Leslie Massey
Australia has a diverse range of trade relationships with China, Japan, and India. These relationships are underpinned by shared values, historical ties, and strategic interests. For instance, Australia and Japan share a commitment to democracy, human rights, free trade, and a rules-based international order. The two countries have a long history of trade, with Japan importing Australian coal and wool as early as the late 1800s. Similarly, Australia and India have a positive defence relationship, strengthened by their shared experience in World War I and formalized through agreements such as the Memorandum on Defence Cooperation and the Joint Declaration on Security Cooperation. In the case of China, Australia's trade relationship is complex due to geopolitical tensions and the AUKUS alliance. Despite this, Australia continues to trade with China, particularly in areas such as beef exports.
| Characteristics | Values |
|---|---|
| Trade with China | China has ramped up its imports of Australian grain-fed beef. |
| Australia would struggle to pay for its submarines without its trade relationship with China. | |
| Trade with Japan | Japan's "new capitalism" policies aim to reinvigorate the economy over the medium term. |
| Japan's major imports include crude petroleum, petroleum gas, coal briquettes, integrated circuits, and broadcasting equipment. | |
| Australia and Japan share common strategic interests, including alliances with the United States and a commitment to a peaceful, stable, and prosperous Indo-Pacific region. | |
| Trade with India | Over 85% of Australian goods exports by value to India are tariff-free, rising to 90% by January 1, 2026. |
| The Australia-India Economic Cooperation and Trade Agreement (ECTA) helps secure access to the fast-growing Indian market of over 1.4 billion people and provides Australian businesses with trade diversification opportunities. |
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What You'll Learn
- The trade relationship between Australia and Japan has strengthened since the post-war era
- Australia and Japan share common strategic interests, including alliances with the US
- Australia's trade with China helps fund its security alliance with the US
- Australia-India trade is facilitated by the Economic Cooperation and Trade Agreement (ECTA)
- Australia and India have a positive defence relationship, with regular personnel and training exchanges
The trade relationship between Australia and Japan has strengthened since the post-war era
Australia and Japan have shared a highly complementary and mutually beneficial relationship in the energy and resources sector. Diplomatic relations between the two countries were re-established in 1952, following the termination of the Allied occupation. In the postwar period, Australia was an avid consumer of Japanese products, importing industrial equipment and machinery, as well as consumer goods. Australia's demand for ceramic insulators, for instance, was crucial for the development of its electricity grid and played a significant role in reopening trade with Japan.
The relationship between the two countries is underpinned by a shared commitment to democracy, human rights, and the rule of law, as well as common approaches to international security. Australia is a reliable supplier of food, energy, and mineral resources, while Japan is an important market for Australian exports and a source of investment. Japanese investment has been particularly important in the development of Australia's agrifood sector, with beef being the most prominent example.
The Australia-Japan partnership is Australia's closest and most mature in Asia and is of fundamental importance to both countries' strategic and economic interests. In the early 1970s, Japan became Australia's largest trading partner, a position it maintained for 26 years until 2009 when China surpassed it. Despite this, Japan remains an essential element in Australia's growth and prosperity in the Asia-Pacific region.
The relationship between the two countries has continued to strengthen over time, with various initiatives and agreements in place. In 1976, the Australian Government established the Australia-Japan Foundation (AJF) to expand and develop contact and exchange between the peoples of the two countries. In 2013, Australia's former Prime Minister Tony Abbott hailed Japan as Australia's "closest friend" in Asia and worked towards creating a Free Trade Agreement. More recently, in 2021, the two countries, along with the United States, pledged a new undersea internet cable for Nauru, Kiribati, and the Federated States of Micronesia. In January 2022, the Reciprocal Access Agreement (RAA) was signed, allowing their respective militaries to work together seamlessly on defence and humanitarian operations.
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Australia and Japan share common strategic interests, including alliances with the US
Australia and Japan have a strong strategic partnership that is fundamental to both countries' interests. The relationship is built on a shared commitment to democracy, human rights, and the rule of law, as well as a common approach to international security.
The two countries have a long history of trade relations, with Japan importing Australian coal and wool as early as the late 1800s. Japan was Australia's largest trading partner for 26 years, from the early 1970s until 2009, when it was surpassed by China. In 2021, Japan was Australia's second-largest trading partner, with two-way goods and services trade valued at AUD87.2 billion. Japanese investment continues to be significant for the Australian economy.
Australia and Japan also have a strong security relationship, regularly participating in joint defence exercises and consulting on regional security issues. They work closely with their common ally, the United States, to maintain stability, resilience, and prosperity in the Indo-Pacific region. This includes addressing security challenges posed by countries like North Korea and, increasingly, China.
The US-led Combined Maritime Forces are an example of a multinational force that contributes to deterrence in the Indo-Pacific. The US, along with its allies, is deepening security arrangements to ensure a shared vision of a free and open Indo-Pacific. Australia and Japan's security cooperation was further strengthened with the 2022 renewal of the Joint Declaration on Security Cooperation, which aims to respond to pressing security challenges in the region.
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Australia's trade with China helps fund its security alliance with the US
Australia's trade with China is vital to its economy, and this trade helps fund its security alliance with the US. China's demand for Australian resources, particularly iron ore, has resulted in a torrent of cash for Australia, boosting profits, dividends, and government tax receipts.
