HindustanTimes.com

Friday, June 6, 2003

Worried Japan plays catchup on free-trade deals

Reuters
Tokyo, June 6

Japan is likely to step up efforts to sign a free-trade pact with South
Korea this weekend, looking to catch up on a global wave of two-way and
regional trade deals that threaten to chip away at its share of export
markets.

With feasibility studies already under way, Japanese Prime Minister
Junichiro Koizumi is expected to press for the start of higher-level talks
for a free trade agreement (FTA) when he meets South Korean President Roh
Moo-Hyun in Tokyo on Saturday.

"(The possibility of FTA negotiations) will probably be discussed along with
other issues," Vice Trade Minister, Seiji Murata told reporters this week,
declining to elaborate.

For Japan, the elimination of tariffs and restrictions on trade with South
Korea is not only a chance to bring about even bigger flows with its
third-largest trade partner.

It would also help to close the gap opened up by China's various initiatives
for free-trade ties within Asia, a growing focus for export-dependent
economies in the region.

"Japan still sees multilateral trade negotiations as its basic stance on
external trade policy, but it can't afford to fall behind in the global wave
of FTAs," said Yusuke Maekawa, a researcher at the government-backed Japan
External Trade Organisation (JETRO).

Japan's only FTA deal to date is with Singapore. Talks on an FTA with Mexico
are stalling over agricultural products.

STICKING POINT

Japan's long-protected farm sector is also expected to be a major sticking
point in any FTA negotiations with South Korea, along with Seoul's concern
that freer trade would widen its trade deficit with Tokyo.

Still, many say the fact that Japan is looking at FTA talks with Thailand,
the Philippines and Malaysia -- all big agricultural exporters -- is a sign
it sees FTAs as the way forward.

Thailand on Thursday hinted it could work around agricultural issues in
forging an FTA with Japan.

"Our country would like to sign an FTA with Japan, but there is a problem of
agriculture and we recognise this... So we can start sector by sector,"
Prime Minister Thaksin Shinawatra told a seminar in Tokyo.

That would be a welcome sign for Japan, which is now paying a high price for
its lack of an FTA with Mexico, once a hot market for its cars and
electrical components.

Mexico's free-trade pacts with 32 countries, including one with the United
States and Canada and another with the European Union, have taken a toll on
Japanese exports to it.

Chinese moves to cosy up to the 10-member Association of South East Asian
Nations (ASEAN) have also raised the stakes for Japan, threatening its role
as the region's economic leader.

China and ASEAN have a deadline set for June 30, 2004, to agree on schedules
for phasing out tariffs by 2010 for the six original ASEAN members and 2015
for the four poorer Indochina members of the club.

Japan, which approached ASEAN more than a year after China, agreed in
November to forge a wide-ranging agreement with it called the Comprehensive
Economic Partnership, which will include elements of a possible FTA, within
a decade.

Koizumi was quoted as vowing to Asian political and business leaders in a
speech on Thursday to make the partnership into a free-trade zone rivalling
the European Union and the North American Free Trade Agreement.
"In the case of Mexico, it may not be so much about what the merits would be
of having an FTA with a trading partner, but what the consequences are of
not having one," said JETRO's Maekawa.

"There are hopes that FTAs will be one initiative that could play a big role
in helping Japan beat its current economic slump... But once talks actually
start, it's often the case that obstacles emerge," Maekawa said.

© Hindustan Times Ltd. 2002.
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