Australia’s economy represents a well-developed market system, which is one of the strongest economies in the world. Nowadays Australia is a highly developed industrial-agrarian country with a diversified economy as well as large scientific and technical potential. The country occupies the 12th place among the members of the Organization for Economic Cooperation and Development based on its main statistical indicators including the standard of living. As a result of the government’s structural economic reforms, the economic system of the country is extremely flexible and integrated into the global economic system. Its trade and economic relations with other countries have a huge influence on the development of the Australian economy. Australia’s geographical isolation and its distance from major world markets made the government pay great attention to foreign trade and international economic cooperation throughout the whole history of its development. Nowadays Australia has close economic and trade relations with Japan. Relations between Australia and Japan are the example of a stable and long-term partnership which has lasted for over 50 years. The aim of this research paper is to analyze the development of trade relations between these two countries and their common influence on the Asia-Pacific region.
Trade Relations between Australia and Japan
Japan and Australia have a long history of economic relations. “Since 1966, Japan has been Australia’s largest export destination and, from 1970, Japan has been Australia’s largest trading partner” (Rumley 2001, p. 217). Over the past 40 years, the two countries have maintained stable economic relations. Japan remains the largest trading partner and the largest export market of Australia. Japan is a major consumer of Australian coal and liquefied natural gas as well as meat and dairy products. Australian deliveries cover a significant part of Japanese demand for these resources (Beaumont & Jordan 2013).
Since 1980, the basic strategy of Japanese corporations has been active internationalization and promotion of foreign markets, especially the Asian one (Kojima 2010). In search of the least expensive mode of production and the improvement of efficiency, Japanese corporations have begun to develop strategies for the international cooperation and transfer of the most expensive production abroad. Japanese business has become an organizer of large-scale production networks. These days, they are the heart of the economic integration of East Asian economies (Kojima 2010). Compared with 11.4% of industrial products produced abroad in 1990, in 2007, almost 35% of industrial production, including 45% of electronics, was made outside of Japan (Kojima 2010). Many Sony products are now imported into Australia not from Japan, but from China and other East Asian countries (Kojima 2010). Traditionally, Japan has been a major export market for Australian wool. Nowadays, China has become the largest market where transactions are committed by the same Japanese investors. In addition to Japanese firms, Chinese enterprises actively buy wool. They purchase it not only for the needs of the foreign markets, but also for selling clothes in Japan.
Until recently, Australia has been building economic relations with Japan as with a closed market without taking into account the transnational nature of the Japanese economy (Kojima 2010). These days, the commercial interests of Australia and Japan extend far beyond the export and import of specific products. In recent years, Australian experts have been increasingly talking about the need to consider Japan not as an end of economic cooperation, but as a convenient bridge for the Asian economic progress.
The annual revenue of the branches of Japanese corporations in Asia amounts to $1 trillion (Kojima 2010). The cooperation with these branches provides a great opportunity for the development of the Australian business. In 2008, total Australian exports to Asia implemented exclusively through the mediation of Japanese companies amounted to about $6 billion, not including $45 billion of Australian goods exported exclusively to Japan and about $18 billion of goods imported from Japan to Australia (Kojima 2010).
Sociological surveys show that despite the problem of the illegal Japanese whaling industry and the memory about the events of World War II, Australians have a positive attitude to the Japanese (Jain & Lam 2013). Australians trust Japan more than China, South Korea, and the countries of Southeast Asia, which have appeared on the Australian market during recent years. At the same time, the data presented by the Japanese sociological surveys shows that Australia, among other international partners of Japan, is the only country whose trustworthiness has risen consistently throughout the past decade (Jain & Lam 2013). This country is a valuable trading partner. Australia demonstrates financial stability, a transparent legal framework, and free access to a highly qualified multilingual working environment. According to the International Monetary Fund, this country survived the global economic crisis better than others (Jain & Lam 2013). Accordingly, there is considerable potential for the expansion of both bilateral and regional cooperation between Japan and Australia.
Japanese and Australian business communities have been holding an annual conference since 1964 (Tow & Kersten 2013). In 2009, at a regular meeting in the framework of the Japan-Australia Business Cooperation Committee, the issues of energy security were discussed. During this meeting, the stereotypical perceptions of Australia as just a resource base were abandoned. Its competitive advantages in ensuring energy security and maintaining stability in investment flows in the post-crisis environment were highlighted (Tow & Kersten 2013).
Nowadays, Japan is an essential member of trade and investment flows in Eastern, Southeastern and South Asia (Jain & Lam 2013). In 2008, the total volume of Japanese foreign direct investment amounted to about $700 billion, one-third of which was sent to Asia (Jain & Lam 2013). The share of Australia in this volume is quite small. Nevertheless, the country shows a steady growth trend. Japan is the third largest foreign investor in Australia. Its total volume of direct and portfolio investments amounted to $80 billion (Jain & Lam 2013). In 2008, Japanese direct investment increased by 16% from $28 billion to $33 billion (Jain & Lam 2013). However, in relative terms, the share of Australia is not more than 3% (Jain & Lam 2013).
