Annual Report 2004-2005

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Your location: Performance > Outcome 1 > Output 1.1 > 1.1.1 North Asia

OUTPUT 1.1: Protection and advocacy of Australia's international interests through the provision of policy advice to ministers and overseas diplomatic activity

1.1.1 North Asia

On this page: Overview :: Japan :: China :: Republic of Korea (ROK) :: Democratic People's Republic of Korea (DPRK) :: Economic relationships in North Asia


The department worked to strengthen cooperation and dialogue with North Asian countries, to promote Australia's economic, political and strategic objectives in the region, and to deepen people-to-people links.

As North Asia receives more than 40 per cent of Australia's exports, a particular focus of our work was to strengthen bilateral economic ties with Japan, China and the Republic of Korea (ROK). We finalised a joint study into bilateral trade and economic liberalisation with Japan and began a feasibility study on a possible Australia–Japan free trade agreement (FTA). We completed a joint FTA feasibility study with China and began negotiations for an Australia–China FTA. We continued to explore opportunities for expanded economic and trade cooperation with the ROK. In cooperation with other agencies, we helped deliver important market access wins that expanded export opportunities for Australian business.

The region is of great strategic importance to Australia. The department consulted and cooperated with countries inside and outside the region to strengthen regional stability. China, Japan, the ROK and the Democratic People's Republic of Korea (DPRK) (along with the United States) are key players in maintaining stability in two potential flashpoints—the Korean peninsula and the Taiwan strait.

The department expanded second-track (or unofficial) and people-to-people links between Australia and North Asia, including by supporting the activities of the Australia–Japan Foundation, the Australia–China Council and the Australia–Korea Foundation (see sub-output 3.1.2 for more information).


The department advanced Australia's interests in Japan, notably by finalising a joint study into bilateral trade and economic liberalisation and launching a feasibility study on a possible bilateral FTA.

The department supported high-level visits to Japan by the Prime Minister and Mr Vaile in April 2005 and by Mr Downer in March 2005. Our liaison and advocacy prepared the way for the agreement by the prime ministers to undertake a two-year joint feasibility study for a comprehensive bilateral FTA.

The prime ministers also agreed to start formal negotiations to conclude a Japan–Australia Social Security Agreement. An agreement will coordinate respective age pension systems and the rules for compulsory social security and superannuation contributions.

While in Japan, Mr Howard and Mr Vaile visited the 2005 Aichi Expo to promote Australian trade and culture (see sub-output 3.1.2 for more information).

Under the business facilitation agenda of the bilateral Trade and Economic Framework (TEF), the department supported the conclusion of a new instrument covering securities market regulation. The new instrument will help facilitate cooperation in enforcing and supervising securities laws and derivatives transactions. This brings to six the number of agreements concluded under the agenda's eleven policy areas.

Photo - See caption below for description
The Prime Minister Mr John Howard meets with the Japanese Prime Minister, Junichiro Koizumi, during his visit to Tokyo in April 2005. From left: Australian Ambassador to Japan Murray McLean OAM, Mr Howard and the Secretary, Michael L'Estrange. Photo: AUSPIC
Enlarge image :: Photo gallery

We organised and hosted the third Australia–Japan Conference in February 2005. Thirty-eight representatives attended from business, academia, politics and government in both countries. Conference participants pushed strongly for the feasibility study into a bilateral FTA. The conference also recommended expanding bilateral cooperation on political and security issues, including disaster relief, peace building, UN reform and maritime security.

The department led a strong effort to turn around Japan's whaling policy by engaging Japanese government and non-government representatives on the benefits of whale conservation (see sub-output 1.1.7 for more information).

In May 2005, the department hosted the inaugural executive committee meeting to advance preparations for the 2006 Australia–Japan Year of Exchange. The exchange was agreed by prime ministers in 2003 to mark the thirtieth anniversary of the signing of the Basic Treaty of Friendship and Cooperation and aims to highlight the strength and diversity of bilateral relations.


The launching of negotiations for an FTA after the completion of a joint feasibility study demonstrated the rapid strengthening of Australia's relations with China—already Australia's second-largest market for goods (see box below).

The department secured China's agreement to begin bilateral FTA negotiations, announced during the Prime Minister's visit to China in April 2005, which the department supported. The Prime Minister and Chinese Premier Wen Jiabao agreed that negotiations would cover all sectors and involve a single undertaking—meaning nothing is agreed until everything is agreed. The FTA would be consistent with World Trade Organization (WTO) rules, as foreshadowed in the 2003 Australia–China Trade and Economic Framework (TEF).

The department established a China FTA Task Force to undertake the negotiations. The first FTA negotiations took place in Sydney in May 2005, leading to agreement on an initial set of negotiating groups. We began broad-based public consultations to confirm the priority issues and areas of interest and concern, bearing in mind the need underlined publicly by the Minister for Trade for the FTA to address the range of 'behind the border barriers' affecting Australian commercial interests. These public consultations will inform our negotiating position.

