It is a friendship based on a well-established history of trade, mutual respect, common strategic goals, and shared interests. The establishment of a major trading relationship, the Commerce Agreement, in 1957 set the course for a robust trade partnership, while the 1976 Basic Treaty of Friendship and Cooperation (also known as the Nara Treaty) served to deepen cultural confluence between both countries.
In more recent decades, the signing of the Japan-Australia Economic Partnership Agreement (JAEPA) in 2014 represented a major milestone in Japan and Australia’s economic relationship, preparing the way for even stronger bilateral trade and collaboration between the two nations. Historically, Japan and Australia have had thriving trade ties in the energy and natural resources sectors; this bond is fuelled not only by the synergistic trading, in itself, but also by shared sentiments in key areas like sustainability and the shift to greener energy.
To date, Japan and Australia have forged a firm and flourishing friendship, with Australia regarding Japan as its closest partner in Asia. Over the last decade, JAEPA has fostered economic growth and stability. The agreement has played a pivotal role in the diversification of both countries’ economies by expanding trade relations and market access for businesses and investments across an array of sectors, like the financial sector, energy transition, critical minerals, as well as innovation and technology, to name a few.
As JAEPA celebrates its tenth anniversary, cooperation remains strong, with a continued dynamic influence on the two countries’ economic connections. In this interview with Bridges, the Ambassador of Japan to Australia, HE Kazuhiro Suzuki, and the Ambassador of Australia to Japan, HE Justin Hayhurst, weigh in on vital aspects of current trade relations and its various impacts, thus far.
Bridges: Your Excellencies, could you provide an overview of the current state of trade relations between Japan and Australia? How have economic ties evolved in recent years, and what significant developments or challenges have emerged?
Ambassador Justin Hayhurst: Overall, I would characterize it as positive, growing, and broadening. So, Australia has had a decade’s long energy partnership with Japan. That remains very strong. And, in many ways, with the higher prices, it’s of even greater value to Australia now than in the past. It’s also more important in the area of Japan’s energy security. Historically, there has also been great strength in agribusiness. But I think another trend is the way the partnership is broadening into new areas. For instance, there are large and growing Japanese investments in the infrastructure sector, in the real estate sector, and in energy transition projects in Australia.
Japan is Australia’s second largest trading partner; our exports to Japan are at record levels. And while that’s concentrated at the moment in traditional energy commodities, there’s obviously going to be a change as the partnership continues to evolve. But there’s a lot of momentum and a lot of business interest, as seen at the 60th anniversary of the Japan Australia Business Cooperation Committee in Melbourne, in October 2023. More than 300 Japanese delegates attended, examining opportunities from
LNG and critical minerals to hydrogen, innovation, and the services sector.
Ambassador Kazuhiro Suzuki: The Japan-Australia relationship has never been better. Last year’s Lowy Institute poll, which is a poll of public Australian attitudes to foreign relations, in response to the question ‘how much do you trust (these countries) to act responsibly in the world?’, Japan earned top place (85%), followed by the UK(84%), France(79%), and the US(61%).
In many ways, this is not surprising, given that Japan and Australia enjoy a longstanding economic partnership, which is often called a ‘complementary relationship’. When we backtrack through history, the first documented trade between Japan and Australia was in coal in 1865. From the 1970s through to around the early 2010s, Japan was Australia’s top trading partner. At present Japan is Australia’s second-largest trading partner, while Australia is the third-largest trading partner for Japan. However you look at it, that’s a remarkable degree of closeness over a long period of time. Even now, about 60% of Japan’s iron ore imports, and around 40% of its natural gas imports come from Australia. With regards to food, about 40% of Japan’s beef imports and 90% of its sugar imports are from Australia. Similarly, about 40% of Australia’s imported passenger cars are of Japanese origin. It’s pretty obvious – just driving around on the streets of any major city in Australia I see Japanese car brands everywhere. Furthermore, nowadays we can see more Japanese industrial products and investments in Australia, enriching society as a whole. For example, on the financial front, Japanese banks run second only to Australia’s four megabanks in terms of corporate loans. As for project finance, where a great portion of funds are injected into large-scale infrastructure programs, three out of the top seven banks in Australia are Japanese.
Bridges: The Japan-Australia Economic Partnership Agreement has been a key milestone in the economic collaboration between the two nations. How do you assess the impact of this agreement on strengthening the bilateral relationship and promoting trade between Japan and Australia? Are there specific sectors or industries that have experienced notable growth as a result of this partnership?
