Australia and Japan have long enjoyed a strong trade relationship ever since they became our first major trading partner in Asia.
Today’s signing of Australia’s free trade agreement with Japan is a major step forward in this relationship, formalising the partnership that has been fundamental to the economic interests of both nations. It is ultimately a huge opportunity for Australian business.
Importantly, the agreement also symbolises Australia’s willingness to engage and work within a meaningful partnership with Japan and more broadly across Asia.
Australia is perfectly positioned to respond to the projected growth in demand from Asia over the coming years, for goods and services in agriculture, resources, healthcare, education, professional services and tourism, to name just a few.
This commitment and willingness to engage is exactly the sort of message we should be sending to the region.
As the nation’s largest business bank, NAB recognises the enormous benefits on offer under the free trade agreement with Japan. Ultimately, it is a trade arrangement that will continue to reap benefits for Australia and Australian business for decades to come.
In the beef export industry, for example, in the first year of the FTA, Australian farmers will see Japanese tariffs on frozen beef fall 8 per cent, while tariffs on fresh beef will drop 6 per cent.
These upfront cuts will give Australian exporters a strong competitive advantage relative to our competitors, such as the US and Canada.
Over the long term, the benefits are even more significant. Japanese tariffs for frozen beef will nearly halve from almost 40 per cent today to just 19.5 per cent over the next 18 years. For fresh beef exports, tariffs will drop to 23.5 per cent over 15 years.
Given beef and veal make up 38 per cent of all Australian agricultural exports to Japan, this is a significant and long-term confidence boost for local farmers and exporters looking to position their businesses for the years ahead.
The five-year FTA review process will also provide an opportunity to firmly advocate on behalf of some industries that didn’t enjoy the same policy outcomes as other sectors of the economy. As with any major trade agreement, this is an important step in addressing both the opportunities and limitations that can come out of such a process.
Looking more broadly, one in four of NAB's Australian business customers are already active in Asia, with approximately 50 per cent of our large corporate and institutional customers already operating in the region.
More than 70 per cent of NAB's small to medium business customers with international dealings are also focused on Asia, with over half confident their activity in Asia will grow in the future.
With FTAs now established with Japan and South Korea, and a potential landmark agreement with China on the horizon, we expect this engagement will only continue to rise.
NAB's Agribusiness Asia Desk, which was established to initiate and strengthen trading ties in the region, has already observed a rise in merger and acquisition opportunities in the market as businesses look for equity injections or overseas expansions.
We have also seen an increase in production and businesses looking to vertically integrate their supply chains to capitalise on the free trade agreements.
To date, NAB's specialist desk has assisted wine exporters, milk and meat processors and cheese manufacturers realise strong export opportunities in Japan and across Asia.
The free trade agreement signed today is another occasion for Australian business to be thinking about and planning for how they will capitalise on the opportunities in Japan and Asia in the years to come, preparing for how they will meet the rise in demand for Australian goods and services and how they will grow their business in the process.
The real value for Australia will be seen not just in what occurs today, tomorrow and over the next 12 months -- but in the years and decades to come as Australian business builds on the foundations of the agreement, initiates new business and export channels and realises the long-lasting benefits.
Joseph Healy is Group Executive, Business Banking at National Australia Bank.