TRADE-JAPAN: No More Big Brother Approach in Asia

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Mar 20 2007 (IPS) - Japan’s new free trade agreements (FTAs) with South-east Asian countries symbolise a new era in regional economic ties – a move from the old big brother relationship to a series of partnerships that could be the first step towards a single market in the future, say analysts here.

”Japan is keen to move ahead with bilateral trade pacts in the Pacific and East Asia. The view here is 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 globalisation,” Daisuke Hiratsuka, an economist at the quasi-governmental think tank, the Institute of Developing Economies, explained to IPS.

Indeed, the free trade agreements (FTAs) are referred to in Japan as Economic Partnership Agreements (EPAs). This concept, trade experts told IPS, demonstrates the growing view in Japan, especially among the business community and government officials, that bilateral agreements foster trade, incorporating a wider exchange such as personnel 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. Bilateral agreements based on dealing with these specific issues are important, For Asia, on the other hand, the merit is to gain Japanese technology and inroads to its market,” said Prof. Masaki Fukunaga, an expert on South Asia.

Statistics estimate that Japan’s aging population will demand 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 energy supply markets in Asia, say analysts. A case in point is the FTA with Brunei, an oil and gas rich country, with which discussions were launched in December.

Almost 100 percent of Japan’s imports from Brunei consist of natural gas and oil. Cars and auto parts comprise about 70 percent 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 pact, that covers access to finance and export markets mostly, has worked well for both sides mainly because it does not cover contentious issues such as liberalising Japan’s politically powerful farm trade.

Next month, Japan is expected to complete pacts with Thailand and the Philippines, though the going has not been that easy. Concessions were made – mainly Japan accepting a limited number of Filipino and Thai workers in exchange for scrapping tariffs on Japan’s machinery exports to those countries.

Seiya Sukegawa, economist at JETRO, the Japan Export Trade Organisation, says studies conducted have confirmed that EPAs are beneficial to both sides by boosting trade in Asia.

For example, he points out, an FTA concluded between Thailand and Japan will lead to an increase of 25.8 percent in Thai exports to Japan while imports will increase 23 percent.

“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 also pave the way for Japanese products to enter the domestic Thai market,” he told IPS.

For instance, Thailand imposes almost 20 percent tariff on Japanese imports of auto-related products. Japan, on the other hand, will cut its current average 21 percent tax on seafood products imported from Thailand.

Despite the enthusiasm, experts also agree there are difficulties concerning FTAs that can often not be mutually beneficial. Critics have highlighted gaps in expectations between Japan, an industrialised country, and the developing economies of Southeast Asia where the elimination of tariffs, a key in an FTA, can result in loss of public income as well as decrease the income of local companies.

The scheduled FTA with Thailand, for example, has been delayed for more than a year not only because of political uncertainty following the installation of a military government in Thailand last year, but also because of difficulties in sorting out tariff cuts, especially for gaining access to the protected agricultural market in Japan.

A proposal by Japan to export industrial waste to Thailand also caused bitter resentment, forcing the issue off the table recently. Waste exports to the Philippines have also been shelved.

Japanese farmers are also not happy. They are watching with increasing nervousness as FTAs with countries such as Thailand, a major rice exporter, could hit them badly.

“We are already seeing incomes drop as a result of the liberalisation of the domestic agricultural market. While rice is still protected, an FTA could lead to a change. We cannot compete with imports of cheap rice from Asia,” said Yoji Kusada, a farmer in Hokkaido.

Japan has a 700 percent tariff on imported rice but its decision to open the beef market has hit Japanese livestock producers badly – annual incomes are down to between 20 to 30 percent official reports say. Takeshi Yasumasa, head of the non-governmental organization, Civilian Research on the Problem of Waste Disposal, said there was 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.” (ENDS/IPS/AP/IF/DV/IP/LB/WT/SK/RDR/07)

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