Ambassador Justin Hayhurst: In terms of bilateral trade, it’s obviously grown. And that’s been to the benefit of both countries. New and more dynamic commercial relationships have developed under the agreement. It’s an agreement that’s got very high utilization rates. When you negotiate a trade agreement, sometimes the requirements are complex and businesses don’t necessarily avail themselves of the provisions of the agreement. In this case, utilization is very, very high; I think it’s over 90 percent. Businesses, large and small, are using the agreement to grow their connections with the other partner. So from that point of view, it’s been a great success. In terms of growth in trade, it’s been a great success. So that’s one part of the story.
The other side of the story is the commitment of both countries to rules-based trade, where you negotiate a trade treaty and agreement. You stick to the rules and you seek to broaden the promotion of trade liberalization and economic integration. This has been part of the partnership on trade between Australia and Japan, where we’ve also worked on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). To stand up for the principles and to abide by trade rules, this creates the predictability, certainty, and transparency businesses required to invest in trade and prosper together. When it was agreed upon, the JAEPA was Japan’s most ambitious trade agreement. And it’s been a platform for a more ambitious trade policy from Japan, and more ambitious partnership with us ever since. Let’s also include the CPTPP in this.
Over the 10 years, the JAEPA has achieved both these aspects: increasing trade and strengthening mutual principles. I think that’s the big lesson here: it’s that trade agreements are not just about bringing two economies closer together, they can also elevate the principles that both countries stand for, economically. The JAEPA is a great success story on those two levels.
Ambassador Kazuhiro Suzuki: The trade relationship between Japan and Australia received a major boost with the entry into force of agreements such as the JAEPA; the CPTPP, championed by both Japan and Australia; and the Regional Comprehensive Economic Partnership (RCEP). It’s worth noting that the JAEPA includes provisions for the stable supply of food, energy, and mineral resources. This reflects the strong degree of trust that Japan has in Australia, and forms the foundation for the stable economic development of both countries.
Trade volume between Japan and Australia is not due to the EPA alone, but it is certainly a major contributing factor. For example, since the implementation of the JAEPA in January 2015, which saw the immediate abolition of the 5% automobile tariff, the export value of passenger cars from Japan to Australia increased by approximately 60%, from AU$61.2 million (FY 2013/2014) to AU$97.5 million (FY 2020/2021).
Bridges: Looking ahead, what are the key areas of cooperation that both Japan and Australia are prioritizing to further enhance economic ties? Are there specific industries, initiatives, or collaborative projects on the horizon that you believe will play a crucial role in deepening the economic partnership between the two countries?
Ambassador Justin Hayhurst: I would highlight three areas of potential, in our continued cooperation: energy transition, critical minerals, and in the areas of strategic trust. Australia’s decades-long energy partnership with Japan remains very strong. We’ve very similar decarbonization and emissions reduction targets, and the challenge is how to support each other’s efforts, as partners. Energy transition and critical minerals are two of the vital areas. So, that will mean building a hydrogen supply chain between Australia and Japan, and that’s one opportunity. But there are also other ways, like through the export of green ammonia or critical minerals to support, for example, battery supply chains in Japan; that is to say, to build these clean energy supply chains in partnership between the two countries.
As for areas of strategic trust, defense industry, data, and telecommunications technology are just some key aspects in which two countries with advanced scientific capabilities and a close political partnership can work together. We can also work together in the space sector.
Ambassador Kazuhiro Suzuki: As a result of the continuation of Russia’s war of aggression against Ukraine and the volatility in the Middle East, Japan still faces very high pressure on its global supply chains and also faces an energy security risk. Therefore, traditional resource sectors are still essential to our relationship with Australia. In this context, I was reassured by Prime Minister Albanese’s commitment to Prime Minister Kishida last September that Australia remains a reliable source of resources and energy for Japan and the region, both now and into the future.
At the same time, as clean energy transition becomes a more urgent issue and IT deeply permeates people’s lives, we must do more in these sectors. Actually, both countries are now moving towards the promotion of cooperation in new frontiers like hydrogen, ammonia, critical minerals, infrastructure, space, and science and technology—all of which will be crucial for the future. This trend is already gathering speed. In early October 2023, the 60th Australia-Japan Joint Business Conference held in Melbourne brought together nearly 730 representatives from both countries’ business sectors. I truly felt that it was an epoch-making conference, reinforcing the point of collaboration between the public and private sectors across a wide range of areas such LNG, critical minerals development, carbon capture and storage technology, green energy transition, carbon neutrality, innovation technology, diversity, productivity improvement, and future workforce development.
As Japan’s Ambassador to Australia, I am dedicated to promoting further business, tech and science collaboration, and cooperation between Japan and Australia wherever I can, hand-in-hand with both countries’ business sectors. The benefits of such cooperation will ultimately bring the economic relationship between the two countries to a new dimension, and that can only be a plus for both of us.