Annual Report 2005-2006

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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) :: Mongolia :: Outlook


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

The department helped expand bilateral economic ties with Japan, China and the Republic of Korea (ROK), three of our largest trading partners. We secured Japan's agreement to the terms of reference and an accelerated timeline for a joint free trade agreement (FTA) feasibility study. We built on the breadth and growing importance of Australia's economic relationship with China by concluding the terms of a new High-level Economic Cooperation Dialogue with China's National Development and Reform Commission and made progress in the Australia–China FTA negotiations. The department undertook high-level advocacy and outreach activities in support of strengthened economic and trade cooperation with the ROK. In cooperation with other agencies, we helped deliver market access wins for Australian businesses and sought to protect their commercial interests.

North Asia is a region of great strategic importance to Australia. The department consulted and cooperated with Japan, China and the ROK to enhance regional stability. We continued to strengthen our political and strategic relationship with Japan, including on counter-terrorism, counter-proliferation, humanitarian relief and peacekeeping. We contributed to international efforts to bring about a nuclear-free Korean peninsula by urging the Democratic People's Republic of Korea (DPRK) to return to negotiations over its nuclear program. We liaised closely with key players in the region and other allies prior to the DPRK's July 2006 missile tests, ensuring a strong and rapid international response to the tests. The department continued to advance Australia's engagement with China on strategic issues such as the Korean peninsula and the South Pacific, including through bilateral senior officials' talks.

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


The department contributed to enhanced cooperation with Japan across a range of shared interests, including through our continued military cooperation in Iraq, reflecting Japan's status as our most important like-minded partner in Asia.

We received Japan's agreement to accelerate a bilateral FTA feasibility study. An FTA with Japan would strengthen further our economic relationship with Japan, which remains Australia's largest trading partner. It has long been by far the largest buyer of Australian goods, valued at $28 billion in 2005, an increase of 28 per cent on 2004. Japan is also Australia's third-largest source of foreign investment.

We helped achieve a number of outcomes to enhance bilateral dialogue. For example, in their March 2006 Joint Statement, Mr Downer and Japanese Foreign Minister Aso declared the comprehensive strategic relationship between Australia and Japan stronger than ever and affirmed their commitment to the highest level of ambition in the future development of the bilateral relationship (see box below).

Mr Downer hosted the inaugural ministerial meeting of the Trilateral Strategic Dialogue involving Australia, Japan and the United States in Sydney in March 2006. The meeting was a significant step in intensifying the strategic dialogue among the three countries (see sub-output 1.1.8 for more information).

FIGURE 5. Australia's trade in goods(a) and services with Japan

Figure 5: Australia's Trade in Goods and Services with Japan

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

Source: DFAT Stars database; ABS Regional services data 2005

Building a comprehensive strategic relationship with Japan— Joint Ministerial Statement

At their meeting in Sydney in March 2006, Mr Downer and Japanese Foreign Minister Taro Aso issued a Joint Ministerial Statement on the bilateral relationship. In that statement they committed to:

Japan FTA feasibility study

The department secured Japan's agreement to the terms of reference and a timeline for the joint FTA feasibility study launched by the Australian and Japanese prime ministers in April 2005.

The department led Australian delegations to three meetings of the joint study group. At the meeting in March 2006 we secured Japan's agreement to intensify the work on the study with a view to finalising it towards the end of 2006, rather than the original April 2007 deadline.

The department continued to advocate the benefits of an Australia–Japan FTA to build support in Japan for starting FTA negotiations, including by sponsoring visits to Australia by Japanese politicians and other key figures to enhance their understanding of the mutual benefits. We began broad-based public consultations in Australia to confirm national priorities and interests in the FTA.

