Annual Report 2007-2008

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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


North Asia is an area of vital strategic and economic importance to Australia. It is the destination for nearly half of our exports. Its continued stability and prosperity have a direct impact on Australia’s national interests.

The department strengthened bilateral relationships with North Asian countries and promoted Australia’s political, economic and strategic objectives in the region. To this end, the department facilitated a number of high-level two-way ministerial visits, including visits to China and Japan by the Prime Minister, Mr Rudd, and visits to Australia by the President of China and the then Prime Minister of Japan. The department also supported visits by the Minister for Foreign Affairs to Japan, the Republic of Korea and Hong Kong, and visits by the Minister for Trade to Japan and China.

The department promoted Australia’s economic interests in the region, including through the continuing negotiations for free trade agreements (FTAs) with China and Japan. The department participated in a feasibility study on a possible FTA with the Republic of Korea.

We advocated Australia’s critical security objectives in North Asia, most notably in relation to the denuclearisation of the Korean Peninsula.


The department made a significant contribution to consolidating and strengthening Australia’s already substantial ties with Japan. Japan is a key partner for Australia in North Asia, reflecting our shared values, complementary economic ties and convergence of strategic interests.

The department supported a significant program of high-level visits to Japan, demonstrating the Government’s commitment to the bilateral relationship. We played a key role in supporting the visit to Australia in September 2007 by then Prime Minister Shinzo Abe and the visit to Japan by Mr Rudd in June 2008. We drafted and consulted on the Joint Statement between Mr Rudd and Prime Minister Yasuo Fukuda that reaffirmed the commitment of both countries to strengthen further our comprehensive strategic, security and economic partnership.

Photo - See caption below for description
The Prime Minister, Mr Kevin Rudd, and Japanese Prime Minister, Mr Yasuo Fukuda, at a joint press conference on 12 June 2008 in Tokyo, when both reaffirmed their commitment to strengthen further the comprehensive strategic, security and economic partnership. Photo: Auspic
Enlarge image :: Photo gallery

Mr Smith visited Japan to advance the Government’s key objectives for the bilateral relationship. He held constructive discussions with Japanese ministers to increase defence and security cooperation, develop responses to climate change and advance FTA negotiations. Mr Smith participated with the Japanese Foreign Minister, Mr Masahiko Koumura, and the US Secretary of State, Dr Condoleezza Rice, in the Trilateral Strategic Dialogue Ministerial Meeting held in Kyoto in June 2008. The meeting issued a forward-looking statement on enhanced trilateral cooperation, including specific measures to foster practical cooperation on humanitarian assistance and disaster relief (see sub-output 1.1.10 for more information).

Mr Crean visited Japan in January 2008 to advance a range of trade and economic objectives with his counterpart, Mr Akira Amari, Minister of Economy, Trade and Industry. These included the need for a successful conclusion to the World Trade Organization (WTO) Doha Round, Australia’s interests in regional economic integration and Australia’s commitment to concluding a comprehensive FTA consistent with the WTO.

Professor Akio Takahara, a specialist in China and East Asian international relations at the University of Tokyo, visited Australia in June 2008 under the department’s Special Visits Program to promote a better appreciation of our respective approaches to North Asia.

Bilateral cooperation

The department consolidated achievements under the landmark 2007 Australia–Japan Joint Declaration on Security Cooperation, including by coordinating the whole-of-government Action Plan to implement the Joint Declaration. The Action Plan was endorsed by then Prime Ministers Howard and Shinzo Abe in Sydney on 9 September 2007. The Action Plan is a rolling list of cooperative activities to implement the Declaration. It builds on existing cooperation and includes a number of ground-breaking activities in traditional and non-traditional security sectors.

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

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

(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
Source: DFAT STARS database and ABS Catalogue 5368.0.

