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Mexican free trade under way

The Asahi Shimbun, Japan

Mexican free trade under way

2 April 2005

Many people in Japan doubtlessly woke up Friday morning ignorant of the fact that April 1 was Day One of free trade with Mexico.

It’s not terribly surprising, of course, as a bean burrito would have had more of an impact on the average consumer.

But that’s not to say the public won’t notice any changes in the coming months.

The prices of certain agricultural products, for example, are bound to fall, in particular those of pork and orange juice.

The economy is also expected to receive a boost, which could have positive and far-reaching ramifications.

The Cabinet Office estimates that the trade pact will lift Japan’s real gross domestic product by 300 billion yen, or 0.06 percent.

Japan’s second FTA, following one with Singapore, is also expected to increase exports of manufactured goods, from vehicles and electronics to steel.

A low-tariff import quota has been set for 38,000 tons of Mexican mid- to high-quality pork for the current fiscal year, a ceiling that will be raised to 80,000 tons in fiscal 2009.

That means the price of pork, the leading farm product imported from Mexico, will come under downward pressure. Japan imported 34,000 tons of Mexican pork in fiscal 2003.

Low-tariff import quotas have also been set for orange juice, oranges, beef and chicken. The quotas will also be expanded in five years.

The auto industry, meanwhile, is considered the largest corporate beneficiary of the free trade agreement.

Mexico will eliminate tariffs on Japanese automobiles in seven years. For a starter, a tariff-free import quota has been established.

Getting a jump on the trade pact, Honda Motor Co. introduced its high-end Acura line in Mexico and started exporting Japanese-built luxury sedans at the end of 2004.

Japanese makers have until now been hampered in competition with rivals from the United States and the European Union, which have long enjoyed the perks of free trade with Mexico.

Annual auto sales in Mexico have exceeded the 1-million mark, but sales of Honda and Toyota Motor Corp. amount to fewer than 30,000 units.

Mexico has scrapped tariffs on Japanese electronics products, electric appliances and auto-related steel products. Tariffs on other steel products will be lifted within 10 years.(IHT/Asahi: April 2,2005)