Across the border from
Tokyo at Foodex, Asia's largest food promotion fest - or
in this case, a fiesta - the Mexicans definitely stood
out. The displays took up a large swath of space in a
sprawling exhibition complex on the China coast. The
tequila samples flowed, and spiced morsels of pork,
chicken and beef, along with fruits and vegetables, drew
crowds. In contrast to the other North American food
giants - the United States and Canada, both under the
pall of mad cow disease - Mexico was celebrating.
After a year and a half of on-again, off-again
negotiations, Japan and Mexico this week hammered out
one of the most important bilateral Free Trade
Agreements (FTA) in the Asia-Pacific rim, following a
US-Australia FTA finally signed earlier this year.
On Friday night, Japanese and Mexican ministers
held a video conference to formalize the agreement. For
Japan, the lineup included Foreign Minister Yoriko
Kawaguchi; Agriculture, Forestry and Fisheries Minister
Yoshiyuki Kamei; and Economy, Trade and Industry
Minister Shoichi Nakagawa. Mexico was represented by
Secretary of Economy Fernando Canales and Secretary of
Agriculture Javier Usabiaga, who earlier hosted a lavish
Mexican food fest of his own for Japanese businessmen
and other worthies, to the delight of Japanese
television crews.
The agreement is expected to
clear the air a bit for Japan's most ambitious, and much
delayed plans set out last December at a historic
meeting of the Association of Southeast Asian Nations
(ASEAN), held for the first time in Tokyo, to establish
a string of free-trade initiatives in Southeast Asia,
including Malaysia, Thailand and the Philippines.
Tokyo's talks with those states are underway.
But Japan's only success on the FTA front so far is a
2002 agreement with Singapore, which was made easier by
the absence of serious clashes over agricultural trade.
Another key set of negotiations is being conducted with
neighboring industrial powerhouse South Korea, where
Japan faces both food and industrial obstacles.
Both sides talk tough but make
concessions Despite the outward signs of tough
talking, the Japan-Mexico give-and-take provides enough
room for future progress on all the hot-button trade
issues that are being kicked around on the international
battlefield of the World Trade Organization (WTO). Last
September, Mexico's resort town of Cancun was the scene
of a near breakdown of the current round of global trade
talks. At the time, the issues focused on farm trade,
with sharp divisions between the food producer and
consumer countries, as well as the poorer and richer
nation blocs.
During negotiations with Mexico,
Japan won concessions that put off decisions on a number
of farm issues (chicken, for instance) that are part of
talks with countries such as Thailand. In return, Japan
conceded what is touted as significant ground, much of
which is more symbolic than concrete. This is much
easier for Japan to do now that the economy is doing
better (a revised 6.7 percent annual pace in the last
quarter). The other is that Prime Minister Junichiro
Koizumi's governing Liberal Democratic Party (LDP) has
been buttering up the domestic farm industry for the
past year to win support in an upcoming national
election in July.
Japan's Farm Minister Kamei
can pledge that Japan will not compromise on rice
tariffs in its talks with other nations in Asia, but at
the same time, it can offer Mexico a larger quota and
low-tariff rates on pork and other key farm products,
without stooping to any additional protectionist
subsidies to Japanese pork farmers as result of the
Mexican agreement. This is partly because the domestic
pork business is gradually falling into the hands of big
companies, which are more interested in international
trade than raising pigs. Farmers already are heavily
subsidized, making domestic pork more expensive than
imports, since tariffs are geared to domestic prices.
What Mexican negotiators can boast about is that
the package finally reached represents the first time
that Japan has agreed to a "comprehensive" free-trade
package that involves the agricultural sector. Japan
made concessions by offering low-tariff import quotas on
some key agricultural products such as pork and orange
juice. The quid pro quo: Mexico agreed to remove tariffs
on steel from Japan over the next 10 years after the
free-trade pact goes into effect.
All of that
makes up for the early setbacks. Japan and Mexico had
expected to sign an FTA last October during Mexican
President Vicente Fox's official visit to Japan. But
that fell flat as a tortilla, with a failure to iron out
wide gaps in how to deal with Mexican agricultural
goods.
For Mexico, pact will create 410,000
jobs At home, the Mexican government can boast
that as a result of the FTA, exports to Japan will
increase by an average of 10.6 percent annually,
according to the Mexican Ministry of Commerce. This will
create 410,000 jobs over the next 10 years, as
investments in factories by Japanese companies increase.
One estimate predicts investments of about US$1.3
billion a year, or $12.7 billion over a decade. Mexico's
exports to Japan in 2002 were worth $1.8 billion, while
Japan sold products worth 3.8 billion.
Current
Mexican tariffs, ranging between 18 percent and 30
percent, reportedly will be lifted on Japanese games,
motorcycles, computer peripherals, photocopiers,
telecommunications equipment, CD players and musical
instruments. Japan and Mexico will also create a new
tariff-free export quota for Japanese cars, in addition
to the existing quota of roughly 30,000. Japanese
officials said the duty-free quota is to make up 5
percent of the Mexican market in the first year. The
quotas would be expanded gradually before being
completely lifted by the seventh year. Steel tariffs
would also be scrapped within 10 years.
These
provisions will no doubt be good for large Mexican
companies, which face high tariffs, especially on
imported machine parts brought in from Japan.
Farm goods, however, were the sticking point
down to the end, partly because Japan didn't want to
show its hand in negotiations for other FTAs (Mexico is
an old pro on FTAs, having entered 33 of them). The two
countries finally agreed to an 80,000-ton quota on pork
at a duty of 2.2 percent, down from 4.3 percent.
Low-tariff import quotas would also be in place for
6,500 tons of orange juice; 4,000 tons of fresh oranges;
6,000 tons of beef; and 8,500 tons of poultry, according
to Kyodo News.
Japan buys just about all of its
avocados, tequila and salsa from Mexico, but only a
small amount of pork, poultry, meat, tuna, juice and
pumpkins comes from there.
A Japanese first:
"freeing" farm, industrial products "What is
most important is that for the first time, Japan was
able to free so many farm and industrial products,"
Hirokazu Hayashi, head of the trade policy bureau at the
Japanese Ministry of Economy, Trade and Industry, told
reporters.
If the agreement is going to work, it
should help in the talks with Malaysia, Thailand, the
Philippines and South Korea. It is clear that Japan and
countries in ASEAN are keen to reach agreements in part
to balance the enormous influence that China now has as
a fast growing economic power in the world. Japan shares
that interest.
The US stands somewhere in the
middle. When asked in congressional hearings, US Special
Trade Representative Robert Zoellick said that the US
would not enter an FTA with Japan or South Korea because
they "won't open their agricultural markets". Thailand,
on the other hand, would be a good prospect.
In
the meantime, Mexico may even get to like sushi made
from its own tuna.
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