Japan needs to develop coordinated trade policy amid era of FTA talks

by Yasushi Azuma

Japan is beginning to realize the importance of adopting a coordinated trade policy to gain the upper hand in negotiations on free-trade agreements with other Asian countries in 2004.

Japan is lagging behind other developed countries as it has so far only concluded an FTA with Singapore, in January 2002. The start of the first round of talks on an FTA with South Korea on Monday, however, prepares Japan for a new “FTA era” with the launching of formal negotiations with Thailand, the Philippines and Malaysia early next year.

Yearlong negotiations with Mexico have also continued despite differences over farm products, and Japan plans to launch formal talks with the Association of Southeast Asian Nations on an FTA in 2005, with an eye to concluding one by 2012.

Japan’s lack of a comprehensive and coordinated trade policy — a weakness stemming from bureaucratic turf wars between three ministries — could, however, hinder accords with its trading partners. The issue was highlighted at the collapse of the World Trade Organization’s ministerial meeting in Cancun, Mexico, in September and the breakup of FTA talks between Japan and Mexico in October.

In trade negotiations, whether bilateral or multilateral, the heads of three Japanese ministries often take part, meeting with fewer ministers from the negotiation partners.

During marathon talks in Tokyo from Oct. 13 to 16, Mexican Economy Secretary Fernando Canales found himself facing three Japanese ministers — Foreign Minister Yoriko Kawaguchi, Trade Minister Shoichi Nakagawa and Agriculture Minister Yoshiyuki Kamei. Later, Canales told his aides he does not want to go through similar negotiations again, according to a senior Japanese trade ministry official.

Following the two events, the Ministry of Economy, Trade and Industry and the Agriculture, Forestry and Fisheries Ministry launched separate task forces to better deal with FTA negotiations. The Foreign Ministry also plans to boost its own FTA task force by increasing staff in January.

After the Cancun meeting, former trade minister Takeo Hiranuma proposed to Prime Minister Junichiro Koizumi that Japan create a government agency modeled on the Office of the U.S. Trade Representative to take charge of trade talks in a comprehensive manner.

Kenichi Takayasu, a senior economist at Japan Research Institute Ltd., said Japan should review its trade negotiation style, which features the involvement of the three ministries plus the Finance Ministry, which is in charge of customs and tariffs.

“Conducting trade policy based on coordination between the four ministries is reaching its limit,” Takayasu said, adding that he supports the launch of a Japanese version of the USTR.

The creation of a new office to handle trade policy may still be far off, but the prime minister’s office has now slowly begun to seek a larger role in negotiations for FTAs. In November, the government dispatched a team headed by Assistant Deputy Chief Cabinet Secretary Shotaro Yachi to Mexico in a bid to take the initiative in FTA talks with Mexico.

Friday last week, the prime minister’s office held the first liaison meeting on promoting FTAs of senior officials from relevant ministries, in an attempt to coordinate the policies of such ministries and tackle negotiations on FTAs from a broader perspective.

Moreover, in the negotiations with Mexico early this month the Japanese side narrowed down the participants by dropping METI officials to give it more flexibility in the talks, which focused on controversial farm products.

Takayasu has welcomed the developments, saying the sense of urgency over a coordinated trade policy is spreading within the government.