Protectionist Japan warms to more free trade
Asia Times | Mar 23, 2007
Protectionist Japan warms to more free trade
By Suvendrini Kakuchi
TOKYO — Japan’s new free-trade agreements (FTAs) with Southeast Asian countries symbolize a new era in regional economic ties — a move from the old "big brother" relationship to a series of bilateral partnerships that could represent the first step toward a future single Asian market.
"Japan is keen to move ahead with bilateral trade pacts in the Pacific and East Asia," said Daisuke Hiratsuka, an economist at the Institute of Developing Economies, a quasi-governmental think-tank. "The view here is that FTAs can be the key to developing a highly sophisticated Asian export market, producing cheap but technologically advanced goods, a position of strength for Asia in the era of globalization."
Indeed, the FTAs are referred to in Japan as economic partnership agreements (EPAs). The concept, trade experts say, demonstrates the growing view in Japan among the business community and government officials that bilateral agreements not only foster trade, but incorporate a wider exchange of personnel, technology and natural resources.
"The EPA is an extremely strategic requirement for Japan that faces such challenges as a lack of raw materials, low birth rates and closed-door immigration policies," said Masaki Fukunaga, a regional trade expert. "Bilateral agreements based on dealing with these specific issues are important. For [Southeast] Asia, on the other hand, the merit is to gain Japanese technology and inroads to its market."
Japan’s aging population will require an increase of 1.5 million home caregivers by 2010, a requirement that cannot be met by its current population growth of 1.3 births per woman. Also, China’s growing energy needs are challenging Japan’s own supply markets in Asia. That has Tokyo aggressively trying to secure trade deals that bolster its energy security. A case in point is the recent FTA with Brunei, a Southeast Asian country rich in oil and gas, with which discussions were launched in December.
Almost 100% of Japan’s imports from Brunei consist of natural gas and oil. Meanwhile, cars and auto parts comprise about 70% of Japan’s exports to Brunei, with tariffs expected to be eliminated within three years.
Japan concluded its first FTA, with Singapore, in 2002. The bilateral pact covers access to finance and other service sectors. It has worked well for both sides mainly because it does not include contentious issues such as liberalizing Japan’s politically powerful farm sector.
South of the border
Next month, Japan is expected to complete pacts with both Thailand and the Philippines, though the going has not been easy. Big concessions were made - mainly from Japan, by accepting a larger number of Filipino and Thai workers in exchange for scrapping tariffs on Japan’s machinery exports to those countries.
Seiya Sukegawa, an economist at the Japan Export Trade Organization (JETRO), said studies have confirmed that EPAs signed and under consideration are beneficial to both sides by facilitating larger trade volumes.
"Japanese companies have expressed a huge interest in the upcoming FTA and see it as strengthening investment in Thailand. Eliminating tariffs will boost Thai exports from Japanese companies and also pave the way for Japanese products to enter the domestic Thai market," he said.
Thailand currently imposes an almost 20% tariff on Japanese imports of auto-related products, which would be significantly reduced in the proposed FTA. Japan, on the other hand, will substantially cut its current average 21% tax on seafood products imported from Thailand.
Despite those potential trade gains, there have been a series of sticking points. Critics of the potential deals have highlighted gaps in expectations between Japan, an industrialized country, and the developing economies of Southeast Asia, where the elimination of tariffs will result in loss of public income as well as crimp the fortunes of certain local companies.
The scheduled FTA with Thailand has been delayed for more than a year because of political uncertainty that followed the installation of a military government there last September 19. The deal has also encountered difficulties in sorting out tariff cuts, especially for Thai food exporters keen to gain greater access to Japan’s highly protected and potentially lucrative agricultural markets.
A proposal by Japan to export industrial waste to Thailand as part of the FTA has raised the hackles of civil-society groups there, forcing the issue off the negotiating table recently. Waste exports to the Philippines have also been shelved as part of a possible FTA with Manila. Japanese farmers are similarly peeved by the threat of Thailand, a major rice exporter, flooding their markets with cheaper imports.
"We are already seeing incomes drop as a result of the liberalization of the domestic agricultural market," said Yoji Kusada, a farmer in Hokkaido. "While rice is still protected, an FTA could lead to a change. We cannot compete with imports of cheap rice from Asia." Japan currently imposes a whopping 700% tariff on imported rice.
Tokyo’s decision to open the beef market to foreign imports has hit Japanese livestock producers particularly hard: annual incomes among cattle farmers are down between 20% and 30% since FTAs came into effect, official reports say. As such, Takeshi Yasumasa, head of the non-governmental organization Civilian Research on the Problem of Waste Disposal, said there is a need for upcoming FTAs to be negotiated carefully.
Yasumasa, who leads a lobby to stop Japanese industrial waste being exported to the Philippines, said: "FTAs can work for both sides if the governments can incorporate such issues as environment protection, support for the losers, and other factors that ensure a fair exchange. The pact must not just focus on gaining profits."
(Inter Press Service)