Key initiatives under the Plan include: joint training in peace building and disaster relief; updating bilateral defence arrangements to promote greater practical defence cooperation; and expanding bilateral law enforcement cooperation in areas such as transport and border security, and in combating international crimes including terrorism, proliferation of weapons of mass destruction, illicit drugs and money laundering.

The department conducted the second annual Secretary-level high-level bilateral dialogue with Japan in July 2007, covering political, strategic and economic issues.

Japan remained Australia’s largest export market in 2007. Australia’s total exports to Japan were $34.6 billion, a decrease of 2.6 per cent on 2006. But iron ore sales increased by 6.9 per cent to $4.5 billion, while petroleum (crude and refined) increased by 24 per cent to $1.3 billion. Japan was Australia’s top market for exports of primary products (as a whole), agricultural products (as a whole), and specifically for coal, liquefied natural gas (LNG), aluminium, copper ores, woodchips, beef, dairy products and fresh or frozen fish. In 2007–08 Japan was also Australia’s third-largest source of foreign investment.

The department deepened further the economic relationship with Japan. We held four negotiating rounds with Japan on a comprehensive FTA (see sub-output 1.1.7 on page 102 for more information).

With other government agencies, we helped conclude a Joint Statement on the Enhancement of Cooperation on Climate Change and Energy Security which was signed by former prime ministers Howard and Shinzo Abe in September 2007.

The department, with the Department of the Treasury, helped conclude an updated taxation treaty with Japan which was signed by Mr Smith in Tokyo in January 2008. The treaty strengthens the already significant investment relationship between Australia and Japan and will assist further trade and investment flows between the two countries.

In June 2008, Mr Rudd and Prime Minister Yasuo Fukuda agreed to encourage the financial regulatory authorities in both countries to expand their cooperation, including through a regular bilateral dialogue to share experiences in financial services.

The department worked with the Department of Environment, Water, Heritage and the Arts to urge Japan to cease its ‘scientific’ whaling program in the Southern Ocean (see sub-output 1.1.9 for more information).


Building on a flourishing economic and trade relationship, the department supported a range of initiatives to enhance Australia’s links with China. In 2007, China emerged as Australia’s largest trading partner, with two-way trade in goods and services reaching $58 billion, a year-on-year increase of 15 per cent.

The strength of the bilateral relationship was in part reflected in the number of senior visits in both directions. The department supported a visit by President Hu Jintao to Australia in September 2007 to participate in the APEC Economic Leaders’ Meeting in Sydney. The visit was marked by the conclusion of a number of bilateral initiatives, most significantly a Joint Statement on Climate Change and Energy, and commercial outcomes, including preliminary agreements to supply additional LNG to China.

The department also assisted a visit to Australia by Chinese Foreign Minister Yang Jiechi in February 2008 for the inaugural Australia–China Strategic Dialogue. The dialogue covered regional and global strategic issues of mutual interest.

Mr Rudd visited Beijing, Sanya and Boao in April 2008. He discussed with President Hu Jintao and Premier Wen Jiabao bilateral and strategic issues. Mr Rudd raised China’s policy in Tibet in discussions with the Chinese leadership. Major visit outcomes were agreement to strengthen cooperation on environment and climate change issues, including a new ministerial-level dialogue on climate change, and agreement to reinvigorate bilateral FTA negotiations. Mr Rudd also announced agreement to establish a bilateral services roundtable.

Photo - See caption below for description
Minister for Trade, Mr Simon Crean (centre), with Australian Ambassador to China, Dr Geoff Raby (right), and Austrade’s Regional Director for North East Asia, Mr Laurie Smith (left), at the launch of the Business Club Australia in Beijing on 16 April 2008. Photo courtesy of ABT Creative
Enlarge image :: Photo gallery

Mr Crean co-chaired the Joint Ministerial Economic Commission (JMEC) with his Chinese counterpart, Commerce Minister Mr Chen Deming, in Beijing on 17 April 2008. The meeting addressed bilateral economic and trade issues, including in relation to resources, agriculture and services. Both sides also agreed to take forward our common interests in the WTO Doha Round, and in regional forums such as APEC. Mr Crean also built on the momentum generated by Mr Rudd’s visit to progress the bilateral FTA negotiations. The eleventh round of FTA talks was held in Beijing in June 2008.

