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In another milestone move aimed at expanding economic ties with fast-growing East Asian nations, Japan and the Philippines agreed this week to sign a free-trade agreement (FTA). Increased trade and investment in this region is especially welcome at a time when multilateral trade talks under the auspices of the World Trade Organization (WTO) are making little headway.

Japan concluded its first FTA, with Singapore, in 2002. Besides the Philippines, Japan is seeking to sign a similar pact with three other nations at an early date: Thailand, Malaysia and South Korea. Progress in these talks will give momentum to Tokyo’s fledgling FTA strategy.

The latest accord, reached at a meeting between Prime Minister Junichiro Koizumi and President Gloria Macapagal Arroyo in Vientiane, Laos, has two main objectives: One is to remove or reduce barriers to trade and investment between the two nations; the other is to open the Japanese labor market to selected Philippine workers.

In the area of trade, the main sticking point has been imports of agricultural and fishery products to Japan. Rice — the most sensitive product for Japan — has been excluded from the negotiations. However, compromise has been reached on other products such as sugar and tuna. How to treat farm and marine products is also a difficult question in FTA talks with the other three nations.

As for labor-market liberalization, Philippine nurses and lawyers will be allowed to work in Japan provided that they pass the Japanese government’s qualifying examinations. Successful applicants will be issued special visas, which may be renewed every three years.

The number of workers to be accepted — a key point of negotiation — has yet to be determined. What is clear is that Japan is beginning to adopt an “open-door” labor policy for skilled workers from East Asian nations. The accord with the Philippines marks the first step in this direction.

However, strings are attached to employment. This is true particularly of nurses, whose entry has been opposed by Japanese nursing groups and other related domestic interests. To work in Japan, Philippine nurses will have to get the Japanese license, meaning that the license they obtained back home will not be recognized here.

Passing the qualifying test won’t be easy because it will be given in Japanese. This makes it imperative that applicants, not just nurses, acquire a minimum level of proficiency in the Japanese language. Nurses will be required to study the language for six months after their entry. They will also have to undergo on-the-job training to qualify for the license. Official development assistance funds are likely to be used for the language program.

In August 1999, the government made it clear in a basic employment plan that Japan would promote foreign employment in “specialized and technical areas.” In the case of manual workers, though, the plan called for a “careful approach based on national consensus,” since their employment would have “profound effects” on Japan’s economy and society.

Thailand is requesting that its massagers be allowed to work in Japan, but the government regards them as manual workers. It is likely, though, that Japan will have to face up to the issue of employing foreign manual workers and others in its FTA talks with the Association of Southeast Asian Nations (ASEAN), which are expected to begin next April.

According to the Health, Labor and Welfare Ministry, there were 790,000 foreign workers in Japan at the end of March 2003. The survey indicates that the number of unskilled foreign workers had increased over several years and that many of them had taken up permanent residence here. In light of these realities, as well as requests for labor-market liberalization from Asian countries, it is about time to review the 1999 guidepost that divides foreign workers into specialists and laborers.

Japan has reason to speed up its FTA talks with the Philippines and other nations. China, which is projecting its influence in Southeast Asia, is moving toward signing an FTA with ASEAN before Japan. If Japan falls behind China in this race, the argument goes, it could face considerable difficulties in expanding trade and investment in East Asia.

FTAs, however, should complement, not counteract, the WTO round, as the recent Asia-Pacific Economic Cooperation summit in Santiago, Chile, said in a ministerial statement. The challenge for Japan is to promote multilateral liberalization while strengthening bilateral partnership.

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