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Wednesday, Nov. 17, 2010


Uphill on trade policy, diplomacy

As its relations with China and Russia are deteriorating over territorial issues and its domestic opinion is sharply divided on further opening of its markets, Japan hosted and chaired the Asia-Pacific Economic Cooperation forum summit on Saturday and Sunday in the port city of Yokohama — the first APEC summit in 15 years in Japan.

The results of the APEC summit, which Prime Minister Naoto Kan chaired, and his meetings with the leaders of the United States, China and Russia show that he will continue to face difficulties both in trade policy and diplomacy while the approval rating of his Cabinet is falling.

The leaders from 21 Pacific Rim economies broadly agreed to seek to form an economically integrated community on the basis of a Free Trade Area of the Asia-Pacific (FTAAP), a free and open trade and investment initiative proposed by the United States in 2006.

But the path toward the integration has remained unclear. This is because Japan, as chair, failed to mediate among APEC members, especially the U.S. and China, which have different views. Japan's weakness as chair derived from the fact that the Japanese government has been unable to build a consensus among Japanese people on whether to drastically open Japanese markets. Mr. Kan's administration and his Democratic Party of Japan need to vigorously coordinate various economic groups that have mutually conflicting interests and to develop and present a clear strategy to cope with further trade and investment liberalization.

The APEC leaders' agreement on a path toward forging an economically integrated community encompassing the Pacific Rim region, the most important task for the Yokohama summit, turned out to be incoherent. Their declaration, called the Yokohama Vision, says that an FTAAP, the basis of the integration, should be pursued "by developing and building on ongoing regional undertakings, such as ASEAN+3, ASEAN+6 and the Trans-Pacific Partnership (TPP), among others."

Japan failed to have the U.S. and China concur. The U.S. attaches importance to expanding the 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. The U.S., Australia, Malaysia, Peru and Vietnam are now negotiating to enter the TPP. On the other hand, China wants to strengthen ASEAN+3, which groups the 10-member Association of Southeast Asian Nations plus Japan, China and South Korea.

Japan wanted the Yokohama Vision to state 2020 as the goal year for the economic integration based on an FTAAP. While the U.S. complained that 2020 is too late, some APEC members, which want to protect their industries, complained that 2020 is too early. Thus Japan could not include the goal year for the FTAAP-based integration in the vision.

Attending a meeting of the leaders of the nine countries negotiating on the TPP, Mr. Kan expressed Japan's hope to start consultations with the TPP negotiating countries without saying that Japan will join the TPP. As Mr. Kan said, Japan must seek to achieve the two goals simultaneously — opening the country and revitalizing its agriculture, which will face severe competition if Japan joins the TPP. The Kan administration should quickly work out new agricultural policies.

On the fringe of the APEC summit, Mr. Kan met with Chinese President Hu Jintao, Russian President Dmitry Medvedev and U.S. President Barack Obama.

Japan and China agreed to hold their leaders' meeting only about 30 minutes beforehand. It lasted only 22 minutes. The two sides reiterated their respective position on the sovereignty issue over the Senkaku Islands of Okinawa Prefecture. Mr. Kan and Mr. Hu agreed to pursue "mutually beneficial strategic relations." It would be far-fetched to say that Mr. Kan has succeeded in putting the bilateral ties on a normal path.

Mr. Kan met with Mr. Medvedev and protested against his visit on Nov. 1 to Kunashiri Island, one of the four islands off Hokkaido over which Japan and Russia have a sovereignty dispute. Not meeting with Mr. Medvedev would have been a better way to express Japan's protest against his Kunashiri visit. The meeting gave him a chance to say directly to Mr. Kan that Kunashiri is part of Russian territory. Mr. Kan said that deepening bilateral economic relations would have a good influence on the territorial issue talks. Russia may only get economic fruit and make no compromise over the territorial issue. Japan may need to consider taking a completely new approach to the issue.

To Mr. Kan's relief, Mr. Obama renewed the U.S. commitment to the defense of Japan, including the Senkaku Islands, and support for Japan's position over the territorial dispute with Russia. But Mr. Kan will continue to be troubled by the issue of the relocation of the U.S. Marine Corps Air Station Futenma in Okinawa Island. The outcome of the Okinawa gubernatorial election later this month may further complicate the situation.

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