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How the Japan FTA could change your life – maybe

These are the best heaters when it comes to electricity costs. Photo: Shutterstock

These are the best heaters when it comes to electricity costs. Photo: Shutterstock

Australia’s free trade agreement with Japan is set to go live this week, and consumers can be sure of at least one advantage: cheaper Japanese cars.

The deal – known formally as the Japan-Australian Economic Partnership Agreement – will come into effect on Thursday, and follows the launch of a similar agreement with South Korea in December.

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Both Toyota and Mazda have pre-empted the Japan FTA by reducing the prices of their Japanese-built cars.

Toyota’s LandCruiser family, Corolla hatch and Yaris have all become cheaper, while Mazda has reduced the price of its Mazda3, Mazda6, CX-5 and CX-9 vehicles.

Toyota said its cheapest model, the Yaris, has been reduced by $800, while its more expensive models have been reduced by as much as $7,630. Mazda, meanwhile, put the price reductions at between $400 and $1000.

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Imported air conditioners may get cheaper in time for the end of summer. Photo: Shutterstock

Toyota described the price cut as a ‘happy New Year gift’ to customers.

What else will get cheaper?

Lowering tariffs on imported goods is great news for Japanese producers, as it means they will be paying less tax. But is there any guarantee that Australian consumers will see a drop in the price of other Japanese and Korean staples, such as electronics and white goods?

Mazda and Toyota aside, no Japanese or Korean company has made any statement about how they will respond to the FTA.

The New Daily contacted Mitsubishi, Sony, Samsung and Hyundai to find out whether they were planning to pass on the savings to consumers. Only Mitsubishi and Samsung responded, but neither committed to lowering prices in line with the new tax regime.

According to Dr Margaret McKenzie, lecturer in economics at Deakin University: “It isn’t clear removing tariffs confers a benefit on consumers. There’s actually very little academic evaluation of the benefit to consumers.”

Tit for tat

In essence, a free trade agreement is a matter of “I’ll lift my tariffs if you lift yours.”

Japan is lowering or getting rid of tariffs on a wide range of Australian products, including beef, seeds, dairy, sugar and unwrought nickel. It is even lifting a six per cent tariff on kangaroo leather.

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Japan is lifting a six per cent tariff on kangaroo leather Photo: Shutterstock

The lift of the beef tariff in particular is a major boon for Australian beef producers, who export $1.43 billion of beef to Japan every year.

Australian beef imports were previously whacked with a 38.5 per cent tax. Fresh and frozen beef will now be charged a little over 30 per cent, and that figure will drop to around 20 per cent over the next 15 years.

In return, Australia is lifting tariffs on Japanese imports and restrictions on Japanese investors.

Any benefit to consumers is therefore a fortunate side effect, and certainly not part of the design.

Who benefits from FTAs?

This overwhelming emphasis on the producers rather than consumers or workers has led many to criticise free trade agreements as giving too much prominence to big corporations.

Dr McKenzie says free trade agreements can often be beneficial, but the devil is in the detail.

“The move towards free trade has been as much on ideological grounds as it has on practical grounds such as increased productivity, more jobs and better deals for consumers.”

She says one reason why the previous Labor government didn’t cut a deal with the Asian powerhouse economies is because it had a “priority of preserving employment”.

“The current government,” she claims, “doesn’t have this kind of compunction.”

Why cars?

Japan exports $6.7 billion worth of motor vehicles to Australia every year, making this by far its biggest export to Australia.

As a car producer itself, Australia competes with Japan, which is why it imposed tariffs on Japanese cars – by making it expensive for Japanese car manufacturers to export cars to Australia, the government was protecting the domestic car industry.

But with the news that Australia will cease manufacturing cars by the end of 2017, there is no longer an industry to protect, giving the government free rein to drop tariffs on imported cars.

As Japan’s largest car producer, and one of the largest companies in the world, Toyota surely had input into the terms of the free trade agreement. The fact that it has come out blazing suggests that, in the very new environment, it has an aggressive plan for the Australian market.

In Toyota Australia’s own words: “We want to build our brand and sales by ensuring we provide the best possible customer experience – and this aggressive move on price is part of Toyota’s renewed commitment to the people who buy our vehicles.”

Presumably this “aggressive move” is also about increasing profits. But either way, cheaper cars are cheaper cars.

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