Japan would remain Australia’s major trading partner for another decade despite the rapid growth achieved by China, Australia’s ambassador to Japan has predicted.
Japan would remain Australia’s major trading partner for another decade despite the rapid growth achieved by China, Australia’s ambassador to Japan has predicted.
Murray McLean said Japan had been Australia’s top export destination for 40 years, and he expected the ties between the two countries would be strengthened by negotiation of a free trade agreement next year.
Speaking at a WA Business News Meet the Ambassadors breakfast last week, Mr McLean observed that the focus on China’s rapid growth had overshadowed the continuing importance of Japan, which had underpinned the development of WA’s iron ore and LNG export industries.
Australian exports of goods to Japan were worth $28 billion in 2005, 80 per cent higher than exports to China and two-and-a-half times higher than exports to the US.
“The fundamental importance of Japan right now is very visible to our trade interests,” Mr McLean told the breakfast gathering.
“Talk that it will be taken over perhaps next year or whenever by the massive growth in China is just nonsense.
“China will grow probably one day to a point where it overtakes Japan as our number one export market but … it may be as much as a decade on.”
He said there had been a marked improvement in Japan’s economic performance in the past few years after a long period of weak growth.
He said there was “palpable confidence” in Japan for the first time in more than a decade, due in part to the policies of recently re-elected prime minister, Junichiro Koizumi.
“What he has guaranteed for Japan is that reform is on the agenda for the long term,” Mr McLean said.
Another factor is Japan’s economic revival was the rapid growth in China, which had created a degree of economic and strategic competition between the two countries.
“This is often cast in negative terms but it’s also positive because it drives a lot of Japanese business people and the government to seek ways of ensuring Japan stays the course,” Mr McLean said.
The ambassador was upbeat about the prospects of concluding an FTA, after the two countries agreed in April 2005 to study this concept.
He said this would be a “major strategic head-turning initiative” that would highlight the importance of Japan and take the relationship to a new level.
Officials in the two countries agreed in March to accelerate their studies and aimed to complete their work by the end of the year, which would allow for the negotiation of an FTA in 2007.
Studies in Japan had concluded that an FTA with Australia would provide a 0.13 per cent, or $27 billion, boost to its GDP.
Mr McLean said the perceived difficulties with an FTA, particularly in Japan, were “more psychological than real”.
A particular concern was that Australian farmers would swamp the Japanese market, but he argued that Australia had limited capacity to increase exports of products such as rice and beef to Japan.
“We are not the massive threat they think we are.”
He added that an FTA was about much more than the export of goods; it would also boost trade in services, free up the movement of people and boost intellectual property protection.
