Australia-Japan Free Trade Agreement Will Add More Heat To The Market

After years of negotiation, a Free Trade Agreement has at last been reached between Australia and Japan, meaning an even more competitive new car market.

April 7, 2014 is a historic day in Australian-Japanese relations, as it marks the day that the Japan-Australia Economic Partnership Agreement (JAPEA) was officially reached.
Years in the making, the Free Trade Agreement (FTA) will be validated by both countries and should deliver significant benefits to Australian farmers, resource exporters, service providers and consumers.

This latest Agreement joins a growing list of deals Oz has already set in place with other global economies, including New Zealand, Singapore, Thailand, USA, Chile, the Association of South-East Asian Nations (ASEAN) and Malaysia.

With the removal and reduction of tariff barriers, Australian consumers are expected to save substantially on items like cars, electronics and other household goods.
The savings on new cars from Japan, which make up one-third of all Australian new car purchases, could equal as much as $1500 per vehicle, although manufacturers are warning that they may choose to ‘value-add’ instead of slashing prices.

‘How [savings] are passed on will depend very much on what the market is doing and what our competitors are doing at the time’ said Mazda Australia Senior Public Relations Manager Steve Maciver.

Like other manufacturers, he suggests that ‘a specification adjustment, rather than a change in price’ may be how consumers receive added value as a result of this recent agreement.
Elimination of the 5 per cent tariff on Japanese motor vehicles will be immediate (after the agreement is concluded) for 75 per cent of vehicles and over three years for the remainder. The 5 per cent tariff on automotive components will be eliminated over five years.

AADA CEO Patrick Tessier, made comment on the recent FTA agreement in April in the Financial Review, citing the Government’s relaxing of tariff laws will mean greater opportunities for consumers. However, he also warned that any advantages gained would quickly disappear if large-scale used car import laws are lifted, an issue which AADA continues to rally against (read more on page 32 of Automotive Dealer Magazine May/June 2014 Issue).

Overall though, the Australia-Japan FTA agreement is a positive step forward not only for new car consumers, but the entire country.

In fact, industry economists have suggested that Australia’s long-term exports to Japan could increase by as much as 54 per cent, representing billions of dollars to the Australian economy and job security in many vital industries.

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