Japanese companies have been the main investors in Australia since 1960, when they have begun to sign long-term contracts for the mining of coal and iron ore, and the reduction of natural gas, aluminum, and other natural resources (Rix 2013). These companies operate in many areas. They provide over 60% of Australian exports to Japan and 20% of Japanese exports to Australia (Rix 2013). In the early 2000s, the direction of Japanese investment significantly differentiated the development of new markets (Rix 2013). For example, nowadays, Sumitomo Corporation is an important part of the Australian real estate market (Rix 2013).
Japanese investors are particularly active in Australian food and grocery market. Several years ago, two major deals in this area were implemented. The Japanese alimentary company Asahi Breweries acquired a majority share of the largest Australian producer of soft drinks Cadbury Plc. Kirin Company and completed the acquisition of the Australian food group National Foods (Rix 2013).
Japanese retailers and large commercial and retail chains conduct vigorous activities in Australia. Moreover, they focus on the environment and safety (Mulgan & Honma 2015). Environmental labeling has become extremely popular in Japan. The topic of organic products has become particularly acute in Japan after a series of scandals involving Chinese dairy products. Japanese consumers are increasingly associating the concept of eco-friendliness with Australian goods. Accordingly, Japanese investors are interested in promoting their brands produced on the basis of environmentally friendly production (Mulgan & Honma 2015).
The topic of ecology is important in another area of the Australian-Japanese economic cooperation – motor car construction. Australia is the third largest market for new Japanese cars. “In Australia from the early 1980s onwards, the government, unions, and business sought to bring in the Japanese system into play across the industrial landscape on the face of a declining manufacturing sector that was severely uncompetitive internationally” (Bayari 2011, p. 70). The local branch of Toyota is one of the three most successful automobile manufacturers and the largest exporter of passenger vehicles in Australia. “Toyota Motor Corporation Australia opened its Melbourne factory in 1963” (Bayari 2011, p. 8). The Australian government has become a co-investor into the construction of a new assembly department of Toyota in the Melbourne suburb allocating $32 million from a special state fund for the stimulation of environmentally friendly engineering in Australia (Bayari 2011). This subsidy has convinced the Japanese side to abandon the original idea of building a department in Thailand, which has failed to recover from the devastating effects of the financial crisis. The Australian department has started to work on the assembly of cars with environmentally friendly hybrid engines. Australia strives to meet the needs of Japan. In such a way, it is earning a strong position in the Japanese automotive transnational production network (Bayari 2011).
Today nine largest Japanese trading houses are represented in the Australian market (Rix 2013). The largest two of them – Mitsubishi and Mitsui – are Australia’s leading exporters. Mitsui occupies a place in the top 20 Australian companies in terms of sales. Mitsui’s main business in Australia is the export of minerals and raw materials, including coal, natural gas, iron ore, copper, aluminum, oil, meat, and wood, to Japan. In the 1960s, Mitsui started investing into the coal industry, in the 1970s – in iron ore, in the 1980s – in natural gas (Rix 2013). Since 1990, Mitsui has been actively investing in biotechnology and plantations (Rix 2013). Right now the strategy of the company is to expand its investments in coal, iron ore, and gas.
Australia has also been increasingly investing into the Japanese economy. However, the indicators of investment activity of Australia into Japan are much lower than expected. Only 4% of all East Asian direct investments of Australia are directed to Japan (Rix 2013). This number looks insignificant against the figure of more than 50% of trade turnover with other countries in the region (Rix 2013). The main objective of Australia is active entry of the Asian market. One of the necessary tools for this goal is the use of the existing Japanese investment units. In June, 2009, the trade ministers of Australia and Japan announced the creation of a new annual dialog mechanism at the ministerial level, which confirmed maturity and stability of the bilateral trade and economic relations between the countries (Rix 2013).
Australia is one of the most highly developed countries on the globe. It holds a strong position in the global market. This country is characterized by the rapid growth of living standards. The historical process of the formation of the country’s current parameters – a relatively small population, vast territory, rich natural resources, a high proportion of raw materials in exports, and a strong flow of foreign investments into the economy – has made Australia a highly developed industrial country. Japan and Australia are two influential states in the Asia-Pacific region. There are any common interests and broad prospects for the two countries. What concerns Japanese and Australian trade and economic cooperation, it should be noted that there is a great economic complementarity between the two countries and huge potential for cooperation. There are unprecedented opportunities for the development of this relationship in the future.
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