Other high-level visits to China facilitated by the department included those by the Minister for Climate Change and Water, Senator Penny Wong, when she accompanied Mr Rudd to Beijing in April 2008; the Minister for Agriculture, Fisheries and Forestry, Mr Tony Burke in April 2008; and the Treasurer, Mr Wayne Swan, in June 2008, as well as visits by the premiers of Victoria, Queensland and New South Wales.

Bilateral cooperation

Australia continued to engage China at senior levels on political issues of mutual interest. In July 2007, the department facilitated Australia’s participation in the annual Human Rights Dialogue, held at deputy secretary level in Beijing. The dialogue enabled a focused exchange of our respective views on human rights issues.

The department contributed to strengthening Australia’s engagement with China on consular matters by facilitating the signing of bilateral treaties on extradition and the transfer of prisoners in September 2007.

Australia’s trade relationship with China continued to flourish on the back of China’s fast-paced economic growth and the resultant boom in our resources trade. Iron ore was our biggest export to China, valued at $9 billion in 2007. The department worked closely with Australian iron ore exporters to facilitate this trade, including by emphasising to the Chinese Government the importance of adhering to market principles. Building on the success of our LNG trade with China, the department promoted Australia’s reputation as a long-term, stable source of energy supplies.

The agricultural sector is also an important component of our merchandise trade. Wool was our biggest agricultural export to China, valued at $1.7 billion in 2007. The department continued to pursue greater access to the China market for Australian agricultural exporters, and continued to seek improvements to China’s administration of its wool tariff rate quota.

With a view to broadening the bilateral trade relationship, the department pursued commercial opportunities in emerging sectors, such as financial services. The department contributed to obtaining Qualified Domestic Institutional Investor (QDII) approved destination status for Australia, which was secured during Mr Swan’s visit to China in June 2008. The QDII scheme will enable qualified Chinese investors to invest in Australian equities and managed funds.

The department facilitated the third Australia–China Business Council (ACBC) Networking Day, which was held at Parliament House in March 2008. Ministers and senior officials engaged with the ACBC on future prospects and priorities in Australia’s economic and trade relationship with China.

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

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

(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
Source: DFAT STARS database and ABS Catalogue 5368.0.


The department advanced Australia’s substantial economic interests in Taiwan. In 2007, Taiwan was our ninth-largest export destination, with exports valued at $6.5 billion.

Energy and resources continue to underpin the economic relationship. In November 2007 the department helped facilitate the signing of a Key Terms Agreement between Woodside and Taiwan’s CPC Corporation for the sale of LNG to Taiwan. The agreement forms the basis for the parties to negotiate an LNG supply agreement for the potential sale of 2 to 3 million tonnes of LNG a year over 15–20 years, targeted to commence between 2013 and 2015. Mr Crean attended a signing ceremony in February 2008 to acknowledge the agreement.

The department organised and hosted the 12th round of annual economic consultations. The consultations helped to advance trade and economic objectives, including in the areas of investment, science and technology and education.

Other outcomes to which the department contributed during the year included the signing of memorandums of understanding on customs cooperation, and on the regulation of ‘spam’ email and a mutual recognition arrangement on the exchange of safety reports on radio communication products.

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

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

(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
Source: DFAT STARS database and ABS Catalogue 5368.0.

Hong Kong

The department continued to work closely with the Australian business community and other stakeholders to advance our substantial commercial interests in Hong Kong.