Other political, trade and economic issues

Photo - See caption below for description
Ambassador to Japan Murray McLean OAM receives from the Executive Deputy President of Japan Post, Mr Toshihiro Takahashi, a sheet of ten Japan Post stamps issued to mark the 2006 Australia–Japan Year of Exchange, at the Australian embassy in Tokyo in May 2006.
Enlarge image :: Photo gallery

In cooperation with the Department of Agriculture, Fisheries and Forestry and industry organisations, the department worked to maintain Australia's position as the largest beef exporter to Japan in 2005. In the continued absence of US beef from Japan's market following the discovery of bovine spongiform encephalopathy (BSE—known colloquially as 'mad cow disease') in North America in 2003, Australia provided 90 per cent of Japan's beef imports. We led a group of major beef exporting countries, including the United States, Canada and New Zealand, to secure greater flexibility from the Japanese Government in the implementation of its beef tariff measures.

The department continued to reinforce Australia's concerns about Japan's whaling program, including the targeting of humpback and fin whales. In January 2006 we joined a group of 17 countries, led by Brazil, in representations in Tokyo urging Japan to stop its whaling program. The group explained the stance of anti-whaling countries in the lead-up to the annual meeting of the International Whaling Commission (see sub-output 1.1.7 for more information).

The department supported successive rounds of negotiations between the Department of Families, Community Services and Indigenous Affairs and the Japanese Government for an Australia–Japan Social Security Agreement, which is expected to be signed before the end of 2006. This agreement will coordinate respective retirement pension systems and the rules for compulsory social security and superannuation contributions.

People-to-people links

The 2006 Australia–Japan Year of Exchange (YOE), a joint prime ministerial initiative to commemorate the 30th anniversary of the signing of the Basic Treaty of Friendship and Cooperation between Australia and Japan, began in January 2006. The department supported the Australian YOE Executive Committee, chaired by Dr Ashton Calvert AC, which played a key role in overseeing the official Australian YOE program and securing corporate sponsorship for a number of prestigious Australian cultural events in Japan. These events included a tour by the Sydney Symphony orchestra, an exhibition of contemporary Australian art at the Bridgestone Art Museum and an Australian film festival at the National Film Centre in Tokyo. Prime Minister Howard launched a commemorative publication, Friendship and Co-operation: the 1976 Basic Treaty between Australia and Japan, which was commissioned for the YOE as part of the department's historical document series Australia in the world: The Foreign Affairs and Trade files (see sub-output 3.1.3 for more information).

The department coordinated Australian participation in the 4th Australia–Japan Conference, held in Tokyo in June 2006. Attended by representatives from business, academia, politics and government, the conference highlighted the strength and diversity of bilateral relations. Participants recommended increased bilateral cooperation on political and security issues, including the evolution of regional architecture, peacekeeping, humanitarian assistance, non-proliferation, counter-terrorism and energy security. The conference called on both governments to start negotiations in 2007 on a comprehensive free trade agreement.


The department played a key role in strengthening Australia's relations with China, now Australia's second-largest merchandise trading partner. Our economic complementarities—with Australia's resource exports helping to fuel China's rapidly growing economy—underpinned the strong and diverse bilateral relationship.

High-level visits

The department supported a number of high-level visits in both directions that strengthened our bilateral engagement and led to the finalisation of several bilateral agreements. Premier Wen Jiabao's visit in April 2006—accompanied by the Chairman of the National Development and Reform Commission Ma Kai, Foreign Minister Li Zhaoxing and Commerce Minister Bo Xilai—helped take forward the free trade agreement negotiations (see sub-output 1.1.5 for more information). Premier Wen and the Prime Minister also agreed to establish an annual exchange of visits at the level of deputy prime minister or above. During the visit eight bilateral agreements were signed, covering legal mutual assistance, nuclear cooperation and transfers, agricultural technical cooperation, coal mine safety, education and training and the exchange of young scientists.

We supported visits to China by the Governor-General in October 2005 and the Prime Minister in June 2006. The Governor-General's visit reciprocated the visit to Australia by China's head of state President Hu Jintao in October 2003. The Prime Minister witnessed the arrival of the first commercial shipment of Australian liquefied natural gas (LNG) at the Guangdong receiving terminal and attended a major conference on the Australia–China Free Trade Agreement.

