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Japan: Free trade with Mexico

The Asahi Shimbun | Tokyo | March 12, 2004

EDITORIAL: Free trade with Mexico

Bilateral pact doesn’t mean giving up on WTO.

Japan and Mexico have reached a basic accord on free trade. Japan promises to increase imports of pork, oranges and other agricultural products from Mexico, while that country says it will import more steel, automobiles and other industrial products from Japan.

The pact is the first comprehensive free trade agreement that Japan has signed with any country. The move, reached after much difficulty in quelling the fears of domestic farmers worried about cheap agricultural imports, is a significant advance for Japan’s trade policy.

This nation has benefited from exports of electric appliances, automobiles and other industrial products in which it has a competitive edge. It has also built factories overseas. The gains from such trade have helped raise the standard of living for many Japanese citizens. Mexico is one of such trading partners for Japan.

As Mexico already has free trade agreements with the United States and Europe, however, Japanese businesses have been at a disadvantage in competing with industries of those countries.

While bilateral free trade agreements are sanctioned by the World Trade Organization, they are subject to strict rules. One rule is that more than 90 percent of the value of both parties’ external trade must be liberalized. That means if Japan wants to form free trade agreements with developing countries, it is obliged to open its market for farm products from those trading partners.

If the interests of all concerned are to be equally met, each side must compromise. Trade partners can profit in industries in which they have a comparative advantage, but weaker sectors of each country may suffer. At the same time, those relatively weaker sectors should try to improve their competitive edge by improving their structural organization. Japan’s agreement with Mexico demonstrates to the world that our nation has chosen to proceed in that direction.

Japan values economic cooperation with countries in East Asia, and so it has started negotiations for free trade agreements with South Korea, Thailand, Malaysia and the Philippines. Japan is likely to have difficulties with agricultural products like chicken and sugar in its talks with Thailand and in accepting health and nurse care workers in negotiations with the Philippines. We hope Japan, building upon its success with this agreement with Mexico, will be able to come to agreements with these countries that will help bring prosperity to all.

Countries that form a free trade agreement must, in principle, eliminate tariffs and other trade barriers within 10 years. The next decade is thus a do-or-die period of reform. In Japan’s agriculture sector, we must work to open the domestic market while advancing domestic production by increasing the scale of individual farms and working out reliable and sustainable methods to provide safe food to the consumers.

While the first step has been taken in a strategy to establish bilateral free trade agreements, care must be taken not to go too far in depending on them. For free trade to expand, the world needs multilateral agreements among the 150 countries that are parties to the World Trade Organization.

The latest round of multilateral trade negotiations with World Trade Organization members was stalemated by discontented voices in the developing world that said only the developed world benefits from free trade. But poorer countries also tend to be left out of bilateral free trade agreements. Developed countries thus must persuade developing countries that the next round of multilateral trade talks will benefit them as well. Japan should not slacken its efforts to promote the multilateral trade talks.

This nation shifted its emphasis to bilateral free trade agreements from the multilateral WTO talks because China had begun negotiating with the Association of Southeast Asian Nations, redoubling Beijing’s diplomatic efforts to increase trade with its neighbors. Japan is also being put to the test over what action it will take in regard to the political order in East Asia.

 source: Asahi Shimbun