Chapter 2 - Australia and Japan—Natural Partners
2.1
Japan stands prominently
on the world economic stage in the Asia Pacific region. It is the world’s
second largest economy after the US, the world’s largest individual national commodity importer, the
world’s leading creditor nation and it has one of the highest per capita
incomes and the highest savings rate in the world. Aside from its global
significance, Japan is of
primary importance to Australia.[1]
Japan and Australia
2.2
Australia’s commercial
links with Japan span many
generations. Over the years, and even as Japan emerged as a new and dominant global economic force, this
relationship has matured and deepened into a mutually beneficial partnership.
2.3
In 1947, Australia referred to Japan
as a natural market.[2]
This theme has evolved over the years into a notion of partnership that is now
central to the understanding of the Australia-Japan relationship. Past and
present leaders of both countries have found no difficulty in applying the term
partnership to the Australia-Japan relationship. They have spoken openly of a
close friendship, of enjoying a rich and diverse relationship and of the spirit
of trust that underpins this relationship.[3]
Readily they have acknowledged their common concerns, shared policy objectives,
mutual interests and the complementarity in trade.[4] Both countries have made a firm
commitment to freedom and democracy, and expressed their desire to work
together to achieve joint objectives especially promoting the economic
prosperity of their region. The partnership has been described as ‘close’,
‘constructive’ even ‘indispensable’.[5]
2.4
In May 1995, the Prime Ministers of Australia
and Japan reflected on this ‘relationship of unprecedented quality’ and in a
joint declaration reaffirmed the importance they place on the close
relationship of goodwill and cooperation that Australia and Japan have forged
over the post-war years. They pledged to build on that foundation ‘an enduring
and steadfast partnership’.
2.5
In August 1997, Australia and Japan
formalised a new Partnership Agenda which ‘recognised the breadth of the links
and exchanges at all walks of life between Australia and Japan’. The
Agenda sought to promote deeper mutual understanding and cooperation across a
diverse range of shared interests. It acknowledged the strong commercial ties
between the two countries and gave a commitment to build on the complementarity
and growing diversification of their trade.[6]
2.6
Despite such warm and encouraging words and the
strong complementarity in trade that binds Australia and Japan, it is
essential for the two countries to guard against complacency. Many witnesses
believe that if the relationship is to continue to benefit both countries and
indeed the region, it will need to be nurtured and tended.
2.7
Mr Leon Wolff, a law lecturer and research fellow at the Australia-Japan Research
Centre, ANU, regarded this inquiry as timely not because Australians have
neglected Japan but rather
Australians have enjoyed such a comfortable relationship with Japan. The Committee notes that there are
tensions, however, in the relationship that should not be ignored,
disagreements that need to be managed and adjustments to be made as changes
occur within both countries and globally. Many witnesses recognised that the
challenge for both countries is to maintain and cultivate this relationship in
an environment of economic change, uncertainties and insecurities. The
partnership will have to embrace a much wider range of economic exchanges and
it must grow in sophistication and depth. According to Mr Wolff, it is time
to consider what is happening within Australia and, more particularly, in Japan.
2.8
The Committee believes that this inquiry
provides a good opportunity to take stock of the relationship between Australia and Japan and to consider its future—‘how we can go to the next step and
tighten the bonds that exist between us’.[7]
2.9
A number of witnesses, particularly those who
have worked in Japan and
closely with the Japanese people, speak of the depth of this relationship which
has been fostered over many years of close association and cooperation.[8] Despite the majority view that
the relationship between Australia and Japan rests on a solid footing of
goodwill and mutual benefit, some witnesses were apprehensive that this strong
and robust relationship nurtured by successive governments ‘looks set to
fracture due to current economic conditions in Japan’.[9]
2.10
Warm rhetoric can mask or even deny underlying
tensions or disjunctions in a relationship; it can certainly gloss over
problems. In 1997, Japan’s Ambassador to Australia, Mr Yukio Satoh, suggested
that for all the talk of partnership at the level of public opinion, the
peoples from each of these two countries seem to regard the other as citizens
of a ‘distant country’. He argued that ‘the future task of the governments of Japan and Australia is to realise a state of relations where the peoples of both
countries speak of Japan-Australia partnership with a sense of reality’.[10]
2.11
One witness went further to state that the
Australia-Japan relationship is ‘currently as dead as a dodo...a relationship
that is floundering’. Mr Bradley Treadwell, Managing Director, Osborne Associates, told the Committee that the
deterioration in the Australia-Japan relationship was not only at government
level but also at business, private sector and cultural levels. He submitted:
I cannot see one layer in the Australia-Japan relationship which
is presently growing, developing or opening up new vistas for interchange,
cultural diversity and growth in business development.[11]
2.12
In his opinion, the reverse was happening with
waves of Japanese investment and other interactions receding. This
disintegration was not a one-sided affair and he called urgently for a
re-invigoration of the relationship.[12]
He cited poor media reporting and the apparent cutting back of forums that have
hitherto existed in the Australia-Japan relationship such as the ‘very vibrant
Australia-Japan economic institute in Sydney’ as evidence of a tired
relationship. He suggested that a continuing focus on the Australia-Japan
relationship would be a vital facilitation role for government.[13]
2.13
Undoubtedly for Australia and Japan, there is a
growing need to manage an increasingly diverse relationship under conditions of
rapid technological advancement, a changing global economic system and international
uncertainty. Both countries have to adjust to, and foster their relationship
in, an environment of shifting power structures, tensions between major trading
partners and economic insecurities—fault lines are appearing in the trading
links between the US and Japan, China is emerging as an economic force, and
there is the aftermath of the Asian economic crisis. There are the
uncertainties generated by globalisation, the push for trade liberalisation,
and uneasy rumblings from within the WTO process. Moreover, Japan itself is
undergoing fundamental change with a comprehensive program of reform, severe
demographic shifts such as its rapidly ageing population, and a restructuring
and reorientation of its economic system.
2.14
The Committee’s inquiry was conducted while all
these developments were taking place. In this report, the Committee at first
deals with developments in contemporary Japan especially in light of the
economic downturn in Japan. It then turns to the Australia-Japan relationship.
It briefly sketches the evolution of Australia’s trading links with Japan to
provide some understanding of the foundations upon which the Australia-Japan
relationship stands. The Committee then focuses on recent developments in the
Australia-Japan relationship. It looks at the effects of Japan’s economic
troubles on Australia’s trading links with Japan, the opportunities opening up
in Japan for Australian business despite the economic recession and the steps
Australia can take to improve its commercial ties with Japan. Finally, the
Committee broadens the scope of the inquiry and places the Australia-Japan
trading links within the broader Asia commercial trading network. It also looks
at Japan’s trading relationship with the United States.
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