Helping to cement ties with southern China—a key consumer of Australia's resources exports—the department facilitated the visit by Guangdong Party Secretary Zhang Dejiang in November 2005. We helped organise the Guangdong Australia Business Conference where Mr Zhang was the keynote speaker. State Councillor Hua Jianmin's January 2006 visit allowed constructive high-level dialogue on climate change and energy.

Commercial interests

The department advanced the commercial interests of Australian companies across a range of sectors. Our representations to the Chinese Government on behalf of Australian suppliers strongly opposed the use by China of import licenses to cap iron ore prices. We supported the efforts of Australian companies seeking new coal, gas and renewable energy contracts in China. The department supported efforts by Australian insurers and banks to acquire equity in Chinese insurance firms and financial institutions. Many of these deals are nearing completion.

In January 2006, the department convened an inter-sessional senior officials' meeting of the Joint Ministerial Economic Commission. During the meeting, we emphasised that pricing of resources was a matter for commercial negotiations and that import licences and price caps would reduce Australian confidence in the Chinese market. We worked with the Department of Agriculture, Fisheries and Forestry to extend market access in China for Australian agricultural products. In April 2006, the two countries signed two new quarantine protocols, paving the way for exports of Australian citrus and deer products to China. The citrus protocol could see $50 million in exports to China per year. While the deer industry is small in Australia, there is good potential for growth in the China market. In April 2006, both countries signed a protocol extending arrangements for Australian wheat and barley exports to China for a further three years. China is a vital market for Australian grain, with wheat and barley exports to China worth around $400 million each year. The department reinforced links with the business community by organising a successful networking day in Canberra for 55 members of the Australia China Business Council.

We initiated a regular structured dialogue, including on resource issues, with China's leading economic policy agency, the National Development and Reform Commission. This High-level Economic Cooperation Dialogue occurred for the first time in Canberra in April 2006 during Premier Wen Jiabao's visit. Before the dialogue, with the department's help Australian and Chinese companies signed agreements concerning six major commercial projects.

Institutional links

Photo - See caption below for description
Trade Minister Mr Mark Vaile and Chairman of China’s National Development and Reform Commission Mr Ma Kai shake hands after signing, in April 2006, a memorandum of understanding establishing high-level economic cooperation. Prime Minister Mr John Howard applauds the signing. Photo: AUSPIC/Michael Jones
Enlarge image :: Photo gallery

The department led whole of government negotiations that produced agreement on two treaty-level documents on nuclear cooperation. The agreements, which need to be ratified by both countries, outline a framework for the possible export of uranium to China in line with Australia's strict safeguards and for cooperation in the peaceful use of nuclear science and technology. The Australian ratification process, involving parliamentary scrutiny through the Joint Standing Committee on Treaties, will begin in the second half of 2006.

The department helped facilitate the conclusion of the Treaty between Australia and the People's Republic of China on Mutual Legal Assistance in Criminal Matters. This enables Australia and China to assist each other more effectively in the prosecution of serious crimes, including drug trafficking, fraud, money laundering and people trafficking.

We supported senior officials' talks in December 2005 and June 2006 that strengthened Australia's engagement with China on strategic issues, including the Korean Peninsula and the South Pacific. Through these talks and other meetings, we continued to urge Beijing and Taipei to avoid actions that would unilaterally alter the status quo across the Taiwan Strait and to begin the dialogue necessary to build a foundation for a lasting peaceful settlement.

FIGURE 6. Australia's trade in goods(a) and services with China

Figure 6: Australia's Trade in Goods and Services with China

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

Source: DFAT Stars database; ABS Regional services data 2005


The department helped the Australian business community maximise the potential benefits of Taiwan's continuing strong import demand. We facilitated progress on difficult quarantine issues and promoted opportunities in the minerals and energy, education, electronics and aviation sectors through high-level visits, officials' talks and advocacy on behalf of businesses. We supported new Taiwanese investment in Australian agriculture, resources and high-tech industries.

