Thursday, March 11, 2004
Japan faces more free trade tests after Mexico
Reuters Tokyo, March 11
Japan's progress towards a free trade pact with Mexico gives a shine to its image but whether the breakthrough will make it easier to forge similar deals in Asia is hard to say, analysts said on Thursday.
Japan is keen not to lose ground to China in a race for free trade agreements (FTA), but there have been doubts about its commitment since its only FTA so far, with Singapore, doesn't include politically sensitive farm products.
"I think a Japan-Mexico FTA would come as a big shock to... China and South Korea, which didn't think Japan would move forward," said Waseda University professor Toshihiko Kinoshita.
Japan and Mexico edged closer towards a free trade pact this week after nearly 16 months of difficult talks, which were dogged by disputes over market access for Mexican pork and orange juice as well as Japanese cars and steel.
While a formal pact has yet to be sealed, ministers from the two countries said on Wednesday that they had reached broad or general agreements on farm and industrial products.
The negotiations are likely to have given Japanese officials experience in making package deals that strike a balance on farm and industrial goods beneficial for both sides, said Sanae Suzuki, a researcher at the Institute of Developing Economies.
"I think it let them study how to make a package," Suzuki said, adding that such know-how would be beneficial for Japan's FTA talks with Asian countries.
Japan launched talks with Malaysia, Thailand and the Philippines this year and with South Korea late last year.
It hopes to conclude agreements with some of those countries before starting talks on a broad pact with the Association of South East Asian Nations (ASEAN) by the beginning of 2005, with the aim of forging a pact by 2012.
China aims to conclude a free trade pact with six ASEAN countries by 2010 and with the other four by 2015.
NEEDED JOLT?
Among countries with which Japan is in talks, the one to feel the biggest impact from a Mexico-Japan FTA is likely to be South Korea, said Waseda University's Kinoshita.
South Korean products will face a disadvantage against Japanese goods on exports to Mexico if the deal is clinched.
"I think it will create a greater sense of urgency in South Korea that it can't focus just on agriculture, that it needs to move forward on FTAs," he said.
Like Japan, South Korea has only one free trade deal, a pact with Chile, which finally passed parliament in February after three previous attempts were foiled by violent demonstrations by farmers and obstruction by farm-belt legislators.
"This will be positive for a Japan-South Korea FTA," said Kinoshita, a specialist in international economics.
But analysts also sounded a note of caution, saying each FTA negotiation had unique circumstances and issues.
For example, calls for FTAs with the four Asian countries aren't as strong in Japan compared to the case of Mexico, IDE's Suzuki said.
"In Mexico's case... there was very strong pressure from the car industry," Suzuki said.
"But with Asian countries, industrial products won't come up as much and the focus will be more on farm goods," she said.
An agreement with Mexico on farm products doesn't mean a deal with Asian countries will be easy.
"Key products are different for each case," said Ken-Ichi Takayasu, a senior economist at Japan Research Institute.
"In the likely case that Japan discusses rice with Thailand, that will involve a whole different set of interests," he said.
© Hindustan Times Ltd. 2004.