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Japan, ASEAN reach FTA, but rice excluded

Japan Today

Japan, ASEAN reach FTA, but rice excluded

Sunday, August 26, 2007

MANILA - Japan and the Association of Southeast Asian Nations reached a free trade agreement Saturday, under which Tokyo will immediately repeal tariffs on 90% of imports from ASEAN by value to catch up with China and South Korea in intensifying regional FTA races.

Japan and ASEAN will sign the accord in November when their leaders meet in Singapore. Rice and some other agricultural products that are politically sensitive in Japan were excluded from the accord, which was struck at a Japan-ASEAN economic ministers’ meeting in Manila.

The FTA is the first that Japan has concluded with a regional bloc. Japan is now seeking a 16-nation free trade zone in the Asia-Pacific region that would put together the 10 ASEAN members, Australia, China, India, Japan, New Zealand and South Korea.

"This marks a great step forward" toward closer economic linkage in East Asia, Japanese Economy, Trade and Industry Minister Akira Amari told reporters after attending the Manila meeting. Trade between Japan and ASEAN totaled 16.4 trillion yen in 2005, making ASEAN Japan’s third-largest trading partner after the United States and China.

Liberalizing trade with ASEAN, with a population of some 5.5 million, is estimated to help expand Japan’s gross domestic product 1.1 trillion to 2 trillion yen, a Japanese official said. ASEAN can expect an increase in investment from Japanese companies in the region under the pact.

Under the latest accord, Japan will eliminate tariffs on 90% of imports from ASEAN by value immediately after it takes effect.

Six major ASEAN members - Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand - will repeal tariffs on 90% of imports from Japan within 10 years in terms of both value and the number of items.

A more gradual tariff elimination timetable was set for the remaining four ASEAN members with smaller economies - Cambodia, Myanmar, Laos and Vietnam.

Vietnam will eliminate tariffs on 90% of imports from Japan within 15 years and others will abolish 85% within 18 years.

Such major products from Japan as electrical appliances, automobile components and steel are subject to the tariff elimination in principle but excluded in some countries.

For example, tariffs of up to 40% have so far been levied when a Japanese manufacturer assembles flat-panel TVs in an ASEAN country, using key components imported from Japan, and sells them in another ASEAN country. Such high tariffs will be eventually eliminated within 10 years in seven ASEAN countries, including Malaysia and Thailand.

After immediately eliminating tariffs on 90% of imports from ASEAN, meanwhile, Japan will repeal the 3% portion within 10 years and lower tariffs on the 6% portion.

The remaining 1%, which represents some farm products like rice, sugar and dairy goods, was excluded from the tariff elimination and reduction.

China and South Korea have already concluded free trade accords with ASEAN. Without a similar accord, Japanese products would be less competitive than Chinese and South Korean goods.

ASEAN is also in free trade talks with India and Australia.

In FTAs, gradual tariff elimination is common. By immediately repealing tariffs on most imports, Japan aims to speed up liberalization of trade with ASEAN and boost the competitiveness of Japanese products in the region.

Japan will have more favorable treatment from ASEAN in tariffs on flat-panel TVs and automobile components, compared with the same South Korean products.

Tariffs on those products from Japan will eventually be eliminated in many ASEAN countries but those on such products from South Korea will only be reduced under its pact with ASEAN.

Among ASEAN members, Japan has implemented FTAs with Singapore and Malaysia. It has also signed agreements with Indonesia, the Philippines and Thailand, though these have yet to go into effect. It has reached an agreement with Brunei and is negotiating with Vietnam.

 source: Japan Today