However, Australia's relationship with China has been strained due to trade strikes and disputes. Since May 2020, China has blocked or disrupted Australian exports, including beef, wine, barley, and coal, previously worth over A$20 billion annually. This has prompted Australia to seek greater economic cooperation with the US to counter Chinese economic coercion.
The US has signaled rhetorical support for Australia, with officials declaring their commitment to standing with Australia in the face of Chinese trade strikes. However, the US has been reluctant to offer material support, causing concerns about the effectiveness of the alliance.
Australia's pursuit of nuclear-powered submarines through the AUKUS agreement with the US and UK is seen as a move to contain China's military expansion in the Indo-Pacific region. This has further strained ties with China, which views it as a threat to its interests.
Despite the risks to its trade relationship with China, Australia's security alliance with the US is partly funded by its trade with China. The revenue generated from exports to China helps Australia finance its defense capabilities, including the costly Virginia-class nuclear submarines. Therefore, Australia's trade with China plays a crucial role in supporting its security alliance with the US.
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Australia-India trade is facilitated by the Economic Cooperation and Trade Agreement (ECTA)
Australia's trade relationship with China, Japan, and India is based on strong economic and trade complementarities and longstanding community and cultural links. China is Australia's largest two-way trading partner, accounting for 26% of its goods and services trade with the world in 2023-24. Two-way trade with China increased by 2.6% in 2023-24, totalling $325 billion.
Australia's trade with India is facilitated by the Economic Cooperation and Trade Agreement (ECTA). The Australia-India ECTA came into force on 29 December 2022, and has helped secure access to the fast-growing Indian market of over 1.4 billion people. It gives Australian businesses opportunities for trade diversification, with over 85% of Australian goods exports by value to India now tariff-free. This will increase to 90% by 1 January 2026, and high tariffs have been reduced on some agricultural products. Additionally, 96% of imports from India are now tariff-free, rising to 100% by 1 January 2026.
The ECTA agreement with India is expected to strengthen Australia's economic ties with India, which is one of the world's fastest-growing major economies. The agreement will reduce trade barriers and increase opportunities for Australian businesses in the Indian market. It will also enhance economic cooperation between the two countries, particularly in areas such as trade in goods and services, investment, and intellectual property.
Australia's trade relationship with India has grown significantly over the years. India is a key market for Australian exports, particularly in areas such as education, tourism, and resources. The ECTA agreement is expected to further boost trade between the two countries and create new opportunities for Australian businesses in the Indian market.
The ECTA agreement with India is part of Australia's strategy to diversify its trade partnerships and reduce reliance on any single market. By strengthening economic ties with India, Australia can access new markets and reduce the risks associated with concentrating its trade activities in a limited number of regions. The agreement also reflects the strong cultural and community links between Australia and India, with a large Indian diaspora in Australia contributing to the growing bilateral relationship.
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Australia and India have a positive defence relationship, with regular personnel and training exchanges
Australia and India have a long history of cooperation, including shared experiences in World War I in Gallipoli and along the Western Front. This has resulted in a positive defence relationship, which is supported by the 2006 Memorandum on Defence Cooperation and the 2009 Joint Declaration on Security Cooperation. The defence relationship has grown to include a range of forums for strategic dialogue, as well as regular interactions between respective services through senior visits, staff talks, and training exchanges.
The Australia-India defence relationship encompasses almost every major function of the military, including strategic dialogues, coordination, and information exchanges. Military exercises involving ground, AI, and maritime forces are also a key component. For example, Australia and India engage in the bilateral naval exercise AUSINDEX, which has been held biennially since 2015. In 2019, Australia sent over 1000 personnel to India for the third edition of the exercise, including five ships, Australian Army forces, and RAAF aircraft. India reciprocated in 2021, sending two ships to participate in the activity in Australia, which was reduced in scope due to COVID restrictions.
In addition to AUSINDEX, the two countries also participate in other joint exercises. Australia joined India, the United States, and Japan in Exercise MALABAR in October 2020, and Australia hosted the exercise for the first time in August 2023. The Royal Australian Navy has also participated in every iteration of the Indian Navy's multilateral naval exercise, Exercise MILAN, since 2003.
The two countries also engage in regular personnel and training exchanges. For example, every year, Australia sends two officers to attend Indian military educational institutions, and India sends two officers to study in Australia. In 2015, an Australian officer attended the Indian Navy's Long Hydrography course in Goa. These exchanges contribute to the enhancement of the defence relationship between the two countries.
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Frequently asked questions
Australia's trade relationship with China is complex and influenced by various factors, including economic gains and geopolitical tensions. For example, Australia's exports of beef to China have increased due to high demand and favourable trade policies. However, there are also concerns about the potential negative impact of Australia's alliance with the United States on its trade relationship with China.
Australia and Japan have a long history of trade relations, dating back to the late 1800s when Japan began importing Australian coal and wool. The relationship was disrupted during World War II but was re-established in 1952. Today, Japan is a major importer of Australian goods and a key partner in the region, with shared values and strategic interests.
Australia and India have a positive and growing trade relationship, strengthened by the Australia-India Economic Cooperation and Trade Agreement (ECTA), which came into force in 2022. This agreement provides Australian businesses with access to India's large and fast-growing market and promotes trade diversification. Additionally, Australia and India have a history of defence cooperation, which further solidifies their relationship.
