Whether the new free trade agreement with Japan is a big success or just a milestone along the way for future negotiations, some good will come from it immediately. Investors should see what industries and companies may gain from these changes.
Apart from the foods products that Australia exports to Japan each year, Australian consumers will benefit by the elimination of tariffs for Japanese cars and electronic appliances. The current tariff is about $800-$900 depending on the car. It is hard to say how much extra earnings per car that will create for auto dealership companies like Automotive Holding Group Ltd (ASX: AHE) or AP Eagers Limited (ASX: APE), but if Japanese car prices come down some, then sales volumes may increase.
After sales parts and vehicle accessories suppliers such as ARB Corporation Limited (ASX: ARP) could sell more items for popular Japanese 4WD vehicles and trucks if there is a competitive price advantage for such vehicles.
For Australian exports, most energy and mineral resources will enter Japan duty-free. Iron ore, coal and LNG are already duty-free, so the immediate elimination of tariffs under this agreement would be for such things as coking coal, petroleum oils and titanium dioxide.
Again, the producers of such materials may not see a reduction in their costs, yet sales volumes may increase because of it and could give better pricing. Rio Tinto Limited (ASX: RIO) and BHP Billiton Limited (ASX: BHP) are some of the major exporters of metallurgical coal.
Titanium dioxide is a form of rutile, or mineral sand, that Iluka Resources Limited (ASX: ILU) produces high grades of. The material is in high demand in China as well for paint and the production of titanium.
Foolish takeaway
News about trade agreements may not be exciting to read about, yet the effects can be great over time. Further negotiations may get more Australian exports into Japan and we can buy our favourite products cheaper here.
