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The trade ministry’s fiscal 2007 white paper calls for creation of an “open and seamless” economic system in East Asia where Japanese companies have already established strong business networks. Behind the call is recognition that a dynamic East Asian economy is indispensable for Japan’s economic growth.

Having overcome the 1997 financial crisis, the East Asian economy has been steadily growing. The real gross domestic product of East Asia (China, South Korea, the 10-nation ASEAN, India, Australia and New Zealand), Taiwan and Hong Kong combined grew 8.8 percent in 2006 compared with 5.4 percent for the world economy. In 2005, the region’s real GDP accounted for 27.6 percent of global GDP, topping the European Union’s 24.8 percent. Intraregional trade accounted for 55.8 percent of the region’s trade the same year, nearing the EU’s figure of 62.1 percent.

The white paper on trade points out that East Asia has established a trade system in which each country supplies every other with intermediate products, with final products being exported to Japan, Europe and the United States. It now serves as a manufacturing center of such products as automobiles, personal computers, DVD players and chemical fiber.

To accelerate economic integration and development in the region, the report stresses the importance of signing agreements not only to abolish tariff and nontariff barriers, but also to protect investment and intellectual property rights, and ensure the free movement of people. It also says that Japan will explore the possibility of signing free trade agreements or economic partnership agreements with the U.S., EU and other large economic blocs.

It rightfully points out, however, that bilateral agreements cannot cover global trade. It is important that Japan work to advance the Doha round of global trade talks under the World Trade Organization. Japan will need to be prepared to make necessary concessions in promoting global trade talks and bilateral FTAs/EPAs. When FTAs/EPAs are hard to achieve, it should consider pushing less comprehensive measures such as investment accords, as the report suggests.

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