APEC chair Japan may toil to lead free-trade-zone talks

Trade policy unclear; FTA deals stuck

by Miya Tanaka

Kyodo News

SAPPORO — Discussions by Pacific Rim economies about creating a regionwide free-trade zone are expected to accelerate this year after APEC trade ministers reaffirmed Sunday, the last day of a two-day meeting, the need for such action.

But it remains to be seen if Japan can demonstrate the necessary leadership as chair of the Asia-Pacific Economic Cooperation forum, with analysts saying the Democratic Party of Japan’s trade strategy is still unclear and the government is struggling to conclude free-trade agreements with key trade partners.

Further clouding the prospects is Yukio Hatoyama’s abrupt resignation as prime minister last week after only about eight months in power.

Japan has so far made clear it will seek to create the Free Trade Area of the Asia-Pacific region, or FTAAP, by 2020, enshrining the goal in the basic strategy for growth through 2020.

Apparently trying to gauge other nations’ feelings about setting a time frame, caretaker Minister of Economy, Trade and Industry Masayuki Naoshima briefed participants in the two-day meeting on Japan’s commitment to the project, according to Japanese officials.

But speaking to reporters, Naoshima, who was part of the Hatoyama Cabinet that resigned last week but who still represents Japan, indicated APEC members are not yet at the stage of reaching a consensus on setting such a target.

“There were various discussions about the 2020 target, with some saying, ‘Would that mean that such a thing will not be created by then?’ and others saying that they wouldn’t be able to respond to changes in circumstances if a distant target is fixed.”

Forging a consensus among APEC’s 21 members on the specifics for such a plan is no easy task, with some countries, including China, apparently cautious about the idea.

Japan has its own problems in pursuing the concept — how to deal with its heavily protected agricultural sector.

“If we try to take concrete actions with a view to starting negotiations for FTAAP, we would have to persuade the farm ministry,” a Ministry of Economy, Trade and Industry official said earlier, adding the time is not yet ripe for that.

Japan’s agricultural sector is considered a major stumbling block for the country to negotiate FTAs with farm product exporters, as well as engage in global trade liberalization talks under the World Trade Organization.

Japan has concluded 11 FTAs, including one with the Association of Southeast Asian Nations. Japan, China and South Korea have also recently kicked off a joint study involving industry, government and academia as a step toward launching government-level negotiations on a trilateral FTA.

But Japan has not been able to start FTA talks with other major trade partners, including the United States and the European Union, and it is likely a great deal of time will pass before moves among Japan, China and South Korea take shape.

“I think Japan is in a difficult position to demonstrate its leadership in addressing trade issues in the APEC process at this moment, given the lack of progress in bilateral, multilateral and WTO negotiations,” said Junichi Sugawara, an analyst at Mizuho Research Institute Ltd.

He said the DPJ’s trade strategy remains unclear and it is unlikely the government can paint a detailed picture before the Upper House election expected in July, as it would require debate over how to resolve politically sensitive agricultural issues.

“Doing such a thing would be like setting foot in a minefield,” Sugawara said, noting going into details on the FTAAP idea would at the same time possibly mean presenting a time frame toward agricultural trade liberalization.

Reflecting the awkward domestic situation, Japan has been vague about its stance toward another multilateral FTA that is emerging in the region as a potential core framework toward creating FTAAP.

The arrangement, called the Trans-Pacific Strategic Economic Partnership Agreement, launched negotiations in March to expand the membership from the current four — Brunei, Chile, New Zealand and Singapore — to include the United States and Australia.

Known as the TPP, the undertaking boasts a “high-quality” regional FTA that basically requires member countries to eliminate all tariffs by 2015.

A Japanese official said Tokyo “has great interest” in joining the TPP but will also pursue “any kind of pathways to promote free-trade areas in the region” by making use of other frameworks, including the ASEAN plus three, which groups ASEAN, Japan, China and South Korea.

But the reality is that the TPP is too “high a bar” for Japan to say it will try to clear, the senior METI official said.

“We have not been able to have any discussion on whether the government is prepared to share the pains the agricultural sector would face once we seek to engage in the TPP,” he said.

Sugawara said Japanese industry circles may not necessarily be after the TPP, but are wary of the United States leading moves to set rules on such areas as intellectual property rights and financial services in the TPP in Japan’s absence, with the potential for such rules to eventually be applied to the FTAAP.

Meanwhile, Sugawara was not entirely pessimistic about the impact of the political instability triggered by the resignation of Hatoyama, who saw his approval ratings tumble toward the end of his leadership amid a spat over the relocation of a U.S. base in Okinawa.

“Mr. Hatoyama may have had difficulty in mapping out a bold strategy on FTA issues in the face of low support rates, so starting afresh may turn out to be a positive,” he said, referring to the launch of Prime Minister Naoto Kan’s Cabinet set for Tuesday.

But another government official indicated after the APEC trade ministers’ meeting that Japan may have to worry about itself before thinking about how to reach a consensus on APEC’s future.