India inks economic partnership accord

Japan pact to cut tariffs, open market of 1 billion

by Kazuaki Nagata

Japan and India signed a bilateral economic partnership agreement Wednesday that will strengthen ties with the fast-growing South Asian market of 1.15 billion people.

The EPA will remove tariffs on 94 percent of the bilateral total trade in terms of value, which was about ¥900 billion in 2009, within 10 years.

Foreign Minister Seiji Maehara and Indian Commerce Minister Anand Sharma signed the agreement in Tokyo, making India the 12th country to sign a free-trade agreement with Japan.

At the ceremony, Maehara expressed hope that the newly signed agreement will “promote a strategic partnership between the two countries so that they can establish win-win relations and achieve growth.”

Hidehiko Fujii, chief economist at Japan Research Institute, said the bilateral partnership will have a positive impact on domestic companies already operating in or seeking business opportunities in the market.

“The Indian market and economy are rapidly growing, and it is a very big, attractive market for Japanese firms. It’s about accessing there,” said Fujii.

Rival companies from other countries are aggressively advancing into India, so the EPA will help Japanese firms compete, Fujii said, adding the pact is likely to push Japanese companies to move forward their investment plans in areas such as personnel training and building plants in India.

For instance, the agreement will benefit Japanese automakers in India — most notably Suzuki Motor Co., a dominant player in the Indian auto market — in procuring parts from Japan at lower costs.

Meanwhile, India also sees opportunities to strengthen its trade through the partnership with the world’s third-biggest economy.

“This agreement that we have signed will enable our institutions, our private and public sector, to bring about a major change and incremental growth in both investment and trade,” said Sharma during a news conference at Japan National Press Club in Tokyo.

He also said India is still facing many challenges, including building world-class infrastructure and creating more opportunities for its people, noting, “Japan has a great role to play, particularly bringing your value-added manufacturing and technology” that will help realize sustainable and environmentally sustainable development.

Once the EPA takes effect, it will immediately eliminate tariffs on India’s exports of nearly all steel-related products to Japan, while those on Japan’s exports of similar products to India will be abolished within five years.

The two countries, however, failed to reach an agreement on labor issues. India has demanded that its nurses and caregivers be allowed to work in Japan, which will badly need a larger labor force to support a rapidly aging society.

However, Tokyo and New Delhi agreed to continue the labor talks in an effort to reach a conclusion on the issue within two years after the EPA takes effect. The Diet must first ratify the EPA before any implementation.

The two countries also agreed to ease conditions in approving the import of generic drugs, which will benefit Indian drugmakers hoping to enter the Japanese market.

The pact will also give India improved access to Japan’s food market, especially items such as fruit, seafood, curry and tea.

In total, the tariffs on 90 percent of Japan’s exports to India and 97 percent of India’s exports to Japan will be abolished within 10 years.

The EPA will also eliminate tariffs of Japan’s export of DVD players, lithium-ion batteries and camcorders, all of which are currently slapped with a 10 percent tariff, within 10 years.

Fujii of Japan Research Institute also pointed out that by strengthening its competitiveness in the Indian market, Japanese firms can create value chains of products around Asia.

“It is not just Japanese companies making value chains by connecting India with countries like Vietnam and Thailand, EPAs are very helpful in creating cross-border value chains,” Fujii said.

India’s population is about 1.15 billion and is expected by some to surpass China as the world’s most populous nation in the near future.

Information from Kyodo added