Regional insights

A recent report from the Australia Bureau of Statistics on International trade in goods listed over A$2 billion of exports to Japan from Victoria for the financial year 2017-18.

This not only represents a 35 per cent increase on the previous year but is also the largest value of Victorian exports to Japan in over ten years.

Exports that have traditionally done well for Victoria showed strong growth including dairy, meat, liquefied propane and aluminium but it was also encouraging to see in the last financial year that value add goods such edible products and preparations, transmission parts and shafts, medicaments, and rotating electric plant and parts recorded good increases.

Fruit and nuts performed well for the same period growing 29 per cent to $54m.

Since agreement was reached on protocols for exporting table grapes in 2014, the Victorian Government has been supporting industry promotions of Australian table grapes in Japan. Exports grew from 16 containers in 2014 to 679 in 2018. The Victorian Government also continues to support the promotion of citrus through the Taste of Australia program.

While the growth trend in exports to Japan is good news for Victoria, the EU-Japan Economic Partnership Agreement, which is likely to come into force during 2019, will increase competition as tariffs come down on EU cheese, wine and meat. It is also not out of the question that pressure from the US will ultimately lead to some bilateral concessions on trade from the Japanese.

In view of this, the time is not right to take the pedal off promoting Victorian exports to Japan. The Victorian Government is continuing to support exporters through participation in industry programs delivered by Meat and Livestock Australia, Dairy Australia and Horticulture Innovation Australia. The Victorian Government will again lead a trade mission to Japan’s largest trade show, Foodex, in March 2019.

In other sectors, the Victorian Government will continue to work closely with Austrade in areas such as the life sciences and international education.

Competition in Japan is fierce and the Japanese are very exacting in their requirements but for export ready companies who have a unique offering and are prepared to do the hard yards, the time is right and Japan can be a rewarding market.

For a region that is often overlooked in the media, the Korean peninsula is suddenly very much in the spotlight. Few people will not have seen the footage of President Moon Jae-In crossing the demarcation line into North Korea at the invitation of President Kim Jong-Un in April. And fewer will have missed the meeting between President Trump and President Kim in Singapore in June.

Flying under the radar however were the local elections in June across South Korea which gave President Moon’s Minjoo party a landslide victory over the conservative opposition. Whether everyone’s wish for a unified and denuclearised Korea is realistic or not, after a long period of political instability under the previous President, Moon’s policy of appeasement with the North, and a shoring up of his support base, augurs well for a period of consolidation and continued economic growth in the South.

For Victoria, South Korea is a particularly important market for our agribusiness, education and tourism exports. Less well known is the fact that Korea is also a growing market for our beauty and personal care products.

In 2017 South Korea’s beauty and personal care industry was estimated to be valued at approximately USD12.6 billion. (Source: Beauty and Personal Care in South Korea, Euromonitor International, May 2018). Koreans are not only huge consumers of personal care and beauty products, they are interested in products perceived to be natural, including organics, and those originating from countries with a clean and green reputation, such as Australia.

South Korea has a rapidly growing e-commerce market with online purchases from foreign retail sites reaching USD1.6 billion in 2016. (Source: E-Commerce in Korea, Austrade, August 2017). This comes as no surprise given South Korea has some of the world’s fastest internet connection speeds and very high levels of mobile adoption, internet and social media usage. E-commerce is creating opportunities for Victorian companies that manufacture beauty products and in 2017, perfumery and cosmetics represented Victoria’s ninth largest merchandise exports to South Korea. (Source: Australian Bureau of Statistics)

South Korea is also well known for its leadership in Information and Communications Technology (ICT) products, particularly semiconductors, displays, mobile devices and computers.  As the country moves forward, South Korea is also looking to build capabilities in the Internet of Things (IoT), artificial and augmented reality (AR/VR), big data management, 3D printing and cloud computing, creating opportunities for Victorian companies with innovative products and ideas.

Other technology related focus areas for South Korea, with potential opportunities for trade or collaborations with Victoria, include digital health, cyber security and fintech.

On 8 March the Comprehensive Progressive Agreement for Trans Pacific Partnership (TPP-11) was signed in Santiago by the governments of Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The TPP-11 will enter into force once the signatories have notified completion of their domestic legal procedures.

The election result gives Prime Minister Abe a fresh mandate to continue the government’s bold monetary, fiscal and structural changes which have helped break the deflationary cycle in Japan and created six

The TPP-11 is good news for Victorian exporters to Japan, building on some of the existing terms under the Japan Australia Economic Partnership Agreement (JAEPA). While the US is yet to sign on and has no bilateral trade agreement with Japan, this agreement continues to give Australia a competitive advantage over one of Japan’s other key trading partners.

Food exporters, in particular, are expected to benefit under TPP-11. Accelerated reduction of tariffs on beef, a reduction in tariffs on pork cuts, increased quotas for wheat and barley, elimination of tariffs on certain cheese products and tariff reductions and new quota allocations for others, an extended period for lower "out of season" tariffs on oranges, and elimination of tariffs on fruit juices within 10 years, are just some of the benefits to Victorian exporters.

Victorian government continues to support food exporters to Japan through a number of initiatives including the recent Trade Mission to Foodex (Japan’s largest trade fair for the food and beverage industry), support for Meat and Livestock Australia’s programs promoting grass fed beef and lamb, and promotion of horticultural products through the ‘Taste of Australia’ program.

Information on tariffs and useful information on market size can be found at DFAT’s FTA portal.

On 22 October, the Japanese went to the polls and delivered a resounding victory for Prime Minister Abe and his ruling LDP/Komeito coalition. Following the election, Prime Minister Abe was quick to reaffirm it was business as usual which is good news for Victoria for a number reasons.

The election result gives Prime Minister Abe a fresh mandate to continue the government’s bold monetary, fiscal and structural changes which have helped break the deflationary cycle in Japan and created six quarters of growth. Prime Minister Abe is also expected to continue promoting his strong international agenda which includes supporting trade liberalisation, promoting global skills development, increasing defence cooperation, building tourism, hosting major sporting events, and creating opportunities for increased collaboration on research and development.

Victorian exporters should benefit from the current government’s international policy agenda through:

• Reduced trade barriers under the Japan Australia Economic Partnership Agreement (JAEPA). Japan, along with the other remaining signatories to the Trans Pacific Partnership is also a key supporter of the revised agreement, TPP11, which would further reduce trade barriers for our exporters to both Japan and the other nine signatory countries should it proceed;
• Increased student numbers through Japan’s study abroad programs and increased opportunities for institution to institution partnerships as Japan prioritises global literacy as a key to economic growth;
• Continued demand for quality food and beverage to meet the needs of Japan’s growing tourism sector, particularly in the lead up to the Olympic Games in 2020;
• Growing opportunities for research and development collaboration with Japan;
• Deregulation which is driving increased interest in investment in offshore funds.