JAPAN-AUSTRALIA FTA? DON'T HOLD YOUR BREATH

C O N F I D E N T I A L TOKYO 002984 SIPDIS STATE FOR EAP/J STATE PASS USTR FOR AUSTR CUTLER AND DAUSTR BEEMAN E.O. 12958: DECL: 10/22/2018 TAGS: EAGR ECON ETRD JA USTR SUBJECT: JAPAN-AUSTRALIA FTA? DON'T HOLD YOUR BREATH Classified By: Ambassador J. Thomas Schieffer; reasons 1.4 (b) and (d) ¶1. (C) Successful conclusion of an Australia-Japan free trade agreement remains uncertain, Allan McKinnon, DCM at the Australian embassy, told EMIN October 16. With a seventh round of negotiations slated to commence October 27 in Canberra, he described the process to date as "onerous." The GOJ has resisted GOA efforts to remove all tariff and non-tariff barriers, and both sides, McKinnon said, have devoted considerable time to sector-by-sector cost-benefit analyses. ¶2. (SBU) Agriculture -- Japan is Australia's biggest export market for food -- remains a primary stumbling block. McKinnon noted Australia and Japan did not broach agriculture until the fourth round of negotiations, which even then glossed over key issues such as wheat and beef. He said Australia is no longer interested in exporting rice to Japan, and that given the severe Australian drought and the GOA's reconsideration of water use, he saw no likelihood of Australia being realistically able to export rice to Japan in the future (Australia has reduced its total rice production to about one percent of levels achieved six to seven years ago, according to McKinnon.) On dairy, McKinnon stated Japan is unable to meet growing demand for butter and other dairy products. The GOJ, however, continues to insist such products be excluded from the FTA. ¶3. (C) McKinnon expressed low expectations for a breakthrough on agriculture when negotiating teams meet at the end of October. He said turnover of MOFA staff has impeded negotiations. Despite MOFA's complaints that the Australians are too focused on agriculture, GOA negotiators continue to insist an FTA with Japan, or any other country, must include a substantive chapter on agriculture. McKinnon stated Japan's Agriculture Ministry (MAFF) "lacks any real thinking" on these issues and is holding back progress. MOFA officials have told him privately they feel frustrated by MAFF's lack of movement on agriculture. ¶4. (C) McKinnon sees no GOJ interest now in achieving an Australia-Japan FTA, which traces its origins to a trade liberalization feasibility study launched during the Howard-Koizumi era. He indicated Foreign Minister Smith had instructed GOA negotiators to "keep trying a while longer" to conclude an agreement even though the outcome remains unclear. In a separate conversation, MOFA North Americas Second Director Noriyuki Shikata confirmed McKinnon's assessment, saying negotiation of the Japan-Australia FTA is now "all about politics" and unlikely to succeed. SCHIEFFER