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Japan-India accord should lead to more EPAs

The Yomiuri Shimbun | Sept. 21, 2010

Japan-India accord should lead to more EPAs

The Yomiuri Shimbun

An economic partnership agreement with India likely will give Japanese businesses a boost in such industries as automobiles and home electronic appliances in the huge Indian market, which has been growing rapidly.

Japan and India broadly agreed earlier this month to sign an EPA. A formal agreement is expected to be made when Indian Prime Minister Manmohan Singh visits Japan in October.

The agreement is the first of its kind to be made under the Democratic Party of Japan-led government and will make India the 12th nation or region with which this country has an EPA. Coming as it did after four years of difficult negotiations, the broad agreement is of particular significance.

The key point in the agreement is that the two nations will gradually lower tariffs on goods that account for 94 percent of the value of their exports, and eliminate the tariffs in 10 years.

The tariffs imposed by India on Japan’s major export items, such as auto parts and steel, range from 7.5 percent to 10 percent. Japan would benefit greatly from their elimination.

Japanese manufacturers with production bases in India also could reduce the procurement costs of parts from Japan and other items.

The EPA also includes an agreement to ease restrictions on investment in India. We hope Japanese companies seize this chance by carefully crafting strategies for the construction of local factories and expanded investment in plants and equipment.

Highly attractive market

The Indian market is particularly appealing. The nation has a population of 1.2 billion people and its economy continues to register 9 percent annual growth. The number of middle-income households who purchase such products as automobiles and home electronic appliances is rapidly growing, and there has been strong demand for social infrastructure such as railroads and electric power.

Prime Minister Naoto Kan’s administration has expressed its intention to incorporate the vigor of Asia and other regions in its new growth strategy. In line with this policy, the EPA between Japan and India is expected to strengthen Japanese companies’ competitiveness and expand infrastructure exports.

But South Korea, which has been aggressively promoting EPAs, already put one with India into effect in January. Under this bilateral agreement, tariffs on many items are set to be abolished in five to eight years, a faster pace for opening up the Indian market than the one established in the Japan-India pact.

The Japan-India EPA will alleviate some of the disadvantages Japanese companies face against their South Korean rivals. But we must keep an eye on the competitiveness of South Korean companies.

Compromise needed

India has asked Japan to accept Indian nurses and other workers, but Japan has resisted making a specific decision on this matter. To deepen economic partnerships between this country and India, Japan should make concessions.

Japan has fallen behind other nations in its EPA strategy. Negotiations with South Korea have been suspended, and talks with Australia have run into difficulty as Japan is resisting opening its agricultural market.

There are no prospects even for the start of negotiations with the United States and the European Union.

To help Japan catch up, the government aims to devise basic guidelines on the EPA by November. We urge the government to include measures to open the agriculture sector, which has always been the bottleneck in negotiations. Without this, there will be no progress.

 source: Yomiuri Shimbun