A major success in 2008 was the decision by Hong Kong’s Government in its 2008–09 Budget to abolish duties on wine, beer and other alcoholic drinks (except spirits). Together with industry, the department lobbied strongly for the abolition, which will benefit Australian wine exporters and wine-related services providers. We also worked with other affected countries and industry to mitigate any trade-restricting effects of the region’s new nutritional labelling requirements. We will monitor the effects of this legislation on Australian exporters of small volume products and consider further action if required.

The department supported a visit to Hong Kong by Mr Smith in May 2008. The visit reaffirmed Australia’s strong ties with Hong Kong and advanced economic interests—Hong Kong is already Australia’s fifth-largest source of investment and there are strong prospects for increased investment. The department supported a visit to Hong Kong in April 2008 by the Minister for Agriculture, Fisheries and Forestry, Mr Tony Burke.


Macau’s rapid growth continues to attract significant Australian investment and increasing exports of Australian professional services, notably in the tourism, gaming, construction, and food and beverage sectors. Two thousand Australians now live and work in Macau and this number is increasing. The department supported growing business community and commercial interests by increasing consular visits to Macau and introducing a postal passport application service for adult passports.

Republic of Korea (ROK)

The ROK is Australia’s third-largest merchandise export market and an important partner on regional issues.

The department facilitated a number of high-level visits that advanced our political, strategic and economic interests, and demonstrated the importance Australia places on its relationship with the ROK. Apart from Mr Burke’s visit in April 2008, the Minister for Foreign Affairs, Mr Smith, visited the ROK in May 2008. The Minister for Broadband, Communications and the Digital Economy, Senator Stephen Conroy, visited ROK in June 2008, as did the Minister for Climate Change and Water, Senator Penny Wong. The Speaker of the House of Representatives, Mr Harry Jenkins, represented the Government at the inauguration of ROK President Lee Myung-bak in February 2008.

Former ROK President Roh Moo-hyun visited Sydney in September 2007 to attend the APEC Economic Leaders’ Meeting. The department supported a Guest-of-Government visit to Australia in May 2008 by Ms Park Geun-hye, a prominent and influential ROK politician. As part of our FTA advocacy and to promote Australian beef, Mr Nam Ho-kyung, President of the ROK Hanwoo (beef cattle) Association, visited Australia in June 2008 under the department’s Special Visits Program.

The department continued to promote and support Australia’s expanding commercial interests in the ROK. Australian merchandise exports to the ROK increased by over 9 per cent in 2007 to reach $13.5 billion. In the same period, Australian services exports to the ROK amounted to $1.86 billion, an increase of 14 per cent over 2006. This performance reflected increased exports of natural resources and energy and major contributions by travel, and transportation and education services. In 2007, the number of ROK student enrolments in Australia increased by 11 per cent to reach 34 674 while 253 200 Koreans visited Australia.

The department worked closely with the Australian beef industry to defend Australia’s beef exports in the face of renewed competition from competitors. We facilitated a visit to the ROK in Apri 2008 by the Minister for Agriculture, Fisheries and Forestry, Mr Burke, which resulted in positive discussion at ministerial level of our key agricultural trade interests. The department also supported efforts by Australia’s LNG industry to increase sales to the ROK.

We continued to promote the benefits of a comprehensive FTA to ROK ministers and senior officials. We consulted closely with Australian and Korean peak industry groups to support the outcomes of the joint non-government FTA feasibility study, completed in April 2008, which concluded that Australia and the ROK would benefit significantly from negotiating a comprehensive FTA. We will continue to press for early commencement of negotiations.

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

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

(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
Source: DFAT STARS database and ABS Catalogue 5368.0.

Democratic People's Republic of Korea (DPRK)

Reflecting Australia’s strategic interests in North Asia and commitment to the international non-proliferation regime, the department continued to cooperate closely with like-minded countries to encourage the DPRK to abandon its nuclear program. The department continued to implement fully the measures contained in United Nations Security Council Resolution 1718, which was adopted in response to the DPRK nuclear test of October 2006.

