Little Joy For Car Buyers In Japanese And Korean Free Trade Agreement Photo:

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Tim O'Brien | Apr, 09 2014 | 6 Comments

There will be little joy for Australian car buyers in the Free Trade Agreements now signed with both Japan and Korea.

Australian tariffs on imported cars are negligible, just five percent.

Made negligible in their impact on retail prices on cars imported from Japan and Korea, in fact, by global currency fluctuations and the forward hedging that all car importers do to offer stable prices in this market (and other markets).

When the dollar was sitting above 105 cents against the US dollar (and with similar relativity against the Yen) exactly a year ago, car importers were enjoying a 15 percent+ advantage in their currency dealings and in the price they pay for their imported products.

And of course, when the dollar plunged to just 49 cents against the greenback in April 2001 - just over a decade ago (and not in some dim dark past) - car importers were struggling at a forty percent+ disadvantage to where they currently sit.

To even out these currency fluctuations, they hedge.

In the rolling sea of spikes and troughs that currencies in the world economy ride, Australia's remnant five percent tariff on cars was/is next to three-fifths of five-tenths of FA. (And tariffs on Thai-built cars have been at zero for some time... not that you'd notice.)

So don't expect the simplistic spin that the Government and the mainstream media has put on things that we'll be paying "on average" $1500 less for Japanese cars to be anything near the truth of the matter.

We might end up paying less, or more, but it won't have anything to do with the FTA.

Interestingly, while Japanese tariffs on Australian beef are to halve - to drop from 38.5 percent to 19.5 percent - this is to happen over 18 years. Yes, 18 years.

If you were born ten minutes ago you will be eligible for your driver's licence before the full benefit to Australian beef producers takes effect (and that's assuming the "reviews" of the FTA go our way).

Car tariffs, on the other hand, are to disappear in three years. Now aren't you glad we had such tough guys at the table negotiating on our behalf?

It is apparent now, if it wasn't before, that these FTAs with Japan, Korea, soon China (and earlier with Thailand), together make the altar on which our local car manufacturing and components industry was sacrificed.

That slight pain in the arse you're feeling right now is because, in all likelihood, we've managed to roger ourselves yet again.

- Tim O'Brien
TMR Managing Editor

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