Agriculture in an Australia-Japan FTA

I was invit­ed to speak, last week, to the 43rd joint coun­cil meet­ing of the Aus­tralia-Japan Busi­ness Coun­cils on the vexed top­ic of the inclu­sion of agri­cul­tur­al trade in any future Aus­tralia-Japan free trade agreement

You’ll find a copy of the out­line of my talk here and an on-line ver­sion of my slides in the Gal­lagh­ery

My argu­ment is, in brief, that the evi­dence of 40 years of Japan­ese eco­nom­ic growth and devel­op­ment shows that mov­ing resources out of low-val­ue activ­i­ties like agri­cul­ture (where 60% of incomes are derived from reg­u­la­to­ry sup­ports, accord­ing to the OECD) to high­er-val­ue activ­i­ties such as ser­vices and man­u­fac­tur­ing means stronger growth and greater food secu­ri­ty for Japan.

Recent mod­el­ing of a poten­tial FTA between Aus­tralia and Japan mere­ly con­firms that Japan’s astro­nom­i­cal pro­tec­tion of farm­ing means that there is still some way to go down that track. There are still sig­nif­i­cant gains to be made by Japan.

In oth­er times, this oppor­tu­ni­ty would prob­a­bly cut lit­tle ice with Japan­ese pol­i­cy-mak­ers. But the iner­tia of Japan­ese eco­nom­ic pol­i­cy is being dis­turbed by the evi­dence of a com­ing demo­graph­ic squeeze (a large, rapid­ly-aging pop­u­la­tion), by the increased fis­cal pres­sure on a gov­ern­ment with domes­ti­cal­ly-held debts approach­ing 170% of GDP, a poten­tial­ly bit­ter chal­lenge from Chi­na for eco­nom­ic and strate­gic supe­ri­or­i­ty, and the boost to con­fi­dence that the recent escape from reces­sion brings. 

One prod­uct of this (for Japan) rest­less­ness has been PM Koizumi’s vic­to­ry in his plans to ratio­nal­ize a major finan­cial insti­tu­tion: the Japan postal sav­ings bank. There is spec­u­la­tion that oth­er eco­nom­ic ratio­nal­iza­tion may fol­low: Koizumi—whom the Econ­o­mist calls a ‘mas­ter of gesture’—isn’t say­ing. But there is inevitably a sus­pi­cion that oth­er sacred cows, per­haps includ­ing the insti­tu­tions of pro­tect­ed agri­cul­ture, are fac­ing the same treat­ment.

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