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Japan, Mexico ink landmark accord

Japan, Mexico ink landmark accord

The Asahi Shimbun

20 September 2004

MEXICO CITY-After months of drawn-out negotiations, Prime Minister Junichiro Koizumi Friday signed an Economic Partnership Agreement (EPA) with Mexican President Vicente Fox.

For Japan, the agreement is the country’s most comprehensive bilateral accord to date.

The pact is the first to include agricultural products-a factor that initially drew strong opposition at home. It also goes a step further than a free trade agreement and includes regulations in other areas, including labor mobility and investment.

Mexican officials initially called for trade concessions in beef, oranges, pineapples and leather products. Japan instead agreed to expand import quotas over a five-year period for pork, beef, chicken, oranges and orange juice. The two nations said that would be revised in 2010-the fifth year into the EPA that is expected to come into effect next spring.

Japan has high hopes that Mexico, which boasts a population of 100 million and is the world’s 10th-largest economy, will raise industrial exports. The agreement will allow for a duty-free quota for motor vehicles and steel. It also earmarks a program that will eventually see those areas completely liberalized.

That is good news for Japan steel firms and automakers who have struggled to get a grip on the Mexican market.

Facing an average tariff level of 16 percent, Japan’s share of Mexico’s total imports tumbled from 6.1 percent in 1994 to 3.7 percent in 2000 after Mexico signed free trade agreements with the United States, Canada and the European Union allowing for zero tariff levels.

Now, say industry representatives, Japan’s industrial product exporters will have the chance to regain their position and expect exports to Mexico to compete on equal terms with those of U.S. and European manufacturers.

Mexico has also pledged to abolish tariffs on virtually all other products within 10 years. Japan will also be able to participate in Mexican government procurement tenders.

According to the Ministry of Economy, Trade and Industry, the EPA is estimated to increase the value of Japan’s exports by around 400 billion yen per year.

But it hasn’t been all smooth sailing.

The Japanese government came under sharp pressure from the nation’s influential farm lobby to protect pig farmers. Despite almost halving the tariff on high-quality pork from 4.3 percent to 2.2 percent and expanding the import quota to 80,000 tons over a five-year period, government negotiators decided to retain the differential value tariff system to protect domestic producers.

That compromise means consumers are not likely to see reduced pork retail prices.

Meanwhile, analysts say the decision to include agricultural products will likely influence Japan’s ongoing talks on free trade agreements with Southeast Asian countries including Thailand, the Philippines and Malaysia.

(IHT/Asahi: September 20,2004) (09/20)