Seeking Mutual Benefit

The summit meeting concluded based on mutual benefits. Prime Ministers of Japan and Australia concurred with making bilateral economic partnership agreement starting next year. Both leaders sought maximum benefit with minimum sacrifice. While the deal was a gospel for Japanese Prime Minister, Shinzo Abe, in his ailing diplomacy, it is unclear whether it works for fundamental problem related to the United States, China or South Korea.

In the meeting, Japan accepted two-way reduction of tariff on beef. Tariff on frozen beef, used for processed foods like beef bowls, will eventually be reduced from 38.5% to 19.5% eighteen years later and that on refrigerated beef for family use will be lowered to 23.5% through fifteen years. The deal included more import of cheese, protecting rice by categorizing as an exception of trade liberation.

The deal was attractive for the Australians. Although Australia gave in with abolition of tariff on cars from Japan, it could obtain good access to the beef market in Japan faster than U.S. The biggest rival for Aussie beef in Japan has been U.S. beef. After Japan opened its market to U.S. beef thirty months old or younger last year, share of Aussie beef has been eroded. As a highly agricultural economy, Australia preferred beef market in sacrifice of car industry, which has already been incompetent against Japanese cars.

Ranchers in Japan, mainly dairy producers, became furious about the deal. They sell male cattle, which does not yield milk, as their side business. Cheap beef from Australia will be a great threat for them. However, Aussie beef does not compete with wagyu in Japan in terms of quality and price. Ordinary consumers are welcoming to have cheap beef in super markets. The government of Japan realizes that the damage is not going to be too big.

The Japanese government is persuading dairy ranchers with a reasoning of taking advantage in the negotiation with U.S. over trans-Pacific partnership. Standing off with U.S., which insists on elimination of tariffs on beef, pork and other agricultural products, Japan is making the EPA with Australia a bargaining chip to extract compromise from U.S. But, it is obvious that ranchers are exploited by both deals with Australia and America, while exporters and consumers are delighted.

It is fair to say, anyway, that the deal made a beautiful touchdown for Abe in his diplomacy. But, different from relation with Australia, Japan and U.S. do not have much card on their negotiation. Settling down is not so easy. For Australia, China is a bigger market than Japan and South Korea is another big buyer of Aussie beef. Quarrels between Japan and those two big Asian markets are not acceptable.