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Japan seeks to assure future through East Asia initiative

Bangkok Post | December 16, 2007

Japan seeks to assure future through East Asia initiative

Nophakhun Limsamarnphun

Hiroyuki Ishige, director-general of Japan’s Trade Policy Bureau at the Ministry of Economy, Trade and Industry (METI), told me the other day that the size of Japan’s population peaked about two years ago, forcing the country to prepare for the consequences of a declining and ageing population.

One measure is to expand the role of Japanese businesses and industries overseas because of slower growth in domestic opportunities due to the demographic factor. Hence Japan, the world’s second largest economy after the US, jumped on the free trade agreement (FTA) bandwagon and has now modified it into the so-called economic partnership agreement (EPA) initiative.

Besides the import-tariff reductions featured in bilateral and regional FTAs, the proposed EPAs also cover liberalisation and facilitation of movement of people, goods and capital, as well as establish rules for investment, intellectual property protection and competition policy, among others.

Japan has signed EPAs with eight countries so far, including Singapore, Thailand, Malaysia, Philippines, Indonesia, Mexico and Chile, while conducting negotiations with South Korea, Vietnam, India and the Gulf Cooperation Council, which includes Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, Qatar and Oman. In addition, last month it concluded in principle a regional comprehensive EPA with the 10-member Asean grouping. According to Ishige, the multi-layered framework will strengthen the industrial competitiveness of Japan and Asean through trade liberalisation in the production network and lay the foundation for wider economic integration in East Asia.

Under the regional deal, trade in goods will be liberalised with a 90-per-cent cut in tariffs. Agricultural products such as rice will be excluded for Japan, largely due to strong domestic sentiment against opening this market.

However, the deal will endorse the accumulation of rules of origin, covering all parts and components produced in any of the Asean countries.

This will directly benefit Japanese automotive, electronic and electrical-appliance industries, among others, which have developed a region-wide network of factories in Asean countries for parts and components while helping to boost Asean’s competitiveness as a destination for foreign direct investment (FDI).

Ishige is also bullish on the so-called East Asia Initiative, in which Japan has been promoting the formation of an economic partnership involving Asean and six other countries, namely, China, Japan, South Korea, Australia, India and New Zealand, known as the comprehensive economic partnership in East Asia or CEPEA. This follows a proposal from China for an FTA involving Asean plus three other countries - China, Japan and Korea.

He noted that the ratio of intra-regional trade in East Asia has been rising significantly in the past several years, topping 44 per cent in 2005, compared to 43 per cent for Nafta and 65 per cent for the European Union. As a result, East Asia is "coming of age" as a major global economic player.

By covering a wide range of issues — including trade in goods and services, investment and intellectual property — the proposed comprehensive economic partnership will help build free, fair and rule-based market economies in the region.

By late 2008, Asean economic ministers and their counterparts from the six countries will submit a final report of their recommendations on CEPEA. To deepen regional cooperation, Japan has also proposed setting up an economic research institute for Asean and East Asia to focus on policies for sustainable development.

Beyond East Asia, Japan is stepping up efforts to conclude EPA/FTAs with the US and EU, as its businesses and industries are increasingly worried that their country is lagging behind South Korea, which has already signed an FTA with the US and is a competitor in the auto and electronics industries. After decades of high economic growth following the end of World War II, it seems Japan is facing unprecedented competition from China and South Korea, Asia’s new economic powerhouses, on the regional as well as global stage.

 source: Bangkok Post