Economic partnerships between Japan, ASEAN essential

Economic partnerships between Japan, ASEAN essential

Takashi Shiraishi, Historian, Kyoto University's Center
for Southeast Asian Studies, The Yomiuri Shimbun, Asia News Network, Tokyo

Economic partnerships between Japan and member countries of
the Association of Southeast Asian Nations most likely will be
the major topic of discussion when Thai Prime Minister Thaksin
Shinawatra, Philippine President Gloria Macapagal Arroyo, and
Malaysian Prime Minister Mohamed Mahathir visit Japan next month.

Thaksin is certain to propose the official launching of
bilateral negotiations on economic partnership when he meets
Prime Minister Junichiro Koizumi. The Philippine and Malaysian
leaders may also present similar proposals.

However, the Agriculture, Forestry and Fisheries Ministry and
the Liberal Democratic Party (LDP) reportedly are determined to
reject the Thai proposal because they are opposed to the
scrapping of tariffs on agricultural products, which Thaksin is
expected to put forward. There is, therefore, some uncertainty
over whether the Japanese government will agree with Thailand to
begin formal negotiations.

Economic partnerships between Japan and ASEAN countries are of
strategic importance to Japan's Asia policy. It will be most
unfortunate if the negotiations fail or bog down due to
opposition by the ministry, by LDP lawmakers with vested
interests, and by agricultural lobbies such as the Central Union
of Agricultural Cooperatives.

It is imperative that the prime minister show strong
leadership in the face of strong opposition.

Economic partnerships between Japan and ASEAN were first
proposed by Koizumi in Singapore during his Southeast Asian tour
in January 2002 as the first step toward the establishment of an
East Asian community.

From the 1980s through the mid-1990s, Japan, through its
direct investments, was a driving force behind the regional
economic development in East Asia.

As a consequence, Japan, South Korea, China, Hong Kong,
Taiwan, and ASEAN have achieved a significant degree of
integration, economically and culturally (as seen more recently
in the phenomenal spread of Japanese pop culture through the
entire region).

Economic partnerships with Southeast Asian countries are a
crucial component of the Japanese government's initiative to
promote further integration of the East Asian region by building
on existing relationships in the region.

However, Japan is not the only country pushing for such an
initiative. The Chinese government is also actively promoting
free trade agreements with the ASEAN.

Japan has so far maintained a strong presence in the region
because of its market size, trade, investments, and provision of
economic aid.

But what about the future? In light of Japan's current
economic stagnation and the rise of China, many ASEAN countries
are starting to feel that their futures will be more closely
linked with China than with Japan.

Under such circumstances, if Japan is unable to open formal
negotiations on economic cooperation because of opposition by
agricultural interests, it will be seen as unreliable. Its sphere
of economic influence in Southeast Asia will diminish, while
China's will expand. This only underscores the strategic
importance of economic partnerships with ASEAN countries as a
cornerstone of Japan's Asia policy.

What, then, are the goals of economic partnership, and why are
they important?

Economic partnership is sometimes viewed as just another name
for free trade agreement, but it is not.

The Japan-ASEAN economic partnerships have three aims. One is
to conclude a free trade agreements to promote trade
liberalization. The second is to develop and standardize various
systems, such as streamlining customs procedures, increasing the
transparency of government procurement, developing a protection
system for intellectual property rights, and standardizing
professional qualifications to reduce the cost of cross-border
economic activities. The third is to promote intellectual and
personnel exchanges, and environmental cooperation, among other
issues.

Thus, even though a free trade agreement is a core element of
economic partnership, the partnership itself goes beyond the
framework of the free trade agreement.

A free trade agreement, by definition, must comply with the
rules of the World Trade Organization by covering, in effect, all
trade items. Agricultural or any other trade sectors cannot be
excluded from the agreement.

This is why Japan-ASEAN economic partnerships discussions,
especially when they involve agricultural issues, are met with
stiff resistance.

Those who oppose the official launching of Japanese-Thai
economic partnership negotiations argue that if Japan begins
formal negotiations with Thailand, Thailand likely will propose
the abolition of tariffs on all agricultural products, including
those closely associated with Japan's agricultural mainstays like
rice, chicken and starch.

But is opposing the partnerships really beneficial to Japan?

Those who insist on the partnerships' possible negative impact
on specific agricultural products must present statistics showing
the precise extent of damage to their respective industries if
tariffs are abolished.

The fact of the matter is that Japan has already significantly
reduced tariffs as part of its WTO trade negotiations. Tariffs on
some agricultural products have been reduced to less than 10
percent, while others have even dropped to 1 percent. Besides, at
a time when exchange rates regularly fluctuate more than 10
percent, tariffs are really not much of a protective measure.

So why are Japan-ASEAN economic partnerships important? One is
that such partnerships are needed to maintain our current living
standards. Japan is still reeling from a decadelong economic
slump. The declining birthrate and aging of the society are also
becoming serious problems.

Notwithstanding the slump, economic development in East Asia
has significantly contributed to the Japanese economy. Japanese
companies have invested in ASEAN countries and China. They have
established offshore production and marketing which have enabled
Japan to maintain its international competitiveness. Asian
companies also import consumer and capital goods from Japan.

Another reason is that economic partnership will help promote
reforms within Japan itself.

Japan must keep pace with the rapid changes in this age of
globalization. When a free trade agreement is discussed, issues
such as "protection of employment" and "protection of domestic
industries" are always raised. However, if an industry that has
lost its international competitiveness is protected, resources
are tied up in inefficient enterprises and cannot be reinvested
in ventures with growth potential.

The resulting economy lacks dynamism and forces companies and
individuals with potential and innovative business ideas to seek
opportunities outside Japan. Domestic industries will be hollowed
out, unemployment will rise, and incomes will fall. Moreover,
protected industries will lose their domestic markets and decline
further.

What is needed now is not protection, but the creation of
industrial products crafted by advanced technologies and
sophisticated designs, food products (beef, Japanese cherries and
other fruits) with high international competitiveness backed by
brand names and quality, and services to meet the needs of
nation's decreasing and aging population. Economic partnerships
have much to offer toward realizing these goals.

Japan is now at the crossroads. If we maintain a defensive
stance on economic partnership, we won't have a future. What we
need now is a political leadership capable of transcending
domestic vested interests and sectionalism.