Question 20N.2.HL.TZ0.2a.ii

The Comprehensive and Progressive Agreement for Trans-Pacific
Partnership (CPTPP), Australia and Japan

1. In 2018, Australia signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)*. The agreement creates the third largest free trade area in the world, covers nearly 500 million people and is worth more than US$12 trillion. The members of the agreement have stated that economic integration and free trade is important to help foster good political relations and inclusive growth for all nations.
   
   
2. The trade agreement will aim to gradually eliminate most trade protection within the member countries. The agreement will see tariffs eliminated for Australian cheese and beef exports to Japan, and increased quotas for the export of rice to Japan from 4400 to 8400 tonnes. Nikkei Asian Review reported that “Fast-food restaurants in particular are embracing the import as a way to cut costs to cope with rising wages.” Additionally, Japanese food manufacturers will be able to lower production costs for rice-based meals and benefit from increased stability of input prices. The benefits from the agreement for Japan’s economy are projected to exceed US$70 billion, but some industries would be negatively affected.
   
   
3. Japanese farmers are worried about the increase in imported food from Australia. Furthermore, the Japanese government is concerned about the effects of the CPTPP on Japan’s food self-sufficiency—Japan relies on other countries for over 60 % of its food. In response to these concerns the Japanese government has offered support for domestic farmers to diversify production into other crops. The government also plans to subsidize the rice farmers through the initial phase of lowering trade barriers.
   
   
4. The agreement is said to be worth more than US$37 billion to Australian agricultural exports. It is hoped that CPTPP and the falling value of the Australian dollar will help Australia to reduce its current account deficit, but some economists have argued that this can take a long time. According to some estimations, the short-run price elasticity of demand (PED) for Australian exports is 0.2 and the short-run PED for imports in Australia is 0.4. However, the long-run PED for Australian exports is 1.1 and the long-run PED for imports in Australia is 1.3.
   
   
5. There have also been concerns about the CPTPP from trade unions in Australia. They argue that it deregulates the labour markets and gives corporations from other countries an ability to take legal action against governments for implementing laws that raise wages or protect the environment, if the foreign corporation can prove that the law hurt their commercial interests. One university lecturer said that the future costs to the taxpayer could be significant if foreign companies take the Australian government to court.
   
   
6. The trade agreement would allow workers from other countries to work in Australia without employers being required to check if Australian citizens are available to fill the jobs before the migrant workers are employed. It is estimated this may risk 39 000 jobs in Australia. Furthermore, environmental activists have expressed concerns that the negative environmental and social effects of the agreement have not been well considered. This may lead to conflicts with Australia’s commitment to the United Nations’ Sustainable Development Goals.

Adapted from Karp, P., 2017. Revived Trans-Pacific trade deal undercuts Australian jobs market, unions say. The
Guardian, Copyright Guardian News & Media Ltd 2021, https://www.theguardian.com/australia-news/2017/dec/19/
revived-trans-pacific-trade-deal-undercuts-australian-jobs-market-unions-say; Kodachi, H., 2019. Australian rice
finds favor in Japan as cheaper option, Nikkei Asian Review, https://asia.nikkei.com/Business/Markets/Commodities/
Australian-rice-finds-favor-in-Japan-as-cheaper-option.

* The CPTPP includes eleven member countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.