Japan and Mexico threw in the towel Thursday, failing to strike a bilateral free-trade agreement after a four-day marathon of ministerial-level talks.

The failure bodes ill for Japan, which hoped to use a Mexico FTA as a gateway to similar agreements with other countries.

Although officials were quick to announce that negotiations were not over and that both countries were determined to continue talks, they were unable to say when the next meeting would be.

Japan and Mexico had agreed a year ago to sign a basic accord in time for Mexican President Vicente Fox’s Japan visit.

Japan has only one FTA, with Singapore. It was signed in January 2002.

Fox arrived in Tokyo on Wednesday and is scheduled to fly out of Osaka on Saturday.

Agriculture minister Yoshiyuki Kamei blamed the impasse on Mexico, complaining that Mexico “presented too high a hurdle” over products such as orange juice and pork.

As of Thursday morning, negotiators had bridged gaps in most areas except for tariff-free quotas on items such as pork and orange juice, sources said.

At that time, Mexico accepted Japan’s proposal to increase low-tariff imports of pork to 75,000 tons from 40,000 tons over five years, on condition that the pork agreement would be reviewed after three years.

But later in the day, Mexico increased its demand over the tariff-free quota on orange juice.

Mexico had initially wanted Japan to phase out tariffs on imports of orange juice over 10 years. Japan rejected this and later proposed creating a tariff-free quota on imports of orange juice, the sources said. Mexico agreed to create such a quota but pushed for a larger volume, which the Japanese then rejected.

A Japanese official slammed Mexican negotiators after the meeting. He said that despite an agreement earlier in the day between Prime Minister Junichiro Koizumi and Fox to “agree on the FTA by the end of the day,” the Mexican side came up with a demand that was too tough for Japan to swallow.

Observers attributed the breakdown to political pressure on both sides, making it difficult to compromise.

Fox’s public support has declined amid a struggling domestic economy, and pressure has mounted from industry groups. Representatives of these groups accompanied the Mexican delegation.

Both countries are at precarious stages politically. In July, Fox’s National Action Party lost the Lower House election for Congress. Japan meanwhile will have a Lower House election in November and an Upper House election in the summer.

But the real reason behind the failure of the talks was Japan’s lack of an overall strategy on trade, said Tsutomu Sugiura, director of Marubeni Research Institute.

“Unless Japan as a whole decides on its top priority and what it can compromise on to achieve its goal, it will not succeed in talks with Mexico, talks with other countries or even talks at the World Trade Organization,” Sugiura said.

Earlier Thursday, Koizumi said both sides “have agreed to 90 percent” of the FTA. Fox expressed hope after the summit, saying the bilateral FTA “would be a historical agreement,” being the first to bridge Latin America and Asia.

But as the ministers broke away to leave for the APEC meeting, time ran out for negotiations.

The last round of talks was held Thursday afternoon between agricultural minister Kamei, Foreign Minister Yoriko Kawaguchi and trade minister Shoichi Nakagawa and their counterparts, Mexican Secretary of Economy Fernando Canales and Foreign Minister Luis Ernesto Derbez.

Business chiefs worried

Business leaders expressed concern Thursday over the breakdown of free-trade talks between Japan and Mexico over the issue of tariffs on Mexican agricultural imports, specifically, pork and orange juice.

According to a statement by Hiroshi Okuda, chairman of the Japan Business Federation (Nippon Keidanren), the talks with Mexico “are the litmus test to gauge how Japan’s upcoming talks to conclude FTAs with South Korea and Association of Southeast Asian Nations will fare.”

“I strongly hope that the two countries will produce an agreement as quickly as possible,” Okuda said.

Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry, urged the government to strike an agreement with Mexico by the end of the year.

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