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Tokyo tries dual trade diplomacy

January 20, 2005

Tokyo tries dual trade diplomacy

The Asahi Shimbun

The government wants to have it both ways with its trade diplomacy this year, focusing on bilateral free trade agreements in the first half and multilateral negotiations at the World Trade Organization in the second.

While the WTO takes a dim view of bilateral arrangements, seeing them as antithetical to its goal of forging a set of global free trade rules, Japanese officials say current circumstances dictate a two-pronged approach.

Chances appear slim that the so-called Doha round of trade liberalization talks under the WTO will reach a conclusion by the time of a ministerial meeting scheduled for December in Hong Kong.

In contrast, nearly 300 FTAs are expected by the end of 2005, putting pressure on Japan not to be left out.

"FTAs complement WTO agreements," said a government official. "We can’t fall behind other countries in establishing them."

For now, Japan is focusing on concluding FTAs with East Asian countries such as Malaysia and Thailand.

Sources say strong opposition to opening the South Korean market will likely stall FTA talks with Seoul. No headway is foreseen at least until a summit meeting of the Asia-Pacific Economic Cooperation forum to be held in Pusan in November.

Japan’s FTA efforts are expected to further expand in April to include talks with the Association of Southeast Asian Nations, and with Indonesia, the largest country in the regional grouping.

Meanwhile, economic ties with China continue to grow in importance for Japan as the Asian behemoth rises to third place in terms of trade volume behind the United States and Germany.

Leaders from East Asian countries are scheduled to meet in Kuala Lumpur in December to discuss forming an East Asian community. If this comes to pass, Japan cannot fail to establish close relations with China, analysts say.

Tokyo fears that Washington, which opposed the East Asian Economic Caucus proposal in the early 1990s, may also object to the new initiative.

Japanese officials anticipate having to closely coordinate policies with China to prevent a united East Asia from appearing to be an exclusive club.

At the moment, Japan’s diplomatic relations with China are strained, due in part to Prime Minister Junichiro Koizumi’s controversial visits to Yasukuni Shrine, which honors Japan’s war dead, including Class-A war criminals.

While China has called on Japan to conclude a bilateral FTA, talks are not likely to start anytime soon.

Japan fears such an agreement may adversely affect domestic farmers.

Under the circumstances, the government is eager to start full-fledged negotiations with China and South Korea for a three-way investment pact by year-end.

 source: Asahi Shumbun