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Fear of losing out to China prompts FTA stampede

Japan Times

10 September 2004

Fear of losing out to China prompts FTA stampede


Staff writer

Panicking suddenly over the specter of being left behind by its Asian neighbors, Japan is rushing to conclude bilateral free-trade agreements, with ministers striving to get stalled talks restarted.

Japan is preparing to open its doors to more skilled labor, looking to wrap up free-trade accords with Malaysia, the Philippines and Thailand by year’s end, according to Cabinet ministers. Tokyo also plans to conclude negotiations with Seoul in 2005.

The Health, Labor and Welfare Ministry is considering hitherto unthinkable plans to accept Filipino nurses and other caregivers — on condition that they learn to speak Japanese and pass Japanese license exams. In return, the Philippines would lower trade barriers on machinery and electronics products.

But that’s not all. Japan has its sights on bigger fish.

The government agreed Saturday with the 10-member Association of Southeast Asian Nations to launch discussions over an FTA next year, with an eye to signing the treaty by 2012. It is also making overtures to more than 10 other countries, including China, India, Australia and Brazil, in pursuit of economic partnerships.

Japan has thus far signed one FTA — with Singapore in January 2002. It will sign another with Mexico this month.

Talks are gaining momentum amid complaints by Japan’s biggest exporters that the spread of free-trade pacts has led to tariff hikes for countries without FTAs.

Until World Trade Organization talks make concrete progress toward a more comprehensive agreement, "Japan does not want to end up footing the bill for free-trade agreements between other countries," said Osamu Watanabe, chairman of the Japan External Trade Organization.

Exporters also point to China’s ongoing FTA negotiations with ASEAN members, New Zealand and Australia, warning that Japan will concede its status as regional economic leader to China.

Eager to take the initiative, members of the Japan Business Federation (Nippon Keidanren), the country’s most powerful business lobby, plan to accompany Prime Minister Junichiro Koizumi when he visits Brazil later this month. They hope to make presentations on the potential benefits of an FTA between Brazil and Japan. But farmers in Japan — as in most countries — remain opposed to lowering trade barriers and letting cheaper crops in. Japan also has especially high tariffs on shoes and other leather products, in part to protect the descendants of "burakumin," the feudal-era outcast class of leather tanners.

The FTA with Singapore does not include agricultural products. But the FTA with Mexico will lower or eliminate barriers on 380 foods and drinks, including pork, beef and orange juice.

As domestic pros and cons indicate, an FTA could widen economic disparities within the country, economists say.

According to the Research Institute of Economy, Trade and Industry, a trade ministry think tank, FTAs will boost growth in Aichi Prefecture, home to Toyota Motor Corp., whose chairman also chairs Nippon Keidanren.

FTAs are likely to harm growth in regions heavily reliant on agriculture, it said.

Hajime Yamazaki, chief consultant of UFJ Institute Ltd.’s investment consulting department, pointed to the overall benefits.

"Japanese consumers, who have been ignored in the debate about FTAs, stand to benefit from cheaper farm goods," he said.