Abe-Bush statement sets ball rolling on FTA
Daily Yomiuri, Japan
Abe-Bush statement sets ball rolling on FTA
By Toshihiko Yada and Shigeki Kurokawa
30 April 2007
The agreement by Prime Minister Shinzo Abe and U.S. President George W. Bush to share information about their countries’ free trade agreement talks with third parties apparently marked a first step toward an eventual FTA between Tokyo and Washington.
But despite the inclusion of such a goal during their summit meeting at Camp David, Md., on Friday, both governments will need to tread carefully: Many people in Japan are worried any such deal with the United States would be a devastating body blow to the domestic agricultural industry.
Both leaders pledged to exchange information about trade pacts their countries have signed or are negotiating. But the joint statement explicitly avoided the wording "Japan-U.S. FTA" to prevent irritating domestic business leaders who are uneasy about recent trade liberalization drives.
On the surface, trade officials in the Bush administration avoided directly mentioning the Japan-U.S. FTA plan. Assistant U.S. Trade Representative Wendy Cutler even said recently the United States is "not ready" for an FTA with Japan. But with the leaders’ statement including the acronym "FTA" and exchanges of information set to start, the tasks lying ahead for both sides are becoming apparent.
"The statement likely marked the first step toward a bilateral FTA between Tokyo and Washington," a Japanese trade negotiation source said.
Washington has its sights set on strengthening the global free trade system that has the United States at its core. Signing an FTA with Japan—the world’s second-largest economy—after reaching a pact with South Korea would represent a huge stride toward the U.S. goal of signing an FTA with the Asia-Pacific Economic Cooperation forum, which could eventually lead to the Free Trade Area of the Asia-Pacific.
At a joint press conference after the summit meeting, Bush spoke warmly of the close economic ties between Japan and the United States. He said there was 270 billion dollars in bilateral trade last year, "and that’s positive for the American people and the people of Japan."
For Japan, FTAs are an effective way to attract other countries’ economic vigor to help maintain economic growth as the nation’s population decreases. The signing of an FTA between Washington and Seoul earlier this month also increased the sense of urgency among Japanese government officials and business leaders.
"Promoting an economic partnership pact [including an FTA] between Japan and the United States also is a pressing task," Japan Business Federation (Nippon Keidanren) Chairman Fujio Mitarai said at a press conference on April 23.
Japan and the United States also have a common interest in working together to keep pace with China, whose economy has been barreling along in recent years. In 2006, the U.S. trade deficit with China hit a new high for the fifth straight year at 232.5 billion dollars, accounting for about 30 percent of the total U.S. trade deficit for the year.
Dissatisfaction among U.S. lawmakers about the ballooning trade deficit with China is reaching a breaking point, and several bills for trade sanctions on China have been submitted in the Congress.
The main purpose of the agreement between Abe and Bush to work together to realize a new international treaty for protecting intellectual property rights was to pressure China, which has been one of the world’s largest producers of pirated goods.
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Obstacles ahead
A Japan-U.S. FTA will have to overcome obstacles that are particularly high on the Japan side. Tokyo had been reluctant to even broach discussion of an FTA with Washington for fear of igniting a backlash from people in the agriculture sector and lawmakers with vested interests in the field who have been increasingly cautious about trade liberalization drives that might harm domestic agriculture.
In Japan, the average size of farmland managed by a farming household is 1.8 hectares. This pales in comparison with the United States, where the average family farm is 99 times larger at 178 hectares.
If all tariffs are eliminated and farmers in both countries have to compete under the same conditions, Japanese farmers would face crippling hardships.
U.S. industries also would not escape scot-free. If Washington abolishes its import tariffs on trucks, which currently are set at 25 percent, U.S. automakers may find themselves staring down the barrel of an increase of imported Japanese vehicles.
However, the U.S. government apparently expects the benefits to be gained in agriculture and some other industries will more than offset any losses incurred.
"Any time you have a lot of trade, there’s always complicated trade issues," Bush said at the press conference. "I’m absolutely convinced the Japanese people will be better off when they eat American beef," he added, a poke aimed at pressing the government to lift its ban on imports of U.S. beef.
For both governments, whether the planned bilateral FTA will benefit their respective trade strategies will require painstaking examination.