Photo - See caption below for description
Minister for Foreign Affairs, Mr Stephen Smith, meeting with President of the Republic of Korea, Mr Lee Myung-bak, at MráLeeĺs official residence, Cheong Wa Dae (the Blue House) in Seoul on 8 May 2008. Photo: Blue House
Enlarge image :: Photo gallery

Until the DPRK closed its Canberra embassy in January 2008, the department met regularly with the ambassador and other embassy officials to urge the DPRK to abide by the commitments it made under the Six-Party Talks process. A delegation led by Dr Geoff Raby, Australia’s Ambassador to China and the DPRK, visited Pyongyang in August 2007 to reinforce this message and to emphasise the benefits which the DPRK would derive from doing so.

Australia welcomed the DPRK’s shutdown of its Yongbyon nuclear facilities and the readmission of International Atomic Energy Agency (IAEA) inspectors in July 2007 as positive steps towards the denuclearisation of the Korean peninsula. We also welcomed the DPRK’s commitment in the 3 October 2007 Six-Party Agreement to provide a complete and correct declaration of its nuclear programs and to disable its Yongbyon reactor, reprocessing plant and fuel fabrication plant by 31 December 2007. Mr Smith welcomed the DPRK’s submission of its declaration of nuclear programs to China, as Chair of the Six-Party Talks, on 26 June 2008.

Although bilateral development assistance and progress in the bilateral relationship remain suspended, Australia continued to provide humanitarian assistance to the North Korean people, without linkage to political considerations, through United Nations agencies and the Red Cross.


The department expanded the bilateral relationship with Mongolia. The two countries held the first meeting of the Joint Working Group on Mining and Energy in Ulaanbataar in August 2007 and Australia appointed an Honorary Consul based in Mongolia in late 2007.

TABLE 5. Australia's trade in goods and services with North Asian economies

Goods and services (a)

Republic of Korea
Hong Kong, China
Other (b)
Total North Asia

(a) Goods data on a recorded trade basis, services data on a balance of payments basis.
(b) Goods data only. Services data is not published by the ABS for these countries.
Source: DFAT STARS database and ABS Catalogue 5368.0.


The department will continue to work with North Asian partners to promote regional stability and Australia’s economic interests.

The department will continue to strengthen Australia’s economic relationship with Japan, including by seeking to achieve substantial progress in FTA negotiations. We will continue to implement and build on the Action Plan for the Joint Declaration on Security Cooperation. The Australia–Japan ‘2+2’ Joint Foreign and Defence Ministerial Consultations (JAUSMIN) is an important forum for the Minister for Foreign Affairs and the Minister for Defence to discuss issues of common strategic interest with their Japanese counterparts. The next JAUSMIN meeting is due be held before the end of 2008. The Trilateral Strategic Dialogue, which brings together the foreign ministers of Australia and Japan and the Secretary of State of the United States, also provides a forum to exchange views on both regional and global issues of mutual interest, and to discuss trilateral cooperation that helps promote stability and security globally with a particular focus on the Asia Pacific region. The department will continue to urge Japan to cease whaling activities in the Southern Ocean. We will work to ensure that differences over whaling do not undermine other elements of our bilateral relationship.

The department will further consolidate the bilateral relationship with China, building on our strong economic complementarity, shared interests in regional stability, and extensive community links. We will seek to achieve substantial progress in FTA negotiations. We will pursue bilateral engagement through regular official dialogues on resources and energy, trade in services, strategic issues, regional security, climate change and human rights.

The department will continue to expand Australia’s relationship with the ROK, including by supporting efforts by Australian business to increase commercial ties. We will seek to build on the successful conclusion of the joint non-government FTA study to move towards commencement of negotiations.

The department will continue its close and active cooperation with the United States, Japan, the ROK and the international community to encourage the DPRK to continue to honour its commitment to denuclearise. We remain ready to provide direct support to the DPRK, conditional on continuing progress towards the abandonment of its nuclear programs.


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