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Japan, India to agree on FTA by year-end: sources

Kyodo News, Japan

Japan, India to agree on FTA by year-end: sources

17 August 2010

TOKYO/Kyodo Japan and India are expected to reach a bilateral free trade agreement by the end of this year, sources close to the matter said Tuesday.

It will mark the 12th such trade deal for Japan and the first since the Democratic Party of Japan-led coalition wrested power from the long-ruling Liberal Democratic Party in September 2009.

Through the arrangement, Tokyo aims to stimulate Japan’s economic growth by boosting exports of vehicle parts and other products to India, which with a population of 1.2 billion is the second-most populous market after China.

Prime Minister Naoto Kan’s government has been promoting the establishment of closer economic relations with emerging Asian countries through FTAs under the nation’s growth strategy, as Japan aims to benefit from fast-growing Asian economies.

The government is seeking to expand Japan’s network of FTAs by accelerating similar free trade talks with South Korea and Peru, in addition to India.

For the Japan-India trade deal, both countries’ governments appear to have made concessions to reach an agreement, with the Japanese side moving toward simplifying approval procedures for the sale of medical goods in its domestic market, while the Indian side looks set to cut tariffs on vehicle parts, the sources said.

After holding a working-level meeting in September, the two countries are expected to strike a basic agreement on the FTA in the fall when Indian Prime Minister Manmohan Singh visits Japan and meets with Kan.

By reaching an FTA with India, where Japanese manufacturers of cars and electronics appliances are expanding their output, Japan is aiming to benefit from tariff cuts on parts and materials imported from Japan for production in India.

India, meanwhile, is seeking to boost exports of generic drugs to Japan.
According to the Japanese Foreign Ministry, trading with India accounted for only 0.9 percent of Japan’s total trade value in fiscal 2008.

When then-Prime Minister Yukio Hatoyama visited India in late 2009, he agreed with Singh to accelerate the countries’ FTA talks to strike an agreement at an early date.

So far, Japan has agreed FTAs mainly with members of the Association of Southeast Asian Nations such as the Philippines and Indonesia.

Japan is hoping to reach FTAs with other countries at an early date as it is lagging behind South Korea in FTA negotiations with big markets such as the European Union and the United States. South Korea has already agreed an FTA with India.

Some Japanese vehicle and electronics manufacturers that are facing tough competition from South Korean rivals in the global market have expressed concern regarding the Japanese government’s slow FTA negotiations with other countries.