The department supported the visit to Australia in May 2005 by the Chairman of China's National People's Congress and number-two ranked Politburo member, Wu Bangguo. The visit had a strong energy and resources focus, including visits to liquefied natural gas (LNG) and iron ore shipping and production facilities in the Pilbara and the HIsmelt Corporation Ltd iron plant in Kwinana to promote possible cooperation. Mr Wu supported enhanced bilateral cooperation in his keynote address to a China–Australia Trade and Economic Cooperation Forum in Sydney organised by the department and the Australia–China Business Council.

Feasibility study points to benefits of Australia–China FTA

The department and the Chinese Ministry of Commerce undertook a feasibility study into an Australia–China FTA over an 18-month period. An important and necessary precursor to the Government’s decision to begin FTA negotiations, the study involved extensive consultations with Australian business, industry associations and state and federal government agencies. It examined the likely benefits and costs to both economies of all aspects of the FTA.

Independent economic modelling conducted for the study estimated that:

The modelling demonstrated that any additional adjustment costs for Australia arising from the FTA would be relatively small compared with adjustment already under way in response to domestic reform and globalisation.

As part of the study’s outreach activities, the department organised an Australia–China FTA conference in Sydney in August 2004. Australian participants strongly supported a comprehensive arrangement positioning Australia to benefit from China’s expected continued future growth. Chinese participants also indicated broad support for an FTA.

The department's engagement with China on strategic issues built mutual understanding of our approaches to regional security concerns. We supported Mr Downer's August 2004 visit to China to exchange views on prospects for resolving the North Korean nuclear issue, the importance of stability in Hong Kong and, consistent with our wish to engage more closely with China on South Pacific issues, Australia's objectives for improving governance and stability in that region. With an eye on implications for Australian interests, we provided advice on policy responses to Taiwan's 'parliamentary' elections and China's passage of its anti-secession law.

The department continued to seek to influence human rights issues in China through the bilateral human rights dialogue and representations to the Chinese Government. In October 2004 we led Australia's delegation to the eighth round of the bilateral dialogue. The meeting, held in Australia, featured an unprecedented side-meeting between the Chinese delegation and a group of Australian non-government organisations (NGOs). At the Chinese delegation's request, we facilitated a visit by delegation members to Redfern in Sydney to discuss Indigenous issues. The ninth round of the dialogue was held in Beijing at the end of June 2005. It included a field visit to Hunan Province where the Australian delegation, including Australia's Special Representative for HIV/AIDS, visited relevant facilities and met HIV/AIDS sufferers to raise awareness of Australia's HIV/AIDS programs.

Republic of Korea (ROK)

The department supported Australian LNG suppliers in the ROK market, helping position them for future multi-billion dollar contracts (North West Shelf Australia LNG narrowly missed out on a contract in February 2005 but continues to look positively towards opportunities in the Korean market). We continued to highlight Australia's track record as a reliable and cost-effective resource supplier.

The ROK is hosting APEC in 2005. The department liaised closely with Korean authorities to shape the APEC agenda to match Australia's interests. Considering that Australia will host APEC in 2007, the department maintained a close working relationship with the ROK organisers in preparing for our responsibility in 2007.

Departmental advocacy was crucial in convening the first round of bilateral social security negotiations in Canberra in May 2005, led by the Department of Family and Community Services and the Treasury. An agreement would enhance people-to-people links and business opportunities by making it easier for Australians and Koreans to work in the other's country.

The department helped the Australian Political Exchange Council establish a reciprocal political visits program. The first visit under the program—a Korean delegation to Australia—is scheduled for August 2005. The exchange will create links between future leaders of both countries and increase mutual awareness.

With other agencies, the department organised the second Korea–Australia– New Zealand Broadband Summit, held in Seoul in June 2005. The summit brought together information technology (IT) ministers (Australia's delegation was led by the Minister for Communications, Information Technology and the Arts, Senator Coonan) and industry delegations to enhance commercial links and raise the profile of Australia's information and communications technology industry.

The department and Austrade overcame obstacles to the export of the Holden Statesman motor vehicle to the ROK—the first Australian car to be sold in Korea— including by hosting a technical seminar in Seoul on Australian motor vehicle design rules. Mr Vaile introduced the Statesman vehicle at a function in Seoul during his 31 May–4 June 2005 visit.

We coordinated Mr Vaile's visit which centred on the fourth Ministerial Joint Trade and Economic Commission (MJTEC) meeting. Although ministers agreed to further develop trade and economic links, the ROK's protection of its agriculture sector precludes the possibility of a comprehensive free trade agreement at this stage.

We contributed to close cooperation on bilateral, regional and global security and economic issues through our support for three other events: a visit to Australia by ROK Foreign Minister Ban Ki-moon in August 2004, senior officials' talks in Canberra in October 2004 and MJTEC officials' talks in Seoul in May 2005.

