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Japan’s 2010 Regional Free Trade Agreement: No Laughing matter?

Updated On: Apr 07, 2006

Free trade Agreements (FTAs) or Economic Partnership Agreements (EPAs) appear to serve as the current foreign policy tool to build regionalism within ASEAN and East Asia, but more needs to be said about their underlying political-economic intent and outcome.

Japan has announced an ambitious plan to forge a Regional FTA with the 10 ASEAN member states, ChinaSouth KoreaAustraliaNew Zealand and India – attendees of the first East Asia Summit last December – by 2010. Trade Minister Toshihiro Nikai revealed this at a press conference on April 4 adding that the 2010 FTA is a first step towards the establishment of an East Asian economic community.

This might come as a surprise for many since much need to be done on the Japanese side as Japan has been amongst the slowest to jump on the bilateral and regional FTAs.  However, it might be a signal that  Japan is rushing to put its own house in order by revising its national FTA policy, which operates only on an ad hoc basis and is limited by the actions of its major trading partners. Overseen by the Council on Economic and Fiscal Policy (CEFP) which is chaired by Prime Minister Junichiro Koizumi,Japan needs to cough up a new “global strategy” for FTAs by May this year.

But two major stumbling blocks stand in Japan’s way to becoming a full-fledged FTA player: agricultural liberalisation and cross-border movement of labour. A current FTA with Malaysia and ongoing talks with the PhilippinesThailandIndonesiaSouth Korea, and Chile are at stake.  

To realise the Regional FTA initiative, Japanese Foreign Minister Taro Aso has prescribed a reduction of the time-frame of negotiations. Elsewhere, Motoshige Itoh, an economics professor at Tokyo University who has been involved in Japan’s FTA negotiations, explained that Japan “cannot afford to be left out” of the current FTA race within Asia and at the global scale. Japan has reached a “turning point and must go along with the rest of the world,” he adds.

Thus far, Japan has only secured FTAs with Singapore and Mexico, but is now taking on the ‘unnatural’ role (vis-à-vis ASEAN) of extending FTAs to 15 countries and regions stretching from India to Australia and from Asean to the Persian Gulf.

Why the haste and ambition?

Japan’s move can be interpreted as an attempt to regain regional leadership lost to China in the current FTA race, especially over ASEAN. The recent Sino-Aussie trade agreement on mineral resources added to the sense of urgency.  Meanwhile, the US is aggressive in having a share of the pie as well since the launch of the 2002 Enterprise for Asean Initiative, and has targeted to complete deals with Vietnam, Laos, Thailand and Malaysia before June next year.  And Japan’s other East Asian partner South Korea is also negotiating with the US.

Japan’s Regional FTA strategy may either appear to be a pipedream or a way out of the political stalemate given the current ‘tense’ relations with China and South Korea over the Yasukuni shrine visits.

Regardless of the outcome, Japan is not placing all its chips on the Regional FTA, as the competition for energy security is fought on other soils as well. Following the bids by China, the US and European nations, Japan is alsoexploring FTA options beginning July this year with the Gulf Cooperation Council (GCC), which currently supply Japan with 75 per cent of its crude oil and more than 23 per cent of its natural gas requirements.

Japan is not the only new convert to the race to conclude FTAs. Malaysia, who used to eschew bilateral FTA is now on high gear in this track.  International trade minister Datuk Seri Rafidah Aziz on April 4 presented Malaysia’s strongest stance on FTAs yet. “Southeast Asia's aim to boost regional economic integration shouldn't stop individual countries from seeking bilateral free trade pacts [since] every country retains the right to forge individual accords with anyone,” Rafidah said.

However, more perhaps need to be done to consider the implications of the various bilateral FTAs as a recent UNESCAP report warned against possible negative effects of the proliferation of FTAs.   Other considerations include addressing the people’s concerns of FTAs undermining job and food security, and the nation’s economy, as well as a more transparent process in forging FTA deals – issues raised by Malaysian activists two weeks ago against a bilateral free trade deal with theUS.

Sources:

Corporate Japan plans major thrust into India (The Business Times, March 20, 2006)

Japan shaping national FTA strategy (The Business Times, March 27, 2006)

Malaysia’s FTA with US faces protest (Associated Foreign Press, March 27, 2006)

US keen to boost Asean trade via S'pore (The Straits Times, April 3, 2006)

Rafidah: ASEAN vision for economic integration shouldn't block individual FTA talks (Associated Press, April 4, 2006)

Japanmoots regional free trade pact by 2010(The Straits Times, April 5, 2006)