The outlook for the World Trade Organization's new round of trade negotiations is uncertain after member nations failed to agree on farm-trade "modality" before the March 31 deadline. The U.S.-European split over the Iraq war has slowed the momentum for talks. The initial goal of reaching a comprehensive agreement by January 2005 is now in doubt.

With difficulty expected in the new round of talks, most countries are likely to step up moves to conclude regional or bilateral free-trade agreements. International attention is focused on Japan, China and South Korea, all of which have fallen behind Western nations in signing FTAs.

In January Japan took the first step toward signing an FTA when it concluded an economic partnership agreement with Singapore. In September 2002, Japan and South Korea established an FTA study group of industry officials, bureaucrats and academics. In November, a summit of Japan and the Association of Southeast Asian Nations issued a joint declaration concerning a comprehensive economic partnership. In the same month, Japan and Mexico started formal talks on an FTA. Japan is also considering FTAs with Thailand, the Philippines, Australia, Chile and Taiwan.

Negotiations on an FTA with Singapore, a major trading nation, went smoothly because Japan faced no pressure to make extra cuts in tariffs on farm and marine products. Similar negotiations with other countries are unlikely to be so easy in light of Japanese farm groups' strong resistance to trade liberalization.

Regarding the WTO farm-trade talks, the Central Union of Agricultural Cooperatives argues that importance should be attached to other functions of agriculture besides food security. It also contends that special consideration should be given to tariffs, import restrictions and subsidies.

The organization urges the government not to cut or abolish tariffs on farm produce through FTAs, insisting that the produce issue should be addressed as part of the WTO's comprehensive framework. The group seeks to check government moves to liberalize farm-trade item by item through FTAs. Influential politicians representing special interests for farm groups and agricultural cooperatives' resistance to trade liberalization hinder Japan's FTA diplomacy.

Meanwhile, the Japan Federation of Economic Organizations is hoping that FTAs will help Japan revitalize its moribund economy. The federation calls for a "dual approach" of pushing negotiations on FTAs with individual countries and ASEAN. In particular, the federation says, Japan should speed up negotiations with Thailand, which accounts for 27 percent of Japan's investments in ASEAN.

Business and farm lobbies are thus divided over FTAs, with the government torn between them.

On its Web site, the Foreign Ministry recently published Japan's FTA strategies, focusing on the significance and priorities of FTAs. On the basis of these strategies, the ministry plans to promote further studies of FTA policies by taking public opinion into account for the first time. The published strategies include the following points:

(1) Priority should be given to FTAs with South Korea and ASEAN by considering realistic possibilities, including the political and diplomatic factors.

(2) Negotiations should be expedited on an FTA with Mexico, given the economic disadvantages Japan suffers because of the North American Free Trade Agreement.

(3) China should be watched carefully for the time being regarding its adherence to WTO agreements and economic performance.

(4) It is premature to seek a comprehensive economic agreement with Russia since it has yet to join the WTO.

(5) Japan should not consider immediate negotiations concerning FTAs and economic partnership agreements with the United States, Canada and the European Union because of the difficulties expected over farm and marine products.

China is also seeking closer economic ties with ASEAN and announced plans in December 2001 to conclude an FTA with the association in 10 years. ASEAN members Indonesia and Malaysia are unenthusiastic about an FTA with China. Beijing, though, has reportedly offered to cut tariffs on lumber, palm oil and tropical fruits before concluding FTAs with them.

If Japan balks at making concessions on tariffs on farm produce, China is bound to gain the upper hand in trade. FTA talks are likely to stall if Japan sticks to protectionism on farm trade.

According to the Organization for Economic Cooperation and Development, Japan's 1996-98 index on farm-trade protection was more than double that of the EU and eight times that of the U.S. The social cost of strong farm-trade protection in Japan seems substantial.

The government late last year adopted a policy of phasing out reductions in the amount of land dedicated to rice cultivation. To make Japanese agriculture more competitive, specialized farming households headed by men up to 60 years of age were to be encouraged and commercial corporations allowed to enter the agriculture market. Furthermore, management of agricultural cooperatives should be improved.

I believe that pushing agricultural reform through FTAs will lead to the recovery of the Japanese economy.