Photo - See caption below for description
The Minister for Foreign Affairs Mr Alexander Downer visiting Pyongyang in August 2004. From left to right: Chris Kenny, Media Adviser Mr Downer's Office; Australian Ambassador to the DPRK Dr Alan Thomas; Mr Downer; HE Mr Kim Yong-nam, President of the Presidium of the Supreme People's Assembly; Australian Ambassador to Japan Murray McLean OAM; Brad Haynes, Senior Adviser Mr Downer's Office; Alice Cawte, Counsellor - Political, Australian embassy Beijing; Scott Dewar, First Secretary, Australian embassy Beijing. Photo: John Feder
Enlarge image :: Photo gallery

Democratic People's Republic of Korea (DPRK)

Progress in Australia's bilateral relationship with the DPRK remained suspended in 2004–05, as it has been since the late 2002 revelations about the DPRK's nuclear weapons program. This situation will remain until there is substantive progress by North Korea to resolve the nuclear issue.

The department supported Mr Downer's visit to Pyongyang in August 2004 to register Australia's continuing concerns about the DPRK's nuclear weapons program. Mr Downer met with the DPRK Supreme People's Assembly President Kim Yong-Nam and Foreign Minister Paek Nam-Sun. Mr Downer urged the DPRK to renounce nuclear weapons programs and to return to the six-party talks in a constructive spirit, including by responding productively to the proposals tabled when the six parties met in June 2004. Mr Downer also urged the DPRK to engage more fully with the international community to address human rights concerns.

We worked closely with regional partners through the ASEAN Regional Forum to reinforce to the DPRK the extent of international concern over its nuclear programs. Australia again co-sponsored a resolution carried by the UN Commission on Human Rights in April 2005 urging the DPRK leadership to alleviate the human rights situation inside the country.

Although the bilateral relationship remained on hold, Australia was very concerned about the humanitarian situation in the DPRK and contributed, through AusAID, $6.5 million in food and other aid via multilateral channels in 2004–05.

The department continued to work with law enforcement and other government agencies on the investigation of the DPRK vessel, the Pong Su, allegedly involved in trafficking heroin into Australia in April 2003. The case is expected to go to court in the second half of 2005.

  Export Export   Import Import  
Goods(a) and Services 2003
Trend Growth
Trend Growth
Japan 22 836 25 595 2.6% 14 358 14 679 4.2%
China 10 106 12 296 19.1% 13 409 16 871 21.4%
Republic of Korea 8 940 10 054 5.2% 4 304 4 611 2.8%
Taiwan 4 087 4 520 -3.8% 3 102 3 376 1.9%
Hong Kong, China 4 123 4 010 -1.2% 334 392 52.9%
Other 70 69 32.6% 17 17 8.2%
Total North Asia 50 162 56 544 4.6% 44 560 49 624 8.2%

(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database and ABS International trade in services by partner country 2004.

Economic relationships in North Asia

In addition to our successful efforts to implement the Trade and Economic Framework and launch an FTA feasibility study, the department worked with industry and other agencies to advance our trade and investment interests in Japan.

In conjunction with the Department of Agriculture, Fisheries and Forestry and producer organisations, we secured a substantial increase in Australian beef export volumes to Japan. With the United States absent from the market following the 2003 bovine spongiform encephalopathy (BSE) scare, Australia supplied over 91 per cent of Japan's imported beef needs in 2004. The department also supported ministerial efforts urging Japan not to impose its safeguard tariff on beef.

The department supported advocacy by the Australian Quarantine and Inspection Service that secured market access gains for Australian exports to Japan. Such gains included exports of citrus from South Australia's Riverland district and fresh cherry varieties from Tasmania grown especially for the Japanese market.


(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database.

The department and the Department of Agriculture, Fisheries and Forestry supported Australian agricultural interests through a '1.5-track' (combined official and unofficial) agricultural dialogue held at the University of Tokyo in May 2005. The dialogue, organised by the Australia–Japan Research Centre of the Australian National University, resulted in a constructive exchange on food safety, social demographics and structural adjustment, strengthening links between the Australian and Japanese agriculture industries.

Further to the completion of the FTA feasibility study and the launch of FTA negotiations, the department pursued a range of trade and economic objectives in China. They included:


(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database.

Beyond the support provided to Australian LNG suppliers and auto manufacturers, we advocated Australia's economic interests in the ROK in a range of commercial fields. The department:


(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database.

The department took advantage of opportunities that continued to flow from Taiwan's accession to the WTO and its return to strong economic growth. We facilitated market access in agriculture and in promoting emerging opportunities in the biotechnology, electronics, aviation and minerals and energy sectors through officials' talks and advocacy on behalf of businesses.

The department supported bilateral high-level and officials' consultations on economic issues, minerals and energy, agriculture, higher education and science. We made targeted representations leading to:


(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database.

The department helped Australian companies secure commercial opportunities in Hong Kong, focusing on education, tourism, hospitality equipment and services. Notable achievements included:

We increased our engagement with Macau, supporting Australian business successes in the tourism, gaming and construction industries, as well as in training and education services. With support from the department, Australian companies won major engineering and construction projects on three new casino projects.

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Department of Foreign Affairs and Trade Annual Report 2004–2005
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