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Regional trade pacts take Pacific spotlight ahead of APEC summit

by Miya Tanaka

Kyodo News

SENDAI — In less than two months, Pacific Rim countries are expected to present a clear picture on how they will pursue their long-term vision of creating a regionwide free-trade zone.

The concept, dubbed the Free Trade Area of the Asia-Pacific, has yet to be defined in detail, but Japan appears to be paying more attention to the idea of joining a U.S.-backed multilateral trans-Pacific free-trade pact that is seen as the potential core framework for the FTAAP.

One sign has come from Akihiro Ohata, new head of the Ministry of Economy, Trade and Industry. Ohata told a news conference just days after assuming his new post that he is eager to consider joining the so-called Trans-Pacific Partnership Agreement (TPP).

“I would like to step up moves so that Japan can start considering joining the TPP,” he said Tuesday while acknowledging the need to address the issue of agriculture, a frequent trade-talk obstacle due its highly protected nature.

The minister’s remarks came ahead of a key diplomatic event Japan will host in November, when the leaders of 21 Pacific Rim economies will gather for the annual meeting of the Asia-Pacific Economic Cooperation forum.

A key item on APEC’s agenda is the promotion of regional economic integration. The leaders agreed last year that APEC should explore “possible pathways to achieve FTAAP” and report the outcome this year.

The TPP, originally an agreement between Brunei, Chile, New Zealand and Singapore that took effect in 2006, is among the various projects in the region being undertaken to achieve economic integration. Negotiations to expand the agreement are under way with four new countries, including such major agricultural exporters as the United States and Australia.

With the original agreement boasting a “high-quality” FTA that basically requires member countries to eliminate all tariffs, joining the TPP is seen as too high a bar for Japan, which has been reluctant to open up its agricultural market.

“Of course, joining is quite difficult, unless we overcome agricultural issues,” Ohata said. “But I would like to make preparations so that participation would be possible.”

Agriculture, Forestry and Fisheries Minister Michihiko Kano also backed Ohata. He said the farm sector has to shift to an “aggressive” stance in dealing with FTA issues, although he noted that financial resources should be secured to support the farming industry.

Some analysts said even though Ohata’s openly expressed eagerness about the TPP shows “a sense of urgency,” Japan seems to be lagging in the intensifying global FTA race.

Junichi Sugawara, a trade policy expert at Mizuho Research Institute, said companies are not finding Japanese business conditions attractive in either the short or long term because of the yen’s strength and the declining population.

“In such a situation, falling behind in FTA issues and finding that you cannot even catch up with what South Korea is doing would certainly have pressed the government,” he said.

While Japan has not been able to start free-trade negotiations with major trading partners, such as the United States or the European Union, South Korea has already signed an FTA with the U.S. The pact, however, has not yet taken effect, and the agreement with the EU will start in July next year.

A Foreign Ministry official said it is not appropriate to compare Japan with South Korea in such a way because the sizes of the economies differ. But he acknowledged the importance of Japan taking an “upbeat” stance on FTA issues and exercising leadership in APEC discussions on regional economic integration.

“We have to carry out studies on whether to join the TPP in the remaining two months. Making such a decision requires resolution,” said the official, speaking on condition of anonymity.

“Unless we take a positive stance, it will be difficult for us to get others to follow us,” he added.

Sugawara, however, predicted that Japan will stop short of announcing it will join the TPP when the APEC meeting begins.

Referring to Kano’s proposal that Japan should use environmental tax revenues to support farmers who are likely to face an influx of cheaper agricultural products when FTAs are promoted, Sugawara said, “This is not something that can be done in several months.”

But other experts are starting to wonder if the TPP framework will maintain its momentum as a driving force toward the creation of the FTAAP, after the rotating APEC chair is passed to the United States from Japan next year.

Hikari Ishido, the Singapore-based head of the Chiba University APEC Study Center, said the United States has become “increasingly inwardly focused” after its subprime-mortgage problems, and such a stance may make it difficult for the country to see progress on the TPP negotiations.