Japan-Thailand FTA: Tokyo settles for an easy and small trade deal.
The Asahi Shimbun, August 4, 2005
EDITORIAL: Japan-Thailand FTA
Tokyo settles for an easy and small trade deal.
Japan has reached a general accord for a bilateral free trade agreement (FTA) with Thailand, a key trade and diplomatic partner in Asia. Expectations for a substantial and beneficial agreement were high, but the deal has ended up a deep disappointment apparently because Japan took the line of least resistance.
Japan’s principal goal was opening up the Thai auto market. But the agreement provides for only a small reduction in Thailand’s tariffs on large passenger cars and puts off the final decision concerning smaller vehicles. The deal will scrap Thai import duties on auto parts and steel products, but only through a slow process stretching for up to 10 years.
While the negotiations are aimed at concluding a comprehensive economic partnership that also covers a range of projects for industrial development in Thailand, such as training programs, the core is free trade. But Japan has failed to accomplish much of its objectives on this count.
The poor results should be blamed primarily on Japan’s unwillingness to open its market for Thai agricultural products. Tokyo ensured early in the talks that rice fell off the agenda. And the slim cuts in Japan’s tariffs on Thai exports of chicken and pork agreed upon offer no great benefits for Japanese consumers.
Japan agreed to allow a small number of Thai nurses to work in Japan, but only as exceptional cases, much like in its FTA with the Philippines.
The negotiations covered a broad range of issues, including rules concerning investment and labor movements between the two countries as well as trade in a variety of goods, from farm produce to industrial products. There were understandably many tough policy challenges both sides had to tackle to work out an agreement.
The two countries now need to reopen talks on issues that have been shelved while moving for an early implementation of the tariff cuts they agreed upon.
The deal with Thailand represents Japan’s fifth bilateral FTA. But it is already clear that the Japanese government’s approach to negotiating such a trade pact is not producing the expected results. With FTA talks with South Korea, India and then China on the diplomatic schedule, the government should revise its negotiation strategy.
To secure good deals, it is crucial for Japan to develop tie-ups that include structural reforms in domestic industries instead of handling them with stopgap measures. In this respect, serious structural reforms in the domestic economy are needed to lower the barriers for agricultural imports and foreign workers.
Although Japan boasts high productivity in its manufacturing sector, it has made little headway in reforming its inefficient agricultural sector. Hamstrung by this productivity gap, Japan has been forced to settle for small, unsatisfactory trade deals in areas where its industries are highly competitive globally, such as automaking.
The government should also rethink the traditional formula for international negotiations based on the sectionalized government structure, in which individual ministries and agencies handle their respective areas of talks independently.
In the talks with Thailand, the Ministry of Agriculture, Forestry and Fisheries swiftly struck a deal on farm trade, leaving little room for bargaining to extract concessions for officials at the Ministry of Economy, Trade and Industry, which is in charge of trade in industrial products.
Japan’s negotiations with South Korea, aimed at hammering out an agreement by the end of this year, have been suspended for nine months. It is true that the recent diplomatic disputes between the two countries over history and other issues have caused the environment for the talks to deteriorate considerably. But the main cause of the impasse has been Japan’s reluctance to make concessions on farm trade in response to South Korea’s desire to increase its agricultural and fisheries exports to Japan.
Japanese industrial products generally have a competitive edge over their South Korean rivals. South Korea cannot be expected to offer concessions to strike a deal with Japan if there is not much to gain in return. If Japanese negotiators give serious consideration to the interests of the other side, it could lead to a fruitful FTA.
Japan has fallen badly behind in the accelerating global trend toward FTAs. It needs to realize that speedy negotiations and substantial agreements are expected.