In December 2005 the department facilitated a visit to Taiwan by the Minister for Vocational and Technical Education, Gary Hardgrave, promoting education exports and advancing cooperation between the two sides' post-secondary education sectors. We supported talks between the Taiwan Minister of Economic Affairs, Ho Mei-yueh, and Minister for Industry, Tourism and Resources, Ian Macfarlane, contributing to increased awareness of Australian resources and high-tech capabilities. The department worked to increase access for the Australian electronics industry to global supply chains through an agreement between the two sides' electronics industry peak bodies.

FIGURE 7. Australia's trade in goods(a) and services with Taiwan

Figure 7: Australia's Trade in Goods and Services with Taiwan

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

Source: DFAT Stars database; ABS Regional services data 2005

Hong Kong

We helped Australian companies capitalise on trade and investment opportunities arising from Hong Kong's continued strong economic growth, including its deepening links with the booming Pearl River Delta region of mainland China. Our business promotion efforts focused on the education, tourism, entertainment, construction, logistics and financial industries. We consulted closely with Hong Kong-based Australian services companies on the China FTA negotiations, ensuring the negotiations reflected the full range of Australian industry interests.


We increased our engagement with Macau by supporting the formation of a Macau chapter of the Australian Chamber of Commerce in Hong Kong and facilitating Australian export and investment successes in the tourism, gaming and construction industries, as well as in training and education services.

Republic of Korea (ROK)

The department worked hard to expand trade and investment opportunities in the ROK, our fourth-largest export market. We used our contacts with key energy policy decision-makers and the government-owned gas importers to support the efforts of Australian projects to extend an existing LNG contract and to position themselves for future contracts. In January 2006 we provided an opportunity for the ROK Minister for Commerce, Industry and Energy to meet directly with senior Australian industry representatives, reinforcing the changing dynamics of a tightening global LNG market.

The department worked closely with the Department of Agriculture, Fisheries and Forestry to protect and promote Australia's agricultural interests in the ROK. We supported successful efforts to change rice tender specifications for Australia's 2005 country-specific quota, allowing Australian suppliers to fill their quota allocation.

The department undertook a broad program of high-level advocacy and outreach activities in support of our interest in starting comprehensive FTA negotiations. As part of this effort we provided strong support to the Australia–Korea Business Council for its joint business council meeting. We were successful in developing some support in the ROK business community for a ROK–Australia FTA, but the ROK Government is focused on its negotiations with the United States and continues to have concerns about the perceived sensitivity of Australian agricultural exports.

During the ROK's hosting of APEC in 2005, the department worked to ensure the agenda reflected Australia's interests, most notably in maintaining APEC's focus on trade and investment liberalisation and in continuing APEC's move into security issues.

We facilitated a number of high-level visits to the ROK, including by Prime Minister Howard for the APEC Leaders' Meeting and Mr Downer for the Annual Foreign Ministers' Talks in November 2005. Political links were strengthened further by an exchange of parliamentary delegations, the first under a reciprocal political visits' program. The department assisted the ongoing development of bilateral defence relations, including through the visit to the ROK by then Defence Minister, Robert Hill, and a visit to Australia by the Chairman of the ROK Joint Chiefs of Staff, General Lee Sang-hee.

The department continued to support efforts to conclude negotiations for bilateral agreements on social security and double taxation. A social security agreement will improve bilateral employment and business opportunities, while a renegotiated double taxation agreement will enhance the business and investment environment by reducing withholding tax provisions.

FIGURE 8. Australia's trade in goods(a) and services with the Republic of Korea

Figure 8: Australia's Trade in Goods and Services with the Republic of Korea

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

Source: DFAT Stars database; ABS Regional services data 2005

Democratic People's Republic of Korea (DPRK)

Development of Australia's bilateral relationship with the DPRK has been suspended since revelations in late 2002 about the DPRK's uranium enrichment activities. The department underlined to the DPRK embassy in Canberra that relations would not be taken forward until the DPRK made substantive and genuine progress to resolve the nuclear issue, including by returning to the six-party talks in a constructive spirit.

The department worked closely with friends and allies to reinforce to the DPRK the extent of international concern over its 5 July 2006 missile launches and its nuclear weapons program.

