TOKYO -- Seven years of negotiations on an economic pact between Japan and Australia came to fruition Monday, defying skeptics who had seen little chance of agreement on farm market access.
Before Shinzo Abe and Tony Abbott made it official, ministers from both sides hashed out a deal in five hours of bargaining Saturday in Tokyo.
Andrew Robb, Australia's trade minister, pressed Japan to halve its 38.5% tariff on Australian beef. Japanese Agriculture Minister Yoshimasa Hayashi made a counteroffer: Japan would go down to 19.5% on frozen beef, mostly used for processing, but only to 23.5% on chilled beef, which vies for Japanese supermarket shoppers' money alongside domestic cuts. Australian beef would "gain a big advantage" in Japan, Hayashi assured Robb.
What may look like a gambit is less risky than it appears. Hayashi also asked for a "safeguard" that lets Japan restore the original tariff in the event of a big increase in beef imports. Tokyo "gets what it wants while letting Australia save face," a Japanese government source said.
JA-Zenchu, a powerful union of Japanese farming cooperatives, opposed the economic partnership agreement when the negotiations began in 2007. While it did not welcome Monday's deal, it did say in a statement it was impressed that the Japanese side had conducted itself "tenaciously." The agriculture and finance ministries are expected to consider expanding an income support program financed by both the government and livestock farmers.
Japan's EPA with Australia could become a bargaining chip in negotiations with the U.S. on the Trans-Pacific Partnership, a 12-nation free trade project. Michael Froman, the U.S. trade representative, has insisted that Japan must agree in principle to eliminate all tariffs in its five priority areas: rice, wheat, beef and pork, dairy products and sugar.
The EPA threatens to put American beef at a price disadvantage to the Australian kind in Japan. Hoping that this prospect would drive the U.S. side into a compromise on the TPP, ruling Liberal Democratic Party lawmaker Koya Nishikawa went to Australia last month to gauge how committed Abbot was to making a deal.
"I think everything's going to be fine," Nishikawa told Abe upon his return.
Froman is in Japan this week for talks with Economic Policy Minister Akira Amari. But with congressional elections ahead in November, the White House would risk alienating farmers and other interest groups by making major concessions to the Japanese side.
"Even if the U.S. were to give up on eliminating all tariffs, it would likely agree to leave them in place on only a tiny fraction of products," a Japanese government source said.