Benefits for Australian exporters and Japanese investors

The agreement is expected to deliver substantial benefits for the Australian economy, particularly in the agricultural sector, in light of Japan’s heavily protected agricultural market. Key outcomes in this area on entry into force of the agreement will include:

  • rapid tariff reductions for beef,
  • elimination of the 15 per cent tariff on bottled wine over 7 years,
  • duty-free quotas for Australian cheese, and
  • immediate duty-free and quota free access for wheat for feed and barley for feed, as well as streamlined export arrangements for some Australian wheat varieties.

Australian resource and manufacturing exporters are also set to benefit from JAEPA, with 99.7 per cent of Australia’s exports of resource, energy and manufacturing products entering Japan duty-free on entry into force of the agreement. On full implementation, all of Australia’s current resources, energy and manufactured goods exports will benefit from duty-free entry into Japan. JAEPA also improves access for Australian service providers to the Japanese market in financial, legal, education and telecommunications sectors.

JAEPA also encourages Japanese investment into Australia through raising the screening threshold for Japanese investment from $248 million to $1,078 million.

No ISDS Provisions

Importantly for cross-border investors, as previously anticipated,5 JAEPA does not include investor-state dispute settlement (ISDS) provisions, which offer protections against political risks such as expropriation of investment assets or profits and discrimination as between cross-border and national investors.

The inclusion of ISDS provisions in free trade agreements has proven to be a controversial issue, and one in respect of which the former Labor and current Coalition Governments have adopted different positions. The former Labor Government refused to include ISDS provisions in trade agreements, stating that it would not support provisions that conferred greater legal rights on foreign businesses than those available to domestic businesses, or constrained the ability of the Government to make laws on public interest matters. In contrast, the Coalition Government has said that it will approach the inclusion of ISDS provisions on a case-by-case basis, and that the rights of governments to take decisions in the public interest can be protected provided that trade agreements include appropriate safeguards.

Despite this more sympathetic approach towards ISDS provisions, it seems that the Coalition did not consider JAEPA to be an appropriate context in which to agree to ISDS provisions. However, to the extent that the Trans-Pacific Partnership does include such provisions, Australian and Japanese cross-border investors may be able to rely on those ISDS mechanisms to protect their investments, given that both Australian and Japan are participating in the Trans Pacific Partnership.

JAEPA will come into force following domestic approval processes in Australia and Japan.