We continued to press the DPRK to improve its human rights, including the treatment of North Korean refugees returned from China. In November 2005, Australia co-sponsored a resolution at the UN General Assembly urging the DPRK to meet its international human rights obligations.

The department made strong representations to the DPRK urging it to rescind its August 2005 decision to expel the World Food Program (WFP) and non-government organisation staff. This decision constrained Australia's ability to provide its usual level of humanitarian assistance in 2005–06. However, once the DPRK and WFP reached a new agreement in May 2006, AusAID provided $1 million to the WFP's Protracted Recovery and Relief Operation in North Korea and $500 000 to the International Federation of the Red Cross for DPRK water and sanitation projects.

Australia's Ambassador to China, who is also accredited to the DPRK, visited Pyongyang from 28 November–3 December 2005 when he urged the DPRK to return to the six-party talks, improve its human rights record and reconsider the WFP expulsion.

The department worked with law enforcement and other government agencies to finalise the heroin trafficking case involving the DPRK vessel, the Pong Su.


The department provided support for the visit to Mongolia by Minister for Industry, Tourism and Resources, Ian Macfarlane in October 2005 to promote Australia's mining and investment interests. We continued to support Mongolia's economic and political transition through dialogue and working-level exchanges.


As a fitting way to mark the 50th Anniversary of the Australia–Japan Commerce Agreement, we will seek Japan's active support to conclude the joint FTA feasibility study and advance to formal FTA negotiations in 2007. The department will work for continued close and effective relations with the next Japanese administration following the appointment of a new prime minister in September 2006. We will promote strategic and security linkages with Japan, including in the context of the Trilateral Strategic Dialogue. We will continue to strengthen cooperation to obtain optimal outcomes for Australia in the development of East Asian regional architecture, especially in the context of Australia's hosting of APEC in 2007.

Prospects over the coming year are bright for Australia–China relations. We expect to see continuing strong growth in bilateral trade and investment, underpinned by substantial economic complementarities. We will work with other agencies to implement the eight bilateral agreements signed during Premier Wen Jiabao's April 2006 visit to Australia. We will use the broad range of bilateral dialogue mechanisms on trade and economic cooperation, resources, regional security and disarmament, human rights and consular matters to enhance our cooperation and manage differences constructively. We will continue to encourage China to make a positive contribution to the region, including in regional organisations and groupings.

For the ROK our main objective will be shifting our strong and friendly relations to a higher level, commensurate with our shared democratic and market economy values. Expanding and deepening political linkages will be important as will pursuing our shared interests in open, inclusive regional architecture. A continuation of dialogue on a ROK–Australia FTA will be a priority. We will continue to work closely with Australian industry to expand Australia's role as a strategic supplier of energy to Korea.

Our priority with the DPRK will be to continue working actively with allies, friends and the broader international community to send a strong message that it must return to the six-party talks without precondition, abandon all nuclear weapons programs and return to the Nuclear Non-Proliferation Treaty. We remain ready to support progress in these areas.

We will maintain our support for the development of economic and cultural links with Taiwan within the framework of our 'one-China' policy. We will continue to urge both Beijing and Taipei to avoid provocative statements or other actions that might put regional security at risk.

We will continue to work closely and actively with the Hong Kong Government to build on our thriving trade, investment and people-to-people links.

TABLE 5. Australia's trade in goods and services with North Asian economies
  Export Export   Import Import  
Goods(a) and services 2004 $m 2005 $m Trend growth 2000–2005 2004 $m 2005 $m Trend growth 2000–2005
Japan 25 500 31 594 2.2% 18 583 19 120 2.1%
China 13 111 18 621 20.1% 19 004 22 541 18.3%
Republic of Korea 10 225 12 191 2.4% 5 257 5 514 1.8%
Taiwan 4 500 5 940 –2.9% 3 799 3 860 2.4%
Hong Kong, China 4 134 4 062 –5.2% 2 773 2 934 0.3%
Other 69 51 15.2% 17 28 16.7%
Total North Asia 57 539 72 459 4.3% 49 433 53 997 7.1%

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

Source: DFAT Stars database and ABS International trade in services by partner country 2005

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