Page 2 of 3 A dry run for a
Japan-US
FTA By Hisane Masaki
market. Australia is Japan's
second-largest export market for automobiles and
auto parts and is also a key market for many other
industrial goods.
At present, tariffs are
levied on more than 70% of Japanese goods imported
into Australia and about 20% of Australian goods
imported into Japan. Australia's tariff rates
average 3.5%, Japan's
7.1%. The results of a joint
feasibility study between the two governments,
released last December, found that freer trade
would boost Australia's gross domestic product
(GDP) by at least A$39 billion (US$33 billion) and
Japan's by a minimum of A$27 billion over a
20-year period.
As it has done in
negotiations with energy-resource suppliers such
as Indonesia and Brunei, Tokyo plans to ask
Canberra to include in the proposed bilateral FTA
an energy clause specifying Australia's commitment
to ensuring stable supplies in the long term.
Australia is a major supplier of coal,
iron ore and liquefied natural gas, which together
account for nearly 60% of its Japan-bound exports.
With the world's largest uranium deposits,
Australia is also an important potential source of
uranium for Japan's civilian nuclear policy.
Biggest stumbling
block Agriculture will certainly be the
biggest obstacle to a successful conclusion of FTA
negotiations between Tokyo and Canberra, which is
why Tokyo wants to use Australia as a kind of
trial run before approaching the United States.
Japan has refused to put many of its
agricultural products on the table with other
trading partners. Under the basic agreement with
Indonesia, for example, Japan will cut tariffs on
nearly all industrial and forestry products while
removing gradually those on tropical fruits. The
pact excludes so-called sensitive products such as
rice, wheat and meat.
Japanese farmers
have long been part of the ruling Liberal
Democratic Party's (LDP's) traditional support
base, even though agriculture accounts for a
paltry 1% of the nation's GDP and farm households
are rapidly aging and shrinking. Nevertheless,
farmers have wielded disproportionately strong
political influence.
Agricultural,
forestry and fishery products account for about
22% of Japan's overall imports from Australia. The
Agriculture, Forestry and Fisheries Ministry
estimates that if import tariffs on Australian
farm products are eliminated, imports of such main
items as wheat, sugar, dairy products and beef
could rise sharply, resulting in a reduction in
domestic output worth nearly 800 billion yen
(about $6.7 billion).
The LDP lawmakers
representing farmers, as well as the ministry, are
demanding exclusion of those four items, as well
as rice, the nation's most politically sensitive
item, from any agreement with Australia. But
Australia has shown reluctance about the idea,
although it agreed to exclude sugar with the US.
WTO rules require any agreements to liberalize
"substantially all trade" between FTA partners.
Japan and Australia held their first round
in Canberra this Monday and Tuesday, four months
after Abe and Australian Prime Minister John
Howard agreed during telephone conversations last
December to launch such negotiations.
The
date for the first round of negotiations was
apparently delayed out of consideration to Japan's
political calendar. The first round was held after
unified local elections in Japan ended last
Sunday. The two countries plan to hold their
second round in Tokyo after the election for
Japan's House of Councilors in late July.The first
round was procedural; the two sides are expected
to start actual haggling over the scope and degree
of trade liberalization in the second round.
Japan's farm minister, Toshikatsu
Matsuoka, is a leader of those LDP lawmakers with
close ties to the farm industry and the most vocal
opponent of market liberalization. Before the
first round of FTA negotiations, he said, "We will
enter the talks but with the commitment to defend
key items."
Japan-US FTA The
signing of the US-South Korea FTA has fueled calls
from Japanese business leaders for a similar pact
between Japan and the United States, the world's
two largest economies. There are concerns that as
a result of the US-Korea deal, Japanese exporters
of some products, especially electronics, might
lose out to their Korean rivals, who face zero or
lower import tariffs, in the US market.
Mexico and its two northern neighbors, the
US and Canada, are members of the North American
Free Trade Agreement (NAFTA), which took effect in
1994. But small and medium-sized Japanese
companies that cannot afford to avoid tariffs by
setting up shop in North America could suffer
most. For now, the best way for them to do
business might be to set up shop in South Korea
and then
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