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Friday, Nov. 12, 2010


Japan's push for open trade

The 2010 APEC forum meetings started in Yokohama on Monday and an APEC leaders summit will take place on Saturday and Sunday. As host and chair, Japan faces the task of leading the Asia-Pacific Economic Cooperation members to agree on steps to push for further liberalization of trade and investment.

The 21 economies of the Asia-Pacific Economic Cooperation forum, established in 1989, account for some 54 percent of world gross domestic product and some 43 percent of global trade. Under the Bogor Goals adopted by APEC in 1994, this year is the deadline for its industrialized members to achieve free and open trade and investment. The deadline for the developing members is 2020.

Japan must lead the APEC members in evaluating the progress under the Bogor Goals in such areas as tariffs, investment and intellectual property rights. Not only the progress in five industrialized countries — Japan, the United States, Canada, Australia and New Zealand — but also in eight developing economies, including South Korea, Singapore, Hong Kong and Mexico, will be evaluated.

Japan also must lead the APEC members in working out the road map for the U.S.-proposed Free Trade Area of the Asia-Pacific (FTAAP), which would encompass all the APEC members. An action plan for a growth strategy and efforts for regional economic integration will be important issues. Japan may have a difficult time in mediating the conflict between the U.S. and China — two rival economic powers in the Asia-Pacific region — which are very likely to check each other's economic influence from growing in the region.

An important issue for Japan is how to cope with the Trans-Pacific Partnership (TPP), which was initiated in 2005 by Singapore, Chile, New Zealand and Brunei, and aims to create a new framework for trade liberalization by eliminating tariffs on imports from member countries in principle by 2015. This year, the U.S., Australia, Malaysia, Peru and Vietnam are negotiating to enter the TPP.

Prime Minister Naoto Kan will announce Japan's policy toward the TPP in the APEC summit. If Japan is to revitalize its economy in the long-run, it must seek further liberalization through such means as participation in the TPP. Failure to seek greater liberalization, which entails further opening of its own markets, could leave Japan out of the region's economic prosperity.

South Korea, a rival of Japan, has been well aware of the advantage of seeking liberalization through the conclusion of bilateral free trade agreements (FTAs), under which tariffs will be scrapped in principle. It has already signed FTAs with the U.S. and the European Union with the aim of expanding its exports of such items as automobiles and electronic appliances. FTAs have become vogue as multilateral trade liberalization talks under the auspice of the World Trade Organization have stalled

U.S. President Barack Obama expressed the U.S.'s plan to join the TPP during his visit to Tokyo in November 2009. The U.S. apparently wants to use the TPP as a springboard for not only eliminating tariff and non-tariff barriers but also for liberalizing the movement of people and capital in the Asia-Pacific region. Behind the U.S.'s move is a strategy to increase its exports and gain the economic upper hand in the region.

The Kan Cabinet on Tuesday decided that Japan will start consultations with the nine countries that are pushing TPP negotiations, while collecting necessary information. It stopped short of saying that Japan will join the TPP, but is expected to make a decision around June 2011.

The reality is that Japanese public opinion is divided over whether the nation should join the TPP. The industrial and agricultural sectors are at loggerheads. The Japan Business Federation (Nippon Keidanren), the nation's largest business lobby, is calling on Tokyo to enter TPP negotiations as soon as possible. In contrast, the Central Union of Agricultural Cooperatives (JA-Zenchu) says that because the TPP's principle is the complete abolition of tariffs, cheap agricultural products will flood Japan and devastate the country's agriculture.

The TPP also covers intellectual property rights, service industry and government procurement. If Japan enters into TPP negotiations, the U.S. may file a strong objection to the Japanese government's plan to increase government control over the privatized postal service. Japan also may be forced to accept more nurses and nursing care workers from abroad.

While the TPP will expose Japan to many difficulties, it may serve as a catalyst to make the country adapt to the rapidly changing economic environment. The government needs to build consensus among people by carefully listening to views of various groups, including consumers. Particularly important will be the need to devise effective measures to revitalize and boost the competitiveness of Japan's agriculture, which is suffering from a shortage of young farmers and the ruining of rice paddies due to the government's myopic paddy reduction policy.

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